International Stem Cell CORP 10-K

ITEM 9A. 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) at the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, at December 31, 2024, our disclosure controls and procedures were effective. 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. 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: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) 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; and (iii) 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. 36 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 our internal control over financial reporting was effective at December 31, 2024. Changes in Internal Control Over Financial Reporting There were no changes in our internal controls during the year ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. ITEM 9B. OTHER INFORMATION During the three months ended December 31, 2024, no director or “officer” (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K. ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 37 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item regarding our directors is incorporated by reference to the information in our definitive Proxy Statement (the “Proxy Statement”) expected to be filed with the Securities and Exchange Commission within 120 days of December 31, 2024, in connection with our 2024 Annual Meeting of Stockholders under the heading “Election of Directors.” The information required by this Item regarding our Code of Conduct and Ethics in incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the caption “Code of Conduct and Ethics.” The information required by this Item regarding our Governance Committee and Audit Committee is incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the caption “Corporate Governance.” At December 31, 2024, our executive officers were as follows: Name Position Age Andrey Semechkin Co-Chairman and Chief Executive Officer 65 Russell Kern Executive Vice President, Chief Scientific Officer, and Principal Financial Officer 39 Andrey Semechkin , Ph.D., Co-Chairman and CEO, has been a Director of the Company since December 2008. Dr. Semechkin has served as our Chief Executive Officer since November 2009, and from December 2008 to November 2009 he served in other senior management positions with the Company. Dr. Semechkin is a specialist in system analysis, strategic planning and corporate management. He is a member of the Russian Academy of Sciences and has been Deputy Director of Institute of System Analysis since 2004. Dr. Semechkin was awarded the Russian Government Award in Science and Technology in 2006 and has written several scientific books. He has over 30 years’ experience creating and managing businesses across different industries and scientific sectors. Russell Kern , Ph.D., Executive Vice President, Chief Scientific Officer, Principal Financial Officer, and CEO of Lifeline Skin Care Inc., became a Director in October 2008. Dr. Kern has served as our Chief Scientific officer since June 2013 and previously served since December 2008 in various scientific and management positions, including as Vice President Research and Development. Dr. Kern was trained in medical genetics, embryology and stem cell biology. He holds a Ph.D. degree in Human Physiology from the Russian Academy of Medical Sciences and has broad expertise in neuroscience, and was part of the team, along with scientists from the NYU Medical School that elucidated the physiological changes that occur in the brains of Parkinson’s disease patients. Dr. Kern directs ISCO’s R&D programs including stem cell derivation, differentiation and the pre-clinical and clinical evaluation of stem cell derived cells and tissue. He has developed a general method of deriving highly pure populations of neural stem cells and dopaminergic neurons from pluripotent stems cells that is novel, practical and suitable for use in a clinical setting. Dr. Kern is a well-known speaker on stem cell biology, including the use of stem cells for neurology and skin regeneration. He has more than 40 publications in the field of Parkinson’s disease and stem cell biology, and he is an active member of the American Academy of Neurology and the Society for Neuroscience. Dr. Russell Kern is the son of Dr. Andrey Semechkin, our Co-Chairman and Chief Executive Officer. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the caption “Executive Compensation.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the captions “Stock Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Equity Compensation Plan Information.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the captions “Related Person Transactions” and “Corporate Governance – Director Independence.” 38 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is incorporated by reference to the information in the Proxy Statement, expected to be filed within 120 days of December 31, 2024, under the caption “Principal Accounting Fees and Services.” 39 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report. 1. Financial Statements As part of this Annual report on Form 10-K, the consolidated financial statements are listed in the accompanying index to financial statements on Page F-1 . 2. Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or accompanying notes thereto. 3. Exhibit Index The following is a list of exhibits filed as part of this Annual Report on Form 10-K (including those incorporated herein by reference): Exhibit Number 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). 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). 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). 3.4 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on December 5, 2014). 3.5 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 28, 2015). 3.6 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2017). 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). 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). 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). 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). 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). 4.5 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). 4.6 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.7 of the Registrant’s Form 10-K filed March 30, 2021). 40 10.1 Amended and Restated 2010 Equity Participation Plan dated September 21, 2023 (incorporated by reference to Appendix A of the Registrant’s Form14C filed on September 27, 2023). 10.2 Amended and Restated Investors Rights Agreement dated March 9, 2012 (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on March 15, 2012). 10.3 Management Rights Letter dated March 9, 2012 (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on March 15, 2012). 10.4 Dividend Waiver Agreement dated October 12, 2012 (incorporated by reference to Exhibit 10.29 of the Registrant’s Form S-1 filed on October 18, 2012). 10.5 Amended and Restated License Agreement with Advanced Cell Technology, Inc. dated February 7, 2013 (ACT IP) (incorporated by reference to Exhibit 10.1 of the Registrant’s Amendment to Form 8-K filed on February 14, 2013) . 10.6 Amended and Restated License Agreement with Advanced Cell Technology, Inc. (UMass IP) (incorporated by reference to Exhibit 10.3 of the Registrant’s Amendment to Form 8-K filed on February 14, 2013). 10.7 Amended and Restated License Agreement dated February 7, 2013 with Advanced Cell Technology, Inc. (Infigen IP) (incorporated by reference to Exhibit 10.2 of the Registrant’s Amendment to Form 8-K filed on February 14, 2013). 10.8 Amendment dated November 13, 2014 to Amended and Restated Investor Rights Agreement dated as of March 9, 2012 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on November 18, 2014). 10.9 Waiver Agreement dated December 31, 2014 with holders of Series G Preferred Stock (incorporated by reference by Exhibit 10.32 of the Registrant’s Form 10-K filed March 30, 2015). 10.10 Registration Rights Agreement, dated January 8, 2016, by and between International Stem Cell Corporation and Andrey Semechkin (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on January 12, 2016). 10.11 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on March 10, 2016). 10.12 Lease Agreement dated October 26, 2021 (incorporated by reference to Exhibit 10.12 of the Registrant’s Form 10-K filed on March 29, 2022). 10.13 Lease Agreement dated November 30, 2021 (incorporated by reference to Exhibit 10.13 of the Registrant’s Form 10-K filed on March 29, 2022). 10.14 Co-Tenant Agreement dated December 15, 2021 (incorporated by reference to Exhibit 10.14 of the Registrant’s Form 10-K filed on March 29, 2022). 10.15 Form of Note issued on March 1, 2023 (incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on March 16, 2023). 10.16 Form of Note issued on September 15, 2023 (incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on September 18, 2023). 10.17 Form of Note issued on September 15, 2024 (incorporated by reference to Exhibit 10.1 of Registrant’s Form 8-K filed on September 17, 2024). 