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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2019
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-36362
BioLife Solutions, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
94-3076866
(IRS Employer
Identification No.)
3303 MONTE VILLA PARKWAY, SUITE 310, BOTHELL, WASHINGTON, 98021
(Address of registrant’s principal executive offices, Zip Code)
(425) 402-1400
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, par value $0.01 per share
Trading symbol ($)
BLFS
Name of exchange on which registered
NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such said
files). Yes ☑ No ☐
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☑ Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
As of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common equity (based on closing price on June 28, 2019
of $16.95 per share) held by non-affiliates was approximately $230 million.
As of May 14, 2020, 23,999,516 shares of the registrant’s common stock were outstanding.
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ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
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PART I
PART II
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 15.
ITEM 16.
SIGNATURES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements which are made pursuant to the safe harbor provisions of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-
looking statements in this Form 10-K do not constitute guarantees of future performance and actual results could differ materially from those contained in
the forward-looking statements. These statements are based on current expectations of future events. Such statements include, but are not limited to,
statements about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products
and services, our ability to implement our business strategy and anticipated business and operations, in particular following the 2019 acquisitions, future
financial and operational performance, our anticipated future growth strategy, including the acquisition of synergistic cell and gene therapy manufacturing
tools and services or technologies or other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, future
financial and operating results, the impact of the COVID-19 pandemic, plans, objectives, expectations and intentions, revenues, costs and expenses, interest
rates, outcome of contingencies, business strategies, regulatory filings and requirements, the estimated potential size of markets, capital requirements, the
terms of any capital financing agreements and other statements that are not historical facts. You can find many of these statements by looking for words
like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend,” or similar expressions in this Form 10-K. We
intend that such forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current
expectations and projections. Factors that might cause such a difference include those discussed under “Risk Factors,” as well as those discussed elsewhere
in the Form 10-K.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K or, in the case of
documents referred to or incorporated by reference, the date of those documents.
All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-
looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as may be
required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking statements.
References throughout this Form 10-K to “BioLife Solutions, Inc.”, “BioLife”, “we”, “us”, “our”, or the “Company” refer to BioLife Solutions, Inc. and
its subsidiaries, taken as a whole, unless the context otherwise indicates.
Certain Information Included in this Form 10-K
EXPLANATORY NOTE
This Form 10-K includes restated Consolidated Financial Statements for the year ended December 31, 2018 and for the quarters ended March 31, 2018,
June 30, 2018, September 30, 2018, March 31, 2019, June 30, 2019 and September 30, 2019 to reflect adjustments made to account for certain Warrants (as
defined below) as a liability. The Warrants were previously recorded as equity as described below. In addition, as further described below, adjustments were
made to quarterly results for 2019 related to accounting for certain market-based stock awards and the valuation of contingent consideration, in-process
research and development technology, and goodwill for our Astero Bio Corporation (“Astero”) acquisition. This Annual Report on Form 10-K for the year
ended December 31, 2019 provides restated quarterly data for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019,
June 30, 2019 and September 30, 2019.
We have not filed and do not intend to file amendments to our previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the
periods affected by the restatements of our Consolidated Financial Statements. Accordingly, as disclosed in our Current Report on Form 8-K filed April 30,
2020, the Company's previously issued financial statements for the periods from January 1, 2014 through September 30, 2019, including the Company’s
previously issued audited financial statements for the year ended December 31, 2018, should no longer be relied upon, nor should any related reports of our
then independent registered public accounting firm, Peterson Sullivan LLP, nor any previously furnished or filed reports, earnings releases, guidance,
investor presentations, or similar communications of the Company regarding these periods be relied upon. Investors should rely only on the financial
information and other disclosures, including the adjusted or restated financial information, included in this Form 10-K and subsequent filings, as
applicable.
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Background of Restatement
The Company in consultation with its Audit Committee, concluded that its previously issued Consolidated Financial Statements for the periods beginning
with the first quarter of 2018 through the third quarter of 2019 (collectively, the “Affected Periods”) should be restated because of a misapplication in the
guidance around accounting for Warrants and should no longer be relied upon as discussed above (the Audit Committee concluded that it was not necessary
to restate the financial statements for any period prior to January 1, 2018). In connection with the restatement of the Consolidated Financial Statements for
the Affected Periods, the Audit Committee further concluded to make certain other adjustments to our Consolidated Financial Statement for the periods
beginning with the first quarter of 2019 through the third quarter of 2019 – see below and see Note 16: “Quarterly Financial Information (Unaudited)” to
our Consolidated Financial Statements.
The reclassification of the Warrants did not have any impact on our liquidity, cash flows, revenues or costs of operating our business and the other non-cash
adjustments to the Consolidated Financial Statements, in all of the Affected Periods, do not impact the amounts previously reported for the Company’s cash
and cash equivalents, operating expenses or total cash flows from operations.
The warrants at issue are those certain warrants (“Warrants”) to purchase common stock of the Company that we issued to certain investors in a March
2014 public offering pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-192880) and pursuant to a note conversion agreement
with certain note holders. Following issuance of the Warrants, the Company accounted for the Warrants in its financial statements as equity. The Warrants
have an exercise price of $4.75 per share and expire in March 2021 unless previously exercised. A total of 6,910,283 Warrants were issued in March 2014
and, as of December 31, 2019, there were 3,409,005 Warrants outstanding.
Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not
include the subsequent non-cash changes in estimated fair value of the Warrants in accordance with Accounting Standards Codification 480,
“Distinguishing Liabilities from Equity” (“ASC 480”). The Warrants generally provide that, in the event of a fundamental transaction under rule 13(e)-3,
the holder may receive cash value for the Warrants calculated using a Black Scholes model with a volatility rate equal to the greater of (i) the historical
100-day look-back period or (ii) 100% equity volatility. As a result, the Warrant cannot be classified within equity according to generally accepted
accounting principles. Instead, the Warrants issued by the Company should be recorded as a liability at fair value at the date of grant, and marked to market
at each reporting period. Changes in fair value are recorded in earnings.
Also, during the preparation and audit of the Company’s Consolidated Financial Statements for fiscal 2019, the Company identified material errors
impacting the first, second and third quarters of 2019 related to the valuation of contingent consideration, in-process research and development technology
and goodwill for our Astero Bio Corporation (“Astero”) acquisition and valuation of market-based restricted stock awards.
COVID-19
The Company is filing this Form 10-K on a delayed basis in accordance with the order (the “Order”) promulgated by the Securities and Exchange
Commission on March 25, 2020 in Release No. 34-88465 relating to the Exchange Act. The Company was unable to file the Form 10-K in a timely manner
because the Seattle area, including the location of the Company’s corporate headquarters and its media production facility and warehouse was, and is
currently, at an epicenter of the coronavirus outbreak in the United States. The Company has been following the recommendations of local health
authorities to minimize exposure risk for its team members for the past several months, including the temporary closures of its offices and having team
members work remotely, and, as a result, the Form 10-K was not able to be completed by the filing deadline. Reference is made to our disclosures in this
Form 10-K regarding the impact of COVID-19 on the Company, including those disclosures discussed under the heading “Risk Factors” herein.
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ITEM 1.
BUSINESS
PART I
The following discussion of our business contains forward-looking statements that involve risks and uncertainties. When used in this report, the words
“intend,” “anticipate,” “believe,” “estimate,” “plan” and “expect” and similar expressions as they relate to us are included to identify forward-looking
statements. Our actual results could differ materially from those anticipated in these forward-looking statements and are a result of certain factors,
including those set forth under “Risk Factors” and elsewhere in this Form 10-K (“Form 10-K”).
References throughout this Form 10-K to “BioLife Solutions, Inc.”, “BioLife”, “we”, “us”, “our”, or the “Company” refer to BioLife Solutions, Inc. and
its subsidiaries, taken as a whole, unless the context otherwise indicates.
Overview
We develop, manufacture and market bioproduction tools to the cell and gene therapy (“C>”) industry, which are designed to improve quality and de-
risk biologic manufacturing and delivery. Our products are used in basic and applied research, and commercial manufacturing of biologic-based therapies.
Customers use our products to maintain the health and function of biologic material during sourcing, manufacturing, storage, and distribution of cells and
tissues.
We currently operate as one bioproduction tools business with product lines that support several steps in the biologic material manufacturing and delivery
process. We have a diversified portfolio of tools that focus on biopreservation, frozen storage, and thawing of biologic materials. We have in-house
expertise in cryobiology and continue to capitalize on opportunities to maximize the value of our product platform for our extensive customer base through
both organic growth innovations and acquisitions.
Our Products
Our bioproduction tools are comprised of four main product lines
●
●
●
●
Biopreservation media
Automated thawing devices
Cloud connected “smart” shipping containers
Freezer and storage technology and related components
Biopreservation media
Our proprietary biopreservation media products, HypoThermosol® FRS and CryoStor®, are formulated to mitigate preservation-induced, delayed-onset cell
damage and death, which result when cells and tissues are subjected to reduced temperatures. Our technology can provide our C> customers with
significant shelf life extension of biologic source material and final cell products, and can also greatly improve post-preservation cell and tissue viability
and function. Our biopreservation media is serum-free, protein-free, fully defined, and manufactured under current Good Manufacturing Practices (cGMP).
We strive to source wherever possible, the highest available grade, multi-compendium raw materials. We estimate our media products have been
incorporated in over 400 customer clinical applications, including numerous chimeric antigen receptor (CAR) T cell and other cell types.
Stability (i.e. shelf-life) and functional recovery are crucial aspects of academic research and clinical practice in the biopreservation of biologic-based
source material, intermediate derivatives, and isolated/derived/expanded cellular products and therapies. Limited stability is especially critical in the
C> field, where harvested cells and tissues will lose viability over time, if not maintained appropriately at normothermic body temperature (37ºC) or
stored in a hypothermic state in an effective preservation medium. Chilling (hypothermia) is used to reduce metabolism and delay degradation of harvested
cells and tissues. However, subjecting biologic material to hypothermic environments induces damaging molecular stress and structural changes. Although
cooling successfully reduces metabolism (i.e., lowers demand for energy), various levels of cellular damage and death occur when using suboptimal
methods. Traditional biopreservation media range from simple “balanced salt” (electrolyte) formulations to complex mixtures of electrolytes, energy
substrates such as sugars, osmotic buffering agents and antibiotics. The limited stability which results from the use of these traditional biopreservation
media formulations is a significant shortcoming that our optimized proprietary products address with great success.
Our scientific research activities over the last 20+ years enabled a detailed understanding of the molecular basis for the hypothermic and cryogenic (low-
temperature induced) damage/destruction of cells through apoptosis and necrosis. This research led directly to the development of our HypoThermosol®
FRS and CryoStor® technologies. Our proprietary biopreservation media products are specifically formulated to:
Reduce free radical levels upon formation
● Minimize cell and tissue swelling
●
● Maintain appropriate low temperature ionic balances
●
●
●
Provide regenerative, high energy substrates to stimulate recovery upon warming
Avoid the creation of an acidic state (acidosis)
Inhibit the onset of apoptosis and necrosis
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A key feature of our biopreservation media products is their “fully-defined” profile. All of our cGMP products are serum-free, protein-free and are
formulated and filled using aseptic processing. We strive to use USP/Multicompendial grade or the highest quality available synthetic components. All of
these features benefit prospective customers by facilitating the qualification process required to incorporate our products into their regulatory filings.
The results of independent testing demonstrate that our biopreservation media products significantly extend shelf-life and improve cell and tissue post-thaw
viability and function. Our products have demonstrated improved biopreservation outcomes, including greatly extended shelf-life and post-thaw viability,
across a broad array of cell and tissue types.
Competing biopreservation media products are often formulated with simple isotonic media cocktails, animal serum, potentially a single sugar or human
protein. A key differentiator of our proprietary HypoThermosol FRS formulation is the engineered optimization of the key ionic component concentrations
for low temperature environments, as opposed to normothermic body temperature around 37°C, as found in culture media or saline-based isotonic
formulas. Competing cryopreservation freeze media is often comprised of a single permeating cryoprotectant such as dimethyl sulfoxide (“DMSO”). Our
CryoStor formulations incorporate multiple permeating and non-permeating cryoprotectant agents which allow for multiple mechanisms of protection and
reduces the dependence on a single cryoprotectant. We believe that our products offer significant advantages over in-house formulations, or commercial
“generic” preservation media, including, time saving, improved quality of components, more rigorous quality control release testing, more cost effective
and improved preservation efficacy.
We estimate that annual revenue from each customer commercial application in which our products are used could range from $0.5 million to $2.0 million,
if such application is approved and our customer commences large scale commercial manufacturing of the biologic based therapy.
Automated, Water-Free Thawing Products
In April 2019, we acquired Astero Bio Corporation (“Astero”), to expand our bioprocessing tools portfolio and diversify our revenue streams. The Astero
ThawSTAR® line includes automated vial and cryobag thawing products that control the heat and timing of the thawing process of biologic material. Our
customizable, automated, water-free thawing products uses algorithmic programmed, heating plates to consistently bring biologic material from a frozen
state to a liquid state in a controlled and consistent manner. This helps reduce damage during the temperature transition. The ThawSTAR products can
reduce risks of contamination versus using a traditional water bath.
evo® Cloud Connected Shipping Containers
In August 2019, we acquired the remaining shares of SAVSU Technologies, Inc. (“SAVSU”) we did not previously own. SAVSU is a leading developer and
supplier of next generation cold chain management tools for cell and gene therapies. The evo.is cloud app allows biologic products to be traced and tracked
in real time. Our evo platform consists of rentable cloud-connected shippers and include technologies that enable tracking software provides real-time
information on geolocation, payload temperature, ambient temperature, tilt of shipper, humidity, altitude, and real-time alerts when a shipper has been
opened. Our internally developed evo.is software allows customers to customize alert notifications both in data measurements and user requirements. The
evo Dry Vapor Shipper (“DVS”) is specifically marketed to cell and gene therapies. The evo DVS has improved form factor and ergonomics over the
traditional dewar, including extended thermal performance, reduced liquid nitrogen recharge time, improved payload extractors and ability to maintain
temperature for longer periods on its side.
We utilize couriers who already have established logistic channels and distribution centers. Our strategy greatly reduces the cash need to build out
specialized facilities around the world. Our partnerships with several white glove couriers allow us to scale our sales and marketing effort by utilizing their
salesforce. Our courier partnerships market our evo platform to their existing cell and gene therapy customers as a cost effective and innovative solution.
We also market directly to our existing and prospective customers who can utilize the evo platform through our courier partnerships.
Liquid Nitrogen Freezer and Storage Devices
In November 2019, we acquired Custom Biogenic Systems, Inc. (“CBS”) a global leader in the design and manufacture of state-of-the-art liquid nitrogen
laboratory freezers, cryogenic equipment and accessories. The addition of CBS allows for product line growth, diversification of revenue and reduction of
supply chain costs for our evo dry vapor shippers.
Included in CBS’s product line of liquid nitrogen freezers are the Isothermal LN2 freezers, constructed with a patented system which stores liquid nitrogen
in a jacketed space in the walls of the freezer. This dry storage method eliminates liquid nitrogen contact with stored specimens, reduces the risk of cross-
contamination and provides increased user safety in a laboratory setting. To accommodate customer requirements, we offer customizable features including
wide bodied and extended height.
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Our freezer offerings also include high capacity rate freezers which are fully customizable to customer needs with temperature range of -180°C to +50°C
and freezing rates of 0.01 to 99.9 per minute. Password protected software aids in compliance with 21 CFR Part 11 and unlimited programming capability,
these high capacity rate freezers provide a searchable database for freeze run history and allow freeze data to be saved.
To accompany the offerings of cryogenic freezer equipment, we supply equipment for storing critically important biological materials. This storage
equipment includes upright freezer racks, chest freezer racks, liquid nitrogen freezer racks, canisters/cassettes and frames as well as laboratory boxes and
dividers. Due to our onsite design and manufacturing capability, racks and canisters can be customized to address customers’ varying requirements,
In order to provide customers with a proactive approach to safety and monitoring of equipment containing liquefied gas, CBS offers Versalert, a patented
wireless remote asset monitoring system that can monitor and record temperatures from -200°C to +50°C, and monitor and record two additional variables
using 0-5v or 4-20mA inputs. With an intelligent mesh network with three times the range of competing products, the system enables customers to view
current equipment conditions and receive alarm notification on smartphones, tablets or personal computers and maintain permanent electronic records for
regulatory compliance and legal verification.
Our Market Opportunity and Competition
The C> market has been rapidly expanding, treating diseases once thought incurable. According to the Alliance for Regenerative Medicine (“ARM”)
there were currently over 1,000 ongoing clinical trials utilizing regenerative medicine at the end of 2019. ARM also states there were over $9.8 billion in
total global financings in the regenerative market in 2019. The FDA predicts five to ten cell and gene therapies per year will be approved. These
technologies change the way physicians treat patients. The manufacturing, distribution and the delivery process is significantly different from many other
types of medicines and therapies. We believe we are well positioned to address many of the manufacturing difficulties in the process of producing cell and
gene therapies.
The Bioproduction Process
Our products currently fulfill several steps in the bioproduction process for cell and gene therapies. See the diagram below from an illustration of this
process and our product roles. We now offer products that integrate into the critical steps of preservation, thawing, fixed storage, and transportable storage
under controlled conditions.
Our Strategy
We intend to aggressively leverage the numerous relationships with the leading cell and gene therapy companies that use our media products to offer our
expanded product portfolio of bioproduction tools. Over the last several years, we have built a strong reputation as a trusted supplier of critical tools used in
cell and gene therapy manufacturing. We believe that our relationships and reputation could enable us to drive incremental revenue growth through the sale
of additional products to a captive customer base.
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Research and Development
Business Operations
Our research and activity is focused on evaluating new potential disruptive technologies which may be applicable throughout the cell and gene therapy
manufacturing workflow. We routinely assess and analyze the strengths and weaknesses of competitive products and are typically engaged in business
development discussions on an ongoing basis.
Sales and Marketing
We market and sell our products through direct sales and third party distribution. Our products are marketed and distributed by STEMCELL Technologies,
MilliporeSigma, VWR, Thermo Fisher and several other regional distributors under non-exclusive agreements. In 2019, sales to third party distributors
accounted for 46% of our revenue compared to 33% in 2018. We employ scientific team members in sales and support roles because we believe that is
what makes us a trusted and critical supplier to our customers. Our technical application support team consists of individuals with extensive experience in
cell processing, biopreservation, freezing and thawing. We have also hired experienced field-based sales and customer care team members to support our
growing product portfolio.
In the years 2019 and 2018, we derived approximately 15% of our product revenue from one customer and approximately 29% of our product revenue
from two customers, respectively.
The following table represents the Company’s total revenue by geographic area (based on the location of the customer):
Revenue by customers’ geographic locations
North America
Canada
Europe, Middle East, Africa (EMEA)
Other
Total revenue
Manufacturing
Year Ended December 31,
2018
2019
69%
16%
14%
1%
100%
77%
13%
8%
2%
100%
Biopreservation Media - We maintain and operate two independent cGMP clean room production suites for manufacturing sterile biopreservation media
products. Our quality management system (“QMS”) was certified to the ISO 13485:2016 standard in 2018. Our QMS is aligned with applicable sections of
21 CFR Part 820 - Quality System Regulation for Good Manufacturing Practice of medical devices, 21 CFR Parts 210 and 211 - cGMP for Finished
Pharmaceuticals, FDA Guidance - Sterile Drug Products, Volume 4, EU Guidelines Annex 1 - Manufacture of Sterile Medicinal Products, ISO 13408 -
Aseptic Processing of Healthcare Products, and ISO 14644 - Clean Rooms and Associated Controlled Environments. To date, we have not experienced
significant difficulties in obtaining raw materials for the manufacture of our biopreservation media products. Pursuant to our supply agreements, we are
required to notify customers of any changes to our raw materials.
Automated Thawing – Our ThawSTAR automated, water-free thawing products are produced by a contract manufacturing organization (“CMO”) based in
the United States. We believe this CMO has the skills, experience and capacity needed to meet our quality standards and demand expectations for the
product line.
evo Cold Chain Products – Production of our evo cold chain management hardware products is performed by external CMOs and by personnel in our
Albuquerque, New Mexico facility. We are currently engaged in a project to qualify our CBS facility as a secondary supplier of liquid nitrogen dewars for
our evo product line.
Freezer and Storage – The majority of our CBS freezers and related accessories are manufactured in our facility in Bruce Township, Michigan. We are
reliant on certain critical suppliers for some components.
Support
We provide product support through a combination of channels including phone, web, and email. These support services are delivered by our customer care
and scientific teams. These teams are responsible for providing timely, high-quality technical expertise on all our products.
Product Regulatory Status
Our media, thawing and evo products are not subject to any specific United States Food and Drug Administration (“FDA”) or other international marketing
regulations for drugs, devices, or biologics. We are not required to sponsor formal prospective, controlled clinical-trials in order to establish safety and
efficacy. However, to support our current and prospective clinical customers, we manufacture and release our products in compliance with cGMP and other
relevant quality standards.
To assist customers with their regulatory applications, we maintain Type II Master Files at the FDA for CryoStor, HypoThermosol FRS, BloodStor 27, and
our Cell Thawing Media products, which provide the FDA with information regarding our manufacturing facility and process, our quality system, stability
and safety, and any additional testing that has been performed. Customers engaged in clinical and commercial applications may notify the FDA of their
intention to use our products in their product development and manufacturing process by requesting a cross-reference to our master files.
One freezer in our Customer Biogenic Systems product line is currently regulated as a Class 2 medical device in the EU.
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Intellectual Property
The following table lists our granted and pending patents. We have also obtained certain trademarks and tradenames for our products to distinguish our
genuine products from our competitors’ products and we maintain certain details about our processes, products, and strategies as trade secrets. While we
believe that the protection of patents and trademarks is important to our business, we also rely on a combination of trade secrets, nondisclosure and
confidentiality agreements, scientific expertise and continuing technological innovation to maintain our competitive position. Despite these precautions, it
may be possible for unauthorized third parties to copy certain aspects of our products and/or to obtain and use information that we regard as proprietary
(see “Item 1A. Risk Factors” of this Annual Report for additional details). The laws of some foreign countries in which we may sell our products do not
protect our proprietary rights to the same extent as do the laws of the United States.
Biopreservation media
Automated thawing
evo cold chain
Freezers and accessories
Total
Employees
Issued Patents
29
6
9
6
50
Patents Applied For
1
16
7
7
31
Registered Trademarks
10
7
7
6
30
As of May 1, 2020, we had 151 full time employees and 7 part-time employees. Our employees are not covered by any collective bargaining agreement.
We consider relations with our employees to be good.
Corporate History
We were incorporated in Delaware in 1987 under the name Trans Time Medical Products, Inc. In 2002, the Company, then known as Cryomedical
Sciences, Inc. was engaged in manufacturing and marketing cryosurgical products. It completed a merger with our wholly-owned subsidiary, BioLife
Solutions, Inc., which was engaged as a developer and marketer of biopreservation media products for cells and tissues. Following the merger, we changed
our name to BioLife Solutions, Inc.
Principal Offices; Available Information
Our principal executive offices are located at 3303 Monte Villa Parkway, Suite 310, Bothell, Washington 98021 and the telephone number is (425) 402-
1400. We maintain a website at www.biolifesolutions.com. The information contained on or accessible through our website is not part of this Annual
Report on Form 10-K and is not incorporated in any manner into this Annual Report. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934
(the “Exchange Act”), are available free of charge on our website as soon as reasonably practicable after we electronically file such reports with, or furnish
those reports to, the Securities and Exchange Commission (the “SEC”). The SEC also maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
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ITEM 1A.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of
the other information contained in this Annual Report, before deciding to invest in our common stock. If any of the following risks materialize, our
business, financial condition, results of operation and prospects will likely be materially and adversely affected. In that event, the market price of our
common stock could decline and you could lose all or part of your investment.
The majority of our net product revenue come from a relatively small number of customers and products in a limited number of market sectors; if we
lose any of these customers or if there are problems in those market sectors, our net product revenue and operating results could decline significantly.
In the years ended December 31, 2019 and 2018, we derived approximately 15% of our revenue from one distributor and approximately 29% of our
revenue from two customers, respectively. No other customer accounted for more than 10% of revenue in the years ended December 31, 2019 or 2018. In
the years ended December 31, 2019 and 2018, we derived approximately 73% and 88% of our revenue from CryoStor products, respectively. Due to our
acquisitions in 2019, we expect both our revenue concentration related to CryoStor, and our customer concentration to be reduced for the year ended
December 31, 2020. Our principal customers may vary from period to period and such customers may not continue to purchase products from us at current
levels or at all (particularly as a result of the COVID-19 pandemic). Further, the inability of some of our customers to consummate anticipated purchases of
our products due to changes in end-user demand, and other unpredictable factors that may affect customer ordering patterns could lead to significant
reductions in net product revenue which could harm our business. Because our revenue and operating results are difficult to predict (particularly as a result
of the COVID-19 pandemic), we believe that period-to-period comparisons of our results of operations are not a good indicator of our future performance.
Additionally, if revenue declines in a quarter, whether due to a delay in recognizing expected revenue, adverse economic conditions, the COVID-19
pandemic or otherwise, our results of operations will be harmed because many of our expenses are relatively fixed. In particular, a large portion of our
manufacturing costs, our research and development, sales and marketing and general and administrative expenses are not significantly affected by
variations in revenue. Further, our cost of product revenue is dependent on product mix. If our quarterly operating results fail to meet investor expectations,
the price of our common stock may decline.
We expect our operating results to fluctuate significantly from period to period.
Following our acquisitions in 2019, we have increased our fixed costs and now sell products having higher costs of product revenue than our
biopreservation media products. We expect that the result of these acquisitions will make it more difficult to predict our revenue and operating results from
period-to-period and that, as a result, comparisons of our results of operations are not currently and will not be for the foreseeable future a good indicator of
our future performance. For example, if revenue declines in a quarter, whether due to a delay in recognizing expected revenue, adverse economic
conditions, the COVID-19 pandemic or otherwise, our results of operations will be harmed because many of our expenses are now relatively fixed. In
particular, a large portion of our manufacturing costs, research and development expenses, sales and marketing expenses and general and administrative
expenses are not significantly affected by variations in revenue. Further, a shift in product revenue concentration away from our CryoStor products and
towards our new products with higher costs of product revenue will adversely affect our operating margin. If our quarterly operating results fail to meet
investor expectations, the price of our common stock may decline.
We may engage in future acquisitions or strategic transactions which may require us to seek additional financing or financial commitments, increase
our expenses and/or present significant distractions to our management.
In fiscal 2019, we acquired three companies and made investments in two other companies. We are continuing to actively evaluate opportunities to grow
our portfolio of cell and gene therapy tools. In the event we engage in an acquisition or strategic transaction, including by making an investment in another
company, we may need to acquire additional financing. Obtaining financing through the issuance or sale of additional equity and/or debt securities, if
possible, may not be at favorable terms and may result in additional dilution to our current stockholders. Additionally, any such transaction may require us
to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our
management or business, which could adversely affect our operations and financial results. For example, an acquisition or strategic transaction may entail
numerous operational and financial risks, including the risks outlined above and additionally:
exposure to unknown liabilities;
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disruption of our business and diversion of our management's time and attention in order to develop acquired products or technologies;
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higher than expected acquisition and integration costs;
● write-downs of assets or goodwill or impairment charges;
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increased amortization expenses;
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
inability to retain key employees of any acquired businesses.
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, and any
transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.
If intangible assets and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges
against earnings.
In connection with the accounting for our completed acquisitions in 2019, we recorded a significant amount of intangible assets, including developed
technology and customer relationships relating to the acquired product lines, and goodwill. Under U.S. GAAP, we must assess, at least annually and
potentially more frequently, whether the value of intangible assets and goodwill has been impaired. Intangible assets and goodwill will be assessed for
impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill will result in a charge
against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.
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Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of
businesses or technologies.
As a part of our growth strategy, we may make selected acquisitions of complementary products and/or businesses. Any acquisition involves numerous
risks and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition,
or results of operations:
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difficulties in integrating new operations, technologies, products, and personnel;
problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems;
lack of synergies or the inability to realize expected synergies and cost-savings;
difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no
or limited prior experience;
underperformance of any acquired technology, product, or business relative to our expectations and the price we paid;
negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges;
the potential loss of key employees, customers, and strategic partners of acquired companies;
claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction;
the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash;
the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders;
the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is
low or volatile which could preclude us from completing any such acquisitions;
diversion of management’s attention and company resources from existing operations of the business;
inconsistencies in standards, controls, procedures, and policies;
the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies;
assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities that are
difficult to identify or accurately quantify; and
risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property.
In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and
marketing, research and development, manufacturing, finance, legal, and information technologies. There can be no assurance that any of the acquisitions
we may make will be successful or will be, or will remain, profitable. Our failure to successfully address the foregoing risks may prevent us from achieving
the anticipated benefits from any acquisition in a reasonable time frame, or at all.
Healthcare reform measures could adversely affect our business.
The efforts of governmental and third-party payors to contain or reduce the costs of healthcare may adversely affect the business and financial condition of
pharmaceutical and biotechnology companies, including ours. Specifically, in both the United States and some foreign jurisdictions, there have been a
number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Efforts
by governments and other third-party payors to contain or reduce the costs of healthcare through various means may limit our commercial opportunities
and adversely affect our operating results and result in a decrease in the price of our common stock or limit our ability to raise capital.
If our products do not perform as expected or the reliability of the technology on which our products are based is questioned, we could experience lost
revenue, delayed or reduced market acceptance of our products, increased costs and damage to our reputation.
