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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, 2022
☐ 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
BioLife Solutions, Inc. Common Stock
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 ☐
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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 ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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 30, 2022
of $13.81 per share) held by non-affiliates was approximately $472,940,782.
As of March 21, 2023, 43,211,955 shares of the registrant’s common stock were outstanding.
Table of Contents
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
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PART I
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
PART IV
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K” or “Annual Report”) 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 our acquisitions in
recent years, future financial and operational performance, our anticipated future growth strategy, including the acquisition of other 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.
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ITEM 1.
BUSINESS
PART I
The following discussion of our business contains forward-looking statements that involve risks and uncertainties (see the section entitled “Forward-
Looking Statements” herein). Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including those factors set forth under “Risk Factors” and elsewhere in this Form 10-K.
Overview
We are a life sciences company that develops, manufactures, and markets bioproduction tools and services which are designed to improve quality and de-
risk biologic manufacturing, storage, distribution, and transportation in the cell and gene therapy (“CGT”) industry and broader biopharma markets. 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.
We currently operate as one bioproduction tools and services business which supports several steps in the biologic material manufacturing and delivery
process. We have a diversified portfolio of tools and services that focuses on biopreservation, cell processing, frozen biologic storage products and services,
cold-chain transportation, 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 and services are comprised of three revenue lines that contain seven main offerings:
● Cell processing
○ Biopreservation media
○ Human platelet lysate media (“hPL”), cryogenic vials, and automated cell-processing fill machines
● Freezers and thaw systems
○ Ultra-low temperature freezers
○ Cryogenic freezers and accessories
○ Automated thawing devices
● Storage and cold chain services
○ Biological and pharmaceutical material storage
○ Cloud connected “smart” shipping containers
Cell processing
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 CGT 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 are 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 cell processing products
have been incorporated in nearly 700 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
CGT 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.
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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:
● Minimize cell and tissue swelling
● Reduce free radical levels upon formation
● 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
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.
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 and CryoStor 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 savings, improved quality of components, more rigorous quality control release testing, cost
effectiveness, and improved preservation efficacy.
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.
We estimate that annual revenue from each customer commercial application in which our products are used could range from $500,000 to $2.0 million, if
such application is approved and our customer commences large scale commercial manufacturing of the biologic-based therapy.
Human platelet lysate media, cryogenic vials and automated cell-processing fill machines
In September 2021, we acquired Sexton Biotechnologies, Inc. (“Sexton”), a producer of bioproduction tools. Sexton's bioproduction tools portfolio
includes human platelet lysates for cell expansion, which reduces risk and improves downstream performance over fetal bovine serum, human serum, and
other chemically defined media, CellSeal® closed system vials that are purpose-built rigid containers used in CGT that can be filled manually or with high
throughput systems, and automated cell processing machines that bring multiple processes traditionally performed by manual techniques under a higher
level of control to protect therapies from loss or contamination.
For our Sexton vials and media, we estimate that annual revenue from each customer commercial application in which these products are used could also
range from $500,000 to $2.0 million, if such application is approved and our customer commences large scale commercial manufacturing of the biologic-
based therapy.
Freezers and thaw systems
Ultra-low temperature freezers
In May 2021, we acquired Global Cooling, Inc. (“Global Cooling”), a manufacturer of class defining ultra-low temperature freezers. Global Cooling carries
a portfolio of freezers that range in size from portable units to stationary upright freezers to accommodate a wide variety of use cases. Users can configure
these freezers to achieve temperatures between -20°C and -86°C. The portfolio was designed to be environmentally friendly and energy efficient, using as
little as 2.8 kWh/day at temperatures of -80°C. The freezers do not use compressor-based or cascade refrigeration systems. Instead, they use patented free-
piston Stirling engine technology that uses fewer moving parts.
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Cryogenic freezers and accessories
Our line of cryogenic freezers offer leading design and manufacture of state-of-the-art liquid nitrogen laboratory freezers, cryogenic equipment and
accessories. Our Isothermal LN2 freezers are 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 models.
Our high-capacity controlled rate freezers (“HCFR”) are designed for large volume storage with customizable freezing programs and the ability to monitor
conditions in real time.
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.
Automated thawing devices
The 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 use 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 also
reduce risk of contamination versus using a traditional water bath.
Storage and cold chain services
Biological and pharmaceutical storage
In October 2020, we acquired SciSafe Holdings, Inc. (“SciSafe”), a premier provider of biological and pharmaceutical storage. In addition to providing
storage services, SciSafe provides cold chain logistics that ensures materials are kept at target temperatures from the moment that the materials leave the
customer’s premises to their ultimate return. State-of-the-art monitoring systems employed by SciSafe allow for customers to monitor the storage
temperatures of their materials throughout the entire logistics chain.
We operate six storage facilities in the USA and one facility in the Netherlands.
Cloud connected “smart” shipping containers
We are a leading developer and supplier of next generation cold chain management tools for cell and gene therapies. Our cloud-connected shipping
containers and evo.is cloud app allows biologic products to be traced and tracked in real time. Our evo platform consists of rentable cloud-connected
shippers that include technologies enabling tracking software to provide 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 for use with
cell and gene therapies. The evo DVS has an 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 if tilted 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 leveraging
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.
Our market opportunity
The CGT market has been rapidly expanding, treating diseases once thought incurable. According to the Alliance for Regenerative Medicine (“ARM”),
“2023 State of the Industry Report” there were over 2,220 ongoing clinical trials utilizing regenerative medicine at the end of Q4 2022, with an 11% growth
in CGT development companies throughout 2022. ARM also reported there were over $12.6 billion in total global financings in the regenerative market
raised in 2022. The FDA predicts up to fourteen cell and gene therapy regulatory decisions to be made during 2023.
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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 various products and services currently integrate into several steps in our customers’ bioproduction workflow process for cell and gene therapies. See
the diagram below for 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.
Complementary products portfolio
Expanding Participation in Customers’ Workflow
Our strategy
We are focused on the development, production, and commercialization of differentiated, best-in-class products and services that facilitate the
manufacturing, delivery, and storage of cell and gene therapies and biologic materials. Our products are designed to increase our customers’ product yield
and we are committed to supporting our customers with strong customer service and applications expertise.
We leverage our numerous relationships with the leading cell and gene therapy companies that use our expanded product portfolio of bioproduction tools
and services to cross-sell our other parts of the portfolio. 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 and the broader biopharma market. 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. Our products are designed to increase our customers’
product yield and functionality, and we are committed to supporting our customers with strong customer service and expertise in the clinical applications of
our products.
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Research and development
Business Operations
Our research and development activities are focused on evaluating new, potentially 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. We strive to continue to introduce differentiated and high-quality products that address
specific difficulties in manufacturing, delivery and storage of biologic material.
Sales and marketing
We market and sell our products through direct sales and third-party distribution. We have significantly expanded our global commercial organization from
18 team members in 2020 to 58 team members as of December 31, 2022.
We have experienced field-based sales employees who market our growing product portfolio on a direct basis. Over time, we have expanded our sales team
and anticipate adding additional sales personnel. Our technical applications engineers and customer care support teams have extensive experience with the
products and services that we offer.
Our products are also marketed and distributed by STEMCELL Technologies, MilliporeSigma, VWR, part of Avantor, Thermo Fisher and several other
regional distributors under non-exclusive agreements. In 2022, 2021, and 2020, sales to third-party distributors accounted for 50%, 46%, and 45% of our
revenue, respectively.
During the years ended December 31, 2022 and 2021, we derived approximately 18% and 17% of our revenue from the same customer, respectively.
During the year ended December 31, 2020, we derived approximately 13% of our revenue from a different customer.
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
Manufacturing
2022
Year Ended December 31,
2021
2020
72%
17%
7%
4%
100%
78%
7%
14%
1%
100%
73%
13%
12%
2%
100%
Cell processing – We maintain and operate two independent cGMP clean room production suites for manufacturing sterile biopreservation media products
in Bothell, Washington. Our quality management system (“QMS”) in Bothell is certified to the ISO 13485:2016 standard. Our QMS takes guidance from
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.
We also maintain and operate one cGMP clean room production suite for manufacturing hPL media in Indianapolis, Indiana. Our quality management
system (“QMS”) in Indianapolis is certified to the ISO 9001:2015 standard. Our QMS takes guidance from 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, Volume
4, EU Guidelines Annex 2 – Manufacture of Biological active substances and Medicinal Products for Human Use and ISO 14644 – Clean Rooms and
Associated Controlled Environments.
We seek to manage single-source supplier risk by regularly assessing the quality and capacity of our suppliers, implementing supply and quality agreements
where appropriate and actively managing lead times and inventory levels of sourced components. Pursuant to our supply agreements, we are required to
notify customers of any changes to our raw materials. For certain components in which we do not have a secondary supplier, we estimate that it would take
up to six months to find and qualify a second source. Order quantities and lead times for externally sourced components are based on our forecasts, which
are derived from historical demand and anticipated future demand. Lead times for components may vary depending on the size of the order, specific
supplier requirements and current market demand for the materials and parts. Due to COVID-19, we have seen increased lead times for certain raw
materials, particularly personal protective equipment used in our clean rooms and certain form factors of bottles and vials used in our finished products. To
date, we have not experienced significant difficulties in obtaining raw materials for the manufacture of our biopreservation media products.
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Freezers and thaw systems – Ultra-low temperature (“ULT”) freezers are produced in our facilities in Athens, Ohio and Bruce Township, Michigan and by
a contract manufacturing organization (“CMO”) based in Ohio. We believe this CMO has the skills, experience and capacity needed to meet our quality
standards and demand expectations for the product line. We estimate that it would take up to six months to find and qualify an alternative CMO. As of
December 31, 2022, we were transitioning manufacturing operations for this product line to in-house production and anticipate completion within the year
ended December 31, 2023. To date, we have not experienced significant difficulties in obtaining our ULT freezer products from our CMO. During the year
ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips for the
manufacture of our ULT freezer products. During the year ended December 31, 2022, supply chain bottlenecks were mitigated through the diversification
of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for semiconductor
chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still experiencing
constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor supply chain
partnerships.
The majority of our isothermal LN2 freezers and related accessories are manufactured in our facility in Bruce Township, Michigan. We are reliant on
certain critical suppliers for some components. Due to COVID-19, we have seen increased lead times for certain raw materials and components from our
suppliers as well as increased costs on certain raw materials. To date, we have not experienced significant difficulties in obtaining raw materials for the
manufacture of our LN2 freezers freezer and related accessories.
Our ThawSTAR automated, water-free thawing products are produced by a 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. Due to COVID-19, we have seen increased
lead times from our CMO due to increased lead times from our CMO’s suppliers. We estimate that it would take up to six months to find and qualify an
alternative CMO. To date, we have not experienced significant difficulties in obtaining our automated thaw products from our CMO.
Storage and cold chain services – Production of our evo cold chain management hardware products is performed by external CMOs and by personnel in
our Albuquerque, New Mexico facility. During the year-ended December 31, 2022, we began to transition our operations from the Albuquerque, New
Mexico facility to our facility in Bruce Township, Michigan. We anticipate this to be completed in the first quarter of 2023. Our QMS is certified to the ISO
9001:2015 standard. Due to COVID-19 and other market-wide supply chain constraints, we have seen increased lead times for certain raw materials and
components from our suppliers, causing additional increased lead times for the manufacture of our evo cold chain products.
We practice continuous improvement based on routine internal audits as well as external feedback and audits performed by our partners and customers. In
addition, we maintain a business continuity management system that focuses on key areas such as contingency planning, security stocks and off-site storage
of raw materials and finished goods to ensure continuous supply of our products.
SciSafe operates six cGMP compliant storage facilities in the United States and one state-of-the-art facility in the Netherlands, which is registered with the
European Regulatory body in Netherlands (IGJ) for Good Distribution of Active Pharmaceutical Ingredients. One facility in the United States is certified to
the ISO 20387:2018 standard and all facilities, both in the United States and the Netherlands, are certified to the ISO 9001:2015 standard. We rely on
outside suppliers for the build out of our cold-storage chambers and stand-alone freezers. Due to COVID-19, we have experienced increased lead times in
acquiring external stand-alone freezers, which we use to store customers’ biologic materials.
Product regulatory status
Our 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,
Stemulate, nLiven PR, T-Liven PR, CellSeal Closed System Cryogenic Vials, 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.
A group of isothermal, standard, and carousel LN2 freezers in our freezers and thaw systems product line is currently regulated as Class 2 medical devices
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.
Cell processing
Freezers and thaw systems
Storage and cold chain services
Total
Competition
Issued Patents
58
85
11
154
Patents Applied For
9
66
24
99
Registered Trademarks
37
24
9
70
Our bioproduction products and services compete on the basis of value proposition, performance, quality, cost effectiveness, and application suitability
with numerous established technologies. Additional products using new technologies that may be competitive with our products may also be introduced.
Many of the companies selling or developing competitive products have greater financial and human resources, R&D, manufacturing and marketing
experience than we do. They may undertake their own development of products that are substantially similar to or compete with our products and they may
succeed in developing products that are more effective or less costly than any that we may develop. These competitors may also prove to be more
successful in their production, marketing and commercialization activities. We cannot be certain that the research, development and commercialization
efforts of our competitors will not render any of our existing or potential products obsolete.
Human capital
We view our employees and our culture as key to our success. As of December 31, 2022, we had 466 full time employees and 1 part-time employee. Our
employees are not covered by any collective bargaining agreement. We consider relations with our employees to be good.
Since the beginning of the COVID-19 pandemic, the health and safety of our employees has remained a priority. We have implemented and will continue to
implement initiatives safeguarding our employees from the transmission of COVID-19 in accordance with federal, state, and local regulations. We have
taken a variety of measures to ensure the availability and functioning of our critical infrastructure to promote the safety and security of our employees and
to support the communities in which we operate. These measures have included the increase of our raw materials, manufacturing safety stock inventory for
our biopreservation media, expansion of availability for our biological and pharmaceutical storage, requiring remote working arrangements for employees
who are not integral to physically making and shipping our products or who do not need specialized equipment to perform their work, restricting on-site
visits by non-employees, implementing social distancing protocols, and investing in personal protective equipment. As we continue to monitor the
recommendations of public health authorities, we have encouraged positions not essential to being on-site to work to continue working under our flexible
work arrangement.
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. The entity was merged 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 carefully consider 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.
Risks related to our financial condition
Despite our increasingly diversified customer base, we have historically depended on a limited number of customers and products in a limited number
of market sectors; if we lose any of these large customers or if there are problems in those market sectors, our net product revenue and operating
results could decline significantly.
During the years ended December 31, 2022 and 2021, we derived approximately 18% and 17% of our revenue from the same customer, respectively.
During the year ended December 31, 2020, we derived approximately 13% of our revenue from a different customer. No other customer accounted for
more than 10% of revenue in the years ended December 31, 2022, 2021 and 2020. In the years ended December 31, 2022, 2021, and 2020, we derived
approximately 36%, 33%, and 60% of our revenue from CryoStor products, respectively. Additionally, during the years ended December 31, 2022 and
2021, we derived approximately 22% of our revenues in both years from our 780XLE freezers. 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. 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, 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, supply chain issues 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 recent acquisitions, 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, supply
chain issues or otherwise, our results of operations in such period 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 other
developing 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.
Risks related to our acquisition strategy
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 recent years, we recorded a significant amount of intangible assets, including
developed technology, in-process research and development, and customer relationships relating to the acquired product lines, and goodwill. Under
generally accepted accounting principles in the United States, we must assess, at least annually and potentially more frequently, whether the value of
indefinite-lived intangible assets and goodwill have been impaired. Intangible assets and goodwill are assessed for impairment in the event of an
impairment indicator, as was the case in Q2 and Q4 of 2022 when a combination of three events (a significant decline in our market capitalization, the
abandonment of an in-process research and development project within the asset group acquired in the acquisition of Global Cooling and our revised
forecasts for net income and net cash flows to be generated by that asset group) constituted an interim triggering event as of June 30, 2022 and led to
further decline as of the annual impairment testing date of October 1, 2022 that required further analysis with respect to, and resulted in, impairment
charges to goodwill, indefinite-lived intangibles, and definite-lived intangibles. Any future 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 have made and may continue to 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:
● 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, such as the
underperformance of products acquired from Global Cooling;
● negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges, such as the negative cash
flows resulting from our acquisition of Global Cooling;
● 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 (which in the
case of certain of our prior acquisitions were significant);
● 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, including
product liability, 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.
The integration of our acquisitions may result in significant accounting charges that adversely affect the announced results of our Company.
The financial results of our Company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our recent
acquisitions. In addition to the anticipated cash charges, costs associated with the amortization of intangible assets are expected. The price of our common
stock could decline to the extent our financial results are materially affected by the foregoing charges or if the foregoing charges are larger than anticipated.
Our recent acquisitions may result in unexpected consequences to our business and results of operations.
Although we believe that our acquired product lines will generally be subject to risks similar to those to which we are subject to in our existing operations,
we may not have discovered all risks applicable to these businesses during the due diligence process. Some of these risks could produce unexpected and
unwanted consequences for us. Undiscovered risks may result in us incurring financial liabilities, which could be material and have a negative impact on
our business operations.
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We may engage in future acquisitions or other strategic transactions which may require us to seek additional financing or financial commitments,
increase our expenses and/or present significant distractions to our management.
We continue to actively evaluate opportunities and consider other strategic transactions to grow our portfolio of bioproduction tools and services for the cell
and gene therapy and broader biopharma markets. 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 financial or product liabilities;
● disruption of our business and diversion of our management's time and attention in order to negotiate and close on such transaction or develop
acquired products or technologies;
● higher than expected acquisition and integration costs;
● write-downs of assets or goodwill or impairment charges;
● 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, any
transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition, and prospects.
Risks related to our business and operations
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. 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.
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. There can be no assurance that, in the future, our current or
alternative sources for manufacturing supplies will be able to meet all our demands on a timely basis. 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.
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During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips
for the manufacture of our ULT freezer products. During the year ended December 31, 2022, supply chain bottlenecks were mitigated through the
diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for
semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still
experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor
supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.
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 the manufacturing of
certain thaw products, certain cold chain products, two ULT freezer models, and components of our LN2 freezers. 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:
● 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 COVID-19.
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 substantially all of 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. A group of isothermal, standard, and carousel LN2 freezers in our freezers and thaw systems product line is currently regulated as Class 2 medical
devices in the EU. 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.
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Our business may be subject to product liability claims or product recalls, which could be expensive and could result in a diversion of management’s
attention.
Our business exposes us to potential product liability risks that are inherent in designing, manufacturing, and marketing our products. In particular, we are a
supplier of bioproduction tools to the cell and gene therapy industry. 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, and component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks with respect
to these or other products we manufacture or sell could result in an unsafe condition or injury. As a result, we face an inherent risk of damage to our
reputation if one or more of our products are, or are alleged to be, defective. We may be exposed to risks from product liability and warranty claims in the
event that our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in bodily injury and/or
property damage. The outcome of litigation, particularly any class-action lawsuits, is difficult to quantify. Plaintiffs often seek recovery of very large or
indeterminate amounts, including punitive damages. The magnitude of the potential losses relating to these lawsuits may remain unknown for substantial
periods of time and the cost to defend against any such litigation may be significant. Accordingly, we could experience product liability losses in the future
and incur significant costs to defend these claims.
In addition, if any of our products are, or are alleged to be, defective, we may voluntarily participate, or be required by applicable regulators, to participate
in a recall of that product if the defect or the alleged defect relates to safety. In the event of a recall, we may experience lost sales and be exposed to
individual or class-action litigation claims and reputational risk. Product liability, warranty and recall costs may have a material adverse effect on our
business, financial condition and results of operations.
Insurance coverage is increasingly difficult to obtain or maintain.
While we currently maintain product liability insurance, directors’ and officers’ liability insurance, general liability insurance, and other types of insurance,
first- and third-party insurance is increasingly more costly and narrower in scope, and we may be required to assume more risk in the future. If we are
subject to third-party claims or suffer a loss or damage in excess of our insurance coverage, we may be required to share that risk in excess of our insurance
limits. Furthermore, any first- or third-party claims made on our insurance policies may impact our future ability to obtain or maintain product liability
insurance coverage at reasonable costs, if at all.
We are and may become the subject of various claims, litigation or investigations which could have a material adverse effect on our business, financial
condition, results of operations or price of our common stock.
We are and may become subject to various claims (including “whistleblower” complaints), litigation or investigations, including commercial disputes and
employee claims, and from time to time may be involved in governmental or regulatory investigations or similar matters. Any claims asserted against us or
our management, regardless of merit or eventual outcome, could harm our reputation and have an adverse impact on our relationship with our clients,
distribution partners and other third-parties and could lead to additional related claims. Furthermore, there is no guarantee that we will be successful in
defending ourselves in pending or future litigation or similar matters under various laws. Any judgments or settlements in any pending litigation or future
claims, litigation or investigation could have a material adverse effect on our business, financial condition, results of operations and price of our common
stock.
Risks related to our intellectual property and cyber security
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.
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.
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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;
● 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
● we will develop additional proprietary technologies that are patentable, or the patents of others will not have an adverse effect on our
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.
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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.
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:
● 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.
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We are a regular target of malicious third-party attempts, some of which have been successful, 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 has led and could lead in the future to the compromise of sensitive, business, personal or confidential information or instructions to transfer funds by
us or customers to unauthorized recipients. In the third quarter during the year ended December 31, 2022, we experienced an immaterial security breach
that successfully redirected payments from BioLife customers to unauthorized bank accounts. 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. These measures have been breached in
the past and we cannot be certain that they will be successful and sufficient to counter 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 have been, and 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 and have derived 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 has and could in the future 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 in the past, have not, and in the future, 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.
Risks related to our common stock
Our stock price and volume may be volatile, and purchasers of our securities could incur substantial losses.
Our common stock, traded on the NASDAQ Capital Market, may be volatile and has experienced price and volume fluctuations. For example, in the year
ended December 31, 2022, the highest intra-day sale price of our common stock on NASDAQ was $38.01 per share and the lowest intra-day sale price of
our common stock on NASDAQ was $10.40 per share. Our highest trading day volume was 3,276,000 shares traded and the lowest trading day volume
was 138,800 shares traded. We may continue to incur substantial increases or decreases in our stock price and volume in the foreseeable future.
Our stock price and trading volume and the market prices and trading volume 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 and trading volume 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;
● 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;
● Public concerns regarding our products;
● Variations in quarterly operating results;
● General trends in the health care industry;
● Global viruses, epidemics, and pandemics, including COVID-19
● Other factors outside of our control, including significant market fluctuations.
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A significant percentage of our outstanding common stock is held by one stockholder, and this stockholder therefore has significant influence on us
and our corporate actions.
As of December 31, 2022, based on our review of public filings and the Company’s records, one of our existing stockholders, Casdin Capital, LLC
(“Casdin”), owned 7,566,292 shares of our common stock, representing 18% of the issued and outstanding shares of common stock. Accordingly, this
stockholder has had, and will continue to have, significant influence in determining the outcome of any corporate transaction or other matter submitted to
our 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 this stockholder where a stockholder vote may be necessary, we could be prevented from entering into
transactions that could be beneficial to us.
Any future sales of our securities in the public markets or any future securities issuances in connection with our acquisition strategy 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. 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.
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.
Risks related to accounting matters
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, 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.
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 are unable to develop an effective system of internal controls, we may not be able to accurately and timely report financial results or prevent
fraud. If we identify additional material weaknesses in our internal control over financial reporting or are unable to rectify the material weaknesses
that we have identified, 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, Management identified material weaknesses in our internal control
over financial reporting for the fiscal years ended December 31, 2022 and 2021.
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In the course of making our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, we identified several
material weaknesses. Material weaknesses were identified in relation to (i) inappropriately designed entity-level controls impacting the control
environment, risk assessment, and monitoring activities to prevent or detect material misstatements to the consolidated financial statements attributed to an
insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, ineffective identification and
assessment or risks impacting internal control over financial reporting, and ineffective monitoring controls; (ii) information system logical access within
certain key financial systems; (iii) accounting policies and procedures and related controls over certain financial statement areas; (iv) inadequate risk
assessment, accounting policies, procedures, and related controls performed over the recognition and measurement of indirect tax liabilities. Because
material weaknesses in internal control exist, the Company’s internal controls may not prevent, or detect and correct a material misstatement in its financial
statements or disclosures.
In the course of making our assessment of the effectiveness of internal control over financial reporting as of December 31, 2021, we identified several
material weaknesses. Material weaknesses were identified in relation to (i) inappropriately designed entity-level controls impacting the control
environment, risk assessment, and monitoring activities to prevent or detect material misstatements to the consolidated financial statements attributed to an
insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, ineffective identification and
assessment or risks impacting internal control over financial reporting, and ineffective monitoring controls; (ii) information system logical access within
certain key financial systems; (iii) accounting policies and procedures and related controls over complex financial statement areas; (iv) accounting policies,
procedures, and related controls over assets held for lease; (v) accounting policies, procedures, and related controls over the preparation and review of
projected financial information used in determining the valuation of acquired intangible assets and contingent consideration in business combinations as
well as the quantitative impairment analysis of indefinite-lived intangible assets; and (vi) policies, procedures, and related controls over the presentation
and disclosure of amounts presented in the consolidated financial statements in accordance with the applicable financial reporting requirements. Because
material weaknesses in internal control exist, the Company’s internal controls may not prevent, or detect and correct a material misstatement in its financial
statements or disclosures.
The aforementioned material weaknesses did not result in any identified material misstatements to our financial statements, and there were only immaterial
changes to previously released financial results.
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 are in the process of addressing our material weaknesses 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
these deficiencies (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 weaknesses 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.
Risks related to COVID-19 and other disruptive events
Our financial condition and results of operations may be adversely affected by the COVID-19 pandemic.
We continue to closely monitor the impact of the COVID-19 global pandemic on all aspects of our business and geographies, including how it has and will
impact our customers, team members, suppliers, vendors, business partners and distribution channels. The COVID-19 global pandemic has created
significant volatility, uncertainty, and economic disruption, which may continue to affect our business operations and may materially and adversely affect
our results of operations, cash flows and financial position.
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We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. While we have
implemented specific business continuity plans to reduce the impact of COVID-19 and believe that we have sufficient inventory to meet forecasted demand
for the next six to nine months, there is no guarantee that our continuity plan will be successful or that our inventory will meet forecasted or actual demand.
During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips
for the manufacture of our ULT freezer products. During the year ended December 31, 2022, supply chain bottlenecks were mitigated through the
diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for
semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still
experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor
supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.
Additional 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.
We cannot predict at this time the full extent to which the COVID-19 pandemic will impact our business, results, and financial condition, which will
depend on many factors that are not known at this time, as the situation is unprecedented and continues to evolve. These include, among others, the extent
of harm to public health, including the duration of the pandemic, any potential subsequent waves of COVID-19 infection, the emergence of new variants of
COVID-19, some of which may be more transmissible or virulent than the initial strain, and the availability and distribution of effective vaccines and
medical treatments, further disruption to the manufacturing of and demand for our products, our ability to effectively manage inventory levels and adjust
our production schedules to align with demand, impairments and other charges, the impact of the global business and economic environment on liquidity
and the availability of capital, the costs incurred to keep our employees safe while maintaining continued operations, and our ability to effectively motivate
and retain the necessary workforce. We are staying in close communication with our manufacturing facilities, employees, customers, and suppliers, and
acting to mitigate the impact of this dynamic and evolving situation through a variety of measures, which may not be successful and are subject to the
factors described above, many of which are uncertain or outside of our control. Even after the COVID-19 pandemic has subsided, we may continue to
experience impacts to our business as a result of its global economic impact.
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
None.
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ITEM 2.
PROPERTIES
Our material office and manufacturing leases are detailed below:
Location
Bothell, WA
Square Feet
45,522
Corporate headquarters, manufacturing, research and development, marketing, and
administrative offices
Principal Use
Woodinville, WA
Menlo Park, CA
Albuquerque, NM
Bruce Township, MI
Athens, OH
Nelsonville, OH
Columbus, OH
Indianapolis, IN
United States
United States
United States
United States
United States
Netherlands
13,578 Warehouse
3,460 Research and development, and administrative offices
9,932 Manufacturing, research and development, and administrative offices
106,998 Manufacturing, research and development, and administrative offices
50,000 Manufacturing, research and development, and administrative offices
24,114 Warehouse
1,807 Administrative offices
11,415 Manufacturing, research and development, and administrative offices
12,500 Biological and pharmaceutical specimen storage
26,600 Biological and pharmaceutical specimen storage
16,153 Biological and pharmaceutical specimen storage
16,800 Biological and pharmaceutical specimen storage
26,800 Biological and pharmaceutical specimen storage
47,533 Biological and pharmaceutical specimen storage
Lease Expiration
July 2031
January 2030
December 2023
January 2023
Month to Month
March 2028
May 2023
January 2025
September 2024
January 2027
March 2024
June 2024
February 2026
November 2031
March 2026
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
Market information for common stock
Our common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “BLFS.”
Stockholders and dividends
As of March 21, 2023, there were approximately 202 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. We anticipate that we will retain all earnings, if any, to support our
operations. Any future determination as to the payment of dividends will be at the sole discretion of our Board of Directors and will depend on our
financial condition, results of operations, capital requirements and other factors our Board of Directors deems relevant.
See Item 12 for information regarding securities authorized for issuance under our equity compensation plans.
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Performance graph
The following graph shows the cumulative total stockholder return on our common stock with the cumulative total return of the S&P Small Cap 600 Index
and our peer group, assuming an initial investment of $100 on December 31, 2017 and the reinvestment of all dividends.
Issuer repurchases of equity securities
Not applicable.
ITEM 6.
RESERVED
Reserved.
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 our acquisitions in recent years,
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.
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We are a life sciences company that develops and commercializes innovative technologies used in the manufacture, storage and transportation of biological
materials and provides storage solutions for biological and pharmaceutical materials.
We develop, manufacture, and market bioproduction tools and services to the cell and gene therapy (“CGT”) industry and broader biopharma market,
which are designed to improve quality and de-risk biologic manufacturing, storage, and distribution. 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.
Our current portfolio of bioproduction tools and services are comprised of three revenue lines that contain seven main offerings: (i) cell processing
(including biopreservation media for the preservation of cells and tissues, human platelet lysate media for the supplementation of cell expansion, cryogenic
vials and automated fill machines that provide high-quality, efficient, and precise mixes of solutions), (ii) freezers and thaw systems (including a full line of
mechanical ultra-low temperature (“ULT”), isothermal, and liquid nitrogen freezers and accessories, automated thaw devices which provide controlled,
consistent thawing of frozen biologics in vials and cryobags), and (iii) storage and storage services (including biological and pharmaceutical storage
services, and “smart”, cloud connected devices for transporting biologic payloads).
We currently operate as one bioproduction tools and services business which supports several steps in the biologic material manufacturing and delivery
process. We have a diversified portfolio of tools and services that focus on biopreservation, cell processing, frozen biologic storage products and services,
cold-chain transportation, 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.
The consolidated financial statements as of December 31, 2021 and for the years ended December 31, 2021 and 2020 have been corrected to correct
immaterial prior period errors as discussed in Note 2, Correction of immaterial errors to our consolidated financial statements included in this Annual
Report on Form 10-K. Accordingly, Management’s Discussion and Analysis reflects the impact of those corrections.
Sexton Biotechnologies, Inc. acquisition
On August 9, 2021, BioLife entered into an Agreement and Plan of Merger (the “Sexton Merger Agreement”) with BLFS Merger Sub, Inc., a Delaware
corporation (“Sexton Merger Sub”), Fortis Advisors LLC, in its capacity as the representative of the stockholders of Sexton (the “Sexton Seller
Representative”) and Sexton Biotechnologies, Inc., a Delaware corporation.
On September 1, 2021, the Company completed the merger of Sexton Merger Sub with and into Sexton and Sexton became a wholly owned subsidiary of
the Company (the “Sexton Merger”). As consideration for the Sexton Merger (the “Sexton Merger Consideration”), holders of common stock, preferred
stock and options of Sexton, other than the Company (collectively, the “Sexton Participating Holders”), are entitled to receive an aggregate of 530,502
newly issued shares of the Company’s common stock, subject to certain post-closing adjustments, of which 477,452 shares of Common Stock were issued
to the Sexton Participating Holders at the Closing, and 53,050 shares of Common Stock, or approximately 10% of the Merger consideration, were
deposited into an escrow account for indemnification and post-closing purchase price adjustment purposes. Prior to the merger, the Company held preferred
stock in Sexton, which was accounted for using a measurement alternative that measures the securities at cost minus impairment, if any. The Company
accounted for the merger as a step acquisition, which required remeasurement of the Company’s existing ownership in Sexton to fair value prior to
completing the acquisition method of accounting. Using step acquisition accounting, the Company increased the value of its existing equity interest to its
fair value, resulting in the recognition of a non-cash gain of $6.5 million, which was included in the gain on acquisition of Sexton Biotechnologies, Inc. in
the Consolidated Statements of Operations in the year ended December 31, 2021. The Company utilized a market-based valuation approach to determine
the fair value of the existing equity interest based on the total merger consideration offered and the Company’s stock price at acquisition.
The Sexton Merger was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the net tangible
assets acquired was approximately $4.1 million, the deferred tax liability acquired was approximately $1.5 million, the fair value of the intangible assets
acquired was approximately $8.8 million, and the residual goodwill was approximately $28.5 million. The fair value calculations required critical
estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.
Global Cooling, Inc. acquisition
On March 19, 2021, the Company entered into an Agreement and Plan of Merger (the “GCI Merger Agreement”) with BLFS Merger Subsidiary, Inc., a
Delaware corporation (“GCI Merger Sub”), Global Cooling, a Delaware corporation and Albert Vierling and William Baumel, in their capacity as the
representatives of the stockholders of GCI (collectively, the “GCI Seller Representative”).
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On May 3, 2021, pursuant to the GCI Merger Agreement, subject to the terms and conditions set forth therein, the transactions contemplated by the GCI
Merger Agreement were consummated (the “GCI Closing”), GCI Merger Sub merged with and into GCI (the “GCI Merger” and, together with other
transactions contemplated by the GCI Merger Agreement, the “GCI Transactions”), with GCI continuing as the surviving corporation in the GCI Merger
and a wholly owned subsidiary of the Company. In the GCI Merger, all of the issued and outstanding shares of capital stock of GCI immediately prior to
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (other than those properly exercising any applicable dissenter’s
rights under Delaware law) were converted into the right to receive the GCI Merger Consideration (as defined below). The Company paid the GCI Merger
Consideration to the holders of common stock and preferred stock of GCI (collectively, the “GCI Stockholders”).
The aggregate merger consideration paid pursuant to the GCI Merger Agreement to the GCI Stockholders was 6,646,870 newly issued shares of common
stock, provided, however, that the GCI Merger Consideration otherwise payable to GCI Stockholders is subject to the withholding of the GCI Escrow
Shares (as defined below) and is subject to reduction for indemnification obligations. The GCI Merger Consideration allocable to one GCI stockholder was
reduced by 10,400 shares to satisfy an outstanding note receivable of $374,000. In accordance with ASC 805, the Company recognized the settlement of
pre-existing relationships in the forms of cash deposits, trade receivables, and trade payables, which are included in the consideration transferred. The GCI
Merger Consideration is not subject to any purchase price adjustments.
At the GCI Closing, approximately nine percent (9%) of the GCI Merger Consideration (the “Escrow Shares”, along with any other dividends, distributions
or other income on the GCI Escrow Shares, the “GCI Escrow Property”) otherwise issuable to the GCI Stockholders (allocated pro rata among the GCI
Stockholders based on the GCI Merger Consideration otherwise issuable to them at the GCI Closing), was deposited into a segregated escrow account in
accordance with an escrow agreement entered into in connection with the GCI Transactions (the “GCI Escrow Agreement”).
The GCI Escrow Property will be held for a period of up to twenty-four (24) months after the GCI Closing as the sole and exclusive source of payment for
any post-GCI Closing indemnification claims (other than fraud claims), unless earlier released in accordance with the terms of the GCI Escrow Agreement.
The GCI Merger was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the net tangible
assets acquired was $740,000, the deferred tax liability acquired was $24.1 million, the fair value of the intangible assets acquired was $120.5 million, and
the residual goodwill was $137.8 million. The fair value calculations for intangible assets required critical estimates, including, but not limited to, future
expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.
SciSafe Holdings, Inc. acquisition
On September 18, 2020, BioLife entered into a Stock Purchase Agreement, by and among the Company, SciSafe Holdings, Inc., a Delaware corporation,
and the stockholders of SciSafe (collectively, the “SciSafe Sellers”), pursuant to which the Company agreed to purchase from the SciSafe Sellers one
hundred percent (100%) of the issued and outstanding capital shares or other equity interests of SciSafe (the “SciSafe Acquisition”). The SciSafe
Acquisition closed October 1, 2020.
In connection with the SciSafe Acquisition, the Company issued to the SciSafe Sellers 611,683 shares of common stock valued at $29.29 per share and a
cash payment of $15 million, with $1.5 million held in escrow to account for adjustments for net working capital and as a security for, and a source of
payment of, the Company’s indemnity rights. Pending the occurrence of certain events, the Company will issue to the SciSafe Sellers an additional 626,000
shares of common stock, which are issuable to SciSafe Sellers upon SciSafe achieving certain specified revenue targets in each year from 2021 to 2024.
