10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019  

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-51891

INTERNATIONAL STEM CELL CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	20-4494098
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5950 Priestly Drive Carlsbad, CA	92008
(Address of Principal Executive Offices)	(Zip Code)

(760) 940-6383

(Registrant’s telephone number)

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.             ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒

Securities registered pursuant to Section 12(b) of the Act: None

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 13, 2019 the Registrant had 7,533,083 shares of Common Stock outstanding.

International Stem Cell Corporation and Subsidiaries

INDEX TO FORM 10-Q

		Page Numbers
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101 INSTANCE DOCUMENT
Exhibit 101 SCHEMA DOCUMENT
Exhibit 101 CALCULATION LINKBASE DOCUMENT
Exhibit 101 DEFINITION LINKBASE DOCUMENT
Exhibit 101 LABELS LINKBASE DOCUMENT
Exhibit 101 PRESENTATION LINKBASE DOCUMENT

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data and par value)

	March 31,			December 31,
	2019			2018
Assets	(Unaudited)
Cash	$	615		$	1,075
Accounts receivable, net of allowance for doubtful accounts of $12		957			651
Inventory, net		1,460			1,501
Prepaid expenses and other current assets		480			543
Total current assets		3,512			3,770
Non-current inventory		792			805
Property and equipment, net		652			469
Intangible assets, net		2,700			2,674
Right-of-use asset		933			—
Deposits and other assets		74			78
Total assets	$	8,663		$	7,796
Liabilities and Stockholders' Equity
Accounts payable	$	806		$	458
Accrued liabilities		959			579
Operating lease liability, current		294			—
Related party payable		1,009			2,045
Advances		250			250
Fair value of warrant liability		1,148			1,745
Total current liabilities		4,466			5,077
Long-term deferred rent		—			182
Operating lease liability, net of current portion		1,011			—
Total liabilities		5,477			5,259
Commitments and Contingencies
Stockholders' Equity
Series B Convertible Preferred stock, $0.001 par value, 5,000,000 shares authorized, 250,000    issued and outstanding, with liquidation preferences of $415 and $411 at March 31, 2019    and December 31, 2018, respectively		—			—
Series D Convertible Preferred stock, $0.001 par value, 50 shares authorized, 43 issued and    outstanding, with liquidation preference of $4,320		—			—
Series G Convertible Preferred stock, $0.001 par value, 5,000,000 shares authorized,    issued and outstanding, with liquidation preference of $5,000		5			5
Series I-1 Convertible Preferred stock, $0.001 par value, 2,000 shares authorized, 814 issued and    outstanding, with liquidation preferences of $814		—			—
Series I-2 Convertible Preferred stock, $0.001 par value, 4,310 shares authorized,    issued and outstanding with liquidation preference of $4,310		—			—
Common stock, $0.001 par value, 120,000,000 shares authorized, 7,533,083 and 6,933,861 shares    issued and outstanding at March 31, 2019 and December 31, 2018, respectively		8			7
Additional paid-in capital		110,742			109,188
Accumulated deficit		(107,569	)		(106,663	)
Total stockholders' equity		3,186			2,537
Total liabilities and stockholders' equity	$	8,663		$	7,796

See accompanying notes to the unaudited condensed consolidated financial statements.

3

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2019			2018
Revenues
Product sales	$	2,218		$	2,633
Total revenues		2,218			2,633
Expenses
Cost of sales		841			825
Research and development		653			811
Selling and marketing		692			708
General and administrative		1,521			1,474
Total expenses		3,707			3,818
Loss from operations		(1,489	)		(1,185	)
Other income (expense)
Change in fair value of warrant liability		597			355
Interest expense		(14	)		(2	)
Miscellaneous income		—			2
Total other income (expense), net		583			355
Loss before provision for income taxes		(906	)		(830	)
Provision for income taxes		—		—
Net loss	$	(906	)	$	(830	)
Net loss applicable to common    stockholders	$	(906	)	$	(830	)
Net loss per common share-basic	$	(0.12	)	$	(0.14	)
Net (loss) per common share-diluted	$	(0.12	)	$	(0.14	)
Weighted average shares-basic		7,400			6,136
Weighted average shares-diluted		7,400			6,136

See accompanying notes to the unaudited condensed consolidated financial statements.

4

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2019

(in thousands)

(Unaudited)

					Convertible Preferred Stock
	Common
	Stock				Series B				Series D				Series G
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2018		6,934	$	7		250	$	—		—	$	—		5,000	$	5
Conversion of debt		599		1		—		—		—		—		—		—
Stock-based compensation		—		—		—		—		—		—		—		—
Net loss for the period ended    March 31, 2019		—		—		—		—		—		—		—		—
Balance at March 31, 2019		7,533	$	8		250	$	—		—	$	—		5,000	$	5

	Convertible Preferred Stock
									Additional					Total
	Series I-1				Series I-2				Paid-In		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2018		1	$	—		4	$	—	$	109,188	$	(106,663	)	$	2,537
Conversion of debt		—		—		—		—		1,048		—			1,049
Stock-based compensation		—		—		—		—		506		—			506
Net loss for the period ended    March 31, 2019		—		—		—		—		—		(906	)		(906	)
Balance at March 31, 2019		1	$	—		4	$	—	$	110,742	$	(107,569	)	$	3,186

See accompanying notes to the unaudited condensed consolidated financial statements.

5

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2018

(in thousands)

(Unaudited)

					Convertible Preferred Stock
	Common
	Stock				Series B				Series D				Series G
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2017		6,057	$	6		250	$	—		—	$	—		5,000	$	5
Issuance of common stock
for services		6		—		—		—		—		—		—		—
from exercise of options		82		—		—		—		—		—		—		—
Conversion of preferred stock		50		—		—		—		—		—		—		—
Stock-based compensation		—		—		—		—		—		—		—		—
Net loss for the period ended    March 31, 2018		—		—		—		—		—		—		—		—
Balance at March 31, 2018		6,195	$	6		250	$	—		—	$	—		5,000	$	5

\

	Convertible Preferred Stock
									Additional					Total
	Series I-1				Series I-2				Paid-In		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2017		1	$	—		4	$	—	$	106,585	$	(104,532	)	$	2,064
Issuance of common stock
for services		—		—		—		—		8		—			8
from exercise of options		—		—		—		—		90		—			90
Conversion of preferred stock		—		—		—		—		—		—			—
Stock-based compensation		—		—		—		—		307		—			307
Net loss for the period ended    March 31, 2018		—		—		—		—		—		(830	)		(830	)
Balance at March 31, 2018		1	$	—		4	$	—	$	106,990	$	(105,362	)	$	1,639

See accompanying notes to the unaudited condensed consolidated financial statements.

6

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three
	Months Ended March 31,
	2019			2018
Cash flows from operating activities
Net loss	$	(906	)	$	(830	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		72			68
Stock-based compensation expense		506			307
Common stock issued for services		—			8
Change in fair value of warrant liability		(597	)		(355	)
Allowance for inventory obsolescence		3			3
Interest expense on bridge loan from related party		13			1
Loss on disposal of property and equipment		—			1
Impairment of intangible assets		—			111
Amortization of right-of-use asset		18			—
Changes in operating assets and liabilities
Increase in accounts receivable		(306	)		(474	)
Decrease (increase) in inventory		51			(105	)
Decrease in prepaid expenses and other current assets		214			137
Decrease (increase) in deposits and other assets		4			(1	)
Increase in accounts payable		348			782
Increase in accrued liabilities		292			299
Net cash used in operating activities		(288	)		(48	)
Cash flows from investing activities
Purchases of property and equipment		(58	)		(57	)
Payments for patent licenses and trademarks		(61	)		(144	)
Net cash used in investing activities		(119	)		(201	)
Cash flows from financing activities
Proceeds from a bridge loan from a related party		—			350
Proceeds from exercise of stock options		—			90
Payments on financed insurance premiums		(53	)		(48	)
Net cash (used in) provided by financing activities		(53	)		392
Net (decrease) increase in cash		(460	)		143
Cash, beginning of period		1,075			304
Cash, end of period	$	615		$	447
Supplemental disclosure of cash flow information
Cash paid for interest	$	2		$	—
Supplemental disclosure of non-cash investing and financing activities
Conversion of bridge loan from a related party to common stock	$	1,049		$	—
Financed insurance premiums	$	151		$	—
Lease incentives received for construction in progress	$	162		$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

7

International Stem Cell Corporation and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Business Combination and Corporate Restructure

BTHC III, Inc. (“BTHC III” or the “Company”) was organized in Delaware in June 2005 as a shell company to effect the reincorporation of BTHC III, LLC, a Texas limited liability company. On December 28, 2006, the Company effected a Share Exchange pursuant to which it acquired all of the stock of International Stem Cell Corporation, a California corporation (“ISC California”). After giving effect to the Share Exchange, the stockholders of ISC California owned 93.7% of issued and outstanding shares of common stock. As a result of the Share Exchange, ISC California is now the wholly-owned subsidiary, though for accounting purposes it was deemed to have been the acquirer in a “reverse merger.” In the reverse merger, BTHC III is considered the legal acquirer and ISC California is considered the accounting acquirer. On January 29, 2007, the Company changed its name from BTHC III, Inc. to International Stem Cell Corporation.

Lifeline Cell Technology, LLC (“LCT”) was formed in the State of California on August 17, 2001. LCT is in the business of developing and manufacturing purified primary human cells and optimized reagents for cell culture. LCT’s scientists have used a technology, called basal medium optimization, to systematically produce products designed to culture specific human cell types and to elicit specific cellular behaviors. These techniques also produce products that do not contain non-human animal proteins, a feature desirable to the research and therapeutic markets. LCT distinguishes itself in the industry by having in place scientific and manufacturing staff with the experience and knowledge to set up systems and facilities to produce a source of consistent, standardized, non-human animal protein free cell products, some of which are suitable for FDA approval.

On July 1, 2006, LCT entered into an agreement among LCT, ISC California and the holders of membership units and warrants. Pursuant to the terms of the agreement, all the membership units in LCT were exchanged for 133,334 shares of ISC California Common Stock and for ISC California’s assumption of LCT’s obligations under the warrants. LCT became a wholly-owned subsidiary of ISC California.

Lifeline Skin Care, Inc. (“LSC”) was formed in the State of California on June 5, 2009 and is a wholly-owned subsidiary of ISC California. LSC develops, manufactures and markets anti-aging cosmetic products, utilizing an extract derived from the Company’s human parthenogenetic stem cells and the Company’s proprietary small molecule technology.

Cyto Therapeutics Pty. Ltd. (“Cyto Therapeutics”) was registered in the state of Victoria, Australia, on December 19, 2014 and is a limited proprietary company and a wholly-owned subsidiary of the Company. Cyto Therapeutics is a research and development company for the Therapeutic Market, which is conducting clinical trials in Australia for the use of ISC-hpNSC^® in the treatment of Parkinson’s disease.

Going Concern

The Company has sustained recurring losses and needs to raise additional working capital. The timing and degree of any future capital requirements will depend on many factors. The Company’s burn rate for the three months ended March 31, 2019 was approximately $96,000 per month, excluding capital expenditures and patent costs averaging $40,000 per month. There can be no assurance that the Company will be successful in maintaining its normal operating cash flow or raising additional funds, and that such cash flows will be sufficient to sustain the Company’s operations at least through one year after the issuance date of the Company’s condensed consolidated financial statements. Based on the above, there is substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and they do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Management’s plans in regard to these matters are focused on managing its cash flow, the proper timing of its capital expenditures, and raising additional capital or financing in the future.

Basis of Presentation

The Company is a biotechnology company focused on therapeutic and clinical product development with multiple long-term therapeutic opportunities and two revenue-generating subsidiaries with potential for increased future revenues.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q.

8

These financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change to the information disclosed in the notes to consolidated financial statements included in the annual report on Form 10-K of International Stem Cell Corporation and Subsidiaries for the year ended December 31, 2018.

The unaudited condensed consolidated financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated results of operations, financial position and cash flows. The unaudited condensed consolidated financial statements and the related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K. Operating results for interim periods are not necessarily indicative of the operating results for any other interim period or an entire year.

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of International Stem Cell Corporation and its subsidiaries after intercompany balances and transactions have been eliminated.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. There were no cash equivalents as of March 31, 2019 and December 31, 2018.

Inventory

Inventory is accounted for using the average cost and first-in, first-out (FIFO) methods for LCT cell culture media and reagents, average cost and specific identification methods for LSC products, and specific identification method for LCT products. Inventory balances are stated at the lower of cost or net realizable value. Laboratory supplies used in the research and development process are expensed as consumed. Inventory is reviewed periodically for product expiration and obsolescence and is adjusted accordingly. The value of the inventory that is not expected to be sold within twelve months of the current reporting period is classified as non-current inventory on the condensed consolidated balance sheets.

Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. Accounts receivable primarily consist of trade accounts receivable from the sales of LCT’s products, timing of cash receipts by the Company related to LSC credit card sales to customers, as well as LSC trade receivable amounts related to spa and distributor sales. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. As of March 31, 2019 and December 31, 2018, the Company had an allowance for doubtful accounts totaling $12,000.

Property and Equipment

Property and equipment are stated at cost. The provision for depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. The costs of major remodeling and leasehold improvements are capitalized and amortized over the shorter of the remaining term of the lease or the estimated life of the asset.

Intangible Assets

Intangible assets consist of acquired research and development rights used in research and development, and capitalized legal fees related to the acquisition, filing, maintenance, and defense of patents and trademarks. Patent or patent license amortization only begins once a patent license is acquired or a patent is issued by the appropriate authoritative bodies. In the period in which a patent application is rejected or efforts to pursue the patent are abandoned, all the related accumulated costs are expensed. Patents and other intangible assets are recorded at cost of $3,692,000 and $3,632,000 at March 31, 2019 and December 31, 2018, respectively, and are amortized on a straight-line basis over the shorter of the lives of the underlying patents or the useful life of the license. Amortization expense for the three months ended March 31, 2019 and 2018 was $35,000 and $27,000, respectively. All amortization expense related to intangible assets is included in general and administrative expense. Accumulated amortization as of March 31, 2019 and December 31, 2018 was $992,000 and $958,000, respectively.     

9

Long-Lived Asset Impairment

The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows. The Company recognized none and $111,000 of impairment losses on its intangible assets during the three months ended March 31, 2019 and 2018, respectively, due to abandonment of efforts to pursue certain patents or patented technologies.   

Revenue Recognition

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following five-step process:

1.	Identify the contract with the customer
2.	Identify the performance obligations in the contract
3.	Determine the transaction price
4.	Allocate the transaction price to the performance obligations in the contract
5.	Recognize revenue when (or as) each performance obligation is satisfied

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.  

The following table presents the Company's revenue disaggregated by segment, product and geography, based on management's assessment of available data (in thousands):

Biomedical Market:
	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	U.S.		OUS*			Total Revenues		% of Total Revenues			U.S.		OUS*		Total Revenues		% of Total Revenues
Biomedical products
Cells	$	172	$	100		$	272		15	%	$	243	$	141	$	384		18	%
Media		1,401		117			1,518		85	%		1,554		189		1,743		82	%
Other		—		—			—		—			8		—		8		0	%
Total	$	1,573	$	217		$	1,790		100	%	$	1,805	$	330	$	2,135		100	%
*Outside the United States
Cosmetic Market:
	Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
	Total Revenues		% of Total Revenues			Total Revenues		% of Total Revenues
Cosmetic sales channels
Ecommerce	$	215		50	%	$	291		58	%
Professional		213		50	%		207		42	%
Total	$	428		100	%	$	498		100	%

The Company's revenue consists primarily of sales of products from its two revenue-generating operating segments, the anti-aging cosmetics products and biomedical products business segments.  The cosmetic market segment markets and sells a line of luxury skincare products sold through two sales channels: ecommerce and professional.  The ecommerce channel sells direct to customers through online orders, while the professional sales are to spas, salons and other skincare providers. The biomedical market segment markets and sells primary human cell research products with two product categories, cells and media, sold both within and outside the United States.

Contract terms for unit price, quantity, shipping and payment are governed by sales agreements, invoices or online order forms which the Company considers to be a customer's contract in all cases. The unit price is considered the observable stand-alone selling price for the arrangements. Any promotional or volume sales discounts are applied evenly to the units sold for purposes of calculating standalone selling price.

10

Product sales generally consist of a single performance obligation that the Company satisfies at a point in time.  The Company recognizes product revenue when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.   

For LSC products, ecommerce sales are primarily paid through credit card charges, while professional sales are invoiced. The professional sales and biomedical products' standard payment terms for its customers are generally 30 days after the Company satisfies the performance obligations. For anti-aging cosmetic products, the Company honors a 30-day return policy, but historical returns have been minimal and as such, no estimated allowance for sales returns was recorded as of March 31, 2019 and December 31, 2018.

The Company elects to account for shipping and handling as activities to fulfill the promise to transfer the goods.  As a result, no consideration is allocated to shipping and handling.  Rather, the Company accrues the cost of shipping and handling upon shipment of the product, and all contract revenue is recognized at the same time.

Variable Consideration

The Company records revenue from customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of those goods or services. From time to time, the Company offers sales promotions on its skincare products such as discounts and free product offers. Variable consideration is estimated at contract inception only to the extent that it is probable that a significant reversal of revenue will not occur, and updated at the end of each reporting period as additional information becomes available.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.  As of March 31, 2019, and December 31, 2018, accounts receivable totaled $957,000 and $651,000, respectively.  For the three months ended March 31, 2019 and 2018, the Company did not incur material impairment losses with respect to its receivables.

Practical Expedients

The Company has elected the practical expedient not to determine whether contacts with customers contain significant financing components.  The Company pays commissions on certain sales for its biomedical and cosmetic market(s) once the customer payment has been received, which are accrued at the time of the sale.  The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.  In addition, the Company has elected to exclude sales taxes in consideration of the transaction price.

Allowance for Sales Returns

The Company’s cosmetic products have a 30-day product return guarantee and based on historical rate of returns from the years ended December 31, 2015 through 2018, the Company determined that there is a low probability that returns will occur. The returns that have historically occurred have not been significant and have been recognized as they occur as a reduction of revenue that is recognized as performance obligations are met.  As of March 31, 2019 and December 31, 2018, the Company has recorded no allowance for sales returns.

Cost of Sales

Cost of sales consists primarily of salaries and benefits associated with employee efforts expended directly on the production of the Company’s products and include related direct materials, general laboratory supplies and allocation of overhead. Certain of the agreements under which the Company has licensed technology will require the payment of royalties based on the sale of its future products. Such royalties will be recorded as a component of cost of sales. Additionally, the amortization of license fees or milestone payments related to developed technologies used in the Company’s products will be classified as a component of cost of sales to the extent such payments become due in the future.

Research and Development Costs

Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits associated with research and development personnel, overhead and occupancy, contract services, and amortization of license costs for technology used in research and development with alternative future uses.

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Stock-Based Compensation

The Company recognized stock-based compensation expense associated with stock options and other stock-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of a stock-based award is measured at the grant date based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures over the requisite service period of the award. The fair value of stock options is estimated using the Black-Scholes option valuation model, which requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. The fair value of restricted stock awards is based on the market value of the Company’s common stock on the date of grant.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of March 31, 2019 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,148	$	—	$	—	$	1,148

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,745	$	—	$	—	$	1,745

The following table displays the rollforward activity of liabilities with inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity) (in thousands):

	Warrantsto purchase
	common stock
Ending balance at December 31, 2017	$	3,113
Adjustments to estimated fair value		(1,368	)
Ending balance at December 31, 2018	$	1,745
Adjustments to estimated fair value	$	(597	)
Ending balance at March 31, 2019	$	1,148

Income Taxes

The Company accounts for income taxes in accordance with applicable authoritative guidance, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards.

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Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Significant estimates include patent life (remaining legal life versus remaining useful life), inventory carrying values, allowance for excess and obsolete inventories, allowance for sales returns and doubtful accounts, and transactions using the Black-Scholes option pricing model, e.g., warrants and stock options, as well as the Monte-Carlo valuation method for certain warrants. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company believes that the carrying value of its cash, receivables, accounts payable, accrued liabilities and related party note payable as of March 31, 2019 and December 31, 2018 approximate their fair values because of the short-term nature of those instruments. The fair value of certain warrants was determined at each issuance and quarterly reporting date as necessary using the Monte-Carlo valuation methodology.

Income (Loss) Per Common Share

The computation of net loss per common share is based on the weighted average number of shares outstanding during each period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents, which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. At March 31, 2019, there were no non-vested shares of restricted stock, 2,140,156 vested and 3,339,031 non-vested stock options outstanding, and 3,951,052 warrants outstanding; and at March 31, 2018, there were no non-vested shares of restricted stock, 1,054,230 vested and 2,040,596 non-vested stock options outstanding, and 3,951,052 warrants outstanding. These stock options, warrants, and convertible preferred stock were not included in the diluted loss per share calculation because the effect would have been anti-dilutive. Refer to Note 6 for convertible preferred stock.

Comprehensive Income

Comprehensive income or loss includes all changes in stockholders’ equity except those resulting from investments by owners and distributions to owners. The Company did not have any items of comprehensive income or loss other than net loss from operations for the three months ended March 31, 2019 and 2018.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 makes nonemployee share-based payments to be consistent with the accounting for employee share-based payment awards, which measures the fair value of the payment based on grant date and considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. The updated standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In July 2017, the FASB issued ASU No. 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815)" ("ASU 2017-11") effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down round feature when triggered with the effect treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The adoption of ASU 2017-11 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize “right-of-use” assets and a lease liability for all leases with lease terms of more than 12 months. The Company elected the exception from applying the new guidance for any short-term leases or leases with terms less than or equal to 12 months. Topic 842 requires additional quantitative and qualitative financial statement footnote disclosures about the leases, significant judgments made in accounting for those leases and amounts recognized in the financial statements about those leases. In 2018 and 2019, the FASB has issued and incorporated several additional ASUs to provide clarifying guidance associated with the application of certain principles within Topic

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842. The effective date will be the first quarter of fiscal year 2019. The Company elected the “package of practical expedients,” which allowed the Company to not reassess under the new guidance, the Company’s prior conclusions about lease identification, classification, and treatment of initial direct costs as well as electing the modified retrospective approach effective January 1, 2019. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $933,000 and $1,305,000 respectively. All operating lease expense is recognized on a straight-line basis over the lease term.

Accounting Pronouncements Being Evaluated

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820), “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes the valuation processes for Level 3 fair value measurements and adds the disclosure for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The updated standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of this accounting standard update.

2. Inventory

The components of inventories are as follows (in thousands):

	March 31,			December 31,
	2019			2018
Raw materials	$	670		$	656
Work in process		583			590
Finished goods		1,218			1,276
Total		2,471			2,522
Less: allowance for inventory excess and obsolescence		(219	)		(216	)
Inventory, net	$	2,252		$	2,306

3. Property and Equipment

Property and equipment consist of the following (in thousands):

	March 31,			December 31,
	2019			2018
Machinery and equipment	$	1,599		$	1,614
Computer equipment and software		256			251
Office equipment		222			215
Leasehold improvements		996			996
Construction in progress		244			45
		3,317			3,121
Less: accumulated depreciation and amortization		(2,665	)		(2,652	)
Property and equipment, net	$	652		$	469

Depreciation expense for the three months ended March 31, 2019 and 2018 was $37,000 and $41,000, respectively.  

4. Patent Licenses

On December 31, 2003, LCT entered into an Option to License Intellectual Property agreement with Advanced Cell Technology, Inc., which changed its name to Ocata Therapeutics, Inc. and was subsequently acquired by Astellas Pharma Inc. (“Astellas"), for patent rights and paid Astellas $340,000 in option and license fees. On February 13, 2004, LCT and Astellas amended the Option agreement and LCT paid Astellas additional option fees of $22,500 for fees related to registering Astellas’ patents in selected international countries.

On May 14, 2004, LCT amended the licensing agreement with Astellas for the exclusive worldwide patent rights for the following Astellas technologies: UMass IP, ACT IP and Infigen IP. The additional license fees paid were $400,000.

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On February 7, 2013, the Company and Astellas entered into Amended and Restated License Agreements (the “Amendment”) for the purpose of completely amending and restating the terms of the license agreements. Under the terms of the Amendment, the Company acquired exclusive world-wide rights to all human therapeutic uses and cosmetic uses from Astellas and Infigen’s early work on parthenogenic-derived embryonic stem cells, as well as certain rights to patents covering Single Blastomere technology.

Pursuant to the Amendment, all minimum R&D requirements and all milestone payments due to Astellas under the Exclusive License Agreement have been eliminated. The Company will no longer pay any royalties under the ACT IP Agreement and Infigen IP Agreement. The obligation to pay royalties that ranged from 6%-12% under the UMass IP Agreement has been reduced to 0.25% of the net sales of products using technology covered by the UMass IP Agreement; and the obligation to pay a minimum annual license fee of $150,000 has been reduced to $75,000 annually, payable in two installments to Astellas.

As of March 31, 2019, the total amounts capitalized related to the acquired Astellas licenses were $747,000, and $2,945,000 related to the other patent acquisition costs and trademarks.

At March 31, 2019, future amortization expense related to intangible assets subject to amortization is expected to be as follows (in thousands):

	Amount
2019 (Remaining nine months)		72
2020		91
2021		91
2022		91
2023		91
Thereafter		2,181
Total	$	2,617

5. Advances

On June 18, 2008, the Company entered into an agreement with BioTime, Inc. (“Bio Time”), where Bio Time will pay an advance of $250,000 to LCT to produce, make, and distribute Joint Products. The $250,000 advance will be paid down with the first $250,000 of net revenues that otherwise would be allocated to LCT under the agreement. As of March 31, 2019, no revenues were realized from this agreement.

	March 31,		December 31,
	2019		2018
BioTime, Inc. (in thousands)	$	250	$	250

6. Capital Stock

As of March 31, 2019, the Company is authorized to issue 120,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share.

Capital Transactions

Series B Preferred Stock

On May 12, 2008, to obtain funding for working capital, the Company entered into a series of subscription agreements with five accredited investors for the sale of a total of 400,000 Series B Units, each Series B Unit consisting of one share of Series B Preferred Stock (“Series B Preferred”) and two Series B Warrants (“Series B Warrants”) to purchase common stock for each $1.00 invested.

The total purchase price received by the Company was $400,000. The Series B Preferred is convertible into shares of common stock at the initial conversion ratio of 0.0134 shares of common stock for each share of Series B Preferred converted (which was established based on an initial conversion price of $75.00 per share), and the Series B Warrants were exercisable at $75.00 per share until five years from the issuance of the Series B Warrants, which expired unexercised in May 2013. The Series B Preferred contain anti-dilution clauses whereby, if the Company issues equity securities or securities convertible into equity at a price below the conversion price of the Series B Preferred, such conversion price shall be adjusted downward to equal the price of the new securities. The Series B Preferred has a priority (senior to the shares of common stock and Series I Preferred) on any sale or liquidation of the Company equal to the purchase price of the Series B Units, plus a liquidation premium of 6% per year. If the Company elects to declare a dividend in any year, it must first pay to the Series B Preferred holder a dividend equal to the amount of the dividend the Series B Preferred holder would receive if the Series B Preferred were converted just prior to the dividend declaration. Each share of Series B

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Preferred has the same voting rights as the number of shares of common stock into which it would be convertible on the record date. As of March 31, 2019 and December 31, 2018, there were 250,000 shares of the Series B Preferred issued and outstanding.

 In December 2016, the Company issued Restricted Stock to its non-employee directors at a price of $1.08. Accordingly, such transactions triggered adjustments in the current conversion price of the Series B Preferred to $1.08.  

Series D Preferred Stock

On December 30, 2008, the Company entered into a Series D Preferred Stock Purchase Agreement (the “Series D Agreement”) with accredited investors (the “Investors”) and sold 43 shares of Series D Preferred Stock (“Series D Preferred”) at a price of $100,000 per Series D Preferred share.

Ten shares of the Series D Preferred were issued to X-Master Inc., which is a related party and affiliated with the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors, Dr. Andrey Semechkin and Dr. Russell Kern, Executive Vice President and Chief Scientific Officer and a director; and 33 shares of the Series D Preferred were issued to Dr. Andrey Semechkin. As of March 31, 2019 and December 31, 2018, there were 43 shares of the Series D Preferred issued and outstanding.

