What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-03-28 · 46 added, 57 removed, 160 unchanged (39% of the section changed)

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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.

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

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

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Biomedical Market – Primary Human Cell Research Products

Our wholly owned subsidiary 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.

Our wholly owned subsidiary LCT develops, manufactures and commercializes approximately 200 human cell culture products, including frozen human “primary” cells and the reagents (media) needed to grow, maintain and differentiate the cells.

LCT’s scientists have used a standardized, methodical, scientific approach to basal medium optimization to systematically produce optimized products designed to culture specific human cell types and to elicit specific cellular behaviors.

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Research and development

Other income (expense), net

Other (expense) income, net

As a % of revenues

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Product sales revenue for the year ended December 31, 2024 was $9,085 thousand, compared to $7,789 thousand for the year ended December 31, 2023.

The decrease of $391 thousand, or 5%, was attributable to a decrease of $448 thousand in media product sales within our biomedical market segment primarily due to lower sales volume based on customer demand and a decrease of $126 thousand in sales of our skin care products in our anti-aging market segment during 2023 compared to 2022 due to the discontinuation of a product line described below.

These decreases were partially offset by an increase of $183 thousand in cell product sales from our biomedical market segment.

Our original equipment manufacturer (“OEM”) sales in our biomedical market segment have remained fairly stable year-over-year, with OEM purchasing activity accounting for approximately 58% of sales in this market segment.

In 2023, there was a change in the mix of sales from OEM customers as cell sales increased and media sales decreased.

As media sales typically account for approximately 70% of sales in our biomedical market segment, the decrease in sales is primarily driven by the decrease in media sales.

The change in the mix of sales is believed to be the result of normalization of OEM planning systems and lead time measurement post COVID-19 supply chain challenges.

Our professional line of anti-aging products was discontinued in 2022 resulting in only one product line and less overall demand.

Our professional anti-aging product line is sold to consumers exclusively through our ecommerce channel with less marketing and store front or medical office exposure contributing to the decrease in product sales.

In addition, high percentage promotions were decreased leading to a lesser volume of transactions.

The increase of $1,296 thousand, or 17%, was attributable to an increase of $1,211 thousand and $213 thousand in media and cell product sales, respectively, within our biomedical market segment primarily due to increases in original equipment manufacturer (OEM) sales.

These increases were partially offset by a decrease of $128 thousand in sales of our skin care products in our anti-aging market segment during 2024 compared to 2023 due to a decrease in demand.

Our OEM sales in our biomedical market segment have increased year-over-year and accounted for approximately 63% of biomedical product sales in 2024 as compared to 58% in 2023.

The mix of media and cell product sales has remained relatively consistent with media product sales accounting for approximately 72% of biomedical product sales, up from 69% in 2023.

The increase in biomedical product sales was therefore primarily driven by the increase in media product sales.

The overall increase in biomedical product sales is believed to be the result of normalization of OEM planning systems and lead time measurement and is expected to remain a key component of our biomedical business.

Our anti-aging product line is sold to consumers exclusively through our ecommerce channel with less marketing and store front or medical office exposure contributing to the decrease in product sales.

Cost of Sales

Cost of sales for the year ended December 31, 2024 was $3,764 thousand, compared to $3,181 thousand for the year ended December 31, 2023.

The decrease of $88 thousand, or 3%, was primarily attributable a lower cost of direct materials used in products from both the biomedical and anti-aging market segments of $158 thousand and a decrease of freight and shipping costs of $24 thousand.

This decrease was partially offset by higher salaries and benefits, including stock-based compensation, of $52 thousand and an increase in overhead and general laboratory supplies of $29 thousand.

Profit margin was 59% for the year ended December 31, 2023 as compared to 60% for the year ended December 31, 2022.

The decrease in profit margin was primarily driven by manufacturing inefficiencies as a result of less sales.

The increase of $583 thousand, or 18%, was primarily attributable to an increase in biomedical product sales resulting in higher costs of direct materials of $900 thousand, partially offset by positive manufacturing variances attributed to efficiencies from higher production volumes of approximately $286 thousand.