The revenue target set for 2022 was met and, therefore, has resulted in 116,973 shares of common stock becoming issuable to the SciSafe Sellers. These
shares will be issued during the year ended December 31, 2023.
The SciSafe Acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the
contingent consideration was $3.7 million, the fair value of the net tangible assets acquired was $2.8 million, the deferred tax liability was $3.3 million, the
fair value of the intangible assets acquired was $12.1 million, and the residual goodwill was $24.9 million. The fair value calculations for intangible assets
required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and
royalty rates.
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 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
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. 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. Payment terms and conditions vary, although terms generally include a requirement of
payment within 30 to 90 days.
The Company primarily recognizes product revenues, service revenues, and rental revenues. Product revenues are generated from the sale of
biopreservation media, ThawSTAR, and freezer products. We recognize product revenue, including shipping and handling charges billed to customers,
when we transfer control of our products to our customers. Shipping and handling costs are classified as part of cost of product revenue in the Consolidated
Statement of Operations. Service revenues are generated from the storage of biological and pharmaceutical materials. We recognize service revenues over
time as services are performed or ratably over the contract term. 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 years ended December 31, 2022, 2021, and 2020.
The Company also generates revenue from the leasing of our property, plant, and equipment, operating right-of-use assets, and evo cold chain systems to
customers pursuant to service contracts or rental arrangements entered into with the customer. Revenue from these arrangements 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.
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 Operations. 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, trademarks, tradenames, 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. If the estimate of a definite-lived 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. Definite-lived
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.
Indefinite-lived intangibles are carried at the initially recorded fair value less any recognized impairment. In-process research and development (“IPR&D”)
is initially capitalized at fair value as an intangible asset with an indefinite life. When the IPR&D project is complete, it is reclassified as a definite-lived
intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned, a charge would be recorded for the value of the related
intangible asset to our Consolidated Statement of Operations in the period it is abandoned. Indefinite-lived intangibles are tested annually for impairment.
Impairment assessments are conducted more frequently 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.
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
in the fourth quarter 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 in the fourth quarter of 2022.
Warranty guarantees
Our freezer and thaw and certain cell processing products are warranted to provide assurance that the product will function as expected and to ensure
customer confidence in design and overall quality. Warranty coverage on our products is generally provided for specified periods of time and on select
products' hours of usage, and generally covers parts, labor, and other expenses for non-maintenance repairs. Warranty coverage generally does not cover
operator abuse or improper use.
At the time of sale, we recognize expense and record a warranty accrual by product line for estimated costs in connection with forecasted future warranty
claims. Our estimate of the cost of future warranty claims is based primarily on the estimated number of products under warranty, historical average costs
incurred to service warranty claims, the trend in the historical ratio of warranty claims for each part covered, and the historical length of time between the
sale and resulting warranty claim. If applicable, historical claims experience may be adjusted for known product design improvements or for the impact of
unusual product quality issues. We periodically assess the adequacy of our warranty accruals based on changes in our estimates and assumptions and record
any necessary adjustments if the cost of actual claim experience differs from our estimate and indicates that adjustments to our warranty accrual are
necessary. Factors that could have an impact on actual future claims and our warranty accrual include, but are not limited to, items such as performance of
new products; product failure rates; factors impacting product usage, such as changes in sales volumes and shifts in product mix; manufacturing quality and
product design issues, including significant manufacturing or design defects not discovered until after the product is delivered to customers; higher or lower
than expected service and component part costs to satisfactorily address the repair, and, if applicable, changes to the warranty coverage periods.
Additionally, from time to time, we also establish warranty accruals for our estimate of the costs necessary to settle major rework campaigns on a product-
specific basis during the period in which the circumstances giving rise to the major rework campaign become known and when the costs to satisfactorily
address the situation are both probable and estimable. The warranty accrual for the cost of a major rework campaign is primarily based on an estimate of
the cost to repair each affected unit and the number of affected units expected to be repaired.
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We believe that our analysis of historical warranty claim trends and knowledge of potential manufacturing and/or product design improvements or issues
provide sufficient information to establish a reasonable estimate for the cost of future warranty claims at the time of sale and our warranty accruals as of the
date of our Consolidated Balance Sheets. We believe that our $8.3 million warranty accrual as of December 31, 2022 is adequate and historically has been
adequate; however, due to the inherent uncertainty in the accrual estimation process, including forecasting future warranty claims, costs associated with
servicing future warranty claims, and unexpected major rework campaigns that may arise in the future, our actual warranty costs incurred may differ from
our warranty accrual estimate. An unexpected increase in warranty claims and/or in the costs associated with servicing those claims would result in an
increase in our warranty accruals and a decrease in our net earnings.
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, market-based restricted stock awards and performance-based awards granted to our directors and employees. The fair value of market-
based restricted stock awards is estimated at the date of grant using the Monte Carlo Simulation model. The Monte Carlo Simulation valuation model
incorporates assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing our
market-based stock awards, significant judgment is required in determining the expected volatility of our common stock. Expected 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 will ultimately receive.
Provision for income taxes
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 Company’s recorded deferred tax
liabilities as of December 31, 2022 would be a sufficient source of taxable income to realize all of its deferred tax assets except for a portion of its net
operating loss carryforwards. As a result, a full valuation allowance on its deferred tax assets was recorded as of December 31, 2022. 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, 2022, the Company has an unrecognized tax benefit of $610,000 related to tax attributes being carried forward. 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.
As of December 31, 2022, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $128.6 million, which is available to
reduce future taxable income. Approximately $39.5 million of NOL will expire from 2023 through 2037, and approximately $89.1 million of NOL will be
carried forward indefinitely. The NOL carryforwards are subject to an annual limitation in the event of certain cumulative changes in the ownership
interest. This limits 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.
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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.
Discussions of 2020 results and year-to-year comparisons between 2021 and 2020 that are omitted in this Annual Report on Form 10-K can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the SEC on March 31, 2022.
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
Revenue for years ended December 31, 2022, 2021, and 2020 were comprised of the following:
(In thousands, except percentages)
Product revenue
Freezer and thaw
Cell processing
Storage and cold chain services
Service revenue
Freezer and thaw
Storage and cold chain services
Rental revenue
Storage and cold chain services
Total revenue
Year Ended December 31,
2021⁽¹⁾
2022
2020⁽²⁾
2022 vs. 2021
$ Change % Change
2021 vs. 2020
$ Change % Change
$
66,682 $
68,509
809
56,620 $
44,965
328
13,548 $
30,946
46
10,062
23,544
481
18% $
52%
147%
43,072
14,019
282
74
15,234
-
9,817
-
1,752
74
5,417
-%
55%
-
8,065
10,451
161,759 $
7,426
119,156 $
1,795
48,087 $
3,025
42,603
$
41%
36% $
5,631
71,069
318%
45%
613%
-%
460%
314%
148%
(1) 2021 revenue includes product revenue related to Global Cooling from May 3, 2021 through December 31, 2021 and product revenue related to
Sexton from September 1, 2021 through December 31, 2021.
(2) 2020 revenue includes service revenue related to SciSafe from October 1, 2020 through December 31, 2020.
Revenue growth in the year ended December 31, 2022, as compared to the year ended December 31, 2021, was driven primarily by organic growth in our
cell processing product and storage and cold chain services rental product lines, which grew by 45% and 51%, respectively. During the year ended
December 31, 2021, revenues diversified significantly compared to the year ended December 31, 2020. This diversification was primarily driven by the
acquisition of Global Cooling and Sexton in May and September of 2021, respectively. Most notably, the Company’s freezer and thaw revenues increased
by 318% as a result of the acquisition of Global Cooling and growth in LN2 freezer sales in 2021.
Revenue concentrations with one customer increased to 18% in the year ended December 31, 2022 from 17% from the same customer in the year ended
December 31, 2021, primarily as a result of increased sales to a prominent international distributor. Revenue concentrations with one customer increased to
17% in the year ended December 31, 2021 from 13% from a different customer in the year ended December 31, 2020, primarily as a result of
concentrations of freezer sales to a prominent international distributor.
In the year ended December 31, 2022, revenue increased by $42.6 million, or 36%, from the year ended December 31, 2021. Of this increase, $27.7
million, or 23%, of the increase was driven by organic growth. Of the $27.7 million, $19.4 million is derived from our cell processing product line, $1.6
million from our freezer and thaw product and services product lines, and $6.7 million from our storage and cold chain services product line. The
remaining $14.9 million, or 13%, was driven by earning full year revenues from the acquisitions of Global Cooling and Sexton compared to partial
revenues earned during the prior year.
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 fluctuations are expected,
but they may not be predictive of future revenue or otherwise indicative of a trend.
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Costs and operating expenses
Total costs and operating expenses for years ended December 31, 2022, 2021, and 2020 were comprised of the following:
(In thousands, except percentages)
Cost of product, rental, and service revenue
Research and development
Sales and marketing
General and administrative
Intangible asset impairment charges
Intangible asset amortization
Acquisition costs
Change in fair value of contingent
consideration
Total operating expenses
Cost of product, rental, and service revenue
Year Ended December 31,
2021
2020
2022 vs. 2021
$ Change % Change
2021 vs. 2020
$ Change % Change
$
2022
107,937 $
14,798
21,570
47,670
110,364
9,697
18
82,108 $
11,821
14,006
33,668
-
8,202
1,636
20,646 $
6,720
6,413
15,273
-
3,033
668
25,829
2,977
7,564
14,002
110,364
1,495
(1,618)
31 % $
25 %
54 %
42 %
- %
18 %
(99)%
61,462
5,101
7,593
18,395
-
5,169
968
(4,754)
307,300 $
2,875
154,316 $
1,575
54,328 $
(7,629)
152,984
$
(265)%
99% $
1,300
99,988
298%
76%
118%
120%
-%
170%
145%
83%
184%
In the year ended December 31, 2022, cost of product, rental, and service revenue increased $25.8 million or 31% from the year ended December 31, 2021.
This increase was primarily driven by increased sales.
We expect the cost of product, rental, and service revenue to fluctuate in future quarters based on production volumes, product mix, and the impact of any
future acquisitions.
Cost of product, rental, and service revenue as a percentage of revenue was 70%, 69%, and 43% for the years ended December 31, 2022, 2021, and 2020,
respectively. Cost of product, rental, and service revenue in the years ended December 31, 2022, 2021, and 2020 includes $251,000, $1.1 million, and
$411,000, respectively, in inventory step-up expense recorded in the purchase accounting of our Global Cooling, CBS, and AsteroBio Corporation
(“Astero”) acquisitions.
The cost of product, rental, and service revenue as a percentage of revenue was relatively consistent between the years ended December 31, 2022 and 2021,
at 70% and 69%, respectively. Despite these percentages being relatively consistent, the Company experienced decreases in warranty expenses in the year
ended December 31, 2022 that were offset by increases in material and overhead costs driven by increases in personnel expenses, including stock-based
compensation expenses, during the year. Additionally, material cost increases derived from our difficulties in obtaining sheet metal and electrical
components incorporating semiconductor chips for the manufacture of our ULT freezer products due to the effects of COVID-19 during the year ended
December 31, 2021 were mitigated during the current year. Through the diversification of suppliers, we experienced improved pricing from the year ended
December 31, 2021. We were still experiencing constraints in supply for semiconductor chips as of December 31, 2022. Though our costs to obtain
semiconductor components normalized throughout the year, we were still experiencing constraints in obtaining electrical component parts. These
constraints are expected to improve through diversification of our semiconductor supply chain partnerships. We have sufficient supply for electrical
component parts within our operations for the foreseeable future.
Research and development expenses
During the years ended December 31, 2022, 2021, and 2020, research and development (“R&D”) expense consisted primarily of personnel-related costs,
consulting, and external product development services.
R&D expense increased $3.0 million in the year ended December 31, 2022, or 25%, compared with the year ended December 31, 2021. The increase is
primarily due to $2.5 million of increased personnel costs in cash and stock-based compensation expenses from the full year ownership of Global Cooling
and Sexton.
We expect sustained R&D expense increases through the year ended December 31, 2023 as we continue to expand, develop, and refine our product lines,
particularly in the completion of our GCI vault project.
Sales and marketing expenses
Sales and marketing expense (“S&M”) consisted primarily of personnel-related costs, stock based compensation expense, trade shows, sales commissions,
and advertising.
S&M expense increased $7.6 million in the year ended December 31, 2022, or 54%, compared with the year ended December 31, 2021. The increase is
primarily due to $5.0 million of increased personnel expenses from cash and stock compensation. The increase was also driven by a $1.5 million increase
in advertising and trade show costs from the expansion of our product outreach.
We expect S&M expense to increase as we expand our product line offerings and our presence in the markets in which we participate.
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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 the year ended December 31, 2022, G&A expenses increased by $14.0 million, or 42%, compared with the year ended December 31, 2021. Of this
increase, $7.7 million, or 55%, was driven by increased personnel expenses from cash and stock-based compensation. The remaining costs primarily relate
to an increase of $3.2 million in professional services fees and $1.2 million on the losses incurred from asset disposal.
We expect G&A expense to increase as we continue to execute on our growth strategy.
Intangible asset impairment charges
Intangible asset impairment charges consist of the impairments incurred of $69.9 million and $40.5 million during the quarter ended June 30, 2022 and
impairment assessment date of October 1, 2022, respectively. These impairment charges impacted both definite and indefinite-lived intangible assets
acquired during the acquisition of Global Cooling. See Note 11: Goodwill and intangible assets of our accompanying Consolidated Financial Statements
for more information on the events and assessment leading to these non-cash impairment charges during the year ended December 31, 2022.
Intangible asset amortization expense
Amortization expense consists of charges related to the amortization of intangible assets associated with the acquisitions of Global Cooling, Custom
Biogenic Systems (“CBS”), SciSafe, Sexton, SAVSU Technologies, Inc. (“SAVSU”), and Astero 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 Global Cooling, SciSafe, and Sexton
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 SciSafe, CBS, and
Astero acquisitions.
Other income and expenses
Total other income and expenses for the years ended December 31, 2022, 2021, and 2020 were comprised of the following:
(In thousands, except percentages)
Change in fair value of warrant liability
Change in fair value of investments
Interest (expense) income, net
Other income
Gain on acquisition of Sexton
Total other income (expense), net
Year Ended December 31,
2021
2020
2022
$
$
- $
697
(687)
704
-
714 $
(121) $
-
(485)
289
6,451
6,134 $
2022 vs. 2021
$ Change % Change
121
697
(202)
415
(6,451)
(5,420)
(100)% $
- %
42 %
144 %
(100)%
(88)% $
3,601 $
1,319
40
-
-
4,960 $
2021 vs. 2020
$ Change % Change
(3,722)
(1,319)
(525)
289
6,451
1,174
(103)%
(100)%
(1,313)%
- %
- %
24 %
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.
Change in fair value of investments. Reflects fair value adjustments to our investment in iVexSol.
Interest (expense) income, net. Interest expense incurred in the year ended December 31, 2022 related primarily to the loan obtained in September 2022 and
two loans that were assumed in the acquisition of Global Cooling. We also earn interest on cash held in our money market account. Increases in interest
expenses during the year ended December 31, 2022 can also be attributed to the increases in interest rates set by the United States Federal Reserve, causing
the variable interest component on our 2022 term loan to be exposed to increasing interest rates.
31
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Gain on acquisition of Sexton Biotechnologies, Inc. Reflects the non-cash gain associated with our investment in Sexton due to the step-acquisition of the
remaining shares of Sexton and subsequent consolidation of Sexton in our financial statements.
Income Tax Benefit
Income tax benefit for the years ended December 31, 2022, 2021 and 2020 was as follows:
(In thousands, except percentages)
Income tax benefit
Effective tax rate
Year Ended December 31,
2021
2022
2020
$
5,022
$
4%
20,118
$
69%
2022 vs. 2021
$ Change % Change
$
255%
(15,096)
3,264
2021 vs. 2020
$ Change % Change
(75)% $
16,854
516%
The income tax benefit recognized in the year ended December 31, 2022 primarily related to losses generated in 2022. Our effective tax rate for 2022 was
lower than the U.S. statutory rate of 21% primarily due to the change in our valuation allowance.
The income tax benefit recognized in the year ended December 31, 2021 primarily related to losses generated in 2021 and the recognition of the release of
our valuation allowance related to the acquisition of Global Cooling. Our effective tax rate for 2021 was higher than the U.S. statutory rate of 21%
primarily due to windfall benefits on stock compensation, 162(m) limitations on executive compensation, and the change in our valuation allowance.
Liquidity and capital resources
We believe our cash, cash equivalents, restricted cash, cash generated from operations, available-for-sale securities, and credit lines will satisfy, for at least
the next twelve months from the date of this filing, our liquidity requirements, both globally and domestically, including the following: working capital
needs, capital expenditures, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with
our operations. We have not identified any material liquidity concerns as a result of the COVID-19 pandemic.
On December 31, 2022, we had $64.1 million in cash, cash equivalents, and available-for-sale securities, compared to $69.9 million as of December 31,
2021. The decrease in cash and cash equivalents is primarily due to significant investments made in available-for-sale securities, increased investment in
property, plant, and equipment, decrease in working capital related accounts compared to the prior year, offset by the draw of $20 million during Q3 2022
on a term loan.
On September 20, 2022, the Company, and certain of its subsidiaries, entered into a term loan agreement, which provided for up to $50 million in aggregate
principal to be drawn. The agreement provides for borrowings of up to $30 million upon closing and options to borrow up to $10 million between closing
and June 30, 2023, up to $10 million upon the achievement of certain revenue milestones, and an additional $10 million upon the Company’s request
subject to fulfilling certain requirements of the lender. The Company borrowed $20 million upon closing. For additional information on terms, see Note 13:
Long-term debt.
On March 10, 2023, Silicon Valley Bank (“SVB”), the issuer of our term loan, was closed upon the appointment of the Federal Deposit Insurance
Corporation (“FDIC”) as the receiver of SVB. In addition to the term loan, we have deposit accounts held at SVB captured within our cash, cash
equivalents, and available-for-sale securities. However, as of March 13, 2023, all deposit amounts, regardless of amount in excess of FDIC-insured limits,
were guaranteed to customers, mitigating any liquidity constraints.
On May 22, 2020, the Company closed on a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company, pursuant to which
Casdin invested $20.0 million in the Company at $10.50 per share.
On July 7, 2020, the Company closed its public offering of 5,951,250 shares of common stock at the public offering price of $14.50 per share, which
includes the shares purchased pursuant to the exercise in full of the underwriters' option to purchase up to an additional 776,250 shares of its common
stock. The net proceeds from the public offering to BioLife, after deducting underwriting discounts and commissions and estimated underwriter offering
expenses of $6.1 million, were approximately $80.2 million.
On October 1, 2020, we acquired SciSafe for $15.0 million in cash, 611,683 shares of common stock, and up to 626,000 additional shares of common stock
as contingent consideration. As of December 31, 2022 and 2021, 116,973 shares and 64,130 shares were earned, respectively. These shares will be issued
during the year ended December 31, 2023.
Cash flows
(In thousands)
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash and cash equivalents
$
$
Year Ended December 31,
2021
2022
$ Change
2022 vs. 2021
% Change
(8,488) $
(58,117)
16,316
(50,289) $
32
(4,593) $
(13,192)
(2,778)
(20,563) $
(3,895)
(44,925)
19,094
(29,726)
85%
341%
(687)%
145 %
Table of Contents
Operating activities
In the year ended December 31, 2022, our operating activities used cash of $8.5 million reflecting net loss of $139.8 million and non-cash charges totaling
$146.2 million primarily related to impairment of intangible assets, depreciation, amortization, changes in fair value of contingent consideration, deferred
income tax benefit, stock-based compensation, and non-cash lease charges. An increase in accrued expenses and current liabilities of $5.7 million was
primarily driven by a $3.7 million non-income tax liability estimated for sales taxes owed and approximately $1.8 million increase in accrued
compensation for increased headcount compared to the prior year. The increase in accrued expenses and current liabilities was offset by a $6.9 million
reduction in warranty liability and $1.6 million reduction in accounts payable.
In the year ended December 31, 2021, our operating activities used cash of $4.6 million reflecting net loss of $8.9 million and non-cash charges totaling
$6.6 million primarily related to depreciation, amortization, changes in the fair value of investments, changes in fair value of contingent consideration,
deferred income tax benefit, stock-based compensation, and non-cash lease charges. An increase in accounts receivable of $10.1 million was primarily
driven by the 148% year-to-date increase in revenues. The remaining cash provided by operating activities resulted from favorable changes in various other
working capital accounts.
Investing activities
Our investing activities used $58.1 million of cash in the year ended December 31, 2022. We invested $44.6 million in available-for-sale securities in
addition to continued investment in capital expenditures and purchases of assets held for rent, using an additional $13.9 million.
Our investing activities used $13.2 million of cash in the year ended December 31, 2021. We acquired $1.6 million in cash in the acquisitions of Global
Cooling and Sexton. Capital expenditures and purchases of assets held for rent used $14.8 million as we continue to invest in our manufacturing and
storage facilities.
Financing activities
In the year ended December 31, 2022, cash provided by financing activities was $16.3 million. The increase in cash provided by financing activities
compared to the prior year is primarily due to drawing $20 million on a term loan obtained on September 20, 2022, offset by payments on outstanding debt
of $1.7 million and payments on financed insurance premiums of $1.4 million.
In the year ended December 31, 2021, cash used by financing activities was $2.8 million. We used $4.2 million to pay off the line of credit assumed in the
acquisition of Global Cooling. Other significant cash flows include $1.6 million provided by lenders to finance equipment for our continued expansion,
$1.4 million provided by the exercise of stock options, and $1.0 million used to pay financed insurance premiums.
Contractual obligations
Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, accounts receivable collections,
inventory management, and the timing of tax and other payments. As a result, the impact of contractual obligations on our liquidity and capital resources in
future periods should be analyzed in conjunction with such factors. Despite these uncertainties, we believe that our balances of cash, cash equivalents,
available-for-sale securities, and restricted cash in addition to our cash flows from operations are adequate to meet our liquidity requirements in the next 12
months.
The following summarizes certain of our contractual obligations as of December 31, 2022 and the effect such obligations are expected to have on our cash
flows in the next fiscal year:
Long-term debt, including interest
These amounts represent expected cash payments, including principal and interest. Debt obligations are described in Note 13 of the Consolidated Financial
Statements. As of December 31, 2022, our total obligations were $25.6 million, of which $1.8 million was short-term.
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Lease obligations
We have various operating and financing lease agreements for office space, warehouses, manufacturing, research equipment, machinery, and production
locations as well as vehicles and other equipment. Lease obligations are described in Note 6 of the Consolidated Financial Statements. As of December 31,
2022, our total obligations were $18.1 million, of which $3.0 million was short-term.
Purchase obligations
Purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms,
including fixed or minimum quantities to be purchased, fixed, minimum or variable pricing provisions and the approximate timing of the transactions. As
of December 31, 2022, our total obligations were $507,000, of which $304,000 was short-term.
Purchase orders or contracts for the purchase of supplies and other goods and services are not included in the discussion above. We are not able to
determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase
rather than binding agreements. Our purchase orders are based on our current procurement or developmental needs and fulfilled by our vendors within
short time horizons.
Capital requirements
Our future capital requirements will depend on many factors, including the following:
● the expansion of our cell and gene therapy tools and services business
● the ability to sustain product revenue and profits of our cell and gene therapy products and services;
● The degree to which we implement additional automated production equipment throughout our facilities;
● our ability to acquire additional cell and gene therapy products and services;
● the scope of and progress made in our research and development activities; 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 as of the date of this filing. We expect operating expenses in the year ending December 31, 2023 to increase as we
continue to expand our CGT tools business. We expect to incur continued spending related to the research and development of new technology, expansion
of our existing product lines, and expansion of our commercial capabilities for the foreseeable future, with an increased emphasis on the development of
new products during the year ended December 31, 2023. 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. Additional
capital may not be available on reasonable terms, if at all.
Impacts of COVID-19
Our domestic and international operations have been and continue to be affected by the ongoing global pandemic of COVID-19 and the resulting volatility
and uncertainty it has caused in the U.S. and international markets.
During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips
for the manufacture of our ULT freezer products due to the effects of COVID-19. These supply chain disruptions decreased the Company’s profitability as
a result of increased supplier pricing and production stoppages. During the year ended December 31, 2022, supply chain bottlenecks were mitigated
through the diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in
supply for semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were
still experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our
semiconductor supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.
34
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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency exchange rates. Approximately 2% of the
Company's consolidated net sales in the year ended December 31, 2022 were made in euros. The Company is exposed to market risk primarily from
foreign exchange rate fluctuations of the euro as compared to the U.S. dollar as the financial position and operating results of the Company's foreign
operations are translated into U.S. dollars for consolidation.
Month-end exchange rates between the euro and the U.S. dollar, which have not been weighted for actual sales volume in the applicable months in the
periods, were as follows:
High
Low
Average
2022
Year Ended December 31,
2021
2020
$
$
$
1.15 $
0.95 $
1.05 $
1.24 $
1.12 $
1.18 $
1.23
1.06
1.14
The Company's exposure to foreign exchange rate fluctuations also arises from trade receivables and intercompany payables denominated in one currency
in the financial statements, but receivable or payable in another currency.
The Company does not enter into foreign currency forward contracts to reduce its exposure to foreign currency rate changes on forecasted intercompany
sales transactions or on intercompany foreign currency denominated balance sheet positions. Foreign currency transaction gains and losses are included in
"Other income (expense)" in the Consolidated Statements of Operations. The effect of translating net assets of foreign subsidiaries into U.S. dollars are
recorded on the Consolidated Balance Sheet as part of "Accumulated other comprehensive loss, net of taxes".
The effects of a hypothetical 10% appreciation in the U.S. dollar from December 31, 2022 levels against the euro are as follows (in thousands):
Decrease in translation of 2022 earnings into U.S. dollars
Decrease in translation of net assets of foreign subsidiaries
Interest rate risk
$
$
85
107
Our exposure to market risk for changes in interest rates relates primarily to our investments in available-for-sale securities and our long-term debt. We
invest our excess cash in investment grade short to intermediate-term fixed income securities. These securities may have their fair market value adversely
affected due to a rise in interest rates, and we may suffer losses if forced to sell securities that have declined in market value due to changes in interest rates.
Our long-term debt primarily bears interest at a fixed rate, with a variable component subject to an interest rate ceiling. Fluctuations in interest rates
therefore do not materially impact our consolidated financial statements from long-term debt. For additional information about our available-for-sale
securities and long-term debt, see Notes 4 and 13 to the consolidated financial statements in Part II, Item 8 of this Annual Report.
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ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (Grant Thornton LLP, PCAOB ID:248)
Report of Independent Registered Public Accounting Firm (BDO USA, LLP, PCAOB ID: 243)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
36
Page No.
37
39
40
41
42
43
44
45
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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. and subsidiaries (the “Company”) as of December 31, 2022, the
related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for the year ended December 31, 2022,
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, 2022, 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 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, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 31, 2023 expressed an adverse
opinion.
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 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 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.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Global Cooling, Inc. Intangible Asset Impairment
As described further in Note 11 to the consolidated financial statements, the Company has intangible assets that were acquired in the Global Cooling, Inc.
(“GCI”) purchase. Definite-lived 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. Indefinite-lived intangibles are tested annually for
impairment. 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. We identified the quantitative fair value assessment of the GCI intangible
assets as a critical audit matter.
The principal considerations for our determination that the impairment assessment of the GCI intangible assets is a critical audit matter are that the
impairment assessment requires the Company to utilize subjective assumptions to estimate the discounted cash flows attributable to the GCI intangible
assets, such as revenue growth rates, forecasted expenses, royalty rates, and discount rates. The estimation process required a high degree of auditor
judgement and an increased extent of effort.
37
Our audit procedures related to the GCI intangibles included the following, among others.
● We reviewed revenue growth rates and forecasted expenses prepared by management that were utilized in the model through: (i) evaluating
historical performance of GCI and (ii) assessing financial projections against market trends, industry metrics and peer-group/guideline
companies.
● We utilized a valuation specialist to assess the appropriateness of the model utilized and underlying assumptions including royalty rates and
discount rates.
Consolidated Financial Statements - Impact of Internal Control over Financial Reporting
As described in Management’s Report on Internal Control Over Financial Reporting, material weaknesses were identified as of December 31, 2022. The
prevention, detection, and correction of material misstatements of the consolidated financial statements, is dependent, in part, on management (i) designing
and maintaining an effective control environment, including maintaining sufficient resources within the accounting and financial reporting department to
review complex financial reporting transactions; and updating and distributing accounting policies and procedures across the organization (ii) designing
and implementing effective information and communication process to identify and assess the source of and controls necessary to ensure the reliability of
information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial
reporting and (iii) designing and implementing effective process-level control activities and general information technology controls related to financial
reporting processes. We identified the impact on our audit of the material weaknesses related to the control environment, information and communication,
and control activities (“material weaknesses”), as further described in Management’s Report, as a critical audit matter.
The principal consideration for our determination that the impact on our audit of the material weaknesses is a critical audit matter is that especially
challenging auditor judgment was required in designing audit procedures and evaluating audit evidence due to the ineffective system of internal control
over financial reporting, which affects substantially all consolidated financial statement account balances and disclosures.
Our audit procedures related to the material weaknesses included the following, among others.
● We determined the nature and extent of audit procedures that are responsive to the identified material weaknesses and evaluated the evidence
obtained from the procedures performed.
● We lowered the threshold used for investigating differences noted for recorded amounts.
● We selected larger sample sizes for tests of details.
● We substantively tested the accuracy and completeness of system-generated reports used in the audit and more extensively tested these
reports.
● We increased the extent of supervision over the execution of audit procedures.
/s/ GRANT THORNTON LLP
We have served as the Company's auditor since 2022.
Bellevue, Washington
March 31, 2023
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2021, and the related
consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for each of the two years in the period ended
December 31, 2021, 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, 2021, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ BDO USA, LLP
We served as the Company's auditor from 2019 to 2022.
Seattle, Washington
March 31, 2022
39
Table of Contents
BioLife Solutions, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share data)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Available-for-sale securities, current portion
Accounts receivable, trade, net of allowance for doubtful accounts of $739 and $275 as of December 31,
2022 and December 31, 2021, 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
Financing lease right-of-use assets, net
Long-term deposits and other assets
Available-for-sale securities, long term
Equity Investments
Intangible assets, net
Goodwill
Total assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Sales taxes payable
Warranty liability
Lease liabilities, operating, current portion
Lease liabilities, financing, current portion
Debt, current portion
Contingent consideration, current portion
Total current liabilities
Contingent consideration, long-term
Lease liabilities, operating, long-term
Lease liabilities, financing, long-term
Debt, long-term
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and Contingencies (Note 12)
$
$
$
December 31,
2022
2021
19,442 $
31
43,260
33,936
34,904
6,879
138,452
9,064
23,638
15,292
272
281
1,332
5,069
32,088
224,741
450,229 $
15,367 $
9,782
4,151
8,312
2,860
158
1,814
2,138
44,582
2,318
14,962
126
23,793
250
10
86,041
69,860
10
-
23,217
28,345
4,656
126,088
9,809
17,657
18,705
440
325
-
4,372
152,149
224,741
554,286
14,945
6,870
2,591
9,398
2,758
149
862
5,127
42,700
4,900
16,466
291
6,353
5,487
42
76,239
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 as of December 31, 2022 and December 31, 2021
Common stock, $0.001 par value; 150,000,000 shares authorized, 42,832,231 and 41,817,503 shares issued
and outstanding as of December 31, 2022 and December 31, 2021, respectively
Additional paid-in capital
Accumulated other comprehensive loss, net of taxes
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
-
-
43
611,739
(679)
(246,915)
364,188
450,229 $
42
585,397
(282)
(107,110)
478,047
554,286
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
40
Table of Contents
BioLife Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share data)
Product revenue
Service revenue
Rental revenue
Total product, service, and rental revenue
Costs and operating expenses:
Cost of product revenue (exclusive of intangible assets amortization)
Cost of service revenue (exclusive of intangible assets amortization)
Cost of rental revenue (exclusive of intangible assets amortization)
Research and development
Sales and marketing
General and administrative
Intangible asset impairment charges
Intangible asset amortization
Acquisition costs
Change in fair value of contingent consideration
Total operating expenses
Operating loss
Other income (expense):
Change in fair value of warrant liability
Change in fair value of investments
Interest (expense) income, net
Other income
Gain on acquisition of Sexton Biotechnologies, Inc.
Total other income, net
Loss before income tax benefit
Income tax benefit
Net (loss) income
Net (loss) income attributable to common shareholders:
Basic
Diluted
(Loss) earnings attributable to common shareholders:
Basic
Diluted
Weighted average shares used to compute (loss) earnings per share attributable to
common shareholders:
Basic and Diluted
2022
Years Ended December 31
2021
2020
$
$
$
$
$
136,000 $
15,308
10,451
161,759
88,519
12,360
7,058
14,798
21,570
47,670
110,364
9,697
18
(4,754)
307,300
(145,541)
-
697
(687)
704
-
714
(144,827)
5,022
(139,805) $
(139,805) $
(139,805)
(3.29) $
(3.29) $
101,913 $
9,817
7,426
119,156
69,676
5,381
7,051
11,821
14,006
33,668
-
8,202
1,636
2,875
154,316
(35,160)
(121)
-
(485)
289
6,451
6,134
(29,026)
20,118
(8,908) $
(8,908) $
(8,908)
(0.23) $
(0.23) $
44,540
1,752
1,795
48,087
18,058
1,367
1,221
6,720
6,413
15,273
-
3,033
668
1,575
54,328
(6,241)
3,601
1,319
40
-
-
4,960
(1,281)
3,264
1,983
1,822
(1,632)
0.07
(0.06)
42,481,027
38,503,944
27,306,258
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
41
Table of Contents
(In thousands)
Net (loss) income
BioLife Solutions, Inc.
Consolidated Statements of Comprehensive (Loss) Income
2022
Years Ended December 31
2021
2020
$
(139,805) $
(8,908) $
1,983
Other comprehensive loss - foreign currency translation adjustment, net of tax
Unrealized loss on available-for-sale securities, net of tax
(347)
(50)
(282)
-
-
-
Comprehensive (loss) income
$
(140,202) $
(9,190) $
1,983
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
42
Table of Contents
BioLife Solutions, Inc.
Consolidated Statements of Shareholders’ Equity
Series A Series A
Preferred Preferred Common Common Additional
Stock
Stock
Stock
Stock
Accumulated
Other
Paid-in Comprehensive Accumulated Shareholders’
Total
(In thousands, except
share data)
Balance, December 31,
2019
Stock issued as 2019
bonus payout
Stock-based compensation
Sale of common stock, net
of costs
Common stock issued for
services
Shares issued in
acquisitions
Stock option exercises
Stock issued – on vested
RSAs
Cashless exercises of
3,871,405 warrants
Warrant exercises
Net Income
Balance, December 31,
2020
Stock issued as
consideration in GCI
acquisition
Stock issued as
consideration in Sexton
acquisition
Fees incurred for
registration filings
Stock-based compensation
Stock option exercises
Cashless exercise of
79,100 warrants
Stock issued – on vested
RSAs
Foreign currency
translation
Net loss
Balance, December 31,
2021
Stock issued as
consideration for SciSafe
earnout
Fees incurred for
registration filings
Stock-based compensation
Stock option exercises
Stock issued – on vested
RSAs
Other comprehensive loss
Net loss
Balance, December 31,
2022
Shares
Amount
Shares
Amount Capital
Loss
Deficit
Equity
- $
- 20,825,452 $
21 $
143,485 $
- $
(100,185) $
43,321
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
314
5,981
- 7,856,012
8
100,113
-
-
-
3,175
611,683
777,496
-
208,858
- 2,747,970
8,500
-
-
-
-
-
1
-
3
-
-
60
17,916
1,471
-
33,108
150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,983
314
5,981
100,121
60
17,916
1,472
-
33,111
150
1,983
- 33,039,146
33
302,598
-
(98,202)
204,429
-
- 6,636,470
7
232,734
-
232,741
-
530,502
-
31,977
-
-
-
-
-
869,065
-
-
1
(186)
13,956
1,417
-
70,030
-
2,901
-
672,290
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,977
(186)
13,956
1,418
2,901
1
(282)
(8,908)
(282)
-
-
(8,908)
- 41,817,503
42
585,397
(282)
(107,110)
478,047
-
64,130
-
-
-
-
-
-
-
-
161,646
788,952
-
-
-
-
-
-
1
-
-
817
(131)
25,334
323
(1)
-
-
-
-
-
-
-
-
-
-
817
(131)
25,334
323
-
(397)
-
-
-
(139,805)
-
(397)
(139,805)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- $
- 42,832,231 $
43 $
611,739 $
(679) $
(246,915) $
364,188
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
43
Table of Contents
BioLife Solutions, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities
2022
Year Ended December 31,
2021
2020
$
(139,805) $
(8,908) $
1,983
Impairment of intangible assets
Depreciation
Amortization of intangible assets
Amortization of loan costs
Stock-based compensation
Non-cash lease expense
Deferred income tax benefit
Change in fair value of contingent consideration
Change in fair value of warrant liability
Change in fair value of investments
Accretion of investments
Gain on acquisition of Sexton Biotechnologies, Inc.
