| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Going concern assessment
– Cash and cash equivalents Restricted cash Trade accounts and grants
receivable, net – Financing receivable
from Juvenescence Receivables Concentrations of credit
risk Fair Value Measurements Fair
Value Measurements and Disclosures
● Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
● Level 3 – Inputs to the valuation methodology are unobservable; that reflect management’s own assumptions about the assumptions market participants would make and significant to the fair value. In
determining fair value, BioTime utilizes valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. For the
periods presented, BioTime has no financial assets or liabilities recorded at fair value on a recurring basis, except for cash
and cash equivalents consisting of money market funds, shares BioTime holds in Asterias and OncoCyte, and the marketable equity
securities in AgeX and H adasit Bio-Holdings Ltd. (“HBL”) The fair value of BioTime’s
assets and liabilities, which qualify as financial instruments under FASB guidance regarding disclosures about fair value of financial
instruments, approximate the carrying amounts presented in the accompanying consolidated balance sheets. The carrying amounts of
accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities
approximate fair values because of the short-term nature of these items. Equity
method investments at fair value – BioTime uses the equity method of accounting
when it has the ability to exercise significant influence, but not control, as determined in accordance with GAAP, over the operating
and financial policies of a company. For equity method investments which BioTime has elected to measure at fair value, unrealized
gains and losses are reported in the consolidated statements of operations in other income and expenses, net. As further discussed in
Notes 6 and 7, BioTime has elected to account for its OncoCyte and Asterias shares at fair value using the equity method of accounting
because beginning on February 17, 2017 and May 13, 2016, the respective dates on which BioTime deconsolidated OncoCyte and Asterias,
BioTime has not had control of OncoCyte and Asterias, as defined by GAAP, but continues to exercise significant influence over
those companies. Under the fair value method, BioTime’s value in shares of common stock it holds in OncoCyte and Asterias
is marked to market at each balance sheet date using the closing prices of OncoCyte and Asterias common stock on the NYSE American
multiplied by the number of shares of OncoCyte and Asterias held by BioTime, with changes in the fair value of the OncoCyte and
Asterias shares included in other income and expenses, net, in the consolidated statements of operations. The OncoCyte and Asterias
shares are considered level 1 assets as defined by ASC 820, Fair Value Measurements and Disclosures On August 30, 2018, BioTime
consummated the sale of AgeX Shares to Juvenescence (see Note 3). Prior to the Juvenescence Transaction, Juvenescence owned 5.6%
of AgeX’s issued and outstanding common stock. Upon completion of the Juvenescence Transaction, BioTime’s ownership
in AgeX decreased from 80.4% to 40.2% of AgeX’s issued and outstanding shares of common stock, and Juvenescence’s ownership
in AgeX increased from 5.6% to 45.8% of AgeX’s issued and outstanding shares of common stock. Accordingly, beginning on August
30, 2018, BioTime deconsolidated the financial statements and results of AgeX (see Note 4). On
November 28, 2018, BioTime completed the AgeX Distribution whereby following the AgeX Distribution, BioTime retained Beginning on August 30,
2018 through November 28, 2018, the completion of the AgeX Distribution, BioTime held 40.2% of AgeX’s issued and outstanding
shares of common stock and therefore accounted for the AgeX shares in a manner similar to the accounting for Asterias and OncoCyte
shares held discussed above, using the equity method of accounting at fair value. For the period from August 30, 2018, through
November 28, 2018, BioTime recorded an unrealized loss of $4.2 million due to the decrease in the AgeX stock price from August
30, 2018 to the AgeX Distribution date of November 28, 2018. Marketable equity securities
Investments – Debt and Equity
Securities Financial Instruments–Overall:
Recognition and Measurement of Financial Assets and Financial Liabilities, . The HBL shares have a readily
determinable fair value quoted on the Tel Aviv Stock Exchange (“TASE”) (under trading symbol “HDST”) where
share prices are denominated in New Israeli Shekels (NIS). The AgeX shares have a readily determinable fair value quoted on the
NYSE American under trading symbol “AGE”. Accordingly, the marketable equity securities are considered level 1 assets
as defined by ASC 820. These securities are held principally to meet future working capital needs. These securities are measured
at fair value and reported as current assets on the consolidated balance sheets based on the closing trading price of the security
as of the date being presented. Beginning on January 1,
2018, with the adoption of ASU 2016-01 discussed below, the HBL securities are now called “marketable equity securities”
