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Supplemental financial information (Policies)
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12 Months Ended | ||||||||||||
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Dec. 31, 2013
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| Accounting Policies [Abstract] | |||||||||||||
| Presentation and use of estimates | Presentation and use of estimates – The accompanying financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of the financial statements in conformity with GAAP requires management 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 amounts of revenues and expenses during the reporting period. Significant estimates and assumptions include primarily those required in the valuation of inventory, patents, licenses, goodwill, intangible assets, and property and equipment; the timing of revenue recognition; and the calculation of stock-based compensation. Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. |
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| Cash and cash equivalents | Cash and cash equivalents – The Company considers all highly liquid, short-term investments with original maturities of three months or less to be cash and cash equivalents. |
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| Accounts receivable | Accounts receivable – The Company establishes an allowance for doubtful accounts based on a customer's ability and likelihood to pay. There was no allowance at either December 31, 2012 or December 31, 2013. The Company does not accrue interest on past due amounts. Past due accounts are determined based on customer terms, the policy for write-offs and collection efforts based upon individual account circumstances. |
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| Inventories | Inventories – Inventories are valued at the lower of cost or market using the weighted-average cost method. The weighted-average method examines total production volume and total labor and overhead over an appropriate historical period and establishes a weighted-average value of materials, overhead and labor to be assigned to each unit of finished goods inventory. Variances from this weighted average are expensed in the current period. Inventory includes finished goods that may be used by the Company’s research and development, technical services and marketing groups. When such products are consumed internally they are expensed at their inventoried cost to the appropriate department. Provisions, when required, for slow moving, excess and obsolete inventories are recorded to reduce inventory values from cost to their estimated net realizable values, based on product life cycle, development plans, product expiration and quality issues. |
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| Prepaid expenses and other current assets | Prepaid expenses and other current assets – Prepaid expenses and other current assets consist of insurance premiums, annual maintenance contracts, prepaid rent resulting from recording rent on a straight-line basis, professional fees and other miscellaneous payments and deposits. |
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| Property and equipment | Property and equipment – Property and equipment are recorded at cost and are depreciated using the straight-line method over the useful life of the assets, which is three to seven years. Leasehold improvements are depreciated over the shorter of their estimated useful life or the lease term. |
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| Impairment of long-lived assets | Impairment of long-lived assets – The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset. No impairment losses were recorded in either 2011, 2012 or 2013. |
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| Goodwill | Goodwill – The entire balance of goodwill resulted from the 2008 acquisition of two companies and represents the purchase price in excess of identifiable assets and in-process research and development acquired in that transaction. Goodwill is not amortized. The Company has a single reporting unit and all goodwill relates to that unit. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed for impairment at least annually during the fourth quarter, or more frequently if an event occurs indicating the potential for impairment. The Company conducts an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, it then conducts a two-part test for impairment of goodwill. The qualitative factors which the Company may assess during the qualitative approach include, but are not limited to, macroeconomic conditions, industry and market considerations, the overall financial performance of the Company, and the excess of prior year estimates of fair value compared to carrying value. Based on this qualitative assessment, management concluded that as of the 2013 annual impairment test date, it was more likely than not that the fair value of the reporting unit was greater than its carrying value, and no further testing was performed. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then the Company performs the two-step test for goodwill impairment. The first step involves comparing the estimated fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to determine the amount of impairment loss to be recorded. The second step of the impairment test requires a comparison of the implied fair value of the goodwill to the carrying value of the goodwill with the difference being the loss to be recorded. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the first step of the goodwill impairment test. |
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| Intangible assets | Intangible assets – Intangible assets consist of licenses, patents, trade name and a noncompetition agreement with a scientific founder. The Company expenses patent related costs as incurred because, even though the Company believes the patents and underlying processes have continuing value, the amount of future benefits to be derived therefrom is uncertain. Purchased patents and licenses are capitalized and amortized on a straight-line basis over the useful life of the patent or license, which range from one to twenty years. When patents reach a mature stage, any associated legal, defense and maintenance costs are expensed as incurred. |
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| Accrued liabilities | Accrued liabilities – Accrued expenses include accrued payroll, accrued vacation, accrued incentive compensation, accrued royalties, sales and use taxes payable and other various unpaid expenses. |
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| Deferred revenue | Deferred revenue – Deferred revenue represents payments received, but not yet earned. |
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| Debt Discounts | Debt discounts – The Company recorded the fair value of the warrants issued in connection with the Credit Agreement, see Note 4, as a debt discount. The debt discount is amortized to interest expense over a period ending on the earlier of the maturity date of the notes or the date on which the notes are repaid. |