Stock issued for services
Loss on disposal of assets held for rent, net
Loss on disposal of property and equipment, net
Forgiveness of loans payable
Other
Change in operating assets and liabilities, net of effects of acquisitions
Accounts receivable, trade, net
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Sales taxes payable
Warranty liability
Other
Net cash used in operating activities
Cash flows from investing activities
Payments related to the acquisition of SciSafe, net of cash acquired
Cash acquired in acquisition of Global Cooling, Inc. and Sexton Biotechnologies,
Inc.
Investment in iVexSol preferred stock
Investment in PanTHERA Cryosolutions
Purchases of property and equipment
Deposits on property and equipment
Purchases of assets held for rent
Deposits on assets held for rent
Proceeds from sale of marketable securities
Maturities of marketable securities
Investment in available-for-sale securities
Proceeds from sale of equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from Paycheck Protection Program ("PPP") Loan
Payoff of PPP Loan
Proceeds from term loan
Payments on term loan
Proceeds from equipment loans
Payments on equipment loans
Payments of contingent consideration
Proceeds from sale of common stock, net of $6.2 million of costs in 2020
Fees paid related to issuance of common stock
Proceeds from line of credit
Payments on line of credit
Proceeds from exercise of common stock options
Proceeds from exercise of warrants
Payments on financed insurance premium
Other
Net cash provided by (used in) financing activities
110,364
6,775
9,697
18
25,334
3,486
(5,238)
(4,754)
-
(697)
(447)
-
-
773
745
-
166
(10,753)
(6,559)
26
414
1,787
1,526
(1,086)
(260)
(8,488)
-
4,663
8,202
121
13,956
2,053
(20,127)
2,875
121
-
-
(6,451)
-
609
482
(284)
353
(10,132)
114
2,663
2,018
(3,936)
1,412
5,833
(230)
(4,593)
-
2,035
3,033
-
5,981
737
(3,297)
1,575
(3,601)
(1,319)
-
-
60
365
-
-
190
(1,786)
(629)
(50)
(171)
780
759
-
-
6,645
-
-
(14,947)
-
-
-
(10,385)
-
(3,536)
-
420
8,500
(53,116)
-
(58,117)
-
-
20,000
(1,666)
-
(498)
-
-
(131)
-
-
323
-
(1,375)
(337)
16,316
1,559
-
-
(8,385)
-
(6,371)
-
-
-
-
5
(13,192)
-
-
-
-
1,550
(214)
-
-
(145)
27,306
(31,536)
1,418
-
(1,033)
(124)
(2,778)
-
(1,000)
(995)
(1,961)
(2,672)
(2,813)
(362)
-
-
-
35
(24,715)
2,175
(2,175)
-
-
984
-
(483)
100,121
-
-
-
1,472
40
-
(56)
102,078
Net decrease in cash, cash equivalents, and restricted cash
(50,289)
(20,563)
84,008
Cash, cash equivalents, and restricted cash – beginning of period
Effects of currency translation on cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash – end of period
Non-cash investing and financing activities
69,870
(108)
19,473 $
90,456
(23)
69,870 $
$
Cashless exercise of warrants reclassified from warrant liability to common stock $
Stock issued as consideration to acquire Global Cooling, Inc. and Sexton
Biotechnologies, Inc.
Equipment acquired under operating leases
Equipment acquired under finance leases
Purchase of property and equipment not yet paid
Unrealized gains and losses on available-for-sale-securities
Reclassification of warrant liabilities to equity upon exercise
Stock issued as consideration to acquire SciSafe
Stock issued as bonus consideration
$
$
$
$
$
$
$
$
$
Cash interest paid
- $
2,901 $
- $
243 $
- $
478 $
50
- $
817 $
- $
586 $
264,718 $
6,875 $
440 $
197 $
-
- $
- $
- $
452 $
6,448
-
90,456
33,111
-
8,096
-
-
-
110
17,916
314
-
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
44
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and significant accounting policies
Business
BioLife Solutions, Inc. (“BioLife”, “us”, “we”, “our”, or the “Company”) is a developer, manufacturer, and supplier of a portfolio of bioproduction tools
and services including proprietary biopreservation media, automated thawing devices, cloud-connected shipping containers, ultra-low temperature
mechanical freezers, cryogenic and controlled rate freezers, and biological and pharmaceutical materials storage. Our CryoStor freeze media and
HypoThermosol hypothermic storage media 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. Our Sexton cell
processing product line includes human platelet lysates (“hPL”) for cell expansion, reducing risk and improving downstream performance over fetal bovine
serum, human serum, and other chemically defined media, CellSeal cryogenic vials that are purpose-built rigid containers used in cell and gene therapy
(“CGT”) that can be filled manually or with high throughput systems, and automated cell processing machines that bring multiple processes traditionally
performed by manual techniques under a higher level of control to protect therapies from loss or contamination. 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 help administer
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 cryogenic freezer technology provides for controlled rate freezing and cryogenic storage of biologic
materials. Our ultra-low temperature mechanical freezers allow biological materials and vaccines to be stored at temperatures which range from negative
20℃ to negative 86℃. Our evo® shipping containers provide cloud-connected passive storage and transport containers for temperature-sensitive biologics
and pharmaceuticals. Our biological and pharmaceutical materials storage services provide facilities that allow for real-time tracking of biologic materials
and vaccines that can be stored at a wide range of temperatures.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of 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, sales tax liabilities, 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, warranty
reserves, certain accrued expenses, share-based compensation, contingent consideration from business combinations, and the provision for income taxes.
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, SAVSU Technologies, Inc. (“SAVSU”),
Arctic Solutions, Inc. doing business as CBS, SciSafe (acquired on October 1, 2020), Global Cooling, Inc. doing business as Stirling Ultracold (“Global
Cooling” or “GCI” acquired on May 3, 2021), and Sexton Biotechnologies, Inc. (“Sexton” acquired on September 1, 2021). All intercompany accounts and
transactions have been eliminated in consolidation.
All long-lived assets are maintained in the United States of America and the Netherlands.
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Table of Contents
Foreign currency translation
The Company translates balance sheet and income statement items into U.S. dollars. For the Company’s subsidiaries that operate in a local currency
functional environment, all assets and liabilities are translated into U.S. dollars using current exchange rates at the balance sheet date; revenue and expenses
are translated using quarterly exchange rates which approximate to average exchange rates in effect during each period. Resulting translation adjustments
are reported as a separate component of accumulated other comprehensive (loss) income in shareholders' equity.
Segment reporting
The Company views its operations and makes decisions regarding how to allocate resources and manages its business as one reportable segment and one
reporting unit. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for
purposes of allocating and evaluating financial performance.
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. 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. Payment terms and conditions vary, although terms generally include a requirement of
payment within 30 to 90 days. During the year ended December 31, 2022, the Company recognized approximately $511,000 of revenue that was included
in the deferred revenue balance at the beginning of the year.
The Company primarily recognizes product revenues, service revenues, and rental revenues. Product revenues are generated from the sale of
biopreservation media, ThawSTAR, and freezer products. We recognize product revenue, including shipping and handling charges billed to customers, at a
point in time when we transfer control of our products to our customers, which is upon shipment for substantially all transactions. Shipping and handling
costs are classified as part of cost of product revenue in the Consolidated Statement of Operations. Service revenues are generated from the storage of
biological and pharmaceutical materials. We recognize service revenues over time as services are performed or ratably over the contract term. 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 as of and during the year ended December
31, 2022.
The Company also generates revenue from the leasing of our property, plant, and equipment, operating right-of-use assets, and evo cold chain systems to
customers pursuant to service contracts or rental arrangements entered into with the customer. Revenue from these arrangements 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.
The Company enters into various customer service agreements (collectively, “Service Contracts”) with customers to provide biological and pharmaceutical
storage services. In certain of these Service Contracts, the property, plant, and equipment or operating right-of-use assets used to store a customer’s product
are used only for the benefit of one customer. This is primarily driven by the customer’s desire to ensure that sufficient storage capacity is available in a
specific geographic location for a set period of time. These agreements may include extension and termination clauses. These Service Contracts do not
allow for customers to purchase the underlying assets.
The Company has assessed its Service Contracts and concluded that certain of the contracts for the storage of customer products met the criteria to be
considered a leasing arrangement (“Embedded Leases”), with the Company as the lessor. The specific Service Contracts that met the criteria were those
that provided a single customer with the ability to substantially direct the use of the Company’s property, plant, and equipment or operating right-of-use
assets.
Under ASC 842, consistent with the previous guidance, the Company recognizes operating right-of-use asset embedded lessor arrangements on its
Consolidated Balance Sheets in Operating right-of-use assets.
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None of the Embedded Leases identified by the Company qualify as a sales-type or direct finance lease. None of the operating leases for which the
Company is the lessor include options for the lessee to purchase the underlying asset at the end of the lease term or residual value guarantees, nor are any
such operating leases with related parties.
Embedded Leases 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. Non-lease components of the Company’s
rental arrangements include reimbursements of lessor costs.
Total bioproduction tools and services revenue for the years ended December 31, 2022, 2021, and 2020 were comprised of the following:
(In thousands, except percentages)
Product revenue
Freezer and thaw
Cell processing
Storage and cold chain services
Service revenue
Freezer and thaw
Storage and cold chain services
Rental revenue
Storage and cold chain services
Total revenue
2022
Year Ended December 31,
2021⁽¹⁾
2020⁽²⁾
$
$
66,682 $
68,509
809
74
15,234
10,451
161,759 $
56,620 $
44,965
328
-
9,817
7,426
119,156 $
13,548
30,946
46
-
1,752
1,795
48,087
(1) 2021 revenue includes product revenue related to Global Cooling from May 3, 2021 through December 31, 2021 and product revenue related to
Sexton from September 1, 2021 through December 31, 2021.
(2) 2020 revenue includes service revenue related to SciSafe from October 1, 2020 through December 31, 2020.
The following table includes estimated rental revenue expected to be recognized in the future related to embedded leases as well as estimated service
revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting
periods. The Company elected not to disclose the value of the remaining unsatisfied performance obligation with a duration of one year or less as permitted
by the practical expedient in ASU 2014-09, Revenue from Contracts with Customers. The estimated revenue in the following table does not include
contracts with the original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are
unexercised as of December 31, 2022.
The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material
rights pursuant to respective contracts:
(In thousands)
Rental revenue
Service revenue
Risks and uncertainties
COVID-19 pandemic
2023
2024
Total
$
$
3,735 $
200 $
900 $
10 $
4,635
210
Our domestic and international operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus
(“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and international markets.
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During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips
for the manufacture of our ULT freezer products due to the effects of COVID-19. These supply chain disruptions decreased the Company’s profitability as
a result of increased supplier pricing and production stoppages. During the year ended December 31, 2022, supply chain bottlenecks were mitigated
through the diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in
supply for semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were
still experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our
semiconductor supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.
We cannot be assured that a continued or prolonged global pandemic will not have other negative impacts on our manufacturing and shipping processes or
our product costs. The extent to which the COVID-19 pandemic affects our future financial results and operations will depend on future developments
which are highly uncertain and cannot be predicted, including the recurrence, severity and/or duration of the ongoing pandemic, and current or future
domestic and international actions to contain and treat COVID-19.
The Company reviews capital and amortizing intangible assets (long-lived assets) for impairment on an annual basis or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The Company determined that the economic uncertainty caused by the COVID-19
pandemic was a trigger for an impairment review in the quarter ended June 30, 2020 of certain long-lived assets based on the expected near-term weakness
in ThawSTAR and freezer revenue resulting from the impact of COVID-19.
As a result of the Company’s outlook for revenue from the ThawSTAR and freezer product lines, estimated undiscounted cash flow projections were
developed to determine if any impairment of the related intangible assets was warranted. After conducting such review, the Company determined that there
was no impairment of the remaining long-lived assets as of June 30, 2020. Given the inherent uncertainties of the COVID-19 pandemic and the estimates
used in these cash flow projections, changes based on facts and circumstances in future quarters could give rise to impairment.
The Company revised the revenue projections for the ThawSTAR and freezer product lines in the second quarter ended June 30, 2020 to determine the
impact on the fair value of the contingent consideration related to the existing earnout provisions. Based on results of the year ended December 31, 2020
related to these two product lines, we made further adjustments to our revenue projections. After reviewing the impact of the updated revenue projections
on estimated undiscounted cash flow projections, the Company determined that there was no impairment of the remaining long-lived assets as of December
31, 2020. The Company reduced the fair value of the combined contingent consideration liability from $388,000 at June 30, 2020, to $221,000 as of
December 31, 2020 due to updated revenue projections, the time value of money, and actual results for the year ended December 31, 2020.
The Company may also experience other negative impacts of the COVID-19 outbreak such as the lack of availability of the Company’s key personnel,
additional temporary closures of the Company’s office or the facilities of the Company’s business partners, customers, third-party service providers or other
vendors, the inability to travel to market and sell our products, and the interruption of the Company’s supply chain, distribution channels, liquidity and
capital or financial markets.
Any disruption and volatility in the global capital markets as a result of the pandemic may increase the Company’s cost of capital and adversely affect the
Company’s ability to access financing when and on terms that the Company desires. In addition, a potential recession resulting from the spread of COVID-
19 could materially affect the Company’s business, especially if a recession results in higher unemployment causing potential patients to not have access to
health insurance.
The ultimate extent to which the COVID-19 pandemic and its repercussions impact the Company’s business will depend on future developments, which
continue to be uncertain. However, the foregoing and other continued disruptions to the Company’s business as a result of COVID-19 could result in a
material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
On April 20, 2020, the Company received $2,175,320 from the Paycheck Protection Program (“PPP”) in accordance with the CARES Act eligibility
requirements initially established. After subsequent changes to the eligibility requirements of the PPP for publicly traded companies, the Company repaid
the loan in full on April 29, 2020.
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. In periods when we have a net loss, common stock equivalents are excluded from our calculation of earnings per share as their
inclusion would have an antidilutive effect.
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Table of Contents
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)
Basic earnings (loss) per common share
Numerator:
Net (loss) income
Amount attributable to unvested restricted shares
Amount attributable to warrants outstanding
Net (loss) income allocated to common shareholders
Denominator:
Weighted-average common shares issued and outstanding
Basic (loss) earnings per common share
Diluted earnings (loss) per common share
Numerator:
Net (loss) income
Amount attributable to warrants
Less: gain related to change in fair value of warrants
Net loss allocated to common shareholders
Denominator:
Weighted-average common shares issued and outstanding
Diluted loss per common share
2022
Year Ended December 31,
2021
2020
(139,805) $
-
-
(139,805)
(8,908) $
-
-
(8,908)
1,983
(100)
(61)
1,822
42,481,027
(3.29) $
38,503,944
(0.23) $
27,306,258
0.07
(139,805) $
-
-
(139,805)
(8,908) $
-
-
(8,908)
1,983
(14)
(3,601)
(1,632)
42,481,027
(3.29) $
38,503,944
(0.23) $
27,306,258
(0.06)
$
$
$
$
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, cash equivalents, and restricted cash
Year Ended December 31,
2020
2021
1,637,745
18,204
1,655,949
2,131,794
1,499,953
3,631,747
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.
Restricted cash consists entirely of amounts that will be recovered from escrow in relation to the acquisition of SciSafe. The restricted cash is short term in
nature, as the Company anticipates to receive the funds within one year of the balance sheet date.
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as presented in the Company’s Consolidated Statements of
Cash Flows for the years ended December 31, 2022 and 2021.
(In thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
Available-for-sale securities
2022
2021
$
$
19,442 $
31
19,473 $
69,860
10
69,870
Available-for-sale securities consist of U.S. government securities, corporate debt securities, and other debt securities. Management classifies investments
at the time of purchase and reevaluates such classification at each balance sheet date. Investments with maturities beyond one year may be classified as
short-term based on their liquid nature and because such marketable securities represent the investment of cash that is available for current operations.
Available-for-sale securities are reported at fair value based on quoted market prices and other observable market data. Unrealized gains and losses are
reported as a component of other comprehensive (loss) income, net of any related tax effect. Realized gains and losses and other-than-temporary
impairments on investments are included in other income.
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Inventories
Inventories relate to the Company’s cell and gene therapy products. The Company values biopreservation media inventory at cost or, if lower, net realizable
value, using the specific identification method. All other inventory is valued 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 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 revenue volume to cost of product revenue. The Company bases its estimates on
expected product revenue volume, production capacity and expiration dates of raw materials, work in process, and finished products. 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.
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 the collectability of customer account balances. Accounts considered uncollectible are charged against the established allowance.
Equity 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. As of December 31, 2022, these investments are comprised
of $4.1 million in Series A-1 and A-2 Preferred Stock in iVexSol, Inc. (“iVexSol”) and $995,000 in Series E Preferred Stock in PanTHERA CryoSolutions,
Inc. (“PanTHERA”). As of December 31, 2021, these investments are comprised of $3.4 million in Series A-1 and A-2 Preferred Stock in iVexSol, Inc.
(“iVexSol”) and $995,000 in Series E Preferred Stock in PanTHERA CryoSolutions, Inc. (“PanTHERA”).
As of December 31, 2022, Sexton is consolidated in the Consolidated Financial Statements as a result of the step-acquisition completed September 1, 2021.
As of December 31, 2020, the Sexton investment was measured and recorded using a measurement alternative for equity investments that do not have a
readily determinable fair value that measures the securities at cost minus impairment, if any, plus or minus changes resulting from observable process
changes in orderly transactions for identical or similar investments of the same issuer. The Company 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 believed that carrying this investment at fair value
better portrayed the economic substance of the investment. Under the fair value option, gains and losses on the convertible note were included in unrealized
gains/(losses) on investments within net earnings each applicable reporting period. Gains related to the increase in fair value of this convertible note were
$697,000, zero, and $1.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. 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 was recorded separately from other changes in its fair value within
interest income each period. In November of 2020, the Company elected to convert the note into Series A-1 Preferred Stock and invest an additional $1.0
million in Series A-2 Preferred Stock in iVexSol. The Preferred Stock investments in iVexSol are carried at cost minus impairment, if any, plus or minus
changes resulting from observable process changes in orderly transactions for identical or similar investments of the same issuer.
In November of 2020, the Company invested $995,000 in Class E Preferred Shares in PanTHERA CryoSolutions, Inc. In conjunction with this investment,
the Company executed a development and license agreement with PanTHERA under which the Company will make milestone development payments up
to $2.0 million in the event that certain milestones are met in exchange for exclusive, perpetual, worldwide marketing and distribution rights to the
technology for use in cell and gene therapy applications. In June of 2021, PanTHERA satisfied the first milestone and the Company paid $200,000 in
accordance with the agreement. The Preferred Stock investments in PanTHERA are carried at cost minus impairment, if any, plus or minus changes
resulting from observable process changes in orderly transactions for identical or similar investments of the same issuer.
As of December 31, 2022, management believes there are no indications of impairment or changes in fair value for the investments in iVexSol or
PanTHERA.
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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. Carrying values are reviewed for recoverability at the asset grouping level to determine if the facts and circumstances suggest that a potential
impairment may have occurred. 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, 2022, 2021,
and 2020.
Assets held for rent
Assets held for rent are carried at cost less accumulated depreciation. These assets consist of dedicated storage space, 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. Assets utilized to provide dedicated storage space are depreciated over their applicable useful lives once placed in
service. Shippers are depreciated over a useful life of three years when in use by customers.
Our customers rent assets 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 assets rented. At the end of the rental agreement, the customer returns the asset 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.
Carrying values are reviewed for recoverability at the asset grouping level to determine if the facts and circumstances suggest that a potential impairment
may have occurred. 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, 2022, 2021, and 2020.
Lease accounting
We determine if an arrangement is a lease at inception. Where an arrangement is a lease, we determine if it is an operating lease or a financing lease. At
lease commencement, we record a lease liability and corresponding right-of-use (“ROU”) asset. Lease liabilities represent the present value of our future
lease payments over the expected lease term which includes options to extend or terminate the lease when it is reasonably certain those options will be
exercised. The present value of our lease liability is determined using our incremental collateralized borrowing rate at lease inception. ROU assets represent
our right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability for leases with an initial term
greater than 12 months. Over the lease term we use the effective interest rate method to account for the lease liability as lease payments are made and the
ROU asset is amortized in a manner that results in straight-line expense recognition.
We elected to apply the practical expedient for short-term leases and accordingly do not apply lease recognition requirements for short-term leases with a
duration less than twelve months. Instead, we recognize payments related to these arrangements in the Consolidated Statement of Operations as lease costs
on a straight-line basis over the lease term.
Warranty
Our standard warranty terms typically extend between one year and seven years from the date of delivery. We accrue for standard warranty costs based on
historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost over the period.
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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. Our policy for
interest and penalties is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statement of Operations.
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. As of December 31, 2022, the Company has an unrecognized tax benefit of $610,000 related to tax attributes being carried forward. 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.
Advertising
Advertising costs are expensed as incurred and totaled $768,000, $552,000, and $167,000 for the years ended December 31, 2022, 2021, and 2020,
respectively.
Concentrations of risk
During the years ended December 31, 2022 and 2021, we derived approximately 18% and 17% of our revenue from the same customer, respectively.
During the year ended December 31, 2020, we derived approximately 13% of our revenue from a different customer. No other customers accounted for
more than 10% of revenues. Revenue from foreign customers is denominated in United States dollars or euros.
Revenue by major product
CryoStor
780XLE Freezer
2022
Year Ended December 31,
2021
2020
36%
22%
33%
22%
60%
-%
In the years ended December 31, 2022, 2021, and 2020, no suppliers accounted for more than 10% of purchases.
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
2022
Year Ended December 31,
2021
2020
72%
17%
7%
4%
100%
78%
7%
14%
1%
100%
73%
13%
12%
2%
100%
The following table represents the Company’s long-lived assets by geographic area as of December 31:
(In thousands)
United States
Netherlands
Total
2022
2021
$
$
42,829 $
5,437
48,266 $
40,708
5,903
46,611
As of December 31, 2022, two customers accounted for 26% of gross accounts receivable. As of December 31, 2021, two customers accounted for 32% of
gross accounts receivable. No other customers accounted for more than 10% of our gross accounts receivable.
As of December 31, 2022, one supplier accounted for 23% of accounts payable. As of December 31, 2021, a different supplier accounted for 10% of
accounts payable. No other suppliers accounted for more than 10% of our accounts payable.
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, market-based restricted stock awards and performance-based restricted stock awards granted to our directors and employees. The fair value
of stock options, including performance awards, without a market-based 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. 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.
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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 the grant date fair value over the vesting period regardless of the value that the award recipients ultimately
receive.
We have, from time to time, modified the terms of restricted stock awards awarded to employees. We account for the incremental increase in the fair value
over the original award on the date of the modification as an expense for vested awards or over the remaining service (vesting) period for unvested awards.
The incremental compensation cost is the excess of the fair value of the modified award on the date of modification over the fair value of the original award
immediately before the modification.
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
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.
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 in
the fourth 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 its 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 its 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 the reporting unit exceeds its fair value, the Company records
an impairment loss equal to the difference. The Company operates as one reporting unit as of the goodwill impairment measurement date in the fourth
quarter of 2022. As of the testing date and the period after that date through the issuance date of our financial statements, the Company has observed no
indicators of potential goodwill impairment at any point during the period based on its qualitative assessment.
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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. If the estimate of a definite-lived 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. Definite-lived
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. As of June 30, 2022 and October 1, 2022, the Company determined that adverse conditions existed
that indicated impairment of certain definite life intangible assets. Refer to Note 11 of the Consolidated Financial Statements for further details.
Indefinite-lived intangibles are carried at the initially recorded fair value less any recognized impairment. In-process research and development (“IPR&D”)
is initially capitalized at fair value as an intangible asset with an indefinite life. When the IPR&D project is complete, it is reclassified as a definite-lived
intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned, a charge would be recorded for the value of the related
intangible asset to our Consolidated Statement of Operations in the period it is abandoned. Indefinite-lived intangibles are tested annually for impairment.
Impairment assessments are conducted more frequently 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. During the second quarter of 2022, the Company identified interim triggering events that required further analysis with respect
to potential impairment of the IPR&D assets acquired during 2021. After performing quantitative impairment tests as of June 30, 2022 and October 1,
2022, the Company determined that the IPR&D assets were impaired. Refer to Note 11 of the Consolidated Financial Statements for further details.
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 contractual 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. As of December 31, 2022, no warrants were outstanding.
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Recent accounting pronouncements
In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurements
(Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions (“ASC Topic 820”). The FASB issued ASU 2022-03 to
(1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that
prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity related
securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual
restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring
fair value. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption
permitted. We are evaluating when to adopt the amendments in ASU 2022-03. We do not expect a material impact as a result of adopting this amendment.
In March 2022, the FASB issued ASU No. 2022-02 Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings and requires disclosure of current-period gross write-offs by
year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to
loan refinancings and restructurings in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term
extensions when the borrower is experiencing financial difficulties. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 and early
adoption is permitted. The Company adopted this guidance and it did not have a material impact on the Company’s financial position, results of operation,
or cash flows.
In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government
Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the
disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an
entity’s financial statements. The guidance in this update will be effective for fiscal years beginning after December 15, 2023, with early application of the
amendments allowed. The amendments are to be applied prospectively to all transactions within the scope of the amendments that are reflected in financial
statements at the date of initial application and new transactions that are entered into after the date of initial application or, retrospectively to those
transactions. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers. This update amends guidance to require that an entity (acquirer) recognize and measure contract assets and contract liabilities
acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606). At the acquisition date, an acquirer should
account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. ASU 2021-08 is effective for fiscal years
beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted including adoption
in an interim period. The Company adopted this guidance and it did not have a material impact on the Company’s financial position, results of operation, or
cash flows.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting. ASU 2020-04 provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging
relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of
interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around
the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less
susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning
away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform—Scope, which
clarified the scope and application of the original guidance. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform—Deferral of the
Sunset Date of Topic 848. This update extends the sunset provision of ASU 2020-04 to December 31, 2024. The Company has not yet adopted this ASU
and is evaluating the effect of adopting this new accounting guidance.
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 companies that qualified as Smaller
Reporting Companies as defined by the SEC as of November 19, 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.
2. Correction of immaterial errors
During the fourth quarter of 2022, we determined that an error existed in our previously issued consolidated financial statements. Specifically, we identified
we had established nexus in several jurisdictions beginning in the year ended December 31, 2019 in which we were not collecting and remitting sales taxes
appropriately. The error was evaluated under the U.S. Securities and Exchange Commission's ("SEC's") guidance on evaluating the materiality of prior
period misstatements to the Company’s financial statements. We evaluated the error and concluded that it was not material to the previously issued
consolidated financial statements. Although the error was not material to any period, we corrected the accompanying historical consolidated financial
statements for the years ended December 31, 2021 and 2020 to reflect the sales tax liability and associated expenses owed within each period for
comparative purposes.
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The following tables represent the adjustments to our Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the years
ended December 31, 2021 and 2020, as well as adjustments to our Consolidated Balance Sheet as of December 31, 2021 in accordance with ASC 250. The
adjustments to our Consolidated Statements of Comprehensive (Loss) Income and Consolidated Statements of Shareholders’ Equity were limited to the net
income (loss) adjustments outlined below.
The effect of the adjustments to our Consolidated Balance Sheet as of December 31, 2021 was as follows (in thousands):
Prepaid expenses and other current assets
Total current assets
Total assets
Accrued expenses and other current liabilities(1)
Sales taxes payable
Total current liabilities
Total liabilities
Accumulated deficit(2)
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
As reported
December 31, 2021
Adjustment
As corrected
4,427 $
125,859
554,057
7,142
-
40,381
73,920
(105,020)
480,137
554,057
229 $
229
229
(272)
2,591
2,319
2,319
(2,090)
(2,090)
229
4,656
126,088
554,286
6,870
2,591
42,700
76,239
(107,110)
478,047
554,286
(1) In the prior year Consolidated Balance Sheet as of the year ended December 31, 2021, accrued sales taxes in the amount of $272,000 were recorded
within the Accrued expenses and other current liabilities line item on the consolidated balance sheets. These were reclassified to Sales tax payable in
the current year.
(2) The impact of the error on Accumulated deficit in our Consolidated Balance Sheet as of the year ended December 31, 2019 was negative $133,000,
adjusting the ending balance to be $100.2 million when previously reported as $100.1 million.
The effect of the adjustments to our Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 were as follows (in
thousands, except per share data):
2021
General and administrative
Total operating expenses
Operating loss
Interest expense
Total other income, net
Loss before income tax benefit
Net loss(1)
Net loss per basic share
Net loss per diluted share
2020
General and administrative
Total operating expenses
Operating loss
Interest income
Total other income, net
Loss before income tax benefit
Net income(1)
Net income attributable to common shareholders - Basic
Net loss attributable to common shareholders - Diluted
Net income per basic share
Net loss per diluted share
Years Ended December 31, 2021 and 2020
Adjustment
As reported
As corrected
$
32,448 $
153,096
(33,940)
(432)
6,187
(27,753)
(7,635)
(0.20)
(0.20)
14,607
53,662
(5,575)
58
4,978
(597)
2,667
2,450
(954)
0.09
(0.03)
1,220 $
1,220
(1,220)
(53)
(53)
(1,273)
(1,273)
(0.03)
(0.03)
666
666
(666)
(18)
(18)
(684)
(684)
(628)
(678)
(0.02)
(0.03)
33,668
154,316
(35,160)
(485)
6,134
(29,026)
(8,908)
(0.23)
(0.23)
15,273
54,328
(6,241)
40
4,960
(1,281)
1,983
1,822
(1,632)
0.07
(0.06)
(1) The Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2021 and 2020 were adjusted by the impact to net
(loss) income noted here. Comprehensive loss for the year ended December 31, 2021 is now reported at $9.2 million, reflecting an adjustment of $1.3
million, and was previously reported as $7.9 million. Comprehensive income for the year ended December 31, 2020 is now reported at $1.9 million,
reflecting an adjustment of negative $684,000, and was previously reported as $2.7 million.
56
The effect of the adjustments to our Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 were as follows (in
thousands):
2021
Net loss
Prepaid expenses and other current assets
Sales taxes payable
2020
Net income
Prepaid expenses and other current assets
Sales taxes payable
Years Ended December 31, 2021 and 2020
Adjustment
As reported
As corrected
$
(7,635) $
2,802
-
2,667
25
-
(1,273) $
(139)
1,412
(684)
(75)
759
(8,908)
2,663
1,412
1,983
(50)
759
All accompanying footnotes reflect corrected balances presented in the tables above.
3. Fair value measurement
In accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC Topic 820”), the Company measures its financial instruments
at fair value on a recurring basis. The carrying values of certain of our financial instruments including cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities approximate fair value because of their short maturities. The carrying value of our marketable debt securities,
which are accounted for as available-for-sale, are classified within either Level 1 or Level 2 in the fair value hierarchy because we use quoted market prices
or alternative pricing sources and models utilizing market observable inputs to determine their fair value. The carrying values of our long-term debt, which
is classified within Level 2 in the fair value hierarchy, approximates fair value as our borrowings with lenders are at interest rates that approximate market
rates for comparable loans. 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.). 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.
For the investment in iVexSol convertible debt that was converted to Series A-1 preferred stock in November 2020, the significant Level 3 inputs were the
expected term of the instrument, the underlying creditworthiness of iVexSol and the valuation of various embedded features in the note, which were based
on future financings of iVexSol. We considered a range of probability-weighted financing or payoff settlements between 5% and 50% with outcomes
occurring over a range of 1 to 2 years. The estimated market interest rate of approximately 8.0% was based on an average of indexes of below investment
grade debt. The market rate was calibrated to the rate implied in the original issuance in September 2019 and adjusted for changes in market rates quarterly.
The fair value of the SciSafe contingent consideration liability was initially valued based on unobservable inputs using a Monte Carlo simulation. These
inputs included the estimated amount and timing of projected future revenue, a discount rate of 4.5%, a risk-free rate of approximately 0.20%, asset
volatility of 60%, and revenue volatility of 15%. Significant changes in any of those inputs in isolation would result in significant changes in fair value
measurement. Generally, changes used in the assumptions for projected future revenue and revenue volatility would be accompanied by a directionally
similar change in the fair value measurement. Conversely, changes in the discount rate would be accompanied by a directionally opposite change in the
related fair value measurement. However, due to the contingent consideration having a maximum payout amount, changes in these assumptions would not
affect the fair value of the contingent consideration if they vary beyond certain amounts. At the acquisition date, the contingent consideration was
determined to have a fair value of $3.7 million. Subsequent to the acquisition date, the contingent consideration liability was re-measured to fair value with
changes recorded in the change in fair value of contingent consideration in the Consolidated Statements of Operations. During the most recent re-
measurement of the contingent consideration liability as of December 31, 2022, the Company used a discount rate of 12.8%, a risk-free rate of
approximately 4.1%, asset volatility of 68%, and revenue volatility of 30%. This contingent consideration liability is included in the Consolidated Balance
Sheets as of December 31, 2022 and 2021 in the amounts of $4.3 million and $9.9 million, respectively. The changes in fair value of contingent
consideration of $5.6 million and $3.0 million associated with this liability are included within the Change in Fair Value of Contingent Consideration in the
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021, respectively.
57
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For the warrant liability, the significant Level 3 inputs included the contractual remaining term of the warrants and the volatility of the Company’s common
stock. For the estimated term of the warrants, we used the actual terms of the warrants, which expired March 25, 2021. For the volatility of the Company’s
stock as of December 31, 2020, we used historical volatility for the remaining term of each warrant. These amounts ranged from 56.8% to 84.6%. We did
not make any adjustments to the historical volatility. Certain assumptions used in estimating the fair value of the warrants are uncertain by nature. On
March 25, 2021, the expiration date of all remaining warrants, all remaining warrants were exercised via a “cashless” exercise and the warrant liability was
revalued to its intrinsic value, as the Company’s stock price was observable as of that date.
There were no remeasurements to fair value during the year ended December 31, 2022 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, 2022 and 2021,
based on the three-tier fair value hierarchy:
(In thousands)
As of December 31, 2022
Assets:
Cash equivalents:
Money market accounts
Available-for-sale securities:
U.S. government securities
Corporate debt securities
Other debt securities
Total
Liabilities:
Contingent consideration - business combinations
Debt
Total
As of December 31, 2021
Assets:
Money market accounts
Total
Liabilities:
Contingent consideration - business combinations
Total
Level 1
Level 2
Level 3
Total
$
11,416 $
- $
- $
11,416
15,051
-
-
26,467
-
-
- $
-
26,047
3,494
29,541
-
25,607
25,607 $
-
-
-
-
4,456
-
4,456 $
15,051
26,047
3,494
56,008
4,456
25,607
30,063
Level 1
Level 2
Level 3
Total
63,873 $
63,873
-
- $
- $
-
-
- $
- $
-
10,027
10,027 $
63,873
63,873
10,027
10,027
$
$
$
There have been no transfers of assets or liabilities between the fair value measurement levels.
The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs for the years ended
December 31, 2022, 2021, and 2020:
(In thousands)
Beginning balance as of December 31, 2021, 2020, and 2019
Additions
Change in fair value recognized in net (loss) income
Payment of contingent consideration earned
Ending balance
2022
Year Ended December 31,
2021
2020
$
$
10,027 $
-
(4,754)
(817)
4,456 $
7,152
-
2,875
-
10,027 $
1,914
3,663
1,575
-
7,152
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The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs for the years ended December 31, 2021
and 2020:
(In thousands)
Beginning balance as of December 31, 2020 and 2019
Exercised warrants
Change in fair value recognized in net (loss) income
Ending balance
There was no warrant liability activity during the year ended December 31, 2022.
2021
2020
2,780
(2,901)
121
- $
39,602
(33,221)
(3,601)
2,780
$
$
4.
Investments
Available-for-sale securities
The Company’s portfolio of available-for-sale marketable securities consists of the following:
(In thousands)
Available-for-sale securities, current portion
U.S. government securities
Corporate debt securities
Other debt securities
Total short-term
Available-for-sale securities, long-term
Other debt securities
Total marketable securities
$
44,642 $
(In thousands)
Due in one year or less
Due after one year through five years
Total
There were no outstanding available-for-sale marketable securities as of December 31, 2021.
Equity investments
Amortized
Cost
December 31, 2022
Gross unrealized
Gains
Losses
$
15,087 $
26,057
2,169
43,313
1,329
1 $
6
-
7
3
10 $
Estimated
Fair Value
37 $
16
7
60
15,051
26,047
2,162
43,260
-
1,332
60 $
44,592
Amortized
Cost
Estimated
Fair Value
$
$
43,313 $
1,329
44,642 $
43,260
1,332
44,592
The Company periodically invests in non-marketable equity securities of private companies without a readily determinable fair value to promote business
and strategic objectives. These securities included Series A-1 and A-2 Preferred Stock in iVexSol, Inc. with a fair value of $4.1 million and $3.4 million as
of December 31, 2022 and December 31, 2021, respectively, and Series E Preferred Stock in PanTHERA CryoSolutions, Inc. with a fair value of $995,000
as of December 31, 2022 and December 31, 2021.
5.