The Series D Preferred was initially convertible into shares of common stock at $37.50 per share, resulting in an initial conversion ratio of 2,667 shares of common stock for every share of Series D Preferred. The Series D Preferred has an anti-dilution clause whereby, if the Company issues equity securities or securities convertible into equity at a price below the conversion price of the Series D Preferred, the conversion price of the Series D Preferred shall be adjusted downward to equal the price of the new securities. The Series D Preferred has priority over the Series B Preferred Stock, Series G Preferred Stock, Series I-1 Preferred Stock, Series I-2 Preferred Stock and common stock on the proceeds from any sale or liquidation of the Company in an amount equal to the purchase price of the Series D Preferred.

In March 2016, the Company issued Series I Preferred Stock which had an initial conversion price of $1.75, as well as three series of warrants. Accordingly, such transaction triggered an adjustment in the current conversion price of the Series D Preferred to $1.75.  

Series G Preferred Stock

On March 9, 2012, the Company entered into a Series G Preferred Stock Purchase Agreement with AR Partners, LLC (the “Purchaser”) to sell 5,000,000 shares of Series G Preferred Stock (“Series G Preferred”) at a price of $1.00 per Series G Preferred share, for a total purchase price of $5,000,000. The Purchaser is an affiliate of Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer, and Dr. Russell Kern, Executive Vice President and Chief Scientific Officer and a director.

The Series G Preferred was initially convertible into shares of common stock at $60.00 per share, resulting in an initial conversion ratio of 0.0167 shares of common stock for every share of Series G Preferred. The conversion price may be adjusted for stock splits and other combinations, dividends and distributions, recapitalizations and reclassifications, exchanges or substitutions and is subject to a weighted-average adjustment in the event of the issuance of additional shares of common stock below the conversion price.

The Series G Preferred shares have priority over the Series B Preferred, Series I-1 Preferred, Series I-2 Preferred and common stock on the proceeds from any sale or liquidation of the Company in an amount equal to the purchase price of the Series G Preferred, but such payment may be made only after payment in full of the liquidation preferences payable to holders of any shares of Series D Preferred then outstanding. Each share of Series G Preferred has the same voting rights as the number of shares of common stock into which it would be convertible on the record date. As long as there are at least 1,000,000 shares of Series G Preferred outstanding, the holders of Series G Preferred have (i) the initial right to propose the nomination of two members of the Board, at least one of which such nominees shall be subject to the approval of the Company’s independent directors, for election by the stockholder’s at the Company’s next annual meeting of stockholders, or, elected by the full board of directors to fill a vacancy, as the case may be, and (ii) the right to approve any amendment to the certificate of incorporation, certificates of designation or bylaws, in manner adverse to the Series G Preferred, alter the percentage of board seats held by the Series G Preferred directors or increase the authorized number of shares of Series G Preferred. At least one of the two directors nominated by holders of the Series G Preferred shall be independent based on the NASDAQ listing requirements.   

As of March 31, 2019 and December 31, 2018, there were 5,000,000 shares of the Series G Preferred issued and outstanding. On January 21, 2019, the Company issued 599,222 shares of common stock upon conversion of a portion of the Company’s outstanding indebtedness with a principal amount of $1,000,000 and accrued and unpaid interest on the principal of $49,000.  In accordance with the Series G Certificate of Designation, the issuance of Common Shares at the conversion price of $1.75 per share triggered further adjustment in the conversion price and conversion ratio of the Series G Preferred Stock to $9.70 per share and 0.1031 shares, respectively.  

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Series I Preferred Stock

On March 9, 2016, the Company, entered into a Securities Purchase Agreement (the “Series I Agreement”) with three investors, which included two institutional investors and Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman providing for the issuance (the “Offering”) of (i) 2,000 shares of Series I-1 convertible preferred stock (the “Series I-1 Preferred Stock”) issuable to the institutional investors at a price of $1,000 per share, (ii) 4,310 shares of Series I-2 convertible preferred stock (the “Series I-2 Preferred Stock”, and together with the Series I-1 Preferred Stock, the “Preferred Stock”) issuable to Andrey Semechkin at a price of $1,000 per share, (iii) Series A Warrants (the “Series A Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $3.64 per share with a term of five years, (iv) Series B Warrants (the “Series B Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $1.75 per share with a term of six months and (v) Series C Warrants (the “Series C Warrants”, together with the Series A Warrants and the Series B Warrants, collectively, the “Investor Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $1.75 per share with a term of twelve months. The closing of the Offering occurred on March 15, 2016 (the “Closing Date”). The Series I Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature. The Company received cash proceeds of $2.5 million on the closing date. On September 15, 2016, the remaining unexercised Series B Warrants then outstanding expired unexercised. On March 15, 2017, the remaining unexercised Series C Warrants then outstanding expired unexercised.

Rodman & Renshaw, a unit of H.C. Wainwright & Co., LLC. (the “Placement Agent”) acted as the exclusive placement agent for the Offering pursuant to a placement agency engagement letter, dated as of March 9, 2016, by and between the Placement Agent and the Company (the “Engagement Letter”). Upon the closing of the Offering, pursuant to the Engagement Letter, the Placement Agent received a placement agent fee of $200,000 and a warrant to purchase approximately 343,000 shares of common stock (the “Placement Agent Warrant”, together with the Investor Warrants, the “Warrants”) as well as the reimbursement of fees and expenses up to $50,000. Similar to the Series A Warrant, the Placement Warrant has an initial exercise price of $3.64 per share, and is immediately exercisable and will terminate on five years after the date of issuance.  

Subject to certain ownership limitations with respect to the Series I-1 Preferred Stock, the Series I Preferred Stock is convertible at any time into shares of Common Stock at an initial conversion price of $1.75 per share. The Series I Preferred Stock is non-voting, is only entitled to dividends in the event that dividends are paid on the Common Stock, and will not have any preferences over the Common Stock, except that the Preferred Stock shall have preferential liquidation rights over the Common Stock. Other than the Series I-1 Preferred Stock having a beneficial ownership limitation, the Series I-1 Preferred Stock and Series I-2 Preferred Stock are substantially identical. The conversion price of the Series I Preferred Stock is subject to certain resets as set forth in the Certificates of Designation, including the date of any future amendment to the certificate of incorporation with respect to a reverse stock split and the effectiveness dates of the registration statements. As of March 31, 2019 and December 31, 2018, there were 5,124 shares of Series I Preferred Stock outstanding.

See Note 9, Stock Options and Warrants for detailed discussion of the anti-dilution provisions of the Series A Warrants and Placement Agent Warrants.

Reserved Shares

At March 31, 2019, the Company had shares of common stock reserved for future issuance as follows:

Options outstanding	5,479,187
Options available for future grant	3,971,056
Convertible preferred stock	6,132,276
Warrants	3,951,052
	19,533,571

7. Related Party Transactions

Other than with respect to the purchases of Series D Preferred, Series G Preferred and Series I Preferred Stock transactions discussed above, the Company’s related party transactions were for a facility lease and working capital bridge loans.

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During the first quarter of 2011, the Company executed an operating lease for its corporate offices with S Real Estate Holdings LLC. S Real Estate Holdings LLC is owned by Dr. Russell Kern, the Company’s Executive Vice President and Chief Scientific Officer and a director and was previously owned by Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. The lease agreement was negotiated at arm’s length and was reviewed by the Company’s outside legal counsel. The terms of the lease were reviewed by a committee of independent directors, and the Company believes that, in total, those terms are at least as favorable to the Company as could be obtained for comparable facilities from an unaffiliated party. In March 2017 the Company signed an amendment to the lease agreement to extend the term of the lease until 2020 and include annual adjustments to the monthly lease payments.  For the three months ended March 31, 2019 and 2018, the Company recorded $40,000, in rent expense that was related to the facility lease arrangement with related parties.

Between March 6, 2018 and August 8, 2018, to obtain funding for working capital purposes, the Company borrowed a total of $2,000,000 from Dr. Andrey Semechkin and issued an unsecured non-convertible promissory note in the principal amount of $2,000,000 (the “Note”) to Dr. Semechkin (the “Noteholder”). The outstanding principal amount under the Note accrued interest at a rate of four percent (4%) per annum. The Note was due and payable November 1, 2018 and on November 12, 2018, to satisfy the indebtedness incurred on the Note, an amendment to the Note was entered into extending the due date to January 15, 2019.

On January 21, 2019, the Company entered into a Note Conversion Agreement with Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer (the “Conversion Agreement”). The Conversion Agreement provides for the conversion of a total of $1,049,000 (representing $1,000,000 of principal and $49,000 of accrued interest, representing all accrued interest on the amount owed to Dr. Semechkin through January 21, 2019) under the promissory note issued to Dr. Semechkin on August 8, 2018 into a total of 599,222 shares of the Company’s common stock, representing a conversion price of $1.75 per share. Under the Conversion Agreement, the remaining $1,000,000 owed to Dr. Semechkin under the Note has been reflected in a new unsecured, non-convertible promissory note in the principal amount of $1,000,000 (the “New Note”). The outstanding principal amount under the New Note accrues interest at a rate of four and one-half percent (4.5%) per annum. The New Note is due and payable on January 15, 2020, but may be pre-paid by the Company without penalty at any time. See Note 12, Subsequent Events.

8. Income Taxes

The Company estimated Federal and state tax losses for the current year and recorded a full valuation allowance against all net deferred tax assets. As such, no income tax provision has been recorded for the current period. The Company may be subject to Internal Revenue Code (IRC) Sections 382 and 383, which could limit the amount of the net operating loss and tax credit carryovers that can be used in future years. The Company has not completed a study to assess whether an ownership change has occurred, as defined by IRC Sections 382 and 383, or whether there have been ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. The Company estimates that if such a change did occur, the federal and state net operating loss carryforwards and research and development credit carryforwards that can be utilized in the future will be significantly limited. There can be no assurances that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards or the credit carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the carryforwards.  

9. Stock Options and Warrants

Stock Options

The Company adopted the 2006 Equity Participation Plan (as amended the “2006 Plan”), which provides for the grant of stock options, restricted stock and other equity-based awards. Awards for up to 100,000 shares may be granted to employees, directors and consultants under this Plan. The options granted under the 2006 Plan may be either qualified or non-qualified options. Options may be granted with different vesting terms and expire no later than 10 years from the date of grant. The 2006 Plan expired on November 16, 2016. Options and other equity based awards granted prior to the expiration of the 2006 Plan will continue in effect until the option or award is exercised or terminates pursuant to its terms. No new awards may be granted under the 2006 Plan following its expiration.

In April 2010, the Company adopted the 2010 Equity Participation Plan (as amended the “2010 Plan”), which provides for the grant of stock options, restricted stock and other equity-based awards. Awards for up to 9,700,000 shares may be granted to employees, directors and consultants under the 2010 Plan. The options granted under the 2010 Plan may be either qualified or non-qualified options. Options may be granted with different vesting terms and expire no later than 10 years from the date of grant.

In November and December of 2009, the Company issued non-qualified stock options to purchase 68,384 shares of common stock outside the 2006 and 2010 option plans to certain employees and consultants. These options vest over 50 months and expire no later than 10 years from the date of grant. As of March 31, 2019, 12,634 options remain outstanding and a total of 55,750 options were exercised, canceled, or expired.

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Total stock-based compensation expense for the three months ended March 31, 2019 and 2018 was comprised of the following (in thousands):  

	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2019		2018
Cost of sales	$	24	$	6
Research and development		156		124
Selling and marketing		23		7
General and administrative		303		170
	$	506	$	307

Unrecognized compensation expense related to stock options as of March 31, 2019 was $3,450,000, which is expected to be recognized over a weighted average period of approximately 2.0 years.

In accordance with applicable authoritative guidance, the Company is required to establish assumptions and estimates of the fair value of stock options granted, as well as use a valuation model to calculate the fair value of stock-based awards. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. All options are amortized over the requisite service periods.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the three months ended March 31, 2019 and 2018:

	Three Months Ended			Three Months Ended
	March 31,			March 31,
	2019			2018
Significant assumptions (weighted average):
Risk-free interest rate at grant date		2.55	%		2.68	%
Expected stock price volatility		84.80	%		95.61	%
Expected dividend payout		0	%		0	%
Expected option life based on management's estimate	5.77 years			5.76 years

Transactions involving stock options issued to employees, directors and consultants under the 2006 Plan, the 2010 Plan and outside the plans are summarized below. Options issued have a maximum life of 10 years. The following tables summarize the changes in options outstanding and the related exercise prices for the Company’s common stock options issued:

	Number of					Weighted
	OptionsIssued			Weighted		Average	Aggregate
	Under			AverageExercise		Remaining	Intrinsic
	2006 Plan and			Price Per		Contractual	Value
	2010 Plan			Share		Term	(in thousands)
Outstanding at December 31, 2018		4,354,708		$	3.95
Granted		1,142,000		$	1.51
Exercised		—		$	—
Canceled or expired		(30,155	)	$	1.78
Outstanding at March 31, 2019		5,466,553		$	3.45	8.69 years		16
Vested and expected to vest at March 31, 2019		5,065,661		$	3.60	8.64 years	$	16
Exercisable at March 31, 2019		2,127,522		$	6.29	7.88 years	$	10

					Weighted
	Number of		Weighted		Average	Aggregate
	Options Issued		Average Exercise		Remaining	Intrinsic
	Outside		Price Per		Contractual	Value
	the Plan		Share		Term	(in thousands)
Outstanding, vested and exercisable at December 31, 2018		12,634	$	90.23
Granted		—	$	—
Exercised		—	$	—
Canceled or expired		—	$	—
Outstanding, vested and exercisable at March 31, 2019		12,634	$	90.23	0.66 years	$	—

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Restricted Stock Awards

Restricted stock awards are grants that entitle the holder to acquire shares of common stock at zero or a fixed price, which is typically nominal. The Company accounts for the restricted stock awards as issued and outstanding common stock, even though the shares covered by a restricted stock award cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by the Company for the original purchase price following the awardee’s termination of service.

No restricted stock was awarded for the three months ended March 31, 2019. For the three months ended March 31, 2018 there were 5,527 shares of restricted stock awarded and fully vested at a weighted average grant date fair value of $1.47 per share.

The fair value of the restricted stock awards is based on the market value of the common stock on the date of grant. The total grant-date fair value of restricted stock awards vested during the three months ended March 31, 2019 and 2018, was none and approximately $8,000, respectively. The Company recognized none and approximately $8,000 of stock-based compensation expense related to the restricted stock awards for the three months ended March 31, 2019 and 2018, respectively.   As of March 31, 2019, there was no unrecognized compensation costs related to unvested awards. 

Warrants

Warrants Issued with Preferred Stock

Warrants issued in connection with the October 2014 Financing

The Company has accounted for the warrants in accordance with current accounting guidance, which defines how freestanding contracts that are indexed to and potentially settled in a Company’s own stock should be measured and classified. The authoritative accounting guidance prescribes that only warrants issued under contracts that cannot be net-cash settled and are both indexed to and settled in the Company’s common stock can be classified as equity. As the Series A, Series B and Series C Warrants and Placement Agent Warrant agreements did not meet the specific conditions for equity classification, the Company was required to classify the fair value of the warrants issued as a liability, with subsequent changes in fair value to be recorded as income (loss) in the statement of operations upon revaluation of the fair value of warrant liability at each reporting period. Valuation of the Warrants was estimated at issuance and each reporting date using the Monte-Carlo simulation model. As of December 31, 2016, all Series A, B and C Warrants were exercised or expired unexercised.

The following assumptions were used as inputs to the model at March 31, 2019: for the Placement Agent Warrants, stock price of $1.12 and warrant exercise price of $1.75 as of the valuation date; the Company’s historical stock price volatility of 77.2%; risk free interest rate on U.S. treasury notes of 2.40%; warrant expiration of 1.04 years; and a zero dividend rate; simulated as a daily interval and anti-dilution impact if the Company had to raise capital below $1.75 per share.

During the three months ended March 31, 2019 and 2018, the Company recorded no material expense or income related to the change in the fair value of warrant liability in the condensed consolidated statements of operations related to the warrants from the October 2014 financing.

Placement Agent Warrants Price Adjustment - The Warrants are immediately exercisable and the exercise price of the Warrants is subject to certain reset adjustments as set forth in the forms of Warrant, including the date of the amendment to the Company’s certificate of incorporation with respect to the reverse stock split, the effectiveness dates of the registration statements and the six and twelve month anniversaries of the date of issuance of the Warrants. The Company’s registration statement on Form S-1 filed on November 3, 2014 with the SEC became effective after amendment on November 25, 2014.  Pursuant to the terms of the respective warrant agreements, the exercise price of the Placement Agent Warrants were reset at $1.75 per share. At March 31, 2019, 2,483 of the Placement Agent Warrants remained outstanding.   

Warrants issued in connection with the March 2016 Financing

The Company has accounted for the warrants in accordance with current accounting guidance, which defines how freestanding contracts that are indexed to and potentially settled in a Company’s own stock should be measured and classified. The authoritative accounting guidance prescribes that only warrants issued under contracts that cannot be net-cash settled and are both indexed to and settled in the Company’s common stock can be classified as equity. As the Series A, Series B and Series C Warrants and Placement Agent Warrant agreements did not meet the specific conditions for equity classification, the Company was required to classify the fair value of the warrants issued as a liability, with subsequent changes in fair value to be recorded as income (loss) in the statement of operations upon revaluation of the fair value of warrant liability at each reporting period. Unexercised portions of the Series B and C Warrants expired unexercised as of March 31, 2019. Valuation of the Warrants was estimated at issuance and each reporting date using the Monte-Carlo simulation model.

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The following assumptions were used as inputs to the model at March 31, 2019 for Series A Warrants and the Placement Agent Warrants, stock price of $1.12 and warrant exercise price of $1.75 as of the valuation date; the Company’s historical stock price volatility of 77.2%; risk free interest rate on U.S. treasury notes of 2.27%; warrant expiration of 1.96 years; and a zero dividend rate, simulated as a daily interval and anti-dilution impact if the Company had to raise capital below $1.75 per share.

During the three months ended March 31, 2019 and 2018, the Company recorded a net change in fair value of warrant liability income of $597,000 and $355,000, respectively in the condensed consolidated statements of operations related to the warrants from the March 2016 financing.

Series A, and Placement Agent Warrants Price Adjustment - The Warrants are immediately exercisable and the exercise price of the Warrants is subject to certain reset adjustments as set forth in the forms of Warrant, including the date of the amendment to the Company’s certificate of incorporation with respect to any reverse stock split, the effectiveness dates of the registration statements and (in certain events) upon the six and twelve month anniversaries of the date of issuance of the Warrants. Pursuant to the terms a note conversion and stock purchase agreement in December 2017 with Dr. Andrey Semechkin, the exercise price of the Series A Warrants and the Placement Agent Warrants were reset at $1.75 per share.

Warrants Issued with Common Stock

2013 Securities Purchase Agreements for Common Stock

In conjunction with the Company’s sale of 67,500 shares of common stock on January 22, 2013, the Company issued warrants convertible into 33,750 shares of common stock at an exercise price of $30.00 per share. The warrants have a five-year term. These warrants are held by Dr. Andrey Semechkin and Dr. Simon Craw, the Company’s Co-Chairman and Chief Executive Officer and the Company’s former Executive Vice President Business Development, respectively.   These warrants expired unexercised in January 2018.

On March 12, 2013 the Company issued warrants convertible into 16,667 shares of common stock in conjunction with the sale of 33,334 shares of common stock. These warrants have a five-year term and an exercise price of $30.00 per share. Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer is the holder of 1,667 of these warrants. These warrants expired unexercised in March 2018.

Share data related to warrant transactions through March 31, 2019 were as follows:

	Common Stock				Common Stock				Price per Warrant
	March 2016 Financing				October 2014 Financing						Weighted
			Placement		Placement		Total				Average
	Series A		Agent		Agent		Warrants		Range		Exercise Price
Outstanding, December 31, 2018		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75
Forfeited/Cancelled								—	$		$
Outstanding, March 31, 2019		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75

10. Commitments and Contingencies

Leases

The Company has established its primary research facility in 8,215 square feet of leased office and laboratory space in Oceanside, California. The current lease for this facility expires in December 2021, with the Company’s option to terminate the lease on January 1, 2020 upon a six-month advanced notice. The current base rent is approximately $10,000 per month. The facility has leasehold improvements which include cGMP (current Good Manufacturing Practices) level clean rooms designed for the derivation of clinical-grade stem cells and their differentiated derivatives, research laboratories for the Company’s stem cell differentiation studies and segregated rooms for biohazard control and containment of human donor tissue. The monthly base rent will increase by 3% annually on the anniversary date of the agreement.

The Company leases a 13,320 square foot manufacturing facility in Frederick, Maryland, which is used for laboratory and administrative purposes. As of March 31, 2019, the base rent was approximately $17,000 per month. The lease was amended in October 2018 to increase the square footage from 8,280 square feet to 13,320 for an additional 5,040 square feet. In addition, the Company extended the lease to expire in November 2025. The administration space is used to support sales, marketing and accounting. The laboratory is being used to develop and manufacture the Company’s research products. The manufacturing laboratory space has clean rooms and is fitted with the necessary water purification systems, temperature-controlled storage, labeling equipment and other standard manufacturing equipment to manufacture, package, test, store, and distribute cell culture products.   

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On February 25, 2011, the Company entered into a lease agreement (the “Lease Agreement”) with S Real Estate Holdings LLC to allow the Company to expand into new corporate offices located at 5950 Priestly Drive, Carlsbad, California. The building is used for administrative purposes, but could also be used for research and development purposes if such space is needed in the future. The lease initially covered approximately 4,653 square feet, starting on March 1, 2011, and was amended to cover approximately 8,199 square feet effective July 1, 2011, and to cover approximately 9,848 square feet effective January 1, 2013. The lease expired on February 29, 2016, and the Company extended the term of the lease for one year. On February 22, 2017, the Company extended the term of the lease for an additional three years. The Company began paying rent at an initial rate of approximately $5,000 per month and the rate was amended effective July 1, 2011 and January 1, 2013 to account for additional square footage occupied by the Company. As of March 31, 2019, the base rent is approximately $13,000 per month. The monthly base rent will increase by 3% annually on the anniversary date of the agreement. The Company is also obligated to pay a portion of the utilities for the building and increases in property tax and insurance.

S Real Estate Holdings LLC is owned by Dr. Russell Kern, the Company’s Executive Vice President and Chief Scientific Officer and a director, and was previously owned by Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. The Lease Agreement was negotiated at arm’s length and was reviewed by the Company’s outside legal counsel. The terms of the lease were reviewed by a committee of independent directors, and the Company believes that, in total, those terms are consistent with the terms that could be obtained for comparable facilities from an unaffiliated party.   

These operating leases are included in "right-of-use asset" on the Company's March 31, 2019 balance sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments is included in ”operating lease liabilities, current” and “operating lease liabilities, net of current portion” on the Company's March 31, 2019 balance sheet. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $933,000 and $1,305,000, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. 

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.

Information related to the Company's right-of-use assets and related lease liabilities were as follows (in thousands):

	Three months ended  March 31, 2019
Cash paid for operating lease liabilities	$	119
Right-of-use assets obtained in exchange for new operating lease obligations	$	933
Weighted-average remaining lease term (years)		5.16
Weighted average discount rate		17.38	%

Maturities of lease liabilities as of March 31, 2019 were as follows :
2019 (remaining months)	$	372
2020		369
2021		347
2022		220
2023		227
Thereafter		454
		1,989
Less: present value adjustments		(684	)
Total lease liabilities	$	1,305
Current operating lease liabilities	$	294
Non-current operating lease liabilities		1,011
Total operating lease liabilities	$	1,305

The Company incurred rent expense of $140,000 and $87,000 for the three months ended March 31, 2019 and 2018, respectively.   

Customer Concentration

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During the three months ended March 31, 2019 and 2018, for the biomedical market segment, one customer accounted for 42% and 37%of consolidated revenues, respectively.No other single customer accounted for more than 10% of revenues for any period presented.

Vendor Concentration

During the three months ended March 31, 2019 and 2018, no single vendor accounted for more than 10% of consolidated purchases.

11. Segments and Geographic Information

The Company’s chief operating decision-maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information by each reportable company’s statement of operations. The Company operates the business on the basis of three reporting segments, the parent company and two business units:

International Stem Cell Corporation, incorporated in Delaware, is a research and development company, for the therapeutic market, which advances clinical applications of hpSCs for the treatment of various diseases of the central nervous system, liver diseases and is currently conducting clinical trials in Australia for the use of hpSCs in the treatment of Parkinson’s disease through its wholly-owned subsidiary, Cyto Therapeutics;

Lifeline Skin Care, Inc. for the anti-aging cosmetic market, develops, manufactures and markets a category of anti-aging cosmetic skin care products based on the Company’s proprietary parthenogenetic stem cell technology and small molecule technology;

Lifeline Cell Technology, LLC for the biomedical market, develops, manufactures and commercializes primary human cell research products including over 201 human cell culture products, including frozen human “primary” cells and the reagents (called “media”) needed to grow, maintain and differentiate the cells.

Revenues, Expenses and Operating Income (loss)

The Company does not measure the performance of its segments on any asset-based metrics. Therefore, segment information is presented only for operating income (loss). Revenues, expenses and operating income (loss) by market segment were as follows (in thousands):

	For the Three Months Ended
	March 31,
	2019			2018
Revenues:
Anti-aging cosmetic market	$	428		$	498
Biomedical market		1,790			2,135
Total revenues		2,218			2,633
Operating expenses:
Therapeutic market		1,658			1,816
Anti-aging cosmetic market		603			704
Biomedical market		1,446			1,298
Total operating expenses		3,707			3,818
Operating income (loss):
Therapeutic market		(1,658	)		(1,816	)
Anti-aging cosmetic market		(175	)		(206	)
Biomedical market		344			837
Total operating loss	$	(1,489	)	$	(1,185	)

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Geographic Information

The Company’s wholly-owned subsidiaries are located in Maryland, California, and Melbourne, Australia and have customer and vendor relationships worldwide. Significant revenues in the following regions are those that are attributable to the individual countries within the region to which the product was shipped (in thousands):  

	For the Three Months Ended
	March 31,
	2019		2018
North America	$	1,997	$	2,303
Asia		129		238
Europe		89		86
All other regions		3		6
Total	$	2,218	$	2,633

12. Subsequent Events

On April 17, 2019 to obtain funding for working capital purposes, the Company issued an unsecured, non-convertible promissory note in the amount of $1,800,000 to Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. Dr. Andrey Semechkin surrendered a promissory note from the Company for $1,000,000 and provided an additional $800,000 of funds to the Company.  The outstanding principal amount accrues interest at a rate of four and a half Percent (4.5%) per annum and is due and payable January 15, 2020 but may be pre-paid by the Company without penalty at any time.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial information included elsewhere herein. This information should also be read in conjunction with our audited historical consolidated financial statements which are included in our Form 10-K for the fiscal year ended December 31, 2018. The discussion contains forward-looking statements, such as our plans, expectations and intentions (including those related to clinical trials and business and expense trends), that are based upon current expectations and that involve risks and uncertainties. Our actual results may differ significantly from management’s expectations. The factors that could affect these forward looking statements are discussed in Item 1A of Part II of this report.  This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any expectations expressed herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best assessment by our management.

Business Overview

We have generated aggregate product revenues from our two commercial businesses of $2.2 million and $2.6 million for the three months ended March 31, 2019 and 2018, respectively. We currently have no revenue generated from our principal operations in therapeutic and clinical product development.

Our products are based on multi-decade experience with human cell culture and a proprietary type of pluripotent stem cells, human parthenogenetic stem cells (“hpSCs”). Our hpSCs are comparable to human embryonic stem cells (“hESCs”) in that they have the potential to be differentiated into many different cells in the human body. However, the derivation of hpSCs does not require the use of fertilized eggs or the destruction of viable human embryos and also offers the potential for the creation of immune-matched cells and tissues that are less likely to be rejected following transplantation. Our collection of hpSCs, known as UniStemCell™, currently consists of fifteen stem cell lines. We have facilities and manufacturing protocols that comply with the requirements of Good Manufacturing Practice (GMP) standards as promulgated in the U.S. Code of Federal Regulations and enforced by the U.S. Food and Drug Administration (“FDA”).

Market Opportunity and Growth Strategy

Therapeutic Market – Clinical Applications of hpSCs for Disease Treatments. With respect to therapeutic research and product candidates, we focus on applications where cell and tissue therapy is already proven but where there is an insufficient supply of safe and functional cells or tissue. We believe that the most promising potential clinical applications of our technology are: 1) Parkinson’s disease (“PD”); 2) traumatic brain injury (“TBI”); and 3) metabolic/liver diseases. Using our proprietary technologies and know-how, we are creating neural stem cells from hpSCs as a potential treatment of PD and TBI, and stroke, and liver cells from hpSCs that may be able to treat a variety of hepatic and metabolic liver diseases.

Our most advanced project is the neural stem cell program for the treatment of Parkinson’s disease. In 2013 we published in Nature Scientific Reports the basis for our patent on a new method of manufacturing neural stem cells which is used to produce the clinical-grade cells necessary for future clinical studies and commercialization. In 2014 we completed the majority of the preclinical research establishing the safety profile of neural stem cells (“NSC”) in various animal species including non-human primates. In June 2016 we published the results of a 12-month pre-clinical non-human primate study that demonstrated the safety, efficacy and mechanism of action of the ISC-hpNSC^®. In 2017, we began our Phase I trial of ISC-hpNSC®, human parthenogenetic stem cell-derived neural stem cells for the treatment of Parkinson’s disease.  This trial involves three groups, each with four patients, with each group receiving an increasing amount of ISC-hpNSC via intracerebral transplantation.  Patients are evaluated for 12 months (active phase of the study) with an additional 5-year observational follow-up period to assess safety. We reported 12-month results from the first cohort and 6-month interim results of the second cohort at the Society for Neuroscience annual meeting (Neuroscience 2018) in November 2018.  In April 2019, we announced the completion of subject enrollment, with the twelfth subject receiving a transplantation of the highest dose of cells. There have been no safety signals or serious adverse effects seen to date as related to the transplanted ISC-hpNSC® cells. We anticipate providing full results of the phase I clinical study by the second quarter of 2020.

In November 2014 in an important ruling the FDA cleared ISCO’s human parthenogenetic stem cells line for investigational clinical use. This was a necessary step in the process of advancing stem cell therapies based on ISCO’s core technology into clinical development and on to commercialization. Although the Phase I study is conducted in Australia, and therefore not subject to FDA oversight, we anticipate that a significant portion of future studies will be carried out in the United States where this approval is necessary.

In August 2014 we announced the launch of a stroke program, evaluating the use of ISC-hpNSC^® transplantation for the treatment of ischemic stroke using a rodent model of the disease. The Company has a considerable amount of safety data on ISC-hpNSC from the Parkinson’s disease program and, as there is evidence that transplantation of ISC-hpNSC may improve patient outcomes as an adjunctive therapeutic strategy in stroke, having a second program that can use this safety dataset is therefore a logical extension. In

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2015 the Company together with Tulane University demonstrated that NSC can significantly reduce neurological dysfunction after a stroke in animal models.

In October 2016 we announced the results of the pre-clinical rodent study, evaluating the use of ISC-hpNSC® transplantation for the treatment of TBI. The study was conducted at the University of South Florida Morsani College of Medicine. We demonstrated that animals receiving injections of ISC-hpNSC® displayed the highest levels of improvements in cognitive performance and motor coordination compared to vehicle control treated animals. In February 2019, we published the results of the pre-clinical study in Theranostics, a prestigious peer-reviewed medical journal.  The publication titled, “Human parthenogenetic neural stem cell grafts promote multiple regenerative processes in a traumatic brain injury model,” demonstrated that the clinical-grade neural stem cells used in our Parkinson’s disease clinical trial, ISC-hpNSC® , significantly improved TBI-associated motor, neurological, and cognitive deficits without any safety issues.

Anti-Aging Cosmetic Market – Skin Care Products. Our wholly-owned subsidiary Lifeline Skin Care, Inc. (“LSC”) develops, manufactures and offers for sale anti-aging skin care products based on two core technologies: encapsulated extract derived from hpSC and specially selected targeted small molecules. Products containing stem cell technology include: Defensive Day Serum, Recovery Night Serum, Firming Eye Complex, Neck Firming Complex, Aqueous Gel Serum, Intense Moisture Serum, and the ProPLUS Advanced Aqueous Treatment. Products based on the proprietary targeted small molecule technology include: retail and professional formulas of the Collagen Booster (Molecular Renewal Serum), retail and professional formulas of the Elastin Booster, and Brightening Toner. LSC’s products are regulated as cosmetics. LSC’s products are sold domestically through a branded website, Amazon, ecommerce partners and through the professional channel (including dermatologists, plastic surgeons, medical, day and resort spas).

Biomedical Market – Primary Human Cell Research Products. Our wholly-owned subsidiary Lifeline Cell Technology, LLC (“LCT”) develops, manufactures and commercializes approximately 200 human cell culture products, including frozen human “primary” cells and the reagents (called “media”) needed to grow, maintain and differentiate the cells. LCT’s scientists have used a technology called basal medium optimization to systematically produce optimized products designed to culture specific human cell types and to elicit specific cellular behaviors. These techniques also produce products that do not contain non-human animal proteins, a feature desirable to the research and therapeutic markets. Each LCT cell product is quality tested for the expression of specific markers (to assure the cells are the correct type), proliferation rate, viability, morphology and absence of pathogens. Each cell system also contains associated donor information and all informed consent requirements are strictly followed. LCT’s research products are marketed and sold by its internal sales force, OEM partners and LCT brand distributors in Europe and Asia.

Results of Operations

Revenues

Revenue for the three months ended March 31, 2019, totaled $2.22 million, compared to $2.63 million for the three months ended March 31, 2018. LCT contributed $1.79 million or 81% of total revenue for the three months ended March 31, 2019, compared to $2.14 million or 81% for the three months ended March 31, 2018. The decrease of $345,000 or 16% in LCT’s revenue for 2019 was driven primarily by a decrease in sales of media for the period. LSC’s revenue of $428,000 for the three months ended March 31, 2019 accounted for 19% of total revenue, compared to $498,000 or 19% of total revenue for the three months ended March 31, 2018. The decrease of $70,000 or 14% in LSC’s revenue consists primarily of a decrease of $67,000 in ecommerce sales.

Cost of sales

Cost of sales for the three months ended March 31, 2019 was $841,000 or 38% of revenue, compared to $825,000 or 31% of revenue for the three months ended March 31, 2018. LCT’s cost of sales as a percentage of LCT’s revenue increased approximately nine percentage points and LSC’s cost of sales as a percentage of LSC’s revenue decreased approximately two percentage points. LCT’s cost of sales for the three months ended March 31, 2019 was $766,000 or 43% of LCT’s revenue, compared to $729,000 or 34% of LCT’s revenue for the three months ended March 31, 2018. The increase in cost of sales percentage for LCT is primarily due to change in product sales mix for the three months ended March 31, 2019, compared to the corresponding period in 2018. LSC’s cost of sales was $75,000 or 18% of LSC’s revenue for the three months ended March 31, 2019, compared to $96,000 or 19% of LSC’s revenue for the three months ended March 31, 2018. The decrease in cost of sales for LSC is a direct result of the decrease in sales.

Cost of sales reflects direct costs including salaries and benefits related to manufacturing, third party manufacturing costs, materials, general laboratory supplies and an allocation of overhead. We aim to continue refining our manufacturing processes and supply chain management to improve the cost of sales as a percentage of revenue for both LCT and LSC.

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Research and Development (“R&D”)

Research and development expenses were $653,000 for the three months ended March 31, 2019, compared to $811,000 for the same period in 2018. The decrease of $158,000 in R&D expenditures is primarily the result of decreased clinical trial costs of $95,000 and decreased consulting costs of $85,000.

Our R&D efforts are primarily focused on the development of treatments for Parkinson’s disease (“PD”), liver diseases, traumatic brain injury (“TBI”), stroke, and the creation of new cGMP grade human parthenogenetic stem cell lines. These projects are long-term investments that involve developing both new stem cell lines and new differentiation techniques that can provide higher purity populations of functional cells.

Research and development expenses are expensed as they are incurred, and are accounted for on a project by project basis. However, much of our research has potential applicability to each of our projects.

Selling and Marketing Expense

Selling and marketing expenses for the three months ended March 31, 2019 were $692,000, compared to $708,000 in the three months ended March 31, 2018. The decrease of $16,000 or 2% is primarily due to decreased payroll costs of $51,000 combined with increases in stock-based compensation of $16,000 and advertising and trade show costs of $18,000.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2019 were $1.52 million compared to $1.47 million for the same period in 2018. The increase of $47,000 or 3% is primarily due to increased stock-based compensation expenses of $133,000, and consulting costs of $36,000 partially offset by decreased patent impairment costs of $111,000.

Other Income/Expense

Other income was $583,000 for the three months ended March 31, 2019, compared to other income of $355,000 for the three months ended March 31, 2018. The increase of $228,000 in other income is primarily due to the change in the fair value of the warrant liability as compared to March 31, 2018.

Liquidity and Capital Resources

As of March 31, 2019, our cash balance totaled $615,000, compared to $1,075,000 as of December 31, 2018. At March 31, 2019, we had a working capital deficit of $954,000, compared to a $1.31 million deficit as of December 31, 2018. The $353,000 decrease in working capital deficit is primarily due to $306,000 increase in accounts receivable and a decrease of $1,036,000 in related party payable partially offset by $460,000 decrease in cash, 348,000 increase in accounts payable, $294,000 increase in current operating lease liabilities, a $380,000 increase in accrued expenses and a $597,000 decrease in the fair value of warrant liability.

Operating Cash Flows

Net cash used in operating activities was $288,000 for the three months ended March 31, 2019, compared to $48,000 for the corresponding period in 2018. The primary factor contributing to the variability in the reported cash flow amounts relates to the net loss after non-cash adjustments totaling $891,000, increase in accounts receivable of $306,000, decrease in in prepaid expenses and other current assets of $214,000, increase in accounts payable of $348,000 and increase in accrued liabilities of 292,000 for the three months ended March 31, 2019, compared to $686,000 net loss after non-cash adjustments, increase in accounts receivable of 474,000, increase in accounts payable of 782,000 and increase in accrued liabilities of $299,000 for the three months ended March 31, 2018.

Investing Cash Flows

Net cash used in investing activities was $119,000 for the three months ended March 31, 2019, compared to $201,000 in the same period in 2018. The decrease was primarily the result of lower payments for patent licenses and trademarks of $83,000.

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Financing Cash Flows

Net cash used in financing activities was $53,000 for the three months ended March 31, 2019, compared to $392,000 provided by financing activities in the same period in 2018. During the three months ended March 31, 2019, $53,000 was used on payments towards financed insurance premiums. During the three months ended March 31, 2018, $350,000 was received from a bridge loan from a related party having a maturity date of November 1, 2018 and $90,000 from option exercises. These inflows were partially offset by payments made on financed insurance premiums of $48,000.  

Management continues to evaluate various financing sources and options to raise working capital to help fund our current research and development programs and operations. We will need to obtain significant additional capital from sources including exercise of outstanding warrants, equity and/or debt financings, license arrangements, grants and/or collaborative research arrangements to sustain our operations and develop products. Unless we obtain additional financing, we do not have sufficient cash on hand to sustain our operations at least through one year after the issuance date. The timing and degree of any future capital requirements will depend on many factors, including:

• the accuracy of the assumptions underlying our estimates for capital needs in 2019 and beyond;

• the extent that revenues from sales of LSC and LCT products cover the related costs and provide capital;

• scientific progress in our research and development programs;

• the magnitude and scope of our research and development programs and our ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing;

• our progress with preclinical development and clinical trials;

• the time and costs involved in obtaining regulatory approvals;

• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; and

• the number and type of product candidates that we pursue.

Additional financing through strategic collaborations, public or private equity financings or other financing sources may not be available on acceptable terms, or at all. Additional equity financing could result in significant dilution to our stockholders. Additional debt financing may be expensive and require us to pledge all or a substantial portion of our assets. Further, if additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, product candidates or products that we would otherwise seek to develop and commercialize on our own. If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of our product initiatives.

We currently have no revenue generated from our principal operations in therapeutic and clinical product development through research and development efforts. For the three months ended March 31, 2019, our average burn rate was approximately $96,000 per month, excluding capital expenditures and patent costs averaging $40,000 per month. There can be no assurance that we will be successful in maintaining our normal operating cash flow and obtaining additional funds and that the timing of our capital raising or future financing will result in cash flow sufficient to sustain our operations at least through one year after the issuance date.

Based on the factors above, there is substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements were prepared assuming that we will continue to operate as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. Management’s plans in regard to these matters are focused on managing our cash flow, the proper timing of our capital expenditures, and raising additional capital or financing in the future.

We do not currently have any obligations for milestone payments under any of our licensed patents other than the minimum license fee of $75,000 annually, payable in two installments per year to Astellas Pharma pursuant to the amended UMass IP license agreement. No licenses are terminable at will by the licensor. For further discussion of our patents, see Note 4 to our condensed consolidated financial statements.

Off-Balance Sheet Arrangements

As of March 31, 2019, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(e) and 15d-15(e) under the Exchange Act, the Company, with the participation of management, including our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on this evaluation, Management concluded that, at March 31, 2019, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting including the areas of financial reporting and technical accounting, disclosures of equity, complex, non-routine, and significant transactions, and adoption of new accounting standards, collectively resulting from lack of continuity and sufficient accounting and finance resources.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2019 that our certifying officers concluded materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”) and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company’s; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 COSO Framework). Based on the above evaluation, the Company’s Chief Executive Officer and Principal Financial Officer have concluded that as of March 31, 2019, the Company’s disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting including the areas of financial reporting and technical accounting, disclosures of equity, complex, non-routine, and significant transactions, and adoption of new accounting standards, collectively resulting from lack of continuity and sufficient accounting and finance resources.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. RISK FACTORS

You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled “Forward Looking Statements”. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Our business is at an early stage of development and we may not develop therapeutic products that can be commercialized.

Our business is at an early stage of development. We do not have any products in late stage clinical trials. We are still in the early stages of identifying and conducting research on potential therapeutic products. Our potential therapeutic products will require significant research and development and pre-clinical and clinical testing prior to regulatory approval in the United States and other countries. We may not be able to obtain regulatory approvals, enter new and later stage clinical trials for any of our product candidates, or commercialize any products. Our product candidates may prove to have undesirable and unintended side effects or other characteristics adversely affecting their safety, efficacy or cost effectiveness that could prevent or limit their use. Any product using any of our technology may fail to provide the intended therapeutic benefits, or achieve therapeutic benefits equal to or better than the standard of treatment at the time of testing or production.

We have a history of operating losses, do not expect to be profitable in the near future and our independent registered public accounting firm has expressed substantial doubt as to our ability to continue as a going concern.

We have not generated any profits since our entry into the biotechnology business and have incurred significant operating losses. We expect to incur additional operating losses for the foreseeable future and we expect our operating losses to increase significantly. Our commercial businesses have not generated revenues in amounts to support our research and development efforts, and we may not achieve that level of revenues in the foreseeable future.

We have expended substantial funds to develop our technologies, products and product candidates. Based on our financial condition, recurring losses and projected spending, which raise substantial doubt about our ability to continue as a going concern, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2018 regarding this uncertainty. The inclusion of the going concern statement by our auditors may adversely affect our stock price and our ability to raise needed capital or enter into advantageous contractual relationships with third parties. If we were unable to continue as a going concern, the values we receive for our assets on liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

We will need additional capital to conduct our operations and develop our products and our ability to obtain the necessary funding is uncertain.

During the period ended March 31, 2019, we used a significant amount of cash to finance the continued development and testing of our product candidates, and we need to obtain significant additional capital resources in order to develop products going forward. Our average burn rate for the period ended March 31, 2019 was approximately $96,000 per month excluding capital expenditures and patent costs averaging $40,000 per month. We may not be successful in maintaining our normal operating cash flow and the timing of our capital expenditures may not result in cash flows sufficient to sustain our operations through the next twelve months. If financing is not sufficient and additional financing is not available or available only on terms that are detrimental to our long-term survival, it could have a major adverse effect on our ability to pursue our clinical research and product development programs, and could ultimately affect our ability to continue to function. The timing and degree of any future capital requirements will depend on many factors, including:

• the accuracy of the assumptions underlying our estimates for capital needs in 2019 and beyond;

• scientific progress in our research and development programs;

• the magnitude and scope of our research and development programs and our ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing;

• our progress with pre-clinical development and clinical trials;

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• the time and costs involved in obtaining regulatory approvals;

• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; and

• the number and type of product candidates that we pursue.

Additional financing through strategic collaborations, public or private equity or debt financings or other financing sources may not be available on acceptable terms, or at all. Additional equity financing could result in significant dilution to our stockholders, and any debt financings will likely involve covenants restricting our business activities. Additional financing may not be available on acceptable terms, or at all. Further, if we obtain additional funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, product candidates or products that we might otherwise seek to develop and commercialize on our own. If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of our research or product development initiatives, any of which could have a material adverse effect on our financial condition or business prospects.

Additionally, currently the U.S. government, through National Institute of Health appropriations restrictions, prevents federal funding to be used to create new embryonic and parthenogenetic stem cells, so access to grants from the NIH are limited.

We have limited clinical testing and regulatory capabilities, and human clinical trials are subject to extensive regulatory requirements, very expensive, time-consuming and difficult to design and implement. Our products may fail to achieve necessary safety and efficacy endpoints during clinical trials, which may limit our ability to generate revenues from therapeutic products.

Due to the relatively early stage of our therapeutic products and stem cell therapy-based systems, we have not yet invested significantly in internal clinical testing and regulatory capabilities, including for human clinical trials. We cannot assure you that we will be able to invest or develop resources for these capabilities successfully or as expediently as necessary. In particular, human clinical trials can be very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is time consuming. We estimate that clinical trials of our product candidates will take at least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be affected by several factors, including:

• unforeseen safety issues;

• determination of dosing issues;

• inability to demonstrate effectiveness during clinical trials;

• slower than expected rates of patient recruitment;

• inability to monitor patients adequately during or after treatment;

• competitive developments, including changes in the standard of care treatment for an indication; and

• inability or unwillingness of medical investigators to follow our clinical protocols.

In addition, we or the FDA (or other applicable regulatory agency) may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA or other regulatory agency finds deficiencies in our submissions or the conduct of these trials.

Patents held by other persons may result in infringement claims against us that are costly to defend and which may limit our ability to use the disputed technologies and prevent us from pursuing research and development or commercialization of potential products.

A number of pharmaceutical, biotechnology and other companies, universities and research institutions have filed patent applications or have been issued patents relating to cell therapy, stem cells, and other technologies potentially relevant to or required by our expected products. We cannot predict which, if any, of such applications will issue as patents or the claims that might be allowed. We are aware that a number of companies have filed applications relating to stem cells. We are also aware of a number of patent applications and patents claiming use of stem cells and other modified cells to treat disease, disorder or injury.

If third party patents or patent applications contain claims infringed by either our licensed technology or other technology required to make and use our potential products and such claims are ultimately determined to be valid, we might not be able to obtain licenses to these patents at a reasonable cost, if at all, or be able to develop or obtain alternative technology. If we are unable to obtain such licenses at a reasonable cost, we may not be able to develop some products commercially. We may be required to defend ourselves in court against allegations of infringement of third-party patents. Patent litigation is very expensive and could consume substantial

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resources and create significant uncertainties. An adverse outcome in such a suit could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties, or require us to cease using such technology.

The outcome of pre-clinical, clinical and product testing of our products is uncertain, and if we are unable to satisfactorily complete such testing, or if such testing yields unsatisfactory results, we may be unable to sell our proposed products.

Before obtaining regulatory approvals for the commercial sale of any potential human products, our products will be subjected to extensive pre-clinical and clinical testing to demonstrate their safety and efficacy in humans. The clinical trials of our prospective products, or those of our licensees or collaborators, may not demonstrate the safety and efficacy of such products at all, or to the extent necessary to obtain appropriate regulatory approvals. Similarly, the testing of such prospective products may not be completed in a timely manner, if at all, or only after significant increases in costs, program delays or both, all of which could harm our ability to generate revenues. In addition, our prospective products may not prove to be more effective for treating disease or injury than current therapies. Accordingly, we may have to delay or abandon efforts to research, develop or obtain regulatory approval to market our prospective products. The failure to adequately demonstrate the safety and efficacy of a therapeutic product under development could delay or prevent regulatory approval of the product and could harm our ability to generate revenues, operate profitably or produce any return on an investment in us.

Even if we are successful in developing a therapeutic application using our cell technologies, it is unclear whether cell therapy can serve as the foundation for a commercially viable and profitable business.

Stem cell technology is rapidly developing and could undergo significant change in the future. Such rapid technological development could result in our technologies becoming obsolete. While our product candidates appear promising, they may fail to be successfully commercialized for numerous reasons, including, but not limited to, competing technologies for the same indications. There can be no assurance that we will be able to develop a commercially successful therapeutic application for our stem cell technologies.

Moreover, advances in other treatment methods or in disease prevention techniques could significantly reduce or entirely eliminate the need for our cell therapy services, planned products and therapeutic efforts. There is no assurance that cell therapies will achieve the degree of success envisioned by us in the treatment of disease. Additionally, technological or medical developments may materially alter the commercial viability of our technology or services, and require us to incur significant costs to replace or modify programs in which we have a substantial investment. We are focused on cell therapy, and if this field is substantially unsuccessful, this could jeopardize our success or future results. The occurrence of any of these factors may have a material adverse effect on our business, operating results and financial condition.

Our competition includes fully integrated biotechnology, pharmaceutical and cosmetic companies that have significant advantages over us.

The market for therapeutic stem cell products is highly competitive. We expect that our most significant competitors will be fully integrated and more established pharmaceutical, biotechnology and cosmetic companies. These companies are developing stem cell-based products and they have significantly greater capital resources and research and development, manufacturing, testing, regulatory compliance, and marketing capabilities. Many of these potential competitors are further along in the process of product development and also operate large, company-funded research and development programs. As a result, our competitors may develop more competitive or affordable products, or achieve earlier patent protection or product commercialization than we are able to achieve. Competitive products may render any products or product candidates that we develop uneconomic or obsolete.

If competitors develop and market products that are more effective, safer, or less expensive than our product candidates or offer other advantages, our commercial prospects will be limited.

Our cell therapy development programs face, and will continue to face, intense competition from pharmaceutical, biopharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies engaged in drug discovery activities or funding, both in the United States and abroad. Some of these competitors are pursuing the development of drugs and other therapies that target the same diseases and conditions that we are targeting with our product candidates.

As a general matter, we also face competition from many companies that are researching and developing cell therapies. Many of these companies have financial and other resources substantially greater than ours. In addition, many of these competitors have significantly greater experience in testing pharmaceutical and other therapeutic products, obtaining FDA and other regulatory approvals, and marketing and selling. If we ultimately obtain regulatory approval for any of our product candidates, we also will be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have limited or no commercial-scale experience. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated by our competitors. Competition may increase further as a result of advances made in the commercial applicability of our technologies and greater availability of capital for investment in these fields.

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If we fail to meet our obligations under our license agreements, we may lose our rights to key technologies on which our business depends.

Our business depends in part on licenses from third parties. These third-party license agreements impose obligations on us, such as payment obligations and obligations to diligently pursue development of commercial products under the licensed patents. If a licensor believes that we have failed to meet our obligations under a license agreement, the licensor could seek to limit or terminate our license rights, which could lead to costly and time-consuming litigation and, potentially, a loss of the licensed rights. During the period of any such litigation, our ability to carry out the development and commercialization of potential products could be significantly and negatively affected. If our license rights were restricted or ultimately lost, our ability to continue our business based on the affected technology platform could be severely affected adversely.

Significant delays or reductions in U.S. Government funding may negatively affect our results of operations.

We estimate that governmental funding, either directly or indirectly (through sponsorship of academic research), comprises approximately 40% of the market for basic and applied research in biological sciences, which is the target market for our LCT research products. The U.S. Government is considering (and has implemented in the recent past) significant changes in government spending and other governmental programs, which in the recent past involved several automatic spending cuts being implemented. There are many variables in how these laws could be implemented in the future that make it difficult to determine specific impacts on our customers, and we are unable to predict the impact that future spending cuts or other budget initiatives would have on funding our customers receive and resulting sales of our LCT products. Additionally, U.S. Governmental programs are subject to annual congressional budget authorization and appropriation processes. However, whether through the automatic cuts or other decisions, long-term funding for certain programs in which our research product customers participate may be reduced, delayed or cancelled. In the event that governmental funding for any of our research product customers is reduced or delayed, our sales to those customers would likely suffer, which could have a material adverse effect on our results of operations. Further, currently the U.S. government, through National Institute of Health appropriations restrictions, prevents federal funding to be used to create new embryonic and parthenogenetic stem cells, so access to grants from the NIH are limited, which may adversely affect our partnering opportunities and internal therapeutic product development initiatives.

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.

On December 22, 2017, President Trump signed into law new legislation that significantly revises the Internal Revenue Code of 1986, as amended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), effective for net operating losses incurred in taxable years beginning after December 31, 2017, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain how various states will respond to the newly enacted federal tax law. The impact of this tax reform on holders of our securities is also uncertain and could be adverse. Investors should consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our securities.

Restrictive and extensive government regulation could slow or hinder our production of a cellular product.

The research and development of stem cell therapies is subject to and restricted by extensive regulation by governmental authorities in the United States and other countries. The process of obtaining FDA and other necessary regulatory approvals is lengthy, expensive and uncertain. We may fail to obtain the necessary approvals to continue our research and development, which would hinder our ability to manufacture or market any future product.

The development and commercialization of our product candidates is subject to extensive regulation by the FDA and other regulatory agencies in the United States and abroad, and the failure to receive regulatory approvals for our product candidates would likely have a material and adverse effect on our business and prospects.

The process of obtaining FDA and other regulatory approvals is expensive, generally takes many years and is subject to numerous risks and uncertainties, particularly with complex and/or novel product candidates such as our product candidates. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application or may make it easier for our competitors to gain regulatory approval to enter the marketplace. Ultimately, the FDA and other regulatory

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agencies have substantial discretion in the approval process and may refuse to accept any application or may decide that our product candidate data are insufficient for approval without the submission of additional pre-clinical, clinical or other studies. In addition, varying agency interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Any of the following factors, among others, could cause regulatory approval for our product candidates to be delayed, limited or denied:

• the product candidates require significant clinical testing to demonstrate safety and effectiveness before applications for marketing approval can be filed with the FDA and other regulatory authorities;

• data obtained from pre-clinical and nonclinical animal testing and clinical trials can be interpreted in different ways, and regulatory authorities may not agree with our respective interpretations or may require us to conduct additional testing;

• negative or inconclusive results or the occurrence of serious or unexpected adverse events during a clinical trial could cause us to delay or terminate development efforts for a product candidate; and/or

• FDA and other regulatory authorities may require expansion of the size and scope of the clinical trials.

Any difficulties or failures that we encounter in securing regulatory approval for our product candidates would likely have a substantial adverse impact on our ability to generate product sales, and could make any search for a collaborative partner more difficult.

Research in the field of embryonic stem cells is currently subject to strict government regulations, and our operations could be restricted or outlawed by any legislative or administrative efforts impacting the use of nuclear transfer technology or human embryonic material.

Significant portions of our business are focused on human cell therapy, which includes the production of human differentiated cells from stem cells and involves human oocytes. Although our focus is on parthenogenetic stem cells derived from unfertilized oocytes, certain aspects of that work may involve the use of embryonic stem cells. Research utilizing embryonic stem cells is controversial, and currently subject to intense scrutiny, particularly in the area of the use of human embryonic material.

Federal law is not as restrictive regarding the use of federal funds for human embryonic cell research, commonly referred to as hES cell research as it once was. However, federal law does prohibit federal funding for creation of parthenogenetic stem cells. Our operations may also be restricted by future legislative or administrative efforts by politicians or groups opposed to the development of hES cell technology, parthenogenetic cell technology or nuclear transfer technology. Further, future legislative or administrative restrictions could, directly or indirectly, delay, limit or prevent the use of hES technology, parthenogenetic technology, or nuclear transfer technology, the use of human embryonic material, or the sale, manufacture or use of products or services derived from nuclear transfer technology or hES or parthenogenetic technology.

We may be unsuccessful in our efforts to comply with applicable federal, state and international laws and regulations, which could result in loss of licensure, certification or accreditation or other government enforcement actions or impact our ability to secure regulatory approval of our product candidates.

Although we seek to conduct our business in compliance with applicable governmental healthcare laws and regulations, these laws and regulations are exceedingly complex and often subject to varying interpretations. The cell therapy industry is the topic of significant government interest, and thus the laws and regulations applicable to our business are subject to frequent change and/or reinterpretation. As such, there can be no assurance that we will be able, or will have the resources, to maintain compliance with all such healthcare laws and regulations. Failure to comply with such healthcare laws and regulations, as well as the costs associated with such compliance or with enforcement of such healthcare laws and regulations, may have a material adverse effect on our operations or may require restructuring of our operations or impair our ability to operate profitably.

Our manufacture of certain cellular therapy products triggers additional FDA requirements applicable to hESCs which are regulated as a drug, biological product, or medical device. FDA’s GMP regulations govern the manufacture, processing, packaging and holding of cell therapy products regulated as drugs. FDA’s Quality System Regulation, or QSR, similarly governs the manufacture, processing, packaging and holding of cell therapy products regulated as medical devices. We must comply with GMP or QSR requirements including quality control, quality assurance and the maintenance of records and documentation for certain products. We may be unable to comply with these GMP or QSR requirements and with other FDA, state and foreign regulatory requirements. These requirements may change over time and we or third-party manufacturers may be unable to comply with the revised requirements.

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We will continue to be subject to extensive FDA regulation following any product approvals, and if we fail to comply with these regulations, we may suffer a significant setback in our business.

Even if we are successful in obtaining regulatory approval of our product candidates, we will continue to be subject to the requirements of and review by, the FDA and comparable regulatory authorities in the areas of manufacturing processes, post-approval clinical data, adverse event reporting, labeling, advertising and promotional activities, among other things. In addition, any marketing approval we receive may be limited in terms of the approved product indication or require costly post-marketing testing and surveillance. Discovery after approval of previously unknown problems with a product, manufacturer or manufacturing process, or a failure to comply with regulatory requirements, may result in actions such as:

• warning letters or other actions requiring changes in product manufacturing processes or restrictions on product marketing or distribution;

• product recalls or seizures or the temporary or permanent withdrawal of a product from the market; and

• fines, restitution or disgorgement of profits or revenue, the imposition of civil penalties or criminal prosecution.

The occurrence of any of these actions would likely cause a material adverse effect on our business, financial condition and results of operations.

Health care companies have been the subjects of federal and state investigations, and we could become subject to investigations in the future.

Both federal and state government agencies have heightened civil and criminal enforcement efforts. There are numerous ongoing investigations of health care companies, as well as their executives and managers. In addition, amendments to the Federal False Claims Act, have made it easier for private parties to bring “qui tam” (whistleblower) lawsuits against companies under which the whistleblower may be entitled to receive a percentage of any money paid to the government. The Federal False Claims Act provides, in part, that an action can be brought against any person or entity that has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved. The government has taken the position that claims presented in violation of the federal anti-kickback law, Stark Law or other healthcare-related laws, including laws enforced by the FDA, may be considered a violation of the Federal False Claims Act. Penalties include substantial fines for each false claim, plus three times the amount of damages that the federal government sustained because of the act of that person or entity and/or exclusion from the Medicare program. In addition, a majority of states have adopted similar state whistleblower and false claims provision. Any future investigations of our business or executives could cause us to incur substantial costs, and result in significant liabilities or penalties, as well as damage to our reputation.

Restrictions on the use of human stem cells, and the ethical, legal and social implications of that research, could prevent us from developing or gaining acceptance for commercially viable products in these areas.

Although our stem cells are derived from unfertilized human eggs through a process called “parthenogenesis” that can produce cells suitable for therapy, but are believed to be incapable of producing a human being, such cells are nevertheless often incorrectly referred to as “embryonic” stem cells. Because the use of human embryonic stem cells gives rise to ethical, legal and social issues regarding the appropriate use of these cells, our research related to human parthenogenetic stem cells could become the subject of adverse commentary or publicity and some political and religious groups may still raise opposition to our technology and practices. In addition, many research institutions, including some of our scientific collaborators, have adopted policies regarding the ethical use of human embryonic tissue, which, if applied to our procedures, may have the effect of limiting the scope of research conducted using our stem cells, thereby impairing our ability to conduct research in this field. In some states, use of embryos as a source of stem cells is prohibited.

To the extent we utilize governmental grants in the future, the governmental entities involved may retain certain rights in technology that we develop using such grant money and we may lose the revenues from such technology if we do not commercialize and utilize the technology pursuant to established government guidelines.

Certain of our licensors’ research have been or are being funded in part by government grants. Our research may also be government-funded in the future. In connection with certain grants, the governmental entity involved retains various rights in the technology developed with the grant. These rights could restrict our ability to fully capitalize upon the value of this research by reducing total revenues that might otherwise be available since such governmental rights may give the government the right to practice the invention without payment of royalties if we do not comply with applicable requirements.

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We rely on parthenogenesis, cell differentiation and other stem cell technologies that we may not be able to successfully develop, which may prevent us from generating revenues, operating profitably or providing investors any return on their investment.

We have concentrated our research on our parthenogenesis, cell differentiation and stem cell technologies, and our ability to operate profitably will depend on being able to successfully implement or develop these technologies for human applications. These are emerging technologies with, as yet, limited human applications. We cannot guarantee that we will be able to successfully implement or develop our nuclear transfer, parthenogenesis, cell differentiation and other stem cell technologies or that these technologies will result in products or services with any significant commercial utility. We anticipate that the commercial sale of such products or services, and royalty/licensing fees related to our technology, would be an additional source of revenues.

If we are unable to keep up with rapid technological changes in our field or compete effectively, we will be unable to operate profitably.

We are engaged in activities in the biotechnology field, which is characterized by extensive research efforts and rapid technological progress. If we fail to anticipate or respond adequately to technological developments, our ability to operate profitably could suffer. Research and discoveries by other biotechnology, agricultural, pharmaceutical or other companies may render our technologies or potential products or services uneconomical or result in products superior to those we develop. Similarly, any technologies, products or services we develop may not be preferred to any existing or newly developed technologies, products or services.

We may not be able to protect our proprietary technology, which could harm our ability to operate profitably.

The biotechnology, cosmetic, and pharmaceutical industries place considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Our success will depend, to a substantial degree, on our ability to obtain and enforce patent protection for our products, preserve any trade secrets and operate without infringing the proprietary rights of others. We cannot assure you that:

• we will succeed in obtaining any patents, obtain them in a timely manner, or that the breadth or degree of protection that any such patents will protect our interests;

• the use of our technology will not infringe on the proprietary rights of others;

• patent applications relating to our potential products or technologies will result in the issuance of any patents or that, if issued, such patents will afford adequate protection to us or will not be challenged, invalidated or infringed; or

• patents will not be issued to other parties, which may be infringed by our potential products or technologies.

We are aware of certain patents that have been granted to others and certain patent applications that have been filed by others with respect to nuclear transfer and other stem cell technologies. The fields in which we operate have been characterized by significant efforts by competitors to establish dominant or blocking patent rights to gain a competitive advantage, and by considerable differences of opinion as to the value and legal legitimacy of competitors’ purported patent rights and the technologies they actually utilize in their businesses.

Considerable research in the areas of stem cells, cell therapeutics and regenerative medicine is being performed in countries outside of the United States, and a number of our competitors are located in those countries. The laws protecting intellectual property in some of those countries may not provide adequate protection to prevent our competitors from misappropriating our intellectual property.

Our business is highly dependent upon maintaining licenses with respect to key technology.

Although our primary focus relates to intellectual property we have developed internally, some of the patents we utilize are licensed to us by Astellas Pharma, which has licensed some of these from other parties, including the University of Massachusetts. These licenses are subject to termination under certain circumstances (including, for example, our failure to make minimum royalty payments). The loss of any of such licenses, or the conversion of such licenses to non-exclusive licenses, could harm our operations and/or enhance the prospects of our competitors.

Although our licenses with Astellas allow us to cure any defaults under the underlying licenses to them and to take over the patents and patents pending in the event of default by Astellas, the cost of such remedies could be significant and we might be unable to adequately maintain these patent positions. If so, such inability could have a material adverse effect on our business. Some of these licenses also contain restrictions (e.g., limitations on our ability to grant sublicenses) that could materially interfere with our ability to generate revenue through collaborative relationships or other transactions that involve the licensing or sale to third parties of important and valuable technologies that we have, for strategic reasons, elected not to pursue directly. In the future we may require further licenses to complete and/or commercialize our proposed products. We may not be able to acquire any such licenses on a commercially-viable basis.

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Cybersecurity breaches could expose us to liability, damage our reputation, compromise our confidential information or otherwise adversely affect our business.

We maintain sensitive company data on our computer networks, including our intellectual property and proprietary business information, as well as certain personal information regarding customers who purchase our skin care products online. We face a number of threats to our networks from unauthorized access, security breaches and other system disruptions. Despite our security measures, our infrastructure may be vulnerable to attacks by hackers or other disruptive problems. Any such security breach may compromise information stored on our networks and may result in significant data losses or theft of our intellectual property, proprietary business information or our customers’ personally identifiable information. A cybersecurity breach could hurt our reputation by adversely affecting the perception of customers and potential customers of the security of their orders and personal information. In addition, a cybersecurity attack could result in other negative consequences, including disruption of our internal operations, increased cyber security protection costs, lost revenues or litigation.

Certain of our technology may not be subject to protection through patents, which leaves us vulnerable to theft of our technology.

Certain parts of our know-how and technology are not patentable or are trade secrets. To protect our proprietary position in such know-how and technology, we intend to require all employees, consultants, advisors and collaborators to enter into confidentiality and invention ownership agreements with us. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. Further, in the absence of patent protection, competitors who independently develop substantially equivalent technology may harm our business.

We depend on our collaborators to help us develop and test our proposed products, and our ability to develop and commercialize products may be impaired or delayed if collaborations are unsuccessful.

Our strategy for the development, clinical testing and commercialization of our proposed products requires that we enter into collaborations with corporate partners, licensors, licensees and others. We are dependent upon the subsequent success of these other parties in performing their respective responsibilities and the continued cooperation of our partners. Our collaborators may not cooperate with us or perform their obligations under our agreements with them. We cannot control the amount and timing of our collaborators’ resources that will be devoted to our research and development activities related to our collaborative agreements with them. Our collaborators may choose to pursue existing or alternative technologies in preference to those being developed in collaboration with us.

Under agreements with collaborators, we may rely significantly on such collaborators to, among other things:

• design and conduct advanced clinical trials in the event that we reach clinical trials;

• fund research and development activities with us;

• pay us fees upon the achievement of milestones; and

• market with us any commercial products that result from our collaborations.

The development and commercialization of potential products will be delayed if collaborators fail to conduct these activities in a timely manner, or at all. In addition, our collaborators could terminate their agreements with us and we may not receive any development or milestone payments. If we do not achieve milestones set forth in the agreements, or if our collaborators breach or terminate their collaborative agreements with us, our business may be materially harmed.

Contractual arrangements with licensors or collaborators may require us to pay royalties or make other payments related to the development of a product candidate, which would adversely affect the level of our future revenues and profits.

Even if we obtain all applicable regulatory approvals and successfully commercialize one or more of our cell therapy candidates, contractual arrangements between us and a licensor, collaborator or other third party in connection with the respective product may require that we make royalty or other payments to the respective third party, and as a result we would not receive all of the revenue derived from commercial sales of such product.

Our reliance on the activities of our non-employee consultants, research institutions, and scientific contractors, whose activities are not wholly within our control, may lead to delays in development of our proposed products.

We rely extensively upon and have relationships with scientific consultants at academic and other institutions, some of whom conduct research at our request, and other consultants with expertise in clinical development strategy or other matters. These consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. We have limited control over the activities of these consultants and, except as otherwise required by our

37

collaboration and consulting agreements to the extent they exist, can expect only limited amounts of their time to be dedicated to our activities. These research facilities may have commitments to other commercial and non-commercial entities. We have limited control over the operations of these laboratories and can expect only limited amounts of time to be dedicated to our research goals.

We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.

Our business may bring us into conflict with our licensees, licensors or others with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us. That litigation is likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.

We may not be able to obtain third party patient reimbursement or favorable product pricing, which would reduce our ability to operate profitably.

Our ability to successfully commercialize certain of our proposed products in the human therapeutic field may depend to a significant degree on patient reimbursement of the costs of such products and related treatments at acceptable levels from government authorities, private health insurers and other organizations, such as health maintenance organizations. Reimbursement in the United States or foreign countries may not be available for any products we may develop, and, if available, may be decreased in the future. Also, reimbursement amounts may reduce the demand for, or the price of, our products with a consequent harm to our business. We cannot predict what additional regulation or legislation relating to the health care industry or third party coverage and reimbursement may be enacted in the future or what effect such regulation or legislation may have on our business. If additional regulations are overly onerous or expensive, or if health care related legislation makes our business more expensive or burdensome than originally anticipated, we may be forced to significantly downsize our business plans or completely abandon our business model.

Our products may be expensive to manufacture, and they may not be profitable if we are unable to control the costs to manufacture them.

Our products may be significantly more expensive to manufacture than other therapeutic products currently on the market today. We hope to substantially reduce manufacturing costs through process improvements, development of new methods, increases in manufacturing scale and outsourcing to experienced manufacturers. If we are not able to make these, or other improvements, and depending on the pricing of the product, our profit margins may be significantly less than that of other therapeutic products on the market today. In addition, we may not be able to charge a high enough price for any cell therapy product we develop, even if they are safe and effective, to make a profit. If we are unable to realize significant profits from our potential product candidates, our business would be materially harmed.

We presently lack sufficient manufacturing capabilities to produce our therapeutic product candidates at commercial scale quantities and do not have an alternate manufacturing supply, which could negatively impact our ability to meet any future demand for the product.

We expect that we would need to significantly expand our manufacturing capabilities to meet potential demand for our therapeutic product candidates, if approved. Such expansion would require additional regulatory approvals. Even if we increase our manufacturing capabilities, it is possible that we may still lack sufficient capacity to meet demand.

We do not presently have any alternate supply for our products. If our facilities where our products are currently being manufactured or equipment were significantly damaged or destroyed, or if there were other disruptions, delays or difficulties affecting manufacturing capacity, including if such facilities are deemed not in compliance with current Good Manufacturing Practice (“GMP”) requirements, future clinical studies and commercial production for our products would likely be significantly disrupted and delayed. It would be both time consuming and expensive to replace this capacity with third parties, particularly since any new facility would need to comply with the regulatory requirements.

Ultimately, if we are unable to supply our products to meet commercial demand, whether because of processing constraints or other disruptions, delays or difficulties that we experience, our production costs could dramatically increase and sales of the product and its long-term commercial prospects could be significantly damaged.

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To be successful, our proposed products must be accepted by the health care community, which can be very slow to adopt or unreceptive to new technologies and products.

Our proposed products and those developed by our collaborative partners, if approved for marketing, may not achieve market acceptance since hospitals, physicians, patients or the medical community in general may decide not to accept and utilize these products. The products that we are attempting to develop represent substantial departures from established treatment methods and will compete with a number of more conventional therapies manufactured and marketed by major pharmaceutical companies. The degree of market acceptance of any of our developed products will depend on a number of factors, including:

• our establishment and demonstration to the medical community of the clinical efficacy and safety of our proposed products;

• our ability to create products that are superior to alternatives currently on the market;

• our ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods; and

• reimbursement policies of government and third party payers.

If the healthcare community does not accept our products for any of the foregoing reasons, or for any other reason, our business would be materially harmed.

Our business is based on novel technologies that are inherently expensive, risky and may not be understood by or accepted in the marketplace, which could adversely affect our future value.

The clinical development, commercialization and marketing of cell and tissue-based therapies are at an early-stage, substantially research-oriented, and financially speculative. To date, very few companies have been successful in their efforts to develop and commercialize a stem cell product. In general, stem cell products may be susceptible to various risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy, or other characteristics that may prevent or limit their approval or commercial use. Furthermore, the number of people who may use cell or tissue-based therapies is difficult to forecast with accuracy. Our future success is dependent on the establishment of a significant market for cell- and tissue-based therapies and our ability to capture a share of this market with our product candidates.

Our development efforts with our therapeutic product candidates are susceptible to the same risks of failure inherent in the development and commercialization of therapeutic products based on new technologies. The novel nature of cellular therapeutics creates significant challenges in the areas of product development and optimization, manufacturing, government regulation, third-party reimbursement and market acceptance. For example, the United States FDA has relatively limited experience regulating therapies based on cells, and there are few approved treatments utilizing cell therapy.

During the period ended March 31, 2019, we derived approximately 42% of our revenues from one customer.

During the period ended March 31, 2019, one customer accounted for 42% of our consolidated revenues. To the extent that this significant customers reduce or delay its purchases from us or terminate its relationship with us, our revenues would decline significantly and our financial condition and results of operations would suffer substantially.

We depend on key personnel for our continued operations and future success, and a loss of certain key personnel could significantly hinder our ability to move forward with our business plan.

Because of the specialized nature of our business, we are highly dependent on our ability to identify, hire, train and retain highly qualified scientific and technical personnel for the research and development activities we conduct or sponsor. The loss of one or more key executive officers, or scientific officers, would be significantly detrimental to us. In addition, recruiting and retaining qualified scientific personnel to perform research and development work is critical to our success. Our anticipated growth and expansion into areas and activities requiring additional expertise, such as clinical testing, regulatory compliance, manufacturing and marketing, will require the addition of new management personnel and the development of additional expertise by existing management personnel. There is intense competition for qualified personnel in the areas of our present and planned activities. Accordingly, we may not be able to continue to attract and retain the qualified personnel, which would adversely affect the development of our business.

We may not have sufficient product liability insurance, which may leave us vulnerable to future claims we will be unable to satisfy.

The testing, manufacturing, marketing and sale of human therapeutic products entail an inherent risk of product liability claims. We currently have a limited amount of product liability insurance, which may not be adequate to meet potential product liability claims. In the event we are forced to expend significant funds on defending product liability actions, and in the event those funds come from

39

operating capital, we will be required to reduce our business activities, which could lead to significant losses. Adequate insurance coverage may not be available in the future on acceptable terms, if at all. If available, we may not be able to maintain any such insurance at sufficient levels of coverage and any such insurance may not provide adequate protection against potential liabilities. Whether or not a product liability insurance policy is obtained or maintained in the future, any product liability claim could harm our business or financial condition.

Risks Related to the Securities Markets and Our Capital Structure

Stock prices for biotechnology companies have historically tended to be very volatile.

Stock prices and trading volumes for many biotechnology companies fluctuate widely for a number of reasons, including but not limited to the following factors, some of which may be unrelated to their businesses or results of operations:

• clinical trial results;

• the amount of cash resources and such company’s ability to obtain additional funding;

• announcements of research activities, business developments, technological innovations or new products by competitors;

• entering into or terminating strategic relationships;

• changes in government regulation;

• disputes concerning patents or proprietary rights;

• changes in revenues or expense levels;

• public concern regarding the safety, efficacy or other aspects of the products or methodologies being developed;

• reports by securities analysts;

• activities of various interest groups or organizations;

• media coverage; and

• status of the investment markets.

This market volatility, as well as general domestic or international economic, market and political conditions, could materially and adversely affect the market price of our common stock.

Two of our executive officers and directors can significantly influence our direction and policies, and their interests may be adverse to the interests of our other stockholders.

As of March 31, 2019, Dr. Andrey Semechkin, Chief Executive Officer and Co-Chairman of the Board of Directors, and Dr. Russell Kern, Executive Vice President and Chief Scientific Officer and a director, beneficially own approximately 80% of our outstanding shares of common stock, including shares issuable upon conversion of the outstanding shares of our Series D, Series G, and Series I-2 Preferred Stock and shares issuable upon exercise of options and warrants that they hold and that are exercisable within 60 days of March 31, 2019. As a result of their holdings and the rights, preferences and privileges of those series of preferred stock, Dr. Andrey Semechkin and Dr. Russell Kern may appoint and remove two of our four directors, and propose candidates for nomination of up to two additional directors, and therefore will be able to significantly influence the election of our Board of Directors. They may also prevent corporate transactions (such as a merger, consolidation, a sale of all or substantially all of our assets or a financing transaction) that may be favorable from the standpoint of our other stockholders or they may cause a transaction that our other stockholders may view as unfavorable.

The rights of holders of our common stock are subordinate to significant rights, preferences and privileges of our existing five series of preferred stock, and to any additional series of preferred stock created in the future.

Under the authority granted by our Certificate of Incorporation, our Board of Directors has established five separate series of outstanding preferred stock, including Series B, Series D, Series G, Series I-1 and Series I-2 Preferred Stock, which have various rights and preferences senior to the shares of common stock. Shares of some series of our existing preferred stock are also entitled to enhanced voting rights and liquidation preferences. As a result of the various voting rights, the holders of our existing preferred stock may be able to block the proposed approval of various corporate actions, which could prevent us from achieving strategic or other goals dependent on such actions. As a result of the liquidation preferences, in the event that we voluntarily or involuntary liquidate, dissolve or windup our affairs (including as a result of a merger), the holders of our preferred stock would be entitled to receive stated amounts per share, including any accrued and unpaid dividends, before any distribution of assets or merger consideration is made to holders of our common stock. Additionally, these shares of preferred stock may be converted, at the option of the holders, into common stock at rates that may be adjusted, for the benefit of holders of preferred stock, if we sell equity securities below the then

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existing conversion prices. Any such adjustments would compound the potential dilution suffered by holders of common stock if we issue additional securities at prices below the current conversion prices (ranging from $1.08 to $9.70 per share as of March 31, 2019). Additionally, subject to the consent of the holders of our existing preferred stock, our Board of Directors has the power to issue additional series of preferred stock and to designate, as it deems appropriate (subject to the rights of the holders of the current series of preferred stock), the special dividend, liquidation or voting rights of the shares of those additional series. The creation and designation of any new series of preferred stock could adversely affect the voting power, dividend, liquidation and other rights of holders of our common stock and, possibly, any other class or series of stock that is then in existence.

The market price for our common stock has been and may continue to be particularly volatile given our status as a relatively unknown company with a limited operating history and lack of profits, which could lead to wide fluctuations in our share price. The price at which stockholders purchase shares of our common stock may not be indicative of the price of our common stock that will prevail in the trading market.

The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our stock price could continue to be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, there has been limited trading in our common stock. As a consequence of this lack of liquidity, any future trading of shares by our stockholders may disproportionately influence the price of those shares in either direction. Second, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors will be beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time or as to what effect that the sale of shares or the availability of shares for sale at any time will have on the prevailing market price.

In addition, the market price of our common stock could be subject to wide fluctuations in response to:

• quarterly variations in our revenues and operating expenses;

• announcements of new products or services by us;

• fluctuations in interest rates;

• significant sales of our common stock;

• the operating and stock price performance of other companies that investors may deem comparable to us; and

• news reports relating to trends in our markets or general economic conditions.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who is not an affiliate of our company and who has satisfied a six month holding period may, as long as we are current in our required filings with the SEC, sell securities without further limitation. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company who has satisfied a one year holding period. Affiliates of our company who have satisfied a six month holding period may sell securities subject to limitations. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities. Currently, a substantial majority of our securities are either free trading or subject to the release of trading restrictions under the six month or one year holding periods of Rule 144.

Certain provisions of our Certificate of Incorporation and Delaware law may make it more difficult for a third party to affect a change-in-control.

Our Certificate of Incorporation authorizes the Board of Directors to issue up to 20,000,000 shares of preferred stock and our Board of Directors has created and issued shares of five series of preferred stock that remain outstanding, including Series B, Series D, Series G, Series I-1 and Series I-2 Preferred Stock. The terms of various series of Preferred Stock include, among other things, voting rights on particular matters (for example, with respect to the Series D Preferred Stock, restricting our ability to undergo a change in control or merge with, or sell assets to, a third party), preferences as to dividends and liquidation, and conversion rights. These preferred stock rights diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, as long as shares of our Series B, Series D and Series G Preferred Stock remain outstanding, or if our Board creates and issues additional shares of

41

preferred stock in the future with rights that restrict our ability to merge with, or sell assets to, a third party, it could make it more difficult, delay, discourage, prevent or make it more costly to acquire the Company or affect a change-in-control.

The application of the “penny stock” rules to our common stock could limit the trading and liquidity of our common stock, adversely affect the market price of our common stock and increase stockholder transaction costs to sell those shares.

While we are currently exempt from the “penny stock” rules, as long as the trading price of our common stock is below $5.00 per share, the open market trading of our common stock would be subject to the “penny stock” rules, if we otherwise do not continue to qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities.

The sale or issuance of our common stock to holders of Series I Preferred Stocks (“holders”) may cause dilution and the sale of the shares of common stock acquired by those holders, or the perception that such sales may occur, could cause the price of our common stock to fall.

On March 9, 2016, we entered into the Securities Purchase Agreement with two institutional investors and Andrey Semechkin, our Chief Executive Officer and Co-Chairman, pursuant to which those purchasers purchased 6,310 shares of Series I Convertible Preferred Stock initially convertible into approximately 3.6 million shares of our common stock, in addition to Series A, B, and C Warrants for approximately 10.8 million shares of our common stock, the Series A Warrants being exercisable for 5 years from the date of issuance, and the Series B Warrants being exercisable for six months from the date of issuance and the Series C Warrants being exercisable for one year from the date of issuance. As of March 31, 2019, we had 5,124 shares of Series I Convertible Preferred Stock outstanding and Series A Warrants for approximately 3.6 million shares of our common stock outstanding. The conversion price of the Preferred Stock and Warrants is subject to certain resets as set forth in the Certificates of Designation and Warrants, including the date of the amendment to the certificate of incorporation with respect to any reverse stock split. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.

The holders may ultimately convert all, some or none of the Series I Convertible Preferred Stock into shares of our common stock, exercise all, some or none of the Series A warrants to acquire shares of our common stock. Such shares acquired by such holders may be sold, as such holders may sell all, some or none of those shares of common stock. Therefore, the conversion of the preferred stock and exercise of warrants by such holders will result in substantial dilution to the interests of other holders of our common stock. Additionally, the conversion into a substantial number of shares of our common stock such holders, or the anticipation of such conversion, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

The sale or issuance of a substantial number of shares may adversely affect the market price for our common stock.

The future sale of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could significantly and negatively affect the market price for our common stock. We expect that we will likely issue a substantial number of shares of our capital stock in financing transactions in order to fund our operations and the growth of our business. Under these arrangements, we may agree to register the shares for resale soon after their issuance. We may also continue to pay for certain goods and services with equity, which would dilute our current stockholders. Also, sales of the shares issued in this manner could negatively affect the market price of our stock.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial tax losses during our history. Subject to various limitations, we may carryforward unused taxable losses, including those generated in the future, and other available credits to offset any future taxable income until the unused losses or credits expire. Federal and state tax laws impose restrictions on the utilization of net operating loss (“NOL”) and tax credit carryforwards in the event of an “ownership change” as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50 percentage points over their lowest ownership percentage at any time during the applicable testing period (typically, three years). Under Section 382 and Section 383, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post change

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income may be limited. Because of the cost and complexity involved in the analysis of a Section 382 ownership change and the fact that we do not have any taxable income to offset, we have not undertaken a study to assess whether an “ownership change” has occurred or whether there have been multiple ownership changes since we became a “loss corporation” as defined in Section 382. Future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” If an “ownership change” has occurred or does occur in the future, our ability to utilize our NOL carryforwards or other tax attributes may be limited, which could result in an increased future tax liability to us.

The exercise of outstanding options and warrants to acquire shares of our common stock would cause additional dilution which could cause the price of our common stock to decline.

In the past, we have issued options and warrants to acquire shares of our common stock. At March 31, 2019, there were 3,951,052, warrants, for which we have reserved 3,951,052 shares of common stock, and 2,140,156 vested and 3,339,031 non-vested stock options outstanding, and we may issue additional options, warrants and other types of equity in the future as part of stock-based compensation, capital raising transactions, technology licenses, financings, strategic licenses or other strategic transactions. To the extent these options and warrants are ultimately exercised, existing common stockholders would experience additional dilution which may cause the price of our common stock to decline.

Limitations on director and officer liability and indemnification of our officers and directors by us may discourage stockholders from bringing suit against a director.

Our certificate of incorporation and bylaws provide, with certain exceptions as permitted by governing state law, that a director or officer shall not be personally liable to us or our stockholders for breach of fiduciary duty as a director, except for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director. In addition, our certificate of incorporation and bylaws may provide for mandatory indemnification of directors and officers to the fullest extent permitted by governing state law.

Compliance with the rules established by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 is complex. Failure to comply in a timely manner could adversely affect investor confidence and our stock price.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require us to perform an annual assessment of our internal controls over financial reporting and certify the effectiveness of those controls. The standards that must be met for management to assess the internal controls over financial reporting now in effect are complex, costly and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal controls over financial reporting. If we cannot perform the assessment or certify that our internal controls over financial reporting are effective investor confidence and share value may be negatively impacted.

We do not expect to pay cash dividends in the foreseeable future on our common stock.

We have not historically paid cash dividends on our common stock, and we do not plan to pay cash dividends on our common stock in the foreseeable future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Index

Exhibit	Description
3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.4 of the Registrant’s Form 10-SB filed on April 4, 2006, File No. 000-51891).
3.2	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Preliminary Information Statement on Form 14C filed on December 29, 2006, File No. 000-51891).
3.3	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on June 4, 2012, File No. 000-51891).
3.4	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 14, 2014, File No. 000-51891).
3.5	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 28, 2015, File No. 000-51891).
3.6	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2016, File No. 000-51891).
3.7	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 6, 2011, File No. 000-51891).
4.1	Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10-KSB filed on April 9, 2007, File No. 000-51891).
4.2	Certification of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on May 12, 2008, File No. 000-51891).
4.3	Certification of Designation of Series D Preferred Stock (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on January 5, 2009, File No. 000-51891).
4.4	Certificate of Designation of Series G Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on March 14, 2012, File No. 000-51891).
4.5		Certificate of Preferences, Rights and Limitations of Series I-1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on March 10, 2016, File No. 000-51891).
4.6		Certificate of Preferences, Rights and Limitations of Series I-2 Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K filed on March 10, 2016, File No. 000-51891).
4.7		Form of Series A Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 10, 2016, File No. 000-51891).
4.8		Form of Placement Agent Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.4 of the Registrant’s Form 8-K filed on March 10, 2016, File No. 000-51891).
10.1	Note Conversion Agreement, dated January 21, 2019 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on January 23, 2019).
10.2		Form of Note issued on April 17, 2019 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on April 22, 2019).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.*
32.1	Section 1350 Certification of Chief Executive Officer.*
32.2	Section 1350 Certification of Chief Financial Officer.*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*

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Exhibit	Description
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*
* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTERNATIONAL STEM CELL CORPORATION
Dated: May 15, 2019
	By:	/s/    ANDREY SEMECHKIN
	Name:	Andrey Semechkin
	Title:	Chief Executive Officer (Principal Executive Officer)
	By:	/s/    SOPHIA GARNETTE
	Name:	Sophia Garnette
	Title:	Vice President, Legal Affairs and Operations (Principal Financial Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Andrey Semechkin, Chief Executive Officer of International Stem Cell Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of International Stem Cell Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2019  

By:	/s/ Andrey Semechkin
	Andrey Semechkin
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Sophia Garnette, Vice President, Legal Affairs and Operations of International Stem Cell Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of International Stem Cell Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2019  

By:	/s/ Sophia Garnette
	Sophia Garnette
	Vice President, Legal Affairs and Operations
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of International Stem Cell Corporation (the “Company”) for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrey Semechkin, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2019

By:	/s/ Andrey Semechkin
	Andrey Semechkin
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of International Stem Cell Corporation (the “Company”) for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sophia Garnette, Vice President, Legal Affairs and Operations of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2019

By:	/s/ Sophia Garnette
	Sophia Garnette
	Vice President, Legal Affairs and Operations
	(Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 13, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	ISCO
Entity Registrant Name	International Stem Cell CORP
Entity Central Index Key	0001355790
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		7,533,083

XML

Condensed Consolidated Balance Sheets (2019 Unaudited) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets
Cash	$ 615	$ 1,075
Accounts receivable, net of allowance for doubtful accounts of $12	957	651
Inventory, net	1,460	1,501
Prepaid expenses and other current assets	480	543
Total current assets	3,512	3,770
Non-current inventory	792	805
Property and equipment, net	652	469
Intangible assets, net	2,700	2,674
Right-of-use asset	933
Deposits and other assets	74	78
Total assets	8,663	7,796
Liabilities and Stockholders' Equity
Accounts payable	806	458
Accrued liabilities	959	579
Operating lease liability, current	294
Related party payable	1,009	2,045
Advances	250	250
Fair value of warrant liability	1,148	1,745
Total current liabilities	4,466	5,077
Long-term deferred rent		182
Operating lease liability, net of current portion	1,011
Total liabilities	5,477	5,259
Commitments and Contingencies
Stockholders' Equity
Common stock, $0.001 par value, 120,000,000 shares authorized, 7,533,083 and 6,933,861 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	8	7
Additional paid-in capital	110,742	109,188
Accumulated deficit	(107,569)	(106,663)
Total stockholders' equity	3,186	2,537
Total liabilities and stockholders' equity	8,663	7,796
Series B Preferred Stock [Member]
Stockholders' Equity
Convertible Preferred stock
Series D Preferred Stock [Member]
Stockholders' Equity
Convertible Preferred stock
Series G Preferred Stock [Member]
Stockholders' Equity
Convertible Preferred stock	5	5
Series I-1 Preferred Stock [Member]
Stockholders' Equity
Convertible Preferred stock
Series I-2 Preferred Stock [Member]
Stockholders' Equity
Convertible Preferred stock

XML

Condensed Consolidated Balance Sheets (2019 Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Allowance for doubtful accounts receivable	$ 12	$ 12
Preferred stock, par value	$ 0.001
Preferred stock, shares authorized	20,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	120,000,000	120,000,000
Common stock, shares issued	7,533,083	6,933,861
Common stock, shares outstanding	7,533,083	6,933,861
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	250,000	250,000
Preferred stock, shares outstanding	250,000	250,000
Liquidation preference	$ 415	$ 411
Series D Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50	50
Preferred stock, shares issued	43	43
Preferred stock, shares outstanding	43	43
Liquidation preference	$ 4,320	$ 4,320
Series G Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	5,000,000	5,000,000
Preferred stock, shares outstanding	5,000,000	5,000,000
Liquidation preference	$ 5,000	$ 5,000
Series I-1 Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares issued	814	814
Preferred stock, shares outstanding	814	814
Liquidation preference	$ 814	$ 814
Series I-2 Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	4,310	4,310
Preferred stock, shares issued	4,310	4,310
Preferred stock, shares outstanding	4,310	4,310
Liquidation preference	$ 4,310	$ 4,310

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues
Total revenues	$ 2,218,000	$ 2,633,000
Type of Revenue [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember
Expenses
Cost of sales	$ 841,000	$ 825,000
Research and development	653,000	811,000
Selling and marketing	692,000	708,000
General and administrative	1,521,000	1,474,000
Total expenses	3,707,000	3,818,000
Loss from operations	(1,489,000)	(1,185,000)
Other income (expense)
Change in fair value of warrant liability	597,000	355,000
Interest expense	(14,000)	(2,000)
Miscellaneous income		2,000
Total other income (expense), net	583,000	355,000
Loss before provision for income taxes	(906,000)	(830,000)
Provision for income taxes	0
Net loss	(906,000)	(830,000)
Net loss applicable to common stockholders	$ (906,000)	$ (830,000)
Net loss per common share-basic	$ (0.12)	$ (0.14)
Net (loss) per common share-diluted	$ (0.12)	$ (0.14)
Weighted average shares-basic	7,400	6,136
Weighted average shares-diluted	7,400	6,136

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Preferred Stock [Member] Series B Convertible Preferred Stock [Member]	Preferred Stock [Member] Series G Convertible Preferred Stock [Member]	Preferred Stock [Member] Series I One Convertible Preferred Stock	Preferred Stock [Member] Series I Two Convertible Preferred Stock	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2017	$ 2,064	$ 6		$ 5			$ 106,585	$ (104,532)
Beginning balance, shares at Dec. 31, 2017		6,057	250	5,000	1	4
Issuance of common stock
for services	8						8
for services, shares		6
from exercise of options	90						90
from exercise of options, shares		82
Conversion of preferred stock, shares		50
Stock-based compensation	307						307
Net loss	(830)							(830)
Ending balance at Mar. 31, 2018	1,639	$ 6		$ 5			106,990	(105,362)
Ending balance, shares at Mar. 31, 2018		6,195	250	5,000	1	4
Beginning balance at Dec. 31, 2018	2,537	$ 7		$ 5			109,188	(106,663)
Beginning balance, shares at Dec. 31, 2018		6,934	250	5,000	1	4
Issuance of common stock
Conversion of debt	1,049	$ 1					1,048
Conversion of debt, shares		599
Stock-based compensation	506						506
Net loss	(906)							(906)
Ending balance at Mar. 31, 2019	$ 3,186	$ 8		$ 5			$ 110,742	$ (107,569)
Ending balance, shares at Mar. 31, 2019		7,533	250	5,000	1	4

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net loss	$ (906)	$ (830)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	72	68
Stock-based compensation expense	506	307
Common stock issued for services		8
Change in fair value of warrant liability	(597)	(355)
Allowance for inventory obsolescence	3	3
Interest expense on bridge loan from related party	13	1
Loss on disposal of property and equipment		1
Impairment of intangible assets		111
Amortization of right-of-use asset	18
Changes in operating assets and liabilities
Increase in accounts receivable	(306)	(474)
Decrease (increase) in inventory	51	(105)
Decrease in prepaid expenses and other current assets	214	137
Decrease (increase) in deposits and other assets	4	(1)
Increase in accounts payable	348	782
Increase in accrued liabilities	292	299
Net cash used in operating activities	(288)	(48)
Cash flows from investing activities
Purchases of property and equipment	(58)	(57)
Payments for patent licenses and trademarks	(61)	(144)
Net cash used in investing activities	(119)	(201)
Cash flows from financing activities
Proceeds from a bridge loan from a related party		350
Proceeds from exercise of stock options		90
Payments on financed insurance premiums	(53)	(48)
Net cash (used in) provided by financing activities	(53)	392
Net (decrease) increase in cash	(460)	143
Cash, beginning of period	1,075	304
Cash, end of period	615	$ 447
Supplemental disclosure of cash flow information
Cash paid for interest	2
Supplemental disclosure of non-cash investing and financing activities
Conversion of bridge loan from a related party to common stock	1,049
Financed insurance premiums	151
Lease incentives received for construction in progress	$ 162

XML

Organization and Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Significant Accounting Policies

1. Organization and Significant Accounting Policies

Business Combination and Corporate Restructure

BTHC III, Inc. (“BTHC III” or the “Company”) was organized in Delaware in June 2005 as a shell company to effect the reincorporation of BTHC III, LLC, a Texas limited liability company. On December 28, 2006, the Company effected a Share Exchange pursuant to which it acquired all of the stock of International Stem Cell Corporation, a California corporation (“ISC California”). After giving effect to the Share Exchange, the stockholders of ISC California owned 93.7% of issued and outstanding shares of common stock. As a result of the Share Exchange, ISC California is now the wholly-owned subsidiary, though for accounting purposes it was deemed to have been the acquirer in a “reverse merger.” In the reverse merger, BTHC III is considered the legal acquirer and ISC California is considered the accounting acquirer. On January 29, 2007, the Company changed its name from BTHC III, Inc. to International Stem Cell Corporation.

Lifeline Cell Technology, LLC (“LCT”) was formed in the State of California on August 17, 2001. LCT is in the business of developing and manufacturing purified primary human cells and optimized reagents for cell culture. LCT’s scientists have used a technology, called basal medium optimization, to systematically produce products designed to culture specific human cell types and to elicit specific cellular behaviors. These techniques also produce products that do not contain non-human animal proteins, a feature desirable to the research and therapeutic markets. LCT distinguishes itself in the industry by having in place scientific and manufacturing staff with the experience and knowledge to set up systems and facilities to produce a source of consistent, standardized, non-human animal protein free cell products, some of which are suitable for FDA approval.

On July 1, 2006, LCT entered into an agreement among LCT, ISC California and the holders of membership units and warrants. Pursuant to the terms of the agreement, all the membership units in LCT were exchanged for 133,334 shares of ISC California Common Stock and for ISC California’s assumption of LCT’s obligations under the warrants. LCT became a wholly-owned subsidiary of ISC California.

Lifeline Skin Care, Inc. (“LSC”) was formed in the State of California on June 5, 2009 and is a wholly-owned subsidiary of ISC California. LSC develops, manufactures and markets anti-aging cosmetic products, utilizing an extract derived from the Company’s human parthenogenetic stem cells and the Company’s proprietary small molecule technology.

Cyto Therapeutics Pty. Ltd. (“Cyto Therapeutics”) was registered in the state of Victoria, Australia, on December 19, 2014 and is a limited proprietary company and a wholly-owned subsidiary of the Company. Cyto Therapeutics is a research and development company for the Therapeutic Market, which is conducting clinical trials in Australia for the use of ISC-hpNSC^® in the treatment of Parkinson’s disease.

Going Concern

The Company has sustained recurring losses and needs to raise additional working capital. The timing and degree of any future capital requirements will depend on many factors. The Company’s burn rate for the three months ended March 31, 2019 was approximately $96,000 per month, excluding capital expenditures and patent costs averaging $40,000 per month. There can be no assurance that the Company will be successful in maintaining its normal operating cash flow or raising additional funds, and that such cash flows will be sufficient to sustain the Company’s operations at least through one year after the issuance date of the Company’s condensed consolidated financial statements. Based on the above, there is substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and they do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Management’s plans in regard to these matters are focused on managing its cash flow, the proper timing of its capital expenditures, and raising additional capital or financing in the future.

Basis of Presentation

The Company is a biotechnology company focused on therapeutic and clinical product development with multiple long-term therapeutic opportunities and two revenue-generating subsidiaries with potential for increased future revenues.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q.

These financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change to the information disclosed in the notes to consolidated financial statements included in the annual report on Form 10-K of International Stem Cell Corporation and Subsidiaries for the year ended December 31, 2018.

The unaudited condensed consolidated financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated results of operations, financial position and cash flows. The unaudited condensed consolidated financial statements and the related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K. Operating results for interim periods are not necessarily indicative of the operating results for any other interim period or an entire year.

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of International Stem Cell Corporation and its subsidiaries after intercompany balances and transactions have been eliminated.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. There were no cash equivalents as of March 31, 2019 and December 31, 2018.

Inventory

Inventory is accounted for using the average cost and first-in, first-out (FIFO) methods for LCT cell culture media and reagents, average cost and specific identification methods for LSC products, and specific identification method for LCT products. Inventory balances are stated at the lower of cost or net realizable value. Laboratory supplies used in the research and development process are expensed as consumed. Inventory is reviewed periodically for product expiration and obsolescence and is adjusted accordingly. The value of the inventory that is not expected to be sold within twelve months of the current reporting period is classified as non-current inventory on the condensed consolidated balance sheets.

Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. Accounts receivable primarily consist of trade accounts receivable from the sales of LCT’s products, timing of cash receipts by the Company related to LSC credit card sales to customers, as well as LSC trade receivable amounts related to spa and distributor sales. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. As of March 31, 2019 and December 31, 2018, the Company had an allowance for doubtful accounts totaling $12,000.

Property and Equipment

Property and equipment are stated at cost. The provision for depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. The costs of major remodeling and leasehold improvements are capitalized and amortized over the shorter of the remaining term of the lease or the estimated life of the asset.

Intangible Assets

Intangible assets consist of acquired research and development rights used in research and development, and capitalized legal fees related to the acquisition, filing, maintenance, and defense of patents and trademarks. Patent or patent license amortization only begins once a patent license is acquired or a patent is issued by the appropriate authoritative bodies. In the period in which a patent application is rejected or efforts to pursue the patent are abandoned, all the related accumulated costs are expensed. Patents and other intangible assets are recorded at cost of $3,692,000 and $3,632,000 at March 31, 2019 and December 31, 2018, respectively, and are amortized on a straight-line basis over the shorter of the lives of the underlying patents or the useful life of the license. Amortization expense for the three months ended March 31, 2019 and 2018 was $35,000 and $27,000, respectively. All amortization expense related to intangible assets is included in general and administrative expense. Accumulated amortization as of March 31, 2019 and December 31, 2018 was $992,000 and $958,000, respectively.     

Long-Lived Asset Impairment

The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows. The Company recognized none and $111,000 of impairment losses on its intangible assets during the three months ended March 31, 2019 and 2018, respectively, due to abandonment of efforts to pursue certain patents or patented technologies.   

Revenue Recognition

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following five-step process:

1.	Identify the contract with the customer
2.	Identify the performance obligations in the contract
3.	Determine the transaction price
4.	Allocate the transaction price to the performance obligations in the contract
5.	Recognize revenue when (or as) each performance obligation is satisfied

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.  

The following table presents the Company's revenue disaggregated by segment, product and geography, based on management's assessment of available data (in thousands):

Biomedical Market:
	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	U.S.		OUS*			Total Revenues		% of Total Revenues			U.S.		OUS*		Total Revenues		% of Total Revenues
Biomedical products
Cells	$	172	$	100		$	272		15	%	$	243	$	141	$	384		18	%
Media		1,401		117			1,518		85	%		1,554		189		1,743		82	%
Other		—		—			—		—			8		—		8		0	%
Total	$	1,573	$	217		$	1,790		100	%	$	1,805	$	330	$	2,135		100	%
*Outside the United States
Cosmetic Market:
	Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
	Total Revenues		% of Total Revenues			Total Revenues		% of Total Revenues
Cosmetic sales channels
Ecommerce	$	215		50	%	$	291		58	%
Professional		213		50	%		207		42	%
Total	$	428		100	%	$	498		100	%

The Company's revenue consists primarily of sales of products from its two revenue-generating operating segments, the anti-aging cosmetics products and biomedical products business segments.  The cosmetic market segment markets and sells a line of luxury skincare products sold through two sales channels: ecommerce and professional.  The ecommerce channel sells direct to customers through online orders, while the professional sales are to spas, salons and other skincare providers. The biomedical market segment markets and sells primary human cell research products with two product categories, cells and media, sold both within and outside the United States.

Contract terms for unit price, quantity, shipping and payment are governed by sales agreements, invoices or online order forms which the Company considers to be a customer's contract in all cases. The unit price is considered the observable stand-alone selling price for the arrangements. Any promotional or volume sales discounts are applied evenly to the units sold for purposes of calculating standalone selling price.

Product sales generally consist of a single performance obligation that the Company satisfies at a point in time.  The Company recognizes product revenue when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.   

For LSC products, ecommerce sales are primarily paid through credit card charges, while professional sales are invoiced. The professional sales and biomedical products' standard payment terms for its customers are generally 30 days after the Company satisfies the performance obligations. For anti-aging cosmetic products, the Company honors a 30-day return policy, but historical returns have been minimal and as such, no estimated allowance for sales returns was recorded as of March 31, 2019 and December 31, 2018.   

The Company elects to account for shipping and handling as activities to fulfill the promise to transfer the goods.  As a result, no consideration is allocated to shipping and handling.  Rather, the Company accrues the cost of shipping and handling upon shipment of the product, and all contract revenue is recognized at the same time.

Variable Consideration

The Company records revenue from customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of those goods or services. From time to time, the Company offers sales promotions on its skincare products such as discounts and free product offers. Variable consideration is estimated at contract inception only to the extent that it is probable that a significant reversal of revenue will not occur, and updated at the end of each reporting period as additional information becomes available.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.  As of March 31, 2019, and December 31, 2018, accounts receivable totaled $957,000 and $651,000, respectively.  For the three months ended March 31, 2019 and 2018, the Company did not incur material impairment losses with respect to its receivables.

Practical Expedients

The Company has elected the practical expedient not to determine whether contacts with customers contain significant financing components.  The Company pays commissions on certain sales for its biomedical and cosmetic market(s) once the customer payment has been received, which are accrued at the time of the sale.  The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.  In addition, the Company has elected to exclude sales taxes in consideration of the transaction price.

Allowance for Sales Returns

The Company’s cosmetic products have a 30-day product return guarantee and based on historical rate of returns from the years ended December 31, 2015 through 2018, the Company determined that there is a low probability that returns will occur. The returns that have historically occurred have not been significant and have been recognized as they occur as a reduction of revenue that is recognized as performance obligations are met.  As of March 31, 2019 and December 31, 2018, the Company has recorded no allowance for sales returns.

Cost of Sales

Cost of sales consists primarily of salaries and benefits associated with employee efforts expended directly on the production of the Company’s products and include related direct materials, general laboratory supplies and allocation of overhead. Certain of the agreements under which the Company has licensed technology will require the payment of royalties based on the sale of its future products. Such royalties will be recorded as a component of cost of sales. Additionally, the amortization of license fees or milestone payments related to developed technologies used in the Company’s products will be classified as a component of cost of sales to the extent such payments become due in the future.

Research and Development Costs

Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits associated with research and development personnel, overhead and occupancy, contract services, and amortization of license costs for technology used in research and development with alternative future uses.

Stock-Based Compensation

The Company recognized stock-based compensation expense associated with stock options and other stock-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of a stock-based award is measured at the grant date based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures over the requisite service period of the award. The fair value of stock options is estimated using the Black-Scholes option valuation model, which requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. The fair value of restricted stock awards is based on the market value of the Company’s common stock on the date of grant.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of March 31, 2019 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,148	$	—	$	—	$	1,148

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,745	$	—	$	—	$	1,745

The following table displays the rollforward activity of liabilities with inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity) (in thousands):

	Warrantsto purchase
	common stock
Ending balance at December 31, 2017	$	3,113
Adjustments to estimated fair value		(1,368	)
Ending balance at December 31, 2018	$	1,745
Adjustments to estimated fair value	$	(597	)
Ending balance at March 31, 2019	$	1,148

Income Taxes

The Company accounts for income taxes in accordance with applicable authoritative guidance, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Significant estimates include patent life (remaining legal life versus remaining useful life), inventory carrying values, allowance for excess and obsolete inventories, allowance for sales returns and doubtful accounts, and transactions using the Black-Scholes option pricing model, e.g., warrants and stock options, as well as the Monte-Carlo valuation method for certain warrants. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company believes that the carrying value of its cash, receivables, accounts payable, accrued liabilities and related party note payable as of March 31, 2019 and December 31, 2018 approximate their fair values because of the short-term nature of those instruments. The fair value of certain warrants was determined at each issuance and quarterly reporting date as necessary using the Monte-Carlo valuation methodology.

Income (Loss) Per Common Share

The computation of net loss per common share is based on the weighted average number of shares outstanding during each period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents, which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. At March 31, 2019, there were no non-vested shares of restricted stock, 2,140,156 vested and 3,339,031 non-vested stock options outstanding, and 3,951,052 warrants outstanding; and at March 31, 2018, there were no non-vested shares of restricted stock, 1,054,230 vested and 2,040,596 non-vested stock options outstanding, and 3,951,052 warrants outstanding. These stock options, warrants, and convertible preferred stock were not included in the diluted loss per share calculation because the effect would have been anti-dilutive. Refer to Note 6 for convertible preferred stock.

Comprehensive Income

Comprehensive income or loss includes all changes in stockholders’ equity except those resulting from investments by owners and distributions to owners. The Company did not have any items of comprehensive income or loss other than net loss from operations for the three months ended March 31, 2019 and 2018.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 makes nonemployee share-based payments to be consistent with the accounting for employee share-based payment awards, which measures the fair value of the payment based on grant date and considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. The updated standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In July 2017, the FASB issued ASU No. 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815)" ("ASU 2017-11") effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down round feature when triggered with the effect treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The adoption of ASU 2017-11 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize “right-of-use” assets and a lease liability for all leases with lease terms of more than 12 months. The Company elected the exception from applying the new guidance for any short-term leases or leases with terms less than or equal to 12 months. Topic 842 requires additional quantitative and qualitative financial statement footnote disclosures about the leases, significant judgments made in accounting for those leases and amounts recognized in the financial statements about those leases. In 2018 and 2019, the FASB has issued and incorporated several additional ASUs to provide clarifying guidance associated with the application of certain principles within Topic 842. The effective date will be the first quarter of fiscal year 2019. The Company elected the “package of practical expedients,” which allowed the Company to not reassess under the new guidance, the Company’s prior conclusions about lease identification, classification, and treatment of initial direct costs as well as electing the modified retrospective approach effective January 1, 2019. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $933,000 and $1,305,000 respectively. All operating lease expense is recognized on a straight-line basis over the lease term.

Accounting Pronouncements Being Evaluated

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820), “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes the valuation processes for Level 3 fair value measurements and adds the disclosure for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The updated standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of this accounting standard update.

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Inventory

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Inventory

2. Inventory

The components of inventories are as follows (in thousands):

	March 31,			December 31,
	2019			2018
Raw materials	$	670		$	656
Work in process		583			590
Finished goods		1,218			1,276
Total		2,471			2,522
Less: allowance for inventory excess and obsolescence		(219	)		(216	)
Inventory, net	$	2,252		$	2,306

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Property and Equipment

3 Months Ended

Mar. 31, 2019

Property Plant And Equipment [Abstract]

Property and Equipment

3. Property and Equipment

Property and equipment consist of the following (in thousands):

	March 31,			December 31,
	2019			2018
Machinery and equipment	$	1,599		$	1,614
Computer equipment and software		256			251
Office equipment		222			215
Leasehold improvements		996			996
Construction in progress		244			45
		3,317			3,121
Less: accumulated depreciation and amortization		(2,665	)		(2,652	)
Property and equipment, net	$	652		$	469

Depreciation expense for the three months ended March 31, 2019 and 2018 was $37,000 and $41,000, respectively.  

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Patent Licenses

3 Months Ended

Mar. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Patent Licenses

4. Patent Licenses

On December 31, 2003, LCT entered into an Option to License Intellectual Property agreement with Advanced Cell Technology, Inc., which changed its name to Ocata Therapeutics, Inc. and was subsequently acquired by Astellas Pharma Inc. (“Astellas"), for patent rights and paid Astellas $340,000 in option and license fees. On February 13, 2004, LCT and Astellas amended the Option agreement and LCT paid Astellas additional option fees of $22,500 for fees related to registering Astellas’ patents in selected international countries.

On May 14, 2004, LCT amended the licensing agreement with Astellas for the exclusive worldwide patent rights for the following Astellas technologies: UMass IP, ACT IP and Infigen IP. The additional license fees paid were $400,000.

On February 7, 2013, the Company and Astellas entered into Amended and Restated License Agreements (the “Amendment”) for the purpose of completely amending and restating the terms of the license agreements. Under the terms of the Amendment, the Company acquired exclusive world-wide rights to all human therapeutic uses and cosmetic uses from Astellas and Infigen’s early work on parthenogenic-derived embryonic stem cells, as well as certain rights to patents covering Single Blastomere technology.

Pursuant to the Amendment, all minimum R&D requirements and all milestone payments due to Astellas under the Exclusive License Agreement have been eliminated. The Company will no longer pay any royalties under the ACT IP Agreement and Infigen IP Agreement. The obligation to pay royalties that ranged from 6%-12% under the UMass IP Agreement has been reduced to 0.25% of the net sales of products using technology covered by the UMass IP Agreement; and the obligation to pay a minimum annual license fee of $150,000 has been reduced to $75,000 annually, payable in two installments to Astellas.

As of March 31, 2019, the total amounts capitalized related to the acquired Astellas licenses were $747,000, and $2,945,000 related to the other patent acquisition costs and trademarks.

At March 31, 2019, future amortization expense related to intangible assets subject to amortization is expected to be as follows (in thousands):

	Amount
2019 (Remaining nine months)		72
2020		91
2021		91
2022		91
2023		91
Thereafter		2,181
Total	$	2,617

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Advances

3 Months Ended

Mar. 31, 2019

Advances [Abstract]

Advances

5. Advances

On June 18, 2008, the Company entered into an agreement with BioTime, Inc. (“Bio Time”), where Bio Time will pay an advance of $250,000 to LCT to produce, make, and distribute Joint Products. The $250,000 advance will be paid down with the first $250,000 of net revenues that otherwise would be allocated to LCT under the agreement. As of March 31, 2019, no revenues were realized from this agreement.

	March 31,		December 31,
	2019		2018
BioTime, Inc. (in thousands)	$	250	$	250

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Capital Stock

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

Capital Stock

6. Capital Stock

As of March 31, 2019, the Company is authorized to issue 120,000,000 shares of common stock, $0.001 par value per share, and 20,000,000 shares of preferred stock, $0.001 par value per share.

Capital Transactions

Series B Preferred Stock

On May 12, 2008, to obtain funding for working capital, the Company entered into a series of subscription agreements with five accredited investors for the sale of a total of 400,000 Series B Units, each Series B Unit consisting of one share of Series B Preferred Stock (“Series B Preferred”) and two Series B Warrants (“Series B Warrants”) to purchase common stock for each $1.00 invested.

The total purchase price received by the Company was $400,000. The Series B Preferred is convertible into shares of common stock at the initial conversion ratio of 0.0134 shares of common stock for each share of Series B Preferred converted (which was established based on an initial conversion price of $75.00 per share), and the Series B Warrants were exercisable at $75.00 per share until five years from the issuance of the Series B Warrants, which expired unexercised in May 2013. The Series B Preferred contain anti-dilution clauses whereby, if the Company issues equity securities or securities convertible into equity at a price below the conversion price of the Series B Preferred, such conversion price shall be adjusted downward to equal the price of the new securities. The Series B Preferred has a priority (senior to the shares of common stock and Series I Preferred) on any sale or liquidation of the Company equal to the purchase price of the Series B Units, plus a liquidation premium of 6% per year. If the Company elects to declare a dividend in any year, it must first pay to the Series B Preferred holder a dividend equal to the amount of the dividend the Series B Preferred holder would receive if the Series B Preferred were converted just prior to the dividend declaration. Each share of Series B Preferred has the same voting rights as the number of shares of common stock into which it would be convertible on the record date. As of March 31, 2019 and December 31, 2018, there were 250,000 shares of the Series B Preferred issued and outstanding.

 In December 2016, the Company issued Restricted Stock to its non-employee directors at a price of $1.08. Accordingly, such transactions triggered adjustments in the current conversion price of the Series B Preferred to $1.08.  

Series D Preferred Stock

On December 30, 2008, the Company entered into a Series D Preferred Stock Purchase Agreement (the “Series D Agreement”) with accredited investors (the “Investors”) and sold 43 shares of Series D Preferred Stock (“Series D Preferred”) at a price of $100,000 per Series D Preferred share.

Ten shares of the Series D Preferred were issued to X-Master Inc., which is a related party and affiliated with the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors, Dr. Andrey Semechkin and Dr. Russell Kern, Executive Vice President and Chief Scientific Officer and a director; and 33 shares of the Series D Preferred were issued to Dr. Andrey Semechkin. As of March 31, 2019 and December 31, 2018, there were 43 shares of the Series D Preferred issued and outstanding.

The Series D Preferred was initially convertible into shares of common stock at $37.50 per share, resulting in an initial conversion ratio of 2,667 shares of common stock for every share of Series D Preferred. The Series D Preferred has an anti-dilution clause whereby, if the Company issues equity securities or securities convertible into equity at a price below the conversion price of the Series D Preferred, the conversion price of the Series D Preferred shall be adjusted downward to equal the price of the new securities. The Series D Preferred has priority over the Series B Preferred Stock, Series G Preferred Stock, Series I-1 Preferred Stock, Series I-2 Preferred Stock and common stock on the proceeds from any sale or liquidation of the Company in an amount equal to the purchase price of the Series D Preferred.

In March 2016, the Company issued Series I Preferred Stock which had an initial conversion price of $1.75, as well as three series of warrants. Accordingly, such transaction triggered an adjustment in the current conversion price of the Series D Preferred to $1.75.  

Series G Preferred Stock

On March 9, 2012, the Company entered into a Series G Preferred Stock Purchase Agreement with AR Partners, LLC (the “Purchaser”) to sell 5,000,000 shares of Series G Preferred Stock (“Series G Preferred”) at a price of $1.00 per Series G Preferred share, for a total purchase price of $5,000,000. The Purchaser is an affiliate of Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer, and Dr. Russell Kern, Executive Vice President and Chief Scientific Officer and a director.

The Series G Preferred was initially convertible into shares of common stock at $60.00 per share, resulting in an initial conversion ratio of 0.0167 shares of common stock for every share of Series G Preferred. The conversion price may be adjusted for stock splits and other combinations, dividends and distributions, recapitalizations and reclassifications, exchanges or substitutions and is subject to a weighted-average adjustment in the event of the issuance of additional shares of common stock below the conversion price.

The Series G Preferred shares have priority over the Series B Preferred, Series I-1 Preferred, Series I-2 Preferred and common stock on the proceeds from any sale or liquidation of the Company in an amount equal to the purchase price of the Series G Preferred, but such payment may be made only after payment in full of the liquidation preferences payable to holders of any shares of Series D Preferred then outstanding. Each share of Series G Preferred has the same voting rights as the number of shares of common stock into which it would be convertible on the record date. As long as there are at least 1,000,000 shares of Series G Preferred outstanding, the holders of Series G Preferred have (i) the initial right to propose the nomination of two members of the Board, at least one of which such nominees shall be subject to the approval of the Company’s independent directors, for election by the stockholder’s at the Company’s next annual meeting of stockholders, or, elected by the full board of directors to fill a vacancy, as the case may be, and (ii) the right to approve any amendment to the certificate of incorporation, certificates of designation or bylaws, in manner adverse to the Series G Preferred, alter the percentage of board seats held by the Series G Preferred directors or increase the authorized number of shares of Series G Preferred. At least one of the two directors nominated by holders of the Series G Preferred shall be independent based on the NASDAQ listing requirements.   

As of March 31, 2019 and December 31, 2018, there were 5,000,000 shares of the Series G Preferred issued and outstanding. On January 21, 2019, the Company issued 599,222 shares of common stock upon conversion of a portion of the Company’s outstanding indebtedness with a principal amount of $1,000,000 and accrued and unpaid interest on the principal of $49,000.  In accordance with the Series G Certificate of Designation, the issuance of Common Shares at the conversion price of $1.75 per share triggered further adjustment in the conversion price and conversion ratio of the Series G Preferred Stock to $9.70 per share and 0.1031 shares, respectively.  

Series I Preferred Stock

On March 9, 2016, the Company, entered into a Securities Purchase Agreement (the “Series I Agreement”) with three investors, which included two institutional investors and Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman providing for the issuance (the “Offering”) of (i) 2,000 shares of Series I-1 convertible preferred stock (the “Series I-1 Preferred Stock”) issuable to the institutional investors at a price of $1,000 per share, (ii) 4,310 shares of Series I-2 convertible preferred stock (the “Series I-2 Preferred Stock”, and together with the Series I-1 Preferred Stock, the “Preferred Stock”) issuable to Andrey Semechkin at a price of $1,000 per share, (iii) Series A Warrants (the “Series A Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $3.64 per share with a term of five years, (iv) Series B Warrants (the “Series B Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $1.75 per share with a term of six months and (v) Series C Warrants (the “Series C Warrants”, together with the Series A Warrants and the Series B Warrants, collectively, the “Investor Warrants”) to purchase up to approximately 3.6 million shares of common stock at an initial exercise price of $1.75 per share with a term of twelve months. The closing of the Offering occurred on March 15, 2016 (the “Closing Date”). The Series I Agreement also contains representations, warranties, indemnification and other provisions customary for transactions of this nature. The Company received cash proceeds of $2.5 million on the closing date. On September 15, 2016, the remaining unexercised Series B Warrants then outstanding expired unexercised. On March 15, 2017, the remaining unexercised Series C Warrants then outstanding expired unexercised.

Rodman & Renshaw, a unit of H.C. Wainwright & Co., LLC. (the “Placement Agent”) acted as the exclusive placement agent for the Offering pursuant to a placement agency engagement letter, dated as of March 9, 2016, by and between the Placement Agent and the Company (the “Engagement Letter”). Upon the closing of the Offering, pursuant to the Engagement Letter, the Placement Agent received a placement agent fee of $200,000 and a warrant to purchase approximately 343,000 shares of common stock (the “Placement Agent Warrant”, together with the Investor Warrants, the “Warrants”) as well as the reimbursement of fees and expenses up to $50,000. Similar to the Series A Warrant, the Placement Warrant has an initial exercise price of $3.64 per share, and is immediately exercisable and will terminate on five years after the date of issuance.  

Subject to certain ownership limitations with respect to the Series I-1 Preferred Stock, the Series I Preferred Stock is convertible at any time into shares of Common Stock at an initial conversion price of $1.75 per share. The Series I Preferred Stock is non-voting, is only entitled to dividends in the event that dividends are paid on the Common Stock, and will not have any preferences over the Common Stock, except that the Preferred Stock shall have preferential liquidation rights over the Common Stock. Other than the Series I-1 Preferred Stock having a beneficial ownership limitation, the Series I-1 Preferred Stock and Series I-2 Preferred Stock are substantially identical. The conversion price of the Series I Preferred Stock is subject to certain resets as set forth in the Certificates of Designation, including the date of any future amendment to the certificate of incorporation with respect to a reverse stock split and the effectiveness dates of the registration statements. As of March 31, 2019 and December 31, 2018, there were 5,124 shares of Series I Preferred Stock outstanding.

See Note 9, Stock Options and Warrants for detailed discussion of the anti-dilution provisions of the Series A Warrants and Placement Agent Warrants.

Reserved Shares

At March 31, 2019, the Company had shares of common stock reserved for future issuance as follows:

Options outstanding	5,479,187
Options available for future grant	3,971,056
Convertible preferred stock	6,132,276
Warrants	3,951,052
	19,533,571

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Related Party Transactions

3 Months Ended

Mar. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

7. Related Party Transactions

Other than with respect to the purchases of Series D Preferred, Series G Preferred and Series I Preferred Stock transactions discussed above, the Company’s related party transactions were for a facility lease and working capital bridge loans.

During the first quarter of 2011, the Company executed an operating lease for its corporate offices with S Real Estate Holdings LLC. S Real Estate Holdings LLC is owned by Dr. Russell Kern, the Company’s Executive Vice President and Chief Scientific Officer and a director and was previously owned by Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. The lease agreement was negotiated at arm’s length and was reviewed by the Company’s outside legal counsel. The terms of the lease were reviewed by a committee of independent directors, and the Company believes that, in total, those terms are at least as favorable to the Company as could be obtained for comparable facilities from an unaffiliated party. In March 2017 the Company signed an amendment to the lease agreement to extend the term of the lease until 2020 and include annual adjustments to the monthly lease payments.  For the three months ended March 31, 2019 and 2018, the Company recorded $40,000, in rent expense that was related to the facility lease arrangement with related parties.    

Between March 6, 2018 and August 8, 2018, to obtain funding for working capital purposes, the Company borrowed a total of $2,000,000 from Dr. Andrey Semechkin and issued an unsecured non-convertible promissory note in the principal amount of $2,000,000 (the “Note”) to Dr. Semechkin (the “Noteholder”). The outstanding principal amount under the Note accrued interest at a rate of four percent (4%) per annum. The Note was due and payable November 1, 2018 and on November 12, 2018, to satisfy the indebtedness incurred on the Note, an amendment to the Note was entered into extending the due date to January 15, 2019.

On January 21, 2019, the Company entered into a Note Conversion Agreement with Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer (the “Conversion Agreement”). The Conversion Agreement provides for the conversion of a total of $1,049,000 (representing $1,000,000 of principal and $49,000 of accrued interest, representing all accrued interest on the amount owed to Dr. Semechkin through January 21, 2019) under the promissory note issued to Dr. Semechkin on August 8, 2018 into a total of 599,222 shares of the Company’s common stock, representing a conversion price of $1.75 per share. Under the Conversion Agreement, the remaining $1,000,000 owed to Dr. Semechkin under the Note has been reflected in a new unsecured, non-convertible promissory note in the principal amount of $1,000,000 (the “New Note”). The outstanding principal amount under the New Note accrues interest at a rate of four and one-half percent (4.5%) per annum. The New Note is due and payable on January 15, 2020, but may be pre-paid by the Company without penalty at any time. See Note 12, Subsequent Events.

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Income Taxes

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The Company estimated Federal and state tax losses for the current year and recorded a full valuation allowance against all net deferred tax assets. As such, no income tax provision has been recorded for the current period. The Company may be subject to Internal Revenue Code (IRC) Sections 382 and 383, which could limit the amount of the net operating loss and tax credit carryovers that can be used in future years. The Company has not completed a study to assess whether an ownership change has occurred, as defined by IRC Sections 382 and 383, or whether there have been ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. The Company estimates that if such a change did occur, the federal and state net operating loss carryforwards and research and development credit carryforwards that can be utilized in the future will be significantly limited. There can be no assurances that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards or the credit carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the carryforwards.  

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Stock Options and Warrants

3 Months Ended

Mar. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Options and Warrants

9. Stock Options and Warrants

Stock Options

The Company adopted the 2006 Equity Participation Plan (as amended the “2006 Plan”), which provides for the grant of stock options, restricted stock and other equity-based awards. Awards for up to 100,000 shares may be granted to employees, directors and consultants under this Plan. The options granted under the 2006 Plan may be either qualified or non-qualified options. Options may be granted with different vesting terms and expire no later than 10 years from the date of grant. The 2006 Plan expired on November 16, 2016. Options and other equity based awards granted prior to the expiration of the 2006 Plan will continue in effect until the option or award is exercised or terminates pursuant to its terms. No new awards may be granted under the 2006 Plan following its expiration.

In April 2010, the Company adopted the 2010 Equity Participation Plan (as amended the “2010 Plan”), which provides for the grant of stock options, restricted stock and other equity-based awards. Awards for up to 9,700,000 shares may be granted to employees, directors and consultants under the 2010 Plan. The options granted under the 2010 Plan may be either qualified or non-qualified options. Options may be granted with different vesting terms and expire no later than 10 years from the date of grant.

In November and December of 2009, the Company issued non-qualified stock options to purchase 68,384 shares of common stock outside the 2006 and 2010 option plans to certain employees and consultants. These options vest over 50 months and expire no later than 10 years from the date of grant. As of March 31, 2019, 12,634 options remain outstanding and a total of 55,750 options were exercised, canceled, or expired.

Total stock-based compensation expense for the three months ended March 31, 2019 and 2018 was comprised of the following (in thousands):  

	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2019		2018
Cost of sales	$	24	$	6
Research and development		156		124
Selling and marketing		23		7
General and administrative		303		170
	$	506	$	307

Unrecognized compensation expense related to stock options as of March 31, 2019 was $3,450,000, which is expected to be recognized over a weighted average period of approximately 2.0 years.

In accordance with applicable authoritative guidance, the Company is required to establish assumptions and estimates of the fair value of stock options granted, as well as use a valuation model to calculate the fair value of stock-based awards. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. All options are amortized over the requisite service periods.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the three months ended March 31, 2019 and 2018:

	Three Months Ended			Three Months Ended
	March 31,			March 31,
	2019			2018
Significant assumptions (weighted average):
Risk-free interest rate at grant date		2.55	%		2.68	%
Expected stock price volatility		84.80	%		95.61	%
Expected dividend payout		0	%		0	%
Expected option life based on management's estimate	5.77 years			5.76 years

Transactions involving stock options issued to employees, directors and consultants under the 2006 Plan, the 2010 Plan and outside the plans are summarized below. Options issued have a maximum life of 10 years. The following tables summarize the changes in options outstanding and the related exercise prices for the Company’s common stock options issued:

	Number of					Weighted
	OptionsIssued			Weighted		Average	Aggregate
	Under			AverageExercise		Remaining	Intrinsic
	2006 Plan and			Price Per		Contractual	Value
	2010 Plan			Share		Term	(in thousands)
Outstanding at December 31, 2018		4,354,708		$	3.95
Granted		1,142,000		$	1.51
Exercised		—		$	—
Canceled or expired		(30,155	)	$	1.78
Outstanding at March 31, 2019		5,466,553		$	3.45	8.69 years		16
Vested and expected to vest at March 31, 2019		5,065,661		$	3.60	8.64 years	$	16
Exercisable at March 31, 2019		2,127,522		$	6.29	7.88 years	$	10

					Weighted
	Number of		Weighted		Average	Aggregate
	Options Issued		Average Exercise		Remaining	Intrinsic
	Outside		Price Per		Contractual	Value
	the Plan		Share		Term	(in thousands)
Outstanding, vested and exercisable at December 31, 2018		12,634	$	90.23
Granted		—	$	—
Exercised		—	$	—
Canceled or expired		—	$	—
Outstanding, vested and exercisable at March 31, 2019		12,634	$	90.23	0.66 years	$	—

Restricted Stock Awards

Restricted stock awards are grants that entitle the holder to acquire shares of common stock at zero or a fixed price, which is typically nominal. The Company accounts for the restricted stock awards as issued and outstanding common stock, even though the shares covered by a restricted stock award cannot be sold, pledged, or otherwise disposed of until the award vests and any unvested shares may be reacquired by the Company for the original purchase price following the awardee’s termination of service.

No restricted stock was awarded for the three months ended March 31, 2019. For the three months ended March 31, 2018 there were 5,527 shares of restricted stock awarded and fully vested at a weighted average grant date fair value of $1.47 per share.

The fair value of the restricted stock awards is based on the market value of the common stock on the date of grant. The total grant-date fair value of restricted stock awards vested during the three months ended March 31, 2019 and 2018, was none and approximately $8,000, respectively. The Company recognized none and approximately $8,000 of stock-based compensation expense related to the restricted stock awards for the three months ended March 31, 2019 and 2018, respectively.   As of March 31, 2019, there was no unrecognized compensation costs related to unvested awards. 

Warrants

Warrants Issued with Preferred Stock

Warrants issued in connection with the October 2014 Financing

The Company has accounted for the warrants in accordance with current accounting guidance, which defines how freestanding contracts that are indexed to and potentially settled in a Company’s own stock should be measured and classified. The authoritative accounting guidance prescribes that only warrants issued under contracts that cannot be net-cash settled and are both indexed to and settled in the Company’s common stock can be classified as equity. As the Series A, Series B and Series C Warrants and Placement Agent Warrant agreements did not meet the specific conditions for equity classification, the Company was required to classify the fair value of the warrants issued as a liability, with subsequent changes in fair value to be recorded as income (loss) in the statement of operations upon revaluation of the fair value of warrant liability at each reporting period. Valuation of the Warrants was estimated at issuance and each reporting date using the Monte-Carlo simulation model. As of December 31, 2016, all Series A, B and C Warrants were exercised or expired unexercised.

The following assumptions were used as inputs to the model at March 31, 2019: for the Placement Agent Warrants, stock price of $1.12 and warrant exercise price of $1.75 as of the valuation date; the Company’s historical stock price volatility of 77.2%; risk free interest rate on U.S. treasury notes of 2.40%; warrant expiration of 1.04 years; and a zero dividend rate; simulated as a daily interval and anti-dilution impact if the Company had to raise capital below $1.75 per share.

During the three months ended March 31, 2019 and 2018, the Company recorded no material expense or income related to the change in the fair value of warrant liability in the condensed consolidated statements of operations related to the warrants from the October 2014 financing.

Placement Agent Warrants Price Adjustment - The Warrants are immediately exercisable and the exercise price of the Warrants is subject to certain reset adjustments as set forth in the forms of Warrant, including the date of the amendment to the Company’s certificate of incorporation with respect to the reverse stock split, the effectiveness dates of the registration statements and the six and twelve month anniversaries of the date of issuance of the Warrants. The Company’s registration statement on Form S-1 filed on November 3, 2014 with the SEC became effective after amendment on November 25, 2014.  Pursuant to the terms of the respective warrant agreements, the exercise price of the Placement Agent Warrants were reset at $1.75 per share. At March 31, 2019, 2,483 of the Placement Agent Warrants remained outstanding.   

Warrants issued in connection with the March 2016 Financing

The Company has accounted for the warrants in accordance with current accounting guidance, which defines how freestanding contracts that are indexed to and potentially settled in a Company’s own stock should be measured and classified. The authoritative accounting guidance prescribes that only warrants issued under contracts that cannot be net-cash settled and are both indexed to and settled in the Company’s common stock can be classified as equity. As the Series A, Series B and Series C Warrants and Placement Agent Warrant agreements did not meet the specific conditions for equity classification, the Company was required to classify the fair value of the warrants issued as a liability, with subsequent changes in fair value to be recorded as income (loss) in the statement of operations upon revaluation of the fair value of warrant liability at each reporting period. Unexercised portions of the Series B and C Warrants expired unexercised as of March 31, 2019. Valuation of the Warrants was estimated at issuance and each reporting date using the Monte-Carlo simulation model.

The following assumptions were used as inputs to the model at March 31, 2019 for Series A Warrants and the Placement Agent Warrants, stock price of $1.12 and warrant exercise price of $1.75 as of the valuation date; the Company’s historical stock price volatility of 77.2%; risk free interest rate on U.S. treasury notes of 2.27%; warrant expiration of 1.96 years; and a zero dividend rate, simulated as a daily interval and anti-dilution impact if the Company had to raise capital below $1.75 per share.

During the three months ended March 31, 2019 and 2018, the Company recorded a net change in fair value of warrant liability income of $597,000 and $355,000, respectively in the condensed consolidated statements of operations related to the warrants from the March 2016 financing.

Series A, and Placement Agent Warrants Price Adjustment - The Warrants are immediately exercisable and the exercise price of the Warrants is subject to certain reset adjustments as set forth in the forms of Warrant, including the date of the amendment to the Company’s certificate of incorporation with respect to any reverse stock split, the effectiveness dates of the registration statements and (in certain events) upon the six and twelve month anniversaries of the date of issuance of the Warrants. Pursuant to the terms a note conversion and stock purchase agreement in December 2017 with Dr. Andrey Semechkin, the exercise price of the Series A Warrants and the Placement Agent Warrants were reset at $1.75 per share.

Warrants Issued with Common Stock

2013 Securities Purchase Agreements for Common Stock

In conjunction with the Company’s sale of 67,500 shares of common stock on January 22, 2013, the Company issued warrants convertible into 33,750 shares of common stock at an exercise price of $30.00 per share. The warrants have a five-year term. These warrants are held by Dr. Andrey Semechkin and Dr. Simon Craw, the Company’s Co-Chairman and Chief Executive Officer and the Company’s former Executive Vice President Business Development, respectively.   These warrants expired unexercised in January 2018.

On March 12, 2013 the Company issued warrants convertible into 16,667 shares of common stock in conjunction with the sale of 33,334 shares of common stock. These warrants have a five-year term and an exercise price of $30.00 per share. Dr. Andrey Semechkin, the Company’s Co-Chairman and Chief Executive Officer is the holder of 1,667 of these warrants. These warrants expired unexercised in March 2018.

Share data related to warrant transactions through March 31, 2019 were as follows:

	Common Stock				Common Stock				Price per Warrant
	March 2016 Financing				October 2014 Financing						Weighted
			Placement		Placement		Total				Average
	Series A		Agent		Agent		Warrants		Range		Exercise Price
Outstanding, December 31, 2018		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75
Forfeited/Cancelled								—	$		$
Outstanding, March 31, 2019		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Leases

The Company has established its primary research facility in 8,215 square feet of leased office and laboratory space in Oceanside, California. The current lease for this facility expires in December 2021, with the Company’s option to terminate the lease on January 1, 2020 upon a six-month advanced notice. The current base rent is approximately $10,000 per month. The facility has leasehold improvements which include cGMP (current Good Manufacturing Practices) level clean rooms designed for the derivation of clinical-grade stem cells and their differentiated derivatives, research laboratories for the Company’s stem cell differentiation studies and segregated rooms for biohazard control and containment of human donor tissue. The monthly base rent will increase by 3% annually on the anniversary date of the agreement.

The Company leases a 13,320 square foot manufacturing facility in Frederick, Maryland, which is used for laboratory and administrative purposes. As of March 31, 2019, the base rent was approximately $17,000 per month. The lease was amended in October 2018 to increase the square footage from 8,280 square feet to 13,320 for an additional 5,040 square feet. In addition, the Company extended the lease to expire in November 2025. The administration space is used to support sales, marketing and accounting. The laboratory is being used to develop and manufacture the Company’s research products. The manufacturing laboratory space has clean rooms and is fitted with the necessary water purification systems, temperature-controlled storage, labeling equipment and other standard manufacturing equipment to manufacture, package, test, store, and distribute cell culture products.   

On February 25, 2011, the Company entered into a lease agreement (the “Lease Agreement”) with S Real Estate Holdings LLC to allow the Company to expand into new corporate offices located at 5950 Priestly Drive, Carlsbad, California. The building is used for administrative purposes, but could also be used for research and development purposes if such space is needed in the future. The lease initially covered approximately 4,653 square feet, starting on March 1, 2011, and was amended to cover approximately 8,199 square feet effective July 1, 2011, and to cover approximately 9,848 square feet effective January 1, 2013. The lease expired on February 29, 2016, and the Company extended the term of the lease for one year. On February 22, 2017, the Company extended the term of the lease for an additional three years. The Company began paying rent at an initial rate of approximately $5,000 per month and the rate was amended effective July 1, 2011 and January 1, 2013 to account for additional square footage occupied by the Company. As of March 31, 2019, the base rent is approximately $13,000 per month. The monthly base rent will increase by 3% annually on the anniversary date of the agreement. The Company is also obligated to pay a portion of the utilities for the building and increases in property tax and insurance.

S Real Estate Holdings LLC is owned by Dr. Russell Kern, the Company’s Executive Vice President and Chief Scientific Officer and a director, and was previously owned by Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. The Lease Agreement was negotiated at arm’s length and was reviewed by the Company’s outside legal counsel. The terms of the lease were reviewed by a committee of independent directors, and the Company believes that, in total, those terms are consistent with the terms that could be obtained for comparable facilities from an unaffiliated party.   

These operating leases are included in "right-of-use asset" on the Company's March 31, 2019 balance sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments is included in ”operating lease liabilities, current” and “operating lease liabilities, net of current portion” on the Company's March 31, 2019 balance sheet. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $933,000 and $1,305,000, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. 

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.

Information related to the Company's right-of-use assets and related lease liabilities were as follows (in thousands):

	Three months ended  March 31, 2019
Cash paid for operating lease liabilities	$	119
Right-of-use assets obtained in exchange for new operating lease obligations	$	933
Weighted-average remaining lease term (years)		5.16
Weighted average discount rate		17.38	%

Maturities of lease liabilities as of March 31, 2019 were as follows :
2019 (remaining months)	$	372
2020		369
2021		347
2022		220
2023		227
Thereafter		454
		1,989
Less: present value adjustments		(684	)
Total lease liabilities	$	1,305
Current operating lease liabilities	$	294
Non-current operating lease liabilities		1,011
Total operating lease liabilities	$	1,305

The Company incurred rent expense of $140,000 and $87,000 for the three months ended March 31, 2019 and 2018, respectively.   

Customer Concentration

During the three months ended March 31, 2019 and 2018, for the biomedical market segment, one customer accounted for 42% and 37% of consolidated revenues, respectively. No other single customer accounted for more than 10% of revenues for any period presented.

Vendor Concentration

During the three months ended March 31, 2019 and 2018, no single vendor accounted for more than 10% of consolidated purchases.

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Segments and Geographic Information

3 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

Segments and Geographic Information

11. Segments and Geographic Information

The Company’s chief operating decision-maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information by each reportable company’s statement of operations. The Company operates the business on the basis of three reporting segments, the parent company and two business units:

International Stem Cell Corporation, incorporated in Delaware, is a research and development company, for the therapeutic market, which advances clinical applications of hpSCs for the treatment of various diseases of the central nervous system, liver diseases and is currently conducting clinical trials in Australia for the use of hpSCs in the treatment of Parkinson’s disease through its wholly-owned subsidiary, Cyto Therapeutics;

Lifeline Skin Care, Inc. for the anti-aging cosmetic market, develops, manufactures and markets a category of anti-aging cosmetic skin care products based on the Company’s proprietary parthenogenetic stem cell technology and small molecule technology;

Lifeline Cell Technology, LLC for the biomedical market, develops, manufactures and commercializes primary human cell research products including over 201 human cell culture products, including frozen human “primary” cells and the reagents (called “media”) needed to grow, maintain and differentiate the cells.

Revenues, Expenses and Operating Income (loss)

The Company does not measure the performance of its segments on any asset-based metrics. Therefore, segment information is presented only for operating income (loss). Revenues, expenses and operating income (loss) by market segment were as follows (in thousands):

	For the Three Months Ended
	March 31,
	2019			2018
Revenues:
Anti-aging cosmetic market	$	428		$	498
Biomedical market		1,790			2,135
Total revenues		2,218			2,633
Operating expenses:
Therapeutic market		1,658			1,816
Anti-aging cosmetic market		603			704
Biomedical market		1,446			1,298
Total operating expenses		3,707			3,818
Operating income (loss):
Therapeutic market		(1,658	)		(1,816	)
Anti-aging cosmetic market		(175	)		(206	)
Biomedical market		344			837
Total operating loss	$	(1,489	)	$	(1,185	)

Geographic Information

The Company’s wholly-owned subsidiaries are located in Maryland, California, and Melbourne, Australia and have customer and vendor relationships worldwide. Significant revenues in the following regions are those that are attributable to the individual countries within the region to which the product was shipped (in thousands):

	For the Three Months Ended
	March 31,
	2019		2018
North America	$	1,997	$	2,303
Asia		129		238
Europe		89		86
All other regions		3		6
Total	$	2,218	$	2,633

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Subsequent Events

3 Months Ended

Mar. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

12. Subsequent Events

On April 17, 2019 to obtain funding for working capital purposes, the Company issued an unsecured, non-convertible promissory note in the amount of $1,800,000 to Dr. Andrey Semechkin, the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors. Dr. Andrey Semechkin surrendered a promissory note from the Company for $1,000,000 and provided an additional $800,000 of funds to the Company.  The outstanding principal amount accrues interest at a rate of four and a half Percent (4.5%) per annum and is due and payable January 15, 2020 but may be pre-paid by the Company without penalty at any time.

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Organization and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business Combination and Corporate Restructure

Business Combination and Corporate Restructure

BTHC III, Inc. (“BTHC III” or the “Company”) was organized in Delaware in June 2005 as a shell company to effect the reincorporation of BTHC III, LLC, a Texas limited liability company. On December 28, 2006, the Company effected a Share Exchange pursuant to which it acquired all of the stock of International Stem Cell Corporation, a California corporation (“ISC California”). After giving effect to the Share Exchange, the stockholders of ISC California owned 93.7% of issued and outstanding shares of common stock. As a result of the Share Exchange, ISC California is now the wholly-owned subsidiary, though for accounting purposes it was deemed to have been the acquirer in a “reverse merger.” In the reverse merger, BTHC III is considered the legal acquirer and ISC California is considered the accounting acquirer. On January 29, 2007, the Company changed its name from BTHC III, Inc. to International Stem Cell Corporation.

Lifeline Cell Technology, LLC (“LCT”) was formed in the State of California on August 17, 2001. LCT is in the business of developing and manufacturing purified primary human cells and optimized reagents for cell culture. LCT’s scientists have used a technology, called basal medium optimization, to systematically produce products designed to culture specific human cell types and to elicit specific cellular behaviors. These techniques also produce products that do not contain non-human animal proteins, a feature desirable to the research and therapeutic markets. LCT distinguishes itself in the industry by having in place scientific and manufacturing staff with the experience and knowledge to set up systems and facilities to produce a source of consistent, standardized, non-human animal protein free cell products, some of which are suitable for FDA approval.

On July 1, 2006, LCT entered into an agreement among LCT, ISC California and the holders of membership units and warrants. Pursuant to the terms of the agreement, all the membership units in LCT were exchanged for 133,334 shares of ISC California Common Stock and for ISC California’s assumption of LCT’s obligations under the warrants. LCT became a wholly-owned subsidiary of ISC California.

Lifeline Skin Care, Inc. (“LSC”) was formed in the State of California on June 5, 2009 and is a wholly-owned subsidiary of ISC California. LSC develops, manufactures and markets anti-aging cosmetic products, utilizing an extract derived from the Company’s human parthenogenetic stem cells and the Company’s proprietary small molecule technology.

Cyto Therapeutics Pty. Ltd. (“Cyto Therapeutics”) was registered in the state of Victoria, Australia, on December 19, 2014 and is a limited proprietary company and a wholly-owned subsidiary of the Company. Cyto Therapeutics is a research and development company for the Therapeutic Market, which is conducting clinical trials in Australia for the use of ISC-hpNSC^® in the treatment of Parkinson’s disease.

Going Concern

Going Concern

The Company has sustained recurring losses and needs to raise additional working capital. The timing and degree of any future capital requirements will depend on many factors. The Company’s burn rate for the three months ended March 31, 2019 was approximately $96,000 per month, excluding capital expenditures and patent costs averaging $40,000 per month. There can be no assurance that the Company will be successful in maintaining its normal operating cash flow or raising additional funds, and that such cash flows will be sufficient to sustain the Company’s operations at least through one year after the issuance date of the Company’s condensed consolidated financial statements. Based on the above, there is substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements were prepared assuming that the Company will continue as a going concern and they do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Management’s plans in regard to these matters are focused on managing its cash flow, the proper timing of its capital expenditures, and raising additional capital or financing in the future.

Basis of Presentation

Basis of Presentation

The Company is a biotechnology company focused on therapeutic and clinical product development with multiple long-term therapeutic opportunities and two revenue-generating subsidiaries with potential for increased future revenues.

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q.

These financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change to the information disclosed in the notes to consolidated financial statements included in the annual report on Form 10-K of International Stem Cell Corporation and Subsidiaries for the year ended December 31, 2018.

The unaudited condensed consolidated financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated results of operations, financial position and cash flows. The unaudited condensed consolidated financial statements and the related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s annual report on Form 10-K. Operating results for interim periods are not necessarily indicative of the operating results for any other interim period or an entire year.

Principles of Consolidation

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of International Stem Cell Corporation and its subsidiaries after intercompany balances and transactions have been eliminated.

Cash Equivalents

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. There were no cash equivalents as of March 31, 2019 and December 31, 2018.

Inventory

Inventory

Inventory is accounted for using the average cost and first-in, first-out (FIFO) methods for LCT cell culture media and reagents, average cost and specific identification methods for LSC products, and specific identification method for LCT products. Inventory balances are stated at the lower of cost or net realizable value. Laboratory supplies used in the research and development process are expensed as consumed. Inventory is reviewed periodically for product expiration and obsolescence and is adjusted accordingly. The value of the inventory that is not expected to be sold within twelve months of the current reporting period is classified as non-current inventory on the condensed consolidated balance sheets.

Accounts Receivable

Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. Accounts receivable primarily consist of trade accounts receivable from the sales of LCT’s products, timing of cash receipts by the Company related to LSC credit card sales to customers, as well as LSC trade receivable amounts related to spa and distributor sales. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. As of March 31, 2019 and December 31, 2018, the Company had an allowance for doubtful accounts totaling $12,000.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. The provision for depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years. The costs of major remodeling and leasehold improvements are capitalized and amortized over the shorter of the remaining term of the lease or the estimated life of the asset.

Intangible Assets

Intangible Assets

Intangible assets consist of acquired research and development rights used in research and development, and capitalized legal fees related to the acquisition, filing, maintenance, and defense of patents and trademarks. Patent or patent license amortization only begins once a patent license is acquired or a patent is issued by the appropriate authoritative bodies. In the period in which a patent application is rejected or efforts to pursue the patent are abandoned, all the related accumulated costs are expensed. Patents and other intangible assets are recorded at cost of $3,692,000 and $3,632,000 at March 31, 2019 and December 31, 2018, respectively, and are amortized on a straight-line basis over the shorter of the lives of the underlying patents or the useful life of the license. Amortization expense for the three months ended March 31, 2019 and 2018 was $35,000 and $27,000, respectively. All amortization expense related to intangible assets is included in general and administrative expense. Accumulated amortization as of March 31, 2019 and December 31, 2018 was $992,000 and $958,000, respectively.     

Long-Lived Asset Impairment

Long-Lived Asset Impairment

The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their carrying value may not be recovered, and at least annually. The Company considers assets to be impaired and writes them down to fair value if expected associated undiscounted cash flows are less than the carrying amounts. Fair value is the present value of the associated cash flows. The Company recognized none and $111,000 of impairment losses on its intangible assets during the three months ended March 31, 2019 and 2018, respectively, due to abandonment of efforts to pursue certain patents or patented technologies.   

Revenue Recognition

Revenue Recognition

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following five-step process:

1.	Identify the contract with the customer
2.	Identify the performance obligations in the contract
3.	Determine the transaction price
4.	Allocate the transaction price to the performance obligations in the contract
5.	Recognize revenue when (or as) each performance obligation is satisfied

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.  

The following table presents the Company's revenue disaggregated by segment, product and geography, based on management's assessment of available data (in thousands):

Biomedical Market:
	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	U.S.		OUS*			Total Revenues		% of Total Revenues			U.S.		OUS*		Total Revenues		% of Total Revenues
Biomedical products
Cells	$	172	$	100		$	272		15	%	$	243	$	141	$	384		18	%
Media		1,401		117			1,518		85	%		1,554		189		1,743		82	%
Other		—		—			—		—			8		—		8		0	%
Total	$	1,573	$	217		$	1,790		100	%	$	1,805	$	330	$	2,135		100	%
*Outside the United States
Cosmetic Market:
	Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
	Total Revenues		% of Total Revenues			Total Revenues		% of Total Revenues
Cosmetic sales channels
Ecommerce	$	215		50	%	$	291		58	%
Professional		213		50	%		207		42	%
Total	$	428		100	%	$	498		100	%

The Company's revenue consists primarily of sales of products from its two revenue-generating operating segments, the anti-aging cosmetics products and biomedical products business segments.  The cosmetic market segment markets and sells a line of luxury skincare products sold through two sales channels: ecommerce and professional.  The ecommerce channel sells direct to customers through online orders, while the professional sales are to spas, salons and other skincare providers. The biomedical market segment markets and sells primary human cell research products with two product categories, cells and media, sold both within and outside the United States.

Contract terms for unit price, quantity, shipping and payment are governed by sales agreements, invoices or online order forms which the Company considers to be a customer's contract in all cases. The unit price is considered the observable stand-alone selling price for the arrangements. Any promotional or volume sales discounts are applied evenly to the units sold for purposes of calculating standalone selling price.

Product sales generally consist of a single performance obligation that the Company satisfies at a point in time.  The Company recognizes product revenue when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.   

For LSC products, ecommerce sales are primarily paid through credit card charges, while professional sales are invoiced. The professional sales and biomedical products' standard payment terms for its customers are generally 30 days after the Company satisfies the performance obligations. For anti-aging cosmetic products, the Company honors a 30-day return policy, but historical returns have been minimal and as such, no estimated allowance for sales returns was recorded as of March 31, 2019 and December 31, 2018.   

The Company elects to account for shipping and handling as activities to fulfill the promise to transfer the goods.  As a result, no consideration is allocated to shipping and handling.  Rather, the Company accrues the cost of shipping and handling upon shipment of the product, and all contract revenue is recognized at the same time.

Variable Consideration

The Company records revenue from customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of those goods or services. From time to time, the Company offers sales promotions on its skincare products such as discounts and free product offers. Variable consideration is estimated at contract inception only to the extent that it is probable that a significant reversal of revenue will not occur, and updated at the end of each reporting period as additional information becomes available.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.  As of March 31, 2019, and December 31, 2018, accounts receivable totaled $957,000 and $651,000, respectively.  For the three months ended March 31, 2019 and 2018, the Company did not incur material impairment losses with respect to its receivables.

Practical Expedients

The Company has elected the practical expedient not to determine whether contacts with customers contain significant financing components.  The Company pays commissions on certain sales for its biomedical and cosmetic market(s) once the customer payment has been received, which are accrued at the time of the sale.  The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.  In addition, the Company has elected to exclude sales taxes in consideration of the transaction price.

Allowance for Sales Returns

Allowance for Sales Returns

The Company’s cosmetic products have a 30-day product return guarantee and based on historical rate of returns from the years ended December 31, 2015 through 2018, the Company determined that there is a low probability that returns will occur. The returns that have historically occurred have not been significant and have been recognized as they occur as a reduction of revenue that is recognized as performance obligations are met.  As of March 31, 2019 and December 31, 2018, the Company has recorded no allowance for sales returns.

Cost of Sales

Cost of Sales

Cost of sales consists primarily of salaries and benefits associated with employee efforts expended directly on the production of the Company’s products and include related direct materials, general laboratory supplies and allocation of overhead. Certain of the agreements under which the Company has licensed technology will require the payment of royalties based on the sale of its future products. Such royalties will be recorded as a component of cost of sales. Additionally, the amortization of license fees or milestone payments related to developed technologies used in the Company’s products will be classified as a component of cost of sales to the extent such payments become due in the future.

Research and Development Costs

Research and Development Costs

Research and development costs, which are expensed as incurred, are primarily comprised of costs and expenses for salaries and benefits associated with research and development personnel, overhead and occupancy, contract services, and amortization of license costs for technology used in research and development with alternative future uses.

Stock-Based Compensation

Stock-Based Compensation

The Company recognized stock-based compensation expense associated with stock options and other stock-based awards in accordance with the authoritative guidance for stock-based compensation. The cost of a stock-based award is measured at the grant date based on the estimated fair value of the award, and is recognized as expense on a straight-line basis, net of estimated forfeitures over the requisite service period of the award. The fair value of stock options is estimated using the Black-Scholes option valuation model, which requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option. The fair value of restricted stock awards is based on the market value of the Company’s common stock on the date of grant.

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of March 31, 2019 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,148	$	—	$	—	$	1,148

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,745	$	—	$	—	$	1,745

The following table displays the rollforward activity of liabilities with inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity) (in thousands):

	Warrantsto purchase
	common stock
Ending balance at December 31, 2017	$	3,113
Adjustments to estimated fair value		(1,368	)
Ending balance at December 31, 2018	$	1,745
Adjustments to estimated fair value	$	(597	)
Ending balance at March 31, 2019	$	1,148

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with applicable authoritative guidance, which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Significant estimates include patent life (remaining legal life versus remaining useful life), inventory carrying values, allowance for excess and obsolete inventories, allowance for sales returns and doubtful accounts, and transactions using the Black-Scholes option pricing model, e.g., warrants and stock options, as well as the Monte-Carlo valuation method for certain warrants. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company believes that the carrying value of its cash, receivables, accounts payable, accrued liabilities and related party note payable as of March 31, 2019 and December 31, 2018 approximate their fair values because of the short-term nature of those instruments. The fair value of certain warrants was determined at each issuance and quarterly reporting date as necessary using the Monte-Carlo valuation methodology.

Income (Loss) Per Common Share

Income (Loss) Per Common Share

The computation of net loss per common share is based on the weighted average number of shares outstanding during each period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents, which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. At March 31, 2019, there were no non-vested shares of restricted stock, 2,140,156 vested and 3,339,031 non-vested stock options outstanding, and 3,951,052 warrants outstanding; and at March 31, 2018, there were no non-vested shares of restricted stock, 1,054,230 vested and 2,040,596 non-vested stock options outstanding, and 3,951,052 warrants outstanding. These stock options, warrants, and convertible preferred stock were not included in the diluted loss per share calculation because the effect would have been anti-dilutive. Refer to Note 6 for convertible preferred stock.

Comprehensive Income

Comprehensive Income

Comprehensive income or loss includes all changes in stockholders’ equity except those resulting from investments by owners and distributions to owners. The Company did not have any items of comprehensive income or loss other than net loss from operations for the three months ended March 31, 2019 and 2018.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 makes nonemployee share-based payments to be consistent with the accounting for employee share-based payment awards, which measures the fair value of the payment based on grant date and considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. The updated standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In July 2017, the FASB issued ASU No. 2017-11, "Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815)" ("ASU 2017-11") effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2017-11 changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments require entities that present earnings per share ("EPS") in accordance with Topic 260 to recognize the effect of the down round feature when triggered with the effect treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The adoption of ASU 2017-11 on January 1, 2019 did not result in a material impact on the Company’s balance sheet or statement of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize “right-of-use” assets and a lease liability for all leases with lease terms of more than 12 months. The Company elected the exception from applying the new guidance for any short-term leases or leases with terms less than or equal to 12 months. Topic 842 requires additional quantitative and qualitative financial statement footnote disclosures about the leases, significant judgments made in accounting for those leases and amounts recognized in the financial statements about those leases. In 2018 and 2019, the FASB has issued and incorporated several additional ASUs to provide clarifying guidance associated with the application of certain principles within Topic 842. The effective date will be the first quarter of fiscal year 2019. The Company elected the “package of practical expedients,” which allowed the Company to not reassess under the new guidance, the Company’s prior conclusions about lease identification, classification, and treatment of initial direct costs as well as electing the modified retrospective approach effective January 1, 2019. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $933,000 and $1,305,000 respectively. All operating lease expense is recognized on a straight-line basis over the lease term.

Accounting Pronouncements Being Evaluated

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820), “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes the valuation processes for Level 3 fair value measurements and adds the disclosure for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The updated standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of this accounting standard update.

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Organization and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Summary of Revenue Disaggregated by Segment, Product and Geography Based on Management's Assessment

The following table presents the Company's revenue disaggregated by segment, product and geography, based on management's assessment of available data (in thousands):

Biomedical Market:
	Three Months Ended March 31, 2019										Three Months Ended March 31, 2018
	U.S.		OUS*			Total Revenues		% of Total Revenues			U.S.		OUS*		Total Revenues		% of Total Revenues
Biomedical products
Cells	$	172	$	100		$	272		15	%	$	243	$	141	$	384		18	%
Media		1,401		117			1,518		85	%		1,554		189		1,743		82	%
Other		—		—			—		—			8		—		8		0	%
Total	$	1,573	$	217		$	1,790		100	%	$	1,805	$	330	$	2,135		100	%
*Outside the United States
Cosmetic Market:
	Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
	Total Revenues		% of Total Revenues			Total Revenues		% of Total Revenues
Cosmetic sales channels
Ecommerce	$	215		50	%	$	291		58	%
Professional		213		50	%		207		42	%
Total	$	428		100	%	$	498		100	%

Fair Values of Liabilities on a Recurring Basis

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of March 31, 2019 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,148	$	—	$	—	$	1,148

The table below sets forth a summary of the Company’s liabilities which are measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

	Total		Level 1		Level 2		Level 3
LIABILITIES:
Warrants to purchase common stock	$	1,745	$	—	$	—	$	1,745

Fair Value Measurement and Unobservable Rollforward Activity of Liabilities

The following table displays the rollforward activity of liabilities with inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity) (in thousands):

	Warrantsto purchase
	common stock
Ending balance at December 31, 2017	$	3,113
Adjustments to estimated fair value		(1,368	)
Ending balance at December 31, 2018	$	1,745
Adjustments to estimated fair value	$	(597	)
Ending balance at March 31, 2019	$	1,148

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Inventory (Tables)

3 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Summary of the Components of Inventories

The components of inventories are as follows (in thousands):

	March 31,			December 31,
	2019			2018
Raw materials	$	670		$	656
Work in process		583			590
Finished goods		1,218			1,276
Total		2,471			2,522
Less: allowance for inventory excess and obsolescence		(219	)		(216	)
Inventory, net	$	2,252		$	2,306

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2019

Property Plant And Equipment [Abstract]

Summary of Property and Equipment

Property and equipment consist of the following (in thousands):

	March 31,			December 31,
	2019			2018
Machinery and equipment	$	1,599		$	1,614
Computer equipment and software		256			251
Office equipment		222			215
Leasehold improvements		996			996
Construction in progress		244			45
		3,317			3,121
Less: accumulated depreciation and amortization		(2,665	)		(2,652	)
Property and equipment, net	$	652		$	469

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Patent Licenses (Tables)

3 Months Ended

Mar. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Future Amortization Expense Related to Intangible Assets Subject to Amortization

At March 31, 2019, future amortization expense related to intangible assets subject to amortization is expected to be as follows (in thousands):

	Amount
2019 (Remaining nine months)		72
2020		91
2021		91
2022		91
2023		91
Thereafter		2,181
Total	$	2,617

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Advances (Tables)

3 Months Ended

Mar. 31, 2019

Advances [Abstract]

Schedule of Advances from Nonaffiliated Collaboration

As of March 31, 2019, no revenues were realized from this agreement.

	March 31,		December 31,
	2019		2018
BioTime, Inc. (in thousands)	$	250	$	250

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Capital Stock (Tables)

3 Months Ended

Mar. 31, 2019

Equity [Abstract]

Summary of Shares of Common Stock Reserved for Future Issuance

At March 31, 2019, the Company had shares of common stock reserved for future issuance as follows:

Options outstanding	5,479,187
Options available for future grant	3,971,056
Convertible preferred stock	6,132,276
Warrants	3,951,052
	19,533,571

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Stock Options and Warrants (Tables)

3 Months Ended

Mar. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Total Stock-based Compensation Expense

Total stock-based compensation expense for the three months ended March 31, 2019 and 2018 was comprised of the following (in thousands):  

	Three Months Ended		Three Months Ended
	March 31,		March 31,
	2019		2018
Cost of sales	$	24	$	6
Research and development		156		124
Selling and marketing		23		7
General and administrative		303		170
	$	506	$	307

Fair Value of Stock Option Award Weighted Average Assumptions

The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the three months ended March 31, 2019 and 2018:

	Three Months Ended			Three Months Ended
	March 31,			March 31,
	2019			2018
Significant assumptions (weighted average):
Risk-free interest rate at grant date		2.55	%		2.68	%
Expected stock price volatility		84.80	%		95.61	%
Expected dividend payout		0	%		0	%
Expected option life based on management's estimate	5.77 years			5.76 years

Summary of Changes in Options Outstanding and Related Exercise Prices for Shares of Company's Common Stock Options Issued

The following tables summarize the changes in options outstanding and the related exercise prices for the Company’s common stock options issued:

	Number of					Weighted
	OptionsIssued			Weighted		Average	Aggregate
	Under			AverageExercise		Remaining	Intrinsic
	2006 Plan and			Price Per		Contractual	Value
	2010 Plan			Share		Term	(in thousands)
Outstanding at December 31, 2018		4,354,708		$	3.95
Granted		1,142,000		$	1.51
Exercised		—		$	—
Canceled or expired		(30,155	)	$	1.78
Outstanding at March 31, 2019		5,466,553		$	3.45	8.69 years		16
Vested and expected to vest at March 31, 2019		5,065,661		$	3.60	8.64 years	$	16
Exercisable at March 31, 2019		2,127,522		$	6.29	7.88 years	$	10

					Weighted
	Number of		Weighted		Average	Aggregate
	Options Issued		Average Exercise		Remaining	Intrinsic
	Outside		Price Per		Contractual	Value
	the Plan		Share		Term	(in thousands)
Outstanding, vested and exercisable at December 31, 2018		12,634	$	90.23
Granted		—	$	—
Exercised		—	$	—
Canceled or expired		—	$	—
Outstanding, vested and exercisable at March 31, 2019		12,634	$	90.23	0.66 years	$	—

Summary of Outstanding Warrants Related to Warrant Transactions

Share data related to warrant transactions through March 31, 2019 were as follows:

	Common Stock				Common Stock				Price per Warrant
	March 2016 Financing				October 2014 Financing						Weighted
			Placement		Placement		Total				Average
	Series A		Agent		Agent		Warrants		Range		Exercise Price
Outstanding, December 31, 2018		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75
Forfeited/Cancelled								—	$		$
Outstanding, March 31, 2019		3,605,713		342,856		2,483		3,951,052	$	1.75	$	1.75

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Information Related to Right-of-use Assets and Lease Liabilities

Information related to the Company's right-of-use assets and related lease liabilities were as follows (in thousands):

	Three months ended  March 31, 2019
Cash paid for operating lease liabilities	$	119
Right-of-use assets obtained in exchange for new operating lease obligations	$	933
Weighted-average remaining lease term (years)		5.16
Weighted average discount rate		17.38	%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2019 were as follows :
2019 (remaining months)	$	372
2020		369
2021		347
2022		220
2023		227
Thereafter		454
		1,989
Less: present value adjustments		(684	)
Total lease liabilities	$	1,305
Current operating lease liabilities	$	294
Non-current operating lease liabilities		1,011
Total operating lease liabilities	$	1,305

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Segments and Geographic Information (Tables)

3 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

Revenues, Expenses and Operating Income (Loss) by Market Segment

Revenues, expenses and operating income (loss) by market segment were as follows (in thousands):

	For the Three Months Ended
	March 31,
	2019			2018
Revenues:
Anti-aging cosmetic market	$	428		$	498
Biomedical market		1,790			2,135
Total revenues		2,218			2,633
Operating expenses:
Therapeutic market		1,658			1,816
Anti-aging cosmetic market		603			704
Biomedical market		1,446			1,298
Total operating expenses		3,707			3,818
Operating income (loss):
Therapeutic market		(1,658	)		(1,816	)
Anti-aging cosmetic market		(175	)		(206	)
Biomedical market		344			837
Total operating loss	$	(1,489	)	$	(1,185	)

Summary of Significant Revenues in Following Regions

Significant revenues in the following regions are those that are attributable to the individual countries within the region to which the product was shipped (in thousands):

	For the Three Months Ended
	March 31,
	2019		2018
North America	$	1,997	$	2,303
Asia		129		238
Europe		89		86
All other regions		3		6
Total	$	2,218	$	2,633

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Organization and Significant Accounting Policies - Additional Information (Detail)		3 Months Ended		12 Months Ended
	Jul. 01, 2006 shares	Mar. 31, 2019 USD ($) Subsidiary Segment shares	Mar. 31, 2018 USD ($) shares	Dec. 31, 2018 USD ($) shares
Organization And Significant Accounting Policies [Line Items]
Percentage of ownership in issued and outstanding shares of common stock parent Company		93.70%
Common stock in subsidiary Company | shares	133,334
Burn rate		$ 96,000
Capital expenditures and patent costs		$ 40,000
Revenue-generating subsidiaries | Subsidiary		2
Original maturities period, maximum		3 months
Cash equivalents		$ 0		$ 0
Allowance for doubtful accounts receivable		12,000		12,000
Patents and other intangible assets		3,692,000		3,632,000
Accumulated amortization		992,000		958,000
Impairment losses on intangible assets		$ 0	$ 111,000
Number of revenue-generating operating segments | Segment		2
Description of payment terms		The Company's revenue consists primarily of sales of products from its two revenue-generating operating segments, the anti-aging cosmetics products and biomedical products business segments. The cosmetic market segment markets and sells a line of luxury skincare products sold through two sales channels: ecommerce and professional. The ecommerce channel sells direct to customers through online orders, while the professional sales are to spas, salons and other skincare providers. The biomedical market segment markets and sells primary human cell research products with two product categories, cells and media, sold both within and outside the United States.
Accounts receivable		$ 957,000		651,000
Impairment losses with respect to receivables		$ 0	$ 0
Product return guarantee period		30 days
Allowance for sales returns		$ 0		$ 0
Vested stock options outstanding | shares		2,140,156	1,054,230
Stock options outstanding, non-vested | shares		3,339,031	2,040,596
Warrants outstanding | shares		3,951,052	3,951,052	3,951,052
Right-of-use assets		$ 933,000
Operating lease, liabilites		1,305,000
ASU 2016-02 [Member]
Organization And Significant Accounting Policies [Line Items]
Right-of-use assets		933,000
Operating lease, liabilites		$ 1,305,000
Restricted Stock [Member]
Organization And Significant Accounting Policies [Line Items]
Non-vested restricted stock awards | shares		0	0
LSC [Member]
Organization And Significant Accounting Policies [Line Items]
Allowance for doubtful accounts receivable		$ 0		$ 0
General and Administrative Expense [Member]
Organization And Significant Accounting Policies [Line Items]
Amortization expense		$ 35,000	$ 27,000
Minimum [Member]
Organization And Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment		3 years
Maximum [Member]
Organization And Significant Accounting Policies [Line Items]
Estimated useful life of property and equipment		5 years
Sales commissions amortization period		1 year

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Organization and Significant Accounting Policies - Summary of Revenue Disaggregated by Segment, Product and Geography Based on Management's Assessment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 2,218	$ 2,633
Biomedical Market [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 1,790	$ 2,135
% of Total Revenues	100.00%	100.00%
Biomedical Market [Member] | U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 1,573	$ 1,805
Biomedical Market [Member] | OUS [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	217	330
Biomedical Market [Member] | Cells [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 272	$ 384
% of Total Revenues	15.00%	18.00%
Biomedical Market [Member] | Cells [Member] | U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 172	$ 243
Biomedical Market [Member] | Cells [Member] | OUS [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	100	141
Biomedical Market [Member] | Media [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 1,518	$ 1,743
% of Total Revenues	85.00%	82.00%
Biomedical Market [Member] | Media [Member] | U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 1,401	$ 1,554
Biomedical Market [Member] | Media [Member] | OUS [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	117	189
Biomedical Market [Member] | Other [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues		$ 8
% of Total Revenues		0.00%
Biomedical Market [Member] | Other [Member] | U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues		$ 8
Cosmetic Market [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 428	$ 498
% of Total Revenues	100.00%	100.00%
Cosmetic Market [Member] | Ecommerce [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 215	$ 291
% of Total Revenues	50.00%	58.00%
Cosmetic Market [Member] | Professional [Member]
Disaggregation Of Revenue [Line Items]
Total Revenues	$ 213	$ 207
% of Total Revenues	50.00%	42.00%

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Organization and Significant Accounting Policies - Fair Values of Liabilities on a Recurring Basis (Detail) - Fair Value, Measurements, Recurring [Member] - Warrants [Member] - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
LIABILITIES:
Warrants to purchase common stock	$ 1,148	$ 1,745
Level 3 [Member]
LIABILITIES:
Warrants to purchase common stock	$ 1,148	$ 1,745

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Organization and Significant Accounting Policies - Fair Value Measurement and Unobservable Rollforward Activity of Liabilities (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Adjustments to estimated fair value	$ 597	$ 355
Warrants [Member]
Fair Value Disclosures [Abstract]
Beginning balance	1,745	$ 3,113	$ 3,113
Adjustments to estimated fair value	(597)		(1,368)
Ending balance	$ 1,148		$ 1,745

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Inventory - Summary of the Components of Inventories (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 670	$ 656
Work in process	583	590
Finished goods	1,218	1,276
Total	2,471	2,522
Less: allowance for inventory excess and obsolescence	(219)	(216)
Inventory, net	$ 2,252	$ 2,306

XML

Property and Equipment - Summary of Property and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 3,317	$ 3,121
Less: accumulated depreciation and amortization	(2,665)	(2,652)
Property and equipment, net	652	469
Machinery and Equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,599	1,614
Computer Equipment and Software [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	256	251
Office Equipment [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	222	215
Leasehold Improvements [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	996	996
Construction in Progress [Member]
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 244	$ 45

XML

Property and Equipment - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Property Plant And Equipment [Abstract]
Depreciation expense	$ 37	$ 41

XML

Patent Licenses - Additional Information (Detail)					12 Months Ended
	Feb. 07, 2013 Installment	May 14, 2004 USD ($)	Feb. 13, 2004 USD ($)	Dec. 31, 2003 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Mar. 31, 2019 USD ($)
Finite-Lived Intangible Assets [Line Items]
Other patent acquisition costs and trademarks							$ 2,945,000
UMass IP [Member]
Finite-Lived Intangible Assets [Line Items]
Obligation to pay royalties (Ranged)	0.25%
Minimum annual license fee					$ 150,000	$ 75,000
Number of installments | Installment	2
UMass IP [Member] | Minimum [Member] | Previously Reported [Member]
Finite-Lived Intangible Assets [Line Items]
Obligation to pay royalties (Ranged)	6.00%
UMass IP [Member] | Maximum [Member] | Previously Reported [Member]
Finite-Lived Intangible Assets [Line Items]
Obligation to pay royalties (Ranged)	12.00%
Astellas IP [Member]
Finite-Lived Intangible Assets [Line Items]
Patent acquisition costs							$ 747,000
License [Member]
Finite-Lived Intangible Assets [Line Items]
Option and license fees		$ 400,000	$ 22,500	$ 340,000

XML

Patent Licenses - Summary of Future Amortization Expense Related to Intangible Assets Subject to Amortization (Detail) $ in Thousands	Mar. 31, 2019 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
2019 (Remaining nine months)	$ 72
2020	91
2021	91
2022	91
2023	91
Thereafter	2,181
Total	$ 2,617

XML

Advances - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018	Jun. 18, 2008
Advances [Abstract]
Advances from nonaffiliated collaboration	$ 250,000	$ 250,000	$ 250,000
Specified amount of revenue to be utilized for advances			$ 250,000
Revenue realized from agreement	$ 0

XML

Advances - Schedule of Advances from Nonaffiliated Collaboration (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Jun. 18, 2008
Advances [Abstract]
Advances from nonaffiliated collaboration	$ 250	$ 250	$ 250

XML

Capital Stock - Additional Information (Detail) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Equity [Abstract]
Common stock, shares authorized	120,000,000	120,000,000
Preferred stock, shares authorized	20,000,000
Common stock, par value	$ 0.001	$ 0.001
Preferred stock, par value	$ 0.001

XML

Capital Stock - Series B Preferred Stock Transactions - Additional Information (Detail) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended
	May 12, 2008 USD ($) Investor $ / shares shares	Mar. 31, 2016 $ / shares	May 31, 2008	Mar. 31, 2019 $ / shares shares	Dec. 31, 2018 $ / shares shares	Dec. 31, 2016 $ / shares	Mar. 12, 2013 $ / shares	Jan. 22, 2013 $ / shares
Class of Stock [Line Items]
Number of accredited investors | Investor	5
Warrants exercisable price | $ / shares				$ 1.75	$ 1.75		$ 30.00	$ 30.00
Restricted Stock [Member]
Class of Stock [Line Items]
Shares issued to non-employee directors | $ / shares						$ 1.08
Series B Warrants [Member]
Class of Stock [Line Items]
Number of warrants to purchase common stock | shares	2
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Number of units issued | shares	400,000
Number of Series B Preferred Stock for each Series B unit | shares	1
Common stock purchase price, per share | $ / shares	$ 1.00
Proceeds from issuance of preferred stock and warrants | $	$ 400
Initial conversion price | $ / shares	$ 75.00
Warrants exercisable price | $ / shares	$ 75.00
Number of years from issuance of warrants to convert as common stock	5 years
Liquidation premium			6.00%
Preferred stock, shares issued | shares				250,000	250,000
Preferred stock, shares outstanding | shares				250,000	250,000
Convertible preferred stock, conversion price | $ / shares		$ 1.08
Series B Preferred Stock [Member] | Common Stock [Member]
Class of Stock [Line Items]
Conversion ratio for each share | shares	0.0134

XML

Capital Stock - Series D Preferred Stock Transactions - Additional Information (Detail) - $ / shares				1 Months Ended	3 Months Ended
	Mar. 12, 2013	Jan. 22, 2013	Dec. 30, 2008	Mar. 31, 2016	Mar. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Number of shares of common stock sold	33,334	67,500
Series D Preferred Stock [Member]
Class of Stock [Line Items]
Number of shares of common stock sold			43
Preferred stock, price per share			$ 100,000
Preferred stock, shares issued					43	43
Preferred stock, shares outstanding					43	43
Initial conversion price			$ 37.50
Conversion ratio for each share			2,667
Convertible preferred stock, conversion price				$ 1.75
Series D Preferred Stock [Member] | X-Master Inc. [Member]
Class of Stock [Line Items]
Number of shares of common stock sold			10
Series D Preferred Stock [Member] | Co-Chairman and Chief Executive Officer [Member]
Class of Stock [Line Items]
Number of shares of common stock sold			33
Series I Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares outstanding					5,124	5,124
Initial conversion price					$ 1.75

XML

Capital Stock - Series G Preferred Stock Transactions - Additional Information (Detail)					3 Months Ended
	Jan. 21, 2019 USD ($) shares	Mar. 12, 2013 shares	Jan. 22, 2013 shares	Mar. 09, 2012 USD ($) Directors $ / shares shares	Mar. 31, 2019 $ / shares shares	Dec. 31, 2018 shares
Class of Stock [Line Items]
Number of shares of common stock sold		33,334	67,500
Convertible common stock, conversion price | $ / shares					$ 1.75
Common Stock [Member]
Class of Stock [Line Items]
Conversion of debt, shares					599,000
Co-Chairman and Chief Executive Officer [Member] | Note Conversion Agreement [Member]
Class of Stock [Line Items]
Non-convertible promissory note, principal amount | $	$ 1,000,000
Accrued and unpaid interest | $	$ 49,000
Co-Chairman and Chief Executive Officer [Member] | Note Conversion Agreement [Member] | Common Stock [Member]
Class of Stock [Line Items]
Conversion of debt, shares	599,222
Series G Preferred Stock [Member]
Class of Stock [Line Items]
Convertible preferred stock, conversion price | $ / shares				$ 60.00	$ 9.70
Conversion ratio for each share				0.0167	0.1031
Number of directors to be nominated by preferred shareholders | Directors				2
Number of independent directors out of directors to be nominated by preferred shareholders | Directors				1
Preferred stock, shares issued					5,000,000	5,000,000
Preferred stock, shares outstanding					5,000,000	5,000,000
Series G Preferred Stock [Member] | Minimum [Member]
Class of Stock [Line Items]
Convertible Redeemable Preferred stock, shares outstanding				1,000,000
Series G Preferred Stock [Member] | AR Partners, LLC [Member]
Class of Stock [Line Items]
Number of shares of common stock sold				5,000,000
Issuance price per share | $ / shares				$ 1.00
Total proceeds | $				$ 5,000,000

XML

Capital Stock - Series I Preferred Stock Transactions - Additional Information (Detail) - USD ($)					3 Months Ended
	Mar. 15, 2016	Mar. 09, 2016	Mar. 12, 2013	Jan. 22, 2013	Mar. 31, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Number of shares of convertible preferred stock sold			33,334	67,500
Warrants outstanding converted into common stock			16,667	33,750
Warrants exercisable price			$ 30.00	$ 30.00	$ 1.75	$ 1.75
Warrant term				5 years
Placement Agent [Member]
Class of Stock [Line Items]
Warrants exercisable price		$ 3.64
Warrant term		5 years
Date of placement agency engagement letter		Mar. 09, 2016
Placement agent fee		$ 200,000
From exercises of warrants, shares		343,000
Reimbursement of fees and expenses		$ 50,000
Series I-1 Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares outstanding					814	814
Series I-2 Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares outstanding					4,310	4,310
Series I Preferred Stock [Member]
Class of Stock [Line Items]
Initial conversion price					$ 1.75
Preferred stock, shares outstanding					5,124	5,124
Purchasers [Member] | Securities Purchase Agreement [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Cash proceeds	$ 2,500,000
Purchasers [Member] | Securities Purchase Agreement [Member] | Series A Warrants [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Warrants outstanding converted into common stock		3,600,000
Warrants exercisable price		$ 3.64
Warrant term		5 years
Purchasers [Member] | Securities Purchase Agreement [Member] | Series B Warrants [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Warrants outstanding converted into common stock		3,600,000
Warrants exercisable price		$ 1.75
Warrant term		6 months
Purchasers [Member] | Securities Purchase Agreement [Member] | Series C Warrants [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Warrants outstanding converted into common stock		3,600,000
Warrants exercisable price		$ 1.75
Warrant term		12 months
Purchasers [Member] | Securities Purchase Agreement [Member] | Series I-1 Preferred Stock [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Number of shares of convertible preferred stock sold		2,000
Preferred stock, stated value per share		$ 1,000
Purchasers [Member] | Securities Purchase Agreement [Member] | Series I-2 Preferred Stock [Member] | Chief Executive Officer and Co-Chairman [Member]
Class of Stock [Line Items]
Number of shares of convertible preferred stock sold		4,310
Preferred stock, stated value per share		$ 1,000

XML

Capital Stock - Summary of Shares of Common Stock Reserved for Future Issuance (Detail)	Mar. 31, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance net	19,533,571
Options Outstanding [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance net	5,479,187
Options Available for Future Grant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance net	3,971,056
Convertible Preferred Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance net	6,132,276
Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future issuance net	3,951,052

XML

Related Party Transactions - Additional Information (Detail) - USD ($)		3 Months Ended		5 Months Ended
	Jan. 21, 2019	Mar. 31, 2019	Mar. 31, 2018	Aug. 08, 2018
Related Party Transaction [Line Items]
Related party rent expense		$ 40,000	$ 40,000
Conversion of debt		$ 1,049,000
Common Stock [Member]
Related Party Transaction [Line Items]
Conversion of debt, shares		599,000
Conversion of debt		$ 1,000
Co-Chairman and Chief Executive Officer [Member] | Note Conversion Agreement [Member]
Related Party Transaction [Line Items]
Non-convertible promissory note, principal amount	$ 1,000,000
Related party transaction, description		The outstanding principal amount under the New Note accrues interest at a rate of four and one-half percent (4.5%) per annum. The New Note is due and payable on January 15, 2020, but may be pre-paid by the Company without penalty at any time.
Debt conversion, converted instrument	1,049,000
Accrued interest on promissory note	$ 49,000
Conversion price	$ 1.75
Co-Chairman and Chief Executive Officer [Member] | Note Conversion Agreement [Member] | Common Stock [Member]
Related Party Transaction [Line Items]
Conversion of debt, shares	599,222
Unsecured Non-convertible Promissory Note [Member] | Chief Executive Officer and Co-Chairman [Member]
Related Party Transaction [Line Items]
Non-convertible promissory note, principal amount				$ 2,000,000
Maturity date				Nov. 01, 2018
Annual interest rate				4.00%
Related party transaction, description		The outstanding principal amount under the Note accrued interest at a rate of four percent (4%) per annum. The Note was due and payable November 1, 2018 and on November 12, 2018, to satisfy the indebtedness incurred on the Note, an amendment to the Note was entered into extending the due date to January 15, 2019
Unsecured Non-convertible Promissory Note [Member] | Co-Chairman and Chief Executive Officer [Member] | Note Conversion Agreement [Member]
Related Party Transaction [Line Items]
Non-convertible promissory note, principal amount				$ 1,000,000
Maturity date	Jan. 15, 2020
Annual interest rate	4.50%
Conversion of debt	$ 1,000,000

XML

Income Taxes - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2019 USD ($)
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 0

XML

Stock Options and Warrants - Stock Options - Additional Information (Detail) - USD ($)	2 Months Ended	3 Months Ended
	Dec. 31, 2009	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2010	Dec. 31, 2006
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to stock options		$ 3,450,000
Unrecognized compensation cost related to unvested shares expected to be recognized, weighted-average period		2 years
2006 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiry of options		10 years
Stock options expiration date		Nov. 16, 2016
Options granted to employees, directors and consultants		0
2006 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options that may be granted					100,000
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiry of options		10 years
2010 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options that may be granted				9,700,000
Outside Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiry of options		10 years
Options granted to employees, directors and consultants	68,384
Award vesting terms		50 months
Number of options outstanding		12,634	12,634
Number of options exercised, canceled or expired		55,750
2006 Plan and 2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted to employees, directors and consultants		1,142,000
Number of options outstanding		5,466,553	4,354,708
2006 Plan and 2010 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiry of options		10 years

XML

Stock Options and Warrants - Schedule of Total Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 506	$ 307
Cost of Sales [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	24	6
Research and Development [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	156	124
Selling and Marketing [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	23	7
General and Administrative [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 303	$ 170

XML

Stock Options and Warrants - Fair Value of Stock Option Award, Weighted Average Assumptions (Detail) - Options Available for Future Grant [Member]	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Significant assumptions (weighted average):
Risk-free interest rate at grant date	2.55%	2.68%
Expected stock price volatility	84.80%	95.61%
Expected dividend payout	0.00%	0.00%
Expected option life based on management's estimate	5 years 9 months 7 days	5 years 9 months 3 days

XML

Stock Options and Warrants - Summary of Changes in Options Outstanding and Related Exercise Prices for Shares of Company's Common Stock Options Issued (Detail) - USD ($) $ / shares in Units, $ in Thousands	2 Months Ended	3 Months Ended
	Dec. 31, 2009	Mar. 31, 2019
2006 Plan and 2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Options, Outstanding, Beginning balance		4,354,708
Number of Options, Granted		1,142,000
Number of Options, Canceled or expired		(30,155)
Number of Options, Outstanding, Ending balance		5,466,553
Number of Options, Options vested and expected to vest Ending Balance		5,065,661
Number of Options, Options exercisable Ending Balance		2,127,522
Weighted Average Exercise Price Per Share, Outstanding, Beginning balance		$ 3.95
Weighted Average Exercise Price Per Share, Granted		1.51
Weighted Average Exercise Price Per Share, Canceled or expired		1.78
Weighted Average Exercise Price Per Share, Outstanding, Ending balance		3.45
Weighted Average Exercise Price, Options vested or expected to vest Ending Balance		3.60
Weighted Average Exercise Price, Options exercisable Ending Balance		$ 6.29
Weighted Average Remaining Contractual Term, Options Outstanding Ending Balance		8 years 8 months 8 days
Weighted Average Remaining Contractual Term, Options vested or expected to vest Ending Balance		8 years 7 months 20 days
Weighted Average Remaining Contractual Term, Options exercisable Ending Balance		7 years 10 months 17 days
Aggregate Intrinsic Value, Options outstanding, Ending balance		$ 16
Aggregate Intrinsic Value, Options vested or expected to vest Ending Balance		16
Aggregate Intrinsic Value, Options exercisable Ending Balance		$ 10
Outside Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Options, Outstanding, Beginning balance		12,634
Number of Options, Granted	68,384
Number of Options, Exercised
Number of Options, Canceled or expired
Number of Options, Outstanding, Ending balance		12,634
Weighted Average Exercise Price Per Share, Outstanding, Beginning balance		$ 90.23
Weighted Average Exercise Price Per Share, Granted
Weighted Average Exercise Price Per Share, Exercised
Weighted Average Exercise Price Per Share, Canceled or expired
Weighted Average Exercise Price Per Share, Outstanding, Ending balance		$ 90.23
Weighted Average Remaining Contractual Term, Options exercisable Ending Balance		7 months 28 days

XML

Stock Options and Warrants - Restricted Stock Awards - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 506,000	$ 307,000
Under 2006 Plan and 2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Granted	0	5,527
Number of Shares, Vested		5,527
Weighted Average Grant Date Fair Value, fully Vested		$ 1.47
Grant-date fair value of restricted stock awards	$ 0	$ 8,000
Stock-based compensation expense	0	$ 8,000
Unrecognized compensation costs	$ 0

XML

Stock Options and Warrants - Warrants Issued in Connection with October 2014 Financing - Additional Information (Detail) - Placement Agent Warrants [Member]	Mar. 31, 2019 $ / shares	Nov. 25, 2014 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing price of common stock	$ 1.12
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing price of common stock	$ 1.75
Warrant Exercise Price [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	1.75	1.75
Stock Price Volatility [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	77.2
Risk Free Interest Rate [Member] | U.S. Treasury Notes [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	2.40
Options and Warrant Expected Term [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding term	1 year 14 days
Dividend Rate [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	0.00

XML

Stock Options and Warrants - Placement Agent Warrants Price Adjustment - Additional Information (Detail)	Mar. 31, 2019 $ / shares shares	Dec. 31, 2018 shares	Mar. 31, 2018 shares	Nov. 25, 2014 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	3,951,052	3,951,052	3,951,052
Placement Agent Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	2,483
Placement Agent Warrants [Member] | Warrant Exercise Price [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input | $ / shares	1.75			1.75

XML

Stock Options and Warrants - Warrants Issued in Connection with March 2016 Financing - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2019 USD ($) $ / shares	Mar. 31, 2018 USD ($)	Dec. 31, 2017 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Change in fair value of warrant liability | $	$ 597,000	$ 355,000
Series-A and Placement Agent Warrants [Member] | Warrant Exercise Price [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input			1.75
March 2016 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Change in fair value of warrant liability | $	$ 597,000	$ 355,000
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing price of common stock	$ 1.12
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing price of common stock	$ 1.75
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Warrant Exercise Price [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	1.75
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Stock Price Volatility [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	77.2
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Risk Free Interest Rate [Member] | U.S. Treasury Notes [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	2.27
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Options and Warrant Expected Term [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding term	1 year 11 months 15 days
March 2016 Financing [Member] | Series-A and Placement Agent Warrants [Member] | Dividend Rate [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants and rights outstanding, measurement input	0.00

XML

Stock Options and Warrants - Warrants Issued with Common Stock - Additional Information (Detail) - $ / shares			3 Months Ended
	Mar. 12, 2013	Jan. 22, 2013	Mar. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock sold	33,334	67,500
Warrants outstanding converted into common stock	16,667	33,750
Warrants exercisable price	$ 30.00	$ 30.00	$ 1.75	$ 1.75
Warrant term		5 years
Expiration date of warrants			Jan. 31, 2018
Co-Chairman and Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding converted into common stock	1,667
Warrant term	5 years
Expiration date of warrants			Mar. 31, 2018

XML

Stock Options and Warrants - Summary of Outstanding Warrants Related to Warrant Transactions (Detail) - $ / shares	Mar. 31, 2019	Dec. 31, 2018	Mar. 12, 2013
Class of Warrant or Right [Line Items]
Number of Shares, Outstanding, Beginning balance	3,951,052	3,951,052
Number of Shares, Outstanding, Ending balance	3,951,052	3,951,052
Weighted Average Exercise Price, Outstanding, Beginning balance	$ 1.75		$ 30.00
Weighted Average Exercise Price, Outstanding, Ending balance	1.75	$ 1.75	$ 30.00
Weighted Average [Member]
Class of Warrant or Right [Line Items]
Weighted Average Exercise Price, Outstanding, Beginning balance	1.75
Weighted Average Exercise Price, Outstanding, Ending balance	$ 1.75	$ 1.75
March 2016 Financing [Member] | Series A Common Stock [Member]
Class of Warrant or Right [Line Items]
Number of Shares, Outstanding, Beginning balance	3,605,713
Number of Shares, Outstanding, Ending balance	3,605,713	3,605,713
March 2016 Financing [Member] | Placement Agent [Member]
Class of Warrant or Right [Line Items]
Number of Shares, Outstanding, Beginning balance	342,856
Number of Shares, Outstanding, Ending balance	342,856	342,856
October 2014 Financing [Member] | Placement Agent [Member]
Class of Warrant or Right [Line Items]
Number of Shares, Outstanding, Beginning balance	2,483
Number of Shares, Outstanding, Ending balance	2,483	2,483

XML

Commitments and Contingencies - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2019 USD ($) ft² Customer	Mar. 31, 2018 USD ($) Customer	Oct. 31, 2018 ft²	Sep. 30, 2018 ft²	Feb. 22, 2017	Jan. 01, 2013 ft²	Jul. 01, 2011 ft²	Mar. 01, 2011 ft²
Commitments And Contingencies [Line Items]
Right-of-use assets	$ 933,000
Operating lease liabilities	1,305,000
Rent expense	$ 140,000	$ 87,000
Supplier Concentration Risk [Member] | Vendor One [Member] | Cost of Goods Total [Member]
Commitments And Contingencies [Line Items]
Concentration risk percentage	10.00%	10.00%
Number of customers accounted for more than 10% | Customer	0	0
Biomedical Market [Member] | Customer Concentration Risk [Member] | Major customer 1 [Member] | Sales Revenue Segment [Member]
Commitments And Contingencies [Line Items]
Concentration risk percentage	42.00%	37.00%
Oceanside Facility [Member]
Commitments And Contingencies [Line Items]
Current square feet of leased office and laboratory | ft²	8,215
Lease expiration period	2021-12
Option to terminate of lease	Jan. 01, 2020
Advanced notice required to terminate lease	6 months
Current base rent	$ 10,000
Percentage of increase in monthly base rent	3.00%
Frederick [Member]
Commitments And Contingencies [Line Items]
Current square feet of leased office and laboratory | ft²	13,320			8,280
Lease expiration period	2025-11
Current base rent	$ 17,000
Additional square feet of leased office and laboratory | ft²			5,040
Priestly Drive [Member]
Commitments And Contingencies [Line Items]
Current square feet of leased office and laboratory | ft²						9,848	8,199	4,653
Current base rent	$ 13,000
Percentage of increase in monthly base rent	3.00%
Expiry of lease	Feb. 29, 2016
Expiry of lease additional	1 year				3 years
Initial monthly base rent	$ 5,000

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Commitments and Contingencies - Information Related to Right-of-use Assets and Lease Liabilities (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Operating Leases Future Minimum Payments Due [Abstract]
Cash paid for operating lease liabilities	$ 119
Right-of-use assets obtained in exchange for new operating lease obligations	$ 933
Weighted-average remaining lease term (years)	5 years 1 month 27 days
Weighted average discount rate	17.38%

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Commitments and Contingencies - Schedule of Maturities of Lease Liabilities (Detail)	Mar. 31, 2019 USD ($)
Operating Leases Future Minimum Payments Due [Abstract]
2019 (remaining months)	$ 372,000
2020	369,000
2021	347,000
2022	220,000
2023	227,000
Thereafter	454,000
Total lease payments	1,989,000
Less: present value adjustments	(684,000)
Operating lease, liabilites	1,305,000
Current operating lease liabilities	294,000
Non-current operating lease liabilities	1,011,000
Total operating lease liabilities	$ 1,305,000

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Segments and Geographic Information - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2018 Segment Units Product
Segment Reporting [Abstract]
Number reporting segments | Segment	3
Number of business units | Units	2
Human cell culture products | Product	201

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Segments and Geographic Information - Revenues, Expenses and Operating Income (Loss) by Market Segment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues:
Total revenues	$ 2,218	$ 2,633
Operating expenses:
Total operating expenses	3,707	3,818
Operating income (loss):
Total operating income (loss)	(1,489)	(1,185)
Anti-aging Cosmetic Market [Member]
Revenues:
Total revenues	428	498
Operating expenses:
Total operating expenses	603	704
Operating income (loss):
Total operating income (loss)	(175)	(206)
Biomedical Market [Member]
Revenues:
Total revenues	1,790	2,135
Operating expenses:
Total operating expenses	1,446	1,298
Operating income (loss):
Total operating income (loss)	344	837
Therapeutic Market [Member]
Operating expenses:
Total operating expenses	1,658	1,816
Operating income (loss):
Total operating income (loss)	$ (1,658)	$ (1,816)

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Segments and Geographic Information - Summary of Significant Revenues in Following Regions (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 2,218	$ 2,633
North America [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	1,997	2,303
Asia [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	129	238
Europe [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	89	86
All Other Regions [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Total revenues	$ 3	$ 6

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Subsequent Events - Additional Information (Detail) - USD ($)	Apr. 17, 2019	Mar. 31, 2019	Dec. 31, 2018
Subsequent Event [Line Items]
Related party payable		$ 1,009,000	$ 2,045,000
Unsecured Non-convertible Promissory Note [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Non-convertible promissory note, principal amount	$ 1,800,000
Promissory note surrendered	1,000,000
Related party payable	$ 800,000
Annual interest rate	4.50%
Maturity date	Jan. 15, 2020
Related party transaction, description	The outstanding principal amount accrues interest at a rate of four and a half Percent (4.5%) per annum and is due and payable January 15, 2020 but may be pre-paid by the Company without penalty at any time.