Our success depends on the market’s confidence that we can provide reliable, high-quality products to our customers. We believe that customers in our
target markets are likely to be particularly sensitive to product defects and errors. Our reputation and the public image of our products and technologies
may be impaired if our products fail to perform as expected. Although our products are tested prior to shipment, defects or errors could nonetheless occur
in our products. In the future, if our products experience, or are perceived to experience, a material defect or error, this could result in loss or delay of
revenues, delayed market acceptance, damaged reputation, diversion of development resources, legal claims, increased insurance costs or increased service
and warranty costs, any of which could harm our business. Such defects or errors could also narrow the scope of the use of our products, which could
hinder our success in the market. Even after any underlying concerns or problems are resolved, any lingering concerns in our target market regarding our
technology or any manufacturing defects or performance errors in our products could continue to result in lost revenue, delayed market acceptance,
damaged reputation, increased service and warranty costs and claims against us.
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We face significant competition.
The life sciences industry is highly competitive. We anticipate that we will continue to face increased competition as existing companies may choose to
develop new or improved products and as new companies could enter the market with new technologies, any of which could compete with our product or
even render our products obsolete. Many of our competitors are significantly larger than us and have greater financial, technical, research, marketing, sales,
distribution and other resources than us. There can be no assurance that our competitors will not succeed in developing or marketing technologies and
products that are more effective or commercially attractive than any that are being developed or marketed by us, or that such competitors will not succeed
in obtaining regulatory approval, or introducing or commercializing any such products, prior to us. Such developments could have a material adverse effect
on our business, financial condition and results of operations. Also, even if we can compete successfully, there can be no assurance that we can continue do
so in a profitable manner.
We are dependent on outside suppliers for all our manufacturing supplies.
We rely on outside suppliers for all our manufacturing supplies, parts and components. Although we believe we could develop alternative sources of supply
for most of these components within a reasonable period of time, there can be no assurance that, in the future, our current or alternative sources will be able
to meet all our demands on a timely basis, particularly given the uncertainty surrounding the COVID-19 pandemic. Unavailability of necessary components
could require us to re-engineer our products to accommodate available substitutions, which could increase costs to us and/or have a material adverse effect
on manufacturing schedules, products performance and market acceptance. In addition, an uncorrected defect or supplier’s variation in a component or raw
material, either unknown to us or incompatible with our manufacturing process, could harm our ability to manufacture products. We might not be able to
find a sufficient alternative supplier in a reasonable amount of time, or on commercially reasonable terms, if at all. If we fail to obtain a supplier for the
components of our products, our operations could be disrupted.
Our success will depend on our ability to attract and retain key personnel.
In order to execute our business plan, we must attract, retain and motivate highly qualified managerial, scientific, manufacturing, and sales personnel. If we
fail to attract and retain skilled scientific and sales personnel, our sales efforts will be hindered. Our future success depends to a significant degree upon the
continued services of key scientific and technical personnel. If we do not attract and retain qualified personnel, we will not be able to achieve our growth
objectives.
Difficulties in manufacturing could have an adverse effect upon our expenses and our product revenues.
We currently manufacture all of our biopreservation media products, freezer products and related components. We currently outsource most of the
manufacturing of our ThawSTAR and evo products. The manufacturing of our products is difficult and complex. To support our current and prospective
clinical customers, we comply with and intend to continue to comply with cGMP in the manufacture of our products. Our ability to adequately manufacture
and supply our products in a timely matter is dependent on the uninterrupted and efficient operation of our facilities and those of third-parties producing
raw materials and supplies upon which we rely in our manufacturing. The manufacture of our products may be impacted by:
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availability or contamination of raw materials and components used in the manufacturing process, particularly those for which we have
no other source or supplier;
the ongoing capacity of our facilities;
our ability to comply with new regulatory requirements, including our ability to comply with cGMP;
inclement weather and natural disasters;
changes in forecasts of future demand for product components;
potential facility contamination by microorganisms or viruses;
updating of manufacturing specifications;
product quality success rates and yields; and
global viruses and pandemics, including the current COVID-19 pandemic.
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If efficient manufacture and supply of our products is interrupted, we may experience delayed shipments or supply constraints. If we are at any time unable
to provide an uninterrupted supply of our products to customers, our customers may be unable to supply their end-products incorporating our products to
their patients and other customers, which could materially and adversely affect our product revenue and results of operations.
While we are not currently subject to FDA or other regulatory approvals on our products, if we become subject to regulatory requirements, the
manufacture and sale of our products may be delayed or prevented, or we may become subject to increased expenses.
None of our products are subject to FDA. In particular, we are not required to sponsor formal prospective, controlled clinical-trials to establish safety and
efficacy. Additionally, we comply with cGMP requirements. This is done solely to support our current and prospective clinical customers. However, there
can be no assurance that we will not be required to obtain approval from the FDA, or foreign regulatory authorities, as applicable, prior to marketing any of
our products in the future. Any such requirements could delay or prevent the sale of our products or may subject us to additional expenses.
Expiration of our patents may subject us to increased competition and reduce our opportunity to generate product revenue.
The patents for our products have varying expiration dates and, when these patents expire, we may be subject to increased competition and we may not be
able to recover our development costs. In some of the larger economic territories, such as the United States and Europe, patent term extension/restoration
may be available. We cannot, however, be certain that an extension will be granted or, if granted, what the applicable time or the scope of patent protection
afforded during any extended period will be. If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject to
increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated. Furthermore, we may not
have sufficient time to recover our development costs prior to the expiration of our U.S. and non-U.S. patents.
US Patent 6,045,990, which provides patent coverage relating to HypoThermosol FRS, expired in April 2019, and its foreign patent counterparts expired in
July 2019. This may reduce the barrier to entry for competition for this product, which may materially affect the pricing of HypoThermosol FRS and our
ability to retain market share. We hold various trade secrets and other confidential know-how related to the manufacturing and testing of our products
which limit our exposure to the expiration of US patent 6,045,990.
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Our proprietary rights may not adequately protect our technologies and products.
Our commercial success will depend on our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for our technologies
and products in the United States and other countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the
extent that our proprietary technologies and products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We intend to apply for additional patents covering both our technologies and products, as we deem appropriate. We may, however, fail to apply for patents
on important technologies or products in a timely fashion, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad to
prevent others from practicing our technologies or from developing competing products and technologies. In addition, the patent positions of life science
industry companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. As a
result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot guarantee that:
● we were the first to make the inventions covered by each of our issued patents and pending patent applications;
● we were the first to file patent applications for these inventions;
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● we will develop additional proprietary technologies that are patentable, or the patents of others will not have an adverse effect on our
others will not independently develop similar or alternative technologies or duplicate any of our technologies;
any of our pending patent applications will result in issued patents;
any of our patents will be valid or enforceable;
any patents issued to us will provide us with any competitive advantages, or will not be challenged by third parties; and
business.
The actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends on many factors, including the type of
patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity
and enforceability of the patents. Our ability to maintain and solidify our proprietary position for our products will depend on our success in obtaining
effective claims and enforcing those claims once granted. Our issued patents and those that may be issued in the future, or those licensed to us, may be
challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or
competitive advantages against competitors with similar products. We also rely on trade secrets to protect some of our technology, especially where it is
believed that patent protection is inappropriate or unobtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts to protect
our trade secrets, our employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our proprietary
information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and
uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop
equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all our products in every jurisdiction would be prohibitively expensive. Competitors may use our technologies
in jurisdictions where we have not obtained patent protection to develop their own products. These products may compete with our products and may not
be covered by any patent claims or other intellectual property rights.
The laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies
have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology,
which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in
substantial cost and divert our efforts and attention from other aspects of our business.
If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas and compete directly against us.
Our success will depend to a significant degree on our ability to secure and protect intellectual property rights and enforce patent and trademark protections
relating to our technology. While we believe that the protection of patents and trademarks is important to our business, we also rely on a combination of
copyright, trade secret, nondisclosure and confidentiality agreements, know-how and continuing technological innovation to maintain our competitive
position. From time to time, litigation may be advisable to protect our intellectual property position. However, these legal means afford only limited
protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Any litigation in this regard could be costly,
and it is possible that we will not have sufficient resources to fully pursue litigation or to protect our intellectual property rights. This could result in the
rejection or invalidation of our existing and future patents. Any adverse outcome in litigation relating to the validity of our patents, or any failure to pursue
litigation or otherwise to protect our patent position, could materially harm our business and financial condition. In addition, confidentiality agreements
with our employees, consultants, customers, and key vendors may not prevent the unauthorized disclosure or use of our technology. It is possible that these
agreements will be breached or that they will not be enforceable in every instance, and that we will not have adequate remedies for any such breach.
Enforcement of these agreements may be costly and time consuming. Furthermore, the laws of foreign countries may not protect our intellectual property
rights to the same extent as the laws of the United States.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be
unable to protect our rights to, or use of, our technology.
If we choose to go to court to stop someone else from using the inventions claimed in our patents or our licensed patents, that individual or company has
the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would
consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will
decide that these patents are invalid or unenforceable and that we do not have the right to stop the other party from using the inventions. There is also the
risk that, even if the validity or enforceability of these patents is upheld, the court will refuse to stop the other party on the grounds that such other party’s
activities do not infringe our rights.
If we wish to use the technology claimed in issued and unexpired patents owned by others, we will need to obtain a license from the owner, enter into
litigation to challenge the validity or enforceability of the patents or incur the risk of litigation in the event that the owner asserts that we infringed its
patents. The failure to obtain a license to technology or the failure to challenge an issued patent that we may require to discover, develop or commercialize
our products may have a material adverse effect on us.
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If a third party asserts that we infringed its patents or other proprietary rights, we could face a number of risks that could seriously harm our results of
operations, financial condition and competitive position, including:
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patent infringement and other intellectual property claims, which would be costly and time consuming to defend, whether or not the
claims have merit, and which could delay a product and divert management’s attention from our business;
substantial damages for past infringement, which we may have to pay if a court determines that our product or technologies infringe a
competitor’s patent or other proprietary rights;
a court prohibiting us from selling or licensing our technologies unless the third party licenses its patents or other proprietary rights to us
on commercially reasonable terms, which it is not required to do; and
if a license is available from a third party, we may have to pay substantial royalties or lump-sum payments or grant cross licenses to our
patents or other proprietary rights to obtain that license.
The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover
various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.
If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the
relevant patent, and/or that the patent claims are invalid, and/or that the patent is unenforceable, and we may not be able to do this. Proving invalidity, in
particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.
U.S. patent laws as well as the laws of some foreign jurisdictions provide for provisional rights in published patent applications beginning on the date of
publication, including the right to obtain reasonable royalties, if a patent subsequently issues and certain other conditions are met.
Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United
States and many foreign jurisdictions are typically not published until 18 months after filing, and because publications in the scientific literature often lag
behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending
applications, or that we were the first to invent the technology.
Patent applications filed by third parties that cover technology similar to ours may have priority over our patent applications and could further require us to
obtain rights to issued patents covering such technologies. If another party files a U.S. patent application on an invention similar to ours, we may elect to
participate in or be drawn into an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United
States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent
position with respect to such inventions. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can
because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a
material adverse effect on our ability to raise the funds necessary to continue our operations. We cannot predict whether third parties will assert these
claims against us, or whether those claims will harm our business. If we are forced to defend against these claims, whether they are with or without any
merit and whether they are resolved in favor of or against us, we may face costly litigation and diversion of management’s attention and resources. As a
result of these disputes, we may have to develop costly non-infringing technology, or enter into licensing agreements. These agreements, if necessary, may
be unavailable on terms acceptable to us, if at all, which could seriously harm our business or financial condition.
Our inability to protect our systems and data from continually evolving cybersecurity risks or other technological risks, including as a result of
breaches of our associated third parties, could affect our ability to conduct our business.
In conducting our business, we process, transmit and store sensitive business information and personal information about our customers, vendors, and other
parties. This information may include account access credentials, credit and debit card numbers, bank account numbers, social security numbers, driver’s
license numbers, names and addresses and other types of sensitive business or personal information. Some of this information is also processed and stored
by our third-party service providers to whom we outsource certain functions and other agents, including our customers, which we refer to collectively as
our associated third parties.
We are a regular target of malicious third-party attempts to identify and exploit system vulnerabilities, and/or penetrate or bypass our security measures, in
order to gain unauthorized access to our networks and systems or those of our associated third parties. Such access could lead to the compromise of
sensitive, business, personal or confidential information. As a result, we proactively employ multiple methods at different layers of our systems to defend
our systems against intrusion and attack and to protect the data we collect. However, we cannot be certain that these measures will be successful and will be
sufficient to counter all current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information.
Our computer systems and our associated third parties’ computer systems could be in the future, subject to breach, and our data protection measures may
not prevent unauthorized access. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and
are often difficult to detect. Threats to our systems and our associated third parties’ systems can derive from human error, fraud or malice on the part of
employees or third parties, or may result from accidental technological failure. Computer viruses and other malware can be distributed and could infiltrate
our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes,
including to interfere with our services or create a diversion for other malicious activities. Our defensive measures may not prevent downtime,
unauthorized access or use of sensitive data. Further, while we select our third party service providers carefully, and we seek to ensure that our customers
adequately protect their systems and data, we do not control their actions and are not able to oversee their processes. Any problems experienced by our
associated third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyber-attacks and
security breaches, could adversely affect our ability to conduct our business and our financial condition.
We could also be subject to liability for claims relating to misuse of personal information, such as violation of data privacy laws. We cannot provide
assurance that the contractual requirements related to security and privacy that we impose on our service providers who have access to customer data will
be followed or will be adequate to prevent the unauthorized use or disclosure of data. Any failure to adequately enforce or provide these protective
measures could result in liability, protracted and costly litigation, governmental intervention and fines.
The market for our common stock is limited and our stock price is volatile.
Our common stock, traded on the NASDAQ Capital Market, is volatile and has experienced price and volume fluctuations.
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The market prices of many publicly traded companies, including emerging companies in the life sciences industry, have been, and can be expected to be,
highly volatile. The future market price of our common stock could be significantly impacted by numerous factors, including, but not limited to:
Future sales of our common stock or other fundraising events;
Sales of our common stock by existing shareholders;
Changes in our capital structure, including stock splits or reverse stock splits;
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● Announcements of technological innovations for new commercial products by our present or potential competitors;
● Developments concerning proprietary rights;
● Adverse results in our field or with clinical tests of our products in customer applications;
● Adverse litigation;
● Unfavorable legislation or regulatory decisions;
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Public concerns regarding our products;
● Variations in quarterly operating results;
● General trends in the health care industry;
● Global viruses, epidemics and pandemics, including the current COVID-19 pandemic; and
● Other factors outside of our control, including significant market fluctuations.
A significant percentage of our outstanding common stock is held by two stockholders, and these stockholders therefore have significant influence on
us and our corporate actions.
As of December 31, 2019, two of our existing stockholders, Taurus4757 GmbH (“Taurus”) and WAVI Holdings AG (“WAVI”), owned, collectively, 4.7
million shares of our common stock, representing 22% of the issued and outstanding shares of common stock and warrants to purchase 3.9 million shares
of our common stock and options to purchase 68,000 shares of our common stock. Taurus and WAVI were previously secured lenders to our Company, and
the chairman of Taurus, Mr. Girschweiler, is a member of our board of directors. Accordingly, these stockholders have had, and will continue to have,
significant influence in determining the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers,
consolidations and the sale of all or substantially all our assets, election of directors and other significant corporate actions. In addition, without the consent
of these stockholders, we could be prevented from entering into transactions that could be beneficial to us.
Anti-takeover provisions in our charter documents and under Delaware law could make a third-party acquisition of us difficult.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may discourage unsolicited takeover
proposals that stockholders may consider to be in their best interests. These provisions include the ability of our board to designate the terms of and issue
new series of preferred stock without stockholder approval and to amend our bylaws without stockholder approval. Further, as a Delaware corporation, we
are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless
certain specific requirements are met as set forth in Section 203. Collectively, these provisions could make a third-party acquisition of us difficult or could
discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.
Any future sales of our securities in the public markets may cause the trading price of our common stock to decline and could impair our ability to
raise capital through future equity offerings.
Sales of a substantial number of shares of our common stock or other securities in the public markets, or the perception that these sales may occur, could
cause the market price of our common stock or other securities to decline and could materially impair our ability to raise capital through the sale of
additional securities. In addition to the 3.9 million warrants to purchase shares of our common stock owned by Taurus and WAVI, we have an additional
88,000 warrants exercisable to purchase shares of common stock outstanding which will be freely tradable upon exercise. We have agreed to use our best
efforts to keep a registration statement registering the issuance and resale of many such shares effective during the term of the warrants. In addition, we
have a significant number of shares of our common stock reserved for issuance pursuant to other outstanding options and rights. If such shares are issued
upon exercise of options, warrants or other rights, or if we issue additional securities in a public offering or a private placement, such sales or any resales of
such securities could further adversely affect the market price of our common stock. The sale of a large number of shares of our common stock or other
securities also might make it more difficult for us to sell equity or equity-related securities in the future at a time and at the prices that we deem appropriate.
Securities or industry analysts may not publish favorable research or reports about our business or may publish no information, which could cause our
stock price or trading volume to decline.
The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us and our business.
We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the
analysts who cover us issue an adverse opinion regarding our stock price, our business or stock price would likely decline. If one or more of these analyst
cease coverage of our company or fail to regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our stock
price or trading volume to decline.
We do not anticipate declaring any cash dividends on our common stock.
We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to
retain all funds and earnings for use in the operation and expansion of our business.
Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could
significantly affect our financial results or financial condition.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide
range of matters that are relevant to our business, such as revenue recognition, asset impairment and fair value determinations, inventories, business
combinations and intangible asset valuations, leases, and litigation, are highly complex and involve many subjective assumptions, estimates, and
judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our
reported or expected financial performance or financial condition and could require us to restate our prior financial statements and issue a non-reliance
statement regarding our prior financial disclosures.
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Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the
Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations
on our ability to use our net operating loss and tax credit carryforwards.
Section 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the ability of a company that undergoes an ownership
change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit
carryforwards and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes
involving stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of
stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit
carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the company’s stock
immediately before the ownership change. We may be unable to offset our taxable income with losses, or our tax liability with credits, before such losses
and credits expire and therefore would incur larger federal income tax liability.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud. If we identify a
material weakness in our internal control over financial reporting, our ability to meet our reporting obligations and the trading price of our stock could
be negatively affected.
As described in Item 9A — Controls and Procedures and elsewhere in this Form 10-K, in connection with the restatement of our Consolidated Financial
Statements, we identified a material weakness in our internal control over financial reporting with regard to having sufficient technical resources to
appropriately analyze and account for complex financial instruments and complex share-based awards. With regard to our prior interpretation of ASC 480,
“Distinguishing Liabilities from Equity”, as it related to the initial classification and subsequent accounting of our registered Warrants as equity instruments
dating back to March 2014. Upon a reassessment, we determined that we should have accounted for these Warrants as liabilities instead of equity. This
material weakness with regard to lacking sufficient technical resources also affected our ability to appropriately value and account for share based payment
instruments with market-based vesting provisions under ASC 718, “Stock Compensation”. We determined that we should have used a Monte Carlo
simulation to value share based payment instruments with a market-based vesting condition. Given this material weakness, management concluded that we
did not maintain effective internal control over financial reporting as of December 31, 2019.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide
reliable financial reports or prevent fraud could harm our business. We regularly review and update our internal controls, disclosure controls and
procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control
over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only
reasonable, not absolute, assurances that the objectives of the system are met. A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains
material errors.
While we plan on addressing our material weakness as disclosed herein, elements of our remediation plan can only be accomplished over time and we can
offer no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain such internal controls could adversely impact our
ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete
understanding of our operations or may lose confidence in our reported financial information. Likewise, if our financial statements are not filed on a timely
basis as required by the SEC and The Nasdaq Stock Market, we could face severe consequences from those authorities. In either case, it could result in a
material adverse effect on our business or have a negative effect on the trading price of our common stock. Further, if we fail to remedy this deficiency (or
any other future deficiencies) or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or
shareholder litigation. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness
identified or that any additional material weaknesses or restatements of our financial statements will not arise in the future due to a failure to implement and
maintain adequate internal control over financial reporting or circumvention of those controls.
Further, in the future, if we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public
accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose
confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements
could also subject us to sanctions and/or investigations by the SEC, The Nasdaq Stock Market or other regulatory authorities.
Our financial condition and results of operations for fiscal 2020 may be adversely affected by the recent COVID-19 outbreak.
The Seattle area, including the location of our corporate headquarters and our media production facility and warehouse, was an early location of
coronavirus cases in the U.S. We are currently following the recommendations of local health authorities to minimize exposure risk for our team members
and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be
reasonably estimated at this time. While we have implemented specific business continuity plans to reduce the potential impact of COVID-19 and believe
that we have sufficient inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that our continuity plan, once
in place, will be successful or that our inventory will meet forecasted or actual demand.
We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our
customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver
inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19
could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand
for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic
may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may
emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have
a material adverse effect on our business, results of operations, financial condition and prospects.
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The restatement of our historical financial statements has consumed a significant amount of our time and resources and may continue to do so.
As described herein, we have restated our Consolidated Financial Statements for the periods discussed herein. The restatement process was highly time and
resource-intensive and involved substantial attention from management, as well as significant legal and accounting costs. Although we have now
completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or The Nasdaq Stock Market regarding our restated
Consolidated Financial Statements or matters relating thereto.
Any future inquiries from the SEC or The Nasdaq Stock Market as a result of the restatement of our historical financial statements will, regardless of the
outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.
Further, many companies that have been required to restate their historical financial statements have experienced a decline in stock price and stockholder
lawsuits related thereto.
Natural disasters, geopolitical unrest, war, terrorism, public health issues or other catastrophic events could disrupt the supply, delivery or demand of
products, which could negatively affect our operations and performance.
We are subject to the risk of disruption by earthquakes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks
and other hostile acts, public health issues, epidemics or pandemics and other events beyond our control and the control of the third parties on which we
depend. Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, our
employees, facilities, partners, suppliers, distributors or customers, and could decrease demand for our products, create delays and inefficiencies in our
supply chain and make it difficult or impossible for us to deliver products to our customers. A catastrophic event that results in the destruction or disruption
of our data centers or our critical business or information technology systems would severely affect our ability to conduct normal business operations and,
as a result, our operating results would be adversely affected.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
PROPERTIES
Our material office and manufacturing leases are detailed below:
Location
Square Feet
Principal Use
Bothell, WA
Menlo Park, CA
Albuquerque, NM
32,106
1,250
9,932
Lease Expiration
July 2021
Corporate headquarters, manufacturing, research
and development, marketing and administrative
offices
Research and development, and administrative
July 2020
offices
Manufacturing, research and development, and
December 2021
administrative offices
Bruce Township, MI
106,998
Manufacturing, research and development, and
November 2020
administrative offices
We consider the facilities to be in a condition suitable for their current uses. Because of anticipated growth in the business and due to the increasing
requirements of customers or regulatory agencies, we may need to acquire additional space or upgrade and enhance existing space. We believe that
adequate facilities will be available upon the conclusion of our leases.
ITEM 3.
LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such
proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of
operations.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
Our common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “BLFS.”
As of May 5, 2020, there were approximately 161 holders of record of our common stock. We have never paid cash dividends on our common stock and do
not anticipate that any cash dividends will be paid in the foreseeable future.
See Item 12 for information regarding securities authorized for issuance under our equity compensation plans.
Issuer Repurchases of Equity Securities
Not applicable.
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ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA
Not applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-K contains “forward-looking statements”. These forward-looking statements involve a number of risks and uncertainties. We caution readers
that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the
forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements
about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products and
services, our ability to implement our business strategy and anticipated business and operations, in particular following the 2019 acquisitions, future
financial and operational performance, our anticipated future growth strategy, including the acquisition of synergistic cell and gene therapy manufacturing
tools and services or technologies, or other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, future
financial and operating results, the impact of the COVID-19 pandemic, plans, objectives, expectations and intentions, revenues, costs and expenses, interest
rates, outcome of contingencies, business strategies, regulatory filings and requirements, the estimated potential size of markets, capital requirements, the
terms of any capital financing agreements and other statements that are not historical facts. You can find many of these statements by looking for words
like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend,” or similar expressions in this Form 10-K. We
intend that such forward-looking statements be subject to the safe harbors created thereby.
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These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current
expectations and projections. Factors that might cause such a difference include those discussed under “Risk Factors,” as well as those discussed elsewhere
in the Form 10-K.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K or, in the case of
documents referred to or incorporated by reference, the date of those documents.
All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-
looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as may be
required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking statements.
Restatement
As discussed in the Explanatory Note and Note 2: “Restatement of Consolidated Financial Statements” to this Form 10-K, we are amending and restating
our audited consolidated financial statements and related disclosures for the year ended December 31, 2018 presented in this Form 10-K along with our
unaudited consolidated financial statements and related disclosures for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018, March 31,
2019, June 30, 2019 and September 30, 2019 (see Note 16; “Quarterly Financial Information (Unaudited)” to our consolidated financial statements).
The following discussion and analysis of our financial condition and results of operations incorporates the restated amounts. For this reason, the data set
forth in this section may not be comparable to discussion and data in our previously filed Annual Report on Form 10-K for the year ended December 31,
2018.
We are a life sciences company that develops and commercializes innovative technologies used in the manufacture, storage and transportation of biological
drugs.
We develop, manufacture and market bioproduction tools to the cell and gene therapy industry, which are designed to improve quality and de-risk biologic
manufacturing and delivery. Our products are used in basic and applied research, and commercial manufacturing of biologic based therapies by maintaining
the health and function of biologic material during sourcing, manufacturing, storage, distribution, and patient delivery of cells and tissues.
Our current portfolio of bioprocessing tools includes our biopreservation media for the preservation of cells and tissues, automated thaw devices which
provide controlled, consistent thawing of frozen biologics in vials and cryobags, a line of “smart”, cloud connected devices for transporting biologic
payloads at a variety of temperature ranges and a full line of isothermal and liquid nitrogen freezers and accessories for freezing and storage of biologic
samples.
We currently operate as one bioproduction tools business with product lines that serve the continuum in the biologic drug manufacturing and delivery
process. We have a diversified portfolio of tools that focus on the freezing and thawing process of biologic drugs. We have in-house expertise in
cryobiology and continue to capitalize on opportunities to maximize the value of our product platform for our extensive customer base through both
organic growth innovations and acquisitions.
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Astero Bio Corporation Acquisition
On April 1, 2019, BioLife completed the acquisition of all the outstanding shares of Astero. Astero’s ThawSTAR product line is comprised of a family of
automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. The products improve the quality of administration of
high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and
overheating, which are inherent with the use of traditional water baths.
The Astero Acquisition was accounted for as a purchase of a business under Financial Accounting Standards Board (“FASB”) Accounting Standard
Codification No. (“ASC”) 805, “Business Combinations.” In connection with the Acquisition, the Company paid (i) a base payment in the amount of $12.5
million consisting of (x) an initial cash payment of $8.0 million at the closing of the transactions contemplated by the Purchase Agreement, subject to
adjustment for working capital, net debt and transaction expenses, and (y) a deferred cash payment that was paid into escrow of $4.5 million payable upon
the earlier of Astero meeting certain product development milestones or one year after the date of the Closing and (ii) earnout payments in calendar years
2019, 2020 and 2021 of up to an aggregate of $3.5 million, which shall be payable upon Astero achieving certain specified revenue targets in each year and
a separate earnout payment of $5.0 million for calendar year 2021 which shall be payable upon Astero achieving a cumulative revenue target over the
three-year period from 2019 to 2021.
SAVSU Technologies, Inc. Acquisition
On August 7, 2019, the Company consummated the acquisition (the “SAVSU Acquisition”) of the remaining shares of SAVSU Technologies, Inc., a
Delaware corporation, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by and among the Company, SAVSU and SAVSU Origin
LLC, a Delaware limited liability company (“Origin”). Pursuant to the Exchange Agreement, Origin agreed to transfer to the Company and the Company
agreed to acquire from Origin 8,616 shares of common stock of SAVSU, representing the remaining 56% of the outstanding shares of SAVSU that the
Company did not own, in exchange for 1,100,000 shares of common stock of the Company. On August 8, 2019, the Company completed the SAVSU
Acquisition, and SAVSU became a wholly owned subsidiary of the Company.
SAVSU is a leading developer and supplier of next generation cold chain management tools for C>. The evo® cloud connect platform allows biologic
products to be traced and tracked in real time. Our evo platform consists of rentable cloud connected shippers and evo technology tracking software
provides real-time information on geolocation, payload temperature, ambient temperature, tilt of shipper, humidity, altitude, and real-time alerts when a
shipper has been opened. Our internally developed evo software allows customers to customize alert notifications both in data measurements and user
requirements. The evo Dry Vapor Shipper (“DVS”) is specifically marketed to C> companies. The evo DVS has improved form factor and ergonomics
over the traditional dewar, including extended thermal performance, reduced liquid nitrogen recharge time, improved payload extractors and ability to
maintain temperature for longer periods on its side. The evo DVS does not require to be shipped in a pallet format, enabling shipping on narrow-bodied
aircraft which is not an option for competitors who use palletized shipments. Our integrated system of internal and external packing innovations reduces
risk of payload breakage due to shock while in transportation.
The SAVSU Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The Company paid to Origin 1,100,000
shares of unregistered common stock totaling $19.9 million (based on a share price of $18.12 at the time of acquisition) for the 56% we did not previously
own.