and unrealized holding gains and losses on these securities, including changes in foreign currency exchange rates, are reported
in the consolidated statements of operations in other income and expenses, net. Prior to January 1, 2018 and the adoption of ASU
2016-01, the HBL securities were called “available-for-sale securities” and unrealized holding gains and losses, including
changes in foreign currency exchange rates, were reported in other comprehensive income or loss, net of tax, and were a component
of the accumulated other comprehensive income or loss on the consolidated balance sheet. Realized gains and losses, and declines
in value judged to be other-than-temporary related to marketable equity securities, are included in other income and expenses,
net, in the consolidated statements of operations. On January 1, 2018, in
accordance with the adoption of ASU 2016-01, BioTime recorded a cumulative-effect adjustment for the HBL available-for-sale-securities
to reclassify the unrealized gain of $328,000 included in consolidated accumulated other comprehensive income to the consolidated
accumulated deficit balance. For the year ended December
31, 2018, BioTime recorded an unrealized gain of $677,000, included in other income and expenses, net, due to the increase in fair
market value of the HBL marketable equity securities from January 1, 2018 to December 31, 2018. For the year ended December 31,
2018, BioTime recorded an unrealized gain of $481,000, included in other income and expenses, net, due to the increase in fair
market value of the AgeX marketable equity securities from November 28, 2018 to December 31, 2018. Property and equipment,
net and construction in progress Construction
in progress is not depreciated until the underlying asset is placed into service (see Note 15). Long-lived intangible
assets Impairment of long-lived
assets – Accounting for warrants
– Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and Equity Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock Transactions with noncontrolling
interests of subsidiaries – 810-10-45-23,
Consolidation Other Presentation Matters, Research and development
– General and administrative stock exchange-related costs, depreciation expense, marketing costs, and other
miscellaneous expenses which are allocated to general and administrative expense Foreign currency translation
adjustments and other comprehensive income or loss – Foreign currency transaction
gains and losses – For transactions denominated in other than the functional currency
of BioTime or its subsidiaries, BioTime recognizes transaction gains and losses in the consolidated statements of operations and
classifies the gain or loss based on the nature of the item that generated it. The majority of BioTime’s foreign currency
transaction gains and losses are generated by Cell Cure’s intercompany debt due to BioTime (see Notes 11 and 12), which are
U.S. dollar-denominated, while Cell Cure’s functional currency is the Israeli New Shekel (“NIS”). At each balance
sheet date, BioTime remeasures the intercompany debt using the current exchange rate at that date pursuant to ASC 830, Foreign
Currency Matters. Income taxes – BioTime accounts for income taxes in accordance with ASC 740, Income Taxes On December 22, 2017, the
United States enacted major federal tax reform legislation, Public Law No. 115-97, commonly referred to as the 2017 Tax Cuts and
Jobs Act (“2017 Tax Act”), which enacted a broad range of changes to the Internal Revenue Code. Changes to taxes on
corporations impacted by the 2017 Tax Act include, among others, lowering the U.S. federal tax rates to a 21% flat tax rate, elimination
of the corporate alternative minimum tax (“AMT”), imposing additional limitations on the deductibility of interest
and net operating losses, allowing any net operating loss (“NOLs”) generated in tax years ending after December 31,
2017 to be carried forward indefinitely and generally repealing carrybacks, reducing the maximum deduction for NOL carryforwards
arising in tax years beginning after 2017 to a percentage of the taxpayer’s taxable income, and allowing for the expensing
of certain capital expenditures. The 2017 Tax Act also puts into effect a number of changes impacting operations outside of the
United States including, but not limited to, the imposition of a one-time tax “deemed repatriation” on accumulated
offshore earnings not previously subject to U.S. tax, and shifts the U.S taxation of multinational corporations from a worldwide
system of taxation to a territorial system. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances
(including the effects of the one-time transition tax) to be recognized in the period in which the legislation is enacted (see
Note 14). For 2017, LifeMap Sciences included a deemed
repatriation of $227,000 in accumulated foreign earnings not previously subject to U.S. tax in federal income from LifeMap Sciences
Ltd. The federal taxable income was offset by the LifeMap Sciences’ net operating loss carryforwards resulting in no federal
income tax due. Beginning in 2018, the 2017 Tax Act subjects
a U.S. shareholder to tax on Global Intangible Low Tax Income (GILTI) earned by certain foreign subsidiaries. In general, GILTI