The net increase in cost of sales was also partially offset by an overall decrease in cost of sales in our anti-aging market segment of $31 thousand as a result of a decrease in product sales.

Profit margin was 59% for both the years ended December 31, 2024 and 2023.

Margins remained consistent despite slightly higher OEM sales as a result of manufacturing efficiencies in our biomedical market segment and normalization of some raw material costs post COVID.

Cost of sales consists primarily of salaries and benefits associated with employee efforts expended directly on the production of the Company’s products, as well as related direct materials, general laboratory supplies and an allocation of overhead.

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General and administrative expenses for the year ended December 31, 2024 was $3,516 thousand, compared to $3,514 thousand for the year ended December 31, 2023.

The increase of $157 thousand, or 5%, was primarily attributable to an increase in consulting, audit, and brokers fees of $246 thousand combined with higher salaries and benefits, including stock-based compensation, of $32 thousand, and an increase in logistics costs of $17 thousand.

These increases were partially offset by decreases in legal expenses and directors and officers insurance fees of $93 thousand, a decrease in licenses and permit fees of $32 thousand, and a decrease in meals and entertainment expense of $14 thousand.

The change in general and administrative expenses for the year ended December 31, 2024 was

primarily attributable to increases in personnel-related costs, including from salaries, benefits and travel expenses, of $94 thousand, audit fees of $92 thousand, temporary services of $21 thousand, foreign currency loss due to unfavorable exchange rates of $20 thousand, write off of bad debt of $4 thousand and patent impairment from abandonment of $2 thousand.

These increases were offset by decreases in consulting fees of $157 thousand, legal fees of $42 thousand, D&O and other insurance related costs of $19 thousand and $12 thousand in other general and administrative expenses.

Our general and administrative expenses consist primarily of employee-related expenses including salaries, bonuses, benefits and stock-based compensation.

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Selling and marketing expenses for the year ended December 31, 2024 was $1,216 thousand, compared to $1,246 thousand for the year ended December 31, 2023.

Overall sales and marketing expenses have remained relatively flat year-over-year with an increase of $72 thousand in consulting fees largely offset by a decrease in logistics of $27 thousand, a decrease in advertising costs of $17 thousand, a decrease in personnel-related costs, including sales commissions, of $8 thousand, and a decrease in subscriptions and dues of $7 thousand.

The change in expense year-over-year is primarily attributable to changes in our anti-aging market segment.

The decrease of $30 thousand, or 2%, was primarily attributable to decreases in advertising costs, including creative and web service fees, of $33 thousand, merchandising fees of $18 thousand, marketing materials and other general expenses of $10 thousand, dues and subscriptions of $9 thousand, and personnel-related costs of $5 thousand.

These decreases were partially offset by increases in temporary services of $29 thousand and in license fees of $4 thousand.

The overall change in expense year-over-year is primarily attributable to a decrease in selling and marketing expenses attributable to our anti-aging market segment.

Our sales and marketing expenses consist primarily of personnel-related expenses, such as salaries, benefits, and stock-based compensation, facility costs not otherwise included in or allocated to other departments, as well as marketing material costs, permits and licenses for ecommerce, and other advertising type expenses.

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Research and development expenses for the year ended December 31, 2024 was $657 thousand, compared to $511 thousand for the year ended December 31, 2023.

The increase of $19 thousand, or 4%, was primarily attributable to a $128 thousand increase in personnel-related costs from increased salaries and stock-based compensation awards granted.

The increase was partially offset by a decrease in general lab expenses and materials of $37 thousand, a decrease in the Astellas licensing fees of $31 thousand from the expiration of the licensing agreement in July 2022, and a decrease in consulting fees of $18 thousand.

The increase is also offset by an increase of $21 thousand in our Australian research and development tax credit related to qualifiable expenditures from our research and development activities of our Australian subsidiary, Cyto Therapeutics.

The increase of $146 thousand, or 29%, was primarily attributable to increases in personnel-related costs, including increased salaries, stock-based compensation awards grants and travel expense, of $144 thousand, depreciation expense of $9 thousand and other general expenses of $7 thousand, as well as a decrease in the Australian research and development tax credit for qualified expenditures incurred by our Australian subsidiary, Cyto Therapeutics, of $5 thousand.