Custom Biogenic Systems, Inc. Acquisition
On November 10, 2019, we entered into an Asset Purchase Agreement, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc., a Michigan corporation (“CBS Seller”), pursuant to which we agreed to
purchase from the CBS Seller substantially all of CBS Seller’s assets, properties and rights (the “CBS Acquisition”). The CBS Seller, a privately held
company with operations located near Detroit, Michigan, designs and manufactures liquid nitrogen laboratory freezers and cryogenic equipment and also
offers a related cloud-based monitoring system that continuously assesses biologic sample storage conditions and alerts equipment owners if a fault
condition occurs. The Acquisition closed on November 12, 2019.
In connection with the CBS Acquisition, we paid to CBS Seller (i) a base payment in the amount of $15.0 million, consisting of a cash payment of $11.0
million paid at the closing of the CBS Acquisition, less a cash holdback escrow of $550,000 to satisfy certain indemnification claims, and an aggregate
number of shares of our common stock, with an aggregate fair value equal to $4.0 million, less a holdback escrow of shares of Common Stock with an
aggregate value equal to $3.0 million to satisfy potential payments related to any product liability claims outstanding as of March 13, 2019 and (ii)
potential earnout payments in calendar years 2020, 2021, 2022, 2023 and 2024 of up to an aggregate of, but not exceeding, $15.0 million payable to CBS
Seller upon achieving certain specified revenue targets in each year for certain product lines.
The CBS acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. Under the acquisition method
of accounting, the acquired assets and liabilities assumed from CBS were recorded as of the acquisition date, at their fair values, and consolidated with
BioLife. The preliminary fair value of the net tangible assets acquired is $6.0 million, the preliminary fair value of the identifiable intangibles is $6.8
million, and the preliminary residual goodwill is $3.1 million. The fair value estimates required critical estimates, including, but not limited to, future
expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be
reasonable. Actual results may differ from these estimates.
Critical Accounting Policies and Estimates
We have identified the policies and estimates below as being critical to our business operations and the understanding of our results of operations. These
policies require management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters
that are inherently uncertain. The impact of and any associated risks related to these policies on our business operations are discussed throughout
“Management’s Discussion and Analysis of Financial Condition,” including in the “Results of Operations” section, where such policies affect our reported
and expected financial results. Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information
presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
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Revenue Recognition
We generate revenue from the sale of our products, primarily to customers within the C> market. Under ASC 606, “Revenue from Contracts with
Customers,” revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products
or services is transferred to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring
products or services to a customer (“transaction price”). To the extent the transaction price includes variable consideration, the Company estimates the
amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method,
depending on the facts and circumstances relative to the contract. When determining the transaction price of a contract, an adjustment is made if payment
from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical
expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the
Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a
significant financing component or variable consideration as of and during the year ended December 31, 2019.
Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance
obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The
Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is
not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations. The Company recognizes product revenue under the terms of
each customer agreement upon transfer of control to the customer, which occurs at a point in time.
Inventories
We value inventory at the lower of cost or net realizable value, using the first-in first-out method. We review our inventory at least quarterly and record a
provision for excess and obsolete inventory based on our estimates of expected product revenue volume, production capacity and expiration dates of raw
materials, work-in-process and finished products. We write down inventory that has become obsolete, inventory that has a cost basis in excess of its
expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods
is done to order and tested for quality specifications prior to shipment.
A change in the estimated timing or amount of demand for our products could result in additional provisions for excess inventory quantities on hand. Any
significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating
results. During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised
estimate of inventory valuations.
Assets held for rent
Assets held for rent consists of all evo shippers and related components, in process of being assembled, and evo shippers and accessories complete and
ready to be deployed and placed in service upon a customer order. Our customers rent the shippers per a rental agreement, which includes access to the
evo.is cloud based tracking and information app. We retain ownership of the evo shippers and the evo tracking software platform. At the end of the rental
agreement, the customer returns the shipper to the Company. Once an evo shipper is deployed and placed in service with a customer, we depreciate the cost
of the evo shippers and related accessories over an estimated useful life of three years.
Business combinations
Amounts paid for acquisitions are allocated to the tangible and intangible assets acquired and liabilities assumed, if any, based on their fair values at the
dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible
assets and deferred revenue obligations. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions
determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill.
While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any
contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period,
which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to
goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first,
any subsequent adjustments are recorded to our consolidated statements of comprehensive income. The fair value of contingent consideration includes
estimates and judgments made by management regarding the probability that future contingent payments will be made, the extent of royalties to be earned
in excess of the defined minimum royalties, etc. Management updates these estimates and the related fair value of contingent consideration at each
reporting period based on the estimated probability of achieving the earnout targets and applying a discount rate that captures the risk associated with the
expected contingent payments. To the extent our estimates change in the future regarding the likelihood of achieving these targets we may need to record
material adjustments to our accrued contingent consideration. Changes in the fair value of contingent consideration are recorded in our consolidated
statements of operations. We use the income approach to determine the fair value of certain identifiable intangible assets including customer relationships
and developed technology. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful
lives and then discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth
rates, expected trends in technology, etc. We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of
money and certain industry-specific risk factors. We believe the estimated purchased customer relationships, developed technologies, trademark/tradename,
patents, and in process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a
third party would pay for the assets.
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Intangible Assets and Goodwill
Intangible assets
Intangible assets with a definite life are amortized over their estimated useful lives using the straight-line method and the amortization expense is recorded
within intangible asset amortization in the consolidated statements of operations. Intangible assets and their related estimated useful lives are reviewed at
least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent
impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or
different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for the
Company’s products or changes in the size of the market for the Company’s products. If impairment indicators are present, the Company determines
whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is
written down to the estimated fair value of the asset based on the sum of the future discounted cash flows expected to result from the use and disposition of
the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life. The Company continues to believe that its definite-lived intangible assets are recoverable at December
31, 2019.
Goodwill
We test goodwill for impairment on an annual basis, and between annual tests if events and circumstances indicate it is more likely than not that the fair
value of our goodwill is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are
not limited to, current economic and market conditions, including a decline in the Company’s market capitalization, a significant adverse change in legal
factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator. Goodwill is tested for impairment
as of December 31st of each year, or more frequently as warranted by events or changes in circumstances mentioned above. Accounting guidance also
permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its
fair value. If, after this qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying
amount, then no further quantitative testing would be necessary. A quantitative assessment is performed if the qualitative assessment results in a more
likely than not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a
reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value.
The Company operates as one reporting unit as of the goodwill impairment measurement date of December 31, 2019. As a result of our 2019 quantitative
assessment, we concluded that goodwill does not need to be impaired as of December 31, 2019.
Contingent Consideration
We estimate the acquisition date fair value of the acquisition-related contingent consideration using various valuation approaches, including option pricing
models and Monte Carlo simulations, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market
participants would use to value these liabilities. The fair value of the contingent consideration is remeasured each reporting period, with any change in the
value recorded in our consolidated statements of operations as change in fair value of contingent consideration.
Stock-based Compensation
We measure and record compensation expense using the applicable accounting guidance for share-based payments related to stock options, time-based
restricted stock, and performance-based awards granted to our directors and employees. The fair value of stock options is determined by using the Black-
Scholes option-pricing model. The fair value of market-based restricted stock awards is estimated, at the date of grant, using the Monte Carlo Simulation
model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or
awards, a risk-free interest rate and dividend yield. In valuing our stock options and market-based stock awards, significant judgment is required in
determining the expected volatility of our common stock and the expected life that individuals will hold their stock options prior to exercising. Expected
volatility for stock options is based on the historical and implied volatility of our own common stock while the volatility for our market-based restricted
stock awards is based on the historical volatility of our own stock and the stock of companies within our defined peer group. Further, our expected volatility
may change in the future, which could substantially change the grant-date fair value of future awards and, ultimately, the expense we record. The fair value
of restricted stock, including performance awards, without a market condition is estimated using the current market price of our common stock on the date
of grant.
We expense stock-based compensation for stock options, restricted stock awards, and performance awards over the requisite service period. For awards
with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award.
For awards with a market condition, we expense over the vesting period regardless of the value that the award recipients ultimately receive.
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Provision for Income Taxes
We maintain a full valuation allowance on our net deferred tax assets. The assessment regarding whether a valuation allowance is required considers both
positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment,
significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss and its forecasted
losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, “Accounting for
Income Taxes”, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its assets will be
maintained. The Company will continue to assess the realizability of its assets going forward and will adjust the valuation allowance as needed.
The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax
filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to
examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available.
The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. As of December 31, 2019, the Company had no uncertain tax positions.
As of December 31, 2019, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $44.7 million, which is available to
reduce future taxable income. Approximately $34.9 million of NOL will expire from 2020 through 2037, and approximately $9.8 million of NOL will be
carried forward indefinitely. The NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the
ownership interest. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Subsequent
ownership changes may further affect the limitation in future years.
Recent Accounting Standards Update
See Note 1: “Organization and Significant Accounting Policies – Recent Accounting Pronouncements,” to our consolidated financial statements included in
this report for more information.
Results of Operations
The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial
statements and the related footnotes thereto.
Revenue
In 2019, we acquired three companies which resulted in increased revenue diversification compared to prior years, in which nearly all revenue was derived
from our biopreservation media product line. Although our revenues in 2019 were more diversified, both in terms of product and customer concentration, a
trend we expect to see continue in 2020, we did realize quarterly fluctuations based on large customer ordering patterns, which is something we expect will
continue in 2020.
Revenue for years ended December 31, 2019, and 2018 were comprised of the following:
(In thousands)
Biopreservation media
Automated thawing
evo shippers
Freezers and accessories
Total revenue
Year Ended December 31,
2018
2019(1)
$
$
23,358
1,184
692
2,137
27,371
$
$
19,742
––
––
––
19,742
(1)
2019 revenue includes automated thawing revenue related to Astero from April 1, 2019 through December 31, 2019; evo shipper rental revenue
related to SAVSU from August 8, 2019 through December 31, 2019; and freezer and accessory revenue related to CBS from November 12, 2019
through December 31, 2019.
For 2019, revenue increased by $7.6 million, or 39%, compared with 2018. The increase is due to the acquisitions throughout 2019, and an increase in
product revenue of our biopreservation media products. Product revenue of our biopreservation media products in 2019 increased $3.6 million, or 18%
compared with 2018. Our biopreservation media products continued to be adopted by customers in the C> market and we realized a higher selling price
per liter in 2019 compared to 2018. Revenue is impacted by the relatively high degree of customer concentration, the timing of orders, the development
efforts of our customers or end-users and regulatory approvals for biologics that incorporate our products, which may result in significant quarterly
fluctuations. Such quarterly fluctuations are expected, but they may not be predictive of future revenue or otherwise indicative of a trend.
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Table of Contents
Costs and Operating Expenses
Total costs and operating expenses for years ended December 31, 2019 and 2018 were comprised of the following:
(In thousands, except percentages)
Cost of revenue
Research and development
Sales and marketing
General and administrative
Intangible asset amortization
Acquisition costs
Change in fair value of contingent consideration
Total costs and operating expenses
Cost of Revenue
Year Ended December 31,
2019
2018
$ Change
% Change
$
$
8,760 $
3,168
4,701
8,893
1,079
940
50
27,591 $
6,217 $
1,298
2,615
5,950
––
––
––
16,080 $
2,543
1,870
2,086
2,943
1,079
940
50
11,511
41%
144%
80%
49%
––%
––%
––%
72%
In 2019 cost of revenue increased $2.5 million, or 41% when compared to 2018, due primarily to the increase in revenue mentioned above. We expect that
cost of product revenue may fluctuate in future quarters based on production volumes and product mix. The product lines acquired in 2019 have a higher
cost of product revenue than our biopreservation media products.
Cost of product revenue as a percentage of revenue was 32%, and 31% for 2019 and 2018, respectively. Cost of product revenue in 2019 includes $289,000
in inventory step-up related amortization recorded in the purchase accounting of our Astero and CBS acquisitions. The increase in cost of product revenue
as a percentage of revenue is a result of the inventory step-up, and higher costs of product revenue as a percentage of revenue for the product lines acquired
in 2019 through the Astero, Savsu and CBS acquisitions.
Research and Development Expenses
During 2019 and 2018 research and development (“R&D”) expense consisted primarily of salaries and other personnel-related costs, consulting and
external product development services.
R&D expense increased $1.9 million in 2019, or 144%, compared with 2018. The increase is primarily due to our three acquisitions in 2019 and stock
compensation expense.
We expect our R&D expense to increase as we continue to expand, develop and refine the product lines we acquired in 2019.
Sales and Marketing Expenses
Sales and marketing expense (“S&M”) consists primarily of salaries, and other personnel-related costs, stock compensation expense, trade shows, sales
commissions and advertising.
In 2019, S&M expense increased $2.1 million, or 80%, compared with 2018. The increase reflects the S&M costs we absorbed related to our acquisitions,
stock compensation expense and an increase in our direct selling costs.
We expect S&M expense to increase, as we expand our direct selling efforts to support the broader product line offerings resulting from our 2019
acquisitions.
General and Administrative Expenses
General and administrative (“G&A”) expense consists primarily of personnel-related expenses, non-cash stock-based compensation for administrative
personnel and members of the board of directors, professional fees, such as accounting and legal, and corporate insurance.
In 2019, G&A expenses increased by $2.9 million, or 49%, compared with 2018. The increase reflects the assumption of G&A expenses related to our
2019 acquisitions, and the continued buildout of our administrative infrastructure, primarily through increased headcount and information technology
expenditures, to support expected future growth and stock compensation expense.
We expect G&A expense to increase reflecting the infrastructure and costs related to supporting the larger expected enterprise created as a result of our
2019 acquisitions.
Intangible asset amortization expense
Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions, Astero, SAVSU and CBS in which
we acquired definite-lived intangible assets.
Acquisition costs
Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs related to our Astero, SAVSU and CBS acquisitions.
Change in fair value of contingent consideration
Change in fair value of contingent consideration consists of changes in estimated fair value of our potential earnouts related to our Astero acquisition.
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Other Income and Expenses
Total other expenses for years ended December 31, 2019 and 2018 were comprised of the following:
(In thousands, except percentages)
Change in fair value of warrant liability
Interest income (expense), net
Other
Loss on equity method investment – SAVSU
Gain on acquisition - SAVSU
Total other income (expenses)
Year Ended December 31,
2019
2018
(restated)
$
$
(12,835) $
501
(13)
(739)
10,108
(2,978) $
(28,271) $
276
––
(672)
––
(28,667) $
$ Change
% Change
15,436
225
(13)
(67)
10,108
25,689
55%
81%
––
(10%)
––
90%
Change in fair value of warrant liability. Reflects the changes in fair value associated with the periodic “mark to market” valuation of certain warrants that
were issued in 2014. See Note 1: “Organization and Significant Accounting Policies” of our accompanying consolidated financial statements “Certain
Warrants which have Features that may Result in Cash Settlement” for more information.
Interest Income. We earn interest on cash held in our money market account. We had a higher weighted average cash balance in our money market account
for the year ended December 31, 2019 compared to 2018.
Interest Expense. Interest expense is related to equipment financing.
Loss on equity method investment. The non-cash loss associated with our proportionate share of the net loss in our investment in SAVSU prior to our
acquisition of the remaining shares of SAVSU and subsequent consolidation of SAVSU in our financial statements.
Gain on acquisition of SAVSU. The non-cash gain associated with our equity investment in SAVSU due to the acquisition of the remaining shares of
SAVSU and subsequent consolidation of SAVSU in our financial statements.
Liquidity and Capital Resources
On December 31, 2019, we had $6.4 million in cash and cash equivalents, compared to $30.7 million at December 31, 2018. The reduction in cash is
primarily due to the cash payments associated with the 2019 acquisitions of Astero and CBS. We acquired Astero on April 1, 2019 for $12.5 million in
cash and contingent consideration of up to $8.5 million (which payment requirement has not been triggered or otherwise paid to date). We anticipate paying
$484,000 for the earnout related to 2019 revenues of Astero in early 2020. On August 8, 2019, we acquired SAVSU for 1,100,000 shares of common stock.
On November 12, 2019, we acquired CBS for $11.0 million in cash, $4.0 million in shares of our common stock, and up to $15.0 million in contingent
consideration payable in cash or stock (which payment requirement has not been triggered or otherwise paid to date).
Based on our current expectations with respect to our future revenue and expenses, we believe that our current level of cash and cash equivalents will be
sufficient to meet our liquidity needs for at least the next 12 months. However, if our revenues do not grow as expected, including as a result of the
COVID-19 pandemic, and if we are not able to manage expenses sufficiently, we may be required to obtain additional equity or debt financing if our cash
resources are depleted. Further, the Company may choose to raise additional capital through a debt or equity financing in an attempt to mitigate the
heightened level of business uncertainty caused by the COVID-19 pandemic, or in order to pursue additional acquisition or strategic investment
opportunities. Additional capital, if required, may not be available on reasonable terms, if at all.
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Table of Contents
Cash Flows
(In thousands)
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash and cash equivalents
Operating Activities
Year Ended December 31,
2019
2018 (restated)
$ Change
$
$
1,213 $
(27,018)
1,596
(24,209) $
2,348 $
(6,500)
28,146
23,994 $
(1,135)
(20,518)
(26,550)
(48,203)
In 2019, our operating activities provided cash of $1.2 million reflecting a net loss of $1.7 million and non-cash charges totaling $6.6 million primarily
related to depreciation, amortization, gain on acquisition of SAVSU, changes in fair value contingent consideration, income tax benefit related to the
acquisition of SAVSU, fair value change in warrant liability and stock-based compensation charges. An increase in accounts receivable used $290,000 of
cash and was primarily driven by the 39% year-to-date increase in revenues and an increase in inventory used $3.7 million to support future revenue. These
cash items used for operating activities were offset by cash items provided by operating activities that included an increase in accounts payable and accrued
liabilities of $1.4 million. The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts.
For 2018, our operating activities provided cash of $2.3 million reflecting net loss of $25.0 million and non-cash charges totaling $30.7 million primarily
related to fair value change in warrant liability, depreciation, amortization of deferred rent related to lease incentives, loss in our equity investment in
SAVSU and stock-based compensation charges. An increase in receivables consumed $2.0 million of cash and was primarily driven by the 79% year-to-
date increase in revenues. An increase in inventory levels to accommodate future revenue growth used $1.7 million of cash. The remaining cash flow
provided by operations resulted from net favorable changes in various other working capital accounts.
Investing Activities
Our investing activities used $27.0 million of cash during 2019. We used $12.4 million, gained $1.3 million, and used $11.0 million in cash for the Astero,
SAVSU, and CBS acquisitions, respectively. We also invested $1.0 million and $1.5 million in our strategic investments in iVexSol and Sexton Bio,
respectively. Capital expenditures used $2.3 million as we continue to invest in our manufacturing facilities and increase in SAVSU’s assets held for rent.
For 2018, our investing activities used $6.5 million of cash, including $6.0 million for the purchase of additional shares of SAVSU. The remaining
$500,000 was used for purchases of equipment.
Financing Activities
In 2019, cash provided by financing activities of $1.6 million included $1.8 million from the proceeds of warrant and stock option exercises.
In 2018, our financing activities provided $28.1 million of cash. We received proceeds of $20.0 million from the sale of stock to an institutional investor,
$12.9 million from the proceeds of outstanding warrant and stock option exercises. We used $4.3 million in cash to redeem Series A preferred shares and
$436,000 related to dividend payments on Series A preferred shares.
Period subsequent to year-end
The Seattle area, including the location of our corporate headquarters and our media production facility and warehouse, was at the epicenter of the
coronavirus outbreak in the U.S. We are currently following the recommendations of local health authorities to minimize exposure risk for our team
members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact
cannot be reasonably estimated at this time. While we are currently implementing specific business continuity plans to reduce the potential impact of
COVID-19 and believe that we have sufficient inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that
our continuity plan, once in place, will be successful or that our inventory will meet forecasted demand.
We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our
customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver
inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19
could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand
for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic
may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may
emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have
a material adverse effect on our business, results of operations, financial condition and prospects.
We experienced an increase in demand for our biopreservation media products in the latter half of March 2020, which we attribute to our customers’ desire
to secure inventory in the face of wide-spread uncertainty. However, the ultimate future impact of COVID-19 on our business is subject to significant
uncertainty.
27
Table of Contents
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing arrangements.
Capital Requirements
Our future capital requirements will depend on many factors, including the following:
●
●
●
●
●
●
●
the expansion of our cell and gene therapy tools business;
the ability to sustain product revenue and profits of our cell and gene therapy products;
The degree to which we implement additional automated production equipment throughout our facilities;
our ability to acquire additional cell and gene therapy products;
the scope of and progress made in our research and development activities
the extent of any share repurchase activity; and
the success of any proposed financing efforts.
Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash
needs for at least the next 12 months. We expect operating expenses in the year ending December 31, 2020 to increase as we continue to expand our
C> tools business. We expect to incur continued spending related to the development and expansion of our product lines and expansion of our
commercial capabilities for the foreseeable future. Our future capital requirements may include, but are not limited to, purchases of property, plant and
equipment, the acquisition of additional cell and gene therapy products and technologies to complement our existing manufacturing capabilities, and
continued investment in our intellectual property portfolio.
We actively evaluate various strategic transactions on an ongoing basis, including acquiring complementary products, technologies or businesses that
would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our
shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and
anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing
needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or
another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our stockholders,
and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible
debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party
funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Further,
the Company may choose to raise additional capital through a debt or equity financing in an attempt to mitigate the heightened level of business uncertainty
caused by the COVID-19 pandemic. Additional capital may not be available on reasonable terms, if at all.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated statements of Operations
Consolidated statements of Shareholders’ Equity
Consolidated statements of Cash Flows
Notes to Consolidated Financial Statements
28
Page No.
29
31
32
33
34
35
Table of Contents
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
Shareholders and Board of Directors
BioLife Solutions, Inc.
Bothell, Washington
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of BioLife Solutions, Inc. (the “Company”) as of December 31, 2019, the related
consolidated statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2019, 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, 2019, and the results of its operations and its cash flows for the year ended December 31, 2019, in
conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's
internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated May 15, 2020 expressed an adverse opinion
thereon.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of the
Accounting Standards Codification Topic 842, “Leases.”
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 audit. We are a public accounting firm registered with the 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 audit 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.
Our audit 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 audit 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 audit provides a reasonable basis
for our opinion.
/S/ BDO USA, LLP
We have served as the Company's auditor since 2019.
Seattle, Washington
May 15, 2020
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Table of Contents
To the Board of Directors and Shareholders
BioLife Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of BioLife Solutions, Inc. ("the Company") as of December 31, 2018, the related
consolidated statements of operations, shareholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted
in the United States.
Restatement of Previously Issued Financial Statements
As discussed in Note 2 to the financial statements, the Company has restated its 2018 financial statements to correct an error.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the 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 audit 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 financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing
procedures to assess the risks of material misstatement of the 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 financial statements. Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ PETERSON SULLIVAN LLP
We served as the Company's auditor since 2007 until 2019.
Seattle, Washington
March 15, 2019, except for the effects of the restatement discussed in Note 2 to the financial statements, as to which the date is May 15, 2020
30
Table of Contents
BioLife Solutions, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $68 and $0 at December 31, 2019
$
and 2018, respectively
Inventories
Prepaid expenses and other current assets
Total current assets
Assets held for rent, net
Property and equipment, net
Operating lease right-of-use assets, net
Long-term deposits and other assets
Investments
Equity method investment in SAVSU
Intangible assets, net
Goodwill
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Lease liabilities, operating, current portion
Contingent consideration, current portion
Total current liabilities
Warrant liability
Contingent consideration, long term
Lease liabilities, operating, long-term
Other long-term liabilities
Total liabilities
Commitments and Contingencies (Note 12)
Shareholders’ equity
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0
shares issued and outstanding at December 31, 2019 and 2018
Common stock, $0.001 par value; 150,000,000 shares authorized, 20,825,452 and 18,547,406 shares
issued and outstanding at December 31, 2019 and 2018, respectively
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
December 31,
2019
December 31,
2018
(restated)
6,448 $
5,345
10,972
1,348
24,113
3,922
5,572
1,040
50
2,500
––
21,982
33,637
92,816 $
3,119 $
3,369
804
377
7,669
39,602
1,537
550
4
49,362
30,657
3,045
3,509
353
37,564
––
1,319
––
36
––
6,548
––
––
45,467
720
1,219
––
––
1,939
28,516
––
––
380
30,835
––
21
143,485
(100,052)
43,454
92,816 $
––
19
113,008
(98,395)
14,632
45,467
The accompanying Notes to consolidated Financial Statements are an integral part of these consolidated financial statements
31
Table of Contents
BioLife Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share data)
Product revenue
Rental revenue
Total product and rental revenue
Costs and operating expenses:
Cost of product and rental revenue (exclusive of intangible assets amortization)
Research and development
Sales and marketing
General and administrative
Intangible assets amortization
Acquisition costs
Change in fair value of contingent consideration
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of warrant liability
Interest income
Interest expense
Other expenses
Loss from equity-method investment in SAVSU
Gain on acquisition of SAVSU
Total other expenses
Net loss before provision for income taxes
Income tax (benefit)
Net loss
Less: Preferred stock dividends and accumulated deficit impact of preferred stock redemption
Net income (loss) attributable to common stockholders
$
Years Ended December 31,
2018
(restated)
2019
26,844 $
527
27,371
8,760
3,168
4,701
8,893
1,079
940
50
27,591
(220)
(12,835)
506
(5)
(13)
(739)
10,108
(2,978)
(3,198)
(1,541)
(1,657)
–
(1,657)
19,742
––
19,742
6,217
1,298
2,615
5,950
––
––
––
16,080
3,662
(28,271)
281
(5)
––
(672)
––
(28,667)
(25,005)
––
(25,005)
(339)
(25,344)
Earnings per share attributable to common stockholders:
Basic and Diluted
Weighted average shares used to compute earnings per share attributable to common stockholders:
Basic and Diluted
$
(0.09) $
(1.56)
19,460,299
16,256,465
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
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(In thousands, except share data)
Balance, December 31, 2017 (restated)
Series A preferred stock redemption
Stock based compensation
Stock issued for private equity transaction
– Casdin Capital, net of legal fees of
$85,000
Stock option exercises
Warrant exercises (restated)
Stock issued – on vested RSUs
Stock issued for services
Preferred stock dividends
Net loss (restated)
Balance, December 31, 2018 (restated)
Stock based compensation
Shares issued in acquisitions
Stock option exercises
Warrant exercises
Stock issued – on vested RSUs
Net loss
Balance, December 31, 2019
4,250 $
(4,250)
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
BioLife Solutions, Inc.
Consolidated Statements of Shareholders’ Equity
Preferred
Stock
Shares –
Series A
Preferred
Stock
Amount –
Series A
Common
Stock
Shares
— 14,021,422 $
—
—
—
—
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Shareholders’
Equity
(Deficit)
14 $
—
—
63,505 $
(4,241)
1,519
(73,051) $
(9)
—
(9,532)
(4,250)
1,519
— 1,428,571
365,983
—
— 2,608,844
116,647
—
5,939
—
—
—
—
—
— 18,547,406 $
—
—
— 1,334,219
697,010
—
121,000
—
125,817
—
—
—
— 20,825,452 $
2
—
3
—
—
—
—
19 $
—
1
1
—
—
—
21 $
19,913
508
31,768
—
36
—
—
113,008 $
3,043
23,931
1,180
2,323
—
—
143,485 $
—
—
—
—
—
(330)
(25,005)
(98,395) $
—
—
—
—
—
(1,657)
(100,052) $
19,915
508
31,771
—
36
(330)
(25,005)
14,632
3,043
23,932
1,181
2,323
—
(1,657)
43,454
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
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BioLife Solutions, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net income to net cash provided by operating activities
Years Ended December 31,
2018
(restated)
2019
$
(1,657) $
(25,005)
Depreciation
Amortization of intangible assets
Stock-based compensation
Non cash lease expense
Loss from equity method investment in SAVSU
Gain on acquisition of SAVSU
Change in fair value of contingent consideration
Deferred income tax benefit
Change in fair value of warrant liability
Other
Change in operating assets and liabilities
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Other liabilities
Other
Net cash provided by operating activities
Cash flows from investing activities
Cash acquired in acquisition of SAVSU
Acquisition of Astero Bio, net of cash acquired
Payments related to the acquisition of CBS
Investment in Sexton
Investment in iVexSol convertible debt
Purchase of property and equipment
Purchase of assets held for lease
Investment in SAVSU
Net cash used in investing activities
Cash flows from financing activities
Stock issue from private equity transaction
Proceeds from exercise of common stock options
Proceeds from exercise of warrants
Payments for redemption of preferred stock
Payments of preferred stock dividends
Other
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Purchase of property and equipment not yet paid
Stock issued as consideration to acquire SAVSU
Stock issued as consideration to acquire assets of CBS
Stock issued for services in prior period included in liabilities at prior year-end
Reclassification of warrant liabilities to equity upon exercise
Receivables converted to equity investment in SAVSU
Purchase of equipment with debt
Legal fees for private equity transaction not yet paid
718
1,079
3,043
512
739
(10,108)
50
(1,541)
12,835
15
(290)
(3,777)
(704)
768
(246)
(81)
(142)
1,213
1,251
(12,439)
(11,000)
(1,500)
(1,000)
(675)
(1,655)
—
(27,018)
—
1,181
574
—
—
(159)
1,596
(24,209)
30,657
6,448 $
29 $
19,932
4,000
—
1,749
—
—
—
338
—
1,519
—
672
—
—
—
28,271
(127)
(2,024)
(1,662)
(104)
(11)
497
—
(16)
2,348
—
—
—
—
—
(500)
—
(6,000)
(6,500)
20,000
508
12,392
(4,250)
(436)
(68)
28,146
23,994
6,663
30,657
54
—
—
36
19,378
150
18
44
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
34
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Significant Accounting Policies
Business
BioLife Solutions, Inc. (“BioLife,” “us,” “we,” “our,” or the “Company”) is a leading developer, manufacturer and supplier of a portfolio of bioproduction
tools including; proprietary biopreservation media, automated thawing devices, cloud-connected shipping containers, and freezer technology for cell and
gene therapies. Our CryoStor® freeze media and HypoThermosol® hypothermic storage are optimized to preserve cells in the regenerative medicine
market. These novel biopreservation media products are serum-free and protein-free, fully defined, and are formulated to reduce preservation-induced cell
damage and death; offering commercial companies and clinical researchers significant improvement in shelf life and post-preservation viability and
function. Our ThawSTAR® product line is comprised of a family of automated thawing devices for frozen cell and gene therapies packaged in cryovials
and cryobags. These products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the
thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths. Our evo shipping
containers are innovative high-performance cloud-connected passive storage and transport containers for temperature-sensitive biologics and
pharmaceuticals. Our cryogenic freezer technology, provides for controlled rate freezing and storage of biologic materials.
