8. DIVESTITURE OF STEM CELL ASSETS
On October 1, 2013, we closed the transaction to divest our human embryonic stem cell assets and our autologous cellular immunotherapy program pursuant to the terms of the previously disclosed asset contribution agreement, or the Contribution Agreement, that we entered into in January 2013 with BioTime, Inc., or BioTime, and BioTime's wholly owned subsidiary, Asterias Biotherapeutics, Inc., or Asterias (formerly known as BioTime Acquisition Corporation).
Under the terms of the Contribution Agreement, on October 1, 2013, we contributed to Asterias our human embryonic stem cell assets, including intellectual property and certain licenses, human embryonic stem cell lines and other assets related to our discontinued human embryonic stem cell programs, including our Phase I clinical trial of oligodendrocyte progenitor cells, or GRNOPC1, in patients with acute spinal cord injury, as well as our autologous cellular immunotherapy program, including data from the Phase I/II clinical trial of the autologous cellular immunotherapy in patients with acute myelogenous leukemia. On October 1, 2013, Asterias assumed all post-closing liabilities with respect to all of the assets contributed by us, including any liabilities related to the GRNOPC1 and autologous cellular immunotherapy clinical trials. Additionally, Asterias was substituted for us as a party in an appeal by us of two rulings in favor of ViaCyte, Inc. by the United States Patent and Trademark Office's Board of Patent Appeals and Interferences, filed by us in the United States District Court for the Northern District of California in September 2012, or the ViaCyte Appeal, and Asterias assumed all liabilities arising after October 1, 2013 with respect to the ViaCyte Appeal.
In accordance with the terms of the Contribution Agreement, on October 1, 2013 we received 6,537,779 shares of Asterias Series A common stock representing 21.4% of Asterias' outstanding common stock as a class as of that date. We are also entitled to receive royalties from Asterias on the sale of products that are commercialized, if any, in reliance upon the patents we contributed to Asterias. Under the terms of the Contribution Agreement and subject to applicable law, following a record date to be declared by our board of directors, we are contractually obligated to distribute all of the shares of Asterias Series A common stock to our stockholders on a pro rata basis, other than with respect to fractional shares and shares that would otherwise be distributed to Geron stockholders residing in certain excluded jurisdictions, which shares, as required by the Contribution Agreement, will be sold with the net cash proceeds therefrom distributed ratably to the stockholders who would otherwise be entitled to receive such shares. We refer to the anticipated distribution by us of the Asterias Series A common stock as the Series A Distribution.
On October 1, 2013, BioTime contributed to Asterias 8,902,077 shares of BioTime common stock, five-year warrants to purchase 8,000,000 additional shares of BioTime common stock at an exercise price of $5.00 per share, or the BioTime Warrants, minority stakes in two of BioTime's subsidiaries and rights to use certain human embryonic stem cell lines. In addition, BioTime had previously loaned Asterias $5,000,000 in cash and the principal amount of this debt was cancelled as part of the closing of the Contribution Agreement. In consideration of BioTime's contributions, on October 1, 2013 Asterias issued to BioTime 21,773,340 shares of Asterias Series B common stock representing 71.6% of Asterias' outstanding common stock as a class as of that date, and three-year warrants to purchase 3,150,000 additional shares of Asterias Series B common stock at an exercise price of $5.00 per share. Upon completion of the Series A Distribution, Asterias is contractually obligated under the Contribution Agreement to distribute the BioTime Warrants on a pro rata basis to the holders of Asterias Series A common stock.
We accounted for the divestiture of the stem cell assets as a nonmonetary transaction since we transferred intangible assets in exchange for a non-controlling interest in Asterias. The stem cell assets we contributed consisted primarily of intellectual property and know-how and did not meet the definition of a business for accounting purposes. A business consists of three elements: inputs, processes and outputs. To be considered a business, only inputs and processes are required, which together form an integrated set of activities used to create outputs. Since we did not contribute any processes, such as operational processes or an organized workforce with the skills and experience to provide the necessary processes capable of being applied to inputs to create outputs, we determined the stem cell assets only represent inputs and are not considered an integrated set of activities. Due to the significant research and development necessary to realize the commercial potential of the stem cell assets, we expensed all research and development costs associated with the stem cell assets as incurred and therefore, there was no recorded amount, or carrying value, for the stem cell assets on our consolidated balance sheets. Since the divestiture of the stem cell assets represented the transfer of nonfinancial assets that do not meet the definition of a business in exchange for a non-controlling equity interest in Asterias, consistent with our accounting policy for such transactions, we have accounted for the transaction using the carrying amount, or book value, of the assets surrendered with no gain or loss recognized. Because the stem cell assets had a carrying amount of zero, we applied a carrying amount of zero to the Asterias Series A common stock received in the divestiture.
We account for the Asterias Series A common stock using the equity method. Under this method, we increase (decrease) the carrying value of the investment by our proportionate share of Asterias' earnings (losses). If our proportionate share of losses exceeds the carrying value of the investment, losses are then applied against any advances, including any commitment to provide financial support, until those amounts are reduced to zero. Asterias incurred net losses from October 1, 2013 through December 31, 2013. Since our investment in Asterias had an initial carrying amount of zero upon the closing of the Contribution Agreement and we have no commitments to provide financial support or obligations to perform services or other activities for Asterias, we suspended the equity method of accounting on October 1, 2013.
As of December 31, 2013, our board of directors had not set a record date for the Series A Distribution because we had not received any notification from BioTime and Asterias that they had met certain securities registration or qualification requirements as required under the Contribution Agreement, including notice that the registration statement that Asterias filed with the Securities and Exchange Commission, or SEC, covering the Series A Distribution was effective and otherwise available to effect the Series A Distribution. Therefore, as of December 31, 2013, we continued to hold the Asterias Series A common stock received in the divestiture. The anticipated Series A Distribution represents a pro-rata distribution of shares of an equity method investment that is a business, which will be accounted for at its carrying amount. Because the carrying amount of the Asterias Series A common stock was zero as of December 31, 2013, the liability relating to our contractual obligation to distribute the Series A common stock was zero as of December 31, 2013.