The increase in research and development expense was partially offset by decreases in general materials and supplies of $15 thousand and consulting fees of $4 thousand.

Our research and development efforts are primarily focused on the development of treatments for Parkinson’s disease, traumatic brain injury, liver diseases, stroke, and the creation of new GMP grade human parthenogenetic stem cell lines.

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Other Income (Expense), Net

Other income, net for the year ended December 31, 2023 was a $532 thousand compared to other expense, net of $148 thousand for the year ended December 31, 2022.

Other income of $671 thousand was primarily attributable to a one-time receipt of the Employee Retention Tax Credit for certain employment taxes enacted by the U.S.

Other expense, net for the year ended December 31, 2024 was $141 thousand, compared to other income, net of $532 thousand for the year ended December 31, 2023.

The decrease in other income (expense), net of $673 thousand was primarily attributable to the one-time receipt of the Employee Retention Tax Credit for certain employment taxes enacted by the U.S.

government in response to the COVID-19 outbreak of $663 thousand in 2023 (refer to Note 8 – Employee Retention Credit within the accompanying consolidated financial statements for further discussion), which was partially offset by other expense.

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Other short-term and long-term commitments that would affect liquidity include lease obligations as well as related party debt repayments.

As of December 31, 2023, we had an accumulated deficit of approximately $110.5 million and have, on an annual basis, incurred net losses and negative operating cash flows since inception.

Substantially all of our operating losses have resulted from the funding of our research and development programs and general and administrative expenses associated with our operations.

We incurred net losses of $131 thousand, which includes the one-time receipt of the Employee Retention Tax Credit of $663 thousand, and $331 thousand for years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had cash of $1.6 million, compared to $742 thousand as of December 31, 2022.

At December 31, 2024, we had an accumulated deficit of approximately $110.7 million and have, on an annual basis, incurred net losses since inception.

Substantially all of our operating losses have resulted from the funding of our research and development programs

and general and administrative expenses associated with our operations.

At December 31, 2024, operating cash flows were positive and we had cash of $1,230 thousand, compared to $1,588 thousand at December 31, 2023.

Licensed Patents

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Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash

Net cash used in financing activities

Net (decrease) increase in cash

Operating Cash Flows

For the year ended December 31, 2023, net cash provided by operating activities was $929 thousand, resulting primarily from our net loss of $131 thousand, which includes the one-time receipt of the Employee Retention Tax Credit of $663 thousand, and net changes in operating assets and liabilities of $100 thousand, consisting primarily of an increase in accounts payable of $42 thousand, and decreases in operating lease liabilities of $229 thousand, accounts receivable of $173 thousand, and inventories of $141 thousand.

The decrease in cash is offset by recurring non-cash adjustments to net income of $960 thousand, including depreciation and amortization expense, stock-based compensation expense, operating lease expense, and related party note payable interest expense.

For the year ended December 31, 2022, net cash provided by operating activities was $332 thousand, resulting primarily from our net loss of $331 thousand and changes in operating assets and liabilities of $226 thousand, partially offset by recurring non-cash adjustments to net income of $890 thousand, including depreciation and amortization expense, stock-based compensation expense, operating lease expense, and interest expense.

For the year ended December 31, 2024, net cash provided by operating activities was $13 thousand, resulting primarily from our net loss of $209 thousand and net changes in operating assets and liabilities of $809 thousand, consisting primarily of increases in accounts receivable of $484 thousand, accrued liabilities of $42 thousand and prepaid expenses and other current assets of $27 thousand, and decreases in operating lease liabilities of $276 thousand, accounts payable of $178 thousand, and inventories of $114 thousand.

The decrease in cash is offset by non-cash adjustments to net loss of $1,031 thousand pertaining to stock-based compensation expense, depreciation and amortization expense, non-cash operating lease expense, interest expense on our related party note payable, changes in inventory reserve and impairment of intangible assets.