19.1* Insider Trading Compliance Program 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Form 10-K filed on March 30, 2016) 23.1* Consent of BDO USA, P.C. 24.1* Power of Attorney (included on signature page hereto) 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 41 32.2* Section 1350 Certification of Chief Financial Officer 97.1 Policy for Recovery of Erroneously Awarded Incentive Compensation 101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. (c) Financial Statement Schedules. Refer to Part IV, Item 15(a)2 above. ITEM 16. FORM 10-K SUMMARY None. 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERNATIONAL STEM CELL CORPORATION By: /s/ A NDREY S EMECHKIN Name: Andrey Semechkin Title: Chief Executive Officer Dated: March 28, 2025 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrey Semechkin and Russell Kern, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature: Capacity: Date: /s/ A NDREY S EMECHKIN Co-Chairman of the Board and Chief Executive Officer (Principal Executive Officer) March 28, 2025 Andrey Semechkin /s/ R USSELL KERN Executive Vice President, Chief Scientific Officer, and March 28, 2025 Russell Kern Director (Principal Financial and Accounting Officer) /s/ D ONALD A. W RIGHT Co-Chairman of the Board March 28, 2025 Donald A. Wright /s/ P AUL V. M AIER Director March 28, 2025 Paul V. Maier 43 International Stem Cell Corporation and Subsidiaries Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. ; San Diego, California ; PCAOB ID No. 243 ) F- 2 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit F- 6 Consolidated Statements of Cash Flows F- 7 Notes to Consolidated Financial Statements F- 8 F- 1 Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors International Stem Cell Corporation San Diego, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of International Stem Cell Corporation (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit, has historically incurred net losses, has not generated revenue from its principal operations in therapeutic and clinical product development through research and development efforts, and does not have sufficient cash on hand to sustain operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Inventory Valuation – Excess and Obsolete Inventory F- 2 As described in Note 1 to the consolidated financial statements, the Company reviews the components of its inventory on a periodic basis for excess and obsolescence and adjusts inventory to the lower of cost or net realizable value as necessary. The Lifeline Cell Technology (“LCT”) cell inventory has a long product life cycle, does not have a shelf life when frozen and future demand is uncertain. As such, management estimates its reserve for allowance for excess and obsolete LCT cell inventory using historical sales data and inventory turnover rates. We identified auditing the Company’s estimate for excess and obsolete LCT cell inventory as a critical audit matter. Auditing inventory turnover rates involves especially challenging auditor judgment due to the nature and extent of audit effort required to address the matter. The primary procedures we performed to address this critical audit matter included: • Assessing the reasonableness of inventory turnover rates by agreeing certain sales and inventory movement data to relevant source documents. • Testing the mathematical accuracy of the excess and obsolete LCT cell inventory reserve calculation. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2019. San Diego, California March 28, 2025 F- 3 International Stem Cell Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share and par value data) December 31, 2024 2023 Assets Current assets: Cash $ 1,230 $ 1,588 Accounts receivable, net 1,058 574 Inventories 1,149 1,263 Prepaid expenses and other current assets 123 96 Total current assets 3,560 3,521 Non-current inventories 252 266 Property and equipment, net 257 215 Intangible assets, net 721 800 Right-of-use assets 352 557 Deposits and other assets 31 31 Total assets $ 5,173 $ 5,390 Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit Current liabilities: Accounts payable $ 186 $ 364 Accrued liabilities 527 485 Operating lease liabilities, current 330 276 Advances 250 250 Related party note payable 3,395 3,457 Total current liabilities 4,688 4,832 Operating lease liabilities, net of current portion 115 445 Total liabilities 4,803 5,277 Commitments and contingencies (Note 11) Series D redeemable convertible preferred stock, $ 0.001 par value; 50 shares authorized; 43 shares issued and outstanding; liquidation preference of $ 4,300 at December 31, 2024 and 2023 4,300 4,300 Stockholders’ Deficit: Non-redeemable convertible preferred stock, $ 0.001 par value; 10,004,310 and 10,004,310 shares authorized; 5,254,310 and 5,254,310 shares issued and outstanding; liquidation preference of $ 9,811 and $ 9,796 at December 31, 2024 and 2023, respectively 5 5 Common stock, $ 0.001 par value; 120,000,000 shares authorized; 8,004,389 shares issued and outstanding at December 31, 2024 and 2023 8 8 Additional paid-in capital 106,742 106,276 Accumulated deficit ( 110,685 ) ( 110,476 ) Total stockholders’ deficit ( 3,930 ) ( 4,187 ) Total liabilities, redeemable convertible preferred stock and stockholders’ deficit $ 5,173 $ 5,390 See accompanying notes to consolidated financial statements. F- 4 International Stem Cell Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share data) Year Ended December 31, 2024 2023 Product sales $ 9,085 $ 7,789 Operating expenses: Cost of sales 3,764 3,181 General and administrative 3,516 3,514 Selling and marketing 1,216 1,246 Research and development 657 511 Total operating expenses 9,153 8,452 Loss from operations ( 68 ) ( 663 ) Other income (expense): Employee retention credit — 663 Interest expense ( 145 ) ( 139 ) Other income, net 4 8 Total other (expense) income, net ( 141 ) 532 Net loss ( 209 ) ( 131 ) Net loss per common share, basic and diluted $ ( 0.03 ) $ ( 0.02 ) Weighted-average common shares used to compute net loss per share, basic and diluted 8,004,389 8,004,389 See accompanying notes to consolidated financial statements. F- 5 International Stem Cell Corporation and Subsidiaries Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit (In thousands) Series D Redeemable Non-redeemable Convertible Convertible Common Additional Total Preferred Stock Preferred Stock Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance at December 31, 2022 — $ 4,300 5,254 $ 5 8,004 $ 8 $ 105,812 $ ( 110,345 ) $ ( 4,520 ) Stock-based compensation — — — — — — 464 — 464 Net loss — — — — — — — ( 131 ) ( 131 ) Balance at December 31, 2023 — 4,300 5,254 5 8,004 8 106,276 ( 110,476 ) ( 4,187 ) Stock-based compensation — — — — — — 466 — 466 Net loss — — — — — — — ( 209 ) ( 209 ) Balance at December 31, 2024 — $ 4,300 5,254 $ 5 8,004 $ 8 $ 106,742 $ ( 110,685 ) $ ( 3,930 ) See accompanying notes to consolidated financial statements. F- 6 International Stem Cell Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 209 ) $ ( 131 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation 466 464 Depreciation and amortization 206 194 Non-cash operating lease expense 205 170 Interest expense on related party note payable 138 132 Change in inventory reserve 14 103 Impairment of intangible assets 2 — Changes in operating assets and liabilities: Accounts receivable ( 484 ) 173 Inventories 114 38 Prepaid expenses and other current assets ( 27 ) ( 6 ) Deposits and other assets — 2 Accounts payable ( 178 ) 42 Accrued liabilities 42 ( 23 ) Operating lease liabilities ( 276 ) ( 229 ) Net cash provided by operating activities 13 929 Cash flows from investing activities Purchases of property and equipment ( 166 ) ( 80 ) Payments for patent licenses ( 5 ) ( 3 ) Net cash used in investing activities ( 171 ) ( 83 ) Cash flows from financing activities Principal repayment on note payable from related party ( 200 ) — Net cash used in financing activities ( 200 ) — Net (decrease) increase in cash ( 358 ) 846 Cash, beginning of period 1,588 742 Cash, end of period $ 1,230 $ 1,588 Supplemental disclosure of cash flow information: Cash paid for interest $ 10 $ 6 Supplemental disclosure of non-cash investing activities: Patent license costs included in accounts payable and accrued expense $ — $ 1 See accompanying notes to consolidated financial statements. F- 7 International Stem Cell Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies Description of Business International Stem Cell Corporation (the “Company”) was organized in Delaware in June 2005 and is publicly traded on the OTCQX under the symbol “ISCO”. The Company is primarily a research and development company, for the therapeutic market, which has focused on advancing potential clinical applications of human parthenogenetic stem cells (“hpSCs”) for the treatment of various diseases of the central nervous system and liver diseases. The Company has the following wholly owned subsidiaries: • Lifeline Cell Technology, LLC (“LCT”) – for the biomedical market, develops, manufactures and commercializes primary human cell research products including over 200 human cell culture products, including frozen human “primary” cells and the reagents (called “media”) needed to grow, maintain and differentiate the cells; • Lifeline Skin Care, Inc. (“LSC”) – for the anti-aging market, develops, manufactures and markets a category of anti-aging skin care products based on the Company’s proprietary parthenogenetic stem cell technology and small molecule technology; • Cyto Therapeutics Pty. Ltd. (“Cyto Therapeutics”) – performs research and development (“R&D”) for the therapeutic market and is currently conducting clinical trials in Australia for the use of ISC-hpNSC® in the treatment of Parkinson’s disease. Going Concern The Company had an accumulated deficit of approximately $ 110.7 million at December 31, 2024 and has historically incurred net losses. The Company has no revenue from its principal operations in therapeutic and clinical product development through research and development efforts. Unless the Company obtains additional financing, the Company does not have sufficient cash on hand to sustain operations for at least one year from the issuance date of these consolidated financial statements. There can be no assurance that the Company will be successful in maintaining normal operating cash flow or obtaining additional funding. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. For the foreseeable future, the Company’s ability to continue its operations is dependent upon its ability to obtain additional financing. The accompanying 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 classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern. The Company continues to evaluate various financing sources and options to raise working capital to help fund current research and development programs and operations. The Company will need to obtain significant additional funding from sources, including debt and/or equity financing, license arrangements, grants and/or collaborative research arrangements to sustain its operations and develop products. The timing and degree of any future capital requirements will depend on many factors, including: • the accuracy of the assumptions underlying the estimates for capital needs in 2025 and beyond; • the extent that revenues from sales of LSC and LCT products cover the related costs and provide capital; • scientific progress in research and development programs; • the magnitude and scope of the Company’s research and development programs and its ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing; • the progress with preclinical development and clinical trials; • the extent to which third party interest in Company’s research and commercial products can be realized through effective partnerships; • the time and costs involved in obtaining regulatory approvals; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; and F- 8 • the number and type of product candidates that the Company decides to pursue. Additional debt financing may be expensive and require the Company to pledge all or a substantial portion of its assets. If additional funds are obtained through arrangements with collaborative partners, these arrangements may require the Company to relinquish rights to some of its technologies, product candidates or products that the Company would otherwise seek to develop and commercialize on its own. Furthermore, if sufficient capital is not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its product initiatives. The Company’s failure to raise capital or enter into applicable arrangements when needed would have a negative impact on its financial condition. Principles of Consolidation and Foreign Currency Transactions The consolidated financial statements include the accounts of International Stem Cell Corporation and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The functional currency of the Company and its wholly owned subsidiaries is the U.S. dollar. Monetary assets and liabilities that are not denominated in the functional currency are remeasured each reporting period into U.S. dollars at foreign currency exchange rates in effect at the respective balance sheet date. Non-monetary assets and liabilities and equity are remeasured at the historical exchange rates. Revenue and expenses are remeasured at the average rate in effect on the date of the transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in general and administrative expense in the accompanying consolidated statements of operations and were not material for the periods presented. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Significant estimates include patent life (remaining legal life versus remaining useful life) and allowance for excess and obsolete inventories. By their nature, estimates are subject to an inherent degree of uncertainty and actual results could differ from these estimates. Segments The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer (Principal Executive Officer). The CODM 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: therapeutic market (“ISCO”); biomedical market (“LTC”); and anti-aging market (“LSC”). The accounting policies of the segments are the same as those described throughout Note 1 – Description of Business and Summary of Significant Accounting Policies . All intercompany balances and transactions between reporting segments have been eliminated in consolidation. Inventories Inventories are accounted for using the average cost and first-in, first-out (“FIFO”) methods for LCT cell culture media and reagents, specific identification method for other LCT products, and average cost and specific identification methods for LSC products. Inventories are stated at the lower of cost or net realizable value. Laboratory supplies used in the research and development process are expensed as consumed. LCT’s inventories have a long product life cycle, do not have a shelf life when frozen and future demand is uncertain. As such, at each reporting period, the Company estimates its reserve for allowance for excess and obsolete inventory using historical sales data and inventory turnover rates. The establishment of a reserve for excess and obsolete inventory establishes a new cost basis of inventories. If the Company is able to sell such inventories, any related reserves would be reduced in the period of sale. The value of inventories that are not expected to be sold within one year of the current reporting period is classified as non-current inventories on the accompanying consolidated balance sheets. Accounts Receivable Trade accounts receivable is 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 measures expected credit losses for financial instruments at each reporting date based on historical experience, current conditions and reasonable forecasts. The allowance for credit losses represents the Company’s estimate of expected credit losses relating to these factors. Amounts are written off against the allowances for credit losses when the Company determines that a customer account is uncollectible. At both December 31, 2024 and 2023 , the Company’s allowance for credit losses was immaterial. F- 9 Advances In June 2008, the Company entered into an agreement with BioTime, Inc. (“BioTime”), whereby BioTime paid an advance of $ 250 thousand to LCT to produce, make, and distribute certain products. The $ 250 thousand advance will be paid down with the first $ 250 thousand of net revenues that otherwise would be allocated to LCT under the agreement. For the years ended December 31, 2024 and 2023 , no revenues were realized and attributable to BioTime under this agreement. 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, which are generally three to five years . Leasehold improvements are capitalized and amortized over the shorter of the remaining term of the lease or the estimated life of the assets. Intangible Assets Intangible assets consist of acquired patent licenses and capitalized legal fees related to the acquisition, filing, maintenance, and defense of patents and trademarks. Amortization begins once the 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 amortized on a straight-line basis over the shorter of the useful life of the underlying patent, which is generally 15 years, or when the intangible asset is rejected or abandoned. All amortization expense and impairment charges related to intangible assets are recognized as general and administrative expenses in the accompanying consolidated statements of operations. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets, operating lease obligations, current, and operating lease obligations, net of current portion, on the Company’s consolidated balance sheets. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of future minimum lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses a discount rate based on its estimated incremental borrowing rate to determine the right-of-use asset and operating lease liabilities to be recognized. The Company determines its incremental borrowing rate based on the terms and lease payments of its operating leases and what it would normally pay to borrow, on a collateralized basis, over similar terms for an amount equal to the lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. In addition, the Company does not separate lease components from non-lease components. The Company has elected to not recognize right-of-use assets and lease liabilities for leases with an initial term of 12 months or less. The Company recognizes lease expense on a straight-line basis over the lease term beginning on the commencement date. Long-Lived Asset Impairment The Company reviews long-lived assets for impairment when events or changes in circumstances (“triggering event”) indicate that the carrying value of an asset or group of assets may not be recovered. If a triggering event is determined to have occurred, the carrying value of an asset or group of assets is compared to the future undiscounted cash flows expected to be generated by the asset or group of assets. If the carrying value exceeds the undiscounted cash flows of the asset or group of assets, which is measured as the excess of fair value over the asset or asset group’s carrying value, then impairment exists. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Revenue Recognition The Company’s revenue consists primarily of sales of products from its two revenue-generating operating segments: the biomedical market segment (LCT) and anti-aging market segment (LSC). The biomedical market segment markets and sells primary human cell research products with two product categories, cells and media, which are sold both domestically within the United States and internationally. The anti-aging market segment markets and sells a line of skin care products directly to customers through online orders via the ecommerce sales channel. F- 10 The following table presents the Company’s revenue disaggregated by segment, product and geography (in thousands, except percentages): LCT: Year Ended December 31, 2024 Total % of Total Domestic International Revenues Revenues Biomedical products Media $ 5,257 $ 696 $ 5,953 72 % Cells 1,703 634 2,337 28 % Total $ 6,960 $ 1,330 $ 8,290 100 % Year Ended December 31, 2023 Total % of Total Domestic International Revenues Revenues Biomedical products Media $ 4,059 $ 683 $ 4,742 69 % Cells 1,602 522 2,124 31 % Total $ 5,661 $ 1,205 $ 6,866 100 % LSC: Year Ended December 31, 2024 2023 Skin care products $ 795 $ 923 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 performance obligation(s) within the arrangements. Any promotional or volume sales discounts are applied evenly to the units sold for purposes of calculating standalone selling price. The Company recognizes revenue when its customer obtains control of the promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Product sales generally consist of a single performance obligation that the Company satisfies at a point in time (i.e., upon shipment of the product). The standard payment terms for the Company’s customers are generally 30 days after the Company satisfies the performance obligation(s). For LSC products, ecommerce sales are generally paid at the time of purchase. The Company accounts for shipping and handling costs, recognized as cost of sales, as activities to fulfill the promise to transfer the goods to a customer. As a result, no consideration is allocated to shipping and handling costs. Rather, the Company accrues the cost of shipping and handling upon shipment of the product, and all contract revenue (i.e., the transaction price) 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 to the customer. From time to time, the Company offers sales promotions on its LSC 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. Practical Expedients The Company has elected the practical expedient to not determine whether contracts with customers contain significant financing components. The Company pays commissions on certain sales for its biomedical and anti-aging product markets 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 be one year or less. These costs are recorded as selling and marketing expenses within the accompanying consolidated statement of operations. In addition, the Company has elected to exclude sales taxes consideration from the determined transaction price. F- 11 Allowance for Sales Returns The Company’s anti-aging products have a 30 -day product return guarantee; however, the Company determined that there is a low probability that returns will occur based on its historical rate of returns. Historically, returns have not been significant and are recognized as a reduction to curre nt period revenue. At December 31, 2024 and 2023 , the Company 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, as well as related direct materials, shipping costs, general laboratory supplies and an allocation of overhead. Certain of the Company’s licensed technology agreements may require the Company to pay royalties based on the future sale of the Company’s products. Such royalties will be recorded as a component of cost of sales when incurred. Additionally, milestone payments or the amortization of license fees related to developed technologies used in the Company’s products will be included as a component of cost of sales to the extent that such payments become due in the future. Advertising Adverting costs are expensed as incurred and included as a component of selling and marketing expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2024 and 2023, advertising costs were approximately $ 179 thousand and $ 204 thousand, respectively. Research and Development Costs Research and development costs, which are expensed as incurred, primarily consist of salaries and benefits associated with research and development personnel, overhead and occupancy costs, contract services costs and amortization of license costs for technology used in research and development without alternative future uses, offset by the research and development tax credits provided by the Australian Taxation Office for qualified expenditures. Australian Research and Development Tax Credit The Company’s wholly owned subsidiary, Cyto Therapeutics, conducts various research and development activities on the Company’s product candidates in Australia. Under Australian tax law, the Australian Taxation Office provides for a refundable tax credit in the form of a cash refund equal to 43.5 % of qualified research and development expenditures, not to exceed established thresholds. The Australian research and development tax incentive program is a self-assessment process, and the Australian Government has the right to review the Company’s qualifying programs and related expenditures for a period of four years. If such a review were to occur and, as a result of the review and failure of a related appeal, the qualified program and related expenditures were disqualified, the respective research and development refunds could be recalled with penalties and interest. The refundable tax credit does not depend on the Company’s generation of future taxable income or ongoing tax status or position. Accordingly, the credit is not considered an element of income tax accounting under Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 740 – Income Taxes. The Company uses the grant accounting model by analogy to International Accounting Standards (“IAS”) 20 to account for the refundable tax credit from the Australian government. The Company recognizes the research and development tax credit as a reduction to research and development expense when there is reasonable assurance that the tax credit will be received, the relevant expenses have been incurred, and the amount can be reliably measured. During the year ended December 31, 2024 and 2023, the Company recognized a reduction in qualified research and development expenses of $ 94 thousand and $ 99 thousand, respectively, in the accompanying consolidated statement of operations. Employee Retention Credit Similar to the Australian research and development tax credit, the Company uses the grant accounting model by analogy to IAS 20 to account for the refundable Employee Retention Tax Credit (“ERC”) from the U.S. government. The Company recognized the refundable tax credit as other income when there was reasonable assurance that the tax credit will be received, the relevant expenses have been incurred, and the amount can be reliably measured. Laws and regulations concerning government programs, including the ERC, are complex and subject to varying interpretations. Claims made under these programs may also be subject to retroactive audit and review. While the Company does not believe there is a basis for estimation of an audit or recapture risk at this time, there can be no assurance that regulatory authorities will not challenge the Company’s claim to the ERC in a future period. Refer to Note 8 – Employee Retention Credit within the consolidated financial statements for further discussion. F- 12 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. Stock-based compensation is recognized as expense on a straight-line basis, net of forfeitures, which are recognized as incurred, 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 Company uses the simplified method to estimate the term of options granted. 