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Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates and assumptions by management affect the Company’s allowance for doubtful accounts, the net realizable value of inventory, fair
value of warrant liability, valuation of market based awards, valuations and purchase price allocations related to investments and business combinations,
expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability
of long-lived assets, estimated fair values of intangible assets and goodwill, amortization methods and periods, certain accrued expenses, share-based
compensation, contingent consideration from business combinations, tax reserves and recoverability of the Company’s net deferred tax assets, and related
valuation allowance.
The Company regularly assesses these estimates, however, actual results could differ materially from these estimates. Changes in estimates are recorded in
the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be
reasonable under the circumstances.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Astero Bio Corporation (“Astero” or
“ThawStar” acquired on April 1, 2019), SAVSU Technologies, Inc. (“SAVSU” acquired on August 8, 2019), and Arctic Solutions, Inc. dba Custom
Biogenic Systems (“CBS” acquired on November 12, 2019). All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company operates and manages its business as one reportable and operating segment, which is the business of bioproduction tools. The Company’s
Chief Executive Officer and Chief Financial and Operating Officer, who are the chief operating decision makers, review financial information on an
aggregate basis for purposes of allocating and evaluating financial performance. All long-lived assets are maintained in the United States of America.
Liquidity and capital resources
As of December 31, 2019, we had $6.4 million in cash and cash equivalents, compared to $30.7 million at December 31, 2018. The reduction in cash is
primarily due to the cash payments associated with the 2019 acquisitions of Astero and CBS. We acquired Astero on April 1, 2019 for $12.5 million in cash
and contingent consideration of up to $8.5 million (which payment requirement has not been triggered or otherwise paid to date). We anticipate paying
$484,000 for the earnout related to 2019 revenues of Astero in early 2020. On August 8, 2019, we acquired SAVSU for 1,100,000 shares of common stock.
On November 12, 2019, we acquired CBS for $11.0 million in cash, $4.0 million in shares of our common stock, and up to $15.0 million in contingent
consideration payable in cash or stock (which payment requirement has not been triggered or otherwise paid to date).
Based on our current expectations with respect to our future revenue and expenses, we believe that our current level of cash and cash equivalents will be
sufficient to meet our liquidity needs for at least the next 12 months. However, if our revenues do not grow as expected, including as a result of the
COVID-19 pandemic, and if we are not able to manage expenses sufficiently, we may be required to obtain additional equity or debt financing if our cash
resources are depleted. Further, the Company may choose to raise additional capital through a debt or equity financing in an attempt to mitigate the
heightened level of business uncertainty caused by the COVID-19 pandemic, or in order to pursue additional acquisition or strategic investment
opportunities. Additional capital, if required, may not be available on reasonable terms, if at all.
Revenue recognition
To determine revenue recognition for contractual arrangements that we determine are within the scope of Financial Accounting Standards Board (“FASB”)
Topic 606, “Revenue from Contracts with Customers”, we perform the following five steps: (i) identify each contract with a customer; (ii) identify the
performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to our performance obligations in the
contract; and (v) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is
probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. Our revenues are
primarily generated from the sale of our biopreservation media, ThawStar, and freezer products. We generally recognize product revenue, including
shipping and handling charges billed to customers, when we transfer control of our products to our customers (transfer of control generally occurs upon
shipment of our product). Shipping and handling costs are classified as part of cost of product revenue in the statement of operations. We are not required to
disclose the value of unsatisfied performance obligations as our contracts have a duration of one year or less.
The Company also generates revenue from the leasing of our evo cold chain systems, which are typically cloud-connected shippers with enabling cold
chain cloud applications, to customers pursuant to rental arrangements entered into with the customer. Revenue from the rental of cold chain systems is not
within the scope of FASB ASC Topic 606 as it is within the scope of FASB ASC Topic 842, “Leases”. All customers leasing shippers currently do so under
month-to-month rental arrangements. We account for these rental transactions as operating leases and record rental revenue on a straight-line basis over the
rental term. These rental arrangements may contain both lease and non-lease components. We have elected to utilize the practical expedient to account for
lease and non-lease components together as a single combined lease component as the timing and pattern of transfer are the same for the non-lease
components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.
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The following table presents revenues by product line:
(In thousands)
Biopreservation media
Automated thaw
evo shippers
Freezers and accessories
Total revenue
Risks and Uncertainties
Year Ended December 31,
2018
2019
23,358 $
1,184
692
2,137
27,371 $
19,742
—
—
—
19,742
$
$
The Company evaluates its operations periodically to determine if any risks and uncertainties exist that could impact its operations in the near term. The
Company does not believe that there are any significant risks which have not already been disclosed in the consolidated financial statements. A loss of
certain suppliers could temporarily disrupt operations, although alternate sources of supply exist for these items. The Company has mitigated these risks by
building finished good and raw material inventory from certain key suppliers. See Note 17: “Subsequent Events” for more information regarding the
impact of COVID-19.
Earnings per share
The Company considers its unexercised warrants and unvested restricted shares, which contain non-forfeitable rights to dividends, participating securities,
and includes such participating securities in its computation of earnings per share pursuant to the two-class method. Basic earnings per share for the two
classes of stock (common stock and warrants) is calculated by dividing net income by the weighted average number of shares of common stock and
warrants outstanding during the reporting period. Diluted earnings per share is calculated using the weighted average number of shares of common stock
plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two class method and the treasury stock method,
whichever is more dilutive.
The following table presents computations of basic and diluted earnings per share under the two class method:
(In thousands, except share and earnings per share data)
Numerator:
Year Ended
December 31,
2019
2018
(restated)
Net loss attributable to BioLife Solutions
Less: Preferred stock dividends and accumulated deficit impact of preferred stock redemption
Basic net loss attributable to common stockholders
$
(1,657) $
—
(1,657)
(25,005)
(339)
(25,344)
Denominator:
Basic and diluted weighted average shares outstanding
19,460,299
16,256,465
Basic and diluted earnings per share attributable to common stockholders
$
(0.09) $
(1.56)
The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-
dilutive:
Stock options and restricted stock awards
Warrants
Total
Cash and cash equivalents
Year Ended
December 31,
2019
2,564,456
2,903,813
5,520,495
2018
(restated)
2,819,306
2,551,507
5,370,813
Cash equivalents consist primarily of interest-bearing money market accounts. We consider all highly liquid debt instruments purchased with an initial
maturity of three months or less to be cash equivalents. We maintain cash balances that may exceed federally insured limits. We do not believe that this
results in any significant credit risk.
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Inventories
Inventories relate to the Company’s cell and gene therapy products. The Company values inventory at cost or, if lower, net realizable value, using the first-
in, first-out method. The Company reviews its inventories at least quarterly and records a provision for excess and obsolete inventory based on its estimates
of expected product revenue volume, production capacity and expiration dates of raw materials, work-in-process and finished products. The Company
writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of
expected requirements to cost of product revenue. A change in the estimated timing or amount of demand for the Company’s products could result in
additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a
significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying consolidated financial
statements, there have been no material adjustments related to a revised estimate of inventory valuations. Work-in-process and finished products
inventories consist of material, labor, outside testing costs and manufacturing overhead.
Accounts receivable
Accounts receivable consist of short-term amounts due from our customers (generally 30 to 90 days) and are stated at the amount we expect to collect. We
establish an allowance for doubtful accounts based on our assessment of the collectability of specific customer accounts. Changes in accounts receivable
are primarily due to the timing and magnitude of orders of our products, the timing of when control of our products is transferred to our customers and the
timing of cash collections.
Accounts receivable are stated at principal amount, do not bear interest, and are generally unsecured. We provide an allowance for doubtful accounts based
on an evaluation of customer account balances past due ninety days from the date of invoicing. Accounts considered uncollectible are charged against the
established allowance.
Investments
We periodically invest in securities of private companies to promote business and strategic objectives. These investments are measured and recorded as
follows:
Non-marketable equity securities are equity securities without a readily determinable fair value. At December 31, 2019 this investment is comprised of $1.5
million in Series A Preferred Stock in Sexton BioTechnologies, Inc. (“Sexton”) This investment is measured and recorded using a measurement alternative
that measures the securities at cost minus impairment, if any. The preferred stock is also convertible at our option into common stock at a price of $0.33 per
share.
As of December 31, 2019, management believes there are no indications of impairment for Sexton.
In September of 2019 the company invested $1.0 million in a convertible note receivable of iVexSol, Inc. (“iVexSol”). The Company has made an
irrevocable election to record this convertible note in its entirety at fair value utilizing the fair value option available under U.S. GAAP. The company
believes that carrying this investment at fair value better portrays the economic substance of the investment. Under the fair value option, gains and losses
on the convertible note are included in unrealized gains/(losses) on investments within net earnings each reporting period. Gains/(losses) related to this
convertible note were not material for the year ended December 31, 2019. The fair value of the Note on the date of investment was determined to be equal
to its principal amount. Interest income related to this Note is recorded separately from other changes in its fair value within interest income each period.
The following table represents the difference between the fair value and the unpaid principal balance of the convertible note as of December 31, 2019:
Fair value as of
December 31, 2019
$1,000,000
Unpaid principal balance as of
December 31, 2019
$1,000,000
Fair value carry amount
(over)/under
$—
Equity Method Investments
Equity method investments at December 31, 2018, consist entirely of our investment in SAVSU. We accounted for our ownership in SAVSU using the
equity method of accounting prior to our acquisition of the remaining ownership interest in SAVSU on August 8, 2019. This method states that if the
investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity
method. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and
50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of
accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying value in the consolidated balance sheet
and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-
temporary impairments which are recorded as a component of other income (expense), net in the consolidated statements of operations. For the period prior
to acquisition, January 1, 2019 through August 7, 2019, SAVSU’s net loss totaled $1.7 million. For the year ended December 31, 2018, SAVSU’s net loss
totaled $1.9 million.
Property and equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years. Leasehold
improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining lease term of the
respective assets. Gains or losses on disposals of property and equipment are recorded within income from operations. Costs of repairs and maintenance are
included as part of operating expenses unless they are incurred in relation to major improvements to existing property and equipment, at which time they
are capitalized.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be
recoverable. If the sum of the expected future cash flows (undiscounted and before interest) from the use of the assets is less than the net book value of the
asset an impairment could exist and the amount of the impairment loss, if any, will generally be measured as the difference between the net book value of
the assets and their estimated fair values. There were no impairment losses recognized during the years ended December 31, 2019 and 2018.
Assets held for rent
Assets held for rent are carried at cost less accumulated depreciation. These assets consist of evo shippers and related components in production shippers
complete and ready to be deployed and placed in service upon a customer order, shippers in the process of being assembled, and components available to
build shippers. When the shipper is sent to our customers, we depreciate the cost of the shippers over its estimated useful life of three years.
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Our customers rent the shippers per a rental agreement. Each agreement provides for fixed monthly rent. Rental revenue and fees are recognized over the
rental term on a straight-line basis. We retain the ownership of the shippers and the evo tracking software platform. At the end of the rental agreement, the
customer returns the shipper to the company.
Assets held for rent are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. If
the sum of the expected future cash flows (undiscounted and before interest) from the use of the assets is less than the net book value of the asset an
impairment could exist and the amount of the impairment loss, if any, will generally be measured as the difference between the net book value of the assets
and their estimated fair values. There were no impairment losses recognized during the years ended December 31, 2019 and 2018.
Lease Accounting
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases: ASC Topic 842, “Leases” (“ASU 2016-02”) that replaces
existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets
and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with
classification affecting the pattern of expense recognition in the consolidated Statements of Operations. Lessor accounting is largely unchanged under ASU
2016-02.
We adopted ASU 2016-02 and related ASUs (collectively Accounting Standards Codification (“ASC”) 842) effective January 1, 2019 using the modified
retrospective method and did not restate comparative periods. Consequently, periods before January 1, 2019 will continue to be reported in accordance with
the prior accounting guidance, ASC 840, “Leases”. We elected the package of practical expedients, which permits us to retain prior conclusions about lease
identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical
expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. We also elected the
practical expedient to combine lease and non-lease components for all of our leases other than net lease real estate leases.
The adoption of this standard resulted in the recording of operating lease right-of-use assets of $1.3 million and short-term and long-term lease liabilities of
$1.8 million as of January 1, 2019. The difference between right-of-use assets and lease liabilities relates to liabilities of $0.5 million for deferred rent and
lease incentives liabilities that were included on our Balance Sheet prior to adoption of ASC Topic 842, “Leases”. These amounts were eliminated at the
time of adoption and are included in the lease liabilities. Adoption of ASC Topic 842, “Leases” did not have a material impact on the Company’s net
earnings and had no impact on cash flows.
Income taxes
We account for income taxes using an asset and liability method which generally requires recognition of deferred tax assets and liabilities for the expected
future tax effects of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are
recognized for the future tax effects of differences between tax bases of assets and liabilities, and financial reporting amounts, based upon enacted tax laws
and statutory rates applicable to the periods in which the differences are expected to affect taxable income. We evaluate the likelihood of realization of
deferred tax assets and provide an allowance where, in management’s opinion, it is more likely than not that the asset will not be realized.
We determine any uncertain tax positions based on a determination of whether and how much of a tax benefit taken in the Company’s tax filings or
positions is more likely than not to be sustained upon examination by the relevant income tax authorities.
Judgment is applied in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. We have not recorded any liabilities for uncertain tax positions or any related interest and penalties. Our tax returns are open to audit for years
ending December 31, 2016 to 2019.
Advertising
Advertising costs are expensed as incurred and totaled $43,000 and $30,000 for the years ended December 31, 2019 and 2018, respectively.
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Concentrations of credit risk and business risk
In the years 2019 and 2018, we derived approximately 15% of our revenue from one customer and 29% of our revenue from two customers, respectively.
All revenue from foreign customers are denominated in United States dollars.
The following table represents the Company’s total revenue by geographic area (based on the location of the customer):
Revenue by customers’ geographic locations
United States
Canada
Europe, Middle East, Africa (EMEA)
Other
Total revenue
Year Ended December 31,
2018
2019
69%
16%
14%
1%
100%
77%
13%
8%
2%
100%
At December 31, 2019, two customers accounted for 25% of gross accounts receivable. At December 31, 2018, three customers accounted for 71% of gross
accounts receivable. No other customers accounted for more than 10% of our gross accounts receivable. In the years 2019 and 2018, we derived
approximately 74% and 88%, respectively, of our revenue from CryoStor products.
Research and development
Research and development costs are expensed as incurred.
Stock-based Compensation
We measure and record compensation expense using the applicable accounting guidance for share-based payments related to stock options, time-based
restricted stock, and performance-based awards granted to our directors and employees. The fair value of stock options, including performance awards,
without a market condition is determined by using the Black-Scholes option-pricing model. The fair value of restricted stock awards with a market
condition is estimated, at the date of grant, using the Monte Carlo Simulation model. The Black-Scholes and Monte Carlo Simulation valuation models
incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing our stock
options, significant judgment is required in determining the expected volatility of our common stock and the expected life that individuals will hold their
stock options prior to exercising. Expected volatility for stock options is based on the historical and implied volatility of our own common stock while the
volatility for our restricted stock awards with a market condition is based on the historical volatility of our own stock and the stock of companies within our
defined peer group. Further, our expected volatility may change in the future, which could substantially change the grant-date fair value of future awards
and, ultimately, the expense we record. The fair value of restricted stock, including performance awards, without a market condition is estimated using the
current market price of our common stock on the date of grant.
We expense stock-based compensation for stock options, restricted stock awards, and performance awards over the requisite service period. For awards
with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award.
For awards with a market condition, we expense over the vesting period regardless of the value that the award recipients ultimately receive.
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Business Combinations, Goodwill and Intangible Assets
Business Combinations
The Company accounts for business acquisitions using the acquisition method as required by FASB ASC Topic 805, “Business Combinations”.
The Company’s identifiable assets acquired and liabilities, including identified intangible assets, assumed in a business combination are recorded at their
acquisition date fair values. The valuation requires management to make significant estimates and assumptions, especially with respect to long-lived and
intangible assets. Critical estimates in valuing intangible assets include, but are not limited to:
●
●
●
future expected cash flows, including revenue and expense projections;
discount rates to determine the present value of recognized assets and liabilities and;
revenue volatility to determine contingent consideration using option pricing models
The Company’s estimates of fair value are based upon assumptions it believes to be reasonable, but that are inherently uncertain and unpredictable.
Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. While the Company uses its best estimates and
assumptions to value assets acquired and liabilities assumed as of the acquisition date, the estimates are inherently uncertain and subject to refinement.
Goodwill is calculated as the excess of the acquisition price over the fair value of net assets acquired, including the amount assigned to identifiable
intangible assets. Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which these
costs are incurred. The results of operations of an acquired business are included in the consolidated financial statements beginning at the acquisition date.
The Company estimates the acquisition date fair value of the acquisition-related contingent consideration using various valuation approaches, including
option pricing models, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market participants would use to
value these liabilities. The fair value of the contingent consideration is remeasured each reporting period, with any change in the value recorded as other
income or expense.
During the measurement period, which may be up to one year from the acquisition date, any refinements made to the fair value of the assets acquired,
liabilities assumed, or contingent consideration are recorded in the period in which the adjustments are recognized. Upon the conclusion of the
measurement period or final determination of the fair value of the assets acquired, liabilities assumed, or contingent consideration, whichever comes first,
any subsequent adjustments are recognized in the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination
measured at fair value. Goodwill is not amortized but is tested for impairment at least annually. The Company reviews goodwill for impairment annually at
the end of its fourth fiscal quarter and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be less than its
carrying amount (a triggering event). The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test
described in FASB ASC Topic 350, “Intangibles – Goodwill and Other”. The more likely than not threshold is defined as having a likelihood of more than
50 percent. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then performing the quantitative goodwill impairment test is unnecessary and goodwill is considered to be
unimpaired. However, if based on the qualitative assessment the Company concludes that it is more likely than not that the fair value of a reporting unit is
less than its carrying amount, the Company will proceed with performing the quantitative goodwill impairment test. In performing the quantitative
goodwill impairment test, the Company determines the fair value of each reporting unit and compares it to its carrying value. If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of a reporting unit exceeds its
fair value, the Company records an impairment loss equal to the difference. As of December 31, 2019, management believes there are no indications of
impairment.
41
Table of Contents
Intangible Assets
Intangible assets consist of developed technology, customer relationships, and tradenames and trademarks, resulting from the Company’s acquisitions.
Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives on a straight-line basis. Intangible
assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of
these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive
landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the
marketplace, including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products. If
impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted
cash flows. If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future discounted
cash flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the
remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company continues to believe that
its definitive-lived intangible assets are recoverable at December 31, 2019.
Certain Warrants which have Features that may Result in Cash Settlement
Warrants that include cash settlement features are recorded as liabilities at their estimated fair value at the date of issuance and are remeasured at fair value
each reporting period with the increase or decrease in fair value recorded in the Consolidated Statements of Operations. The warrants are measured at
estimated fair value using the Black Scholes valuation model, which is based, in part, upon inputs for which there is little or no observable market data,
requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock-price volatility, expected life, risk-
free interest rate and dividend yield. We estimate the volatility of our common stock at the date of issuance, and at each subsequent reporting period, based
on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield
curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to
their remaining contractual term. The dividend rate is based on our historical rate, which we anticipate to remain at zero. The assumptions used in
calculating the estimated fair value of the warrants represent our best estimates. However, these estimates involve inherent uncertainties and the application
of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value
could be materially different. The following is our weighted average assumptions used in the Black Scholes calculations of the warrants:
Risk free interest rate
Expected dividend yield
Expected lives
Expected volatility
42
Year Ended December 31,
2018
2019
1.9%
0.0%
1.7
70.3%
2.6%
0.0%
2.8
63.4%
Table of Contents
Recent accounting pronouncements
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements
for Fair Value Measurement.” ASU 2018-13 includes amendments that aim to improve the effectiveness of fair value measurement disclosures. The
amendments in this guidance modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement,
“Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements,” including the consideration of costs and benefits. The
amendments become effective for the Company in the year ending December 31, 2020 and early adoption is permitted. The Company will adopt this
guidance in the first quarter of 2020 and expects there to be no material impact on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” ASU 2019-12 simplifies
the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, including, but not limited to, the exception to the
incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, the exceptions
related to the recognition of a deferred tax liability related to an equity method investment and the exception to methodology for calculating income taxes
in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019-12 becomes effective for the Company in the year ended
December 31, 2021, including interim periods. The Company is considering early adoption in 2020. Due to the full valuation allowance on the Company’s
net deferred tax assets, the Company is currently expecting no material impact from the adoption of ASU 2019-12 on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a
consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For Smaller Reporting Companies as defined by
the SEC, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is
evaluating the impact of the guidance on its financial statements.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”, which clarifies the accounting for
implementation costs in cloud computing arrangements. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. The Company will adopt the standard prospectively on January 1, 2020. The Company does not expect the adoption of
ASU 2018-15 to result in a material change to its financial statements.
43
Table of Contents
2.
Restatement of Consolidated Financial Statements
Background
In March 2014, pursuant to a registered public offering and note conversion agreement with certain note holders of the Company, the Company issued
warrants (“Warrants”) to purchase common stock of the Company. These Warrants were initially classified as equity. The Warrants included a cash
settlement feature that could arise in certain very limited events, therefore, the Company is now of the view that the Warrants should have been accounted
for as a liability, recorded at fair value at the date of issuance, and marked to market at each reporting period. All changes in fair value should have been
recorded in earnings. The company has evaluated the financial statement impact of changing the warrant classification from equity to liability for
previously reported periods and concluded that this impact is material.
As a result, the amounts previously reported for the periods ended March 31, June 30, September 30 and December 31, 2018 and March 31, June 30, and
September 30 2019 are restated in these financial statements, collectively known as the “Affected Periods.” See Note 16: “Quarterly Financial Information
(Unaudited)” for more information on further restatements affecting quarterly periods.
Impact of the Restatement
The cumulative effect of these adjustments on the Company’s previously-reported accumulated deficit and total shareholders’ equity was an increase of
$27.4 million and a decrease of $28.5 million, respectively, as of the beginning of the fiscal year ended December 31, 2018. These adjustments do not
impact the amounts previously reported for the Company’s cash and cash equivalents, net cash used for operating activities, revenue or operating expenses
in any of the Affected Periods.
All of the following adjustments relate to marking the Warrants to fair value at period end. The effects of the restatement on the following financial
statement line items as of and for the periods indicated are summarized in the following tables:
(In thousands)
As of December 31, 2018
Warrant liability
Total liabilities
Additional paid in capital
Accumulated deficit
Total shareholders’ equity
(In thousands, except per share data)
For the year ended December 31, 2018
Change in fair value of warrants
Total other expense
Net income (loss) before provision for income taxes
Net income (loss)
Net income (loss) attributable to common stockholders
Basic net income (loss) per common share
Diluted net income (loss) per common share
(In thousands)
From March 31, 2014 to January 1, 2018
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity / (deficit)
(In thousands)
For the year ended December 31, 2018
Net income (loss)
Change in fair value of warrant liability
Balance Sheet
As Previously
Reported
Adjustments
As Restated
— $
2,319 $
114,160 $
(71,031) $
43,148 $
28,516 $
28,516 $
(1,152) $
(27,364) $
(28,516) $
28,516
30,835
113,008
(98,395)
14,632
Statement of Operations
As Previously
Reported
Adjustments
As Restated
— $
(396) $
3,266 $
3,266 $
2,927 $
0.18 $
0.14 $
(28,271) $
(28,271) $
(28,271) $
(28,271) $
(28,271) $
(1.74) $
(1.70) $
(28,271)
(28,667)
(25,005)
(25,005)
(25,344)
(1.56)
(1.56)
Statement of Shareholders’ Equity / Deficit
As Previously
Reported
Adjustments
As Restated
84,036 $
(73,958) $
10,092 $
(20,531) $
907 $
(19,624) $
63,505
(73,051)
(9,532)
Statement of Cash Flows
As Previously
Reported
Adjustments
As Restated
3,266 $
— $
(28,271) $
28,271 $
(25,005)
28,271
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
44
Table of Contents
3.
Fair Value Measurement
In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” (“ASC Topic 820”), the Company measures its cash and cash
equivalents and investments at fair value on a recurring basis. The company also measures certain assets and liabilities at fair value on a non-recurring basis
when applying acquisition accounting. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC
Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other
inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3 – Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
As of December 31, 2019, the Company valued the Astero and CBS contingent consideration and warrant liabilities at fair value. As of December 31,
2018, the Company valued warrant liabilities at fair value.
There were no remeasurements to fair value during the year ended December 31, 2019 of financial assets and liabilities that are not measured at fair value
on a recurring basis.
The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and
December 31, 2018, based on the three-tier fair value hierarchy:
(In thousands)
As of December 31, 2019
Assets:
Money market accounts
Convertible debt held at fair value
Total
Liabilities:
Contingent consideration - business combinations
Warrant liability
Total
As of December 31, 2018
Assets:
Money market accounts
Liabilities:
Warrant liability (restated)
Level 1
Level 2
Level 3
Total
6,448 $
—
6,448
—
— $
—
— $
—
—
—
— $
—
— $
1,000
1,000
1,914
39,602 $
41,516
6,448
1,000
7,448
1,914
39,602
41,516
Level 1
Level 2
Level 3
Total
30,657 $
— $
— $
30,657
— $
— $
28,516 $
28,516
$
$
$
$
45
Table of Contents
The fair values of money market funds classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The fair
values of investments and contingent consideration classified as Level 3 were derived from management assumptions (see Note 1 – “Organization and
Significant Accounting Policies.”) There have been no transfers of assets or liabilities between the fair value measurement levels. The following table
presents the changes in investments held at fair value which are measured using Level 3 inputs:
(In thousands)
Beginning balance
Purchases
Change in fair value recognized in net income
Total
Year ended
December 31,
2019
$
$
—
1,000
—
1,000
The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:
(In thousands)
Beginning balance
Additions
Change in fair value recognized in net income
Payments earned, reclassified to accrued liabilities
Total
Year ended
December 31,
2019
$
$
—
2,347
50
(483)
1,914
The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs:
(In thousands)
Beginning balance (as restated)
Exercised warrants
Change in fair value recognized in net income
Ending balance
4.
Inventories
Inventories consist of the following at December 31, 2019 and 2018:
(In thousands)
Raw materials
Work in progress
Finished goods
Total
5.
Assets held for rent
Assets held for rent consist of the following at December 31, 2019:
(In thousands)
Shippers placed in service
Accumulated depreciation
Net
Shippers and related components in production
Total
Year ended
December 31,
2019
Year ended
December 31,
2018
(restated)
28,516 $
(1,749)
12,835
39,602 $
19,623
(19,378)
28,271
28,516
2019
2018
2,979 $
1,896
6,097
10,972 $
1,453
652
1,404
3,509
$
$
$
$
December 31,
2019
3,073
(174)
2,899
1,023
3,922
$
$
Shippers and related components in production include shippers complete and ready to be deployed and placed in service upon a customer order, shippers
in the process of being assembled, and components available to build shippers. We recognized $174,000 in depreciation expense related to assets held for
rent during the year ended December 31, 2019.
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Table of Contents
6.
Leases
We lease approximately 32,106 square feet in our Bothell, Washington headquarters. The term of our lease continues until July 31, 2021 with two options
to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1,
2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the
amended lease agreement, our monthly base rent is approximately $63,000 at December 31, 2019, with scheduled annual increases each August and again
in October for the most recent amendment. We are also required to pay an amount equal to the Company’s proportionate share of certain taxes and
operating expenses.
We lease approximately 1,250 square feet in our Menlo Park, California location. The term of our lease continues until July 1, 2020. In accordance with the
lease agreement, the monthly base rent is approximately $5,000 at December 31, 2019. We are also required to pay an amount equal to the Company’s
proportionate electrical expenses.
We lease approximately 9,932 square feet in our Albuquerque, New Mexico location. The term of our lease continues until December 31, 2021 with two
options to extend the terms of the lease, each of which is for an additional period of three years, with the first extension term commencing, if at all, on
December 1, 2021, and the second extension term commencing, if at all, December 1, 2024. In accordance with the lease agreement, the monthly base rent
is approximately $9,000 at December 31, 2019, with a monthly increase if the term is extended.