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| Revenue recognition | Revenue recognition – The Company recognizes revenue in accordance with Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, and Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition. Product sales – The Company recognizes product sales revenue when the following four basic revenue criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the fee is fixed or determinable; and (iv) collectability is reasonably assured. The Company estimates its return and replacement reserves based on its experience with historical return rates. Product returns and replacements historically have not been material and are not expected to be material. In June 2012, the Company finalized a supply and distribution agreement with Life Technologies Corporation whereby they will manufacture certain cell media for the Company and serve as its sole distributor of these products to third parties. The Company is recognizing this revenue in accordance with ASC 605-45—Revenue Recognition—Principal Agent Consideration. ASC 605-45 specifies various indicators that support the reporting of revenue on a gross basis, including inventory risk, changes to the product and discretion in changing the supplier. The Company does not believe that this agreement includes these characteristics and therefore is recognizing the revenue on a net basis. Collaborations, partnerships and other revenues—The Company recognizes revenue from collaborations, services and other arrangements when its contractual services are performed, provided collectability is reasonably assured. Collaborations may include upfront non-refundable payments, development milestone payments and research and development funding. Principal costs under these agreements includes the Company’s personnel conducting research and development, supplies consumed in that process and allocated overhead. The Company recognizes revenues from non-refundable up-front license fees received under collaboration agreements ratably over the estimated performance period of the collaboration agreement. The estimated performance period is typically based upon detailed project plans completed by the project managers, who establish in regular discussion and collaboration with a counterpart at the customer, key project activities, milestones and resources. If the estimated performance period is subsequently modified, the Company will modify the period over which the up-front license fee is recognized on a prospective basis. The Company recognizes revenue from milestone payments received under collaboration agreements when earned, provided that the milestone event is substantive, its achievability was not reasonably assured at the inception of the agreement, the Company has no further performance obligations relating to the event and collectability is reasonably assured. If these criteria are not met, the Company recognizes milestone payments ratably over the remaining period of its performance obligations under the collaboration agreement. For a milestone to be considered substantive, the payment associated with its achievement must have all of the following characteristics:
As of December 31, 2013, the Company’s contract with Lilly, - see Multiple-element arrangements section below, had seven remaining milestones with associated payments totaling $375,000 that are accounted for under the milestone method and are attributable to achievement of certain research results prior to the end of 2014. Two of the seven milestones originally had a target date in 2013, but were extended to 2014. If the specified results or timing of results are not achieved, the milestone payments will not be made. In 2012, the Company sent invoices of $125,000 for milestones achieved. Of the achieved milestones, $25,000 was recognized as revenue under the milestone method, while the remaining $100,000, which related to milestones that were not considered substantive, was deferred and accounted for ratably over the remaining period of the Company’s performance obligations under the contract. In 2013, the Company recognized $100,000 related to milestones achieved during the year. Payments, such as grants or awards, received for the reimbursement of expenses for research and development activities are recorded as revenue at the gross amount of the reimbursement. Costs associated with these reimbursements are reflected as a component of research and development expenses. In November, 2013, the Company announced that it had received a Notice of Grant Award (NGA) for $16 million from CIRM to create a human induced pluripotent stem cell biobank from 3,000 individuals. The agreement runs through October 31, 2016. In accounting for revenue over that time period the Company will use the Proportional Performance Method whereby revenue will be recognized in proportion to the level of service, as measured by labor and materials cost, provided on a systematic and rational basis. In 2013, the Company received an initial award payment of $1,105,000 and recognized $182,000 as revenue, resulting in deferred revenue of $924,000 as of December 31, 2013. Multiple-element arrangements – Arrangements with customers may include multiple deliverables, including collaborations or agreements that combine products, research and development, participation in joint steering committees and other deliverables. For the Company’s multiple-element arrangements, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value to the customer on a stand-alone basis and (ii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. Revenue is then allocated to each unit of accounting based on the relative selling price of each unit of accounting based first on Vendor Specific Objective Evidence (“VSOE”) if it exists, based next on Third Party Evidence (“TPE”) if VSOE does not exist, and, finally, if both VSOE and TPE do not exist, based on Best Estimated Selling Price (“BESP”). VSOE—In many instances, products are sold separately in stand-alone arrangements. The Company determines VSOE based on its normal pricing and discounting practices for the specific product when sold separately. TPE—When VSOE does not exist, the Company attempts to determine TPE based on competitor prices for similar deliverables when sold separately. Given the novel nature and early stage of the Company’s products, it is difficult to obtain the pricing of similar products with similar functionality sold by other companies on a stand-alone basis. Therefore, the Company is typically not able to determine TPE. BESP—The objective of BESP is to determine the price at which the Company would transact a sale if the deliverable were sold on a stand-alone basis. When both VSOE and TPE do not exist, typically in the case of research and development and joint steering committee elements, the Company determines BESP by considering the cost of the activities required by the agreement and the rights of the Company and its customers to the resulting technology. After separating the elements of an arrangement into the appropriate units of accounting, revenue is recognized for each separate unit of accounting based on the nature of the revenue as described above. In accounting for the multiple-element arrangements, revenue is limited to the lesser of 1) the cumulative amount of payments received or invoiced; or 2) the cumulative amount of revenue earned, as determined using the pro-rata allocation and delivery status or progress of each element. In June 2012, the Company finalized a $5 million multiple-element agreement with Lilly that runs through December 2014. Under the terms of the agreement, Lilly will order a minimum number of units of iCell products each quarter through the fourth quarter of 2014 at a predetermined price for each year. If Lilly fails to order the minimum number of units, the Company may choose a commercial iCell type for the shortfall and invoice Lilly for the same. In addition, through December 31, 2014, the Company will also reprogram a specified number of donor samples provided by Lilly, and invoice Lilly for these MyCell products according to predetermined pricing tiers. The agreement also includes both periodic and milestone payments related to meetings and decisions of a joint steering committee and the custom development of two different cell types. In December 2012, the Company finalized a one year $1.3 million multiple-element agreement with AstraZeneca UK Limited (AstraZeneca). Under the terms of the agreement, AstraZeneca agreed to order a minimum number of units of commercial iCell products, at a predetermined price, prior to December 3, 2013. During the term, the Company was to reprogram donor samples and invoice AstraZeneca for any such MyCell products. The Company believes its remaining obligations under this agreement will be completed in early 2014. In addition, AstraZeneca agreed to provide the Company with payments upon the achievement of certain milestones related to its attempts to develop, manufacture and commercially release a custom cell type. If such cells are successfully developed and commercially launched, then AstraZeneca may purchase such cells, at a mutually agreed upon price, during the term of the agreement and for a period of 18 months thereafter. Changes in judgments and estimates regarding application of these revenue recognition guidelines as well as changes in facts and circumstances could result in a change in the timing or amount of revenue recognized in future periods. During 2011, 2012 and 2013, the Company did not have any significant changes in estimates that impacted the financial statements. |
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| Research and development | Research and development – Research and development costs are expensed as incurred. Research and development costs primarily consist of salaries and other personnel costs, supplies, amortization of patents and licenses, minimum royalties and royalty payments related to Collaborations, partnerships and other revenues and miscellaneous other expenses for facilities and occupancy costs. Other research and development expenses include fees paid to consultants and outside service providers and finished goods used in research and development. |
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| Advertising costs | Advertising costs – The Company expenses advertising costs as incurred. |
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| Stock-based compensation | Stock-based compensation – All share-based payment awards made to employees, consultants (including science advisors) and directors are measured and recognized based on estimated fair values. |
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| Net loss per share of common stock | Net loss per share of common stock – The Company’s basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by dividing the net loss by the weighted-average number of potential common shares outstanding for the period determined using the treasury-stock method. |
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| Comprehensive loss | Comprehensive loss – Comprehensive loss is equal to net loss as presented in the accompanying statements of operations. |
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| Segment reporting | Segment reporting – ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one operating segment. Disaggregation of the Company’s operating results is impracticable, because the Company’s research and development activities and its assets overlap, and management reviews its business as a single operating segment. Thus, discrete financial information is not available by more than one operating segment. |
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| Concentration of credit risk and other risks and uncertainties | Concentration of credit risk and other risks and uncertainties – As of December 31, 2013 the Company had $54.6 million invested in a 100% U.S. Treasury Securities Money Market Fund and $455,000 in a U.S. Government Money Market Fund. An investment in a money market fund is not insured or guaranteed. The Company's remaining cash was deposited with one major financial institution. These deposits exceed federally insured limits. The Company has not experienced any losses in such accounts and believes that the Company is not exposed to any significant risk on these balances. The Company is currently not profitable and no assurance can be provided that it will ever be profitable. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, dependence on key personnel, dependence on key suppliers, protection of proprietary technology, the validity of and continued access to its owned and licensed intellectual property, compliance with government regulations, uncertainty of widespread market acceptance of products and the need to obtain additional financing. The Company's products include materials subject to rapid technological change. Certain materials used in manufacturing have relatively few alternative sources of supply and establishing additional or replacement suppliers for such materials cannot be accomplished quickly. While the Company has ongoing programs to minimize the adverse effect of such uncertainty, and the Company considers technological change in estimating allowances, uncertainty continues to exist. |
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| Fair value of financial instruments | Fair value of financial instruments – The carrying amounts of financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the relatively short-term nature of these instruments. The Company believes the carrying values of long-term debt as of December 31, 2013 is also approximately equal to its fair value. ASC Topic 820, Fair Value Measurement, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include Level 1, defined as observable inputs, such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions. The Company uses the market approach and Level 1 inputs to value its cash equivalents. |
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| Recent accounting pronouncements | Recent accounting pronouncements – There are no recent accounting pronouncements that the Company has not yet adopted that are expected to have a material effect on its financial position, results of operations or cash flows. |