is the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets. The provision further
allows a deduction of 50% of GILTI, however this deduction is limited by the Company’s pre-GILTI U.S. income. For 2018, BioTime
incurred a net loss from foreign activity, accordingly there was no GILTI inclusion in U.S. income. Current interpretations under
ASC 740 state that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences
expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred
as a period expense only. BioTime has elected to account for GILTI as a current period expense when incurred. On December 22, 2017, the
SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to provide guidance for companies that are not able
to complete their accounting for the income tax effects of the 2017 Tax Act in the period of enactment. SAB 118 allows BioTime
to record provisional amounts during a measurement period not to extend beyond one year of the enactment date (see Note 14). BioTime
applied the guidance in SAB 118 when accounting for the enactment-date effects of the 2017 Tax Act during the years ended December
31, 2018 and 2017. As of December 31, 2018, BioTime completed its accounting for all the enactment-date income tax effects of the
2017 Tax Act. Income tax benefit or expense
for each year is allocated to continuing operations, other comprehensive income and the cumulative effects of accounting changes,
if any, recorded directly to shareholders’ equity. ASC 740-20-45 Income Taxes, Intraperiod Tax Allocation, Other Presentation
Matters Marketable equity securities Stock-based compensation
– Compensation –
Stock Compensation orfeitures are accounted for as they occur instead of based on the number
of awards that were expected to vest prior to adoption of ASU 2016-09. Based on the nature and timing of grants, straight line
expense attribution of stock-based compensation for the entire award and the relatively low forfeiture rates on BioTime’s
experience, the impact of adoption of ASU 2016-09 pertaining to forfeitures was not material to the consolidated financial statements Certain of BioTime’s
privately-held formerly consolidated subsidiaries have their own share-based compensation plans. For share-based compensation awards
granted by those privately-held consolidated subsidiaries under their respective equity plans, BioTime determines the expected
stock price volatility using historical prices of comparable public company common stock for a period equal to the expected term
of the options. The expected term of privately-held subsidiary options is based upon the
“simplified method” provided under Staff Accounting Bulletin, Topic 14 Although the fair value
of employee stock options is determined in accordance with FASB guidance, changes in the assumptions can materially affect the
estimated value and therefore the amount of compensation expense recognized in the consolidated financial statements. Basic
and diluted net loss per share attributable to common shareholders For
the years ended December 31, 2018 and 2017, b The
following common share equivalents were excluded from the computation of diluted net income (loss) per common share for the periods
presented because including them would have been antidilutive (in thousands):
Year Ended December 31,
2018 2017
Stock options and restricted stock units 14,269 7,983
Warrants - 9,395
Treasury stock - 81 Recently
adopted accounting pronouncements Adoption of ASU 2016-18 ,
Statement of Cash Flows (Topic 230) Statement of Cash Flows (Topic 230): Restricted Cash The
following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance
sheet dates that comprise the total of the same such amounts shown in the consolidated statements of cash flows for all periods
presented herein and effected by the adoption of ASU 2016-18 (in thousands):
December 31,
2018 2017 2016
Cash and cash equivalents $ 23,587 $ 36,838 $ 22,088
Restricted cash included in prepaid expenses and other current assets (see Note 15) 346 - -
Restricted cash included in deposits and other long-term assets (see Note 15) 466 847 847
Total cash, cash equivalents, and restricted cash as shown in the consolidated statements of cash flows $ 24,399 $ 37,685 $ 22,935 Adoption of ASU 2014-09 ,
Revenues from Contracts with Customers (Topic 606) Revenue from Contracts with Customers Revenue Recognition
BioTime adopted Topic 606
as of January 1, 2018 using the modified retrospective transition method applied to those contracts which were not completed as
of the adoption date. Results for reporting periods beginning on January 1, 2018 and thereafter are presented under Topic 606,
while prior period amounts are not adjusted and continue to be reported in accordance with BioTime’s historical revenue recognition
accounting under Topic 605. On January 1, 2018, the
adoption and application of Topic 606 resulted in an immaterial cumulative effect adjustment to BioTime’s beginning consolidated
accumulated deficit balance. In the applicable paragraphs below, BioTime has summarized its revenue recognition policies for its
various revenue sources in accordance with Topic 606. Revenue Recognition
by Source and Geography – Grant Revenues The following table presents
BioTime’s consolidated revenues disaggregated by source (in thousands).
Year Ended December 31,
REVENUES: 2018 2017 (1)
Grant revenue $ 3,572 $ 1,666
Royalties from product sales and license fees 392 389
Subscription and advertisement revenues (2) 691 1,395
Sale of research products and services 333 8
Total revenues $ 4,988 $ 3,458
(1) Amounts recognized prior to adoption of Topic 606 have not been adjusted under the Topic 606 modified retrospective transition method.
(2) These revenues were generated by LifeMap Sciences, which is a subsidiary of AgeX, are included in BioTime consolidated revenues for the period from January 1, 2018 through August 29, 2018, the date immediately preceding the AgeX Deconsolidation. As a result of the AgeX Deconsolidation on August 30, 2018, BioTime does not expect to recognize subscription and advertisement revenues during subsequent accounting periods. The following table presents
consolidated revenues, disaggregated by geography, based on the billing addresses of customers, or in the case of grant revenues
based on where the governmental entities that fund the grant are located (in thousands). See further discussion under Grant
Revenues
Year Ended December 31,
REVENUES: 2018 2017 (1)
United States $ 1,804 $ 1,651
Foreign (2) 3,184 1,807
Total revenues $ 4,988 $ 3,458
(1) Amounts recognized prior to adoption of Topic 606 have not been adjusted under the Topic 606 modified retrospective transition method.
(2) Foreign revenues are primarily generated from grants in Israel. Research and development
contracts with customers – Royalties from product
sales and license fees – Sale of research products
and services – Revenues from the sale
of hydrogels and stem cell products, including the cost of sales related to those products, were immaterial for all periods presented. Subscription and advertisement
revenues – , including research databases and software tools, iomedical, gene, disease, and stem cell research. ® ® LifeMap Sciences’
performance obligations for subscriptions include a license of intellectual property related to its genetic information packages
and premium genetic information tools. These licenses are deemed functional licenses that provide customers with a “right
to access” to LifeMap Sciences’ intellectual property during the subscription period and, accordingly, revenue is recognized
over a period of time, which is generally the subscription period. Payments are typically received at the beginning of a subscription
period and revenue is recognized according to the type of subscription sold. For subscription contracts
in which the subscription term commences before a payment is due, LifeMap Sciences records an accounts receivable as the subscription
is earned over time and bills the customer according to the contract terms. LifeMap Sciences continuously monitors collections
and payments from customers and maintains a provision for estimated credit losses and uncollectible accounts based upon its historical
experience and any specific customer collection issues that have been identified. Amounts determined to be uncollectible are written
off against the allowance for doubtful accounts. LifeMap Sciences has not historically provided significant discounts, credits,
concessions, or other incentives from the stated price in the contract as the prices are offered on a fixed fee basis for the type
of subscription package being purchased. LifeMap Sciences may issue refunds only if the packages cease to be available for reasons
beyond its control. In such an event, the customer will get a refund on a pro-rata basis. Using the most likely amount method for
estimating refunds under Topic 606, including historical experience, LifeMap Sciences determined that the single most likely amount
of variable consideration for refunds is immaterial as LifeMap Sciences does not expect to pay any refunds. Both the customer and
LifeMap Sciences expect the subscription packages to be available during the entire subscription period, and LifeMap Sciences has
not experienced any significant issues with the availability of the product and has not issued any material refunds. LifeMap Sciences performance
obligations for advertising are overall advertising services and represent a series of distinct services. Contracts are typically
less than a year in duration and the fees charged may include a combination of fixed and variable fees with the variable fees tied
to click throughs to the customer’s products on their website. LifeMap Sciences allocates the variable consideration to each
month the click through services occur and allocates the annual fee to the performance obligation period of the initial term of
the contract because those amounts correspond to the value provided to the customer each month. For click-through advertising services,
at the time the variable compensation is known and determinable, the service has been rendered. Revenue is recognized at that time.