We lease approximately 106,998 square feet in our Detroit, Michigan location. The term of our lease continues until November 30, 2020 with one option to
extend the term of the lease, for an additional sixty months, with the extension term commencing, if at all, on November 12, 2020. These extension options
are not accounted for under ASC Topic 842, “Leases” because we are not reasonably certain we will enter into the renewal options in their current terms
and the current term is less than 12 months. With adequate notice prior to expiration of the option notice period, we have the right to purchase the premises
for a purchase price that is mutually acceptable to landlord and tenant as agreed to by the parties on or before the expiration of the option notice period. In
the event that the parties are unable to mutually agree on the option purchase price then each party shall obtain, at its sole cost and expense, an appraisal of
the premises and the option purchase price will be the average of the two appraisals. For the avoidance of doubt, tenant’s right to elect to purchase the
premises for the option purchase price shall terminate upon the expiration of the option notice period, but tenant shall not be obligated to close on the
purchase of the premises prior to the expiration of the initial term. In accordance with the lease agreement, the monthly base rent is approximately $15,000
at December 31, 2019, with scheduled annual increases if the term is extended.
Operating leases recorded on our consolidated balance sheet are primarily related to our Bothell, Washington headquarters space lease and our
Albuquerque, New Mexico, SAVSU, space lease. We have not included extension options in our ROU assets or lease liabilities as we are not reasonably
certain we will enter into the renewal options in their current terms. Our Detroit, Michigan and Menlo Park, California lease are not recorded on our
consolidated balance sheet as the term expires in one year or less.
Our financing lease is related to research equipment.
We used a weighted average discount rate of 6.5%, our market collateralized borrowing rate, and 8.1%, the weighted average implied interest on our leases,
to determine our operating and financing lease liabilities, respectively. The weighted average remaining term of our operating and financing leases are 1.8
years and 1.2 years, respectively. We initially recognized $1.3 million in operating lease right of use assets and initially recognized $1.8 million in
operating lease liabilities. Through the SAVSU acquisition we acquired $232,000 in operating lease right of use assets and acquired $232,000 in operating
lease liabilities. The operating lease costs recognized in the year ended December 31, 2019 were $663,000, which consist of $612,000 in operating lease
costs and $51,000 in short-term lease costs, we did not have any variable lease costs. The operating lease cash paid in the year ended December 31, 2019 of
$778,000. Rent expense for the year ended December 31, 2018, was recognized under prior GAAP (ASC 840) and amounted to $809,000.
Maturities of our operating lease liabilities as of December 31, 2019 is as follows:
(In thousands)
2020
2021
Total lease payments
Less: interest
Total present value of lease liabilities
Operating
Leases
Financing
Leases
$
$
873 $
559
1,432
(78)
1,354 $
15
3
18
(1)
17
The following table provides the future minimum lease payments under noncancelable operating leases with lease terms in excess of one year at December
31, 2018 in accordance with ASC 840:
(In thousands)
2019
2020
2021
Total
$
Operating
Leases
748
764
452
1,964
47
Table of Contents
7.
Deferred Rent
We eliminated our deferred rent at January 1, 2019 as a result of the implementation of ASU 2016-02. Deferred rent consists of the following at December
31, 2018:
(In thousands)
Landlord-funded leasehold improvements
Less accumulated amortization
Total (current portion $130 December 31, 2018)
Straight line rent adjustment
Total deferred rent
2018
1,125
(757)
368
111
479
$
$
During the year ended December 31, 2018, the Company recorded $127,000 in deferred rent amortization of these landlord funded leasehold
improvements.
Straight line rent adjustment for the year ended December 31, 2018 represents the difference between cash rent payments and the recognition of rent
expense on a straight-line basis over the terms of the lease.
8.
Goodwill and Intangible Assets
Goodwill
The following table represents the changes in the carrying value of goodwill for the year ended December 31, 2019:
(In thousands)
Balance as of December 31, 2018
Goodwill related to Astero acquisition
Goodwill related to SAVSU acquisition
Goodwill related to CBS acquisition
Balance as of December 31, 2019
Intangible Assets
Goodwill
—
9,515
21,037
3,085
33,637
$
$
Intangible assets, net consisted of the following at December 31, 2019:
(In thousands, except weighted average useful life)
December 31, 2019
Finite-lived intangible assets:
Customer Relationships
Tradenames
Technology – acquired
In-process R&D(1)
Total intangible assets
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted
Average
Useful Life (in
years)
$
$
800 $
2,590
19,020
650
23,060 $
(51) $
(123)
(904)
—
(1,078) $
749
2,467
18,116
650
21,982
5.6
8.1
8.4
9.0
8.3
(1) In-process R&D represents the fair value of incomplete research and development that has not yet reached technological feasibility. We will amortize
the asset upon technological feasibility, which has been placed in service in the second quarter of 2020.
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Table of Contents
Amortization expense for finite-lived intangible assets was $1.1 million for the year ended December 31, 2019. In-process research and development was
put into service in the second quarter of 2020, as such we have included the amortization in the schedule below based on an estimated life of 9 years. As of
December 31, 2019, the Company expects to record the following amortization expense:
(In thousands)
For the Years Ended December 31,
2020
2021
2022
2023
2024
Thereafter
Total
9.
Income Taxes
The provision (benefit) for income taxes consists of the following:
(In thousands)
Federal
State
Total current tax provision
Federal
State
Total deferred tax provision
Provision (benefit) for income taxes
$
Estimated
Amortization
Expense
2,788
2,825
2,825
2,795
2,770
7,979
21,982
$
$
Year Ended
December 31,
2019
2018
—
—
—
(1,541)
—
(1,541)
(1,541)
—
—
—
—
—
—
—
In connection with the 2019 SAVSU Acquisition, the Company recognized a deferred tax liability of $1.5 million on acquired intangible assets. As a result,
the Company recorded an income tax benefit of $1.5 million for the release of valuation allowance on our existing U.S. deferred tax assets as a result of the
offset of deferred tax liabilities established for intangible assets from the acquisition.
49
Table of Contents
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
(In thousands)
Tax on net income at federal statutory rate
Change in valuation allowance
Stock-based compensation
Section 162(m) limitation on executive compensation
Book loss on equity method investment
Fair value change in warrant liability
Gain on stock acquisition
Transaction costs
Tax credits
Expired net operating losses
Other
Total
The principal components of the Company’s net deferred tax assets are as follows:
(In thousands)
Deferred tax assets related to:
Net operating loss carryforward
Stock-based compensation
Accruals and reserves
Inventory
Lease liabilities
Tax credit carryforward
Other
Total deferred tax assets
Deferred tax liabilities related to:
Intangibles
Right-of-use assets
Fixed assets
Total deferred tax liabilities
Total deferred taxes
Less: valuation allowance
Net deferred taxes
50
Year Ended
December 31,
2019
2018
21%
(5%)
74%
(17%)
(5%)
(82%)
64%
(4%)
5%
(5%)
1%
47%
December 31,
2019
2018
$
9,495 $
1,110
192
88
208
152
4
11,249
(2,217)
(218)
(108)
(2,543)
8,706
(8,706)
––
21%
2%
3%
(1%)
(1%)
(24%)
—%
—%
—%
—%
—%
—%
7,381
664
181
42
101
––
––
8,369
––
––
(24)
(24)
8,345
(8,345)
––
Table of Contents
The Company maintains a full valuation allowance on its net deferred tax assets. The assessment regarding whether a valuation allowance is required
considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this
assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative book losses,
not including transaction gains, as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740,
“Accounting for Income Taxes”, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its
deferred tax assets will be maintained. The Company will continue to assess the realizability of its deferred tax assets going forward and will adjust the
valuation allowance as needed. Our valuation allowance increased by $0.4 million from 2018 to 2019, primarily due to increases in the net operating loss
carryforwards and stock compensation deferred tax assets offset by an increase in the deferred tax liabilities for intangibles. Our valuation allowance
decreased by $0.4 million from 2017 to 2018, primarily due to a decrease in the deferred tax asset for net operating loss carryforwards.
The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax
filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to
examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available.
The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. As of December 31, 2019, the Company had no uncertain tax positions.
As of December 31, 2019, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $44.7 million, which is available to
reduce future taxable income. Approximately $34.9 million of NOL will expire from 2020 through 2036, and approximately $9.8 million of NOL will be
carried forward indefinitely. The NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the
ownership interest. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The Company
is planning to complete a study during 2020 to determine whether the net operating losses are subject to such limitations. Subsequent ownership changes
may further affect the limitation in future years.
10.
Warrants
In March 2014, pursuant to a to a registered public offering and note conversion agreement with certain note holders, the Company issued warrants to
purchase 6,910,283 shares of common stock at $4.75 per share. The warrants expire in March 2021.
In May 2016, in connection with our WAVI credit facility, the Company issued a warrant to purchase 550,000 shares of common stock at $1.75 per share.
The warrant was immediately exercisable and expires in May 2021.
The following table summarizes warrant activity for the years ended December 31, 2019 and 2018:
Outstanding at beginning of year
Exercised
Outstanding and exercisable at end of year
Year Ended
December 31, 2019
Wtd. Avg.
Exercise
Price
Shares
Year Ended
December 31, 2018
Wtd. Avg.
Exercise
Price
Shares
4,080,005 $
(121,000)
3,959,005 $
4.35
4.75
4.33
6,688,849 $
(2,608,844)
4,080,005 $
4.50
4.75
4.35
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11.
Stock-Based Compensation
Stock Compensation Plans
Our stock-based compensation programs are long-term retention programs that are intended to attract, retain and provide incentives for talented employees,
officers and directors, and to align stockholder and employee interests. We have the following stock-based compensation plans and programs:
During 2013, we adopted the 2013 Performance Incentive Plan (the “2013 Plan”), which allows us to grant options or restricted stock units to all
employees, including executive officers, outside consultants and non-employee directors. An aggregate of 3.1 million shares of common stock were
initially reserved for issuance under the 2013 Plan. In May 2017, the shareholders approved an increase in the number of shares available for issuance to
4.1 million shares. As of December 31, 2019, there were outstanding options to purchase 2.1 million shares of Company common stock and 553,000
unvested restricted stock awards outstanding under the 2013 Plan.
The Company also issued, outside any approved compensation plans, non-incentive stock options. As of December 31, 2019, there were 188,000 such
options outstanding which were fully vested prior to 2018.
Issuance of Shares
When options and warrants are exercised, it is the Company’s policy to issue new shares.
Stock Option Activity
Service Vesting-Based Stock Options
The following is a summary of service vesting-based stock option activity for 2019 and 2018, and the status of service vesting-based stock options
outstanding at December 31, 2019 and 2018:
Year Ended
December 31, 2019
Wtd. Avg.
Exercise
Price
Shares
Year Ended
December 31, 2018
Wtd. Avg.
Exercise
Price
Shares
Outstanding at beginning of year
Granted
Exercised
Forfeited
Expired - vested
Outstanding at end of year
2,043,402 $
––
(469,510)
(3,437)
––
1,570,455 $
1.91
––
1.72
5.69
––
1.96
2,390,012 $
––
(330,983)
(15,627)
––
2,043,402 $
Stock options exercisable at year end
1,465,599 $
1.94
1,661,999 $
1.85
––
1.36
4.34
––
1.91
1.87
We recognized stock compensation expense related to performance-based options of $370,000 and $509,000 during the year ended December 31, 2018.
None was recognized in the year ended December 31, 2019 and 2018. As of December 31, 2019, there was $22.3 million of aggregate intrinsic value of
outstanding service vesting-based stock options, including $20.9 million of aggregate intrinsic value of exercisable service vesting-based stock options.
Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last
trading day of the year and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option
holders exercised their options on December 31, 2019. This amount will change based on the fair market value of the Company’s stock. Intrinsic value of
service vesting-based awards exercised during the years ended December 31, 2019 and 2018 was $7.1 million and $3.8 million, respectively. There were no
service based-vesting options granted during the years ended December 31, 2019 and 2018. The weighted average remaining contractual life of service
vesting-based options outstanding and exercisable at December 31, 2019 is 5.0 years and 5.4 years, respectively. Total unrecognized compensation cost of
service vesting-based stock options at December 31, 2019 of $148,000 is expected to be recognized over a weighted average period of 1.1 years.
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Table of Contents
The following table summarizes information about service vesting-based stock options outstanding at December 31, 2019:
Range of
Exercise Prices
$0.49 - 1.00
$1.01 - 1.50
$1.51 - 2.50
$2.51 - 8.60
Number Outstanding at
December 31, 2019
Weighted Average
Remaining
Contractual Life
Weighted Average
Exercise Price
3,571
175,199
1,328,367
63,318
1,570,455
1.91 $
1.32 $
5.46 $
5.71 $
5.00 $
0.49
1.24
1.94
4.42
1.96
Performance-based Stock Options
The Company’s Board of Directors implemented a Management Performance Bonus Plan for 2017. Based on achieving varying levels of specified revenue
for the year ending December 31, 2017, up to 1,000,000 options to purchase shares of the Company’s common stock may be vested. The options have an
exercise price of $1.64, and if revenue levels for 2017 were met. If the minimum performance targets are not achieved, no options will vest. On February
27, 2018, the Company’s Board of Directors determined that the specified revenue target had been achieved. Accordingly, 999,997 options to purchase
shares of the Company’s common stock vested in 2017 and 2018.
The following is a summary of performance-based stock option activity under our stock option plans for 2019 and 2018, and the status of performance-
based stock options outstanding at December 31, 2019 and 2018:
Year Ended
December 31, 2019
Wtd. Avg.
Exercise
Price
Shares
Year Ended
December 31, 2018
Wtd. Avg.
Exercise
Price
Shares
Outstanding at beginning of year
Granted
Exercised
Outstanding at end of year
964,997 $
––
(227,500)
737,497 $
1.64
––
1.64
1.64
999,997 $
––
(35,000)
964,997 $
Stock options exercisable at year end
737,497 $
1.64
465,001 $
1.64
––
1.64
1.64
1.64
We recognized stock compensation expense related to performance-based options of $509,000 during the year ended December 31, 2018. None was
recognized in the year ended December 31, 2019. As of December 31, 2019, there was $10.7 million of aggregate intrinsic value outstanding and
exercisable performance-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between
the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been
received by the option holders had all option holders exercised their options on December 31, 2019. This amount will change based on the fair market
value of the Company’s stock. Intrinsic value of performance-based awards exercised during the years ending December 31, 2019 and 2018 was $3.7
million and $285,000, respectively. The weighted average remaining contractual life of performance-based options outstanding and exercisable at
December 31, 2019, is 2.0 years.
There were no stock options granted to employees and non-employee directors in the year ending December 31, 2019 and 2018.
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Restricted Stock
Service vesting-based restricted stock
The following is a summary of service vesting-based restricted stock activity for the year ended December 31, 2019 and 2018, and the status of unvested
service vesting-based restricted stock outstanding at December 31, 2019 and 2018:
Year Ended
December 31, 2019
Year Ended
December 31, 2018
Outstanding at beginning of year
Granted
Vested
Forfeited
Non-vested at end of year
279,919 $
309, 218
(125,818)
(33,920)
429,399 $
5.00
17.15
4.57
12.88
13.25
Wtd. Avg.
Grant Date
Fair Value
Shares
Shares
Wtd. Avg.
Grant Date
Fair Value
1.79
7.02
1.81
3.95
5.00
237,926 $
181,268
(116,647)
(22,628)
279,919 $
The aggregate fair value of the service vesting-based awards granted during the years ended December 31, 2019 and 2018 was $5.3 million and $1.3
million, respectively, which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate
fair value of the service vesting-based awards that vested during the years ended December 31, 2019 and 2018 was $1.9 million and $1.1 million,
respectively.
We recognized stock compensation expense of $1.2 million and $413,000 related to service vesting-based awards during the years ended December 31,
2019 and 2018, respectively. As of December 31, 2019, there was $4.9 million in unrecognized compensation costs related to service vesting-based awards.
We expect to recognize those costs over 3.3 years.
Market-based restricted stock
On February 25, 2019 the Company granted 94,247 shares and on April 1, 2019 granted 29,604 shares of market-based stock to its executives in the form
of restricted stock. The shares granted contain a market condition based on Total Shareholder Return (“TSR”). The TSR market condition measures the
Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted
shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as
compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following
assumptions: a historical volatility of 69%, 0% dividend yield and a risk-free interest rate of 2.5%. The historical volatility was based on the most recent 2-
year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the
peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The
risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated
with the market condition of the award. The fair value of this award will be expensed on a straight-line basis over the grant date to the vesting date of
December 31, 2020. For the period ended December 31, 2019, the aggregate grant date fair value of the market-based restricted stock awards was $3.3
million. We recognized stock compensation expense of $1.5 million for the year ended December 31, 2019 related to market-based restricted stock awards.
As of December 31, 2019, there was $1.8 million in unrecognized non-cash compensation costs related to market-based restricted stock awards expected to
vest. We expect to recognize those costs over 1 year.
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Total Stock Compensation Expense
We recorded total stock compensation expense for the years ended December 31, 2019 and 2018, as follows:
(In thousands)
Research and development costs
Sales and marketing costs
General and administrative costs
Cost of product revenue
Total
12.
Commitments and Contingencies
Employment agreements
Year Ended
December 31,
2019
2018
571 $
711
1,584
177
3,043 $
260
269
809
181
1,519
$
$
We have employment agreements with our Chief Executive Officer, Chief Financial and Operating Officer, Chief Science Officer, Chief Quality Officer,
Chief Marketing Officer, Chief Revenue Officer, Vice President, Freezer Technologies, and Vice President, Cold Chain Technologies Sales. None of these
employment agreements is for a definitive period, but rather each will continue indefinitely until terminated in accordance with its terms. The agreements
provide for a base annual salary, payable in monthly (or shorter) installments. In addition, the agreement with the Chief Executive Officer provides for
incentive bonuses at the discretion of the Board of Directors. Under certain conditions and for certain of these officers, we may be required to pay
additional amounts upon terminating the officer or upon the officer resigning for good reason.
Litigation
From time to time, the Company is subject to various legal proceedings that arise in the ordinary course of business, none of which are currently material to
the Company’s business. The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property. As a
result, the Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty,
and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management
resources and other factors. Management is not aware of any pending or threatened litigation.
Indemnification
As permitted under Delaware law and in accordance with the Company’s bylaws, the Company is required to indemnify its officers and directors for certain
errors and occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its
directors. The Company believes the fair value of the indemnification rights and agreements is minimal. Accordingly, the Company has not recorded any
liabilities for these indemnification rights and agreements as of December 31, 2019.
13.
Acquisitions
Astero Acquisition
On April 1, 2019, BioLife completed the acquisition of all the outstanding shares of Astero. Astero’s ThawSTAR product line is comprised of a family of
automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. The products improve the quality of administration of
high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and
overheating, which are inherent with the use of traditional water baths.
In connection with the Acquisition, the Company paid (i) a base payment in the amount of $12.5 million consisting of (x) an initial cash payment of $8.0
million at the closing of the transactions contemplated by the Purchase Agreement, subject to adjustment for working capital, net debt and transaction
expenses, and (y) a deferred cash payment that was paid into escrow of $4.5 million payable upon the earlier of Astero meeting certain product
development milestones or one year after the date of the Closing and (ii) earnout payments in calendar years 2019, 2020 and 2021 of up to an aggregate of
$3.5 million, which shall be payable upon Astero achieving certain specified revenue targets in each year and a separate earnout payment of $5.0 million
for calendar year 2021 which shall be payable upon Astero achieving a cumulative revenue target over the three-year period from 2019 to 2021.
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Table of Contents
Consideration transferred
The Astero Acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. The Astero Acquisition was
funded through payment of approximately $12.5 million in cash and under the terms of the share purchase agreement, Astero shareholders are eligible to
receive up to an additional $8.5 million of contingent consideration in cash over the next three years based on attainment of specific revenue targets. Under
the acquisition method of accounting, the assets acquired and liabilities assumed from Astero were recorded as of the acquisition date, at their respective
fair values, and consolidated with those of BioLife. The fair value of the contingent consideration of $1.5 million was determined using an option pricing
model. The fair value of the net tangible assets acquired is estimated to be approximately $324,000, the fair value of the intangible assets acquired is
estimated to be approximately $4.1 million, and the residual goodwill is estimated to be approximately $9.5 million. The fair value estimates required
critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty
rates. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates.
Total consideration recorded for the acquisition of Astero is as follows (amounts in thousands):
Cash consideration
Contingent consideration
Working capital adjustment
Total consideration transferred
56
$
$
12,521
1,491
(71)
13,941
Table of Contents
Fair Value of Net Assets Acquired
The table below represents the purchase price allocation to the net assets acquired based on their estimated fair values (amounts in thousands). Such
amounts were estimated using the most recent financial statements from Astero as of March 31, 2019.
Cash and cash equivalents
Accounts receivable, net
Inventory
Customer relationships
Tradenames
Developed technology
In-process research and development
Goodwill
Other assets
Accounts Payable
Other liabilities
Fair value of net assets acquired
$
$
11
154
456
160
470
2,840
650
9,515
99
(250)
(164)
13,941
The fair value of Astero’s identifiable intangible assets and estimated useful lives have been estimated as follows (amounts in thousands except years):
Customer relationships
Tradenames
Developed technology
In-process research and development
Total identifiable intangible assets
Estimated Fair
Value
$
$
160
470
2,840
650
4,120
Estimated
Useful
Life (Years)
4
9
5 – 9
N/A
Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the
cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches
deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was
determined by third-party appraisal primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows
attributable to each identifiable intangible asset. The fair value of inventories was determined using both the cost approach and the market approach.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include,
but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure
the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more
significant assumptions inherent in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future
revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate.
Acquired Goodwill
The goodwill of $9.5 million represents future economic benefits expected to arise from synergies from combining operations and commercial
organizations to increase market presence and the extension of existing customer relationships. All but $1.1 million of the goodwill recorded is not
expected to be deductible for income tax purposes.
SAVSU Acquisition
On August 8, 2019, we closed the acquisition of SAVSU pursuant to a Share Exchange Agreement. Pursuant to the Share Exchange Agreement, SAVSU
Origin, LLC agreed to transfer to us and we agreed to acquire from the Seller 8,616 shares of common stock of SAVSU, representing the remaining 56% of
the outstanding shares of SAVSU that we did not previously own, in exchange for 1,100,000 shares of BioLife common stock. As a result of the
acquisition, SAVSU became a wholly-owned subsidiary on August 8, 2019, the acquisition date.
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Table of Contents
Consideration transferred
The SAVSU acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. The acquisition of 56% of
SAVSU was funded through a transfer of 1,100,000 shares of BioLife common stock, which had a fair value of $18.12 per share or $19.9 million at time of
closing. The total value of 100% of SAVSU consisting of the fair value of the stock issued and the fair value of our existing investment in SAVSU was
$35.8 million at time of closing. Prior to the acquisition, we accounted for our investment of SAVSU using the equity method of accounting which resulted
in a recorded book value of $5.8 million at the acquisition date. We remeasured to fair value the equity interest in SAVSU held immediately before the
business combination. The fair value of our equity interest was determined to be $15.9 million on our existing 44% ownership based on the fair value of
shares transferred at the time of acquisition for the 56% we did not previously own. As a result, we recorded a non-operating gain of $10.1 million.
Under the acquisition method of accounting, the assets acquired and liabilities assumed from SAVSU were recorded as of the acquisition date, at their
respective fair values, and consolidated with those of BioLife. The fair value of the net tangible assets acquired is estimated to be approximately $4.2
million, the fair value of the intangible assets acquired is estimated to be approximately $12.2 million, and the residual goodwill is estimated to be
approximately $19.5 million. The fair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and
expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from
these estimates.
Total consideration paid for the acquisition of SAVSU is as follows (amounts in thousands):
Stock consideration for 55.6% equity interest purchased
$
19,932
This stock consideration plus the fair value of our existing equity investment in SAVSU of $15.9 million results in the total purchase price for accounting
purposes of $35.8 million.
Fair Value of Net Assets Acquired
The table below represents the purchase price allocation to the net assets acquired based on their estimated fair values (amounts in thousands). Such
amounts were estimated using the most recent financial statements from SAVSU as of August 7, 2019.
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Property, plant and equipment, net
Operating right-of-use asset
Assets held for lease
Customer relationships
Tradenames
Developed technology
Goodwill
Accounts Payable and accrued expenses
Deferred tax liabilities
Other liabilities
Fair value of net assets acquired
58
$
$
1,251
753
19
546
233
2,441
80
1,320
10,750
21,037
(807)
(1,541)
(232)
35,850
Table of Contents
The fair value of SAVSU’s identifiable intangible assets and estimated useful lives have been estimated as follows (amounts in thousands except years):
Customer relationships
Tradenames
Developed technology
Total identifiable intangible assets
Estimated Fair
Value
$
$
80
1,320
10,750
12,150
Estimated Useful
Life (Years)
6
9
–
7
8
Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the
cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches
deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was
determined primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each
identifiable intangible asset. The fair value of assets held for rent and property, plant and equipment was determined using both the cost approach and the
market approach.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include,
but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure
the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more
significant assumptions inherent in the in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future
revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate.
59
Table of Contents
Acquired Goodwill
The goodwill of $21.0 million represents future economic benefits expected to arise from synergies from combining operations and commercial
organizations to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible
for income tax purposes.
Custom Biogenic Systems Acquisition
On November 10, 2019, we entered into an Asset Purchase Agreement, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc., a Michigan corporation (“CBS Seller”), pursuant to which we agreed to
purchase from the CBS Seller substantially all of CBS Seller’s assets, properties and rights (the “CBS Acquisition”). The CBS Seller, a privately held
company with operations located near Detroit, Michigan, designs and manufactures liquid nitrogen laboratory freezers and cryogenic equipment and also
offers a related cloud-based monitoring system that continuously assesses biologic sample storage conditions and alerts equipment owners if a fault
condition occurs. The Acquisition closed on November 12, 2019.
In connection with the CBS Acquisition, we paid to CBS Seller (i) a base payment in the amount of $15.0 million, consisting of a cash payment of $11.0
million paid at the closing of the CBS Acquisition, less a cash holdback escrow of $550,000 to satisfy certain indemnification claims, and an aggregate
number of shares of our common stock, with an aggregate fair value equal to $4.0 million, less a holdback escrow of shares of Common Stock with an
aggregate value equal to $3.0 million to satisfy potential payments related to any product liability claims outstanding as of March 13, 2019 and (ii)
potential earnout payments in calendar years 2020, 2021, 2022, 2023 and 2024 of up to an aggregate of, but not exceeding, $15.0 million payable to CBS
Seller upon achieving certain specified revenue targets in each year for certain product lines.
The CBS acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. Under the acquisition method
of accounting, the acquired assets and liabilities assumed from CBS were recorded as of the acquisition date, at their fair values, and consolidated with
BioLife. The fair value of the net tangible assets acquired is $6.0 million, the fair value of the identifiable intangibles is $6.8 million, and the residual
goodwill is $3.1 million. The fair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and expense
projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from these
estimates.
Total consideration transferred (in thousands):
Cash consideration
Stock consideration
Contingent consideration
Total consideration transferred
Fair Value of Net Assets Acquired
$
$
11,000
4,000
856
15,856
The table below represents the purchase price allocation to the net assets acquired based on their fair values (amounts in thousands). Such amounts were
estimated using the most recent financial statements from CBS as of November 11, 2019.
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Property, plant and equipment, net
Customer relationships
Tradenames
Developed technology
Goodwill
Accounts Payable
Other liabilities
Fair value of net assets acquired
$
$
1,044
3,232
29
3,615
560
800
5,430
3,085
(1,328)
(611)
15,856
The fair value of CBS’s identifiable intangible assets and weighted average useful lives have been estimated as follows (amounts in thousands except
years):
Customer relationships
Tradenames
Developed technology
Total identifiable intangible assets
60
Estimated Fair
Value
$
$
560
800
5,430
6,790
Estimated
Useful
Life (Years)
6
6
9
Table of Contents
Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the
cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches
deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was
determined primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each
identifiable intangible asset. The fair value of inventories was determined using both the cost approach and the market approach and the fair value of
property, plant and equipment was determined using the cost and market approach.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include,
but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure
the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more
significant assumptions inherent in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future
revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate.
Acquired Goodwill
The goodwill of $3.1 million represents future economic benefits expected to arise from synergies from combining operations and commercial
organizations to increase market presence and the extension of existing customer relationships. All of the goodwill recorded is expected to be deductible for
income tax purposes.
Revenue, Net Income and Pro Forma Presentation
The Company recorded revenue from Astero of $1.2 million and a net loss of $1.5 million from April 1, 2019, the date of acquisition, to December 31,
2019. The Company recorded revenue from SAVSU of $692,000 and a net loss of $1.7 million from August 8, 2019, the date of acquisition, to December
31, 2019. The Company recorded revenue from CBS of $2.1 million and net income of $187,000 from November 12, 2019, the date of acquisition, to
December 31, 2019. The Company has included the operating results of the acquisitions in its consolidated statements of operations since their respective
acquisition date. The following pro forma financial information presents the combined results of operations of Astero, SAVSU and CBS as if the
acquisition had occurred on January 1, 2018 after giving effect to certain pro forma adjustments. These pro forma adjustments include amortization
expense on the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity compensation issued to employees and
the income tax effect of the adjustments made. In addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair
value were excluded from pro forma net income in 2019.
The following pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not
necessarily indicative of the operating results that would have actually occurred had the transactions been consummated on January 1, 2018 or of future
results. Common stock equivalents are excluded since the effect is anti-dilutive due to the Company’s pro forma net losses. Common stock equivalents
include unvested restricted stock, stock options and warrants:
(In thousands)
Total revenue
Net income (loss)
Loss per share:
Basic and diluted
Year Ended
December 31,
(unaudited)
2019
2018
$
$
37,728 $
(3,160)
(0.16) $
32,353
(3,397)
(0.20)
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14.
Consolidated Balance Sheet Detail
Property and Equipment
Property and equipment consist of the following:
(In thousands)
Property and equipment
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
December 31,
2019
2018
$
$
2,112 $
794
5,187
8,093
(2,521)
5,572 $
Depreciation expense for property and equipment was $544,000 and $338,000 for the years ended December 31, 2019 and 2018, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
(In thousands)
Accrued expenses and other current liabilities
Other payables
Accrued compensation
Deferred revenue
Deferred rent, current portion
Other
Total accrued expenses and other current liabilities
15.
Employee Benefit Plan
December 31,
2019
2018
$
$
302 $
1,018
1,554
324
––
171
3,369 $
1,284
706
1,657
3,647
(2,328)
1,319
62
—
998
––
130
29
1,219
The Company sponsors a 401(k) defined contribution plan for its employees. This plan provides for pre-tax and post-tax contributions for all employees.
Employee contributions are voluntary. Employees may contribute up to 100% of their annual compensation to this plan, as limited by an annual maximum
amount as determined by the Internal Revenue Service. The Company matches employee contributions in amounts to be determined at the Company’s sole
discretion. The Company made $158,000 and no contributions to the plan for the years ended December 31, 2019 and 2018.
62
Table of Contents
16.
Quarterly Financial Information (Unaudited)
In addition to the warrant liability misstatement described in Note 2: “Restatement of Consolidated Financial Statements”, we identified the following
adjustments described below for the quarters ended March 31, June 30 and September 30, 2019.
On March 25, 2019 and April 1, 2019, we granted restricted stock awards with market-based vesting provisions see Note 11: “Stock-Based Compensation”.
These awards were inappropriately valued. In the accompanying quarterly information, we valued these market-based awards using a Monte Carlo
simulation. This resulted in a change in stock compensation expense decrease of $75,000, increase of $172,000 and increase of $175,000 for the quarters
ended March 31, June 30, and September 30 2019.
We discovered a computational error in the calculation in the fair value contingent consideration related to the Astero acquisition. The correction of this
error is corrected in the consolidated balance sheet as of June 30 and September 30, 2019 presented below. This change resulted in a decrease of $439,000
in contingent consideration and increase of $439,000 in goodwill and other intangible assets as of June 30 and September 30, 2019.
Financial Statement Reclassification
Certain operating expenses related to cost of revenue and intangible amortization related to acquisitions were reclassified from research and development
and sales and marketing to conform to the presentation of those operating expenses in the statement of operations for the year ended December 31, 2019.
These reclassifications have no impact on previously reported total revenue, net income (loss), net assets, or total cash flows.
The effect of the adjustments on the restated balance sheets, statements of operations, and statements of cash flows for the quarters ended March 31, June
30, and September 30, 2019 and 2018 is presented below. Earnings per shares has been corrected to reflect all adjustments including the effect of
participating securities.
63
Table of Contents
Consolidated Balance Sheets
(unaudited)
Balance Sheet
March 31, 2018
As Previously
Reported
Adjustments
As Restated
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $6 at March
31, 2018
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Investment in SAVSU
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Deferred rent, current portion
Total current liabilities
Deferred rent, long-term
Warrant liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies
$
7,033 $
-
$
1,043
1,837
331
10,244
1,284
692
1,195
3,171
(2,084)
1,087
926
36
12,293 $
586
204
392
130
1,312
457
-
52
1,821
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
14,725 (a)
-
14,725
$
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250
shares designated, and 4,250 shares issued and outstanding at March 31, 2018
Common stock, $0.001 par value; 150,000,000 shares authorized, 14,145,413
shares issued and outstanding at March 31, 2018
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
64
-
-
14
84,518
(74,060)
10,472
12,293 $
-
(20,501) (a)
5,776 (a)
(14,725)
-
$
7,033
1,043
1,837
331
10,244
1,284
692
1,195
3,171
(2,084)
1,087
926
36
12,293
586
204
392
1,312
457
14,725
52
16,546
-
14
64,017
(68,284)
(4,253)
12,293
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $0 at June
30, 2018
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Investment in SAVSU
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Deferred rent, current portion
Total current liabilities
Deferred rent, long-term
Warrant liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies
Balance Sheet
June 30, 2018
As Previously
Reported
Adjustments
As Restated
$
14,167 $
-
$
2,166
2,122
352
18,807
1,284
693
1,230
3,207
(2,163)
1,044
1,900
36
21,787 $
843
173
518
130
1,664
423
-
45
2,132
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
32,599 (a)
-
32,599
$
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250
shares designated, and 4,250 shares issued and outstanding at June 30, 2018
Common stock, $0.001 par value; 150,000,000 shares authorized, 16,107,505
shares issued and outstanding at June 30, 2018
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
65
-
-
16
92,654
(73,015)
19,655
21,787 $
-
(10,892) (a)
(21,707) (a)
(32,599)
-
$
14,167
2,166
2,122
352
18,807
1,284
693
1,230
3,207
(2,163)
1,044
1,900
36
21,787
843
173
518
1,664
423
32,599
45
34,731
-
16
81,762
(94,722)
(12,944)
21,787
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $0 at
September 30, 2018
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Investment in SAVSU
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Deferred rent, current portion
Total current liabilities
Deferred rent, long-term
Warrant liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies
Balance Sheet
September 30, 2018
As Previously
Reported
Adjustments
As Restated
$
32,381 $
-
$
2,699
2,911
298
38,289
1,284
706
1,511
3,501
(2,234)
1,267
6,857
36
46,449 $
1,090
162
713
130
2,095
386
-
38
2,519
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
50,425 (a)
-
50,425
$
32,381
2,699
2,911
298
38,289
1,284
706
1,511
3,501
(2,234)
1,267
6,857
36
46,449
1,090
162
713
2,095
386
50,425
38
52,944
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250
shares designated, and 4,250 shares issued and outstanding at September 30, 2018
Common stock, $0.001 par value; 150,000,000 shares authorized, 18,237,425
shares issued and outstanding at September 30, 2018
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
66
-
-
18
115,776
(71,864)
43,930
46,449 $
-
(3,021) (a)
(47,404) (a)
(50,425)
-
$
-
18
112,755
(119,268)
(6,495)
46,449
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $0 at March
31, 2019
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Operating lease right-of-use assets
Investment in SAVSU
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Lease liability - operating, current position
Lease liability - financing, current position
Total current liabilities
Long-term lease liability - operating
Long-term lease liability - financing
Warrant liability
Other long-term liabilities
Total liabilities
Commitments and Contingencies
Balance Sheet
March 31, 2019
As Previously
Reported
Adjustments
As Restated
$
31,824 $
-
$
$
2,927
4,060
346
39,157
1,284
704
1,803
3,791
(2,424)
1,367
1,196
6,317
36
48,073 $
1,264
142
630
651
14
2,701
980
13
-
13
3,707
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
48,106 (a)
-
48,106
31,824
2,927
4,060
346
39,157
1,284
704
1,803
3,791
(2,424)
1,367
1,196
6,317
36
48,073
1,264
142
630
651
14
2,701
980
13
48,106
13
51,813
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250
shares designated, and 0 shares issued and outstanding at March 31, 2019
Common stock, $0.001 par value; 150,000,000 shares authorized, 18,717,095
shares issued and outstanding at March 31, 2019
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
67
-
-
19
114,951
(70,604)
44,366
48,073 $
-
(1,154) (a)
(46,952) (a)
(48,106)
-
$
-
19
113,797
(117,556)
(3,740)
48,073
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $26 at
June 30, 2019
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Operating lease right-of-use assets
Investment in SAVSU
Intangible assets, net
Goodwill
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Lease liability - operating, current position
Lease liability - financing, current position
Contingent consideration - current
Total current liabilities
Long-term lease liability - operating
Long-term lease liability - financing
Warrant liability
Other long-term liabilities
Contingent consideration - long-term
Total liabilities
Commitments and Contingencies
Balance Sheet
June 30, 2019
As Previously
Reported
Adjustments
As Restated
$
19,617 $
$
3,832
5,306
384
29,139
1,284
577
1,733
3,594
(2,276)
1,318
1,079
6,100
4,446
9,524
136
51,742 $
876
204
963
665
14
371
3,093
806
10
-
7
1,560
5,476
$
-
-
-
-
-
-
-
-
-
-
-
-
-
(430) (c)
(9) (b),(c)
-
(439)
$
-
-
-
-
-
70 (b)
70
-
-
44,194 (a)
-
(509) (b)
43,755
19,617
3,832
5,306
384
29,139
1,284
577
1,733
3,594
(2,276)
1,318
1,079
6,100
4,016
9,515
136
51,303
876
204
963
665
14
441
3,163
806
10
44,194
7
1,051
49,231
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A,
4,250 shares designated, and 0 shares issued and outstanding at June 30, 2019
Common stock, $0.001 par value; 150,000,000 shares authorized,
18,898,609 shares issued and outstanding at June 30, 2019
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
68
-
19
116,013
(69,766)
46,266
51,742 $
-
-
(656) (a)
(43,538) (a),(d)
(44,194)
(439)
$
-
19
115,357
(113,304)
2,072
51,303
Table of Contents
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Accounts receivable, trade, net of allowance for doubtful accounts of $68 at
September 30, 2019
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Subtotal
Less: Accumulated depreciation
Net property and equipment
Assets held for rent, net
Operating lease right-of-use assets
Investment in SAVSU
Intangible assets, net
Goodwill
Long-term deposits
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Accrued compensation
Lease liability - operating, current position
Lease liability - financing, current position
Contingent consideration - current
Total current liabilities
Long-term lease liability - operating
Long-term lease liability - financing
Warrant liability
Other long-term liabilities
Contingent consideration - long-term
Total liabilities
Commitments and Contingencies
Balance Sheet
September 30, 2019
As Previously
Reported
Adjustments
As Restated
$
21,205 $
4,313
5,694
855
32,067
1,599
588
2,247
4,434
(2,298)
2,136
2,976
1,177
1,000
16,485
28,351
36
84,228 $
1,570
642
1,576
771
14
371
4,944
753
6
-
3
1,560
7,266
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(430) (c)
(9) (b),(c)
-
(439)
$
-
-
-
-
-
70 (b)
70
-
-
41,771 (a)
-
(509) (b)
41,332
21,205
4,313
5,694
855
32,067
1,599
588
2,247
4,434
(2,298)
2,136
2,976
1,177
1,000
16,055
28,342
36
83,789
1,570
642
1,576
771
14
441
5,014
753
6
41,771
3
1,051
48,598
Shareholders’ equity (deficit)
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A,
4,250 shares designated, and 0 shares issued and outstanding at September
30, 2019
Common stock, $0.001 par value; 150,000,000 shares authorized, 20,344,825
shares issued and outstanding at June 30, 2019
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity
$
69
20
137,392
(60,450)
76,962
84,228 $
-
-
814 (a)
(42,585) (a),(d)
(41,771)
(439)
$
-
20
138,206
(103,035)
35,191
83,789
Table of Contents
Consolidated Statements of Operations
(unaudited)
(In thousands, except per share and share data)
Revenue
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of warrant liability
Interest income
Interest expense
Loss from equity-method investment in SAVSU
Total other income (expenses)
Net income (loss)
Less: Preferred stock dividends
Net income (loss) attributable to common stockholders
Net income (loss) attributable to common stockholders:
Basic
Diluted
Earnings per share attributable to common stockholders:
Basic
Diluted
Weighted average shares used to compute earnings per share attributable to
common stockholders:
Basic
Diluted
Statement of Operations
Three Months Ending March 31, 2018
As Previously
Reported
Adjustments
As Restated
$
3,815 $
-
$
3,815
1,364
346
612
1,353
3,675
140
-
8
(1)
(144)
(137)
3
(106)
(103) $
(103) $
(103) $
(0.01) $
(0.01) $
$
$
$
$
$
14,098,610
14,098,610
70
-
-
-
-
-
-
4,870 (a)
-
-
-
4,870
$
$
$
$
$
4,870
-
4,870
3,250
(179)
0.23
(0.01)
-
-
1,364
346
612
1,353
3,675
140
4,870
8
(1)
(144)
4,733
4,873
(106)
4,767
3,147
(282)
0.22
(0.02)
14,098,610
14,098,610
Table of Contents
(In thousands, except per share
and share data)
Statement of Operations
Three Months Ending June 30, 2018
Statement of Operations
Six Months Ending June 30, 2018
Revenue
$
As Previously
Reported
Adjustments
-
5,178 $
As Previously
As Restated
$
5,178 $
Reported Adjustments
-
8,993 $
As Restated
8,993
$
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of warrant
liability
Interest income
Interest expense
Loss from equity-method
investment in SAVSU
Total other income (expenses)
Net income (loss)
Less: Preferred stock dividends
Net income (loss) attributable to
common stockholders
Net income (loss) attributable to
common stockholders:
Basic
Diluted
Earnings per share attributable to
common stockholders:
Basic
Diluted
Weighted average shares used to
compute earnings per share
attributable to common
stockholders:
Basic
Diluted
1,537
325
641
1,390
3,893
1,285
-
32
(1)
(177)
(146)
1,139
(93)
-
-
-
-
-
-
(27,485) (a)
-
-
-
(27,485)
(27,485)
-
1,046
(27,485)
1,537
325
641
1,390
3,893
1,285
(27,485)
32
(1)
(177)
(27,631)
(26,346)
(93)
(26,439)
2,901
671
1,253
2,744
7,569
1,424
-
41
(1)
(321)
(281)
1,143
(200)
-
-
-
-
-
-
(22,615) (a)
-
-
-
(22,615)
(22,615)
-
943
(22,615)
$
$
$
$
1,046 $
1,046 $
(27,485)
(27,485)
0.07 $
0.05 $
(1.81)
(1.79)
$
$
$
$
(26,439) $
(26,439) $
943 $
943 $
(22,614)
(22,614)
(1.74) $
(1.74) $
0.06 $
0.05 $
(1.54)
(1.53)
$
$
$
$
2,901
671
1,253
2,744
7,569
1,424
(22,615)
41
(1)
(321)
(22,896)
(21,472)
(200)
(21,672)
(21,672)
(21,672)
(1.48)
(1.48)
15,180,169
20,374,358
-
(5,194,189)
15,180,169
15,180,169
14,642,378
19,063,595
-
(4,421,217)
14,642,378
14,642,378
71
Table of Contents
(In thousands, except per share
and share data)
Statement of Operations
Three Months Ending September 30, 2018
Statement of Operations
Nine Months Ending September 30, 2018
As Previously
Reported
Adjustments
-
5,293 $
As Previously
As Restated
$
5,293 $
Reported Adjustments
-
14,286 $
As Restated
14,286
$
Revenue
$
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of warrant
liability
Interest income
Interest expense
Loss from equity-method investment
in SAVSU
Total other income (expenses)
Net income (loss)
Less: Preferred stock dividends
Net income (loss) attributable to
common stockholders
$
$
Net income (loss) attributable to
common stockholders:
Basic
Diluted
Earnings per share attributable to
common stockholders:
Basic
Diluted
Weighted average shares used to
compute earnings per share
attributable to common stockholders:
Basic
Diluted
$
$
1,606
312
725
1,455
4,098
1,195
-
80
(1)
(43)
36
1,231
(80)
-
-
-
-
-
-
(25,696) (a)
-
-
-
(25,696)
(25,696)
-
1,606
312
725
1,455
4,098
1,195
(25,696)
80
(1)
(43)
(25,660)
(24,465)
(80)
4,507
983
1,978
4,199
11,667
2,619
-
121
(4)
(363)
(246)
2,373
(279)
-
-
-
-
-
-
(48,311) (a)
-
-
-
(48,311)
(48,311)
-
1,151
(25,696)
(24,545)
2,094
(48,311)
4,507
983
1,978
4,199
11,667
2,619
(48,311)
121
(4)
(363)
(48,557)
(45,938)
(279)
(46,217)
1,151 $
1,151 $
(25,696)
(25,696)
$
$
(24,545) $
(24,545) $
2,094 $
2,094 $
(48,311)
(48,311)
$
$
(46,217)
(46,217)
0.07 $
0.05 $
(1.49)
(1.47)
$
$
(1.42) $
(1.42) $
0.13 $
0.10 $
(3.11)
(3.08)
$
$
(2.98)
(2.98)
17,273,412
23,656,633
-
(6,383,221)
17,273,412
17,273,412
15,529,026
21,051,219
-
(5,522,193)
15,529,026
15,529,026
72
Table of Contents
(In thousands, except per share and share data)
Revenue
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Acquisition Costs
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of warrant liability
Interest income
Interest expense
Loss from equity-method investment in SAVSU
Total other income (expenses)
Income (loss) before provision for income taxes
Income taxes
Net income (loss)
Net income (loss) attributable to common stockholders:
Basic
Diluted
Earnings per share attributable to common stockholders:
Basic
Diluted
Weighted average shares used to compute earnings per share attributable to
common stockholders:
Basic
Diluted
$
$
$
$
73
Statement of Operations
Three Months Ending March 31, 2019
As Previously
Reported
Adjustments
As Restated
$
5,770 $
-
$
5,770
1,647
372
848
2,204
208
5,279
491
-
171
(3)
(232)
(64)
427
-
427
427 $
427 $
0.02 $
0.02 $
- (e)
(13) (d),(e)
(11) (d),(e)
(51) (d)
-
(75)
75
(19,663) (a)
-
-
-
(19,663)
(19,588)
-
(19,588)
(19,588)
(19,588)
(1.05)
(1.05)
$
$
$
$
1,647
359
837
2,153
208
5,204
566
(19,663)
171
(3)
(232)
(19,727)
(19,161)
-
(19,161)
(19,161)
(19,161)
(1.03)
(1.03)
18,648,397
24,358,475
-
(5,710,078)
18,648,397
18,648,397
Table of Contents
(In thousands, except per
share and share data)
Statement of Operation
Three Months Ending June 30, 2019
Statement of Operations
Six Months Ending June 30, 2019
As Previously
Reported
Adjustments
-
6,701 $
As Restated
$
6,701 $
Adjustments
-
12,471 $
As Restated
12,471
$
As Previously
Reported
Revenue
$
Operating expenses
Cost of product revenue
(exclusive of intangible
assets amortization)
Research and development
Sales and marketing
General and administrative
Amort of Intangibles
Acquisition Costs
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of
warrant liability
Interest income
Interest expense
Other Expense
Loss from equity-method
investment in SAVSU
Gain on Acquisition of
SAVSU
Total other income
(expenses)
Income (loss) before
provision for income taxes
Income taxes
Net income (loss)
Net income (loss)
attributable to common
stockholders:
Basic
Diluted
Earnings per share
attributable to common
stockholders:
Basic
Diluted
Weighted average shares
used to compute earnings
per share attributable to
common stockholders:
Basic
Diluted
1,958
739
928
2,118
-
39
5,782
919
-
137
(1)
-
(217)
-
10 (d),(e)
(48) (d),(e)
17 (d),(e)
89 (d)
104 (e)
-
172
(172)
3,586 (a)
-
-
-
-
-
1,968
691
945
2,207
104
39
5,954
747
3,586
137
(1)
-
3,606
1,111
1,776
4,321
-
247
11,061
1,410
-
307
(4)
-
(217)
(448)
-
-
10 (d),(e)
(61) (d),(e)
6 (d),(e)
38 (d)
104 (e)
-
97
(97)
(16,077) (a)
-
-
-
-
-
3,616
1,050
1,782
4,359
104
247
11,158
1,313
(16,077)
307
(4)
-
(448)
-
(81)
3,586
3,505
(145)
(16,077)
(16,222)
838
-
838
3,414
-
3,414
4,252
-
4,252
1,265
-
1,265
(16,174)
-
(16,174)
$
$
$
$
838 $
838 $
2,587
(293)
0.04 $
0.03 $
0.14
(0.01)
$
$
$
$
3,425 $
545 $
1,265 $
1,265 $
(16,174)
(16,174)
0.18 $
0.02 $
0.07 $
0.05 $
(0.87)
(0.85)
(14,909)
-
(14,909)
(14,909)
(14,909)
(0.80)
(0.80)
$
$
$
$
18,819,459
24,539,299
-
-
18,819,459
24,539,299
18,734,401
24,439,959
-
(5,705,558)
18,734,401
18,734,401
74
Table of Contents
(In thousands, except per
share and share data)
Statement of Operations
Three Months Ending September 30, 2019
Statement of Operations
Nine Months Ending September 30, 2019
As Previously
Reported
Adjustments
-
6,604 $
As Previously
As Restated
$
6,604 $
Reported Adjustments
-
19,075 $
As Restated
19,075
$
Revenue
$
Operating expenses
Cost of product and rental
revenue (exclusive of
intangible assets
amortization)
Research and development
Sales and marketing
General and administrative
Amort of Intangibles
Acquisition Costs
Total operating expenses
Operating income (loss)
Other income (expenses)
Change in fair value of
warrant liability
Interest income
Interest expense
Other Expense
Loss from equity-method
investment in SAVSU
Gain on Acquisition of
SAVSU
Total other income
(expenses)
Income (loss) before
provision for income taxes
Income taxes
Net income (loss)
$
$
$
Net income (loss)
attributable to common
stockholders:
Basic
Diluted
Earnings per share
attributable to common
stockholders:
Basic
Diluted
Weighted average shares
used to compute earnings
per share attributable to
common stockholders:
Basic
Diluted
2,084
1,309
1,259
2,258
-
291
7,201
(597)
-
110
(1)
(13)
(291)
10,108
10 (d),(e)
(277) (d),(e)
(9) (d),(e)
90 (d)
361 (e)
-
175
(175)
1,128 (a)
-
-
-
-
-
2,094
1,032
1,250
2,348
361
291
7,376
(772)
1,128
110
(1)
(13)
5,690
2,420
3,035
6,579
-
538
18,262
813
-
417
(5)
(13)
(291)
(739)
10,108
10,108
20 (d),(e)
(338) (d),(e)
(3) (d),(e)
128 (d)
465 (e)
-
272
(272)
(14,949) (a)
-
-
-
-
-
9,913
1,128
11,041
9,768
(14,949)
9,316
-
9,316
953
-
953
10,269
-
10,269
10,581
-
10,581
(15,221)
-
(15,221)
9,316 $
9,316
(936)
(454)
0.47 $
0.37 $
(0.05)
(0.02)
$
$
$
8,380 $
8,862
10,581 $
10,581
(15,221)
(15,221)
0.42 $
0.35 $
0.55 $
0.43 $
(0.79)
(0.67)
$
$
$
5,710
2,082
3,032
6,707
465
538
18,534
541
(14,949)
417
(5)
(13)
(739)
10,108
(5,181)
(4,640)
-
(4,640)
(4,640)
(4,640)
(0.24)
(0.24)
19,735,364
25,343,112
-
-
19,735,364
25,343,112
19,071,722
24,705,424
-
(5,633,702)
19,071,722
19,071,722
75
Table of Contents
(In thousands)
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended March 30, 2018
As Previously
Reported
Adjustments
Restated
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities
$
3 $
4,870 (a) $
Depreciation
Stock-based compensation
Amortization of deferred rent related to lease incentives
Amortization of debt discount
Loss from equity method investment in SAVSU
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
(Increase) Decrease in
Accounts payable
Accrued compensation and other current liabilities
Deferred rent
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments on equipment loan
Payments on capital lease obligation
Proceeds from exercise of common stock options and warrants
Payments of preferred stock dividends
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Stock issued for services provided in prior period included in liabilities at year-
end
Purchase of equipment with debt
Series A preferred stock dividends accrued not yet paid
Reclassification of warrant liabilities to equity upon exercise
76
$
$
$
78
373
(32)
-
144
-
(23)
10
12
(69)
(101)
(3)
392
(41)
(41)
(2)
(3)
130
(106)
19
370
6,663
7,033 $
36 $
18
106
- $
-
-
-
-
-
(4,870) (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29
$
$
$
4,873
78
373
(32)
-
144
(4,870)
(23)
10
12
(69)
(101)
(3)
392
(41)
(41)
(2)
(3)
130
(106)
19
370
-
6,663
7,033
36
18
106
29
Table of Contents
(In thousands )
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation
Stock-based compensation
Stock issued for services
Amortization of deferred rent related to lease incentives
Loss from equity method investment in SAVSU
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued compensation and other current liabilities
Deferred rent
Net cash provided by operating activities
Cash flows from investing activities
Investment in equity investment SAVSU
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments on equipment loan
Payments on capital lease obligation
Proceeds from exercise of common stock options and warrants
Payments of preferred stock dividends
Payments for redemption of preferred stock
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Series A preferred stock dividends accrued not yet paid
Stock issued for services provided in prior period included in liabilities at year-
end
Receivables converted to equity investment in SAVSU
Purchase of equipment with debt
Purchase of property and equipment not yet paid
Reclassification of warrant liabilities to equity upon exercise
77
Six Months Ended June 30, 2018
As Previously
Reported
Adjustments
Restated
$
1,143 $
(22,615) (a) $
(21,472)
161
748
(63)
321
-
(1,145)
(275)
(103)
168
6
(6)
955
(1,000)
(61)
(1,061)
(5)
(7)
8,899
(213)
(1,063)
7,611
7,505
6,663
14,168 $
93 $
36
150
18
20
- $
-
-
-
-
22,615 (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
-
-
-
-
9,639
$
161
748
(63)
321
22,615
(1,145)
(275)
(103)
168
6
(6)
955
(1,000)
(61)
(1,061)
(5)
(7)
8,899
(213)
(1,063)
7,611
7,505
-
6,663
14,168
93
36
150
18
20
9,639
$
$
$
Table of Contents
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Depreciation
Stock-based compensation
Stock issued for services
Write off of deferred financing costs
Amortization of deferred rent related to lease incentives
Loss from equity method investment in SAVSU
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued compensation and other current liabilities
Deferred rent
Net cash provided by operating activities
Cash flows from investing activities
Investment in equity investment SAVSU
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from private equity transaction
Payments on equipment loan
Payments on capital lease obligation
Proceeds from exercise of common stock options and warrants
Payments of preferred stock dividends
Payments for redemption of preferred stock
Deferred costs related to security issuance
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Series A preferred stock dividends accrued not yet paid
Stock issued for services provided in prior period included in liabilities at year-
end
Receivables converted to equity investment in SAVSU
Purchase of equipment with debt
Legal fees for private equity transaction not yet paid
Purchase of property and equipment not yet paid
Reclassification of warrant liabilities to equity upon exercise
78
Nine Months Ended September 30, 2018
As Previously
Reported
Adjustments
Restated
$
2,373 $
(48,311) (a) $
(45,938)
245
1,131
(95)
363
-
(1,678)
(1,064)
(49)
343
205
(11)
1,763
(6,000)
(339)
(6,339)
20,000
(9)
(10)
11,725
(306)
(1,063)
(43)
30,294
25,718
6,663
32,381 $
80 $
36
150
18
43
49
- $
-
-
-
-
48,311 (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
-
-
-
-
-
17,509
$
245
1,131
(95)
363
48,311
(1,678)
(1,064)
(49)
343
205
(11)
1,763
(6,000)
(339)
(6,339)
20,000
(9)
(10)
11,725
(306)
(1,063)
(43)
30,294
25,718
-
6,663
32,381
80
36
150
18
43
49
17,509
$
$
$
Table of Contents
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Three Months Ended March 30, 2019
As Previously
Reported
Adjustments
Restated
$
427 $
(19,588) (a) $
(19,161)
Depreciation
Stock-based compensation
Amortization of operating lease liability
Interest expense - finance type lease
Loss from equity method investment in SAVSU
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
(Increase) Decrease in
Accounts payable
Accrued compensation and other current liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments on equipment loan
Payments on capital lease obligation
Proceeds from exercise of common stock options and warrants
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Stock issued for services provided in prior period included in liabilities at year-
end
Purchase of equipment with debt
Series A preferred stock dividends accrued not yet paid
Purchase of property and equipment not yet paid
Reclassification of warrant liabilities to equity upon exercise
79
$
$
$
98
606
(43)
2
232
-
118
(551)
6
553
(302)
1,146
(156)
(156)
(4)
(4)
185
177
1,167
30,657
31,824 $
- $
-
-
46
- $
-
(75) (d)
-
-
-
19,663 (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73
$
$
$
98
531
(43)
2
232
19,663
118
(551)
6
553
(302)
1,146
(156)
(156)
(4)
(4)
185
177
1,167
30,657
31,824
-
-
-
46
73
Table of Contents
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Six Months Ended June 30, 2019
As Previously
Reported
Adjustments
Restated
$
1,265 $
(16,174) (a) $
(14,909)
Depreciation
Stock-based compensation
Amortization of deferred rent related to lease incentives
Amortization of operating lease liability
Interest expense - finance type lease
Loss from equity method investment in SAVSU
Amortization of intangible assets
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
(Increase) Decrease in
Accounts payable
Accrued compensation and other current liabilities
Deferred rent
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Payments related to the Astero Bio Acquisition, net of cash acquired
Investment in equity investment SAVSU
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Payments on equipment loan
Payments on capital lease obligation
Proceeds from exercise of common stock options and warrants
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Series A preferred stock dividends accrued not yet paid
Stock issued for services provided in prior period included in liabilities at year-
end
Receivables converted to equity investment in SAVSU
Purchase of equipment with debt
Purchase of property and equipment not yet paid
Reclassification of warrant liabilities to equity upon exercise
80
$
$
$
209
1,252
-
(87)
2
448
104
-
(632)
(1,341)
(32)
(36)
(20)
-
(53)
1,079
(12,438)
-
(267)
(12,705)
(8)
(7)
600
585
(11,041)
30,657
19,616 $
- $
-
-
-
4
- $
-
97 (d)
-
-
-
-
-
16,077 (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
$
-
-
-
-
400
$
209
1,349
-
(87)
2
448
104
16,077
(632)
(1,341)
(32)
-
(36)
(20)
-
(53)
1,079
(12,438)
-
(267)
(12,705)
(8)
(7)
600
585
(11,041)
30,657
19,616
-
-
-
-
4
400
Table of Contents
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities
Nine Months Ended September 30, 2019
As Previously
Reported
Adjustments
Restated
$
10,581 $
(15,221) (a) $
(4,640)
Depreciation
Loss on disposal of property and equipment
Stock-based compensation
Amortization of operating lease liability
Interest expense - finance type lease
Loss from equity method investment in SAVSU
Gain on acquisition of SAVSU
Amortization of intangible assets
Change in fair value of warrant liability
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
Other assets, net
(Increase) Decrease in
Accounts payable
Accrued compensation and other current liabilities
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Cash acquired on acquisition of SAVSU
Payments related to the Astero Bio Acquisition, net of cash acquired
Investment in iVexSol
Purchase of property and equipment
Purchase of assets held for rent
Net cash used in investing activities
Cash flows from financing activities
Proceeds from private equity transaction
Payments of costs related to Stock Issuances
Payments on equipment loan
Payments on finance lease obligation
Proceeds from exercise of common stock options and warrants
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of year
Non-cash investing and financing activities
Purchase of equipment with debt
Purchase of property and equipment not yet paid
Stock issued as consideration to acquire SAVSU
Reclassification of warrant liabilities to equity upon exercise
$
$
$
81
373
13
1,907
(132)
2
739
(10,108)
465
-
(372)
(1,730)
(272)
(87)
377
558
(98)
2,216
1,251
(12,439)
(1,000)
(356)
(453)
(12,997)
(44)
(12)
(9)
1,394
1,329
(9,452)
30,657
21,205 $
146 $
53
19,932
- $
-
-
272 (d)
-
-
-
-
-
14,949 (a)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,695
$
$
$
373
13
2,179
(132)
2
739
(10,108)
465
14,949
(372)
(1,730)
(272)
(87)
377
558
(98)
2,216
1,251
(12,439)
(1,000)
(356)
(453)
(12,997)
-
(44)
(12)
(9)
1,394
1,329
(9,452)
-
30,657
21,205
146
53
19,932
1,695
Table of Contents
a.
b.
c.
d.
e.
Adjustments related to recording certain warrants as liabilities, see Note 2: “Restatement of Consolidated Financial Statements”.
Adjustments related to change in fair value of Astero contingent consideration at acquisition.
Adjustments related to change in valuation of in-process research and development acquired technology from the Astero acquisition
Adjustments related to change in valuation method of market-based restricted stock awards.
Adjustments related to cost of revenue and intangible amortization were reclassified from research and development and sales and
marketing to conform to the presentation of those operating expenses in the statement of operations for the year ended December 31,
2019
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17.
Subsequent Events
COVID-19
On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The virus and actions taken to mitigate its spread have
had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical
areas in which the Company operates and conducts its business. In particular, the Seattle area, including the location of our corporate headquarters and our
media production facility and warehouse, is at one of the epicenters of the coronavirus outbreak in the U.S. We are currently following the
recommendations of local health authorities to minimize exposure risk for our team members and visitors. However, the scale and scope of this pandemic
is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While we have
implemented specific business continuity plans to reduce the potential impact of COVID-19 and believe that we have sufficient biopreservation media
inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that our continuity plan, once in place, will be
successful or that our inventory will meet forecasted or actual demand.
We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our
customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver
inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19
could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand
for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic
may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may
emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have
a material adverse effect on our business, results of operations, financial condition and prospects.
On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other
things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback
periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable
contributions, and technical corrections to tax depreciation methods for qualified improvement property.
As of March 30, 2020, the company started deferring the employer side of social security payments. We will pay back 50% of our total deferred payments
in 2021 and the remaining 50% in 2022.
We determined that we met the original eligibility requirements per the guidelines original established by the U.S. federal government as part of the
CARES Act for the Pursuant to the Paycheck Protection Program (the “PPP”). As such, on April 20, 2020, the Company received $2,175,320 in support
from the PPP. Because the U.S. government subsequently changed its position and guidelines related to the PPP and publicly traded companies, the
Company repaid the load on April 29, 2020.
Casdin Financing
On May 14, 2020, the Company entered into a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company (“Casdin”),
pursuant to which Casdin agreed to invest $20 million in the Company at a price per share of $10.50. The transaction is expected to close on or before May
26, 2020, subject to ordinary closing conditions. Pursuant to the terms of the share purchase agreement, at closing, the Company will issue to Casdin
1,904,762 shares of Company common stock. The Company has also granted Casdin certain registration rights requiring the Company to file a registration
statement with the Securities and Exchange Commission covering the resale by the Casdin of the shares issued in the transaction.
Cashless warrant exercises
On May 14, 2020, the Company entered into separate warrant exercise agreements with WAVI Holding AG and Taurus4757 GmbH pursuant to which the
warrant holders immediately exercised their respective warrants via a “cashless” exercise as agreed to by the Company. As a result of the cashless exercise,
the Company issued an aggregate of 2,747,970 shares of Company common stock upon cashless exercise of an aggregate of 3,871,405 warrants.
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period
covered by this Form 10-K were not effective, due to the material weakness in our internal controls over financial reporting described below.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, within BioLife Solutions have been detected.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this
assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control—Integrated Framework (2013 framework). Based on our assessment under the framework in Internal Control—Integrated Framework (2013
framework), our management concluded that our internal control over financial reporting was not effective as of December 31, 2019 due to the existence of
a material weakness in our internal controls over complex equity transactions. A material weakness in internal control is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data
reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected. In the course of making our assessment of the effectiveness of internal control over financial
reporting, we identified a material weakness in our internal control over financial reporting. The material weakness related to having insufficient technical
resources to appropriately analyze and account for complex financial instruments, specifically with regard to our prior interpretation of ASC 480,
“Distinguishing Liabilities from Equity”, as it related to the initial classification and subsequent accounting of our Warrants as equity instruments dating
back to March 2014, and ASC 718, “Stock Compensation” as it related to the accounting for stock awards with market-based vesting conditions. Errors in
the accounting for these transactions resulted in the restatement of previously issued financial statements.
The Company’s independent registered public accounting firm, BDO USA, LLP, who audited the consolidated financial statements included in this annual
report, has issued an adverse audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, as
shown below, BDO USA, LLP’s report on the consolidated financial statements appears under Part II, item 8 of this Annual Report on Form 10-K.
In accordance with guidance issued by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their final
assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management’s evaluation of internal
control over financial reporting excluded the internal control activities of SAVSU Technologies, Inc. (“SAVSU,” acquired on August 8, 2019), and Custom
Biogenic Systems, Inc. (“CBS,” acquired on November 12, 2019) as discussed in Note 12, “Acquisitions,” of the Notes to the Consolidated Financial
Statements. We have included the financial results of these in the consolidated financial statements from the date of acquisition. These acquired businesses
constituted approximately 44% of our total consolidated assets (excluding goodwill and intangible assets related to the transactions, which were integrated
into our systems and control environment) and 10% of the total consolidated revenue included in our consolidated financial statements as of and for the
year ended December 31, 2019.
(c) Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2019 that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
(d) Remediation
We plan to devote resources to the remediation and improvement of our internal control over financial reporting, in particular over handling of complex
financial accounting issues. As the Company enters into transactions that involve complex accounting issues, it will consult with third party professionals
with expertise in these matters as necessary to ensure appropriate accounting treatment for such transactions.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
BioLife Solutions, Inc.
Bothell, Washington
Opinion on Internal Control over Financial Reporting
We have audited BioLife Solutions, Inc. (the “Company’s”) internal control over financial reporting as of December 31, 2019, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO
criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31,
2019, based on the COSO criteria.
We do not express an opinion or any form of assurance on management’s statements referring to any corrective actions taken by the Company after the date
of management’s assessment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated
balance sheet of the Company as of December 31, 2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for the year
ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements” and our report dated May 15, 2020
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying “Item 9A, Management’s Annual Report on Internal Control over Financial
Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material
weakness related to the Company’s failure to design and maintain effective controls surrounding reviews of complex equity transactions has been identified
and described in management’s assessment.
This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial
statements, and this report does not affect our report dated May 15, 2020, on those consolidated financial statements.
As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and
conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SAVSU Technologies, Inc. (“SAVSU”),
which was acquired on August 8, 2019, and Custom Biogenic Systems, Inc. (“CBS”), which was acquired on November 12, 2019, and which are included
in the consolidated balance sheets of the Company as of December 31, 2019, and the related consolidated statements of operations, shareholders’ equity,
and cash flows for the year then ended. Together, these acquisitions constituted 44% of assets (excluding goodwill and intangible assets related to the
transaction, which were integrated into the Company's systems and control environment) as of December 31, 2019, and approximately 10% of revenues for
the year ended December 31, 2019. Management did not assess the effectiveness of internal control over financial reporting of SAVSU and CBS because
of the timing of the acquisitions. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal
control over financial reporting of SAVSU and CBS.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process 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. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) 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 the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/S/ BDO USA, LLP
Seattle, Washington
May 15, 2020
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ITEM 9B.
OTHER INFORMATION
On May 14, 2020, the Company entered into a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company (“Casdin”),
pursuant to which Casdin agreed to invest $20 million in the Company at a price per share of $10.50. The transaction is expected to close on or before May
26, 2020, subject to ordinary closing conditions. Pursuant to the terms of the share purchase agreement, at closing, the Company will issue to Casdin
1,904,762 shares of Company common stock. The Company has also granted Casdin certain registration rights requiring the Company to file a registration
statement with the Securities and Exchange Commission covering the resale by the Casdin of the shares issued in the transaction.
On May 14, 2020, the Company entered into separate warrant exercise agreements with WAVI Holding AG and Taurus4757 GmbH pursuant to which the
warrant holders immediately exercised their respective warrants via a “cashless” exercise as agreed to by the Company. As a result of the cashless exercise,
the Company issued an aggregate of 2,747,970 shares of Company common stock upon cashless exercise of an aggregate of 3,871,405 warrants.
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ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
PART III
The following table and text set forth the names and ages of our directors and executive officers as of May 1, 2020. The Board is comprised of only one
class. Also provided herein are brief descriptions of the business experience of each director and executive officer during the past five years (based on
information supplied by them) and an indication of directorships held by each director in other public companies subject to the reporting requirements
under the Federal securities laws. During the past ten years, none of our directors or executive officers has been involved in any legal proceedings that are
material to an evaluation of the ability or integrity of such person, including any of the legal proceedings identified in Item 401(f) of Regulation S-K.
Name
Todd Berard
Roderick de Greef
Karen Foster
James Mathers
Aby J. Mathew, Ph.D.
Michael Rice
Raymond Cohen
Thomas Girschweiler
Andrew Hinson
Joseph Schick
Age
51
59
60
61
48
57
61
62
56
58
Position and Offices With the Company
Chief Marketing Officer
Chief Operating Officer and Chief Financial Officer
Chief Quality Officer
Chief Revenue Officer
Executive Vice President and Chief Scientific Officer
Chief Executive Officer, President, and Director
Chairman of the Board
Director
Director
Director
Todd Berard has been Chief Marketing Officer since December 2019. Before his appointment as Chief Marketing Officer, Mr. Berard had served as
Vice President of Marketing since February 2015 and Senior Director of Marketing since July 2014. Previous to BioLife, Mr. Berard served as Director of
Marketing at Verathon Medical; a division of Roper Inc., from September 2010 until July 2014, overseeing the global marketing, product development, and
product launch strategies for a portfolio of six medical device brands. He also managed all strategic partnerships for product development and helped guide
the organization through several key product launches and the corporate acquisition. At Verathon, Mr. Berard oversaw a creative and product management
team of 12. Responsibilities included all global marketing initiatives and campaigns, strategy, product portfolio management, and strategic planning. He has
over twenty years of experience in life sciences, health care, medical devices, and technology; working for both global leaders and small technology
startups, including the University of Washington School of Medicine, DuPont, and Medtronic. He has a Bachelor of Science Degree in Biochemistry from
the University of Vermont and an MBA from the University of Washington Foster School of Business.
Roderick de Greef has been Chief Financial Officer since May 2016. In December 2019, Mr. de Greef was additionally appointed Chief Operating
Officer. He was appointed interim Chief Financial Officer and interim Secretary in March 2016. Previously, Mr. de Greef served as a director of the
Company from June 2000 through November 2013, and provided the Company with strategic and financial consulting services from July 2007 through
August 2011. Since February 2019, Mr. de Greef has served as a director, chairman of the Audit Committee of the board of directors of Indonesia Energy
Corporation Limited, an oil and gas exploration and production company. Mr. de Greef served Pareteum Corporation., a mobile communications company,
as a director, chair of the Audit Committee and member of the Nominating and Corporate Governance Committee and Compensation Committee from
September 2015 to September 2017, and also from January 2008 to October 2011. From November 2013 to October 2014, Mr. de Greef served as the
president and sole director of Cambridge Cardiac Technologies, Inc. a privately held successor to Cambridge Heart, Inc. From November 2008 to October
2013, Mr. de Greef was the chairman of the board of Cambridge Heart, Inc., a manufacturer of non-invasive diagnostic cardiology products. From
November 2003 to May 2013, Mr. de Greef served as a director, member of the Audit Committee and chairman of the Compensation Committee of
Endologix, Inc. From 2001 to 2006, Mr. de Greef served as Executive Vice President and Chief Financial Officer of NASDAQ listed Cardiac Science,
Inc., which in 2004 was ranked as the 4th fastest growing technology company in North America on Deloitte & Touche’s Fast 500 listing. Mr. de Greef
received his MBA degree from the University of Oregon, and a B.A in Economics and International Relations from San Francisco State University. Mr. de
Greef has extensive experience in corporate finance and the business world in general as well as serving as an officer and director of public companies.
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Karen Foster has been Chief Quality Officer since December 2019. Before her appointment as Chief Quality Officer, Ms. Foster had served as Vice
President, Operations since April 2016. From 2003 to early 2016, Ms. Foster was Vice President of Laboratory Operations and Site Leader at ViaCord,
LLC, a family cord blood bank, and subsidiary of PerkinElmer Inc. Over a 25-year career, Ms. Foster has managed manufacturing and quality operations in
several capacities for companies including ViaCord, Pfizer, Inc. (formerly Pharmacia Corporation) and Amersham Pharmacia Biotech, Inc. (formerly
Phamacia Biotech, Inc.). She holds an MBA from the University of Wisconsin-Milwaukee (specialization in Operations Management), an M.S. in Zoology
from University of Wisconsin-Milwaukee (specialization in Microbiology) and a B.S. in Biological Sciences from Michigan Technological University.
James Mathers has been Chief Revenue Officer since December 2019. Before his appointment as Chief Revenue Officer, Mr. Mathers had served as
the Vice President, Global Sales, since May 2016. Mr. Mathers has more than 30 years of successful sales leadership and entrepreneurial experience in high
growth medical and applied technology organizations. Mr. Mathers’ expertise lies in the building of scalable sales organizations in support of rapid market
adoption of disruptive technologies. From October 2009 to December 2016, Mr. Mathers was Principal/Founder of the Mathers Group, a business
consulting services firm for operational consultancy for physician owned specialty cancer centers and brokerage services for the acquisition and/or sale of
radiation oncology capital equipment. From April 2013 to July 2014, Mr. Mathers was the Area Sales Director for MAKO Surgery/Stryker Orthopedics
where he was responsible for the sales of RIO orthopedic robotics capital equipment for knee and hip replacement. From December 2011 to April 2013,
Mr. Mathers was Director, Business Development for AMAMARK Healthcare responsible for sales revenue for outsourced clinical engineering functions.
Previously, Mr. Mathers served in various global sales, marketing and business development leadership positions at Mako Surgical/Stryker Orthopedics,
BrainLAB, Cardiac Science, Johnson & Johnson and Baxter Healthcare. Mr. Mathers has a Bachelor of Arts in Biology and Pre-Medicine from the
University of Pennsylvania and an MBA from Pepperdine University.
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Aby J. Mathew, Ph.D. has been Executive Vice President and Chief Scientific Officer since December 2019. Before his appointment as Executive
Vice President and Chief Scientific Officer, Mr. Mathew had served as Chief Technical Officer. Dr. Mathew was part of the founding team of BioLife
Solutions, Inc., and has been employed by BioLife since 2000. Dr. Mathew is a co-developer of BioLife’s biopreservation media solutions and co-inventor
on issued and pending patents related to methods, devices, and formulations for the preservation of cells, tissues, and organs. He holds a Ph.D. in
Biological Sciences from Binghamton University and a B.S. in Microbiology from Cornell University. Dr. Mathew has been researching low temperature
biopreservation since 1994, and his studies contributed to the development of BioLife’s current commercial HypoThermosol® and CryoStor® product
platforms and intellectual property foundation. Dr. Mathew is currently active in, or previously a member of, AABB (formerly the American Association of
Blood Banks), BEST (the Biomedical Excellence for Safer Transfusion collaborative), the International Society for Cell Therapy (ISCT), the Alliance for
Regenerative Medicine (ARM), Tissue Engineering & Regenerative Medicine International Society (TERMIS), Society for Cryobiology, International
Society for Biological and Environmental Repositories (ISBER), American Society for Cell Biology, and the Society for In Vitro Biology. Dr. Mathew is a
member of, the Board of Directors, and Advisory Panel, of the Parent’s Guide to Cord Blood Foundation, the Scientific Advisory Board of HemaCare
Corporation, the founding Board of Directors of the Cord Blood Association, the NIST-AMTech National Cell Manufacturing Consortium, the California
Institute for Regenerative Medicine (CIRM) Clinical Advisory Panel, the Business Advisory Board of RoosterBio Inc., and the Scientific Advisory Board
of SAVSU Technologies. Dr. Mathew has obtained UCLA Corporate Governance Program Certification.
Michael Rice has been President and Chief Executive Officer and a director of the Company since August 2006, and was chairman of the Board from
August 2007 to November 2013. Mr. Rice has more than 30 years of leadership and entrepreneurial experience in the medical and high-tech industries. He
was most recently the senior business development manager for medical and wireless products at AMI Semiconductor, from October 2004 to August 2006.
From October 2000 to August 2006, Mr. Rice also served as the director of marketing and business development at Cardiac Science, Inc., a manufacturer of
automated external defibrillators. Prior to that, from May 1998 to October 2000, he was the Vice President, Sales and Marketing for TEGRIS Corporation,
a privately held network services provider. Mr. Rice also spent 12 years, from May 1986 to May 1998 at Physio Control Corporation in several sales and
marketing management roles prior to its acquisition by Medtronic Inc. The Board has determined that Mr. Rice is qualified to serve as a director because it
values management’s insight.
Raymond W. Cohen joined the Board in May 2006 and has served as Chairman of the Board since November 2013. Mr. Cohen is an accredited public
company director with extensive operating and corporate governance experience holding positions on the boards of publicly listed life science companies.
Mr. Cohen currently serves as the Chief Executive Officer and member of the board of directors of Axonics Modulation Technologies, Inc., (NASDAQ:
AXNX), a manufacturer of neuromodulation devices. From mid-2010 to late 2012, Mr. Cohen served as Chief Executive Officer of Vessix Vascular, Inc.
until Vessix was acquired by Boston Scientific Corporation. Previously, from 1997 to 2006, Mr. Cohen served as Chairman and Chief Executive Officer of
NASDAQ listed Cardiac Science, Inc., which in 2004 was ranked as the 4th fastest growing technology company in North America on Deloitte & Touche’s
Fast 500 listing. In 2008, Mr. Cohen was named by AeA as the Private Company Life Science CEO of the Year. Mr. Cohen was named Entrepreneur of the
Year in 2002 by the Orange County Business Journal and was a finalist for Ernst & Young’s Entrepreneur of the Year in the medical company category in
2004. Mr. Cohen holds a B.S. in Business Management from Binghamton University. The board has determined that Mr. Cohen is qualified to serve as a
director because of his extensive experience with public companies.
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Thomas Girschweiler was a member of our Board from 2003 to March 2014 and joined the Board again in May 2015. Mr. Girschweiler has been
engaged in corporate financing activities on his own behalf since 1996. From 1981 to 1996, he was an investment banker with Union Bank of Switzerland.
Mr. Girschweiler is a graduate of the Swiss Banking School. The Board has determined that Mr. Girschweiler is qualified to serve as a director because of
his experience in corporate financing activities and his status as a significant shareholder.
Andrew Hinson joined the Board in February 2007. Mr. Hinson currently serves as a consultant to the biotechnology industry specializing in matters
of clinical and regulatory affairs. Mr. Hinson served as Vice President of Clinical and Regulatory Affairs for LoneStar Heart, Inc. from 2004 to 2016. Mr.
Hinson previously served as the Senior Director of research and clinical development at AnGes MG, Inc. (TSE: 4563) a biotechnology firm engaged in the
development and commercialization of novel gene and cell therapies for the treatment of cardiovascular disease. Prior to that Mr. Hinson had a long career
with Procter & Gamble Pharmaceutical (NYSE:PG) holding multiple technical and management positions in research, clinical development and medical
affairs. Mr. Hinson has diverse experience in the cell and gene therapy markets and extensive experience with regulatory affairs and clinical development
of new therapies for cardiac, neurologic, and gastrointestinal diseases. The Board has determined that Mr. Hinson is qualified to serve as a director because
of his experience and knowledge of companies in the biotechnology space.
Joseph Schick joined the Board in November 2013. He has 13 years of experience as a Chief Financial Officer spanning four different mid-sized
companies in various industries. Prior to his experience as a Chief Financial Officer, Mr. Schick worked in various roles for seven years at Expedia
(NASDAQ: EXPE), including Senior Vice President of Finance. From this background, Mr. Schick has significant experience with SEC reporting, strategic
planning, and mergers and acquisitions. Mr. Schick started his career with Arthur Andersen and is a CPA who received his B.S. in Accounting from the
University of Illinois. He is also on various non-profit boards and completed the Director Certification program at UCLA. The Board has determined that
Mr. Schick is qualified to serve as a director because of his financial experience with public companies.
Except as otherwise provided by law, each director shall hold office until either their successor is elected and qualified, or until he or she sooner dies,
resigns, is removed or becomes disqualified. Officers serve at the discretion of the Board.
There are no family relationships between any of our directors or executive officers and any other of our directors or executive officers.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class
of the Company’s equity securities, to file with the SEC reports of beneficial ownership and reports of changes in beneficial ownership in the Company’s
securities. Based solely upon a review of Forms 3, 4 and 5, and amendments thereto, filed electronically with the SEC during the year ended December 31,
2019, the Company believes that all Section 16(a) filings applicable to its directors, officers, and 10% stockholders were filed on a timely basis during the
year ended December 31, 2019, except that each of Raymond Cohen and Walter Villiger filed one late Form 4 with Mr. Cohen’s Form 4 reporting two
transactions and Mr. Villiger’s Form 4 reporting two transactions.
Overview
BOARD OF DIRECTORS
Our Bylaws provide that the size of our Board is to be determined from time to time by resolution of the Board but shall consist of at least three
members. Our Board presently consists of five members. Our Board has determined three of our directors– Messrs. Cohen, Hinson, and Schick – to be
independent under the rules of the NASDAQ Stock Market, after taking into consideration, among other things, those transactions described under “Certain
Transactions”. Mr. Cohen serves as Chairman of the Board and is an independent director. The Board does not have a lead director; however, recognizing
that the Board is composed almost entirely of outside directors, in addition to the Board’s strong committee system (as described more fully below), we
believe this leadership structure is appropriate for the Company and allows the Board to maintain effective oversight of management.
At each annual meeting of stockholders, members of our Board are elected to serve until the next annual meeting and until their successors are duly
elected and qualified.
Committees of the Board of Directors
The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each committee operates
pursuant to a written charter that may be viewed on our website at www.biolifesolutions.com. The inclusion of our web site address in this Annual Report
does not include or incorporate by reference the information on our web site into this Annual Report.
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The following table sets forth the current composition of the three standing committees of our Board:
Name
Mr. Rice
Mr. Cohen
Mr. Hinson
Mr. Schick (financial expert)
Mr. Girschweiler
Audit
Compensation
Nominating
and
Governance
X
X
Chair
Chair
X
X
X
Chair
X
Board
X
Chair
X
X
X
Audit Committee. Our Audit Committee’s role includes the oversight of our financial, accounting and reporting processes; our system of internal
accounting and financial controls; and our compliance with related legal, regulatory and ethical requirements. The Audit Committee oversees the
appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, including conducting a
review of its independence; reviewing and approving the planned scope of our annual audit; overseeing our independent registered public accounting firm’s
audit work; reviewing and pre-approving any audit and non-audit services that may be performed by our independent registered public accounting firm;
reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls;
reviewing our critical accounting policies and the application of accounting principles; and monitoring the rotation of partners of our independent registered
public accounting firm on our audit engagement team as required by regulation.
In addition, the Audit Committee’s role includes meeting to review our annual audited financial statements and quarterly financial statements with
management and our independent registered public accounting firm. The Audit Committee has the authority to obtain independent advice and assistance
from internal or external legal, accounting and other advisors, at the Company’s expense.
The Board has determined that all members of our Audit Committee meet the independence and financial literacy standards of the NASDAQ Stock
Market and applicable SEC rules. The Board of Directors has determined that Mr. Schick is an “audit committee financial expert” as defined by the rules
of the SEC.
Compensation Committee. The purpose of the Compensation Committee is to discharge its fiduciary responsibilities relating to the compensation of
executive officers, the organizational structure, succession, retention and training policies and review and oversight of benefit programs. Our Compensation
Committee is responsible for reviewing the recommendations of our Chief Executive Officer and Chief Financial Officer, making recommendations to the
Board regarding the compensation of our executive officers, and ensuring that the total compensation paid to the executive officers is reasonable and
competitive, and does not promote excessive risk taking. In making its recommendation to the Board, the Compensation Committee considers the results of
the most recent stockholder advisory vote on executive compensation. The Chief Executive Officer may not be present during voting or deliberation on his
compensation. The Compensation Committee is also responsible for reviewing and making recommendations to the Board regarding director and
committee member compensation. In addition, the Compensation Committee approves and has oversight over our bonus plans for executive officers and/or
stock-based compensation plans and oversight of our overall compensation plans and benefit programs, including approval and oversight of grants.
In discharge of its duties related to administration of executive bonus plans, the Compensation Committee may, subject to the terms of each plan,
delegate authority to management for the day-to-day non-material administration of such plans. Further, the Compensation Committee may, subject to the
terms of each plan, delegate authority to management to make grants to non-executive officers under stock-based compensation plans.
The Compensation Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other
advisors, at the Company’s expense. The Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other
adviser to the Committee, other than in-house legal counsel, only after taking into consideration the six factors outlined in Rule 10C-1 of the Exchange Act.
In considering and determining compensation levels, the Compensation Committee reviews independent and externally generated compensation data, in
accordance with Rule 10C-1 of the Exchange Act.
The members of the Compensation Committee are independent directors within the meaning of the listing standards of the NASDAQ Stock Market.
Nominating and Governance Committee. Our Nominating and Governance Committee’s primary purpose is to evaluate candidates for membership on
our Board and make recommendations to our Board regarding candidates; make recommendations with respect to the composition of our Board and its
committees; provide guidance to our human resources, legal, and finance departments relating to director orientation programs; recommend corporate
governance principles applicable to the Company; manage periodic review, discussion and evaluation of the performance of our Board, its committees and
its members and oversee and monitor compliance with our Code of Business Conduct and Ethics. The Nominating and Governance Committee has the
authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at the Company’s expense.
All members of our Nominating and Governance Committee are independent under the listing standards of the NASDAQ Stock Market.
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The Nominating and Governance Committee will consider candidates recommended by stockholders in accordance with the procedures set forth in our
Bylaws, and prior to the date it recommends a slate of director nominees to the Board. Pursuant to the Nominating and Governance Committee Charter,
there is no difference in the manner in which a nominee recommended by a stockholder or otherwise is evaluated.
In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board’s mix of
skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds,
such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board
at that point in time. In reviewing potential candidates, the Committee will also consider all relationships between any proposed nominee and any of our
stockholders, competitors, customers, suppliers or other persons with a relationship to the Company. The Nominating and Governance Committee believes
that each candidate should be an individual who has demonstrated exceptional ability and judgment, who are willing and able to make a sufficient time
commitment to the Company, and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term
interests of the stockholders.
The Nominating and Governance Committee’s methods for identifying candidates for election to our Board include the solicitation of ideas for
possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or
Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance
Committee may, from time to time, retain, for a fee, one or more third-party search firms to identify suitable candidates. The Nominating and Governance
Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on
the same criteria.
The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and
Governance Committee believe that it is essential that the Board members represent diverse viewpoints.
Codes of Business Conduct and Ethics
We believe in sound corporate governance practices and have always encouraged our employees, including officers and directors to conduct business
in an honest and ethical manner. Additionally, it has always been our policy to comply with all applicable laws and provide accurate and timely disclosure.
Accordingly, the Board has adopted a formal written code of ethics for all employees. The Board has adopted an additional corporate code of ethics for
its Chief Executive Officer, Chief Financial Officer and other senior financial officers, which is intended to be a “code of ethics” as defined by applicable
SEC rules. The Code of Ethics is publicly available on our website at http://investors.biolifesolutions.com/corporate-governance. The Company undertakes
to provide to any person without charge, upon written request, a copy of our code of ethics by writing to Secretary, BioLife Solutions Inc., 3303 Monte
Villa Parkway, Suite 310, Bothell, Washington, 98021. The code of ethics is designed to deter wrongdoing and promote honest and ethical conduct and
compliance with applicable laws and regulations. These codes also incorporate what we expect from our executives so as to enable us to provide accurate
and timely disclosure in our filings with the SEC and other public communications. Any amendments made to the Code of Ethics will be available on our
website.
ITEM 11.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth certain information regarding the compensation, for services rendered in all capacities to us
during 2019 and 2018, of our current principal executive officer and our two other most highly compensated executive officers at the end of 2019 (together,
the “named executive officers”).
Name and Principal
Positions
(a)
Year
(b)
Salary
($)
(c)(1)
Bonus
($)
(d)
Stock
Awards
($)
(e)
All Other
Compensation
($)
(f)
Total
($)
(g)
Michael Rice
President, Chief Executive Officer and Director
2019
2018
530,000
450,000
119,250(2)
67,500
1,592,520(3)
112,500(4)
—
61,937(5)
2,241,770
691,397
Aby J. Mathew
Executive Vice President and Chief Scientific
Officer
2019
419,750
47,222(6)
2018
365,000
54,750
744,644(7)
(8)
91,248
Roderick de Greef
Chief Operating Officer and Chief Financial
Officer
2019
402,500
45,281(9)
707,767(10)
2018
350,000
52,500
87,498(11)
—
—
—
—
1,211,616
510,998
1,155,548
489,998
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(1) Reflects base salary earned in each applicable period.
(2) Performance bonus earned in 2019 was paid out in 12,991 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020.
(3) Represents fair value of 35,497 shares of time-vested restricted stock and 35,497 market-based restricted stock granted on February 25, 2019. The
time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based restricted
stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return
during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers.
(4) Represents 18,750 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder
vesting quarterly over 3 years.
(5) Amounts represent vacation payout to cover taxes on stock awards for vesting periods in 2018
(6) Performance bonus earned in 2019 was paid out in 5,144 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020.
(7) Represents fair value of 16,598 shares of time-vested restricted stock and 16,598 market-based restricted stock granted on February 25, 2019. The
time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based restricted
stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return
during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers.
(8) Represents 15,208 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder
vesting quarterly over 3 years.
(9) Performance bonus earned in 2019 was paid out in 4,933 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020.
(10) Represents fair value of 15,776 shares of time-vested restricted stock and 15,776 performance-based restricted stock granted on February 25, 2019.
The time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based
restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total
shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our
peers.
(11) Represents 14,583 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder
vesting quarterly over 3 years.
Narrative Disclosure to Summary Compensation Table
Employment Agreements
The Company entered into an employment agreement with Michael Rice, Chief Executive Officer, effective January 1, 2018 for a salary of $450,000
per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $517,500 effective January 1, 2019. With
consideration to the recommendations of FW Cook described above, on February 23, 2019, the Compensation Committee approved a salary increase to
$530,000 effective February 15, 2019. The agreement provides that if Mr. Rice’s employment is terminated without “Cause” (other than by reason of death
or disability) or if he resigns for “Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12
months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up
amount with respect to such premiums and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. Rice’s employment is
terminated upon or within 90 days following a “Change in Control”, Mr. Rice is entitled to a lump sum payment equal to 24 months’ salary and an amount
equal to the cost of 24 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination
date, plus a tax gross-up amount with respect to such premiums.
The Company entered into an employment agreement with Aby Mathew, Ph.D., Chief Technology Officer, effective January 1, 2018 for a salary of
$365,000 per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $419,750 effective January 1, 2019.
The agreement provides that if Mr. Mathew’s employment is terminated without “Cause” (other than by reason of death or disability) or if he resigns for
“Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12 months’ medical insurance premiums at
a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums
and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. Mathew’s employment is terminated upon or within 90 days
following a “Change in Control”, Mr. Mathew is entitled to a lump sum payment equal to 12 months’ salary and an amount equal to the cost of 12 months’
medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount
with respect to such premiums.
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The Company entered into an employment agreement with Roderick de Greef, Chief Financial Officer, effective January 1, 2018 for a salary of
$350,000 per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $402,500 effective January 1, 2019.
The agreement provides that if Mr. de Greef’s employment is terminated without “Cause” (other than by reason of death or disability) or if he resigns for
“Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12 months’ medical insurance premiums at
a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums
and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. de Greef’s employment is terminated upon or within 90 days
following a “Change in Control”, Mr. de Greef is entitled to a lump sum payment equal to 18 months’ salary and an amount equal to the cost of 18 months’
medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount
with respect to such premiums.
For purposes of each of these employment agreements, a “Change in Control” means (i) the consummation of a merger or consolidation of the
Company with or into another entity, (ii) the dissolution, liquidation or winding up of the Company or (iii) the sale of all or substantially all of the
Company’s assets. The foregoing notwithstanding, a merger or consolidation of the Company shall not constitute a “Change in Control” if immediately
after such merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent
corporation of such continuing or surviving entity, will be owned by the persons who were the Company’s stockholders immediately prior to such merger
or consolidation in substantially the same proportions as their ownership of the voting power of the Company’s capital stock immediately prior to such
merger or consolidation.
Under each employment agreement, “Cause” means the Company’s belief that any of the following has occurred: (i) any breach of the employment
agreement by the executive officer; (ii) any failure to perform assigned job responsibilities that continues unremedied for a period of 10 days after written
notice to the executive officer by the Company; (iii) the executive officer’s malfeasance or misconduct in connection with the executive officer’s duties
under the employment agreement or any act or omission of the executive officer which is materially injurious to the financial condition or business
reputation of the Company or any of its subsidiaries or affiliates, (iv) commission of a felony or misdemeanor or failure to contest prosecution for a felony
or misdemeanor; (v) the Company’s reasonable belief that the executive officer engaged in a violation of any statute, rule or regulation, any of which in the
judgment of the Company is harmful to the business or to Company’s reputation; (vi) the Company’s reasonable belief that the executive officer engaged in
unethical practices, dishonesty or disloyalty; or (vii) any reason that would constitute “cause” under the laws the State of Washington.
Under each employment agreement, “Good Reason” for the executive officer to terminate his or her employment means the following: (i) the
Company’s material breach of the terms of the employment agreement or any other written agreement between the executive officer and Company; (ii) the
assignment to the executive officer of any duties that are substantially inconsistent with or materially diminish the executive officer’s position prior to
execution of the employment agreement; (iii) a material reduction of the executive officer’s salary, other than as a result of a general salary reduction
affecting substantially all Company employees; (iv) any failure by the Company to obtain the assumption of the employment agreement by any successor
or assign of the Company; or (v) a requirement that the executive officer be based at any office or location more than 50 miles from the executive officer’s
primary work location prior to the effective date of the employment agreement.
Outstanding Equity Awards at December 31, 2019
The following table sets forth information concerning the outstanding equity awards as of December 31, 2019 granted to the named executive officers.
OPTION AWARDS
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
229,226
375,000
93,750
70,833
37,966
55,451
197,707
17,857
10,000
229,837
6,919
43,750
79,625
––
––
6,250
29,167
––
––
––
––
––
––
––
6,250
24,375
––
––
––
––
––
––
––
––
––
––
––
––
––
Option
Exercise
Price ($)
(e)
Option
Expiration
Date
(f)
12/20/2021(2)
5/4/2025(3)
3/15/2026(4)
2/7/2022(5)
2/5/2020(1)
2/11/2021(1)
12/20/2021(2)
2/15/2022(1)
4/21/2024(1)
5/4/2025(6)
12/20/2021(2)
3/4/2026(7)
5/3/2026(8)
1.64
2.06
1.90
1.78
1.40
1.12
1.64
1.40
3.70
2.06
1.64
1.76
1.81
Name (a)
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Roderick de Greef
Roderick de Greef
Roderick de Greef
(1) This award is fully vested.
(2) This award is fully vested.
(3) This award is fully vested.
(4) This award vested 1/4 of the total shares on March 15, 2017 and, thereafter, vested and continues to vest in 36 equal monthly increments.
(5) This award vested 1/4 of the total shares on February 7, 2018 and, thereafter, has vested and continues to vest in 36 equal monthly increments.
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(6) This award vested 1/4 of the total shares on May 4, 2016 and, thereafter, has vested and will continue to vest in 36 equal monthly increments.
(7) This award vested 1/4 of the total shares on March 4, 2017 and, thereafter, has vested and will continue to vest in 36 equal monthly increments.
(8) This award vested 1/4 of the total shares on May 3, 2017 and, thereafter, has vested and will continue to vest in 36 equal monthly increments.
Number of shares or
units of stock that have
not vested
(#)
(c)
Market value of
shares of units
of stock that
have not
vested(1)
($)
(d)
Equity
incentive
plan awards: Number
of
unearned
shares, units or other
rights that have not
vested
(#)
(e)
Equity
incentive
plan awards: Market or
payout value of
unearned
shares, units or other rights
that have not vested
($)
(f)
10,547(2)
35,497(3)
8,555(5)
16,598(6)
8,203(7)
15,776(8)
170,650
574,341
138,420
268,556
132,725
255,256
––
35,497(4)
––
16,598(4)
––
15,776(4)
––
574,341
––
268,556
––
255,256
Grant Date
(b)
1/1/2018
2/25/2019
1/1/2018
2/25/2019
1/1/2018
2/25/2019
Name (a)
Michael Rice
Michael Rice
Aby J. Mathew
Aby J. Mathew
Roderick de Greef
Roderick de Greef
(1) The dollar amounts shown in columns (d) and (f) are determined by multiplying the number of shares or units shown in column (c) or (e), as
applicable, by $16.18, the closing price of BioLife’s common stock on December 31, 2019.
(2) 10,547 unvested time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. Rice continues to
be employed with BioLife through the vesting dates.
(3) 35,497 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments,
provided that Mr. Rice continues to be employed with BioLife through the vesting dates.
(4) The target number of market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest depending on
BioLife’s Relative Total Shareholder Return (“TSR”) compared to a group of 20 peers over the relevant two-year performance period.
(5) 8,555 unvested time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. Mathew continues
to be employed with BioLife through the vesting dates.
(6) 16,598 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments,
provided that Mr. Mathew continues to be employed with BioLife through the vesting dates.
(7) 8,203 time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. de Greef continues to be
employed with BioLife through the vesting dates.
(8) 15,776 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments,
provided that Mr. de Greef continues to be employed with BioLife through the vesting dates.
Director Compensation
Each of our non-employee directors, during the year ended December 31, 2019, non-employee directors were compensated with an annual retainer fee
of $50,000. In addition, the Board Chairman was compensated an additional $100,000 for the year. Committee chairpersons were compensated with
additional annual retainers as follows:
Audit Committee Chairman
Nominating and Governance Committee Chairman
95
Annual
Retainer
$
$
10,000
5,000
Table of Contents
A total of $315,000 in cash director compensation was recorded during the year ended December 31, 2019. The following table sets forth information
regarding compensation earned by our non-employee directors for the year ended December 31, 2019.
Name(1)
Raymond Cohen
Thomas Girschweiler
Andrew Hinson
Joseph Schick
Annual Cash
Retainer
($)
Board and
Committee
Chair Fees
($)
Total
Compensation
($)
50,000
50,000
50,000
50,000
100,000
––
5,000
10,000
150,000
50,000
55,000
60,000
(1) Michael Rice did not receive any additional compensation for his services as a director.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 1, 2020, certain information regarding the beneficial ownership of Common Stock by (i) each stockholder
known by the Company to be the beneficial owner of more than 5% of the outstanding shares thereof; (ii) each director of the Company; (iii) each named
executive officer of the Company; and (iv) all of the Company’s current directors and executive officers (including executive officers that are not named
executive officers) as a group. This table is based upon information supplied by officers, directors, and principal stockholders and Schedule 13D(s) and
Schedule 13G(s) filed with the SEC.
Name and Address of Beneficial Owner
Directors and Executive Officers
Thomas Girschweiler(1)
Michael Rice (Officer and Director)(2)
Aby J. Mathew (Officer) (3)
Roderick de Greef (Officer)(4)
Andrew Hinson (Director)(5)
Raymond Cohen (Director) (6)
Joseph Schick (Director) (7)
Total shares owned by Executive Officers and Directors (10 persons) (8)
5% Stockholders
Walter Villiger(9)
WAVI Holding AG(10)
Taurus4757 GmbH(11)
Casdin Capital, LLC (12)
Common
Stock
Percentage
of Class
3,115,299
852,298
724,009
128,993
50,175
23,388
11,875
5,600,466
5,642,797
5,092,797
3,064,496
2,468,571
13.7%
3.9%
3.3%
0.6%
0.2%
0.1%
0.1%
22.5%
24.0%
22.2%
13.5%
11.6%
Shares of Common Stock subject to options and warrants that are exercisable or will be exercisable within 60 days of May 1, 2020 are deemed
outstanding for computing the number of shares beneficially owned. The percentage of the outstanding shares held by a person holding such options or
warrants includes those currently exercisable or exercisable within 60 days of May 1, 2020, but such options and warrants are not deemed outstanding for
computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, we believe that
the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Unless otherwise
indicated, the business address of each person listed is in care of 3303 Monte Villa Parkway, #310, Bothell, WA 98021.
(1)
(2)
Includes options to purchase 46,428 shares of Common Stock issuable upon exercise of stock options exercisable within 60 days from May 1, 2020,
4,375 share of Common Stock to be issued pursuant to a restricted stock award, 1,520,302 shares of Common Stock held indirectly through Mr.
Girschweiler’s wholly-owned entity named Taurus4757 GmbH and 1,544,194 shares of Common Stock issuable upon exercise of warrants held by
Taurus4757 GmbH.
Includes options to purchase 637,559 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 81,524
shares of Common Stock to be issued pursuant to restricted stock awards.
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(3)
(4)
(5)
(6)
(7)
(8)
(9)
Includes options to purchase 510,852 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 51,661
shares of Common Stock to be issued pursuant to restricted stock awards.
Includes options to purchase 70,919 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 49,442
shares of Common Stock to be issued pursuant to restricted stock awards.
Includes options to purchase 35,714 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 4,375
shares of Common Stock to be issued pursuant to a restricted stock award.
Includes 6,563 shares of Common Stock to be issued pursuant to a restricted stock award.
Includes options to purchase 5,000 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 4,375
shares of Common Stock to be issued pursuant to a restricted stock award.
Includes the securities listed in footnotes 1-7, in addition to 49,660 shares of Common Stock, options to purchase 557,532 shares of Common Stock
issuable under stock options exercisable within 60 days from May 1, 2020 and 87,237 shares of Common Stock to be issued pursuant to restricted
stock awards held by executive officers of the Company that are not named executive officers.
Includes 3,315,586 shares of Common Stock held indirectly through Mr. Villiger’s wholly-owned entity named WAVI Holding AG, 550,000 shares of
Common Stock issuable upon exercise of warrants held by Mr. Villiger and 1,777,211 shares of Common Stock issuable upon exercise of warrants
held by WAVI Holding AG. The business address of Mr. Villiger is Hurdnerstrasse 10 Postfach 8640 Hurden Switzerland V8.
(10) Includes 1,777,211 shares of Common Stock issuable upon exercise of warrants. The business address of WAVI Holding AG is Paradiesstrasse 25
Jona V8 CH 8645.
(11) Includes 1,544,194 shares of Common Stock issuable upon exercise of warrants. The business address of Taurus4757 GmbH is Wissmannstrasse 15,
CH-8057 Zurich, Switzerland.
(12) Based on a Schedule 13G/A filed on February 6, 2020. Consists of 2,468,571 shares of Common Stock. The business address of Casdin Capital, LLC
is 1350 Avenue of the Americas, Suite 2405, New York, New York 10019.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2019 relating to all our equity compensation plans:
Plan category
Equity compensation plans not approved by security holders
(1)
Second amended and restated 2013 performance incentive
plan
Number of
securities to
be issued upon
exercise
of outstanding
options
(in thousands)
Weighted Average
exercise price of
outstanding
options
Number of
granted restricted
stock awards
outstanding
(in thousands)
Number of
securities
remaining
available
for future issuance
(in thousands)
188 $
2,120 $
1.41
1.90
––
937
––
464
(1) Represents shares of common stock issuable pursuant to non-plan stock option agreements entered into prior to the adoption of our 2013
Performance Incentive Plan. Prior to the adoption of our 2013 Performance Incentive Plan, we granted certain individuals stock options pursuant to stock
option agreements that were not issued under a stockholder-approved plan. Each agreement entitles the holder to purchase from us a fixed number of shares
of common stock at a fixed purchase price per share for a fixed period of time, which may not exceed ten (10) years. The specific terms and conditions of
each option, including when the right to exercise the option vests, the number of shares subject to the option, the exercise price per share, the method of
exercise, exercisability following termination, disability and death, and adjustments upon stock splits, combinations, mergers, consolidation and like events
are specified in each agreement. In the event of a liquidation of the Company, or a merger, reorganization, or consolidation of the Company with any other
corporation in which we are not the surviving corporation or we become a wholly-owned subsidiary of another corporation, any unexercised options shall
be deemed canceled unless the surviving corporation elects to assume the options or to issue substitute options in place thereof. In the event of the forgoing,
the holder will have the right to exercise the option during a ten-day period immediately prior to such liquidation, merger, or consolidation.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
Since January 1, 2018, there has not been, nor has there been proposed, any transaction, arrangement or relationship or series of similar transactions,
arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a
party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the
average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers,
beneficial owners of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or
will have a direct or indirect material interest, other than as described above under the headings “Executive Compensation” and “Board of Directors—
Director Compensation” and other than the transactions described below. Each of the transactions described below was reviewed and approved or ratified
by the Audit Committee of the Board. It is anticipated that any future transactions between us and our officers, directors, principal stockholders and
affiliates will be on terms no less favorable to us than could be obtained from unaffiliated third parties. In accordance with our Audit Committee’s charter,
all such transactions will be reviewed and approved by our Audit Committee and a majority of the independent and disinterested members of the Board.
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On May 17, 2018 we redeemed from WAVI 25%, or 1,063 shares of Series A Redeemable Preferred stock outstanding for $1,063,000. On November
27, 2018 we redeemed the remaining 3,187 shares of Series A Redeemable Preferred stock outstanding for $3,187,000. There are no Series A shares
outstanding and no accrued preferred dividends as of December 31, 2018.
Director Independence
Our board of directors is responsible for determining the independence of our directors. For purposes of determining director independence, our board
of directors has applied the definitions set forth in NASDAQ Rule 5605(a)(2) and the related rules of the SEC. Based upon its evaluation, our board of
directors has affirmatively determined that the following directors meet the standards of independence: Mr. Cohen, Mr. Schick, and Mr. Hinson.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firm Fees
The following table sets forth the aggregate fees billed by our current independent accountants, BDO, for professional services rendered in the fiscal year
ended December 31, 2019. BDO did not provide any services in 2018.
Audit fees(1)
Audit related fees(2)
Tax fees(3)
All other fees(4)
Total
2019
214,645
––
––
––
214,645
$
$
The following table sets forth the aggregate fees billed by our previous independent accountants, Peterson Sullivan, for professional services rendered in
the fiscal years ended December 31, 2019 and 2018.
Audit fees(5)
Audit related fees(2)
Tax fees(3)
All other fees(4)
Total
2019
2018
$
84,224 $
76,022
––
––
$
160,246 $
177,000
6,350
––
––
183,350
(1) Audit fees consist of professional services for the audit of our annual financial statements, audit of our internal controls over financial reporting under
Section 404 of the Sarbanes-Oxley Act or services that are normally provided by the accountant in connection with statutory and regulatory filings or
engagement for those fiscal years.
(2) Audit-related fees consist of assurance and related services reasonably related to the performance of the audit or review of our financial statements
that are not reported under the heading Audit fees above. In the years ended December 31, 2019 and 2018, we incurred Audit-related fees in
connection with audits and reviews of companies we acquired.
(3) There were no fees paid that would be considered “Tax fees” in 2019 or 2018. Fees to be disclosed under this category would be for professional
services for tax compliance, tax advice, and tax planning.
(4) There were no fees paid that would be considered “All Other fees” in 2019 or 2018. Fees to be disclosed under this category would be for products
and services other than those described under the headings Audit fees, Audit-related fees and Tax fees above.
(5) Audit fees consist of professional services for the audit of our annual financial statements, audit of our internal controls over financial reporting under
Section 404 of the Sarbanes-Oxley Act, and review of financial statements included in our Form 10-Q or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagement for those fiscal years.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee must pre-approve all services to be performed for us by our independent auditors. Pre-approval is granted usually at
regularly scheduled meetings of the Audit Committee. If unanticipated items arise between regularly scheduled meetings of the Audit Committee, the
Audit Committee has delegated authority to the chairman of the Audit Committee to pre-approve services, in which case the chairman communicates such
pre-approval to the full Audit Committee at its next meeting. The Audit Committee also may approve the additional unanticipated services by either
convening a special meeting or acting by unanimous written consent. During the years ended December 31, 2019 and 2018, all services billed by BDO and
PS were pre-approved by the Audit Committee in accordance with this policy.
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ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
PART IV
(1) Financial Statements (Included Under Item 8): The Index to the Financial Statements is included on page 28 of this Annual Report
on Form 10-K and is incorporated herein by reference.
(2) Financial Statement Schedules:
None.
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(b) Exhibits
Exhibit
Number
2.1†*
2.2†
Stock Purchase Agreement, dated March 13, 2019, by and among the Company, Astero Bio Corporation, the stockholders of Astero Bio
Corporation and the representative of the sellers (included as Exhibit 2.1 to the current report on Form 8-K filed on April 5, 2019)
Share Exchange Agreement, dated August 7, 2019, by and among the Company, SAVSU Technologies, Inc. and SAVSU Origin LLC
(included as Exhibit 2.1 to the current report on Form 8-K filed on August 13, 2019)
Document
2.3†*
Asset Purchase Agreement, dated November 10, 2019, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and
3.1
3.2
3.3
3.4
4.1
wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc. (included as Exhibit 2.1 to the current report on Form 8-K
filed on November 15, 2019)
Amended and Restated Certificate of Incorporation of BioLife Solutions, Inc. (included as Exhibit 4.1 to the Registration Statement on Form
S-8 filed on June 24, 2013)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of BioLife Solutions, Inc. (included as Exhibit 3.1 to the
Current Report on Form 8-K filed on January 30, 2014)
Amended and Restated Bylaws of BioLife Solutions, Inc., effective April 25, 2013 (included as Exhibit A to the Registrant’s Definitive
Information Statement on Schedule 14C filed March 27, 2013)
Certificate of Designations, Preferences, and Rights of Series A Preferred Stock (included as Exhibit 3.1 to the current report on Form 8-K
filed on July 6, 2017)
Description of the Company’s Securities Registered under Section 12 of the Exchange Act (incorporated by reference to the Company’s
registration statement on Form 8-A, as filed on March 19, 2014)
10.1**
Second Amended and Restated 2013 Performance Incentive Plan (included as Appendix A to the Registrant’s Definitive Proxy Statement
filed on April 14, 2017)
10.2**
BioLife Solutions, Inc. Form of Non-Plan Stock Option Agreement (included as Exhibit 4.4 to the Registration Statement on Form S-8 filed
on June 24, 2013)
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Lease Agreement dated August 1, 2007 for facility space 3303 Monte Villa Parkway, Bothell, WA 98021 (included as Exhibit 10.27 and
Exhibit 10.29 to the Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed April 1, 2008)
First Amendment to the Lease, dated November 4, 2008, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.16 to
the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed March 31, 2009)
Second Amendment to the Lease, dated March 2, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.30 to the
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 filed May 14, 2012)
Third Amendment to the Lease, dated June 15, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.37 to the
Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
Fourth Amendment to the Lease, dated November 26, 2012, between the Company and Monte Villa Farms, LLC (included as Exhibit 10.41
to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed March 29, 2013)
Fifth Amendment to Lease, dated August 19, 2014, by and between the Company and Monte Villa Farms LLC (included as Exhibit 10.1
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 filed on November 6, 2014)
Form of Warrant issued to purchasers in the March 25, 2014 public offering (incorporated by reference to Exhibit 4.1 to the Company’s
report on Form 8-K filed March 20, 2014)
10.10**
Employment Agreement dated December 13, 2017 between the Company and Michael Rice (incorporated by reference to Exhibit 10.11 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
10.11**
Employment Agreement dated December 13, 2017 between the Company and Aby Mathew (incorporated by reference to Exhibit 10.12 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
10.12**
Employment Agreement dated December 13, 2017 between the Company and Todd Berard (incorporated by reference to Exhibit 10.13 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
10.13
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Raymond Cohen (included as Exhibit
10.1 to the Current Report on Form 8-K filed on May 5, 2015)
10.14
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Thomas Girschweiler (included as
Exhibit 10.2 to the Current Report on Form 8-K filed on May 5, 2015)
10.15
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Other Non-Employee Directors
(included as Exhibit 10.3 to the Current Report on Form 8-K filed on May 5, 2015)
10.16
Employment Agreement effective December 13, 2017 between the Company and Karen Foster (incorporated by reference to Exhibit 10.17 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
10.17
Employment Agreement dated December 13, 2017 between the Company and Roderick de Greef (incorporated by reference to Exhibit 10.18
to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
10.18
Form of Restricted Stock Purchase Agreement pursuant to the Second Amended & Restated 2013 Performance Incentive Plan (included as
Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on May 16, 2016)
10.19
Form of Stock Option Agreement pursuant to the Second Amended & Restated 2013 Performance Incentive Plan (included as Exhibit 10.5 to
the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on May 16, 2016)
10.20
Common Stock Purchase Warrant issued to WAVI Holding AG (included as Exhibit 10.7 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2016 filed on May 16, 2016)
10.21
Employment Agreement dated December 13, 2017 between the Company and James Mathers (incorporated by reference to Exhibit 10.23 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed March 9, 2018)
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Consent of Peterson Sullivan, LLP (filed herewith)
23.1
Consent of BDO USA, LLP (filed herewith)
23.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2
101.INS
XBRL Instance Document (filed herewith)
101.SCH XBRL Taxonomy Extension Schema (filed herewith)
101.CAL
101.DEF
101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE
XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
XBRL Taxonomy Extension Definition Linkbase (filed herewith)
XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
* Certain sensitive financial, commercial and strategic information relating to the Company has been redacted in the marked portions of the
exhibit.
** Management contract or compensatory plan or arrangement.
†
The exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish
supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
(c) Excluded financial statements:
None.
ITEM 16.
FORM 10-K Summary
The Company has elected not to include a summary pursuant to this Item 16.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date:
May 15, 2020
BIOLIFE SOLUTIONS, INC.
/s/ MICHAEL RICE
Michael Rice
Chief Executive Officer and President
(principal executive officer) and Director
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.
Date:
May 15, 2020
Date:
May 15, 2020
Date:
May 15, 2020
Date:
May 15, 2020
Date:
May 15, 2020
Date:
May 15, 2020
/s/ MICHAEL RICE
Michael Rice
Chief Executive Officer and President
(principal executive officer) and Director
/s/ RODERICK DE GREEF
Roderick de Greef
Chief Financial Officer (principal financial
officer and principal accounting officer)
/s/ RAYMOND COHEN
Raymond Cohen
Chairman of the Board of Directors
/s/ THOMAS GIRSCHWEILER
Thomas Girschweiler
Director
/s/ ANDREW HINSON
Andrew Hinson
Director
/s/ JOSEPH SCHICK
Joseph Schick
Director
102
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference into Registration Statement Nos. 333-222433, 333-208912, and 333-233912 on Form S-3, and Registration
Statement Nos. 333-222437, 333-205101, and 333-189551 on Form S-8 of our report dated March 15, 2019, except for the effects of the restatement
discussed in Note 2 to the financial statements, as to which the date is May 15, 2020, relating to our audit of the 2018 financial statements of BioLife
Solutions, Inc. ("the Company"), appearing in the Annual Report on Form 10-K of BioLife Solutions, Inc. for the year ended December 31, 2019.
EXHIBIT 23.1
/S/ PETERSON SULLIVAN LLP
Seattle, Washington
May 15, 2020
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-233912, 333-222433 and 333-208912) and
Form S-8 (Nos. 333-222437, 333-205101, and 333-189551) of our reports dated May 15, 2020, relating to the 2019 consolidated financial statements and
the effectiveness of BioLife Solutions, Inc.’s internal control over financial reporting, which appear in this Form 10-K. Our report on the effectiveness of
internal control over financial reporting expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2019.
EXHIBIT 23.2
/S/ BDO USA, LLP
Seattle, Washington
May 15, 2020
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) or RULE 13d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
I, Michael Rice, certify that:
1. I have reviewed this annual report on Form 10-K of BioLife Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: May 15, 2020
/s/ Michael Rice
Michael Rice
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) or RULE 13d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
I, Roderick de Greef, certify that:
1. I have reviewed this annual report on Form 10-K of BioLife Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: May 15, 2020
/s/ Roderick de Greef
Roderick de Greef
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of BioLife Solutions, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2019, as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Rice, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: May 15, 2020
/s/ Michael Rice
Michael Rice
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of BioLife Solutions, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2019, as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I, Roderick de Greef, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: May 15, 2020
/s/ Roderick de Greef
Roderick de Greef
Chief Financial Officer