Inventories
Inventories consist of the following as of December 31, 2022 and 2021:
(In thousands)
Raw materials
Work in progress
Finished goods
Total
2022
2021
20,950 $
5,680
8,274
34,904 $
17,252
5,015
6,078
28,345
$
$
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6. Leases
We have various operating lease agreements for office space, warehouses, manufacturing, and production locations as well as vehicles and other
equipment. Our real estate leases have remaining lease terms of one to eight years. We exclude options that are not reasonably certain to be exercised from
our lease terms, ranging from one to five years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased
assets over the lease terms. For certain leases, we receive incentives from our landlords, such as rent abatements, which effectively reduce the total lease
payments owed for these leases. Vehicle and other equipment operating leases have terms between one and five years.
Our financing leases relate to research equipment, machinery, and other equipment.
The table below presents certain information related to the weighted average discount rate and weighted average remaining lease term for the Company’s
leases as of December 31, 2022 and 2021:
Weighted average discount rate - operating leases
Weighted average discount rate - finance leases
Weighted average remaining lease term in years - operating leases
Weighted average remaining lease term in years - finance leases
The components of lease expense for the years ended December 31, 2022, 2021, and 2020 were as follows:
2022
2021
4.2%
6.1%
7.2
2.0
(In thousands)
Operating lease costs
Short-term lease costs
Total operating lease costs
Variable lease costs
Total lease expense
Maturities of our lease liabilities as of December 31, 2022 are as follows:
2022
Year Ended December 31,
2021
2020
$
$
3,701 $
2,141
5,842
1,104
6,946 $
2,817 $
1,727
4,544
749
5,293 $
3.8%
6.1%
7.8
3.0
839
277
1,116
357
1,473
(In thousands)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: interest
Total present value of lease liabilities
7. Assets held for rent
Operating Leases Financing Leases
171
$
101
28
2
-
-
302
(18)
284
3,448 $
3,089
2,649
2,267
2,242
6,927
20,622
(2,800)
17,822 $
$
Assets held for rent consist of the following as of December 31, 2022 and 2021:
(In thousands)
Shippers placed in service
Fixed assets held for rent
Accumulated depreciation
Net
Shippers and related components in production
Total
60
2022
2021
7,671 $
4,686
(4,952)
7,405
1,659
9,064 $
5,645
4,040
(2,272)
7,413
2,396
9,809
$
$
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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 $3.5 million, $1.9 million, and $671,000 in depreciation
expense related to assets held for rent during the years ended December 31, 2022, 2021, and 2020, respectively.
8. Property and equipment
Property and equipment consist of the following as of December 31, 2022 and 2021:
(In thousands)
Property and equipment
Leasehold improvements
Furniture and computer equipment
Manufacturing and other equipment
Construction in-progress
Subtotal
Less: Accumulated depreciation
Net property and equipment
2022
2021
$
$
5,249 $
1,908
20,557
5,095
32,809
(9,171)
23,638 $
3,840
1,861
16,675
2,022
24,398
(6,741)
17,657
Depreciation expense for property and equipment was $3.3 million, $2.9 million, and $1.4 million for the years ended December 31, 2022, 2021, and 2020,
respectively.
9. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following as of December 31, 2022 and 2021:
(In thousands)
Accrued expenses
Accrued taxes
Accrued compensation
Deferred revenue, current
Other
Total accrued expenses and other current liabilities
10. Warranty reserve liability
2022
2021
3,128 $
975
5,080
548
51
9,782 $
1,656
27
4,351
814
22
6,870
$
$
We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework cost, based on historical
product liability claims. Claim costs are deducted from the accrual when paid. Factors that could have an impact on the warranty accrual in any given
period include the following: changes in manufacturing quality, changes in product costs, changes in product mix and any significant changes in sales
volume.
A rollforward of our warranty liability is as follows:
(In thousands)
Beginning balance as of December 31, 2021, 2020, and 2019
Warranty reserve acquired in the acquisition of Global Cooling
Provision for warranties⁽¹⁾
Settlements of warranty claims⁽¹⁾
Ending Balance
$
2022
2021
2020
9,398 $
-
4,463
(5,549)
8,312
212 $
3,353
10,989
(5,156)
9,398
191
-
137
(116)
212
(1) Both the Provision for warranties and Settlements of warranty claims balances include reclassifications of $1.6 million and $1.1 million for the years
ended December 31, 2022 and 2021, respectively, to reflect changes in warranty utilization on pre-existing claims.
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11. Goodwill and intangible assets
Goodwill
The following table represents the changes in the carrying value of goodwill for the years ended December 31, 2022 and 2021:
(In thousands)
Balance as of December 31, 2020
Goodwill related to Global Cooling acquisition
Goodwill related to Sexton acquisition
Balance as of December 31, 2022 and 2021
Intangible assets
Intangible assets, net consisted of the following as of December 31, 2022 and 2021:
(In thousands, except weighted average useful life)
December 31, 2022
$
Goodwill
58,449
137,822
28,470
224,741
Intangible assets:
Customer Relationships
Tradenames
Technology - acquired
Non-compete agreements
Total intangible assets
Intangible assets:
Customer Relationships
Tradenames
Technology - acquired
Non-compete agreements
In-process research and development⁽¹⁾
Total intangible assets
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted
Average
Useful Life (in
years)
11,288 $
13,731
27,892
1,187
54,098 $
(3,993) $
(4,323)
(12,796)
(898)
(22,010) $
7,295
9,408
15,096
289
32,088
9.3
12.8
4.9
2.0
8.2
December 31, 2021
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted
Average
Useful Life (in
years)
17,516 $
35,574
41,942
1,990
67,440
164,462 $
(1,776) $
(2,306)
(7,789)
(442)
-
(12,313) $
15,740
33,268
34,153
1,548
67,440
152,149
10.3
13.8
5.9
3.0
N/A
9.8
$
$
$
$
(1) In-process R&D represents the fair value of incomplete research and development that has not yet reached technological feasibility. Per discussion
below, this balance has been written off as a result of the impairment analyses performed during the second and fourth quarters of the year ended
December 31, 2022.
Impairment expense for both finite and indefinite-lived intangible assets was $110.4 million, zero, and zero for the years ended December 31, 2022, 2021,
and 2020, respectively. Amortization expense for finite-lived intangible assets was $9.7 million, $8.2 million, and $3.0 million for the years ended
December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, the Company expects to record the following amortization expense:
(In thousands)
For the Years Ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total
62
Estimated
Amortization
Expense
5,431
4,606
4,434
4,136
3,382
10,099
32,088
$
$
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Impairment testing as of June 30, 2022
In the six months ended June 30, 2022, the Company experienced a significant decline in its market capitalization. In July 2022, the Company abandoned
an in-process research and development project within the asset group acquired in the acquisition of Global Cooling and revised its forecasts for net income
and net cash flows to be generated by that asset group. The Company determined that these three events constituted interim triggering events that required
further analysis with respect to potential impairment to goodwill, indefinite-lived intangibles, and definite-lived intangibles. The Company performed an
interim quantitative impairment test as of the June 30, 2022 balance sheet date.
To assess any potential impairment of goodwill, the Company compared the carrying value of its single reporting unit against its market capitalization,
noting that the market capitalization exceeded the carrying value. As such, goodwill was not impaired as of June 30, 2022.
The abandonment of the aforementioned in-process research and development project resulted in an $8.0 million non-cash impairment charge during the
three months ended June 30, 2022 in the line item Intangible asset impairment charges in the Company's Consolidated Statements of Operations, which
represents the entirety of the asset’s carrying value.
In order to determine the fair value of our in-process research and development intangible assets not related to the abandoned project, the Company utilized
an average of a discounted cash flow analysis and comparable public company analysis. The key assumptions associated with determining the estimated
fair value include projected future revenue growth rates, earnings before interest, taxes, depreciation and amortization ("EBITDA") margins, the terminal
growth rate, and the discount rate. As a result of the changes in these assumptions, we recognized a $50.9 million non-cash impairment charge during the
three months ended June 30, 2022 in the line item Intangible asset impairment charges in the Company's Consolidated Statements of Operations, which
represents the difference between the estimated fair value of the Company’s in-process research and development intangible assets and their carrying
value.
In order to determine the fair value of the acquired technology, customer relationships, tradename, and non-compete definite-lived intangible assets, the
Company utilized the excess earnings approach, distributor method, relief from royalty method, and with and without approach, respectively. The key
assumptions associated with determining the estimated fair value include (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. As a result of the analysis, we recognized non-cash impairment charges of $3.5 million, $1.5 million, $5.9 million,
and $4,000 during the period ended June 30, 2022 for the acquired technology, customer relationships, tradename, and non-compete definite-lived
intangible assets, respectively, in the line item Intangible asset impairment charges in the Company's Consolidated Statements of Operations, which
represents the difference between the estimated fair value of the Company’s definite-lived intangible assets and their carrying values.
Impairment Testing as of October 1, 2022
The Company annually performs an impairment assessment as of October 1. To assess any potential impairment of goodwill, the Company compared the
carrying value of its single reporting unit against its market capitalization, noting that the market capitalization exceeded the carrying value. As such,
goodwill was not impaired as of October 1, 2022.
In order to determine the fair value of our indefinite-lived intangible assets acquired from Global Cooling, which included an in-process research and
development project, the Company utilized a discounted cash flow analysis. The key assumptions associated with determining the estimated fair value
include projected future revenue growth rates, earnings before interest, taxes, depreciation and amortization ("EBITDA") margins, the terminal growth rate,
and the discount rate. As a result of the changes in these assumptions, we recognized a $8.5 million non-cash impairment charge during the year-ended
December 31, 2022 in the line item Intangible asset impairment charges in the Company's Consolidated Statements of Operations, which represents full
impairment of the carrying value of the Company’s in-process research and development intangible asset as of October 1, 2022.
In order to determine the fair value of the acquired technology, customer relationships, tradename, and non-compete definite-lived intangible assets
acquired from Global Cooling, the Company utilized the excess earnings approach, distributor method, relief from royalty method, and with and without
approach, respectively. The key assumptions associated with determining the estimated fair value include (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. These assumptions differed from those incorporated into the forecasts during
impairment testing as of June 30, 2022 in through the areas of (i) estimated market growth, (ii) estimated market share capture, (iii) product profitability,
and (iv) development costs. As a result of the analysis, we recognized non-cash impairment charges of $10.5 million, $4.7 million, $15.9 million, and
$800,000 during the fourth quarter of the year ended December 31, 2022 for the acquired technology, customer relationships, tradename, and non-compete
definite-lived intangible assets, respectively, in the line item Intangible asset impairment charges in the Company's Consolidated Statements of Operations,
which represents the difference between the estimated fair value of the Company’s definite-lived intangible assets and their carrying values. The carrying
value of the acquired technology, customer relationships, tradename, and non-compete definite-lived intangible assets were $38.4 million, $16.0 million,
$29.6 million, and $2.0 million respectively prior to the impairment charges.
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Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating
the fair value of the Company’s reporting unit, indefinite-lived intangible assets, and definite-lived intangible assets requires us to make assumptions and
estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include projected future
revenue growth rates, EBITDA margins, terminal growth rates, discount rates, royalty rates and other market factors. If current expectations of future
growth rates, margins and cash flows are not met, or if market factors outside of our control change significantly, then our reporting unit, indefinite-lived
intangible assets, and definite-lived intangible assets might become impaired in the future, negatively impacting our operating results and financial
position. As the carrying amounts of the Company’s indefinite-lived and definite-lived intangible assets were impaired as of June 30, 2022 and October 1,
2022 and written down to fair value, those amounts are more susceptible to an impairment risk if there are unfavorable changes in assumptions and
estimates.
12. Commitments and contingencies
Employment agreements
We have employment agreements with certain key employees. 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. 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, 2022.
Non-income related taxes
Companies are required to collect and remit sales tax from certain customers if the company is determined to have nexus in a particular state. Upon the
determination of nexus, which varies by state, companies are additionally required to maintain detailed record of specific product and customer information
within each jurisdiction in which it has established nexus to appropriately determine their sales tax liability, requiring technical knowledge of each
jurisdiction’s tax case law. During the year ended December 31, 2022, the Company determined that a sales tax liability related to the periods of 2019
through 2022 is probable and determined the estimated liability to be approximately $3.7 million. Outside of the analysis performed to determine the sales
tax liability related to the periods of 2019 through 2022, we assessed approximately $306,000 of sales taxes owed during the normal course of business.
Due to the variety of jurisdictions in which this estimated liability relates to and our ongoing assessment of sales taxes owed, we cannot predict when final
liabilities will be satisfied. We will reevaluate the estimated liability and timing of satisfaction each reporting period.
13. Line of credit and long-term debt
Line of credit
In May 2021, the Company acquired Global Cooling and assumed a line of credit which bore interest at a floating rate equal to the 3-month LIBOR rate
plus 5.50%. The maximum allowed on the line of credit was $5.0 million. The line was secured by substantially all assets of Global Cooling. In October
2021, the Company paid off the entirety of the outstanding balance on the line of credit and all related interest.
Long-term debt
In May 2021, the Company assumed three term notes in the acquisition of Global Cooling. At the time of acquisition, these notes carried aggregate
outstanding principal balances of $4.4 million. These term notes bore interest at a floating rate equal to the 3-month LIBOR rate plus 6.50%. The term
notes included financial covenants tied to the performance of Global Cooling.
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In October 2021, the Company entered into amended and restated term notes for all three term notes assumed in the acquisition of Global Cooling.
Pursuant to the loan agreements, one lender provided two term notes in the amounts of $1.4 million and $1.4 million. A separate lender provided one term
note in the amount of $1.8 million. All three term notes bear interest at a fixed rate of 4%, were interest-only with one balloon principal payment at
maturity, and could be pre-paid without penalty at any time. As of September 20, 2022, the Company fully extinguished one of the three term notes. All
financial covenants included in the original agreements previously in effect were removed by the amended loan agreements.
On September 20, 2022, the Company, and certain of its subsidiaries, entered into a term loan agreement, which provided for up to $50 million in aggregate
principal to be drawn. The term loan matures on June 1, 2026. The agreement provides for borrowings of up to $30 million upon closing and options to
borrow up to $10 million between closing and June 30, 2023, up to $10 million upon the achievement of certain revenue milestones, and an additional $10
million upon the Company’s request subject to fulfilling certain requirements of the lender. The Company borrowed $20 million upon closing. Payments on
the borrowing are interest-only through June 2024, with additional criteria allowing for interest-only payments to continue through June 2025. Tranches
borrowed under the term loan agreement bear interest at the Wall Street Journal prime rate plus 0.5%. The interest rate is subject to a ceiling that restricts
the interest rate for each tranche from exceeding 1.0% above the overall rate applicable to each tranche at their respective funding dates. The term loan
agreement contains customary representations and warranties as well as customary affirmative and negative covenants. As of the date of this filing, the
Company is in compliance with the covenants set forth in the 2022 term loan 3 agreement. In the event that borrowings under 2022 term loan 3 exceed $20
million, the Company will become subject to financial covenants.
Long-term debt consisted of the following as of December 31, 2022 and 2021:
(In thousands)
2022 term loan 1
2022 term loan 2
2022 term loan 3
Insurance premium financing
Freezer equipment loan
Manufacturing equipment loans
Freezer installation loan
Other loans
Total debt, excluding unamortized debt issuance costs
Less: unamortized debt issuance costs
Total debt
Less: current portion of debt
Total long-term debt
Maturity Date
⁽¹⁾
Various
Jun-26
Apr-23
Dec-25
Oct-25
Various
Various
Interest Rate
2022
2021
December 31,
4.0% $
4.0%
6.8%
5.0%
5.7%
5.7%
6.3%
$
Various
- $
2,896
20,000
1,074
466
266
1,078
6
25,786
(179)
25,607
(1,814)
23,793 $
1,750
2,813
-
373
612
355
1,334
9
7,246
(31)
7,215
(862)
6,353
(1) 2022 term loan 1 carried a maturity date of September 2024 as of the year ended December 31, 2021. As of September 20, 2022, the entirety of the
outstanding principal and accrued interest was repaid.
2022 term loan 3 is secured by substantially all assets of BioLife, SAVSU, CBS, SciSafe, Global Cooling and Sexton, other than intellectual property. 2022
term loan 2 is secured by substantially all assets of Global Cooling and is effectively subordinated to the security interest established by the lenders of 2022
term loan 3. Equipment loans are secured by the financed equipment.
As of December 31, 2022, the scheduled maturities of loans payable for each of the next five years and thereafter were as follows:
(In thousands)
2023
2024
2025
2026
2027
Thereafter
Total
Amount
1,881
5,544
10,543
5,221
2,597
-
25,786
$
$
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14. Warrants
In May 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.
In March 2021, all remaining outstanding warrants were exercised via a “cashless” exercise. As a result of the cashless exercise, the Company issued an
aggregate of 70,030 shares of Company common stock upon cashless exercise of an aggregate of 79,100 warrants.
The following table summarizes warrant activity for the years ended December 31, 2021 and 2020:
2021
2020
Outstanding at beginning of year
Exercised
Outstanding and exercisable at end of year
79,100 $
(79,100)
- $
4.75
4.75
-
There was no warranty activity during the year ended December 31, 2022.
15. Stock-based compensation
Stock compensation plans
Shares
Wtd. Avg.
Exercise Price
Shares
Wtd. Avg.
Exercise Price
4.33
4.33
4.75
3,959,005 $
(3,879,905)
79,100 $
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 awards 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, July 2020, June 2021, and June 2022, the shareholders approved an increase in the
number of shares available for issuance to 4.1 million shares, 5.0 million shares, 6.5 million shares, and 8.5 million shares, respectively. As of December
31, 2022, there were outstanding options to purchase 456,000 shares of Company common stock and 2.2 million unvested restricted stock awards
outstanding under the 2013 Plan.
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 the year ended December 31, 2022 and 2021, and the status of service
vesting-based stock options outstanding as of December 31, 2022 and 2021:
2022
2021
Outstanding as of beginning of year
Exercised
Forfeited
Expired
Outstanding at end of year
624,531 $
(161,646)
-
(6,592)
456,293 $
2.13
2.00
-
3.22
2.17
Shares
Wtd. Avg.
Exercise Price
Shares
Wtd. Avg.
Exercise Price
2.00
1.61
5.69
1.73
2.13
844,455 $
(183,064)
(1,146)
(35,714)
624,531 $
Stock options exercisable at year end
456,293 $
2.17
624,531 $
2.13
We recognized stock compensation expense related to service-based options of zero, $25,000, and $119,000 during the years ended December 31, 2022,
2021, and 2020. As of December 31, 2022, there was $7.3 million of aggregate intrinsic value of outstanding service vesting-based stock options, including
$7.3 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, 2022. 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, 2022, 2021, and 2020 was $4.1 million, $6.9 million, and $13.1 million, respectively. There were no service based-vesting options granted
during the years ended December 31, 2022, 2021, and 2020. The weighted average remaining contractual life of service vesting-based options outstanding
and exercisable as of December 31, 2022 is 3 years. There were no unrecognized compensation costs for service vesting-based stock options as of
December 31, 2022.
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The following table summarizes information about service vesting-based stock options outstanding as of December 31, 2022:
Range of Exercise Prices
$1.00 - 1.50
$1.51 - 2.00
$2.01 - 2.50
$2.51 - 8.60
Performance-based stock options
Number Outstanding at
December 31, 2022
2,000
177,500
255,938
20,855
456,293
Weighted Average
Remaining Contractual Life
3.85
3.28
2.35
4.92
2.84
$
$
Weighted Average Exercise
Price
1.49
1.90
2.06
5.69
2.16
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 were available for vesting. The
options had an exercise price of $1.64 and vested if revenue levels for 2017 were met. If the minimum performance targets were not achieved, no options
would have vested. 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 the years ended December 31, 2021 and the status
of performance-based stock options outstanding as of December 31, 2021:
Outstanding as of beginning of year
Exercised
Outstanding at end of year
Stock options exercisable at year end
2021
Shares
Wtd. Avg.
Exercise Price
686,001 $
(686,001)
- $
- $
1.64
1.64
1.64
-
There was no performance-based stock option grant activity during the year ended December 31, 2022.
No stock compensation expense was recognized during the years ended December 31, 2022, 2021, and 2020 related to performance-based options. The
intrinsic value of performance-based awards exercised during the years ending December 31, 2022, 2021, and 2020 was zero, $27.4 million, and $1.3
million, respectively. There were no stock options granted to employees and non-employee directors in the years ending December 31, 2022, 2021, and
2020.
Restricted stock
Service vesting-based restricted stock
The following is a summary of service vesting-based restricted stock activity for the years ended December 31, 2022 and 2021, and the status of unvested
service vesting-based restricted stock outstanding as of December 31, 2022 and 2021:
Outstanding as of beginning of year
Granted
Vested
Forfeited
Non-vested at year end
2022
2021
Wtd. Avg.
Grant
Date Fair
Value
37.48
25.26
35.51
40.19
28.94
Wtd. Avg.
Grant
Date Fair
Value
19.31
47.20
19.31
36.95
37.48
Shares
930,854 $
801,484
(378,502)
(141,053)
1,212,783 $
Shares
1,212,783 $
1,373,909
(569,535)
(137,942)
1,879,215 $
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On November 4, 2021, the Board of Directors approved to modify certain restricted stock awards that were awarded to one executive that otherwise would
have expired upon the executive’s intended retirement in early 2023. The modification accelerated the vesting of the awards to vest equally over four
quarters in the year ended December 31, 2022. We recorded incremental stock-based compensation expense of $666,000 in the year ended December 31,
2021 for this stock option modification.
The aggregate fair value of the service vesting-based awards granted during the years ended December 31, 2022, 2021, and 2020 was $34.7 million, $37.8
million, and $15.3 million, respectively. The aggregate fair value of the service vesting-based awards that vested during the years ended December 31,
2022, 2021, and 2020 was $12.6 million, $15.9 million, and $4.5 million, respectively.
During the months of May through August 2022, our board of directors granted 21,566 restricted stock awards in lieu of salary for executive leadership.
The awards vested in full on the date of grant, regardless of employment status on that date. All expenses related to these awards were incurred in the year
ended December 31, 2022. For all specific grant information related to these awards, refer to the Equity Incentive Compensation discussion of Part III
within this filing.
We recognized stock compensation expense of $21.0 million, $12.7 million, and $3.0 million related to service vesting-based awards during the years
ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there was $47.0 million in unrecognized compensation costs related to
service vesting-based awards. We expect to recognize those costs over 3 years.
Performance-based restricted stock
On March 25, 2020, the Company granted 82,805 shares of performance-based stock to its executives in the form of restricted stock. The shares granted
contain a performance condition based on several Company metrics related to 2020 performance. The grant date fair value of this award was $9.18 per
share. The fair value of this award was expensed on a straight-line basis over the requisite service period ending on December 31, 2020.
We recognized stock compensation expense of zero, zero, and $760,000 related to performance-based restricted stock awards for the years ended December
31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there were no unrecognized non-cash compensation costs related to performance-based
restricted stock awards. Non-cash compensation costs were expensed over the period for which performance was measured.
The aggregate fair value of the performance-based awards granted during the years ended December 31, 2022, 2021, and 2020 was zero, zero, and
$760,000, respectively. The aggregate fair value of the performance-based awards that vested during the years ended December 31, 2022, 2021, and 2020
was zero, zero, and $2.3 million, respectively.
Market-based restricted stock
The following is a summary of market-based restricted stock activity under our stock option plan for the years ended December 31, 2022 and 2021 and the
status of market-based restricted stock outstanding as of December 31, 2022 and 2021:
Outstanding as of beginning of year
Granted
Vested
Forfeited
Non-vested at year end
2022
2021
Wtd. Avg.
Grant Date
Fair Value
19.86
22.66
10.95
-
30.64
Wtd. Avg.
Grant Date
Fair Value
19.20
32.50
26.98
40.65
19.86
Shares
224,774 $
152,665
(231,268)
(6,415)
139,756 $
Shares
139,756 $
349,568
(218,280)
-
271,044 $
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. On February 8, 2021, the Company determined the TSR attainment was 200% of the targeted shares,
resulting in 115,634 shares being granted and 231,268 shares vesting to current employees of the Company 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 at the grant date 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 of $3.1 million was expensed on a straight-line basis over the grant date to the vesting date of December 31, 2020.
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On March 25, 2020, the Company granted 109,140 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain
a market condition based on TSR. The TSR market condition measures the Company’s performance against a peer group. On February 24, 2022, the
Company determined the TSR attainment was 200% of the targeted shares, resulting in 109,140 shares being granted and 218,280 shares vesting to current
employees of the Company based on our total shareholder return during the period beginning on January 1, 2020 through December 31, 2022 as compared
to the total shareholder return of 20 of our peers. 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, 2020 through December 31, 2021 as
compared to the total shareholder return of 20 of our peers. The fair value of this award was determined at the grant date using a Monte Carlo simulation
with the following assumptions: a historical volatility of 78%, 0% dividend yield and a risk-free interest rate of 0.3%. 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 of $1.2 million was expensed on a straight-line basis over the
grant date to the vesting date of December 31, 2021.
On February 8, 2021, the Company granted 30,616 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain
a market condition based on 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, 2021 through December 31, 2022 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 68%, 0% dividend yield, and a risk-free
interest rate of 0.1%. 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 rate 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 of
$1.3 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2022.
On May 3, 2021, the Company granted 6,415 shares of market-based stock to one executive in the form of restricted stock. The shares granted contain a
market condition based on 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 the recipient based on our total shareholder return during the
period beginning on January 1, 2021 through December 31, 2022 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 68%, 0% dividend yield, and a risk-free
interest rate of 0.2%. 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 rate 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. In November 2021, the executive
departed the company and, as a result, forfeited these shares, resulting in no expense being recognized in the year ended December 31, 2021 for this award.
On February 24, 2022, the Company granted 240,428 shares of market-based stock to its executives in the form of restricted stock. The shares granted
contain a market condition based on 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, 2022 through December 31, 2023 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 63%, 0% dividend yield, and a
risk-free interest rate of 1.5%. 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 rate 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 of $6.7 million is being expensed on a straight-line basis over the grant date to the vesting date of December 31, 2023.
We recognized stock compensation expense of $4.3 million, $1.4 million, and $2.1 million related to market-based restricted stock awards for the years
ended December 31, 2022, 2021, and 2020. As of December 31, 2022, there was $3.3 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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The aggregate fair value of the market-based awards granted during the years ended December 31, 2022, 2021, and 2020 was $6.7 million, $1.8 million,
and $1.2 million, respectively. The aggregate fair value of the market-based awards that vested during the years ended December 31, 2022, 2021, and 2020
was $5.0 million, $10.2 million, and zero, respectively.
Total stock compensation expense
We recorded total stock compensation expense for the years ended December 31, 2022, 2021, and 2020, as follows:
Research and development costs
Sales and marketing costs
General and administrative costs
Cost of revenue
Total
16. Income taxes
2022
2021
2020
$
$
3,176 $
3,649
14,066
4,443
25,334 $
1,906 $
1,788
8,061
2,201
13,956 $
1,012
852
3,518
599
5,981
The following are the domestic and foreign components of the Company's loss before income taxes:
(In thousands)
Domestic
Foreign
Total
Income tax benefit consists of the following:
(In thousands)
Current:
Federal
State
Foreign
Total current tax provision
Deferred:
Federal
State
Foreign
Total deferred tax benefit
Income tax benefit
2022
Year Ended December 31,
2021
2020
(146,091) $
1,264
(144,827) $
(28,590) $
(436)
(29,026) $
(1,281)
-
(1,281)
2022
Year Ended December 31,
2021
2020
$
$
$
- $
11
205
216
(2,924)
(2,314)
-
(5,238)
- $
-
9
9
(17,703)
(2,424)
-
(20,127)
$
(5,022) $
(20,118) $
-
33
-
33
(3,297)
-
-
(3,297)
(3,264)
In the years ended December 31, 2021 and 2020, income tax benefit included excess tax benefits from stock-based compensation of $10.5 million and $3.2
million, respectively. The tax benefit for the year-ended December 31, 2022 did not contain excess tax benefits from stock-based compensation.
In connection with the 2021 Global Cooling acquisition, the Company recognized a deferred tax liability estimated to be $24.1 million. As a result, the
Company recorded an income tax benefit of $8.0 million for the release of valuation allowance on our existing U.S. deferred tax assets as a result of the
offset of the deferred tax liabilities established for intangible assets from the acquisition. In connection with the 2021 Sexton acquisition, the Company
recorded a deferred tax liability estimated to be $1.5 million with an offset to goodwill.
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In connection with the 2020 SciSafe acquisition, the Company recognized a deferred tax liability of $3.3 million on acquired intangible assets. As a result,
the Company recorded an income tax benefit of $3.3 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.
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
Federal statutory tax
State tax, net of federal benefit
Stock compensation
Sec. 162(m) limitation on executive compensation
Fair value change in contingent consideration
Fair value change in warrant liability
Transaction costs
Gain on stock acquisition
Tax credits
Change in valuation allowance
Expired net operating losses
Other
Total
2022
Year Ended December 31,
2021
2020
21%
3%
-
(1%)
1%
-
-
-
1%
(21%)
-
-
4%
21%
7%
36%
(11%)
(2%)
-
(1%)
5%
-
20%
(5%)
(1%)
69%
21%
20%
251%
(16%)
(38%)
59%
(3%)
-
6%
4%
(47%)
(2%)
255%
The principal components of the Company’s net deferred tax assets are as follows as of December 31, 2022 and 2021:
(In thousands)
Deferred tax assets related to:
Net operating loss carryforwards
Stock-based compensation
Accruals and reserves
Inventory
Lease liabilities
Tax credit carryforward
Capitalized research and development
Other
Total deferred tax assets
Deferred tax liabilities related to:
Intangibles
Right-of-use assets
Fair value change in investments
Fixed assets
Other
Total deferred tax liabilities
Net deferred tax (liabilities) assets before valuation allowance
Less: valuation allowance
Net deferred tax liabilities
2022
2021
29,102 $
3,207
3,724
425
3,653
1,423
2,405
445
44,384
(6,150)
(3,458)
(447)
(1,177)
-
(11,232)
33,152
(33,402)
(250) $
27,500
2,066
3,402
236
4,198
594
-
318
38,314
(35,241)
(4,070)
(294)
(1,203)
-
(40,808)
(2,494)
(2,993)
(5,487)
$
$
Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. The
assessment regarding whether a valuation allowance is required on deferred tax assets considers the evaluation of both positive and negative evidence when
concluding whether it is more likely than not that deferred tax assets are realizable. The valuation allowance recorded as of December 31, 2022 and 2021
primarily relates to deferred tax assets for net operating loss carryforwards.
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The changes in the valuation allowance for deferred tax assets were as follows:
(In thousands)
Balance at January 1
Deferred tax liabilities assumed through acquisitions
Charged to income tax expense
Balance at December 31
2022
2021
2020
$
$
2,993 $
-
30,409
33,402 $
8,498 $
(8,498)
2,993
2,993 $
8,706
(3,297)
3,089
8,498
As of December 31, 2022, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $128.6 million. Approximately $39.5
million of NOL will expire from 2023 through 2037, and approximately $89.1 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 limited 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.
The Tax Cuts and Jobs Act contained a provision which requires the capitalization of Section 174 costs incurred in years beginning on or after January 1,
2022. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a
product, process, formula, invention, computer software, or technique. This provision changes the treatment of Section 174 costs such that the expenditures
are no longer allowed as an immediate deduction but rather must be capitalized and amortized. We have included the impact of this provision, which results
in a deferred tax asset of approximately $2.4 million as of December 31, 2022.
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.
A reconciliation of the beginning and ending balances of uncertain tax positions in the years ended December 31, 2022 and 2021 is as follows:
(In thousands)
Balance at January 1
Increase related to prior year tax positions
Increase related to current year tax positions
Balance at December 31
2022
2021
255 $
170
185
610 $
96
-
159
255
$
$
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,
which includes 2003 through 2022.
17. Acquisitions
Sexton acquisition
General terms and effects
On August 9, 2021, BioLife entered into an Agreement and Plan of Merger (the “Sexton Merger Agreement”) with BLFS Merger Sub, Inc., a Delaware
corporation (“Sexton Merger Sub”), Fortis Advisors LLC, in its capacity as the representative of the stockholders of Sexton (the “Sexton Seller
Representative”) and Sexton, a Delaware corporation. The acquisition strengthens BioLife’s offerings in the cell and gene therapy and broader biopharma
markets.
On September 1, 2021, the Company completed the merger of Sexton Merger Sub with and into Sexton and Sexton became a wholly owned subsidiary of
the Company (the “Sexton Merger”). As consideration for the Sexton Merger (the “Sexton Merger Consideration”), holders of common stock, preferred
stock and options of Sexton, other than the Company (collectively, the “Sexton Participating Holders”), are entitled to receive an aggregate of 530,502
newly issued shares of the Company’s common stock, subject to certain post-closing adjustments, of which 477,452 shares of Common Stock were issued
to the Sexton Participating Holders at the Closing, and 53,050 shares of Common Stock, or approximately 10% of the Merger consideration, were
deposited into an escrow account for indemnification and post-closing purchase price adjustment purposes. Prior to the merger, the Company held preferred
stock in Sexton, which was accounted for using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus
changes resulting from observable process changes in orderly transactions for identical or similar investments of the same issuer. The Company accounted
for the merger as a step acquisition, which required remeasurement of the Company’s existing ownership in Sexton to fair value prior to completing the
acquisition method of accounting. Using step acquisition accounting, the Company increased the value of its existing equity interest to its fair value,
resulting in the recognition of a non-cash gain of $6.5 million, which was included in the gain on acquisition of Sexton Biotechnologies, Inc. in the
Consolidated Statements of Operations for the year ended December 31, 2021. The Company utilized a market-based valuation approach to determine the
fair value of the existing equity interest based on the total merger consideration offered and the Company’s stock price at acquisition.
72
Table of Contents
Total consideration transferred (in thousands, except number of shares and stock price):
Merger consideration shares
BioLife stock price (as of September 1, 2021)
Value of issued shares
plus: Fair value of BioLife’s existing investment in Sexton
less: Net working capital adjustment
Merger Consideration
$
$
$
$
$
530,502
60.50
32,095
7,951
(118)
39,928
Transaction costs related to the acquisition are expensed as incurred and are not included in the calculation of consideration transferred.
Fair value of net assets acquired
Under the acquisition method of accounting, the assets acquired and liabilities assumed from Sexton were calculated as of the merger date, at their
respective fair values, and consolidated with those of BioLife. The gross contractual accounts receivable acquired in the acquisition was $509,000. Of the
acquired accounts receivable, $17,000 is estimated to be uncollectable. The fair value calculations required critical estimates, including, but not limited to,
future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.
The table below represents the fair value of the net assets acquired and liabilities assumed, which were recorded as of the merger date (amounts in
thousands).
Cash
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Property, plant and equipment, net
Operating lease right-of-use assets, net
Developed technology
Customer relationships
Tradenames
Non-compete agreements
Goodwill
Accounts payable
Lease liabilities, operating
Deferred tax liability
Other liabilities
Fair value of net assets acquired
$
$
1,516
492
1,310
670
737
470
4,132
2,276
2,324
90
28,470
(291)
(470)
(1,482)
(316)
39,928
We recorded a measurement period adjustment in the fourth quarter of the year ended December 31, 2021 of $198,000 to the fair value of goodwill and the
deferred tax liability. This adjustment related to the tax attributes of the business combination.
The fair value of Sexton’s identifiable intangible assets and useful lives are as follows (amounts in thousands, except years):
Developed technology
Customer relationships
Tradenames
Non-compete agreements
Total identifiable intangible assets
73
Fair Value
4,132
2,276
2,324
90
8,822
$
$
Useful
Life (Years)
5 - 9
2
11
1
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 estimated fair values of developed technology were
estimated using a multi-period excess earnings approach. The estimated fair values of customer relationships and non-compete agreements were estimated
using a “with and without” approach, comparing projected cash flows under scenarios assuming the customer relationships and non-compete agreements
were and were not in place. The estimated fair value of the tradenames is based on the relief from royalty method, which estimates the value of the trade
names based on the hypothetical royalty payments that are saved by owning the asset.
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.
Acquired goodwill
The goodwill of $28.5 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. The goodwill recorded is not deductible for income tax
purposes.
Global Cooling acquisition
General terms and effects
On March 19, 2021, the Company entered into an Agreement and Plan of Merger (the “GCI Merger Agreement”) with BLFS Merger Subsidiary, Inc., a
Delaware corporation (“GCI Merger Sub”), Global Cooling, a Delaware corporation and Albert Vierling and William Baumel, in their capacity as the
representatives of the stockholders of GCI (collectively, the “GCI Seller Representative”). The acquisition strengthens BioLife’s offerings in the cell and
gene therapy and broader biopharma markets.
On May 3, 2021, pursuant to the GCI Merger Agreement, subject to the terms and conditions set forth therein, the transactions contemplated by the GCI
Merger Agreement were consummated (the “GCI Closing”), GCI Merger Sub merged with and into GCI (the “GCI Merger” and, together with other
transactions contemplated by the GCI Merger Agreement, the “GCI Transactions”), with GCI continuing as the surviving corporation in the GCI Merger
and a wholly owned subsidiary of the Company. In the GCI Merger, all of the issued and outstanding shares of capital stock of GCI immediately prior to
the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (other than those properly exercising any applicable dissenter’s
rights under Delaware law) were converted into the right to receive the GCI Merger Consideration (as defined below). The Company paid the GCI Merger
Consideration to the holders of common stock and preferred stock of GCI (collectively, the “GCI Stockholders”).