For the year ended December 31, 2023, net cash provided by operating activities was $929 thousand, resulting primarily from our net loss of $131 thousand, which includes the one-time receipt of the Employee Retention Tax Credit of $663 thousand, and changes in operating assets and liabilities of $3 thousand, offset by recurring non-cash adjustments to net loss of $1,063 thousand, including stock-based compensation expense, depreciation and amortization expense, non-cash operating lease expense, interest expense on our related party note payable and changes in inventory reserve.

Investing Cash Flows

Net cash used in investing activities for the year ended December 31, 2024 was $171 thousand, compared to $83 thousand for the year ended December 31, 2023.

The increase in cash used in investing activities was primarily attributable to an increase in purchases of property and equipment of $79 thousand for leasehold improvements, partially offset by a decrease in payments for patent licenses of $7 thousand from 2023 compared to 2022.

The increase in cash used in investing activities was primarily attributable to purchases of property and equipment of $166 thousand for lab and manufacturing equipment as compared to $80 thousand used for leasehold improvements in 2023.

There were also payments for patent licenses of $5 thousand during the year ended December 31, 2024 versus $3 thousand during the year ended December 31, 2023.

Financing Cash Flows

For year ended December 31, 2023, no net cash was provided by financing activities compared to $250 thousand cash provided for the year ended December 31, 2022.

For the year ended December 31, 2022, cash provided by financing activities was wholly attributable to proceeds from our related party note payable (refer to Note 10 – Related Party Transactions within the accompanying consolidated financial statements for further discussion).

Net cash used in financing activities for the year ended December 31, 2024 was $200 thousand, compared to no net cash flows provided by or used in financing activities for the year ended December 31, 2023.

Cash used in financing activities was wholly attributable to the partial repayment of principal on our related party note payable (refer to Note 10 – Related Party Transactions within the accompanying consolidated financial statements for further discussion).

Going Concern

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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.

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:

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Our failure to raise capital or enter into applicable arrangements when needed would have a negative impact on our financial condition.

Additional debt financing may be expensive and require us to pledge all or a substantial portion of its assets.

Further, if additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of its technologies, product candidates or products that we would otherwise seek to develop and commercialize on its own.

If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of its product initiatives.

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.

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The 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.

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

Critical Accounting Estimates

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Our significant accounting policies are more fully described in Note 1 – Description of Business and Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our most critical

accounting estimates include current and non-current inventories and stock-based compensation.

Our most critical accounting estimates include current and non-current inventories.

We review our estimates and assumptions periodically and reflect the effects of revisions in the period in which they are deemed to be necessary.

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If we are able to sell such inventory, any related reserves are reduced in the period of sale.

The Company's allowance for excess and obsolete inventory was $739 thousand and $637 thousand as of December 31, 2023 and 2022, respectively.

A 10% change in our reserve estimate in total as of December 31, 2023 would result in a change in reserve of approximately $74 thousand.

The Company’s allowance for excess and obsolete inventory was $736 thousand and $739 thousand at December 31, 2024 and 2023, respectively.

A 10% change in our reserve estimate in total at December 31, 2024 would result in a change in reserve of approximately $74 thousand.

Our reserves are estimates which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from our expectations.

Stock-Based Compensation

We are required to measure and recognize compensation expense for all stock-based payment awards made to employees and consultants based on estimated fair value.

We estimate the fair value of stock options granted using the Black-Scholes option-pricing model.

The determination of fair value of stock-based awards using the Black-Scholes option-pricing model requires the use of certain estimates and subjective assumptions that affect the amount of stock-based compensation expense recognized in our consolidated statements of operations.

These include estimates of the expected volatility of our stock price, expected option life, expected dividends and the risk-free interest rate.

Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award.

The expected option life is calculated using the Simplified Method as prescribed by accounting guidance for stock-based compensation.

We determined expected dividend yield to be 0% given that we have never declared or paid any cash dividends on our common stock, and we currently do not anticipate paying such cash dividends.

The risk-free interest rate is based upon United States Treasury securities with remaining terms similar to the expected term of the stock-based awards.

If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense may differ materially from what we have recorded in the current period.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis