Summary of Significant

Accounting Policies

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but

not

limited to, the allowance for doubtful accounts, carrying amounts of inventories, depreciation and amortization, warranty obligations, assumptions made in valuing financial instruments issued in various compensation and financing arrangements, deferred income taxes and related valuation allowance and the fair values of intangibles and goodwill. Actual results could materially differ from the estimates and assumptions used in the preparation of the Company’s consolidated financial statements.

Revenue Recognition

Revenue is recognized based on the

five

-step process outlined in Accounting Standards Codification (“ASC”)

606:

Step

– Identify the Contract with the Customer

– A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and, (e) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Step

– Identify Performance Obligations in the Contract

– Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are

not

met, the goods or services are accounted for as a combined performance obligation.

Step

– Determine the Transaction Price

– The contract terms and customary business practices are used to determine the transaction price. The transaction price is the amount of consideration expected to be received in exchange for transferring goods or services to the customer. The Company’s contracts include fixed consideration.

Step

– Allocate the Transaction Price

– After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has

one

performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price (“SSP”) at contract inception.

Step

– Satisfaction of the Performance Obligations (and Recognize Revenue)

– When an asset is transferred and the customer obtains control of the asset (or the services are rendered), the Company recognizes revenue. At contract inception, the Company determines if each performance obligation is satisfied at a point in time or over time. For device sales, revenue is recognized at a point in time when the goods are transferred to the customer and they obtain control of the asset. For maintenance contracts, revenue is recognized over time as the performance obligations in the contracts are completed.

Device Sales

Device sales include devices and consumables for BioArchive, AXP,

CAR-TXpress and manual disposables. Most devices are sold with contract terms stating that title passes, and the customer takes control at the time of shipment. Revenue is then recognized when the devices are shipped, and the performance obligation has been satisfied. If devices are sold under contract terms that specify that the customer does

not

take ownership until the goods are received, revenue is recognized when the Company confirms that the customer has received and taken physical possession of the goods.

Service Revenue

Service revenue principally consists of maintenance contracts for BioArchive, AXP and CAR-TXpress products. Devices sold have warranty periods of

one

two

years. After the warranty expires, the Company offers separately priced annual maintenance contracts. Under these contracts, customers pay in advance. These prepayments are recorded as deferred revenue and recognized over time as the contract performance obligations are satisfied. For AXP and CAR-TXpress products, the Company offers

one

type of maintenance contract providing preventative maintenance and repair services. Revenue under these contracts is recognized ratably over time, as the customer has the right to use the service at any time during the annual contract period and services are unlimited. For BioArchive, the Company offers

three

types of maintenance contracts: Gold, Silver and Preventative Maintenance Only. Under the Gold contract, maintenance and repair services are unlimited and revenue is recognized ratably over time. For the Silver and Preventative Maintenance contracts, available services are limited, and revenue is recognized during the contract period when the underlying performance obligations are satisfied. If the services are

not

used during the contract period, any remaining revenue is recognized when the contract expires. The renewal date for maintenance contracts varies by customer, depending when the customer signed their initial contract.

Clinical Services

Service revenue in our Clinical Development Segment includes point of care procedures and cord blood processing and storage. Point of care procedures are recognized when the procedures are performed. Cord blood processing and storage is recognized as the performance obligations are satisfied. Processing revenue is recognized when that performance obligation is completed immediately after the baby’s birth, with storage revenue recorded as deferred revenue and recognized ratably over time for up to

years. As of

December 31, 2019

and

2018,

the total deferred cord blood storage revenue is

$237,000

and

$252,000,

respectively. As of

December 31, 2019,

those amounts were recorded as

$14,000

in current liabilities and

$223,000

in non-current liabilities. As of

December 31, 2018,

those amounts were recorded as

$14,000

in current liabilities and

$238,000

in non-current liabilities. The customer

may

pay for both services at the time of processing. The amount of the transaction price allocated to each of the performance obligations is determined by using the standalone selling price of each component, which the Company applies consistently to all such arrangements. The Company did

not

process and store any new cord blood revenue in

2019.