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 The carrying amounts of the Company’s accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. The carrying value of the Company’s related party note payable does not approximate fair value. Refer to Note 10 – Related Party Transactions within the consolidated financial statements for further discussion. Income Taxes The Company uses the asset and liability method of accounting for income taxes. When the Company prepares its consolidated financial statements, it estimates income taxes based on the various jurisdictions and countries where it conducts business. This requires the Company to estimate current tax exposure and to assess temporary differences that result from differing treatments of certain items for tax and accounting purposes. Deferred income taxes are recognized based on the differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company then assesses the likelihood that deferred tax assets will be realized. Valuation allowances are established when it is more likely than not the deferred tax assets will not be realized. When the Company establishes a valuation allowance or increases this allowance in an accounting period, it records a corresponding tax expense in the consolidated statements of operations. The Company includes interest and penalties related to income taxes within its provision for income taxes. Net Loss Per Share Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury and two-class or “if-converted” methods. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock do not have an obligation to fund losses. Potentially dilutive common stock equivalents are comprised of stock options and convertible preferred stock. For the years ended December 31, 2024 and 2023, there was no difference in the number of shares used to calculate basic and diluted shares outstanding as the Company was in a net loss position. For the years ended December 31, 2024 and 2023, the following common stock options and convertible preferred stock were not included in the diluted net loss per share calculation because the effect would be anti-dilutive. Year Ended December 31, 2024 2023 Employee stock options 12,211,332 8,590,455 Redeemable convertible preferred stock 2,457,143 2,457,143 Non-redeemable convertible preferred stock 5,061,687 5,061,687 Total 19,730,162 16,109,285 Comprehensive Loss Comprehensive loss includes all changes in stockholders’ deficit except those resulting from investments by owners and distributions to owners. The Company did not have any items of comprehensive loss other than net loss from operations for the years ended December 31, 2024 and 2023 . Customer Concentrations For the years ended December 31, 2024 and 2023 , one customer accounted for approxim ately 53 % and 46 % , respectively, of consolidated product sales, and approximately 58 % and 52 % , respectively, of biomedical product sales. At December 31, 2024 and 2023, the same customer accounted for 67 % and 47 % , respectively, of accounts receivable, net. F- 13 No other single customer accounted for more than 10% of product sales, net for the years ended December 31, 2024 and 2023 in either segment. No other single customer accounted for more than 10% of accounts receivable, net at December 31, 2024. At December 31, 2023 , three customers of LCT individually accounted for more than 10% of accounts receivable, net and in the aggregate, accounted for 33 % of accounts receivable, net. Cash Concentrations The Company maintains cash balances at various financial institutions. Accounts at these institutions are secured up to $ 250 thousand by the Federal Deposit Insurance Corporation (“FDIC”). At times, cash balances may exceed this limit. As of December 31, 2024 and 2023, amounts on deposit in excess of FDIC insured limits approximated $ 327 thousand and $ 543 thousand, respectively. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure (“ASU 2023-09”). ASU 2023-09 intends to provide improved transparency about income tax information through improvements to income tax disclosures. Among other things, the amendments in ASU 2023-09 require enhanced disclosures regarding federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. Further, the amendments eliminate certain disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The new standard will be effective for the Company for the fiscal year ending December 31, 2025. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires disclosure of disaggregated information about any relevant expense captions presented on the face of the consolidated statement of operations, including the following required natural expense categories: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) recognized as part of oil- and gas-producing activities or other depletion expenses, as well as certain other expenses, when applicable. The new standard will be effective for the Company for the fiscal year ending December 31, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 intends to simplify the accounting for convertible debt instruments by reducing the number of accounting models and the number of embedded features that could be recognized separately from the host contract. Among other things, the amendment allows certain convertible debt instruments to be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Further, the amendments require use of the if-converted method in the diluted earnings per share calculation for convertible instruments. The Company adopted ASC 2020-06 on January 1, 2024 . The adoption of this standard did no t have a material impact on the Company’s consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure s (“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Among other things, the amendments in ASU 2023-07 require additional information regarding significant segment expenses provided to the chief operating decision maker (“ CODM”), qualitative and quantitative disclosures regarding other segment items, any additional segment profit or loss measures contemplated by the CODM when assessing segment performance, how the CODM allocates resources among segments, and the title and position of the CODM. Further, the amendments require interim segment reporting disclosures that were previously only required to be disclosed annually. ASU 2023-07 is effective for the Company for the fiscal year ending December 31, 2024 and for interim periods beginning January 1, 2025. The adoption of this standard for the year ended December 31, 2024 did no t have a material impact on the Company’s consolidated financial results, but resulted in enhanced disclosures as included in Note 12 – Segments and Geographic Information . F- 14 2. Inventories The components of inventories are as follows (in thousands): December 31, 2024 2023 Raw materials $ 532 $ 526 Work in process 538 597 Finished goods 1,067 1,145 2,137 2,268 Less: allowance for inventory excess and obsolescence ( 736 ) ( 739 ) Total inventories $ 1,401 $ 1,529 Inventories $ 1,149 $ 1,263 Non-current inventories 252 266 Total inventories $ 1,401 $ 1,529 At December 31, 2024 and 2023, the allowance for inventory excess and obsolescence consists of the following activity (in thousands): December 31, 2024 2023 Balance, beginning of year $ 739 $ 637 Provision for inventory reserve 289 277 Write-offs ( 292 ) ( 175 ) Balance, end of year $ 736 $ 739 W rite-offs of inventories include scrapped inventories and reserved inventories sold. 3. Property and Equipment Property and equipment consist of the following (in thousands): December 31, 2024 2023 Machinery and equipment $ 1,662 $ 1,602 Computer equipment and software 221 221 Office equipment 64 89 Leasehold improvements 625 617 Construction in progress 12 12 2,584 2,541 Less: accumulated depreciation and amortization ( 2,327 ) ( 2,326 ) Property and equipment, net $ 257 $ 215 Depreciation and amortization expense for the years ended December 31, 2024 and 2023 was $ 124 thousand and $ 112 thousand. During the year ended December 31, 2024 and 2023, the Company disposed of approximately $ 123 thousand and $ 5 thousand, respectively, in property and equipment that had been depreciated and amortized in full and had no impact to t he accompanying consolidated statements of operations. 4. Intangible Assets Intangible assets consist of the following (in thousands): December 31, 2024 2023 Patents $ 1,293 $ 1,290 Less: accumulated amortization ( 647 ) ( 565 ) 646 725 Indefinite life logos and trademarks 75 75 Intangible assets, net $ 721 $ 800 F- 15 Amortization expense for the years ended December 31, 2024 and 2023 was $ 82 thousand and $ 82 thousand, respectively. Impairment charges for the years ended December 31, 2024 and 2023 was $ 2 thousand and zero , respectively. The impairment charges, measured on a cost basis, relate to the abandonment of certain internally generated and licensed intellectual property in the Company’s therapeutic market segment that was determined by management to have no future economic benefit. The timing of approval of pending patent applications is uncertain and, therefore, are included in the thereafter period below until issued. Pending patents at December 31, 2024 and 2023 was $ 64 thousand and $ 61 thousand, respectively. At December 31, 2024, future amortization expense related to intangible assets subject to amortization is expected to be as follows (in thousands): Year ending December 31, 2025 $ 80 2026 76 2027 73 2028 73 2029 68 Thereafter 276 Total $ 646 5. Convertible Preferred Stock At December 31, 2024 and 2023, the Company was authorized to issue 20,000,000 shares of preferred stock , $ 0.001 par value per share, 50 shares of Series D redeemable convertible preferred stock and 10,004,310 of Series B, Series G and Series I-2 non-redeemable convertible preferred stock. The Company’s Series B, Series G and Series I-2 non-redeemable convertible preferred stock has been classified as equity on the accompanying consolidated balance sheets. The authorized, issued and outstanding shares of non-redeemable convertible preferred stock at December 31, 2024 consisted of the following: Shares Shares Issued and Liquidation Carrying Authorized Outstanding Preference Value (in thousands) Series B 5,000,000 250,000 $ 501 $ — Series G 5,000,000 5,000,000 5,000 5 Series I-2 4,310 4,310 4,310 — Total 10,004,310 5,254,310 $ 9,811 $ 5 The authorized, issued and outstanding shares of non-redeemable convertible preferred stock at December 31, 2023 consisted of the following: Shares Shares Issued and Liquidation Carrying Authorized Outstanding Preference Value (in thousands) Series B 5,000,000 250,000 $ 486 $ — Series G 5,000,000 5,000,000 5,000 5 Series I-2 4,310 4,310 4,310 — Total 10,004,310 5,254,310 $ 9,796 $ 5 The significant rights and preferences of the Company’s convertible preferred stock are as follows: Dividends Holders of the Company’s convertible preferred stock are entitled to participating dividends with common stock when and if declared by the Company’s Board of Directors. The Series D and G convertible preferred stock previously had rights to cumulative dividends in liquidation whether declared or not declared. Since the holders waived the rights to such dividends in 2012, this does not have an ongoing impact. No dividends have been declared for the year ended December 31, 2024. F- 16 Liquidation Liquidation preference among classes of preferred shares is first with Series D with priority, followed by Series G, Series B and Series I-2 on the proceeds from any sale or liquidation of the Company in an amount equal to the purchase price of shares plus (in the case of the Series B) an amount equal to 1 % of the Series B original issue price for every two calendar months from February 1, 2008. Following the satisfaction of the liquidation preferences, all shares of common stock participate in any remaining distribution. Conversion The shares of convertible preferred stock are convertible into shares of common stock at any time, at the option of the holder. The conversion rates of the Series B, Series D, and Series I-2 are subject to anti-dilution adjustments whereby, subject to specified exceptions, if the Company issues equity securities or securities convertible into equity at a price below the applicable conversion price of the Series B, Series D, and Series I-2, the conversion price of each such series shall be adjusted downward to equal the price of the new securities. The conversion rate of the Series G is subject to a weighted-average adjustment in the event of the issuance of additional shares of common stock below the conversion price, subject to specified exceptions. The conversion price of the Series I-2 are also subject to certain resets as set forth in the Certificates of Designation, including a reverse stock split. The following table summarizes the conversion ratio of shares of common stock into which each share of convertible preferred stock can be converted at December 31, 2024: Conversion Initial Current Ratio to Conversion Conversion Common Price Price Stock Series B $ 75.00 $ 0.12 8.33 Series D $ 37.50 $ 1.75 57,142.86 Series G $ 60.00 $ 9.69 0.10 Series I-2 $ 1.75 $ 1.75 571.43 Voting The holders of Series B, Series D, and Series G are entitled to one vote for each share of common stock into which it would convert. As long as there are at least 10 shares of Series D outstanding, the holders of Series D have (i) the right to nominate and elect two members of the Board of Directors, and (ii) the right to approve specified significant transactions affecting the Company. As long as there are at least 1,000,000 shares of Series G outstanding, the holders of Series G have 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 stockholders 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. At least one of the two directors nominated by holders of the Series G shall be independent. The holder of Series I-2 has no voting rights, except as required by law. Series D Preferred Stock Redemption The Company’s Series D redeemable convertible preferred stock contains a contingent redemption feature that is not solely within the Company’s control. Accordingly, the Series D redeemable convertible preferred stock is classified in temporary equity (outside of permanent equity) on the accompanying consolidated balance sheets. 6. Stockholders’ Deficit Common Stock At December 31, 2024, the Company was authorized to issue 120,000,000 shares of common stock, $ 0.001 par value per share. Common Stock Reserved for Future Issuance At December 31, 2024, the Company had shares of common stock reserved for future issuance as follows: Options outstanding 12,522,943 Common stock available for issuance under the 2010 Plan 17,310,115 Redeemable convertible preferred stock 2,457,143 Non-redeemable convertible preferred stock 5,061,687 Total 37,351,888 F- 17 7. Equity Incentive Plans 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 (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 June 2020, the Company amended the 2010 Plan to extend the term until March 2030 . No other material provisions were amended. In September 2023, the Company's Board of Directors voted to amend the 2010 Plan (“2010 Plan Amendment”) to 1) increase the number of shares that may be issued under the 2010 Plan from 9,700,000 shares to an aggregate of 30,000,000 shares of common stock and 2) increase the number of awards an employee may receive in a calendar year from 800,000 shares to 10,000,000 shares. The majority shareholders approved the 2010 Plan Amendment on September 21, 2023 and the Company filed the Notice of Internet Availability of Information Statement (the “Notice”) on September 27, 2023, noting the 2010 Plan Amendment would become effective no earlier than 40 calendar days after the Notice was first made available to shareholders. Accordingly, on November 6, 2023, the 2010 Plan Amendment became effective. For the year ended December 31, 2024 and 2023 , there were no restricted stock units granted. At December 31, 2024 , there were no restricted stock units outstanding. Stock Options Stock options are issued to employees, directors and consultants under the 2006 Plan and the 2010 Plan and have a maximum life of 10 years. For the years ended December 31, 2024 and 2023 , no options were exercised. The Co mpany’s stock option activity for the year ended December 31, 2024 is as follows: Average Weighted- Remaining Aggregate Number of Average Contractual Intrinsic Outstanding Exercise Term Value Options Price (in years) (in thousands) Outstanding at December 31, 2023 11,807,494 $ 0.64 Granted 782,222 $ 0.12 Forfeited or cancelled ( 50,000 ) $ 1.53 Expired ( 16,773 ) $ 22.61 Outstanding at December 31, 2024 12,522,943 $ 0.58 6.94 $ — Vested and expected to vest at December 31, 2024 12,302,639 $ 0.58 6.91 $ — Exercisable at December 31, 2024 9,532,389 $ 0.71 6.38 $ — Stock-Based Compensation The weighted-average assumptions used in the Black-Scholes option valuation model to determine the fair value of stock options grants for the years ended December 31, 2024 and 2023 were as follows: Year Ended December 31, 2024 2023 Risk-free interest rate 4.36 % 4.28 % Expected stock price volatility 108.75 % 91.50 % Expected dividend yield 0 % 0 % Expected life of options (in years) 5.33 5.69 Weighted-average grant date fair value $ 0.06 $ 0.10 F- 18 Total stock-based compensation expense for the years ended December 31, 2024 and 2023 was comprised of the following (in thousands): Year Ended December 31, 2024 2023 Cost of sales $ 1 $ 3 General and administrative 350 359 Selling and marketing 3 7 Research and development 112 95 Total $ 466 $ 464 Unrecognized compensation expense related to stock options at December 31, 2024 was $ 287 thousand, which is expected to be recognized over a weighted-average period of approximately 1.29 years. 8. Employee Retention Credit Other income is primarily attributable to the one-time receipt of the Employee Retention Tax Credit from the Internal Revenue Service (the “IRS”). As a response to the COVID-19 outbreak, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which contained a number of programs to assist workers, families and businesses. Part of the CARES Act provides an Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes equal to 50 % of qualified wages paid, up to $ 10,000 per employee annually, from March 12, 2020 through January 1, 2021. Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits to 70 % of qualified wages paid through June 30, 2021 and 100 % of qualified wages paid through December 31, 2021, up to $ 10,000 per employee per quarter. In January 2023, the Company filed Form 941-X for the three months ended March 31, June 30 and September 30, 2021 to claim a refund for the ERC. The Company elected to account for the ERC under IAS 20 when there was reasonable assurance of receipt, which was determined to be when the notification of acceptance of Form 941-X was received by the IRS. In June 2023, the Company received confirmation from the IRS that changes to the Company’s Q1, Q2 and Q3 941 forms amounting to $ 224 thousand in the first quarter of 2021, $ 238 thousand in the second quarter of 2021, and $ 201 thousand in the third quarter of 2021 had been accepted. The Company received payment from the IRS related to the ERC during the second quarter of 2023 and recorded other income of $ 663 thousand in the accompanying consolidated statement of operations for the year ended December 31, 2023. 9. Income Taxes The components of worldwide pre-tax book loss are as follows: December 31, 2024 2023 Domestic pre-tax book loss $ ( 154 ) $ ( 76 ) Foreign pre-tax book loss ( 55 ) ( 55 ) Consolidated pre-tax book loss $ ( 209 ) $ ( 131 ) 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. The Company has available at December 31, 2024, federal net operating loss carryforwards of approximately $ 19.7 million, which may be applied against future taxable income. At December 31, 2023, the Company had federal net operating loss carryforwards of approximately $ 20.3 million. The decrease in federal operating loss carryforwards for the year ended December 31, 2024 is approximately $ 610 thousand, which is the estimated amount of net operating losses that will be used to offset taxable income for 2024. The Australian net operating loss carryforwards as of December 31, 2024 are approximately $ 549 thousand, which may be carried forward indefinitely. Any federal net operating losses generated prior to 2018 will start to expire beginning in 2026 , and net operating losses generated starting in 2018 will carry forward indefinitely until they are used. The state net operating losses will start to expire beginning in 2036 . The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined at this time. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation F- 19 allowance equal to the tax effect of the loss carryforwards, R&D credits, and accruals; therefore, no net deferred tax asset has been recognized. A reconciliation of the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2024 and 2023 is as follows: Year Ended December 31, 2024 2023 Statutory federal income tax rate 21.0 % 21.0 % State income taxes, net of federal taxes ( 10.6 %) ( 68.0 %) Foreign rate differentials ( 70.8 %) 41.3 % Permanent items ( 2.9 %) ( 9.2 %) Change in valuation allowance 145.9 % 11,815.8 % Research and development tax credits limitation 0.0 % ( 1,241.0 %) Employee retention credit income 0.0 % 104.5 % Stock-based compensation ( 85.7 %) ( 226.9 %) Adjustments to NOL 0.0 % ( 10,830.5 %) ASC 740-10 adjustments 0.0 % 402.0 % Other 3.1 % ( 9.0 %) Effective income tax rate 0.0 % 0.0 % The Company files income tax returns in the U.S. federal jurisdiction, and various states. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018. The Company follows the provisions of FASB ASC 740-10 – Accounting for Uncertainty in Income Taxes . ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in consolidated financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. At December 31, 2024, 2023, and 2022, the Company's reserve for unrecognized tax benefits is approximately $ 478 thousand, $ 478 thousand, and $ 953 thousand, respectively. Due to the full valuation allowance at December 31, 2024, current adjustments to the unrecognized tax benefits will have no impact on the Company's effective tax rate. The Company does not anticipate any significant change in its unrecognized tax benefits within 12 months of this reporting date. The Company includes penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. A reconciliation of the reserve for unrecognized tax benefits is as follows (in thousands): Balance at December 31, 2022 $ 953 Increase (decrease) related to prior year tax positions ( 475 ) Increase (decrease) related to current year tax positions — Increase (decrease) related to settlements with taxing authorities — Increase (decrease) related to lapse in statute of limitations — Balance at December 31, 2023 478 Increase (decrease) related to prior year tax positions — Increase (decrease) related to current year tax positions — Increase (decrease) related to settlements with taxing authorities — Increase (decrease) related to lapse in statute of limitations — Balance at December 31, 2024 $ 478 The Company is subject to IRC Code Section 382 and 383, which limits the amount of the net operating loss and tax credit carryovers that can be used in future years. The Company has 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. Based on the completed study, it was determined that the Company had significant ownership changes that occurred in January 2009 and November 2015. As a result of the ownership changes, under IRC Code Sections 382 and 383, the net operating losses and research and development credits that were generated in the periods prior to November 2015 have been significantly limited and a substantial amount will expire unused. The Company estimates that if another future change in ownership did occur, the federal and state net operating loss carryforwards and research and development credit carryforwards that can be utilized in the future would be significantly limited as well. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards or credit carryforwards, either due to ongoing operating losses or due to ownership change limitations. F- 20 Significant components of deferred tax assets and liabilities are as follows (in thousands): December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 5,208 $ 5,476 Research and development tax credits 922 922 Stock-based compensation 903 995 IRC Section 174 costs 233 172 Intangibles 158 166 Lease liabilities 99 161 Accrued expenses 143 123 Deferred tax assets 7,666 8,015 Less: valuation allowance ( 7,557 ) ( 7,858 ) Net deferred tax assets 109 157 Deferred tax liabilities: Right-of-use assets ( 78 ) ( 125 ) Depreciation ( 31 ) ( 32 ) Total deferred tax liabilities ( 109 ) ( 157 ) Net deferred tax assets $ — $ — 10. Related Party Transactions Related party lease agreements On October 26, 2021, the Company and S Real Estate Holdings, LLC jointly entered into a lease agreement with Rehco Holdings, LLC (the “Lease”), for the purpose of establishing a new corporate headquarters, including corporate, R&D, and manufacturing operations. S Real Estate Holdings LLC is owned by Dr. Russell Kern, the Company’s Executive Vice President, Chief Scientific Officer. The Lease was personally guaranteed by the Dr. Russell Kern, the Company’s Executive Vice President, Chief Scientific Officer. On December 15, 2021, the Company and S Real Estate Holdings LLC entered into a co-tenant agreement, whereby the Company and S Real Estate Holdings LLC agreed to allocate portions of the base rent and variable charges, including insurance, maintenance costs, taxes and operating expenses, between the parties. During the term of the Lease, the Company will be liable for 40 % of all costs incurred in connection with the Lease. Refer to Note 11 – Commitments & Contingencies within the consolidated financial statements for further discussion. Related party note payable Between March 2018 and March 2021, to obtain funding for working capital purposes, the Company borrowed a total of $ 2.9 million from Dr. Semechkin, Co-Chairman and CEO, and issued an unsecured, non-convertible promissory note in the principal amount of $ 2.9 million (the “Note”) to Dr. Semechkin (the “Noteholder”). The outstanding principal amount under the Note accrued interest at a rate of 4.5 % per annum. The outstanding principal and accrued interest on the Note were due and payable on March 15, 2023 and could be pre-paid without penalty at any time. There were no debt issuance fees associated with this issuance. In March 2023, the Noteholder surrendered the Note, and the Company issued a new promissory note (“March 2023 Note”), which featured all the same terms as the previously outstanding note, with the exception of an extension of the maturity date from March 15, 2023 to September 15, 2023 . The March 2023 Note has a principal balance of $ 2.9 million, an interest rate of 4.5 %, and features optional prepayment terms. There were no debt issuance fees associated with this issuance. In September 2023, the Noteholder surrendered the March 2023 Note, and the Company issued a new promissory note (“September 2023 Note”), which featured all the same terms as the previously outstanding note, with the exception of an extension of the maturity date from September 15, 2023 to September 15, 2024 . The September 2023 Note has a principal balance of $ 2.9 million, an interest rate of 4.5 %, and features optional prepayment terms. There were no debt issuance fees associated with this issuance. All amendments during the year ended December 31, 2023 qualified as troubled debt restructurings, which did not result in a gain as the carrying amount of the debt was less than the total future cash payments of the restructured debt. F- 21 On September 15, 2024, the Company surrendered its September 2023 Note, which included repaying $ 0.2 million in outstanding principal, reducing the principal balance to $ 2.7 million, increasing the interest rate from 4.5 % to 5.5 %, and extending the maturity date from September 15, 2024 to September 15, 2025 (“September 2024 Note”). All other terms of the September 2024 Note are the same as the previously outstanding note and there were no debt issuance fees associated with this issuance. Pursuant to ASC 470-60, the amendment did not qualify as a troubled debt restructuring as the creditor did not grant a concession. As the terms of the September 2024 Note were not substantially different than the terms of the September 2023 Note, the amendment was accounted for as a debt modification. The repayment of principal was accounted for as a partial extinguishment of debt, which did not result in an extinguishment gain or loss. 11. Commitments and Contingencies Leases At December 31, 2024 , the Company has three operating leases for real estate in California and Maryland: • San Diego, California – corporate headquarters, including corporate, R&D, and manufacturing operations, with a termination date of December 2026 , jointly leased with a related party (refer to Note 10 – Related Party Transactions within the consolidated financial statements for further discussion). This lease contains no renewal or term extension options; • San Diego, California – supplemental office space adjacent to the Company’s corporate headquarters with a termination date of December 2026 . This lease contains no renewal or term extension options; and • Frederick, Maryland – mixed laboratory and administrative space with a term date of November 2025 . The lease contains one renewal option for an additional three-year term through November 2028. The renewal option is not included in the lease term as it is not reasonably certain that the Company will exercise its renewal option. In October 2021, the Company entered into an operating lease for its new corporate headquarters. The lease commenced in November 2021 and expires on December 31, 2026 . At commencement, base rent due under the lease was approximately $ 11 thousand and increases approximately 3.5 % per annum over the lease term. The lease is subject to additional variable charges, including insurance, maintenance costs, taxes and operating expenses. Base rent and additional variable charges are shared between the Company and S Real Estate Holdings LLC, a related party, with base rent for months two through five of the lease term abated by 50 %. At lease commencement, the Company recognized a right-of-use asset and lease liabilities of approximately $ 232 thousand. In November 2021, the Company entered into an operating lease for supplemental office space adjacent to its new corporate headquarters with the same landlord. The lease commenced in December 2021 and expires on December 31, 2026 , and is not subject to the co-tenant agreement with S Real Estate Holdings, LLC. At commencement, base rent due under the supplemental office lease was approximately $ 4 thousand per month and increases at a fixed amount per annum over the lease term. At lease commencement, the Company recognized a right-of-use asset and lease liabilities of approximately $ 247 thousand. The Company’s operating leases for real estate are subject to additional variable charges for common area maintenance and other variable costs, and do not include an option to extend the lease term. At December 31, 2024, total right-of-use assets and operating lease liabilities were approximately $ 352 thousand and $ 445 thousand, respectively. At December 31, 2024 , the Company had no finance leases. Information related to the Company’s right-of-use assets and related lease liabilities were as follows (in thousands, except years and percentages): Year Ended December 31, 2024 2023 Operating lease costs $ 278 $ 278 Short-term lease costs 3 5 Variable lease costs 161 159 Total lease costs $ 442 $ 442 Cash paid for amounts included in measurement of lease liabilities $ 349 $ 338 Weighted-average remaining lease term (years) 1.50 2.44 Weighted-average discount rate 12.57 % 13.20 % F- 22 Maturities of lease liabilities at December 31, 2024 were as follows (in thousands): Year ending December 31, 2025 $ 360 2026 119 Total minimum lease payments 479 Less: imputed interest ( 34 ) Total future minimum lease payments 445 Less: operating lease liabilities, current ( 330 ) Operating lease liabilities, net of current portion $ 115 Licensed Patents The Company had a minimum annual license fee of $ 75 thousand payable in two installments per year to Astellas Pharma pursuant to the amended UMass IP license agreement. The patents, along with the license agreement, expired at the end of July 2022 . These patents were fully impaired in prior years and, therefore, the expiration did not result in any impairment for the year ended December 31, 2022. The Company does not anticipate any short-term liquidity effects from this obligation as they will no longer be liable for the annual licensing fee. 12. Segments and Geographic Information The CODM 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: therapeutic market (“ISCO”); biomedical market (“LTC”); and anti-aging market (“LSC”). The Company identifies their reporting segments based on market offering as each segment has unique customer needs and regulatory requirements. The CODM uses operating income (loss) to allocate resources (including employees, financial, and capital resources) for each segment predominantly in the annual forecasting process. Corporate overhead expenses have been allocated to the segments either through specific identification or based on a reasonable methodology. The CODM compares year-over-year actual results on a quarterly basis to assess performance and make decisions about allocating resources to the segments. The Company’s measure of segment profit or loss is the operating income (loss) metric. This aligns the segment reporting with the Company's internal management reporting and performance evaluation practices. The Company does not measure the performance of its segments on any asset-based metrics. Therefore, segment information is presented only for results of operations, including operating income (loss). Results of operations by market segment were as follows (in thousands): Year Ended December 31, 2024 ISCO LCT LSC Total Product sales $ — $ 8,290 $ 795 $ 9,085 Operating expenses: Cost of sales — 3,450 314 3,764 General and administrative 2,120 855 541 3,516 Selling and marketing — 712 504 1,216 Research and development 336 283 38 657 Total operating expenses 2,456 5,300 1,397 9,153 (Loss) income from operations $ ( 2,456 ) $ 2,990 $ ( 602 ) $ ( 68 ) Total other expense, net ( 141 ) Net loss $ ( 209 ) Additional Segment Information Interest expense $ ( 145 ) $ — $ — $ ( 145 ) Depreciation and amortization $ 78 $ 125 $ 3 $ 206 Share-based compensation expense $ 295 $ 99 $ 72 $ 466 F- 23 Year Ended December 31, 2023 ISCO LCT LSC Total Product sales $ — $ 6,866 $ 923 $ 7,789 Operating expenses: Cost of sales — 2,836 345 3,181 General and administrative 2,309 737 468 3,514 Selling and marketing — 651 595 1,246 Research and development 209 267 35 511 Total operating expenses 2,518 4,491 1,443 8,452 (Loss) income from operations $ ( 2,518 ) $ 2,375 $ ( 520 ) $ ( 663 ) Total other income, net 532 Net loss $ ( 131 ) Additional Segment Information Interest expense $ ( 139 ) $ — $ — $ ( 139 ) Depreciation and amortization $ 79 $ 112 $ 3 $ 194 Share-based compensation expense $ 308 $ 97 $ 59 $ 464 Geographic Information The Company’s wholly owned subsidiaries are located in Maryland, California and Victoria, Australia, and have customer and vendor relationships worldwide. The Company’s long-lived assets including property, plant, and equipment, net, right-of-use assets, and intangible assets, net are domiciled in the United States. Significant revenues in the following regions are those that are attributable to the individual country within the region to which the product was shipped were as follows (in thousands): Year Ended December 31, 2024 2023 United States $ 7,727 $ 6,548 Asia 890 726 Europe 407 395 All other regions 61 120 Total $ 9,085 $ 7,789 1 3. Subsequent Events In February 2025, the Company and S Real Estate Holdings, LLC, a related party, amended its co-tenant agreement to re-allocate portions of the base rent and variable charges. Retroactively, as of January 2025, the Company will now be liable for 75 % of all costs incurred in connection with the Lease. As a result of the amended co-tenant agreement, the Company will recognize a lease liability and right-of-use asset as of the modification date in Fiscal Year 2025. In March 2025, the Company and St. John Properties, Inc, amended its lease agreement to extend the lease expiration for one year from December 31, 2025 to December 31, 2026 . As a result of the amended lease agreement, the Company will reassess the lease liability and associated right-of-use-asset in Fiscal Year 2025. F- 24