The annual fee is recognized over the initial subscription period because this is a service and the customer simultaneously receives
and consumes the benefit of LifeMap Sciences’ performance. LifeMap Sciences deferred
subscription revenues primarily represent subscriptions for which cash payment has been received for the subscription term, but
the subscription term has not been completed as of the balance sheet date reported. No revenues from subscription and advertisement
products have been recorded since August 29, 2018 because of the AgeX Deconsolidation. The LifeMap Sciences revenues shown for
the year ended December 31, 2018 are for revenues earned through August 29, 2018, the date immediately preceding the AgeX Deconsolidation.
As a result of the AgeX Deconsolidation, BioTime does not expect to earn subscription and advertising revenues in subsequent accounting
periods. For the years ended December
31, 2018 and 2017, LifeMap Sciences recognized $0.7 million and $1.4 million, respectively, in subscription and advertisement revenues.
As of December 31, 2018, there were no deferred revenues related to LifeMap Sciences included in the consolidated balance sheets
due to the AgeX Deconsolidation on August 30, 2018. LifeMap Sciences has licensed
from a third party the databases it commercializes and has a contractual obligation to pay royalties to the licensor on subscriptions
sold. These costs are included in cost of sales on the condensed consolidated statements of operations when the cash is received,
and the royalty obligation is incurred as the royalty payments do not qualify for capitalization of costs to fulfill a contract
under ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers Grant revenues – Research and Development
Arrangements Deferred grant revenues
represent grant funds received from the governmental funding agencies for which the allowable expenses have not yet been incurred
as of the balance sheet date reported. As of December 31, 2018, deferred grant revenue was immaterial. Arrangements with multiple
performance obligations – Adoption of ASU 2016-01,
Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities Changes
to the current GAAP model under ASU 2016-01 primarily affects the accounting for equity investments, financial liabilities under
the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU 2016-01 clarified
guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on
available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities,
and financial liabilities is largely unchanged. The more significant amendments are to equity investments in unconsolidated entities.
In accordance with ASU No. 2016-01, all equity investments in unconsolidated entities (other than those accounted for using the
equity method of accounting) will generally be measured at fair value through earnings. There will no longer be an available-for-sale
classification (changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair
values. marketable equity securities policy,
BioTime adopted ASU 2016-01 on January 1, 2018. Recently Issued Accounting
Pronouncements In June 2018, the FASB
issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which requires lessees to recognize assets and liabilities
for leases with lease terms greater than twelve months in the statement of financial position. Leases will be classified as either
finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 also
requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash
flows arising from leases. The update is effective for fiscal years beginning after December 15, 2018, including interim reporting
periods within that reporting period. Early adoption is permitted. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11.
ASU 2018-10 provides certain areas for improvement in ASU 2016-02 and ASU 2018-11 provides an additional optional transition method
by allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment
to the opening balance of retained earnings in the period of adoption. BioTime is completing its assessment of the impact the
adoption of ASU 2016-02 will have on its consolidated financial statements. BioTime expects that most of its operating lease commitments
will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon the adoption of
ASU 2016-02, which is expected to increase the total consolidated assets and total consolidated liabilities that it reports. BioTime
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