Service revenue recognized in the Clinical Development Segment in

2019

related entirely to revenue deferred from previous years.

The following table summarizes the revenues of the Company’s reportable segments for the year ended

December 31, 2019:

	Year Ended December 31, 2019
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	7,313,000	$	209,000			$	7,522,000
BioArchive		1,472,000		1,438,000				2,910,000
Manual Disposables		909,000		--				909,000
CAR-TXpress		1,457,000		13,000	$	95,000		1,565,000
Other		--		--		51,000		51,000
Total Device Segment		11,151,000		1,660,000		146,000		12,957,000
Clinical Development Segment:
Disposables		68,000		--		--		68,000
Other		--		22,000		--		22,000
Total Clinical Development		68,000		22,000		--		90,000
Total	$	11,219,000	$	1,682,000	$	146,000	$	13,047,000

The following table summarizes the revenues of the Company’s reportable segments for the year ended

December 31, 2018:

	Year Ended December 31, 2018
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	4,131,000	$	262,000	$	--	$	4,393,000
BioArchive		1,792,000		1,306,000		--		3,098,000
Manual Disposables		976,000		--		--		976,000
CAR-TXpress		907,000		--		--		907,000
Other		--		--		95,000		95,000
Total Device Segment		7,806,000		1,568,000		95,000		9,469,000
Clinical Development Segment:
Bone Marrow		--		135,000		--		135,000
Other		38,000		30,000		--		68,000
Total Clinical Development		38,000		165,000		--		203,000
Total	$	7,844,000	$	1,733,000	$	95,000	$	9,672,000

2019,

there was

right of return provided for distributors or customers. For distributors, the Company has

control over the movement of goods to the end customer. The Company’s distributors control the timing, terms and conditions of the transfer of goods to the end customer. Additionally, for sales of products made to distributors, the Company considers a number of factors in determining whether revenue is recognized upon transfer of title to the distributor, or when payment is received. These factors include, but are

not

limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor’s history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor, and whether there are other conditions that

may

indicate that the sale to the distributor is

not

substantive.

Payments from domestic customers are normally due in

two

months or less after the title transfers, the service contract is executed, or the services have been rendered. For international customers, payment terms

may

extend up to

120

days. All sales have fixed pricing and there are currently

variable components included in the Company’s revenue.

Contract Balances

Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does

not

have any material contract assets. When invoicing occurs prior to revenue recognition a contract liability is recorded (as deferred revenue on the consolidated balance sheet). Revenues recognized during the year ended

December 31, 2019

that were included in the beginning balance of deferred revenue were

$1,049,000.

Short term deferred revenues were

$620,000

and

$485,000

December 31, 2019

and

2018,

respectively. Long term deferred revenue, included in other noncurrent liabilities, was

$1,901,000

and

$303,000

December 31, 2019

and

2018,

respectively.

Exclusivity Fee

August 30, 2019,

the Company entered into a Supply Agreement with Corning Incorporated (the “Supply Agreement”). The Supply Agreement has an initial term of

five

years with automatic

two

-year renewal terms, unless terminated by either party in accordance with the terms of the Supply Agreement (collectively, the “Term”). Pursuant to the Supply Agreement, the Company has granted to Corning exclusive worldwide distribution rights for substantially all

-Series

products under the CAR-TXpress™ platform (the “Products”) manufactured by its subsidiary, ThermoGenesis Corp., for the duration of the Term, subject to certain geographical and other exceptions. As consideration for the exclusive worldwide distribution rights for the Products, Corning has agreed to pay a

$2,000,000

exclusivity fee, in addition to any amounts payable throughout the Term for the Products.

The Company performed an evaluation of the revenue recognition of the

$2,000,000

fee under ASC

606.

It determined that the

$2,000,000

will be recognized over time, based on the term of the contract. It was determined that the most likely outcome is the agreement is extended for

one

additional

two

-year term after the initial

five

-year contract is complete. Consequently, the term to recognize the exclusivity fee is over

seven

years. The Company will allocate the upfront fee evenly to each daily performance obligation of providing exclusivity and recognize the revenue ratably over the

seven

-year period. As each day passes, the Company will recognize the portion of the exclusivity fee allocated to that day. For the year ended

December 31, 2019,

the Company recorded revenue of

$96,000

related to the exclusivity fee. The remaining balance of the

$2,000,000

payment of

$1,904,000

was recorded to deferred revenue, with

$286,000

in short-term deferred revenue and

$1,618,000

recorded in long-term deferred revenue.

Backlog of Remaining Customer Performance Obligations

The following table includes revenue expected to be recognized and recorded as sales in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

	2020		2021		2022		2023		2024 and beyond		Total
Service revenue	$	848,000	$	632,000	$	228,000	$	90,000	$	30,000	$	1,828,000
Clinical revenue		14,000		14,000	$	14,000		14,000		181,000		237,000
Exclusivity Fee		286,000		286,000		286,000		286,000		760,000		1,904,000
Total	$	1,148,000	$	932,000	$	528,000	$	390,000	$	971,000	$	3,969,000

Revenues are net of normal discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of

three

months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash and cash equivalents is maintained in checking accounts, money market funds and certificates of deposits with reputable financial institutions that

may

at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation. The Company has cash and cash equivalents of

$10,000

and

$11,000

December 31, 2019

and

2018

in India. The Company has

not

experienced any realized losses on the Company’s deposits of cash and cash equivalents.

Foreign Currency Translation

The Company’s reporting currency is the US dollar. The functional currency of the Company’s subsidiaries in India is the Indian rupee (“INR”). Assets and liabilities are translated into US dollars at period end exchange rates. Revenue and expenses are translated at average rates of exchange prevailing during the periods presented. Cash flows are also translated at average exchange rates for the period, therefore, amounts reported on the consolidated statement of cash flows do

not

necessarily agree with changes in the corresponding balances on the consolidated balance sheet. Equity accounts other than retained earnings are translated at the historic exchange rate on the date of investment. A translation gain (loss) of

$15,000

and

$30,000

was recorded at

December 31, 2019

and

2018,

respectively, as a component of other comprehensive income.

Goodwill, Intangible Assets and Impairment Assessments

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Intangible assets that are

not

considered to have an indefinite useful life are amortized over their useful lives, which generally range from

three

ten

years. Each period the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization.

For goodwill and indefinite-lived intangible assets, the carrying amounts are periodically reviewed for impairment (at least annually) and whenever events or changes in circumstances indicate that the carrying value of these assets

may

not

be recoverable. According to ASC

350

,”Intangibles-Goodwill and Other”

, the Company can opt to perform a qualitative assessment or a quantitative assessment; however, if the qualitative assessment determines that it is more likely than

not

(i.e., a likelihood of more than

percent) the fair value is less than the carrying amount; the Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

Fair Value of Financial Instruments

In accordance with ASC

820,

Fair Value Measurements and Disclosures

, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes

three

levels of inputs that

may

be used to measure fair value:

Level

Quoted market prices in active markets for identical assets or liabilities.

Level

Other observable inputs other than Level

prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are

not

active; or other inputs that are observable or can be corroborated by observable market data.

Level

Unobservable inputs reflecting the reporting entity’s own assumptions.

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short duration. The fair value of the Company’s derivative obligation liability is classified as Level

within the fair value hierarchy since the valuation model of the derivative obligation is based on unobservable inputs. The impairment of goodwill and intangible assets is a non-recurring Level

fair value measurement.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s receivables are recorded when billed and represent claims against

third

parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company estimates the allowance for doubtful accounts based on historical collection trends, age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance

may

be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. A customer’s receivable balance is considered past-due based on its contractual terms. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due.

Inventories

Inventories are stated at the lower of cost or net realizable value and include the cost of material, labor and manufacturing overhead. Cost is determined on the

first

-in,

first

-out basis. The Company writes-down inventory to its estimated net realizable value when conditions indicate that the selling price could be less than cost due to physical deterioration, obsolescence, changes in price levels, or other causes, which it includes as a component of cost of revenues. Additionally, the Company provides valuation allowances for excess and slow-moving inventory on hand that are

not

expected to be sold to reduce the carrying amount of slow-moving inventory to its estimated net realizable value. The valuation allowances are based upon estimates about future demand from its customers and distributors and market conditions.

Because some of the Company’s products are highly dependent on government and

third

-party funding, current customer use and validation, and completion of regulatory and field trials, there is a risk that the Company will forecast incorrectly and purchase or produce excess inventories. As a result, actual demand

may

differ from forecasts and the Company

may

be required to record additional inventory valuation allowances that could adversely impact its gross margins. Conversely, favorable changes in demand could result in higher gross margins when those products are sold.

Equipment

and Leasehold Improvements

Equipment consisting of machinery and equipment, computers and software, office equipment and leasehold improvements is recorded at cost less accumulated depreciation. Repairs and maintenance costs are expensed as incurred. Depreciation for machinery and equipment, computers and software and office furniture is computed under the straight-line method over the estimated useful lives. Leasehold improvements are amortized under the straight-line method over their estimated useful lives or the remaining lease period, whichever is shorter. When equipment and leasehold improvements are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and the impact of any resulting gain or loss is recognized within general and administrative expenses in the consolidated statement of operations for the period.

Warranty

We provide for the estimated cost of product warranties at the time revenue is recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability could have a material impact on our financial position, cash flows or results of operations.

Debt Discount and Issue Costs

The Company amortizes debt discount and debt issue costs over the life of the associated debt instrument, using the straight-line method which approximates the interest rate method.

Derivative Financial Instruments

In connection with the sale of convertible debt and equity instruments, the Company

may

also issue freestanding warrants. If freestanding warrants are issued and accounted for as derivative instrument liabilities (rather than as equity), the proceeds are

first

allocated to the fair value of those instruments. The remaining proceeds, if any, are then allocated to the convertible instrument, usually resulting in that instrument being recorded at a discount from its face amount. Derivative financial instruments are initially measured at their fair value using a Binomial Lattice Valuation Model and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

Stock

Based Compensation

We use the Black-Scholes-Merton option-pricing formula in determining the fair value of our options at the grant date and apply judgment in estimating the key assumptions that are critical to the model such as the expected term, volatility and forfeiture rate of an option. Our estimate of these key assumptions is based on historical information and judgment regarding market factors and trends. If any of the key assumptions change significantly, stock-based compensation expense for new awards

may

differ materially in the future from that recorded in the current period. The compensation expense is then amortized over the vesting period.

The Company has

three

stock-based compensation plans, which are described more fully in

Note

Valuation and Amortization Method – The Company estimates the fair value of stock options granted using the Black-Scholes-Merton option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The formula does

not

include a discount for post-vesting restrictions, as we have

not

issued awards with such restrictions.

Expected Term – For options which the Company has limited available data, the expected term of the option is based on the simplified method. This simplified method averages an award’s vesting term and its contractual term. For all other options, the Company's expected term represents the period that the Company's stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.

Expected Volatility – Expected volatility is based on historical volatility. Historical volatility is computed using daily pricing observations for recent periods that correspond to the expected term of the options.

Expected Dividend – The Company has

not

declared dividends and does

not

anticipate declaring any dividends in the foreseeable future. Therefore, the Company uses a

zero

value for the expected dividend value factor to determine the fair value of options granted.

Risk-Free Interest Rate – The Company bases the risk-free interest rate used in the valuation method on the implied yield currently available on U.S. Treasury

zero

-coupon issues with the same expected term.

Estimated Forfeitures – When estimating forfeitures, the Company considers voluntary and involuntary termination behavior as well as analysis of actual option forfeitures.

Research and Development

Research and development costs, consisting of salaries and benefits, costs of disposables, facility costs, contracted services and stock-based compensation from the engineering, regulatory and scientific affairs departments, that are useful in developing and clinically testing new products, services, processes or techniques, as well as expenses for activities that

may

significantly improve existing products or processes are expensed as incurred. Costs to acquire technologies that are utilized in research and development and that have

future benefit are expensed when incurred.

Acquired In-Process Research and Development

Acquired in-process research and development that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of acquisition, have

not

reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the Company will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated and begin amortization. The Company tests intangible assets for impairment at least annually, or more frequently if impairment indicators exist, by

first

assessing qualitative factors to determine whether it is more likely than

not

that the fair value of the intangible asset is less than it’s carrying amount. If the Company concludes it is more likely than

not

that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the intangible asset with its’ carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.

Patent Costs

The costs incurred in connection with patent applications, in defending and maintaining intellectual property rights and litigation proceedings are expensed as incurred.

Credit Risk

Currently, the Company primarily manufactures and sells cellular processing systems and thermodynamic devices principally to the blood and cellular component processing industry and performs ongoing evaluations of the credit worthiness of the Company’s customers. The Company believes that adequate provisions for uncollectible accounts have been made in the accompanying consolidated financial statements. To date, the Company has

not

experienced significant credit related losses.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its Chief Executive Officer as the CODM. In determining its reportable segments, the Company considered the markets and the products or services provided to those markets.

The Company has

two

reportable business segments:

●

The Device Segment, engages in the development and commercialization of automated technologies for cell-based therapeutics and bio-processing. The device division is operated through the Company’s ThermoGenesis Corp. subsidiary.

●

The Clinical Development Segment, is developing autologous (utilizing the patient’s own cells) stem cell-based therapeutics that address significant unmet medical needs for applications within the vascular, cardiology and orthopedic markets.

Income Taxes

The tax years

1999

2018

remain open to examination by the major taxing jurisdictions to which the Company is subject; however, there is

current examination. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. To date, there have been

interest or penalties charged to the Company in relation to the underpayment of income taxes. There were

unrecognized tax benefits during the periods presented.

The Company’s estimates of income taxes and the significant items resulting in the recognition of deferred tax assets and liabilities reflect the Company’s assessment of future tax consequences of transactions that have been reflected in the financial statements or tax returns for each taxing jurisdiction in which the Company operates. The Company bases the provision for income taxes on the Company’s current period results of operations, changes in deferred income tax assets and liabilities, income tax rates, and changes in estimates of uncertain tax positions in the jurisdictions in which the Company operates. The Company recognizes deferred tax assets and liabilities when there are temporary differences between the financial reporting basis and tax basis of assets and liabilities and for the expected benefits of using net operating loss and tax credit loss carryforwards. The Company establishes valuation allowances when necessary to reduce the carrying amount of deferred income tax assets to the amounts that the Company believes are more likely than

not

to be realized. The Company evaluates the need to retain all or a portion of the valuation allowance on recorded deferred tax assets. When a change in the tax rate or tax law has an impact on deferred taxes, the differences are expected to reverse. As the Company operates in more than

one

state, changes in the state apportionment factors, based on operational results,

may

affect future effective tax rates and the value of recorded deferred tax assets and liabilities. The Company records a change in tax rates in the consolidated financial statements in the period of enactment.

Income tax consequences that arise in connection with a business combination include identifying the tax basis of assets and liabilities acquired and any contingencies associated with uncertain tax positions assumed or resulting from the business combination. Deferred tax assets and liabilities related to temporary differences of an acquired entity are recorded as of the date of the business combination and are based on the Company’s estimate of the appropriate tax basis that will be accepted by the various taxing authorities and its determination as to whether any of the acquired deferred tax liabilities could be a source of taxable income to realize the Company’s pre-existing deferred tax assets.

Net Loss per Share

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding plus the pre-funded warrants. For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the pre-funded warrants have been included since the shares are issuable for a negligible consideration and have

vesting or other contingencies associated with them. There were

324,445

pre-funded warrants included in the year ended

December 31, 2019

calculation. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at

December 31:

	Year Ended December 31,
	2019		2018
Common stock equivalents of convertible promissory note and accrued interest		6,683,646		4,840,556
Vested Series A warrants		40,441		40,441
Unvested Series A warrants (1)		69,853		69,853
Warrants – other		1,281,327		1,616,227
Stock options		291,807		302,364
Total		8,367,074		6,869,441

(

)

The unvested Series A warrants were subject to vesting based upon the amount of funds actually received by the Company in the

second

close of the

August 2015

financing which never occurred. The warrants will remain outstanding but unvested until they expire in

February 2021.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications did

not

have an impact on net loss as previously reported.

Recently Adopted Accounting

Standards

January 1, 2018,

the Company adopted ASU

No.

2014

09,

“

Revenue from Contracts with Customers (

“

Topic

606

”

)” (

“

ASC606

”

)

and related updates. Using the modified retrospective method applied to those contracts which were

not

completed as of

January 1, 2018.

Results for the reporting period beginning after

January 1, 2018

are presented under ASC

606,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting under “Revenue Recognition” (“Topic

605”

). The Company recorded a net increase to accumulated deficit of

$79,000

as of

January 1, 2018

due to the cumulative impact of adopting ASC

606,

with the impact related to service obligations requiring deferral. ASC

606

requires the Company to defer costs related to obligations on service contracts with limited performance obligations. Under previous guidance, these service obligations were amortized on a straight-line basis.

June 2018,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2018

07,

“Compensation-Stock Compensation (

“

Topic

718

”

): Improvements to Nonemployee Share-Based Payment Accounting”

, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted the standard on

January 1, 2019.

The adoption of this standard had an immaterial impact on the Company’s financial statements.

February 2016,

the FASB issued ASU

2016

“

Leases

,” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the standard on

January 1, 2019.

The new standard requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas under previous GAAP only finance lease liabilities (previously referred to as capital leases) were recognized in the balance sheet. In addition, the definition of a lease has been revised which

may

result in changes to the classification of an arrangement as a lease. Under the new standard, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used as a lease, whereas the previous definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgements of an entity’s accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas previous disclosures related only to lessees. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have

not

significantly changed from previous GAAP. Lessor accounting is also largely unchanged.

The new standard provides a number of transition practical expedients, which the Company has elected, including:

●

A “package of three” expedients that must be taken together and allow entities to (

)

not

reassess whether existing contracts contain leases, (

) carryforward the existing lease classification, and (

)

not

reassess initial direct costs associated with existing leases, and

●

An implementation expedient which allows the requirements of the standard in the period of adoption with

restatement of prior periods.

The impact of adoption did

not

have a material impact to the Company as of

January 1, 2019

as the Company’s finance leases are immaterial and its operating leases had remaining terms of less than

one

year. In

January 2019,

the Company signed an amendment to its lease for office space at its corporate headquarters in Rancho Cordova, CA. The amendment extended the lease term by

five

years and was accounted for as a modification. At that time, the Company recorded lease assets and liabilities of

$966,000

and

cumulative effect adjustment to retained earnings.

Recently Issued Accounting Standards

December 2019,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2019

“

Income Taxes (Topic

740

): Simplifying the Accounting of Income Taxes

”, which is intended to simplify various aspects related to accounting for income taxes. ASU

2019

removes certain exceptions to the general principles in Topic

740

and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after

December 15, 2020,

with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

August 2018,

the FASB issued ASU

2018

13,

“

Fair Value Measurement (“Topic

820”

): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement

.” This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is

not

expected to have a material impact on the Company’s financial statements.

June 2016,

the FASB issued

ASU

2016

13,

Financial Instruments - Credit Losses (“Topic

326”

The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires

earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU

2016

is effective for annual period beginning after

December 15, 2022,

including interim reporting periods within those annual reporting periods. We expect that the impact of adoption will

not

have a material impact.