Merger consideration
The aggregate merger consideration paid pursuant to the GCI Merger Agreement to the GCI Stockholders was 6,646,870 newly issued shares of common
stock, provided, however, that the GCI Merger Consideration otherwise payable to GCI Stockholders is subject to the withholding of the GCI Escrow
Shares (as defined below) and is subject to reduction for indemnification obligations. The GCI Merger Consideration allocable to one GCI stockholder was
reduced by 10,400 shares to satisfy an outstanding note receivable of $374,000. In accordance with ASC 805, the Company recognized the settlement of
pre-existing relationships in the forms of cash deposits, trade receivables, and trade payables, which are included in the consideration transferred. The GCI
Merger Consideration is not subject to any purchase price adjustments.
Total consideration transferred (in thousands, except number of shares, stock price, and consideration percentage):
BioLife shares outstanding (as of March 19, 2021)
Merger consideration percentage
Merger consideration shares
less: Merger consideration shares withheld to satisfy outstanding GCI stockholder obligations to GCI
Subtotal
BioLife stock price (as of May 3, 2021)
Value of issued shares
plus: Settlement of BioLife prepaid deposits
plus: Net settlement of BioLife accounts receivable
Merger Consideration
74
33,401,359
19.9%
6,646,870
10,400
6,636,470
35.07
232,741
2,152
16
234,909
$
$
$
$
$
Table of Contents
Transaction costs related to the acquisition are expensed as incurred and are not included in the calculation of consideration transferred.
Escrow shares
At the GCI Closing, approximately nine percent (9%) of the GCI Merger Consideration (the “Escrow Shares”, along with any other dividends, distributions
or other income on the GCI Escrow Shares, the “GCI Escrow Property”) otherwise issuable to the GCI Stockholders (allocated pro rata among the GCI
Stockholders based on the GCI Merger Consideration otherwise issuable to them at the GCI Closing), was deposited into a segregated escrow account in
accordance with an escrow agreement to be entered into in connection with the GCI Transactions (the “GCI Escrow Agreement”).
The GCI Escrow Property will be held for a period of up to twenty-four (24) months after the GCI Closing as the sole and exclusive source of payment for
any post-GCI Closing indemnification claims (other than fraud claims), unless earlier released in accordance with the terms of the GCI Escrow Agreement.
Fair value of net assets acquired
Under the acquisition method of accounting, the assets acquired and liabilities assumed from Global Cooling were calculated as of the merger date, at their
respective fair values, and consolidated with those of BioLife. The gross contractual accounts receivable acquired in the acquisition was $7.1 million. Of
the acquired accounts receivable, $53,000 was estimated to be uncollectable. The fair value calculations required critical estimates, including, but not
limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.
The table below represents the fair value of the net assets acquired and liabilities assumed, which were recorded as of the merger date (amounts in
thousands).
Cash
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Property, plant and equipment, net
Operating lease right-of-use assets, net
Financing lease right-of-use assets, net
Long-term deposits and other assets
Developed technology
Customer relationships
Tradenames
Non-compete agreements
In-process research and development
Goodwill
Accounts payable
Line of credit
Lease liabilities, operating
Lease liabilities, financing
Long-term debt
Deferred tax liability
Other liabilities
Fair value of net assets acquired
$
$
43
7,076
15,547
639
3,512
1,741
114
4
18,140
7,020
26,640
1,240
67,440
137,822
(9,837)
(4,231)
(1,880)
(114)
(4,410)
(24,133)
(7,464)
234,909
We recorded a measurement period adjustment in the fourth quarter of the year ended December 31, 2021 of $607,000 to the fair value of goodwill and the
deferred tax liability. This adjustment related to the tax attributes of the business combination.
The fair value of Global Cooling’s identifiable intangible assets and useful lives are as follows (amounts in thousands, except years):
Developed technology
Customer relationships
Tradenames
Non-compete agreements
In-process research and development
Total identifiable intangible assets
75
Fair Value
Useful
Life (Years)
$
$
18,140
7,020
26,640
1,240
67,440
120,480
6
12
15
4
N/A
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 values of developed technology and in-process
research and development were estimated using a multi-period excess earnings approach. The fair values of customer relationships were estimated using
the “distributor method”. The fair value of the tradenames is based on the relief from royalty method, which estimates the value of the trade names based
on the hypothetical royalty payments that are saved by owning the asset. The fair values of non-compete agreements were estimated using a “with and
without” approach, comparing projected cash flows under scenarios assuming the non-compete agreements were and were not in place. The fair value of
inventory and property, plant and equipment were determined using 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.
Acquired goodwill
The goodwill of $137.8 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. The goodwill recorded is not deductible for income tax
purposes.
SciSafe acquisition
On September 18, 2020, BioLife entered into a Stock Purchase Agreement, by and among the Company, SciSafe Holdings, Inc., a Delaware corporation,
and the stockholders of SciSafe (collectively, the “SciSafe Sellers”) in accordance with the Stock Purchase Agreement, pursuant to which the Company
agreed to purchase from the SciSafe Sellers one hundred percent (100%) of the issued and outstanding capital shares or other equity interests of SciSafe
(the “SciSafe Acquisition”). The SciSafe Acquisition closed October 1, 2020. The acquisition strengthens BioLife’s offerings in the cell and gene therapy
and broader biopharma markets.
Consideration transferred
The SciSafe Acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. At the closing of the SciSafe
Acquisition, the Company agreed to issue to the SciSafe Sellers 611,683 shares of common stock valued at $29.29 per share and a cash payment of $15
million, with $1.5 million held in escrow to account for adjustments for net working capital and as a security for, and a source of payment of, the
Company’s indemnity rights. Pending the occurrence of certain events, the Company will issue to the SciSafe Sellers an additional 626,000 shares of
common stock, which shall be issuable to SciSafe Sellers upon SciSafe achieving certain specified revenue targets in each year from 2021 to 2024. Under
the acquisition method of accounting, the assets acquired and liabilities assumed from SciSafe were recorded as of the acquisition date, at their respective
fair values, and consolidated with those of BioLife. The fair value calculations required critical estimates, including, but not limited to, future expected cash
flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.
Total consideration transferred (in thousands):
Cash consideration
Stock consideration
Contingent consideration
Working capital adjustment
Total consideration transferred
Fair value of net assets acquired
The table below represents the purchase price allocation to the net assets acquired based on their fair values (amounts in thousands).
Cash
Accounts receivable, net
Prepaid expenses and other current assets
Property, plant and equipment, net
Customer relationships
Tradenames
Non-compete agreements
Goodwill
Other assets
Accounts payable
Deferred tax liability
Other liabilities
Fair value of net assets acquired
76
$
$
$
$
15,000
17,916
3,663
(53)
36,526
500
945
31
3,400
7,420
4,020
660
24,943
1,547
(885)
(3,297)
(2,758)
36,526
Table of Contents
On September 30, 2020, the Company advanced SciSafe $500,000 in cash for working capital purposes. This cash and a payable due to the Company were
both assumed in the transaction and are both reflected in the fair value of net assets acquired.
The fair value of SciSafe’s identifiable intangible assets and useful lives are as follows (amounts in thousands except years):
Customer relationships
Tradenames
Non-compete agreements
Total identifiable intangible assets
Fair Value
Useful
Life (Years)
$
$
7,420
4,020
660
12,100
14
19
4
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 values of customer relationships were estimated
using a multi-period excess earnings approach. The fair value of the tradenames is based on the relief from royalty method which estimates the value of the
trade names based on the hypothetical royalty payments that are saved by owning the asset. The fair values of non-compete agreements were estimated
using a “with and without” approach, comparing projected cash flows under scenarios assuming the non-compete agreements were and were not in place.
The fair value of property, plant and equipment was determined using the “market approach”. The fair value of the milestone contingent consideration was
determined using a scenario analysis valuation method which incorporates BioLife’s assumptions with respect to the likelihood of achievement of certain
revenue milestones, revenue volatility, credit risk, timing of earnout share issuances and a risk-adjusted discount rate to estimate the present value of the
expected earnout share issuances.
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.
Indemnification asset
In 2020, the Company recognized a $130,000 liability for a non-income tax contingency related to the acquisition of SciSafe. At the date of acquisition, we
recognized an indemnification asset at the same time and on the same basis as the recognized liability, to the extent that collection is reasonably assured, in
accordance with ASC 805. When indemnified, subsequent changes in the indemnified item are offset by changes in the indemnification asset. We assess the
realizability of the indemnification asset each reporting period. Changes in the principal portion of non-income tax contingencies, as well as changes in any
related indemnification asset, are included in operating income. The indemnification asset is included within prepaid expenses and other current assets on
the balance sheet.
Acquired goodwill
The goodwill of $24.9 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. The goodwill recorded is not deductible for income tax
purposes.
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.
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Table of Contents
Revenue, net income, and pro forma presentation
The Company recorded revenue from Sexton of $1.8 million and a net loss of $1.0 million from September 1, 2021, the date of acquisition, to December
31, 2021. The Company recorded revenue from Global Cooling of $39.1 million and a net loss of $19.6 million from May 3, 2021, the date of acquisition,
to December 31, 2021. The Company recorded revenue from SciSafe of $1.8 million and a net loss of $416,000 from October 1, 2020, the date of
acquisition, to December 31, 2020. The Company has included the operating results of the acquisitions in its Unaudited Condensed Consolidated
Statements of Operations since their respective acquisition date.
The following unaudited pro forma financial information presents the combined results of operations of Sexton as if the acquisition had occurred on
January 1, 2020 after giving effect to certain pro forma adjustments. These pro forma adjustments include intangible amortization, stock-based
compensation expense and salary expense related to a key employee, and the income tax effect of the adjustments made:
(In thousands)
Total revenue
Net loss
2021
(unaudited)
2020
(unaudited)
$
$
122,494 $
(9,860) $
50,856
(1,028)
The following unaudited pro forma financial information presents the combined results of operations of Global Cooling as if the acquisition had occurred
on January 1, 2020 after giving effect to certain pro forma adjustments. These pro forma adjustments include intangible amortization, amortization of
increased inventory basis, depreciation expense, lease expense, transaction costs, interest expense, stock-based compensation expense and salary expense
related to a key employee, and the income tax effect of the adjustments made:
(In thousands)
Total revenue
Net income (loss)
2021
(unaudited)
2020
(unaudited)
$
$
143,732 $
(16,375) $
87,370
501
The following unaudited pro forma financial information presents the combined results of operations of SciSafe as if the acquisition had occurred on
January 1, 2020 after giving effect to certain pro forma adjustments. These pro forma adjustments include intangible amortization, depreciation expense,
stock-based compensation expense, and the income tax effect of the adjustments made:
(In thousands)
Total revenue
Net income
18. Employee benefit plan
2020
(unaudited)
$
$
52,613
1,798
The Company sponsors 401(k) defined contribution plans for its employees. These plans provide 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 these plans, 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 contributions of $1.0 million, $822,000, and $347,000 to the plans for the years ended December 31, 2022,
2021, and 2020.
19. Subsequent events
The Company has evaluated events subsequent to December 31, 2022 through the date of this filing to assess the need for potential recognition or
disclosure. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the Consolidated
Financial Statements.
78
ITEM9.
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 weaknesses 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, 2022. 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, 2022 due to the existence of material weaknesses described below.
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.
Control Environment, Risk Assessment, and Monitoring Activities
Management did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and monitoring
activities to prevent or detect material misstatements to the consolidated financial statements in a timely manner. These material weaknesses were attributed
to:
● Insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls;
● Ineffective identification and assessment of risks impacting internal control over financial reporting; and,
● Ineffective monitoring controls, as the Company did not effectively evaluate whether the components of internal control were present and
functioning.
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Control Activities and Information and Communication
Additionally, management did not adequately design and implement effective control activities, including general controls over information technology,
and effective policies and procedures, resulting in additional material weaknesses within certain business processes. As a result, the following additional
material weaknesses were identified:
● Management did not maintain effective controls over information system logical access within certain key financial systems, including inadequate
segregation of duties impacting the revenue and inventory processes at certain of the Company’s subsidiaries;
● Management did not establish effective accounting policies and procedures and related controls over certain financial statement areas, including the
revenue recognition and procure to pay processes;
● Management did not have adequate risk assessment procedures, or maintain effectively designed and implemented accounting policies, procedures,
and related controls, over the recognition and measurement of indirect tax liabilities in the consolidated financial statements in accordance with the
applicable financial reporting requirements;
After giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our
consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. GAAP, our management, including
our CEO and CFO, has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of
operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or
detected on a timely basis, and therefore, we concluded that the deficiencies represent material weaknesses in our internal control over financial reporting,
and our internal control over financial reporting was not effective as of December 31, 2022.
Management has been actively engaged in developing and implementing remediation plans to address these material weaknesses as described below in
section (c).
The Company’s independent registered public accounting firm, Grant Thornton, LLP, who audited our internal controls over financial reporting, has issued
an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, as stated in its report.
(c)
Remediation
With respect to the material weaknesses described above, management has identified and begun to implement its remediation plan as listed below to
remediate the material weaknesses described in Item 9A and to enhance our overall control environment, risk assessment, control activities, information
and communication, and monitoring activities.
Management of the Company and the Board of Directors are committed to maintaining a strong internal control environment and to making further
progress in remediating the material weaknesses described in section (b). The following steps either have been planned for implementation or have been
implemented in the Company’s ongoing efforts to remediate the material weaknesses identified:
● The Company will reassign all system administrator rights to personnel who do not perform key accounting duties;
● The Company plans to continue hiring and retaining additional highly skilled and qualified individuals related to technical accounting and internal
control over financial reporting;
● The Company will enhance its control environment, risk assessment, and monitoring activities with the added stability of new hires and the
implementation of technology solutions to automate our controls in revenue recognition and procure to pay processes;
● The Company plans to promote accountability of management personnel through the creation of compensation related goals on the design and
execution of internal controls;
● The Company will provide enhanced internal control training to finance and accounting personnel, key management roles across the organization,
and senior leadership team members to ensure awareness of available resources to aid in the design and execution of internal controls; and
● The Company will continue to make strategic investments over time in available tools to streamline execution and documentation of controls
through organization and automation.
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As we continue to evaluate and test the remediation plan outlined above, we may also identify additional measures to address the material weaknesses or
modify certain of the remediation procedures described above. We also may implement additional changes to our internal control over financial reporting
as may be appropriate in the course of remediating the material weaknesses. Management, with the oversight of the Audit Committee, will continue to take
steps necessary to remedy the material weaknesses to reinforce the overall design and capability of our control environment.
The material weaknesses will not be considered remediated until management implements the measures described above and management has concluded,
through testing, that these controls are operating effectively.
(d)
Changes in Internal Control Over Financial Reporting
We made the following material changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) during the fiscal year ended December 31, 2022 to remediate previously reported material weaknesses in our internal control over financial
reporting:
● Ongoing implementation of a new ERP system, NetSuite, to streamline and strengthen execution of internal controls.
● Enhanced and implemented new entity-level controls focused on Director and Officer questionnaires to identify related party transactions,
Service Organization Control report reviews and quarterly board meeting to review financial results against budget to improve overall control
environment, risk assessment, and monitoring activities.
● Implemented enterprise-wide access policy, change management policy, and operations policy to enhance overall General Information
Technology Controls over critical applications.
● Implemented controls over asset-held-for-lease manual journal entry review, physical verification of raw materials and finished goods, and
rollforward review.
● Implemented controls over intangible impairment in purchase price allocation review and analysis of goodwill and impairment.
● Enhanced controls to identify a complete population of related party transactions and submit them for timely approval to the audit committee
and ensure these transactions are properly disclosed in the consolidated financial statements.
Other than the controls implemented to remediate the material weaknesses described above, there have been no changes in our internal control over
financial reporting during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
(e)
Attestation Report of the Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of BioLife Solutions, Inc. and subsidiaries, (the “Company”) as of December 31, 2022, based
on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). In our opinion, because of the effect of the material weaknesses described in the following paragraphs on the achievement of the
objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
A material weakness is a deficiency, or combination of control 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. The
following material weaknesses have been identified and included in management’s assessment.
(i) Inappropriately designed entity-level controls impacting the control environment, risk assessment, and monitoring activities to prevent or detect material
misstatements to the consolidated financial statements attributed to an insufficient number of qualified resources and inadequate oversight and
accountability over the performance of controls, ineffective identification and assessment or risks impacting internal control over financial reporting, and
ineffective monitoring controls; (ii) inappropriate information system logical access within certain key financial systems; (iii) ineffective accounting
policies and procedures and related controls over certain financial statement areas; (iv) inadequate risk assessment, accounting policies, procedures, and
related controls performed over the recognition and measurement of indirect tax liabilities.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated
financial statements of the Company as of and for the year ended December 31, 2022. The material weaknesses identified above were considered in
determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect
our report dated March 31, 2023, which expressed an unqualified opinion on those financial statements.
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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 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 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 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, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
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.
Other information
We do not express an opinion or any other form of assurance on the remediation plans and actions described in Management’s Report.
/s/ GRANT THORNTON LLP
Bellevue, Washington
March 31, 2023
82
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
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 December 31, 2022. The Board is comprised of
only one class of directors. 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:
Name
Michael Rice
Roderick de Greef(1)
Troy Wichterman
Aby J. Mathew, Ph.D.
Todd Berard
Karen Foster
Marcus Schulz
Sarah Aebersold
Joseph Schick
Rachel Ellingson
Amy DuRoss
Joydeep Goswami
Tim Moore
Age
59
61
38
50
54
63
45
47
61
53
48
51
61
Position and Offices With the Company
Chief Executive Officer and Chairman of the Board
Chief Operating Officer and President
Chief Financial Officer
Chief Scientific Officer and Executive Vice President
Chief Marketing Officer
Chief Quality Officer
Chief Revenue Officer
Vice President, Global Human Resources
Director
Director
Director
Director
Director
(1) As of December 31, 2022, Roderick de Greef served as the Company’s Chief Operating Officer and President. On October 3, 2022, Mr. de Greef
announced his retirement, with his final day serving as Chief Operating Officer on January 3, 2023. Geraint Phillips succeeded Mr. de Greef as Senior Vice
President of Global Operations on January 4, 2023. Mr. de Greef currently serves as a Director for the Company.
Michael Rice has been Chief Executive Officer since August 2006 and Chairman of the Board since July 2021 Previously, Mr. Rice served as a director
from August 2006 to July 2021 and 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 of his experience as Chief Executive Officer of the Company and because of
his managerial insights.
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Roderick de Greef was President and Chief Operating Officer at BioLife from November 2021 until he retired on January 3, 2023 and was appointed to the
Board as a director. Previously, Mr. de Greef was appointed Chief Financial Officer from May 2016 to November 2021, and Chief Operating Officer from
December 2019 to May 2021. He was appointed interim Chief Financial Officer and interim Secretary in March 2016. 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 November 2022, Mr. de Greef has served as a director of the Upper Connecticut Valley Hospital, a non-profit, rural hospital in northern
New Hampshire. Since December 2020, Mr. de Greef has served as a director of Sirona Medical Technologies, a cardia electrophysiology company. From
February 2019 to January 2021, Mr. de Greef 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.
Troy Wichterman has been Chief Financial Officer since November 2021. Before his appointment as Chief Financial Officer, Mr. Wichterman served as
the Company’s Vice President, Finance since November 2019. In that role, Mr. Wichterman oversaw the finance and accounting organization in the areas of
integrating acquired businesses, acquisition due diligence and deal structure, SEC reporting, financial planning and analysis, operational finance, and audit
compliance. Mr. Wichterman also served as Director of Financial Planning and Analysis from June 2016 to November 2019 and Financial Analyst from
February 2015 to June 2016. Prior to joining the company, he was most recently a Senior Financial Analyst, Acquisitions at Ventas, a public healthcare
REIT, from January 2013 to September 2014. Prior to Ventas, he was most recently a Senior Portfolio Analyst at Heitman, a private equity REIT, from June
2009 – January 2013 and began his career as an Auditing Associate at PwC in Chicago from 2008 to 2009. Mr. Wichterman is a CPA (inactive) and holds a
Bachelor of Business Administration degree and a Master of Accountancy degree from the University of Wisconsin – Madison.
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, Dr. Mathew had served as Chief Technology 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 and Gene 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 Board of Directors of PanTHERA CryoSolutions, Inc., 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.
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.
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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.
Marcus Schulz has been Chief Revenue Officer since February 2021. Before his appointment as Chief Revenue Officer, Mr. Schulz has served as the Vice
President, Global Sales, since July 2020. Mr. Schulz joined the Company in August 2019 as Vice President of Sales, evo Platform. In that role, Mr. Schulz
supported the Company’s partnerships with specialty couriers that market the evo cold chain management platform to the regenerative medicine market.
Prior to joining the Company, Mr. Schulz served in a variety of strategic business development and executive sales leadership roles with companies
including Siemens Healthcare (2000-2009, most recently as Director, Strategic National Accounts), Johnson & Johnson (2010-2012, most recently as Sales
Director), Aramark Healthcare Technologies (2012-2013, most recently as Director of Business Development), Abbott Laboratories (2013-2015, most
recently as Executive Director, Healthcare Improvement), Belimed, AG (2015-2016, most recently as Executive Director, Strategic Solutions Group) and
most recently, GE Healthcare (2016-2019, most recently as General Manager, National Accounts), where he managed a $1 billion annual revenue strategic
account.
Sarah Aebersold has been Vice President, Global Human Resources since January 2021. Before her appointment as Vice President, Global Human
Resources, Ms. Aebersold has served as the Senior Director, Global Human Resources & Administration since February 2020. In that role, Ms. Aebersold
oversaw human resources programs in the areas of employee relations, talent acquisition, benefits, compensation, coaching, training and development,
policy, and data management. Prior to joining the Company, Ms. Aebersold served in a variety of human resources roles with companies including MCG
Health, a healthcare solutions provider (2016-2020, most recently as Head of Human Resources and Administration), Spacelabs Healthcare, a manufacturer
of medical equipment (2014-2016, 2012-2013, most recently as Senior Manager, Human Resources), T-Mobile, a mobile communication company, (2013-
2013, most recently as Human Resource Manager), Seattle Children’s Hospital, a children’s hospital (2009-2012, most recently as Manager, Human
Resources Consulting), and ZymoGenetics, Inc., a biotechnology/pharmaceutical company (2004-2009, most recently as Human Resources Manager).
Joseph Schick joined the Board in November 2013 as a director and Chair of the Audit Committee. He has 17 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, internal controls, 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.
Rachel Ellingson has served as a director and member of the Company’s Compensation Committee and Audit Committee since April 2021. Since April
2018, Ms. Ellingson has served as Senior Vice President and Chief Strategy Officer at Zimmer Biomet Holdings, Inc., a medical device company (NYSE:
ZBH). As a member of the executive leadership team at ZBH, Ms. Ellingson is responsible for global oversight of strategy, business development and
integration. Prior to joining ZBH, Ms. Ellingson served as Vice President, Corporate Strategy and as a member of the executive leadership team at St. Jude
Medical, Inc., a medical device company, from 2011 to 2017. Before joining St. Jude Medical, Ms. Ellingson served as Vice President, Business
Development and Investor Relations at AGA Medical Corporation, a developer and manufacturer of cardiovascular medical devices. Prior to joining AGA
Medical, Ms. Ellingson was an investment banker, most recently as a Managing Director, Healthcare Investment Banking with Bank of America
Corporation (NYSE: BAC) and prior to that, was with Cowen & Company (NASDAQ: COWN). Ms. Ellingson holds an MBA in Finance from the
University of Connecticut and a Bachelor of Arts degree from the University of Rhode Island. The Board has determined that Ms. Ellingson is qualified to
serve as a director because of her experience with strategic leadership and investment banking.
Amy DuRoss has served as a director and member of the Company’s Governance and Nominating Committee and as Chair of the Compensation
Committee since April 2021. Ms. DuRoss previously served as Chief Executive Officer of Vineti, Inc., a healthcare technology company, from the time that
she co-founded Vineti in April 2016 through March 2022. Ms. DuRoss led Vineti and its software as a service platform to the forefront of innovation
supporting cell and gene therapy manufacturing, delivery and patient follow up. Before co-founding Vineti, Ms. DuRoss focused on healthcare new
business creation for GE Ventures, a venture capital subsidiary of General Electric (NYSE: GE), serving as a Managing Director from May 2013 to May
2017. Prior to GE, Ms. DuRoss was Chief Business Officer at Navigenics, Inc., a genomics company sold to Life Technologies Corporation in 2012. Ms.
DuRoss was Co-founder and Executive Director of Proposition 71, California's stem cell research initiative passed in 2004, as well as Chief of Staff at the
resulting state grant oversight agency. Ms. DuRoss was named a 2016 Health Innovator Fellow by the Aspen Institute. Ms. DuRoss also serves as a
member of the Board of Directors for the ARM Foundation for Cell and Gene Medicine. Ms. DuRoss holds an MBA, Masters degree in English, and
Bachelors of Arts degree in English from Stanford University. The Board has determined that Ms. DuRoss is qualified to serve as a director because of her
experience founding and growing a successful business in the cell and gene therapy space.
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Joydeep Goswami has served as a director and member of the Company’s Audit Committee and as chair of the Nominating and Governance Committee
since October 2021. Mr. Goswami currently serves as Chief Financial Officer, Chief Strategy and Corporate Development Officer at Illumina, a
biotechnology company, since September 2019. As a member of the executive leadership at Illumina, Mr. Goswami is responsible for driving planning,
strategic partnerships, and acquisitions. Prior to Illumina, Mr. Goswami served as the President of Thermo Fisher Scientific's Clinical Next-Generation
Sequencing (NGS) and Oncology business unit, where he oversaw efforts that drove the adoption of NGS in clinical oncology, research and reproductive
health. Mr.Goswami has held senior leadership roles across the pharma/biotech, diagnostics and research tool continuum, previously serving at companies
such as Life Technologies and Invitrogen, in addition to Thermo Fisher Scientific. He has led teams across various functions, including sales, marketing,
R&D and other support functions. Mr. Goswami served as President, Asia Pacific and Japan while at Thermo Fisher Scientific and created the Stem Cells
and Regenerative Medicine Business Unit at Invitrogen. Additionally, he spent five years at McKinsey, where he specialized in strategy for pharmaceutical,
medical technology and technology companies. Mr. Goswami holds his MS, PhD in Chemical Engineering, and MBA from MIT and a Bachelor's degree in
Chemical Engineering from the Indian Institute of Technology. The Board has determined that Mr. Goswami is qualified to serve as a director because of
his experience with strategic leadership and international business operations.
Tim Moore has served as a director and member of the Company’s Compensation and Nominating and Governance Committees since September 2022. He
has more than three decades of leadership experience in biopharmaceutical manufacturing and operations. Mr. Moore served as COO of Instil Bio through
December 2022, a TIL cell therapy company focused on solid tumors. Mr. Moore also served as the President and COO at PACT Pharma from October
2019 through September 2022. Prior to joining PACT, he served as Executive Vice President, Technical Operations at Kite, a Gilead Company, since March
of 2016. During this time Mr. Moore was responsible for overseeing the process development, manufacturing, quality and supply chain for the launch of
Yescarta®, one of the first CAR T therapies to be developed, manufactured and commercialized, as well as advancement of the Kite pipeline. In addition,
Mr. Moore globally expanded the biopharmaceutical operations to serve and support the US, EU, as well as key partners in Asia. Prior to Kite, Mr. Moore
served as the Senior Vice President, Head of Global Technical Operations – Biologics of Genentech, Inc. and as a member of the Genentech Executive
Committee since 2010. In this role, Mr. Moore oversaw global leadership for more than 7,500 professionals across 10 internal sites and over 37 contract
manufacturing organizations, as well as global manufacturing and end-to-end quality supply performance of more than 20 biological product families. Prior
to that, Mr. Moore was Genentech’s Senior Vice President, Global Supply Chain and Global Engineering from 2007 to 2010. Previously, Mr. Moore served
as Vice President, Operations at ZLB Behring (formerly Aventis Behring). He is currently a member of ISPE, PDA and has been a part of the Executive
Committee of BioPhorum and serves as a Board member for Cerus. Mr. Moore received a B.S. in Chemical Engineering from Tulsa University and a M.S.
in Engineering Management from Northwestern University. The Board has determined that Mr. Moore is qualified to serve as a director because of his
extensive experience with leading and executing large scale manufacturing operations in the biopharmaceutical industry.
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.
Board of Directors
Overview
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.
As of the date of this filing, our Board consists of seven members. Our Board has determined five of our directors – Messrs. Schick, Goswami, and Moore,
and Mss. DuRoss and Ellingson – 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. Rice serves as Chairman of the Board and is Chief Executive Officer. 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. If the nominees named in this report are elected, the Board will consist of seven persons.
Committees of the Board of Directors
The Board has established an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. Each committee operates
pursuant to a written charter that may be viewed on our website at http://investors.biolifesolutions.com/corporate-governance. The inclusion of our web
site address in this document does not include or incorporate by reference the information on our web site into this annual filing.
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The following table sets forth the current composition of the three standing committees of our Board:
Name(1)
Mr. Rice
Mr. Schick (financial expert)
Ms. DuRoss
Ms. Ellingson
Mr. Goswami
Mr. Moore
Board
Chair
X
X
X
X
X
Audit
Chair
X
X
Compensation
X
Chair
X
X
Governance
and
Nominating
X
X
Chair
X
(1) Roderick de Greef joined the Board of Directors as of January 4, 2023. He is serving as only a board member and has no involvement in the three
standing committees of the Board.
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.
Please see the section entitled “Report of the Audit Committee of the Board of Directors” for further matters related to the Audit Committee.
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 Securities Exchange Act
of 1934, as amended (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.
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Governance and Nominating Committee. Our Governance and Nominating 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 Governance and Nominating 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 Governance and Nominating Committee are independent under the listing standards of the NASDAQ Stock Market.
The Governance and Nominating 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 Governance and Nominating 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 Governance and Nominating Committee considers the Board’s mix of
skills, experience, character, commitment and diversity, with 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 Governance and Nominating
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 Governance and Nominating 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 Governance and Nominating
Committee may, from time to time, retain, for a fee, one or more third-party search firms to identify suitable candidates. The Governance and Nominating
Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on
the same criteria.
The Governance and Nominating Committee does not have a formal policy with respect to diversity; however, the Board and the Governance and
Nominating Committee believe that it is essential that the Board members represent diverse viewpoints.
Number of Meetings
The Board held a total of ten meetings during 2022. Our Audit Committee held eight meetings in 2022, our Compensation Committee held four meetings
in 2022 and our Governance and Nominating Committee did not hold any meetings during 2022. Each incumbent director attended greater than 75% of the
total number Board meetings and the total number of Board committee meetings.
Board Member Attendance at Annual Stockholder Meetings
Although we do not have a formal policy regarding director attendance at annual stockholder meetings, directors are encouraged to attend these annual
meetings. One of the Company’s directors attended the last annual meeting of stockholders held on June 9, 2022.
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 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.
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Stockholder Communications with Directors
Stockholders wishing to communicate with the Board or with a particular member or committee of the Board should address communications to the Board,
or to an individual member or committee as follows: c/o BioLife Solutions, Inc., Attention: Corporate Secretary, 3303 Monte Villa Parkway, Suite 310,
Bothell, Washington 98021. All communications will be relayed to that addressee. From time to time, the Board may change the process through which
stockholders communicate with the Board or its members or committees. There were no changes in this process in 2022 or as of the date hereof. Please
refer to our website at www.biolifesolutions.com for any future changes in this process. The Board or the particular director or committee of the Board to
which a communication is addressed will, if it deems appropriate, promptly refer the matter either to management or to the full Board depending on the
nature of the communication.
Board Diversity Matrix
Total Number of Directors
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
Board Diversity Matrix as of December 31, 2022
6
Female
Male
Non-Binary
Did Not Disclose
Gender
1
3
2
ITEM 11.
EXECUTIVE COMPENSATION
Compensation Committee report
The Compensation Committee of the Board, which is comprised solely of independent directors within the meaning of applicable rules of NASDAQ,
outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and non-employee directors
within the meaning of Rule 16b-3 under the Exchange Act, is responsible for developing executive compensation policies and advising the Board with
respect to such policies and administering the Company’s cash and equity incentive plans. The Compensation Committee sets performance goals and
objectives for the CEO and the other executive officers, evaluates their performance with respect to those goals and sets their compensation based upon the
evaluation of their performance. In evaluating executive officer pay, the Compensation Committee may retain the services of a compensation consultant
and consider recommendations from the CEO with respect to goals and compensation of the other executive officers. The Compensation Committee
assesses the information it receives in accordance with its business judgment. The Compensation Committee also periodically reviews non-employee
director compensation. All decisions with respect to executive compensation are approved by the Compensation Committee and all decisions with respect
to director compensation are recommended by the Compensation Committee to the full Board for approval.
The Compensation Committee of the Company has reviewed and discussed the compensation discussion and analysis required by Item 402(b) of
Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the
compensation discussion and analysis be included in this document.
Respectfully submitted by the Compensation Committee:
Amy DuRoss, Chairperson
Joseph Schick
Rachel Ellingson
Timothy Moore
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Compensation discussion and analysis
Our compensation discussion and analysis (“CD&A”) describes our executive-compensation philosophy and program as reported in the executive
compensation tables that follow, which provide information relating primarily to compensation decisions for the following 2022 named executive officers
(“NEOs”) of the Company:
Name
Michael Rice
Roderick de Greef(1)
Troy Wichterman
Aby J. Mathew, Ph.D.
Karen Foster
Position with the Company
Chief Executive Officer and Chairman of the Board
Chief Operating Officer and President
Chief Financial Officer
Chief Scientific Officer and Executive Vice President
Chief Quality Officer
(1) As of December 31, 2022, Roderick de Greef served as the Company’s Chief Operating Officer and President. On October 3, 2022, Mr. de Greef
announced his retirement, with his final day serving as Chief Operating Officer on January 3, 2023. Geraint Phillips replaced Mr. de Greef as Chief
Operating Officer on January 4, 2023. Mr. de Greef currently serves as a Director for the Company. The remaining references of Mr. de Greef as Chief
Operating Officer and all compensation earned during 2022 relate to his position as Chief Operating Officer.
2022 year in review
For the fiscal year ended December 31, 2022, we made strong progress toward our long-term goals through a combination of organic growth and success of
recent acquisitions. We are keenly focused on achieving our corporate goals, in alignment with our broader purpose to return long-term value to our
customers and shareholders. Among our accomplishments in the fiscal year ended December 31, 2022 were the following:
Overall revenue growth and key drivers of revenue growth
● Revenue increased to $161.8 million, an overall gain of 36% year-over-year, compared to revenue of $119.2 million in 2021.
● Revenue growth from organic activities accounted for $29.9 million in 2022, representing 70% of BioLife’s year-over-year growth.
● Inorganic revenue growth accounted for $12.7 million in 2022, representing 30% of BioLife’s year-over-year growth.
Revenue growth by product line
● Our Cell Processing platform revenue increased $23.5 million, or 52%, over 2021.
● Organic Cell Processing platform revenue increased $19.4 million, or 45%, over 2021.
● Our Freezers & Thaw Systems platform revenue increased $10.1 million, or 18%, over 2021.
● Organic Freezers & Thaw Systems platform revenue increased $1.6 million, or 9%, over 2021.
● Our Storage & Storage Services platform revenue increased $8.9 million, or 51%, over 2021. All growth in the Storage and Storage Services
platform was organic.
Creating shareholder value
● We delivered total shareholder return (“TSR”) of 203% and 12% over the five-year and three-year periods ending December 31. 2022.
In summary, we met our revenue goal for 2022 and continued to make strong progress toward achieving our long-term goals through a combination of
organic growth and success of recent acquisitions. We are keenly focused on achieving our corporate goals, in alignment with our broader purpose to return
long-term value to our customers and shareholders. We focused on differentiated products suited to the complexities and pressures of modern
biopharmaceutical manufacturing; with single-use and flexible solutions that can help to reduce risk in our customers’ manufacturing, storage, and
distribution processes.
Compensation philosophy
The Company’s compensation philosophy is to provide compensation that will attract and retain high-performing talent in our industry, motivate the
Company’s executive officers to create long-term, enhanced shareholder value and provide a fair reward for executive effort, and stimulate professional and
personal growth. The Company believes that the compensation of its executive officers should align the executive officers’ interests with those of the
shareholders and focus executive officer behavior to achieve both near-term corporate goals and long-term business and strategies.
It is the responsibility of the Compensation Committee of the Board to administer the Company’s compensation programs to ensure that they are
competitive with other bioprocessing, life sciences, and biotechnology companies, and to include incentives that are designed to appropriately drive the
Company’s continued development to create shareholder value. The Compensation Committee reviews and approves all components of the Company’s
executive officer compensation, including base salaries, annual cash incentive compensation, and equity incentive compensation.
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Compensation objectives
The Company’s compensation programs for its executive officers are designed to provide the following:
● Salaries and total compensation that are competitive with other bioprocessing, life sciences, and biotechnology companies with which the Company
competes for talent, determined by comparing the Company’s pay practices with these companies. The committee’s objective is to align executive
total annual compensation, including salary, cash bonus and long-term equity, at the 50th percentile of the Company’s peer group.
● Equity incentive compensation, including market-based equity awards, to ensure that its executive officers are motivated over the long-term to
respond to the Company’s business challenges and opportunities as owners and not just as employees, thereby aligning the executive
officers’ interests with those of shareholders.
● Annual cash incentive compensation that motivates the executive officers to lead and manage the business to meet the Company’s near-and long-
term objectives.
The following features of our compensation programs are designed to protect and promote the interests of our shareholders while aligning executive
compensation with performance. Below we summarize practices we follow to incentivize performance and retain leadership, and practices we do not
follow because we do not believe they serve the long-term interests of our shareholders:
We Do
Pay for Performance: We emphasize market-based compensation that
aligns the interests of our shareholders and executive officers through the use
of both near-term cash incentive compensation and long-term equity awards
subject to both time and market-based vesting.
Benchmark: We maintain an industry-specific peer group for annual
benchmarking of executive compensation. This benchmarking is a key factor
among those used to determine appropriate compensation for our NEOs.
Benefits: We offer market-competitive benefits for executives that are
consistent with the benefits we offer all our employees.
Consult: We consistently engage an independent compensation consultant to
advise on compensation levels and practices.
Risk Assessment: We perform an annual compensation risk assessment.
Double Trigger: We provide each NEO severance benefits that are triggered
only upon a termination of employment, including resignation for good
reason, following a change-in-control (i.e., double trigger).
Hedge or Pledge: We do not allow executive officers to engage in
hedging or pledging of our securities.
We Don’t
Re-Pricing: We do not allow re-pricing of underwater stock options
without shareholder approval.
Gross up Payments: We do not provide tax gross-up payments for our
executive officers.
Guaranteed Bonuses: We do not provide guaranteed bonuses to our
executive officers.
Board and Compensation Committee consideration of shareholder advisory votes on compensation
In evaluating our executive compensation programs for the fiscal year ended December 31, 2022, the Compensation Committee considered the shareholder
advisory vote on our executive compensation, (the “say-on-pay vote”), for the fiscal year ended December 31, 2021, which was approved by 74.2% of the
votes cast.
The Compensation Committee values and continues to consider shareholder input and feedback, including the results of say-on-pay votes, on our
compensation program structure. The Compensation Committee determined that the structure of our executive compensation policies continues to be
appropriately aligned to the achievement of Company goals and objectives and the best interests of shareholders. We believe that compensation program
enhancements of the past several years, as well as our commitment to improved transparency in our CD&A disclosure, have resulted in a compensation
program that best serves our Company, our executives, and our shareholders.
Compensation evaluation process
The Company’s executive officer compensation consists of three primary components: base salary, annual cash incentive compensation, and equity
incentive compensation. Each of these components is intended to complement the others, and taken together, to satisfy the Company’s compensation
objectives. The Compensation Committee considers a number of factors in setting compensation for its executive officers, including Company
performance, the executive’s functional performance, experience and responsibilities, and the compensation of executive officers in similar positions in our
peer group of companies.
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Role of compensation consultant
In establishing compensation levels for each executive officer, the Compensation Committee has the authority to engage the services of outside experts. In
the fiscal year ended December 31, 2022, the Compensation Committee retained FW Cook, an independent compensation consulting firm, to assist
management in assessing and reporting to the Compensation Committee the competitiveness and effectiveness of the Company’s executive compensation
programs. In addition, our finance and human resources departments support management in their work and act in accordance with the direction given to
them to administer our compensation programs.
Management has assessed any potential conflicts of interest raised by the work of FW Cook, our compensation consultant, pursuant to SEC rules and has
determined that no such conflict of interest exists.
In February 2022, the Compensation Committee held meetings with management to review the reports prepared by FW Cook to:
● Review our compensation objectives
● Review the actual compensation of our executive officers for consistency with our objectives
● Analyze trends in executive compensation
● Assess our variable cash compensation structure, as well as incentive plan components and mechanics, to ensure an appropriate correlation between
pay and performance with resulting compensation opportunities that balance returns to the Company and its shareholders
● Assess our equity-based awards programs against our objectives of executive incentive, retention, and alignment with shareholder interests
● Review our peer group and consider appropriate changes related to the realignment of our business
● Benchmark our executive cash compensation and equity-based awards programs, and assess our pay versus performance against our peer group
● Review recommendations for fiscal year 2022 compensation for appropriateness relative to our compensation objectives
Use of peer group to benchmark compensation
In February 2022, FW Cook provided management with an analysis of base salary, target bonus, target total cash, long-term incentive value and design, and
target total compensation for executives, and cash and equity compensation for non-employee directors, of comparable companies in the bioprocessing, life
sciences, and biotechnology industries. In performing this analysis, FW Cook used a peer group of 20 bioprocessing, life sciences, and biotechnology
companies, which was reviewed and approved by management. As necessary, FW Cook, in conjunction with management, revaluates our peer group in
light of developments in the market and our industry. As a result of this review, two companies were added to the peer group and two companies were
removed from the peer group compared to the prior report. The companies included in the peer group had revenues with a median of $168 million, as
compared to the group’s median revenue of $127 million in fiscal year 2021, when the evaluation was last completed.
The peer group used in the report presented for consideration of 2022 compensation decisions and approved by the management consisted of the following
companies:
Antares Pharma, Inc.(1)
Atrion Corporation
Avid Bioservices, Inc.
Axogen Corporation
Azenta
Berkely Lights
Cardiovascular Systems, Inc
Cerus Corporation
Codexis, Inc.
Cryoport, Inc.
Fluidigm Corporation(2)
Glaukos Corporation
iRhythm Technologies, Inc.
Luminex Corporation(3)
Mesa Laboratories, Inc.
NanoString Technologies, Inc.
NEVRO Corporation
Silk Road Medical, Inc.
STAAR Surgical Company
Veracyte, Inc.
(1)
(2)
(3)
Antares Pharma, Inc. was acquired by Halozyme (NASDAQ: HALO) as of May 2022.
Fluidigm Corporation rebranded to Standard BioTools, Inc. (NASDAQ: LAB) in April 2022.
Luminex Corporation was acquired by DiaSorin (EuroNext: DSRLF) in July 2021.
The use of peer group compensation data is one of several factors in determining appropriate compensation parameters for base salary, variable cash
compensation, and equity-based, long-term incentives. The Compensation Committee’s executive compensation decisions are made on a case-by-case
basis, and specific benchmark results do not, in and of themselves, determine individual target compensation decisions.
While the Compensation Committee generally targets each NEO’s total compensation to be near the 50th percentile of the peer group, it considers a
number of additional factors to determine the appropriate level of each NEO’s total compensation and each component of compensation, including
Company performance and the relevant executive’s performance, experience, responsibilities and impact. Due to these other factors, the Compensation
Committee may set an NEO’s compensation below, at, or above the 50th percentile of the peer group.
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Annual review of long-term incentives
The Compensation Committee believes that equity incentives in the form of restricted stock awards, subject to vesting over time or upon achievement of
performance or market-based objectives, are effective vehicles to align individual and team performance with the achievement of the Company’s strategic
and financial goals over time, retain our NEOs, and align the interests of our NEOs with those of our shareholders.
In February 2022, the Compensation Committee granted to the NEOs, service vesting-based restricted stock awards which vest over a four-year period,
and market-based restricted stock awards which 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, 2022 through
December 31, 2023 as compared to the total shareholder return of our 20 company peer group. The size of these grants is based on target long-term
incentive levels for each of the NEOs.
Executive compensation
Base salary
Base salary represents the fixed portion of an executive officer’s compensation and is intended to provide compensation for day-to-day performance. The
Compensation Committee believes that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain
talented and experienced executives. Each executive officer’s base salary is initially determined upon hire or promotion based on the executive officer’s
responsibilities, prior experience, individual compensation history and salary levels of other executives within the Company and similarly situated
executives within our peer group. Base salary is typically reviewed annually. The Compensation Committee believes that the base salaries paid to our
executive officers during the fiscal year ended December 31, 2022 achieved the Company’s compensation objectives. Base salaries for the named executive
officers for 2022, 2021 and 2020 are as follows:
Name
Michael Rice
Aby J Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
2022 Base
2021 Base
Salary ($) (1)
Salary ($) (1)
2020 Base
Salary ($)
645,000
419,750
450,000
375,000
356,500
641,019
419,750
412,137
249,077
356,500
514,712
407,642
390,889
192,308
345,731
Base Salary
Increase in
2022 vs 2021
(%)
Base Salary
Increase in
2021 vs 2020
(%)
1
-
9
50
-
25
3
5
30
3
(1)
These base salary increases were based on each named executive officer’s performance, qualifications, experience, responsibilities, and FW
Cook’s survey of the publicly disclosed compensation for similar positions at companies in the peer group.
Annual cash incentive compensation (short-term incentive) plan
In 2022, as in prior years, executives were eligible for bonuses, as approved by the Compensation Committee and the Board, with pre-established goals and
weightings, which was designed to reward achievements based upon quantitative & qualitative Company performance (the “Company Objectives”), and to
incentivize and reward NEOs for achieving performance goals that drive Company performance, align pay and performance, and support the long-term
growth of the Company.
All NEO incentive payouts are calculated based solely on Company Objectives to closely align compensation with the Company’s performance. The
Compensation Committee determined each NEO’s annual cash incentive compensation after the end of fiscal year 2022, which is calculated as a percentage
of the executive officer’s target annual cash incentive compensation (“Target Award”). The Compensation Committee established each NEOs Target Award
at a level that represents a meaningful portion of each NEOs cash compensation. In addition, the Compensation Committee set thresholds, target, and
maximum performance goals, and related payout levels, considering annual cash incentive compensation levels for comparable positions within our peer
group and our own historical practices. An NEO could earn between 0% and 110% of the NEOs Target Award for achievement of Corporate Objectives,
dependent upon the level of achieved performance.
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Annual cash incentive compensation (short-term incentive) plan protocol
The Compensation Committee administers the Plan:
1. At the beginning of the fiscal year, the CEO, with assistance from senior management, proposes annual Company Objectives, measurement criteria
and weightings, subject to review and approval by the Compensation Committee.
2. At the beginning of the following fiscal year, the CEO and CFO evaluate performance levels and the achievement of these annual Company
Objectives, which are subject to review and approval by the Compensation Committee. Specific bonus award recommendations for all participants
are submitted by the CEO to the Compensation Committee for review and approval.
3. The Compensation Committee determines the bonus awards for individual participants based on the Target Awards and the Company’s performance
against the Company Objectives.
Summary of 2022 performance measure and goals
The Compensation Committee may, at its discretion, elect to adjust bonuses or not to pay bonuses at all. A Target Award and the weight assigned to
Company Objectives are determined based upon competitive market data derived from our peer group. The final incentive payout is determined based on
the achievement of Company Objectives defined for each organizational level and position and the Target Award.
Our Company is focused on driving above-industry level growth through internal innovation, acquisitions, and expansion of applications for our products
and services. With our focus on revenue growth, gross margin improvements, and positive adjusted EBITDA, we believe that revenue, gross margin, and
Adjusted EBITDA are relevant metrics to reflect success. Revenue was the highest weighted Company Objective, and the remaining weighting was
attributed to each of the other Company Objectives as determined by management and approved by the Compensation Committee. We believe these are
objectives that our executive team can directly impact, and that drive shareholder value.
For the 2022 Plan, the Compensation Committee set the following Company Objectives and related payout levels:
● Revenue: For 2022, the revenue target was set at $163 million (excluding acquired revenue during the year), which if achieved, would result in a
payout of 60% of each NEOs Target Award with respect to the revenue metric. If the Company achieved revenues of $166 million, a 10% increase of
payout would result and each NEOs Target Award would be paid at 66% with respect to the revenue metric. If achieved performance was below
$163 million but at or above $160 million, a 10% reduction of payout would result and each NEOs Target Award would be paid at 54% with respect
to the revenue metric. If achieved performance was below $160 million, then no payout would be made to the NEOs with respect to the revenue
metric.
● Adjusted Gross Margin(1): For 2022, the adjusted gross margin target was set at 37%, which if achieved, would result in a payout of 20% of each
NEOs Target Award with respect to the adjusted gross margin metric. If the Company achieved adjusted gross margin of 39%, a 10% increase of
payout would result and each NEOs Target Award would be paid at 22% with respect to the adjusted gross margin metric. If achieved performance
was below 37% but at or above 35%, a 10% reduction of payout would result and each NEOs Target Award would be paid at 18% with respect to the
adjusted gross margin metric. If achieved performance was below 35%, then no payout would be made to the NEOs with respect to the adjusted
gross margin metric.
● Adjusted EBITDA(1): For 2022, the adjusted EBITDA target was set at 7% of revenues, which if achieved, would result in a payout of 20% of each
NEOs Target Award with respect to the adjusted EBITDA metric. If the Company achieved adjusted EBITDA of 9% of revenues, a 10% increase of
payout would result and each NEOs Target Award would be paid at 22% with respect to the adjusted EBITDA metric. If achieved performance was
below 7% of revenues but at or above 5% of revenues, a 10% reduction of payout would result and each NEOs Target Award would be paid at 18%
with respect to the adjusted EBITDA metric. If achieved performance was below 5% of revenues, then no payout would be made to the NEOs with
respect to the adjusted EBITDA metric.
● Complete ULT and Cryostor modules within Netsuite: In 2022, the objective to complete the modules of two significant entities, ULT and CBS,
within Netsuite would result in an additional payout of 5% of each NEOs Target Award, but in no event would an additional payout be achieved if
the revenue, Adjusted Gross Margin or Adjusted EBITDA target was met at or above 100% of achievement. If both modules were not completed,
then no payout would be made to the NEOs with respect to the Netsuite module completion metric.
● Complete Transition to new Cryostor tank supplier: For 2022, a transition of a major tank supplier for Cryostor objective was set to establish a
new key supplier relationship in order to mitigate supply chain constraints, which if achieved, would result in a payout 5% of each NEOs Target
Award, but in no event would an additional payout be achieved if the revenue, Adjusted Gross Margin or Adjusted EBITDA target was met at or
above 100% of achievement. If achieved performance wasn’t met, then no payout would be made to the NEOs with respect to the new tank supplier
metric.
(1)
Adjusted Gross Margin and Adjusted EBITDA are non-GAAP metrics. A reconciliation of these metrics is provided below.
Non-GAAP metric reconciliation tables
Our Target Awards include the calculation of non-GAAP financial measures in which we believe provide useful information for evaluating business
performance. When analyzing the Company's operating results, investors should not consider non-GAAP measures as substitutes for the comparable
financial measures prepared in accordance with GAAP.
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Adjusted gross margin reconciliation
GAAP total revenues
GAAP cost of revenues
COGS intangible asset amortization
GAAP GROSS PROFIT
GAAP GROSS MARGIN
ADJUSTMENTS TO GROSS PROFIT:
Inventory step-up
Intangible asset amortization
ADJUSTED GROSS PROFIT
ADJUSTED GROSS MARGIN
Adjusted EBITDA reconciliation
2022
Years Ended December 31
2021
2020
$
$
$
$
161,759
(107,937)
(5,007)
$
48,815
30.2%
251
5,007
54,073
$
33.4%
$
119,156
(82,108)
(4,557)
$
32,491
27.3%
1,130
4,557
38,178
$
32.0%
48,087
(20,646)
(2,328)
25,113
52.2%
411
2,328
27,852
57.9%
GAAP NET (LOSS) / INCOME
$
(139,805) $
(8,908) $
1,983
2022
Years Ended December 31
2021
2020
ADJUSTMENTS:
Interest expense/(income), net
Income tax benefit
Depreciation
Intangible asset amortization
EBITDA
Share-based compensation (non-cash)
Acquisition costs
Inventory step-up
Loss on Disposal of Assets
Change in fair value of contingent consideration
Change in fair value of investments
Change in fair value of warrant liability
Intangible asset impairment charges
ADJUSTED EBITDA(1)
ADJUSTED EBITDA as a percentage of total revenues
687
(5,022)
6,834
9,697
(127,609) $
25,334
18
251
683
(4,754)
(697)
-
110,364
3,590
$
2.2%
$
$
485
(20,118)
4,800
8,202
(15,539) $
13,974
1,636
1,130
(145)
2,875
-
121
-
4,052
$
3.4%
(40)
(3,264)
2,035
3,033
3,747
5,981
668
411
182
1,575
(1,319)
(3,601)
-
7,644
15.9%
(1)
Adjusted EBITDA excluded executive bonuses from GAAP operating expenses to determine target award percentage.
Individual annual cash incentive targets
For the fiscal year ended December 31, 2022, the Company established a Target Award for each NEO Company Objectives, which are set forth below:
Name
Michael Rice
Aby J Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
Target Award as % of
Salary
for the Fiscal Year
Ended
December 31, 2022 (%)
Portion Tied to
Company
Objectives (%)
100
45
70
55
40
100
100
100
100
100
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Achievement of 2022 company objectives
The following table summarizes the achievement of the Company’s Objectives for the fiscal year ended December 31, 2022:
Revenue target
Adjusted Gross Margin target
Adjusted EBITDA target
Netsuite module completion target
New Cryostor supplier target
Company Objectives for the Fiscal Year Ended December 31, 2022
Achieved $162 million in total revenue
Adjusted Gross Margin of 33.4% did not meet target
Adjusted EBITDA of 2.2% of revenues did not meet target
Did not meet module completion target
New tank supplier appointed
The Compensation Committee reviewed our achievement of the Company Objectives and determined that the Company achieved the Company Objectives
at 59% of target levels. The Compensation Committee made this determination in consideration of the adjusted consolidated revenue of $161.8 million,
adjusted gross margin of 33.4%, adjusted EBITDA, less executive bonus, of 1.0% of revenue, and the qualitative objective that was achieved in 2022.
Annual bonus incentive payments under the plan
The table below shows the annual bonus incentive payments made to our NEOs under the Plan for the fiscal year ended December 31, 2022:
Name
Michael Rice
Aby J Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
Target
Award as %
of Salary for
the Fiscal
Year Ended
December
31, 2022
(%)
2022
Company
Objectives
Results (%)
2022 Bonus
Payout ($)
2022 Overall
Achievement
% of Target
Award
100
45
70
55
40
59
59
59
59
59
380,550
111,510
185,850
121,688
84,252
59
27
41
32
24
Objectives for the fiscal year ending December 31, 2023
Our annual cash incentive compensation plan for the fiscal year ending December 31, 2023 is generally consistent with the program for the fiscal year
ended December 31, 2022. The Compensation Committee, after reviewing assessments provided by management along with market data from FW Cook,
determined each NEOs Target Award percentage of salary for the fiscal year 2023. Company Objectives, including revenue, adjusted gross margin,
adjusted EBITDA, and weightings were established to determine threshold, target, and maximum performance goals for the 2023 annual bonus.
Equity incentive compensation
The Compensation Committee believes that equity incentives in the form of service vesting-based restricted stock awards and market-based restricted stock
awards are effective instruments for long-term compensation. Equity incentives align individual and team performance with the achievement of the
Company’s strategic and financial goals, long-term value creation, and shareholders’ interests. Restricted stock awards are impacted by all stock price
changes, so the value to the executive officers is affected by both increases and decreases in stock price from the market price at the date of grant.
For the fiscal year ended December 31, 2022, the Compensation Committee considered a number of factors in determining what, if any, equity incentive
compensation to grant to the executive officers, including:
● the performance of the Company during the fiscal year
● the number of shares subject to, and exercise price of, outstanding options held by the executive officers
● the number of restricted stock units held by the executive officers
● the vesting schedule of the unvested equity awards held by the executive officers
● the financial statement impact of any equity award
● the amount and percentage of the total equity on a diluted basis held by the executive officers
● the available shares under the Company’s equity incentive plan
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The target split of the long-term equity incentive compensation awards made to our NEOs, based upon dollar value, is 50% market-based, and 50% service
vesting-based restricted stock awards. We granted our NEOs these equity incentive instruments in 2022, 2021, and 2020 and we anticipate that we will
continue to include these grants as part of our long-term incentive compensation program going forward for the reasons noted above.
In February 2022, the Compensation Committee granted the following long-term incentive compensation awards to each of the named executive officers of
the Company. These awards are split based upon dollar value between service vesting-based restricted stock awards (50%) and market-based restricted
stock awards (50%).
Name
Michael Rice
Aby J Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
Service-
vesting
based
stock
awards (#)
Market-
based
Stock
Units (#)
70,094
21,029
23,365
23,365
16,356
70,094
21,029
23,365
23,365
16,356
Service vesting-based equity awards granted in 2022 will vest one-quarter of the shares in one year with the remainder vesting quarterly over three years.
Market-based restricted stock awards 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, 2022 through December 31, 2023 as
compared to the total shareholder return of our 20 company peer group.
2023 long-term equity incentive compensation
In January 2023, the Compensation Committee granted long-term incentive compensation awards to each of the NEOs of the Company. Consistent with the
Company’s compensation philosophy and objectives, as described above, these awards are split based upon dollar value between service vesting-based
restricted stock (50%) and market-based restricted stock (50%), all of which are subject to similar vesting conditions to comparable service vesting-based
and market-based instruments awarded by BioLife as discussed above.
Other compensation
All full-time employees, including the executive officers, are eligible to participate in the health benefits programs, including medical, dental and vision
care coverage, disability and life insurance and the Company’s 401(k) plan. Under the 401(k) plan, the Company matches 100% of the first 4% of eligible
compensation contributed by employees.
Tax and accounting considerations
We have not provided or agreed to provide any of the Company’s executive officers or directors with a gross-up or other reimbursement for tax amounts
they might pay pursuant to Section 4999 or Section 409A of the Code. Sections 280G and 4999 of the Code provide that executive officers, directors who
hold significant shareholder interests and certain other service providers could be subject to significant additional taxes if they receive payments or benefits
in connection with a change in control of the Company that exceed certain limits, and that we or our successor could lose a deduction on the amounts
subject to the additional tax. Section 409A also imposes additional significant taxes on the individual in the event that an employee, director or service
provider receives “deferred compensation” that is not exempt from or does not meet the requirements of Section 409A.
For the Company’s financial statements, cash compensation, such as salary and bonus, is expensed and for income tax returns, cash compensation is
generally deductible except as set forth below. For equity-based compensation, we expense the fair value of such grants over the requisite service period.
Generally, Section 162(m) of the Code disallows a federal income tax deduction for public corporations of remuneration in excess of $1 million paid for
any fiscal year to a “covered employee” of the Company. With respect to taxable years beginning before January 1, 2018, remuneration in excess of $1
million was exempt from this deduction limit if it qualified as “performance-based compensation” within the meaning of Section 162(m). Pursuant to the
Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017, Section 162(m) was amended to: (1) expand the scope of
individuals who are “covered employees,” including anyone who was a covered employee in any prior taxable year beginning after December 31, 2016, (2)
expand the types of companies that are subject to the limitations of Section 162(m), and (3) eliminate the exception for performance-based compensation
and commissions. Transition relief provided that any payment made pursuant to a written and binding agreement that was in effect as of November 2, 2017
and not subsequently materially modified, would be subject to the limitations of Section 162(m) as in effect prior to the amendment. Accordingly,
compensation paid to our covered employees in excess of $1 million will not be deductible unless it qualifies for the transition relief applicable to certain
arrangements in place as of November 2, 2017, as described above. Furthermore, because of the uncertainties as to the application and interpretation of
Section 162(m) as revised by the Tax Cuts and Jobs Act of 2017, including the uncertain scope of the transition relief, no assurance can be given that
previously granted compensation intended to satisfy the requirements for performance-based compensation will, in fact, qualify for such exception.
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The Compensation Committee believes that shareholder interests are best served if the Compensation Committee retains maximum flexibility to design
executive compensation programs that meet stated business objectives. For these reasons, the Compensation Committee, while considering tax
deductibility as a factor in determining executive compensation, may not limit such compensation to those levels that will be deductible, particularly in
light of the expansion of the covered employee group and the elimination of the exception for performance-based compensation.
Compensation risk assessment
The Compensation Committee not only considers and evaluates risks related to the Company’s cash and equity-based compensation programs and
practices, but also evaluates whether the Company’s compensation plans encourage participants to take excessive risks that are reasonably likely to have a
material adverse effect on the Company. Consistent with SEC disclosure requirements, the Compensation Committee has worked with management to
assess compensation policies and practices for Company employees and has concluded that such policies and practices do not create risks that are
reasonably likely to have a material adverse effect on the Company.
Executive compensation tables
Compensation earned
The following table summarizes the compensation earned during the fiscal years ended December 31, 2022, 2021 and 2020 by the Company’s principal
executive officer, principal financial officer, three other most highly compensated executive officers who were serving as an executive officer as of
December 31, 2022 and whose total compensation exceeded $100,000. These individuals are referred to as the Company’s NEOs.
Summary compensation table
The following Summary Compensation Table sets forth certain information regarding the compensation, for services rendered in all capacities to us during
2022, 2021 and 2020, of our current principal executive officer, current principal financial officer, and our three other most highly compensated executive
officers at the end of 2022 (together, the “named executive officers” or “NEO”).
Name and Principal
Positions
(a)
Michael Rice
Chief Executive Officer and
Chairman of the Board
Aby J. Mathew
Executive Vice President and
Chief Scientific Officer
Roderick de Greef
Chief Operating Officer and
President
Troy Wichterman
Chief Financial Officer
Foster Karen A
Chief Quality Officer
Year
(b)
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
Salary
($)
(c)(1)
Bonus
($)
(d)
Stock
Awards
($)
(e)
All Other
Compensation
($)
(f)
Total
($)
(g)
645,000
641,019
514,712
419,750
419,750
407,642
450,000
412,137
390,889
375,000
249,077
192,308
356,500
356,500
345,731
380,550 (2)
603,075 (4)
-
111,510 (7)
207,776 (10)
-
185,850 (15)
223,850 (17)
-
121,688 (20)
30,000 (23)
40,000 (26)
84,252 (29)
156,860 (32)
-
3,703,620 (3)
1,005,813 (5)
963,799 (6)
1,155,834 (8)
579,568 (11)
637,388 (13)
1,747,823 (16)
544,603 (18)
2,663,189 (19)
1,245,968 (21)
280,024 (24)
346,109 (27)
891,900 (30)
492,530 (33)
541,347 (35)
-
-
-
12,200 (9)
11,266 (12)
11,333 (14)
-
-
-
12,200 (22)
11,463 (25)
8,892 (28)
12,200 (31)
11,518 (34)
-
4,729,171
2,249,908
1,478,511
1,699,295
1,218,361
1,056,363
2,383,673
1,180,590
3,054,078
1,754,856
570,564
587,309
1,344,852
1,017,408
887,078
(1)
(2)
(3)
Reflects base salary earned in each applicable period.
Cash incentive bonus earned in 2022. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. Rice’s cash incentive bonus is 100% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 70,094 service vesting-based restricted stock and 70,094 market-based restricted stock granted on February 24, 2022,
and 5,537 service vesting-based restricted stock awards granted in lieu of salary on various dates from May 2022 through August 2022. The
service vesting-based restricted stock award granted February 24, 2022 will vest 1/4 of the shares on February 24, 2023 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, 2022 through December 31, 2023 as
compared to the total shareholder return of our 20 company peer group. The service vesting-based restricted awards granted from May 2022
through August 2022 fully vested the date of grant, which can be found in the Grants of plan-based awards table below.
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(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Cash incentive bonus earned in 2021. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. Rice’s cash incentive bonus is 85% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 7,511 service vesting-based restricted stock and 7,511 market-based restricted stock granted on February 8, 2021, and
8,487 service vesting-based restricted stock granted on April 12, 2021. The service vesting-based restricted stock award granted February 8,
2021 will vest 1/4 of the shares on February 8, 2022 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, 2021 through December 31, 2022 as compared to the total shareholder return of our 20 company peer group.
The service vesting-based restricted award granted April 12, 2021 fully vested October 12, 2021.
Represents fair value of 35,924 service vesting-based restricted stock, 28,868 market-based restricted stock, and 34,641 performance-based
restricted stock granted on March 25, 2020. The service vesting-based stock award vested 1/4 of the shares on March 25, 2021 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, 2020 through
December 31, 2021 as compared to the total shareholder return of our 20 company peer group. The performance-based restricted stock vested at
75% of the number of restricted shares granted to each recipient based on achievement of specified performance metrics approved by the
Compensation Committee.
Cash incentive bonus earned in 2022. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. Mathews’ cash incentive bonus is 45% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 21,029 service vesting-based restricted stock and 21,029 market-based restricted stock granted on February 24, 2022,
and 4,514 service vesting-based restricted stock awards granted in lieu of salary on various dates from May 2022 through August 2022. The
service vesting-based restricted stock award granted February 24, 2022 will vest 1/4 of the shares on February 24, 2023 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, 2022 through December 31, 2023 as
compared to the total shareholder return of our 20 company peer group. The service vesting-based restricted awards granted from May 2022
through August 2022 fully vested the date of grant, which can be found in the Grants of plan-based awards table below.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2022.
Cash incentive bonus earned in 2021. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. Mathews’ cash incentive bonus is 45% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 4,891 service vesting-based restricted stock and 4,891 market-based restricted stock granted on February 8, 2021, and
3,360 service vesting-based restricted stock granted on April 12, 2021. The service vesting-based restricted stock award granted February 8,
2021 will vest 1/4 of the shares on February 8, 2022 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, 2021 through December 31, 2022 as compared to the total shareholder return of our 20 company peer group.
The service vesting-based restricted award granted April 12, 2021 fully vested October 12, 2021.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2021.
Represents fair value of 28,451 service vesting-based restricted stock, 22,863 market-based restricted stock, and 13,718 performance-based
restricted stock granted on March 25, 2020. The service vesting-based stock award vested 1/4 of the shares on March 25, 2021 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, 2020 through
December 31, 2021 as compared to the total shareholder return of our 20 company peer group. The performance-based restricted stock vested at
75% of the number of restricted shares granted to each recipient based on achievement of specified performance metrics approved by the
Compensation Committee.
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(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2020.
Cash incentive bonus earned in 2022. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. de Greef’s cash incentive bonus is 70% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 23,365 service vesting-based restricted stock and 23,365 market-based restricted stock granted on February 24, 2022,
12,068 service vesting-based restricted stock awards granted on January 3, 2022, and 5,882 service vesting-based restricted stock awards
granted in lieu of salary on various dates from May 2022 through August 2022. The service vesting-based restricted stock award granted
February 24, 2022 will vest 1/4 of the shares on February 24, 2023 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, 2022 through December 31, 2023 as compared to the total shareholder return of
our 20 company peer group. The service vesting-based restricted award granted on January 3, 2022 vested 1/4 each quarter end during 2022 and
was fully vested on December 31, 2022. The service vesting-based restricted awards granted from May 2022 through August 2022 fully vested
the date of grant, which can be found in the Grants of plan-based awards table below.
Cash incentive bonus earned in 2021. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. de Greef’s cash incentive bonus is 50% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 4,740 service vesting-based restricted stock and 4,740 market-based restricted stock granted on February 8, 2021, and
3,222 service vesting-based restricted stock granted on April 12, 2021. The service vesting-based restricted stock award granted February 8,
2021 vests in 4 quarterly increments beginning on January 1, 2022, provided that Mr. de Greef continues to be employed with BioLife through
the vesting dates. 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, 2021 through December 31, 2022 as compared to
the total shareholder return of our 20 company peer group. The service vesting-based restricted award granted April 12, 2021 fully vested
October 12, 2021.
Represents fair value of 27,282 service vesting-based restricted stock, 21,923 market-based restricted stock, and 13,154 performance-based
restricted stock granted on March 25, 2020 and 100,000 service vesting-based restricted stock granted on July 22, 2020. The service vesting-
based stock awarded on March 25, 2020 vested 1/4 of the shares on March 25, 2021 with the remainder vesting quarterly over 3 years. The
service vesting-based stock awarded on July 22, 2020 vested 1/4 of the shares on July 22, 2021 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, 2020 through December 31, 2021 as compared to the
total shareholder return of our 20 company peer group. The performance-based restricted stock vested at 75% of the number of restricted shares
granted to each recipient based on achievement of specified performance metrics approved by the Compensation Committee.
Cash incentive bonus earned in 2022. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Mr. Wichterman’s cash incentive bonus is 55% of his base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 23,365 service vesting-based restricted stock and 23,365 market-based restricted stock granted on February 24, 2022,
and 2,574 service vesting-based restricted stock awards granted in lieu of salary on various dates from May 2022 through August 2022. The
service vesting-based restricted stock award granted February 24, 2022 will vest 1/4 of the shares on February 24, 2023 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, 2022 through December 31, 2023 as
compared to the total shareholder return of our 20 company peer group. The service vesting-based restricted awards granted from May 2022
through August 2022 fully vested the date of grant, which can be found in the Grants of plan-based awards table below.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2022.
Bonus earned and paid in 2021 at the discretion of management prior to Mr. Wichterman being promoted to CFO.
Represents fair value of 5,680 service vesting-based restricted stock granted on August 9, 2021. The service vesting-based stock award will vest
1/4 of the shares on August 9, 2022 with the remainder vesting quarterly over 3 years.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2021.
Bonus earned in 2020 was paid out in April 2021, plus bonus earned and paid in 2020 at the discretion of management prior to Mr. Wichterman
being promoted to CFO.
Represents fair value of 21,299 service vesting-based restricted stock granted on June 19, 2020. The service vesting-based stock award vested
1/4 of the shares on June 19, 2021 with the remainder vesting quarterly over 3 years.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2020.
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(29)
(30)
(31)
(32)
(33)
(34)
(35)
Cash incentive bonus earned in 2022. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Ms. Foster’s cash incentive bonus is 40% of her base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 16,536 service vesting-based restricted stock and 16,536 market-based restricted stock granted on February 24, 2022.
The service vesting-based restricted stock award granted February 24, 2022 will vest 1/4 of the shares on February 24, 2023 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, 2022 through December 31, 2023 as
compared to the total shareholder return of our 20 company peer group.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2022.
Cash incentive bonus earned in 2021. The cash incentive bonus earned is determined based on achieving Company Objectives set by the
Compensation Committee. Ms. Foster’s cash incentive bonus is 40% of her base salary with additional compensation determined by the
Compensation Committee.
Represents fair value of 4,157 service vesting-based restricted stock and 4,157 market-based restricted stock granted on February 8, 2021. The
service vesting-based restricted stock award will vest 1/4 of the shares on February 8, 2022 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, 2021 through December 31, 2022 as compared to the total
shareholder return of our 20 company peer group.
This amount represents the match paid by the Company on behalf of such individual into the Company 401(k) plan on 100% of the first 4% of
eligible compensation contributed by such individual during the fiscal year 2021.
Represents fair value of 24,164 time-vested restricted stock, 19,418 market-based restricted stock, and 11,651 performance-based restricted
stock granted on March 25, 2020. The time-vested stock award will vest 1/4 of the shares on March 25, 2021 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, 2020 through December 31, 2021 as
compared to the total shareholder return of 20 of our peers. The performance-based restricted stock will vest as to between 0% and 125% of the
number of restricted shares granted to each recipient based on certain performance metrics set forth by the Company.
The following table reflects the allocation of base salary, cash incentive compensation, equity incentive compensation, and other compensation earned by
the Company’s NEOs in the fiscal year 2022 as set forth in the 2022 Summary Compensation Table above.
Name
Michael Rice
Aby J Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
Long-Term
Incentives
(%)
Short-Term
Incentives
(%)
Base Salary
(%)
78
68
73
71
66
8
7
8
8
7
101
Total
Compensation
($)
4,729,171
1,699,295
2,383,673
1,754,856
1,344,852
14
25
19
21
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Grants of plan-based awards
The following table sets forth certain information regarding each grant of plan-based awards made to a named executive officer in the last completed fiscal
year under any plan, including awards that subsequently have been transferred.
Name (a)
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Roderick de Greef
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Grant Date
(b)
2/24/2022
2/24/2022
5/23/2022(2)
6/3/2022(2)
6/17/2022(2)
7/1/2022(2)
7/15/2022(2)
7/29/2022(2)
8/12/2022(2)
2/24/2022
2/24/2022
5/23/2022(2)
6/3/2022(2)
6/17/2022(2)
7/1/2022(2)
7/15/2022(2)
7/29/2022(2)
8/12/2022(2)
1/3/2022
2/24/2022
2/24/2022
5/23/2022(2)
6/3/2022(2)
6/17/2022(2)
7/1/2022(2)
7/15/2022(2)
7/29/2022(2)
8/12/2022(2)
2/24/2022
2/24/2022
5/23/2022(2)
6/3/2022(2)
6/17/2022(2)
7/1/2022(2)
7/15/2022(2)
7/29/2022(2)
8/12/2022(2)
2/24/2022
2/24/2022
5/23/2022(2)
6/3/2022(2)
6/17/2022(2)
7/1/2022(2)
7/15/2022(2)
7/29/2022(2)
8/12/2022(2)
Estimated Future Payouts Under Equity
Incentive Plan Awards
Target
(#) (d)
Threshold
(#) (c)
Maximum
(#) (e)
All Other Stock
Awards:
Number of
Shares of Stock
or Units (#) (e)
Grant Date
Fair Value of
Stock Awards
($) (f) (1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
70,094
-
-
-
-
-
-
-
-
21,029
-
-
-
-
-
-
-
-
-
23,365
-
-
-
-
-
-
-
-
23,365
-
-
-
-
-
-
-
-
16,356
—
—
—
—
—
—
—
—
140,188
-
-
-
-
-
-
-
-
42,058
-
-
-
-
-
-
-
-
-
46,730
-
-
-
-
-
-
-
-
46,730
-
-
-
-
-
-
-
-
32,712
—
—
—
—
—
—
—
—
-
70,094
964
901
899
847
779
643
504
-
21,029
786
735
733
690
635
524
411
12,068
-
23,365
1,024
957
955
900
828
683
535
-
23,365
448
419
418
394
362
299
234
-
16,356
533
498
497
468
430
355
278
1,656,321
1,960,529
12,397
12,398
12,397
12,400
12,394
12,391
12,393
496,915
588,181
10,108
10,114
10,108
10,102
10,103
10,097
10,106
450,016
552,115
653,519
13,169
13,168
13,169
13,176
13,173
13,161
13,156
552,115
653,519
5,761
5,765
5,764
5,768
5,759
5,762
5,754
386,492
457,477
6,854
6,852
6,854
6,852
6,841
6,841
6,836
(1) The fair value of the market-based restricted stock awards is estimated at the date of grant using the Monte Carlo Simulation model.
(2) The grants awarded on dates indicated here were made in lieu of salary for each applicable pay period.
There were no Non-Equity Incentive Plan awards in the last completed fiscal year.
Discussion of summary compensation table and grants of plan-based awards table
The Company’s executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the
Grants of Plan-Based Awards Table was paid or awarded, are described above under “Compensation Discussion and Analysis.” The material terms of
employment agreements and arrangements with the Company’s named executive officers are described below under the heading “Employment
Arrangements.”
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Outstanding equity awards at December 31, 2022
The following table sets forth certain information regarding the outstanding stock option grants and stock awards held by the NEOs at December 31, 2022.
Awards were made under the 2013 Performance Incentive Plan (the “2013 Plan”). For the outstanding stock option grants and stock awards described
below, vesting is conditioned on the NEO remaining in service to the Company through such vesting date. Such awards may also be subject to accelerated
vesting as described in “Potential Payments Upon Termination or Change in Control.”
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
60,000
190,000
938
100,000
OPTION AWARDS
Equity
Incentive
Plan Awards:
Number
of Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
––
––
––
––
––
––
––
––
Option
Exercise
Price ($)
(e)
1.90
Option
Expiration
Date
(f)
3/15/2026(1)
2.06
5/4/2025(1)
2.06
5/4/2025(1)
1.90
4/13/2026(1)
Name (a)
Michael Rice
Aby J. Mathew
Troy Wichterman
Karen Foster
(1) This award is fully vested.
UNVESTED SHARES
Number of shares
or units of stock
that have not
vested
(#)
(c)
Market value of
shares of units
of stock that
have not
vested(1)
($)
(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)
2,219 (2)
11,227 (3)
4,225 (4)
70,094 (6)
1,038 (8)
8,891 (9)
2,752 (10)
21,029 (12)
-
23,365 (15)
122 (17)
7,988 (18)
3,195 (19)
23,365 (20)
730 (22)
7,552 (23)
2,339 (24)
16,356 (26)
40,386
204,331
76,895
1,275,711
18,892
161,816
50,086
382,728
-
425,243
2,220
145,382
58,149
425,243
13,286
137,446
42,570
297,679
-
-
7,511 (5)
70,094 (7)
-
-
4,891 (11)
21,029 (13)
4,740 (14)
23,365 (16)
-
-
-
23,365 (21)
-
-
4,157 (25)
16,356 (27)
-
-
136,700
1,275,711
-
-
89,016
382,728
86,268
425,243
-
-
-
425,243
-
-
75,657
297,679
Name (a)
Michael Rice
Michael Rice
Michael Rice
Michael Rice
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Aby J. Mathew
Roderick de Greef
Roderick de Greef
Troy Wichterman
Troy Wichterman
Troy Wichterman
Troy Wichterman
Karen Foster
Karen Foster
Karen Foster
Karen Foster
Grant Date
(b)
2/25/2019
3/25/2020
2/8/2021
2/24/2022
2/25/2019
3/25/2020
2/8/2021
2/24/2022
2/8/2021
2/24/2022
2/25/2019
6/19/2020
8/9/2021
2/24/2022
2/25/2019
3/25/2020
2/8/2021
2/24/2022
(1)
(2)
(3)
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 $18.20, the closing price of BioLife’s common stock on December 31, 2022.
2,219 unvested service vesting-based RSAs subject to this award vested February 25, 2023.
11,227 service vesting-based RSAs subject to this award are scheduled to vest in 5 equal quarterly increments, provided that Mr. Rice continues
to be employed with BioLife through the vesting dates.
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(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
4,225 service vesting-based RSAs subject to this award are scheduled to vest in 8 equal quarterly increments, provided that Mr. Rice continues to be
employed with BioLife through the vesting dates.
The target number of 7,511 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2021 and December 31, 2022.
70,094 unvested service vesting-based RSAs subject to this award vested ¼ on February 24, 2023 and, thereafter, will vest in 11 equal quarterly
increments, provided that Mr. Rice continues to be employed with BioLife through the vesting dates.
The target number of 70,094 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2022 and December 31, 2023.
1,038 unvested service vesting-based RSAs subject to this award vested February 25, 2023.
8,891 unvested service vesting-based RSAs subject to this award are scheduled to vest in 5 equal quarterly increments, provided that Mr. Mathew
continues to be employed with BioLife through the vesting dates.
2,752 unvested service vesting-based RSAs subject to this award are scheduled to vest in 8 equal quarterly increments, provided that Mr. Mathew
continues to be employed with BioLife through the vesting dates.
The target number of 4,891 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1, 2021
and December 31, 2022.
21,029 unvested service vesting-based RSAs subject to this award vested ¼ on February 24, 2023 and, thereafter, will vest in 11 equal quarterly
increments, provided that Mr. Mathew continues to be employed with BioLife through the vesting dates.
The target number of 21,029 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2022 and December 31, 2023.
The target number of 4,740 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1, 2021
and December 31, 2022. According to the compensation agreement provided by the Compensation Committee in relation to Mr. de Greef’s
retirement, he will be awarded the remaining unvested shares based on the performance period referenced above upon vesting.
23,365 unvested service vesting-based RSAs subject to this award were vested on an accelerated basis according to Mr. de Greef’s compensation
agreement provided by the Compensation Committee in relation to his retirement. All shares vested as of January 1, 2023 prior to Mr. de Greef’s
retirement on January 3, 2023.
The target number of 23,365 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2022 and December 31, 2023. According to the compensation agreement provided by the Compensation Committee in relation to Mr. de Greef’s
retirement, he will be awarded the remaining unvested shares based on the performance period referenced above upon vesting.
122 unvested service vesting-based RSAs subject to this award vested February 25, 2023.
7,988 unvested service vesting-based RSAs subject to this award will vest in 6 equal quarterly increments, provided that Mr. Wichterman continues
to be employed with BioLife through the vesting dates.
3,195 unvested service vesting-based RSAs subject to this award will vest in 8 equal quarterly increments, provided that Mr. Wichterman continues
to be employed with BioLife through the vesting dates.
23,365 unvested service vesting-based RSAs subject to this award vested ¼ on February 24, 2023 and, thereafter, will vest in 11 equal quarterly
increments, provided that Mr. Wichterman continues to be employed with BioLife through the vesting dates.
The target number of 23,365 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2022 and December 31, 2023.
730 unvested service vesting-based RSAs subject to this award vested February 25, 2023.
7,552 unvested service vesting-based RSAs subject to this award are scheduled to vest in 6 equal quarterly increments, provided that Ms. Foster
continues to be employed with BioLife through the vesting dates.
2,339 unvested service vesting-based RSAs subject to this award are scheduled to vest in 8 equal quarterly increments, provided that Ms. Foster
continues to be employed with BioLife through the vesting dates.
The target number of 4,157 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2021 and December 31, 2022.
16,356 unvested service vesting-based RSAs subject to this award vested ¼ on February 24, 2023 and, thereafter, will vest in 12 equal quarterly
increments, provided that Ms. Foster continues to be employed with BioLife through the vesting dates.
The target number of 16,356 market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest based on our
total shareholder return during (“TSR”) compared to our 20 company peer group over the relevant two-year performance period between January 1,
2022 and December 31, 2023.
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Option exercises and stock vested for the fiscal year ended December 31, 2022
The following Option Exercises and Stock Vested table sets forth certain information regarding each exercise of stock options and each vesting of restricted
stock during the last completed year for each of the named executive officers on an aggregated basis.
Name (a)
Michael Rice
Aby J. Mathew
Roderick de Greef
Troy Wichterman
Karen Foster
Pension benefits
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise (#) (b)
Value Realized on
Exercise ($)
(c)
Number of
Shares
Acquired on
Vesting (#) (d)
Value Realized
on Vesting ($)
(e)
106,668
37,694
—
—
—
2,679,661
1,102,618
—
—
—
85,586
64,592
156,475
10,995
53,479
1,644,752
1,235,926
3,476,480
217,173
1,025,190
The Company has no defined benefit plans or other supplemental retirement plans for the NEOs.
Nonqualified deferred compensation
The Company has no nonqualified defined contribution plans or other nonqualified deferred compensation plans for the named executive officers.
Employment agreements
The Company entered into an employment agreement with Michael Rice, Chief Executive Officer, effective December 1, 2020 for a salary of $530,000
per year. With consideration to recommendations of FW Cook, on February 24, 2022, the Compensation Committee approved a salary increase to
$645,000. 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
or Mr. Rice resigns for “Good Reason” upon or within 90 days following a “Change in Control”, Mr. Rice is entitled to a lump sum payment equal to 24
months’ salary, 100% Target Award of any cash and/or equity incentives for the current year, 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, and unvested stock options, awards, or other equity grants shall immediately fully vest.
The Company entered into an employment agreement with Aby Mathew, Ph.D., Chief Scientific Officer, effective December 1, 2020 for a salary of
$419,800 per year. With consideration to recommendations of FW Cook, on February 24, 2022, the Compensation Committee subsequently approved a
salary of $419,750. 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 or Mr. Mathew resigns for “Good Reason” upon or within 90 days following a “Change in Control”, Mr. Mathew is entitled to a lump sum
payment equal to 12 months’ salary, 100% Target Award of any cash and/or equity incentives for the current year, 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.
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Table of Contents
The Company entered into an employment agreement with Roderick de Greef, Chief Operating Officer, effective December 1, 2020 for a salary of
$402,500 per year. Subsequently, this agreement was superseded by any an amended employment agreement entered into by the Company and Mr. de
Greef, effective November 4, 2021 for a salary of $450,000 per year. 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 or Mr. de Greef resigns for “Good Reason” 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, 100% Target Award of any cash and/or equity incentives for the
current year, 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, and unvested stock options, awards, or other equity grants
shall immediately fully vest.
The Company entered into an employment agreement with Troy Wichterman, Chief Financial Officer, effective November 4, 2021 for a salary of
$325,000 per year. With consideration to recommendations of FW Cook, on February 24, 2022, the Compensation Committee approved a salary increase
to $375,000. The agreement provides that if Mr. Wichterman’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 9 months’ salary, an amount equal to the cost of 9 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. Wichterman’s employment is
terminated or Mr. Witchterman resigns for “Good Reason” upon or within 90 days following a “Change in Control”, Mr. Wichterman is entitled to a lump
sum payment equal to 12 months’ salary, 100% Target Award of any cash and/or equity incentives for the current year, 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.
The Company entered into an employment agreement with Karen Foster, Chief Quality Officer, effective December 1, 2020 for the role of Senior Vice
President and Chief Quality Officer and a salary of $356,000 per year. The agreement provides that if Ms. Foster’s employment is terminated without
“Cause” (other than by reason of death or disability) or if she resigns for “Good Reason,” she is entitled to a lump sum payment equal to 6 months’
salary, an amount equal to the cost of 6 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 Ms. Foster’s employment is terminated or Ms. Foster resigns for “Good Reason” upon or within 90 days following a “Change
in Control”, Ms. Foster is entitled to a lump sum payment equal to 12 months’ salary, 100% Target Award of any cash and/or equity incentives for the
current year, 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.
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.
Potential payments upon termination or change in control
Employment agreements with executives dictate that, upon a change of control through (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 whereby the majority of the voting power of the shares of the continuing or surviving entity is owned by persons who were not
shareholders of the Company immediately prior to such transaction is not substantially the same in proportions to their ownership of the voting power of
the Company’s shares immediately prior to the transaction, the Company will pay the executive’s salary through the date of termination, twelve months
(or 24 months for Mr. Rice) of the executive’s salary as severance pay, the total value of all outstanding cash or stock bonus opportunities in the current
year, and an amount equivalent to the cost of medical insurance premiums for twelve (or 24) months.
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Table of Contents
Assuming the NEOs employment was terminated by the Company without cause or the NEOs resigned for good reason and such event took place on
December 31, 2022, each of the NEOs would have been entitled to the payments and benefits shown in the table below.
Name
Michael Rice
Aby J Mathew
Roderick de Greef(2)
Troy Wichterman
Karen Foster
Payments and Benefits
Accelerated
Vesting
of Equity Awards
($)
(1)
Base Salary
Continuation ($)
Health Insurance
Under COBRA ($)
Total ($)
645,000
419,750
450,000
375,000
178,250
4,101,734
4,543,266
936,754
1,073,309
2,684,318
17,719
8,061
25,682
11,991
8,859
4,764,453
4,971,077
1,412,436
1,366,550
2,871,427
(1)
(2)
The dollar amounts shown are based on the intrinsic value of the stock options and restricted stock awards on December 31, 2022 calculated
using $18.20, the closing price of BioLife’s common stock on December 31, 2022.
Mr. de Greef retired from his position on January 3, 2023.
Assuming the NEO’s employment was terminated by the Company or the NEOs resigned for good reason within 90 days following a change in control and
such event took place on December 31, 2022, each of the NEOs would have been entitled to the payments and benefits shown in the table below.
Name
Michael Rice
Aby J Mathew
Roderick de Greef(2)
Troy Wichterman
Karen Foster
Base Salary
Continuation ($)
2022 Annual
Cash Inventive
($)
Payments and Benefits
Accelerated
Vesting of
Equity Awards
($) (1)
Health
Insurance
Under COBRA ($)
Total
($)
1,290,000
419,750
675,000
375,000
356,500
380,550
111,510
185,850
121,688
84,252
4,101,734
4,543,266
936,754
1,073,309
2,684,318
35,438
8,061
38,523
15,988
17,719
5,807,722
5,082,587
1,836,127
1,585,984
3,142,789
(1)
(2)
The dollar amounts shown are based on the intrinsic value of the stock options and restricted stock awards on December 31, 2022 calculated
using $18.20, the closing price of BioLife’s common stock on December 31, 2022.
Mr. de Greef retired from his position on January 3, 2023.
CEO pay ratio
Pursuant to a mandate of the Dodd-Frank Act, the SEC adopted a rule requiring that we annually disclose the ratio of our median employee’s total annual
compensation to the total annual compensation of our CEO, Michael Rice, who is also our principal executive officer (the “CEO Pay Ratio”).
The Company’s compensation and benefits philosophy and the overall structure of the compensation and benefit programs are broadly similar across the
organization and aim to encourage and reward all employees who contribute to the Company’s success. The Company strives to ensure the pay of every
employee reflects the level of his or her job impact and responsibilities and is competitive within the Company’s peer group. Compensation rates are
benchmarked and are generally set to be market-competitive in the country in which the jobs are performed. The Company’s ongoing commitment to pay
equity is critical to successfully supporting a diverse workforce with opportunities for all employees to grow, develop, and contribute.
We identified the median employee using total salary and wages earned, then subtracting bonuses earned in 2021 but paid in 2022, adding bonuses earned
in 2022 but not paid until 2023, adding the fair value of equity awards granted to the employee during 2022, and adding other compensation. Salary and
wages were annualized for any employees hired during the most recent fiscal year. A total of 467 US based employees who were employed by the
Company on December 31, 2022, the last day of the Company’s fiscal year, were included in the determination of this calculation (including all employees,
whether employed on a full-time, part-time, seasonal or temporary basis).
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As illustrated in the table below, the Company’s 2022 CEO Pay Ratio was approximately 47:1.
Michael Rice (CEO) 2022 Compensation
Median Employee 2022 Compensation
CEO Pay Ratio
$
$
4,729,171
100,315
47:1
To determine the median employee, we included all individuals employed as of December 31, 2022. Compensation for the median employee was
determined in the same manner as the total compensation reported for Mr. Rice in the “Total” column of the Summary Compensation Table. The pay ratio
reported above is a reasonable estimate calculated in a manner consistent with SEC rules, based on the Company’s internal records and the methodology
described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain
exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay
ratio reported by other peer companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and
compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Director compensation
Each of our non-employee directors, during the year ended December 31, 2022, were compensated with an annual retainer fee of $50,000. Committee
chairpersons were compensated with additional annual retainers as follows:
Audit Committee Chair
Compensation Committee Chair
Governance and Nominating Committee Chair
Annual
Retainer
$
$
$
10,000
5,000
5,000
A total of $200,167 in cash director compensation was recorded during the year ended December 31, 2022, which varied by director depending on when
their services began or ended. The following table sets forth information regarding compensation earned by our non-employee directors for the year ended
December 31, 2022.
Name (1)
Amy DuRoss
Rachel Ellingson
Joydeep Goswami
Tim Moore(3)
Joseph Schick
Annual Cash
Retainer
($) (2)
Board and
Committee
Chair Fees
($)
Total Cash
Compensation
($)
50,000
50,000
50,000
16,667
50,000
5,000
-
5,000
-
10,000
55,000
50,000
55,000
16,667
60,000
(1) Michael Rice did not receive compensation for his services as Board Chairman.
(2) Due to the timing of member resignations and appointments, the annual cash retainers vary depending on the respective period of time each director
served.
(3) Mr. Moore joined the board as a Director and member of both the Compensation Committee and Governance and Nominating Committee in
September 2022, serving for 4 months of the year.
The Company’s compensation practices for non-employee directors, as determined by the Compensation Committee and our independent compensation
consultant, FW Cook, includes annual awards of restricted shares of Common Stock. In February 2022, the Compensation Committee, based upon the
recommendation of the independent compensation consultant, FW Cook, determined equity compensation for non-employee directors will be based on a
fixed value of $180,000 rather than a fixed number of shares. These awards vest one year from the date of grant, provided such person is still a director on
such vesting date.
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Director compensation table for the fiscal year ended December 31, 2022
The following table sets forth a summary of the compensation the Company paid to its non-employee directors in the year ended December 31, 2022.
Name
Amy DuRoss
Rachel Ellingson
Joydeep Goswami
Tim Moore
Joseph Schick
Fees Earned or
Paid in Cash
($) (1)
Stock Awards
($) (2)
Total
Compensation
($)
45,750
40,833
44,583
20,000
49,000
195,969
194,144
195,386
180,011
196,984
241,719
234,977
239,970
200,011
245,984
(1) For three months of the year ended December 31,2022, the Directors agreed to be compensated in stock awards in lieu of their cash retainer fees.
The totals below therefore represent cash paid to each Director. The remainder of their compensation is captured in the Stock Awards column. Tim
Moore was not compensated in lieu of cash during the year as his appointment on September 1, 2022 was subsequent to this event.
(2) Represents the grant date fair value of awards granted in 2022 calculated in accordance with the ASC Topic 718. The assumptions the Company
used for calculating the grant date fair values are set forth in Note 1: “Organization and significant accounting policies – Stock-based
Compensation.”
The non-employee directors of the Board who held such position on December 31, 2022 held the following aggregate number of unvested restricted stock
units as of such date:
Name
Amy DuRoss
Rachel Ellingson
Joydeep Goswami
Tim Moore
Joseph Schick
Number of
Unvested
Restricted Stock
Units (#)
14,730
14,730
14,730
7,589
14,730
The following table presents the grant date fair value of each restricted stock award in the fiscal year ended December 31, 2022 to non-employee directors,
computed in accordance with the ASC Topic 718:
Name
Amy DuRoss
Amy DuRoss
Amy DuRoss
Amy DuRoss
Rachel Ellingson
Rachel Ellingson
Rachel Ellingson
Rachel Ellingson
Joydeep Goswami
Joydeep Goswami
Joydeep Goswami
Joydeep Goswami
Tim Moore
Joseph Schick
Joseph Schick
Joseph Schick
Joseph Schick
Grant Date
Number of
Securities Stock
Awards (#)
Grant Date Fair
Value of Stock
Awards ($)
5/6/2022
6/1/2022(1)
7/1/2022(1)
8/1/2022(1)
5/6/2022
6/1/2022(1)
7/1/2022(1)
8/1/2022(1)
5/6/2022
6/1/2022(1)
7/1/2022(1)
8/1/2022(1)
14,730
343
389
295
14,730
311
341
259
14,730
343
369
280
180,001
4,582
5,695
5,691
180,001
4,155
4,992
4,996
180,001
4,582
5,402
5,401
9/1/2022
7,589
180,011
5/6/2022
6/1/2022(1)
7/1/2022(1)
8/1/2022(1)
14,730
374
409
311
180,001
4,997
5,988
5,999
(1) The grants awarded on dates indicated here were made in lieu of director fees for each applicable distribution date.
Compensation Committee interlocks and insider participation
Ms. DuRoss, Mr. Schick, Ms. Ellingson, and Mr. Moore were the members of the Compensation Committee during the year ended December 31, 2022. No
member of the Compensation Committee is a current or former employee of the Company or had any relationship with the Company requiring disclosure
herein. No interlocking relationship exists between any member of the Board or the Compensation Committee and any member of the board or
Compensation Committee of any other company and no such interlocking relationship has existed in the past.
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Table of Contents
Second Amended and Restated 2013 Performance Incentive Plan
The Second Amended and Restated 2013 Performance Incentive Plan and the award agreements entered into thereunder include certain provisions that may
result in a payment to, or acceleration of vesting of awards held by, a named executive officer in connection with a change in control. A change in control is
defined as: (a) the acquisition, directly or indirectly, in one transaction or a series of related transactions, by any person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the total
combined voting power of all outstanding securities of the Company; (b) a merger or consolidation of the Company with any other entity, whether or not
the Company is the surviving entity in such transaction, except for a transaction in which the holders of the outstanding voting securities of the Company
immediately prior to such merger or consolidation hold as a result of holding Company securities prior to such transaction, in the aggregate, securities
possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the Company or of the surviving entity
(or the parent of the surviving entity) immediately after such merger or consolidation; (c) the sale, transfer or other disposition (in one transaction or a
series of related transactions) of all or substantially all of the assets of the Company; or (d) the approval by the stockholders of a plan or proposal for the
liquidation or dissolution of the Company.
In the event of a change in control, the Administrator (as defined in the plan) has the discretion to provide in each award agreement for (i) the vesting of
options to accelerate automatically upon a change in control of the Company (as defined in the plan) and (ii) the assumption of awards by the acquiring or
successor entity (or parent thereof) or replacement by such entity with new options or other incentives upon a change in control of the Company. The terms
of the Company’s outstanding option agreements under the plan provide for accelerated vesting upon the occurrence of the change in control transaction,
provided, that the Administrator in its sole discretion may provide for the purchase or exchange of each option for an amount of cash or other property
having a value equal to the difference between (x) the value of the cash or other property that you would have received pursuant to the change in control
transaction in exchange for the shares issuable upon exercise of the option had the option been exercised immediately prior to the change in control
transaction, and (y) the exercise price of the option. Outstanding options shall terminate and cease to be exercisable upon consummation of a change in
control except to the extent that such awards are assumed by the successor entity pursuant to the terms of the change in control transaction. The
Administrator shall give written notice of a proposed change in control transaction to the holder not less than fifteen (15) days prior to the anticipated
effective date of the proposed transaction.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER
MATTERS
The following table sets forth, as of March 21, 2023, 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 and nominee 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
Common
Stock
Percentage
of Class
Directors and Executive Officers
Aby J. Mathew (Officer)(1)
Michael Rice (Officer and Director)(2)
Karen Foster (Officer)(3)
Todd Berard (Officer)(4)
Roderick de Greef (Director)(5)
Geraint Phillips (Officer)(6)
Joseph Schick (Director)(7)
Rachel Ellingson (Director)(8)
Joydeep Goswami (Director)(9)
Amy DuRoss (Director)(10)
Troy Wichterman (Officer)(11)
Sarah Aebersold (Officer)(12)
Marcus Schulz (Officer)(13)
Tim Moore (Director)
Total shares owned by Executive Officers and Directors (12 persons)
5% Stockholders
Casdin Capital, LLC(14)
Blackrock, Inc.(15)
The Vanguard Group(16)
110
380,112
355,264
190,382
122,964
35,254
28,315
21,449
20,641
18,660
18,157
16,261
16,038
10,672
-
1,234,169
7,566,292
5,477,126
2,466,931
0.9%
0.8%
0.4%
0.3%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
2.8%
17.3%
12.5%
5.7%
Table of Contents
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)
(3)
(4)
Includes options to purchase 150,000 shares of Common Stock issuable under stock options exercisable within 60 days from March 21, 2023 and
6,975 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes options to purchase 60,000 shares of Common Stock issuable under stock options exercisable within 60 days from March 21, 2023 and
10,226 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes options to purchase 100,000 shares of Common Stock issuable under stock options exercisable within 60 days from March 21, 2023 and
5,928 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes options to purchase 30,000 shares of Common Stock issuable under stock options exercisable within 60 days from March 21, 2023 and
5,085 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 4,470 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 337 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 14,730 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 14,730 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 14,730 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 14,730 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 1,687 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 4,101 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
Includes 5,696 shares of Common Stock to be issued pursuant to restricted stock awards within 60 days from March 21, 2023.
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14) Based on a Form 4 filed on September 1, 2021. Consists of 7,566,292 shares of Common Stock. The business address of Casdin Capital, LLC is
1350 Avenue of the Americas, Suite 2405, New York, New York 10019.
(15) Based on a Schedule 13G filed on January 26, 2023. Consists of 5,477,126 shares of Common Stock. The business address of Blackrock, Inc. is 55
East 52nd Street, New York, New York 10055.
(16) Based on a Schedule 13G filed on February 9, 2023. Consists of 2,466,931 shares of Common Stock. The business address of The Vanguard Group
is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
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,
2022, 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, 2022, except those filed by Michael Rice, Aby Mathew, Karen Foster, Roderick de Greef, Troy Wichterman, Sarah Aebersold,
Todd Berard, and Marcus Schulz each filed one late Form 4 reporting one transaction on March 9, 2022.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2022 relating to all our equity compensation plans:
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)
401 $
2.00
2,054
2,150
Plan category
Second amended and restated 2013 performance
incentive plan
Changes in Control
The Company knows of no arrangements resulting in a change in control of the Company. No officer, director, promoter, or affiliate of the Company has, or
proposes to have, any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options,
or otherwise.
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ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain relationships and related transactions
Since January 1, 2022, 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.
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. Schick, Ms. DuRoss, Ms. Ellingson, Mr.
Goswami, and Mr. Moore.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Registered Public Accounting Firm Fees
The following table sets forth the aggregate fees billed by our current independent auditors, Grant Thornton LLP (“Grant Thornton”), for professional
services rendered in the fiscal year ended December 31, 2022.
Audit fees(1)
Total
2022
$
$
1,257,800
1,257,800
(1) Audit fees consist of professional services for the audit of our annual financial statements, 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. 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, 2022 and 2021,
all services billed by Grant Thornton and BDO were pre-approved by the Audit Committee Chair in accordance with this policy.
Change in Accounting Firm
On April 2, 2022, as approved by our Audit Committee, the Company dismissed BDO as the Company’s independent registered public accounting firm.
During the fiscal years ended December 31, 2021 and 2020, BDO’s audit reports on the Company's financial statements did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. However, BDO’s audit report on the
Company’s internal control over financial reporting as of December 31, 2021, contained an adverse opinion due to the material weaknesses noted below.
BDO was not required to report on the Company’s internal control over financial reporting as of December 31, 2020.
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Table of Contents
During the fiscal years ended December 31, 2021 and 2020 and the subsequent period through the date of the Current Report on Form 8-K filed on April 7,
2022, (i) there were no disagreements between the Company and BDO on any matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which disagreements, if not resolved to BDO’s satisfaction, would have caused BDO to make reference to the subject matter
of the disagreements in connection with its audit reports on the Company’s financial statements; and (ii) there were no “reportable events” as the term is
described in Item 304(a)(1)(v) of Regulation S-K, except for the disclosure of material weaknesses in the Company’s internal controls over financial
reporting as disclosed in Part II, Item 9A of the Company’s Form 10-K for the years ended December 31, 2021 and December 31, 2020, related to
inappropriately designed entity-level controls impacting the control environment, risk assessment, and monitoring activities to prevent or detect material
misstatements to the consolidated financial statements attributed to an insufficient number of qualified resources and inadequate oversight and
accountability over the performance of controls, ineffective identification and assessment of risks impacting internal control over financial reporting, and
ineffective monitoring controls; information system logical access within certain key financial systems; accounting policies and procedures and related
controls over complex financial statement areas; accounting policies, procedures, and related controls over assets held for lease; accounting policies,
procedures, and related controls over the preparation and review of projected financial information used in determining the valuation of acquired intangible
assets and contingent consideration in business combinations as well as the quantitative impairment analysis of indefinite-lived intangible assets; and
policies, procedures, and related controls over the presentation and disclosure of amounts presented in the consolidated financial statements in accordance
with the applicable financial reporting requirements.
The Committee approved the engagement of Grant Thornton as the Company’s new independent registered public accounting firm, which engagement was
effective as of April 6, 2022. During the fiscal years ended December 31, 2021 and 2020 and through the date of their engagement, neither the Company
nor anyone acting on its behalf consulted Grant Thornton with respect to (i) the application of accounting principles to a specified transaction, either
completed or proposed, nor the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was
provided to the Company nor oral advice provided that Grant Thornton concluded was an important factor considered by the Company in reaching a
decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or a “reportable event” as
described in Items 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
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 in this Annual Report on
Form 10-K and is incorporated herein by reference.
(2) Financial Statement Schedules: Schedules to the Financial Statements have been omitted because the information required to be set
forth therein is not applicable or is shown in the accompanying Financial Statements or notes thereto.
(b) Exhibits
Exhibit
Number
2.1†*
2.2†*
2.3†
3.1
3.2
3.3
3.4
4.1
Document
Stock Purchase Agreement, dated September 18, 2020, by and among the Company, SciSafe, the stockholders of SciSafe party thereto and
Garrie Richardson (included as Exhibit 2.1 to the current report on Form 8-K filed on September 24, 2020)
Agreement and Plan of Merger, dated as of March 19, 2021, by and among the Company, BLFS Merger Subsidiary, Inc., Global Cooling,
Inc. and Albert Vierling and William Baumel, in their capacity as the representatives of the stockholders of Global Cooling, Inc. (included
as Exhibit 2.1 to the current report on Form 8-K filed on March 25, 2021)
Agreement and Plan of Merger, dated as of August 9, 2021, by and among the Company, BLFS Merger Sub, Inc., Sexton Biotechnologies,
Inc. and Fortis Advisors LLC, in their capacity as the representatives of the stockholders of Sexton Biotechnologies, Inc. (incorporated by
reference to Exhibit 2.6 to Company's report on Form 10-K filed March 31, 2022)
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)
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Table of Contents
10.2**
Amendment No. 1 to Second Amended and Restated 2013 Performance Incentive Plan (included as Exhibit 10.2 to the Annual Report on
Form 10-K for the fiscal y ear ended December 31, 2020 filed March 31, 2021)
10.3**
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)
10.4**
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)
10.5**
Form of Stock Option Agreement pursuant to the Second Amended & Restated 2013 Performance Incentive Plan (included as Exhibit 10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed on May 16, 2016)
Amendment No. 2 to BioLife Solutions, Inc. Second Amended and Restated 2013 Performance Incentive Plan (incorporated by reference
to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-8 filed on July 7, 2021)
Amendment No. 3 to BioLife Solutions, Inc. Second Amended and Restated 2013 Performance Incentive Plan (incorporated by reference
to Exhibit 4.6 of the Registrant's Registration Statement on Form S-8 filed on September 12, 2022)
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)
Eleventh Amendment to the Lease, dated February 22, 2022, by and between the Company and ARE-SEATTLE No. 38, LLC
(incorporated by reference to Exhibit 10.20 to Company's report on Form 10-K filed March 31, 2022)
Lease Agreement dated January 29, 2021 for facility space 301 Treble Cove Road, Billerica, MA 01862 (filed incorporated by reference to
Exhibit 10.21 to Company's report on Form 10-K filed March 31, 2022)
Commercial Lease and Deposit Receipt Agreement dated November 2, 2020 for facility space 3505 and 3507 Edison Way, Menlo Park,
CA 94025 (incorporated by reference to Exhibit 10.22 to Company's report on Form 10-K filed March 31, 2022)
Extension and Amendment of Lease dated December 19, 2022 for facility space 3505 and 3507 Edison Way, Menlo Park, CA 94025 (filed
herewith)
Lease Agreement dated April 1, 2011 for facility space 6000 Poston Road, The Plains, OH 45710 (incorporated by reference to Exhibit
10.24 to Company's report on Form 10-K filed March 31, 2022)
Lease Extension Agreement dated May 30, 2018 for facility space 6000 Poston Road, The Plains, OH 45710 (incorporated by reference to
Exhibit 10.25 to Company's report on Form 10-K filed March 31, 2022)
Lease Agreement dated October 1, 2019 for facility space 1102 Indiana Avenue, Indianapolis, IN 46202 (incorporated by reference to
Exhibit 10.26 to Company's report on Form 10-K filed March 31, 2022)
First Amendment to the Lease, dated August 31, 2021 for facility space 1102 Indiana Avenue, Indianapolis, IN 46202 (incorporated by
reference to Exhibit 10.27 to Company's report on Form 10-K filed March 31, 2022)
Loan and Security Agreement, dated September 20, 2022, between BioLife Solutions, Inc. and Silicon Valley Bank (incorporated by
reference to Exhibit 10.1 to the Company's report on Form 10-Q filed November 9, 2022)
Amended Employment Agreement dated December 1, 2020 between the Company and Michael Rice (incorporated by reference to Exhibit
10.11 to the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement dated December 1, 2020 between the Company and Aby Mathew (incorporated by reference to Exhibit
10.12 to the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement dated December 1, 2020 between the Company and Todd Berard (incorporated by reference to Exhibit
10.13 to the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement effective December 1, 2020 between the Company and Karen Foster (incorporated by reference to
Exhibit 10.17 to the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement dated November 4, 2021 between the Company and Roderick de Greef (incorporated by reference to
Exhibit 10.33 to the Company's report on Form 10-K filed March 31, 2022)
Employment Agreement dated January 1, 2021 between the Company and Sarah Aebersold (incorporated by reference to Exhibit 10.24 to
the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement dated December 31, 2020 between the Company and Marcus Schulz (incorporated by reference to
Exhibit 10.11 to the Company’s report on Form 10-K filed March 31, 2022)
Amended Employment Agreement dated November 4, 2021 between the Company and Troy Wichterman (incorporated by reference to
Exhibit 10.36 to the Company’s report on Form 10-K filed March 31, 2022)
114
Table of Contents
10.26
10.27
Employment Agreement dated November 9, 2021 between the Company and Geraint Phillips (filed herewith)
Board of Directors Services Agreement entered into May 4, 2015 by and between the Company and Other Non-Employee Directors
10.28
21.1
23.1
23.2
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
(included as Exhibit 10.3 to the Current Report on Form 8-K filed on May 5, 2015)
Amended Employment Agreement dated January 1, 2023 between the Company and Executive Officers (filed herewith)
List of the Company’s Subsidiaries
Consent of Grant Thornton LLP (filed herewith)
Consent of BDO USA, LLP (filed herewith)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Inline XBRL Instance Document (filed herewith)
Inline XBRL Taxonomy Extension Schema (filed herewith)
Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)
Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)
Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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.
115
Table of Contents
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:
March 31, 2023
BIOLIFE SOLUTIONS, INC.
/s/ MICHAEL RICE
Michael Rice
Chief Executive Officer (principal executive officer) and
Chairman of the Board of Directors
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:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
Date:
March 31, 2023
/s/ MICHAEL RICE
Michael Rice
Chief Executive Officer (principal executive officer) and Chairman of the Board of
Directors
/s/ TROY WICHTERMAN
Troy Wichterman
Chief Financial Officer (principal financial officer and principal accounting officer)
/s/ RODERICK DE GREEF
Roderick De Greef
Director
/s/ JOSEPH SCHICK
Joseph Schick
Director
/s/ AMY DUROSS
Amy DuRoss
Director
/s/ RACHEL ELLINGSON
Rachel Ellingson
Director
/s/ JOYDEEP GOSWAMI
Joydeep Goswami
Director
/s/ TIM MOORE
Tim Moore
Director
116
Exhibit 10.12
December 19, 2022
Biolife Solutions
3505/3507 Edison Way
Menlo Park, CA, 94025
Re: Rent increases for 2023 for suites 3505/3507
Greetings Biolife Solutions Team,
Based on the latest executed lease extension clause 6, it was agreed upon to have a 6% rental rate increase for the 2023 year. There was an option to
increase the common area, however, Edison Technology Park has decided to keep the common area cost as is, even though the cost to ETP has increased
for all utilities.
The new rental rates for your suites are as follows:
3505/3507 Edison Way Rental rate increase for the months of January 1, 2023 thru
December 31, 2023
Based on lease extension clause 6- Base rent increase of 6% ($.21/sq.ft.) from latest
payment rate of $ 3.50 / sq. ft. for a new rate of $ 3.71 / sq. ft.
Common area remains unchanged from current rate of $ .17/ sq. ft.
Until 2022 True up is complete, the monthly estimated electrical charge will remain
unchanged
Total monthly charges
Total Sq Ft
Cost / sq. ft.
Total Cost
3460 $
3460 $
3.71 $
0.17 $
$
$
12,836.60
588.20
660.00
14,084.80
We will send out new January invoices to reflect the new rental rates. We appreciate your longstanding commitment to Edison Technology Park, and we
wish your company the best in 2023. If you have any questions, please do not hesitate to reach out.
Exhibit 10.26
AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made between BioLife Solutions Inc., a Delaware corporation
(“Employer” or the “Company”), and Geraint Phillips (“Executive”). Executive and the Company are sometimes referred to herein as the “Parties.” The
effective date is November 9, 2021. This Agreement supersedes and replaces all prior employment agreements between Company and Executive, including
any amendments thereto.
RECITALS
A. Employer is in the business (the “Business”) of manufacturing and marketing biopreservation media and cold chain products for cells, tissues,
and organs.
B. Employer desires to obtain the services of Executive, in which capacity Executive has access to Employer’s Confidential Information (as
hereinafter defined), and to obtain assurance that Executive will protect Employer’s Confidential Information and will not compete with Employer or
solicit its customers or its other employees during the term of employment and for a reasonable period of time after termination of employment pursuant to
this Agreement, and Executive is willing to agree to these terms.
C. Executive desires to be assured of the salary and other benefits provided for in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties agree as follows:
1. Employment.
a. Employer hereby employs Executive, and Executive agrees to be employed as Vice President of Operations, ULT Freezer Platform (“VP
Ops – ULT Freezer”), reporting to the Chief Operating Officer, in accordance with the terms and conditions set forth in this Agreement. Changes
may be made from time to time by Employer and/or the Board in its sole discretion to the duties, authorities, reporting relationships and title of
Executive.
b. Executive will devote full time, attention, and best efforts to achieving the purposes and discharging the responsibilities of the VP Ops –
ULT Freezer. Executive will comply with all rules, policies and procedures of Employer as modified from time to time, including without
limitation, rules and procedures set forth in the Employer’s employee handbook, supervisor’s manuals and operating manuals. Executive will
perform all of Executive’s responsibilities in compliance with all applicable laws and will ensure that the operations that Executive manages are in
compliance with all applicable laws. During Executive’s employment, Executive will not engage in any other business activity which, in the
reasonable judgment of the Employer, conflicts with the duties of Executive under this Agreement, whether or not such activity is pursued for
gain, profit or other pecuniary advantage.
Page 1 of 20
c. Nothing herein shall preclude Executive from: (1) continuing to serve on the board of directors or trustees of any business corporation or
any charitable organization on which Executive currently serves and which is identified on Exhibit A hereto, or (2) subject to the prior approval of
the Board, appointment to any additional directorships or trusteeships, or (3) serving in an advisory role for other business entities, provided in
each case, and in the aggregate, that such activities do not interfere with the performance of Executive’s duties hereunder or conflict with Section
7 of this Agreement.
2. Term of Employment. The term of employment (“Term”) will not be for a definite period, but rather continue indefinitely until terminated
in accordance with the terms and conditions of this Agreement.
3. Compensation. For the duration of Executive’s employment hereunder, the Executive will be entitled to compensation which will be
computed and paid pursuant to the following subparagraphs.
a. Base Salary. Employer will pay to Executive a base salary (“Base Salary”) at an annual rate of three hundred thousand dollars
($300,000), payable in such installments (but in no event less than monthly), subject to withholdings and deductions as required or permitted by
law, as is Employer’s policy with respect to other employees. Executive’s Base Salary will be reviewed periodically by the Board of Directors of
Employer during the term of Executive’s employment and may be adjusted in the sole discretion of the Board of Directors based on such review,
but will not be reduced by Employer unless a material adverse change in the financial condition or operations of Employer has occurred or unless
Executive’s responsibilities are altered to reflect less responsibility.
b. Performance Bonus. Employer under direction of its Board may pay or cause to be paid to Executive such Bonus as it from time to time
determines appropriate.
4. Other Benefits.
a. Certain Benefits. Executive will be eligible to participate in all employee benefit programs established by Employer that are applicable
to management personnel such as medical, pension, disability and life insurance plans on a basis commensurate with Executive’s position and in
accordance with Employer’s policies from time to time, but nothing herein shall require the adoption or maintenance of any such plan.
b. Vacations, Holidays and Expenses. Executive will be provided accrued paid vacation of four (4) weeks each calendar year, which shall
be the maximum number of days Executive may accrue at any time, and which shall be taken at such times as are consistent with Executive’s
responsibilities hereunder. Executive will be provided such holidays and vacation as Executive makes available to its management level
employees generally. Employer will reimburse Executive in accordance with company policies and procedures for reasonable expenses
necessarily incurred in the performance of duties hereunder against appropriate receipts and vouchers indicating the specific business purpose for
each such expenditure. In no case shall any reimbursement be made later than December 31st of the year following the calendar year in which such
expense is incurred.
Page 2 of 20
c. Right of Set-off. By accepting this Agreement, Executive consents to a deduction from any amounts Employer owes Executive from
time to time (including amounts owed to Executive as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts
owed to Executive by Employer), to the extent of the amounts Executive owes to Employer. Whether or not Employer elects to make any set-off
in whole or in part, if Employer does not recover by means of set-off the full amount Executive owes it, calculated as set forth above, Executive
agrees to pay immediately the unpaid balance to Employer.
5. Termination, Discharge.
a. For Cause. Employer will have the right to immediately terminate Executive’s services and this Agreement for Cause. “Cause” means
the Employer’s belief that any of the following has occurred:
(i)
(ii)
(iii)
(iv)
(v)
any breach of this Agreement by Executive, including, without limitation, breach of Executive’s covenants in Sections 7, 8, 9,
10, 11 or 12;
any failure to perform assigned job responsibilities that continues unremedied for a period of ten (10) days after written notice to
Executive by Employer;
Executive’s malfeasance or misconduct in connection with Executive’s duties hereunder or any act or omission of Executive
which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or
affiliates,
commission or conviction of a felony or misdemeanor (other than a misdemeanor traffic violation), including a plea of guilty or
failure to contest prosecution for a felony or misdemeanor;
the Employer’s reasonable belief that Executive engaged in a violation of any statute, rule or regulation, any of which in the
judgment of Employer is harmful to the Business or to Employer’s reputation;
Page 3 of 20
(vi)
the Employer’s reasonable belief that Executive engaged in unethical practices, dishonesty or disloyalty, unless Executive has
evidence establishing that Employer directed Executive to commit such practice or act;
(vii)
or any reason that would constitute Cause under the laws the State of Washington.
Upon termination of Executive’s employment hereunder for Cause, the Company shall pay the Executive no later than fourteen (14) days
from the termination date in a lump sum: (x) Executive’s salary through the date of termination, (y) for any unused vacation time, and (z) for any
unreimbursed business expenses that are subject to reimbursement under Employer’s then current policy on business expenses. Executive will
have no rights to any unvested benefits or any other compensation or payments after the termination date.
b. Due to Death or Disability. Employer will have the right to immediately terminate Executive’s services and this Agreement due to death
or disability. For purposes of this Agreement, “disability” means the incapacity or inability of Executive, whether due to accident, sickness or
otherwise, as determined by a medical doctor acceptable to the Board of Directors of Employer and confirmed in writing by such doctor, to
perform the essential functions of Executive’s position under this Agreement, with or without reasonable accommodation (provided that no
accommodation that imposes undue hardship on Employer will be required) for a period of sixty (60) consecutive days or for an aggregate of
ninety (90) days during any period of twelve (12) months, or such longer period as may be required under disability law.
Upon termination of Executive’s employment hereunder due to death or disability, the Company shall pay the Executive no later than fourteen
(14) days from the termination date in a lump sum: (i) Executive’s salary through the date of termination, (ii) a prorated portion of any incentive
bonus opportunity previously approved by the Board, (iii) for any unused vacation time, and (iv) for any unreimbursed business expenses that are
subject to reimbursement under Employer’s then current policy on business expenses. Upon termination of Executive’s employment hereunder
due to death or disability, all unvested stock options, awards, or other equity grants or awards shall immediately fully vest for the benefit of
Executive’s estate. Executive or Executive’s estate (as the case may be) shall be entitled to receive any vested benefits required to be paid by law
and any vested compensation required to be paid by law.
c. Without Cause. Employer may terminate Executive’s employment under this Agreement without cause and without advance notice;
provided, however, that Employer will pay (unless subparagraph 5(d) of this Agreement applies, in which case the provisions therein shall
govern), no later than fourteen (14) days from the termination date in a lump sum:
(i)
(x) Executive’s salary through the date of termination, (y) for any unused vacation time, and (z) for any unreimbursed business
expenses that are subject to reimbursement under Employer’s then current policy on business expenses.
Page 4 of 20
(ii)
severance pay of twelve (12) months’ worth of Executive’s salary at the rate in effect on the termination date.
(iii)
(iv)
the amount equal to the cost of twelve (12) months’ medical insurance premiums at a monthly amount equal to the amount of
COBRA coverage in effect as of the termination date; and
an additional tax gross up payment in an amount necessary so that the amount received by Executive to cover COBRA
premiums under Section 5(c)(iii) after all applicable withholding tax is deducted (using applicable supplemental wage
withholding rates) is the full amount Executive would have received under Section 5(c)(iii) if no tax withholding was made.
Such payments will be subject to all appropriate deductions and withholdings. Upon termination of Executive’s employment hereunder due to
termination without cause, all unvested stock options, awards, or other equity grants or awards shall immediately fully vest. Executive or
Executive’s estate (as the case may be) shall be entitled to receive any vested benefits required to be paid by law and any vested compensation
required to be paid by law.
Executive shall only be entitled to such severance pay if, within thirty (30) days following the date of termination, both Employer and
Executive have signed (and then Executive does not rescind, as may be permitted by law) a mutual general release of claims in a form mutually
acceptable to both parties (provided, however, that such release of claims shall only require each party to release the other party from claims
relating directly to Executive’s employment and the termination thereof, and shall not require Executive to release claims relating to vested
employee benefits or relating to other matters, including, but not limited to, claims relating to Executive’s status as a shareholder of the Company.
d. Change in Control.
(i)
For purposes of this Agreement, Change in Control shall mean (x) the consummation of a merger or consolidation of the
Company with or into another entity, (y) the dissolution, liquidation or winding up of the Company or (z) 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.
Page 5 of 20
(ii)
Employer may terminate Executive’s employment under this Agreement upon or within 90 days following a Change in Control
without advance notice; provided, however, that Employer will pay, no later than sixty (60) days from the termination date in a
lump sum:
(A)
(B)
(C)
(D)
(E)
(i) Executive’s salary through the date of termination, (ii) for any unused vacation time, and (iii) for any unreimbursed
business expenses that are subject to reimbursement under Employer’s then current policy on business expenses;
as severance pay, twelve (12) months’ worth of Executive’s salary at the rate in effect on the termination date;
100% of any incentive cash and/or stock bonus opportunity for the current year;
the amount equal to the cost of twelve (12) months’ medical insurance premiums at a monthly amount equal to the
amount of COBRA coverage in effect as of the termination date; and
an additional tax gross up payment in an amount necessary so that the amount received by Executive to cover COBRA
premiums under Section 5(d)(ii)(D) after all applicable withholding tax is deducted (using applicable supplemental
wage withholding rates) is the full amount Executive would have received under Section 5(d)(ii)(D) if no tax
withholding was made.
(iii)
Executive shall only be entitled to such severance pay if, within thirty (30) days following the date of termination, both
Employer and Executive have signed (and then Executive does not rescind, as may be permitted by law) a mutual general
release of claims in a form mutually acceptable to both parties (provided, however, that such release of claims shall only require
each party to release the other party from claims relating directly to Executive’s employment and the termination thereof, and
shall not require Executive to release claims relating to vested employee benefits or relating to other matters, including, but not
limited to, claims relating to Executive’s status as a shareholder of the Company.
Page 6 of 20
(iv)
Upon termination of Executive’s employment hereunder due to a Change in Control, all unvested stock options, awards, or other
equity grants or awards shall immediately fully vest. Executive or Executive’s estate (as the case may be) shall be entitled to
receive any vested benefits required to be paid by law and any vested compensation required to be paid by law.
e. No Fault Termination By Executive. Executive may terminate Executive’s employment under this Agreement for any reason provided
that Executive gives Employer at least ninety (90) days’ notice in writing. Employer may, at its option, accelerate such termination date to any
date at least two weeks after Executive’s notice of termination. Employer may also, at its option, relieve Executive of all duties and authority after
notice of termination has been provided. Upon termination of Executive’s employment in accordance with this Section, Company shall pay the
Executive no later than fourteen (14) days from the termination date in a lump sum: (i) Executive’s salary through the date of termination, (ii) for
any unused vacation time, and (iii) for any unreimbursed business expenses that are subject to reimbursement under Employer’s then current
policy on business expenses. Such payments will be subject to all appropriate deductions and withholdings. Upon termination, Executive will have
no rights to any unvested benefits or any other compensation.
f. Termination By Executive for Good Reason. Executive’s employment pursuant to this Agreement shall terminate in the event
Executive shall determine that there is “Good Reason” to terminate Executive’s employment, which shall mean the following:
(i)
(ii)
Employer’s material breach of the terms of this Agreement or any other written agreement between Executive and Employer; or
The occurrence of any of the following conditions, without Executive’s consent:
(A)
a significant diminution in the nature or scope of Executive’s authority, title, function or duties, excluding a change in
reporting to a person other than who executive reports to as of the Effective Date of this Agreement;
Page 7 of 20
(B)
(C)
(D)
a ten percent (10%) reduction in Executive’s base salary or a twenty-five percent (25%) reduction in Executive’s target
bonus opportunity (unless such reduction is part of a Company officer-wide program to reduce expenses);
any material breach of the terms of this Agreement by the Company; or
failure of any successor or assignee to the Company to assume this Agreement.
Provided that Executive has provided with notice of the existence of a condition giving rise to “Good Reason” to terminate within ninety (90) days
following the initial existence of such a condition, Employer shall have thirty (30) days to cure any such alleged breach, assignment, reduction or
requirement referenced above, after Executive provides Employer written notice of the actions or omissions constituting such breach, assignment,
reduction or requirement.
If Executive resigns Executive’s employment for Good Reason, Executive shall be paid no later than fourteen (14) days from the termination date
in a lump sum:
I.
II.
III.
IV.
(i) Executive’s salary through the date of termination, (ii) for any unused vacation time, and (iii) for any unreimbursed business
expenses that are subject to reimbursement under Employer’s then current policy on business expenses.
severance pay of twelve (12) months’ worth of Executive’s salary at the rate in effect on the termination date.
the amount equal to the cost of twelve (12) months’ medical insurance premiums at a monthly amount equal to the amount of
COBRA coverage in effect as of the termination date; and
an additional tax gross up payment in an amount necessary so that the amount received by Executive to cover COBRA premiums
under Section 5(f)(III) after all applicable withholding tax is deducted (using applicable supplemental wage withholding rates) is the
full amount Executive would have received under Section 5(f)(III) if no tax withholding was made.
Such payments will be subject to all appropriate deductions and withholdings. Upon termination of Executive’s employment hereunder due to
resignation for good reason, all unvested stock options, awards, or other equity grants or awards shall immediately fully vest. Executive or Executive’s
estate (as the case may be) shall be entitled to receive any vested benefits required to be paid by law and any vested compensation required to be paid by
law.
Page 8 of 20
Executive shall only be entitled to such severance pay if, within thirty (30) days following the date of termination, both Employer and Executive
have signed (and then Executive does not rescind, as may be permitted by law) a mutual general release of claims in a form mutually acceptable to both
parties (provided, however, that such release of claims shall only require each party to release the other party from claims relating directly to Executive’s
employment and the termination thereof, and shall not require Executive to release claims relating to vested employee benefits or relating to other matters,
including, but not limited to, claims relating to Executive’s status as a shareholder of the Company.
6. Return of Company Property. Upon termination of this Agreement or upon request of the Company, Executive shall deliver to the
Corporation all property, documents and materials pertaining to the Company’s business including, but not limited to, memoranda, notes, records,
drawings, manuals, disks, copies, representations, extracts, summaries and analyses, all inventory, demonstration units, and any other property, documents
or media of the Corporation, and all equipment belonging to the company, including but not limited to corporate cards, access cards, office keys, office
equipment, laptop and desktop computers, cell phones and other wireless devices, thumb drives, zip drives and all other media storage devices.
7. Covenant Not To Compete. During Executive’s employment by Employer and for a period expiring one (1) year after the termination of
Executive’s employment for any reason, Executive covenants and agrees that Executive will not:
a. Directly, indirectly, or otherwise, own, manage, operate, control, serve as a consultant to, be employed by, participate in, or be connected,
in any manner, with the ownership, management, operation or control of any business that competes with the Business or that competes with
Employer or any of its affiliates or that is engaged in any type of business which, at any time during Executive’s employment with Employer,
Employer or any of its affiliates planned to develop;
b. Hire, offer to hire, entice away or in any other manner persuade or attempt to persuade any officer, employee or agent of Employer or any
of its affiliates to alter or discontinue a relationship with Employer or to do any act that is inconsistent with the interests of Employer or any of its
affiliates;
c. Directly or indirectly solicit, divert, take away or attempt to solicit, divert or take away any customers of Employer or any of its affiliates;
or
d. Directly or indirectly solicit, divert, or in any other manner persuade or attempt to persuade any supplier of Employer or any of its
affiliates to alter or discontinue its relationship with Employer or any of its affiliates.
For the purposes of this Section 7, businesses that are deemed to compete with Employer include, without limitation, businesses engaged in
manufacturing and marketing biopreservation media for cells, tissues, and organs or cold chain management products and/or services. The geographic
scope of the prohibitions in this Section 7 shall be any city, town or county in which the Company conducts or does any business as of or within one (1)
year of Executive’s last day of employment with the Company. Notwithstanding Executive’s obligations under this Section 7, Executive will be entitled to
own, as a passive investor, up to five percent (5%) of any publicly traded company without violating this provision.
Page 9 of 20
Employer and Executive agree that: this provision does not impose an undue hardship on Executive and is not injurious to the public; that this
provision is necessary to protect the business of Employer and its affiliates; the nature of Executive’s responsibilities with Employer under this Agreement
require Executive to have access to confidential information which is valuable and confidential to all of the Business; the scope of this Section 7 is
reasonable in terms of length of time and geographic scope; and adequate consideration supports this Section 7, including consideration herein.
8. Confidential Information. Executive recognizes that Employer’s business and continued success depend upon the use and protection of
confidential and proprietary business information, including, without limitation, the information and technology developed by or available through licenses
to Employer, to which Executive has access (all such information being “Confidential Information”). For purposes of this Agreement, the phrase
“Confidential Information” includes, for Employer and its current or future subsidiaries and affiliates, without limitation, and whether or not specifically
designated as confidential or proprietary: all business plans and marketing strategies; information concerning existing and prospective markets and
customers; financial information; information concerning the development of new products and services; information concerning any personnel of
Employer (including, without limitation, skills and compensation information); intellectual property; and technical and non-technical data related to
software programs, designs, specifications, compilations, inventions, improvements, methods, processes, procedures and techniques; provided, however,
that the phrase does not include information that (a) was lawfully in Executive’s possession prior to disclosure of such information by Employer; (b) was,
or at any time becomes, available in the public domain other than through a violation of this Agreement; (c) is documented by Executive as having been
developed by Executive outside the scope of Executive’s employment and independently; or (d) is furnished to Executive by a third party not under an
obligation of confidentiality to Employer. Executive agrees that during Executive’s employment and after termination of employment irrespective of cause,
Executive will use Confidential Information only (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when
required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by
any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible
such information, and then only after providing written notice to Employer that such a demand has been made. Executive’s obligation under this
Agreement is in addition to any obligations Executive has under state or federal law. Executive agrees to deliver to Employer immediately upon
termination of Executive’s employment, or at any time Employer so requests, all tangible items containing any Confidential Information (including,
without limitation, all memoranda, photographs, records, reports, manuals, drawings, blueprints, prototypes, notes taken by or provided to Executive, and
any other documents or items of a confidential nature belonging to Employer), together with all copies of such material in Executive’s possession or
control. Executive agrees that in the course of Executive’s employment with Employer, Executive will not violate in any way the rights that any entity has
with regard to trade secrets or proprietary or confidential information. Executive’s obligations under this Section 8 are indefinite in term and shall survive
the termination of this Agreement.
Page 10 of 20
9. Work Product and Copyrights. Executive agrees that all right, title and interest in and to the materials resulting from the performance of
Executive’s duties at Employer and all copies thereof, including works in progress, in whatever media, (the “Work”), will be and remain in Employer upon
their creation. Executive will mark all Work with Employer’s copyright or other proprietary notice as directed by Employer. Executive further agrees:
a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States (the “Copyright
Law”), that all such Work will be considered a “work made for hire” as such term is used and defined in the Copyright Law, and that Employer
will be considered the “author” of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and
b. If any portion of the Work does not qualify as a “work made for hire” as such term is used and defined in the Copyright Law, that
Executive hereby assigns and agrees to assign to Employer, without further consideration, all right, title and interest in and to such Work or in any
such portion thereof and any copyright therein and further agrees to execute and deliver to Employer, upon request, appropriate assignments of
such Work and copyright therein and such other documents and instruments as Employer may request to fully and completely assign such Work
and copyright therein to Employer, its successors or nominees, and that Executive hereby appoints Employer as attorney-in-fact to execute and
deliver any such documents on Executive’s behalf in the event Executive should fail or refuse to do so within a reasonable period following
Employer’s request.
10. Inventions and Patents. For purposes of this Agreement, “Inventions” includes, without limitation, information, inventions, contributions,
improvements, ideas, or discoveries, whether protectable or not, and whether or not conceived or made during work hours. Executive agrees that all
Inventions conceived or made by Executive during the period of employment with Employer belong to Employer, provided they grow out of Executive’s
work with Employer or are related in some manner to the Business, including, without limitation, research and product development, and projected
business of Employer or its affiliated companies. Accordingly, Executive will:
a. Make adequate written records of such Inventions, which records will be Employer’s property;
Page 11 of 20
b. Assign to Employer, at its request, any rights Executive may have to such Inventions for the U.S. and all foreign countries;
c. Waive and agree not to assert any moral rights Executive may have or acquire in any Inventions and agree to provide written waivers
from time to time as requested by Employer; and
d. Assist Employer (at Employer’s expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions.
Executive understands and agrees that Employer or its designee will determine, in its sole and absolute discretion, whether an application for
patent will be filed on any Invention that is the exclusive property of Employer, as set forth above, and whether such an application will be abandoned prior
to issuance of a patent. Employer will pay to Executive, either during or after the term of this Agreement, the following amounts if Executive is sole
inventor, or Executive’s proportionate share if Executive is joint inventor: $750 upon filing of the initial application for patent on such Invention; and
$1,500 upon issuance of a patent resulting from such initial patent application, provided Executive is named as an inventor in the patent.
Executive further agrees that Executive will promptly disclose in writing to Employer during the term of Executive’s employment and for one (1)
year thereafter, all Inventions whether developed during the time of such employment or thereafter (whether or not Employer has rights in such Inventions)
so that Executive’s rights and Employer’s rights in such Inventions can be determined. Except as set forth on the initialed Exhibit B (List of Inventions) to
this Agreement, if any, Executive represents and warrants that Executive has no Inventions, software, writings or other works of authorship useful to
Employer in the normal course of the Business, which were conceived, made or written prior to the date of this Agreement and which are excluded from
the operation of this Agreement.
NOTICE: In accordance with Washington law, this Section 10 does not apply to Inventions for which no equipment, supplies, facility, or
trade secret information of Employer was used and which was developed entirely on Executive’s own time, unless: (a) the Invention relates (i)
directly to the business of Employer or (ii) to Employer’s actual or demonstrably anticipated research or development, or (b) the Invention results
from any work performed by Executive for Employer.
11. Cooperation. The parties agree that certain matters in which Executive will be involved during the Term may necessitate Executive's
cooperation in the future. Accordingly, following the termination of Executive's employment for any reason, to the extent reasonably requested by the
Board, Executive shall cooperate with the Employer in connection with matters arising out of Executive's service to the Employer; provided that, the
Employer shall make reasonable efforts to minimize disruption of Executive's other activities. The Employer shall reimburse Executive for reasonable
expenses incurred in connection with such cooperation.
Page 12 of 20
12. Non-Disparagement. Executive agrees and covenants that Executive will not at any time make, publish or communicate to any person or
entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Employer or its businesses, or any of its
employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties. This Section 12 does not, in any way,
restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any
applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does
not exceed that required by the law, regulation, or order. The Executive shall promptly provide written notice of any such order to the Chief Executive
Officer.
13. Remedies. Notwithstanding other provisions of this Agreement regarding dispute resolution, Executive agrees that Executive’s violation of
any of Sections 7, 8, 9, 10, 11 or 12 of this Agreement would cause Employer irreparable harm which would not be adequately compensated by monetary
damages and that an injunction may be granted by any court or courts having jurisdiction, restraining Executive from violation of the terms of this
Agreement, upon any breach or threatened breach of Executive of the obligations set forth in any of Sections 7, 8, 9, 10, 11 or 12. The preceding sentence
shall not be construed to limit Employer from any other relief or damages to which it may be entitled as a result of Executive’s breach of any provision of
this Agreement, including Sections 7, 8, 9, 10, 11 or 12. Executive also agrees that a violation of any of Sections 7, 8, 9, 10, 11 or 12 would entitle
Employer, in addition to all other remedies available at law or equity, to recover from Executive any and all funds, including, without limitation, wages,
salary and profits, which will be held by Executive in constructive trust for Employer, received by Executive in connection with such violation.
14. Dispute Resolution. Except for the right of Employer and Executive to seek injunctive relief in court, any controversy, claim or dispute of
any type arising out of or relating to Executive’s employment or the provisions of this Agreement shall be resolved in accordance with this Section 144
regarding resolution of disputes, which will be the sole and exclusive procedure for the resolution of any disputes. This Agreement shall be enforced in
accordance with the Federal Arbitration Act, the enforcement provisions of which are incorporated by this reference. Matters subject to these provisions
include, without limitation, claims or disputes based on statute, contract, common law and tort and will include, for example, matters pertaining to
termination, discrimination, harassment, compensation and benefits. Matters to be resolved under these procedures also include claims and disputes arising
out of statutes such as the Fair Labor Standards Act, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Washington
Minimum Wage Act, and the Washington Law Against Discrimination. Nothing in this provision is intended to restrict Executive from submitting any
matter to an administrative agency with jurisdiction over such matter.
a. Mediation. Employer and Executive will make a good faith attempt to resolve any and all claims and disputes by submitting them to
mediation in Snohomish County, Washington before resorting to arbitration or any other dispute resolution procedure. The mediation of any claim
or dispute must be conducted in accordance with the then-current JAMS procedures for the resolution of employment disputes by mediation, by a
mediator who has had both training and experience as a mediator of general employment and commercial matters. If the parties to this Agreement
cannot agree on a mediator, then the mediator will be selected by JAMS in accordance with JAMS’ strike list method. Within thirty (30) days after
the selection of the mediator, Employer and Executive and their respective attorneys will meet with the mediator for one mediation session of at
least four hours. If the claim or dispute cannot be settled during such mediation session or mutually agreed continuation of the session, either
Employer or Executive may give the mediator and the other party to the claim or dispute written notice declaring the end of the mediation process.
All discussions connected with this mediation provision will be confidential and treated as compromise and settlement discussions. Nothing
disclosed in such discussions, which is not independently discoverable, may be used for any purpose in any later proceeding. The mediator’s fees
will be paid in equal portions by Employer and Executive, unless Employer agrees to pay all such fees.
Page 13 of 20
b. Arbitration. If any claim or dispute has not been resolved in accordance with Section 14.a., then the claim or dispute will be determined
by arbitration in accordance with the then-current JAMS employment arbitration rules and procedures, except as modified herein. The arbitration
will be conducted by a sole neutral arbitrator who has had both training and experience as an arbitrator of general employment and commercial
matters and who is and for at least ten (10) years has been, a partner, a shareholder, or a member in a law firm. The arbitration shall be held in
Snohomish County, Washington. If Employer and Executive cannot agree on an arbitrator, then the arbitrator will be selected by JAMS in
accordance with Rule 15 of the JAMS employment arbitration rules and procedures. No person who has served as a mediator under the mediation
provision, however, may be selected as the arbitrator for the same claim or dispute. Reasonable discovery will be permitted and the arbitrator may
decide any issue as to discovery. The arbitrator may decide any issue as to whether or as to the extent to which any dispute is subject to the dispute
resolution provisions in Section 14 and the arbitrator may award any relief permitted by law. The arbitrator must base the arbitration award on the
provisions of Section 14 and applicable law and must render the award in writing, including an explanation of the reasons for the award. Judgment
upon the award may be entered by any court having jurisdiction of the matter, and the decision of the arbitrator will be final and binding. The
statute of limitations applicable to the commencement of a lawsuit will apply to the commencement of an arbitration under Section 14.b. The
arbitrator’s fees will be paid in equal portions by Employer and Executive, unless Employer agrees to pay all such fees.
15. Fees Related to Dispute Resolution. Unless otherwise agreed, the prevailing party will be entitled to its costs and attorneys’ fees incurred
in any litigation or dispute relating to the interpretation or enforcement of this Agreement.
Page 14 of 20
16. 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be
deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at
such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein
for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be
exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the
limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section
1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the
payment is no longer subject to a substantial risk of forfeiture.
a. If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made
or benefits to be delivered in connection with the Executive’s “Separation from Service” (as defined below) that constitute deferred compensation
subject to Section 409A of the Code shall not be made until the later of (i) eighteen months following the Effective Date or (ii) six months plus
one day after the Executive’s Separation from Service (the “409A Deferral Period”) as required by Section 409A of the Code, provided that the
payment of any such deferred compensation may be paid immediately following the Executive’s death. Payments of any such deferred
compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump
sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.
b. For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate
payments and benefits to the fullest extent allowed by Section 409A of the Code.
c. For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A
of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall
mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services
would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or
independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide
services the Executive performed over the immediately preceding thirty-six (36) month period.
Page 15 of 20
17. Disclosure. Executive agrees fully and completely to reveal the terms of this Agreement to any future employer or potential employer of
Executive and authorizes Employer, at its election, to make such disclosure.
18. Representation of Executive. Executive represents and warrants to Employer that Executive is free to enter into this Agreement and has no
contract, commitment, arrangement or understanding to or with any party that restrains or is in conflict with Executive’s performance of the covenants,
services and duties provided for in this Agreement, and is not contravene the terms of any statute, law, or regulation to which Executive is subject.
Executive agrees to indemnify Employer and to hold it harmless against any and all liabilities or claims arising out of any unauthorized act or acts by
Executive that, the foregoing representation and warranty to the contrary notwithstanding, are in violation, or constitute a breach, of any such contract,
commitment, arrangement or understanding.
19. Conditions of Employment. Employer’s obligations to Executive under this Agreement are conditioned upon Executive’s timely
compliance with requirements of the United States immigration laws.
20. Assignability. This Agreement shall not be assignable by Executive. This Agreement may be assigned by the Company to a company which
is a successor in interest to substantially all of the business operations of the Company. Such assignment shall become effective when the Company notifies
the Executive of such assignment or at such later date as may be specified in such notice. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such successor company, provided that any assignee expressly assumes the obligations, rights and
privileges of this Agreement.
21. Notices. Any notices required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile, by
registered or certified mail, postage prepaid, or by overnight courier, to Executive at Executive’s home address as most recently updated in Executive’s
Human Resources records, or to BioLife Solutions, Inc., 3303 Monte Villa Parkway, #310, Bothell, WA 98021, Attention: Chief Executive Officer. Notices
shall be deemed to have been given (i) upon delivery, if delivered by hand or by email, (ii) seven days after mailing, if mailed, (iii) one business day after
delivery, if delivered by courier, and (iv) one business day following receipt of an appropriate electronic confirmation, if by facsimile.
22. Severability. If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a
violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void,
shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the
fullest extent permitted by law. The Parties shall engage in good faith negotiations to modify and replace any provision which is declared invalid or
unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable
provision which it replaces. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be
deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties.
Page 16 of 20
23. Waivers. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a
waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construed as a waiver of any subsequent
breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other
right or remedy granted hereby or by law.
24. Governing Law. Except as provided in Section 14 above, the validity, construction and performance of this Agreement shall be governed
by the laws of the State of Washington without regard to the conflicts of law provisions of such laws. The parties hereto expressly recognize and agree that
the implementation of this Section 2424 is essential in light of the fact that Employer has its corporate headquarters and its principal executive offices
within the State of Washington, and there is a critical need for uniformity in the interpretation and enforcement of the employment agreements between
Employer and its key employees. Aside from any disputes that must be resolved by arbitration as provided for in Section 14, the Snohomish County
Superior Court in Washington shall have exclusive jurisdiction of any lawsuit arising from or relating to Executive’s employment with, or termination
from, Employer, or arising from or relating to this Agreement. Executive consents to such venue and personal jurisdiction.
25. Counterparts. This Agreement may be executed in counterpart in different places, at different times and on different dates, and in that case
all executed counterparts taken together collectively constitute a single binding agreement.
26. Costs and Fees Related to Negotiation and Execution of Agreement. Each Party shall be responsible for the payment of its own costs
and expenses, including legal fees and expenses, in connection with the negotiation and execution of this Agreement. Neither Party will be liable for the
payment of any commissions or compensation in the nature of finders' fees or brokers' fees, gratuity or other similar thing or amount in consideration of the
other Party entering into this Agreement to any broker, agent or third party acting on behalf of the other Party.
27. Entire Agreement. This instrument contains the entire agreement of the parties with respect to the relationship between Executive and
Employer and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this
Agreement related to the terms and conditions of Executive’s employment. This Agreement may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or discharge is sought, and any such modification will be signed by an
authorized representative of Employer.
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IN WITNESS WHEREOF, the parties have duly signed and delivered this Agreement as of the day and year first above written.
EMPLOYER
By: /s/ Roderick de Greef
TITLE: COO
EXECUTIVE
/s/ Geraint Phillips
Page 18 of 20
EXHIBIT A
DISCLOSURE OF OUTSIDE BOARD OF DIRECTORS AND TRUSTEE POSITIONS
Page 19 of 20
EXHIBIT B
LIST OF INVENTIONS
Page 20 of 20
Exhibit 10.28
FIRST AMENDMENT TO AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED EXECUTIVE EMPLOYMENT AGREEMENT (“Amendment”) is an agreement made between
BioLife Solutions, Inc., a Delaware corporation (“Employer” or the “Company”), and [NAME] (“Executive”). Executive and the Employer are sometimes
referred to herein as the “Parties.” The effective date is January 1, 2023 (“Effective Date”).
WHEREAS, the Parties entered into that certain Amended Executive Employment Agreement effective [DATE], as amended (the “Agreement”);
and
WHEREAS, the Parties wish to amend the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the
receipt of and sufficiency of which are hereby acknowledged, the Employer and the undersigned Executive agree as follows:
1. Defined Terms. Except as specifically provided herein, capitalized terms not defined herein shall have the meanings ascribed to them in the
Agreement.
2.
Amendment of Section 5.d(ii). As of the Effective Date, Section 5.d(ii) of the Agreement is hereby deleted and replaced in its entirety with the
following (exclusive of subparagraphs (A) through (E) of the Agreement which are not deleted shall remain in full force and effect):
5. . . .
d. . . .
ii.
. . .
Employer may terminate Executive’s employment under this Agreement or Executive may resign for Good Reason upon or
within 12 months following a Change in Control without advance notice; provided, however, that Employer will pay, no later
than sixty (60) days from the termination date in a lump sum:
3. Amendment of Section 5.(d)(iv). As of the Effective Date, Section 5.d(iv) of the Agreement is hereby deleted and replaced in its entirety with the
following:
5 . . . .
d. . . .
iv.
Upon termination of Executive’s employment hereunder due to a Change in Control, including by Executive for Good Reason,
all unvested stock options, awards, or other equity grants or awards shall immediately fully vest. Executive or Executive’s estate
(as the case may be) shall be entitled to receive any vested benefits required to be paid by law and any vested compensation
required to be paid by law.
4. No Other Amendments. Nothing in this Amendment is intended to amend any language of the Agreement other than as specifically set forth
above, and the remainder of the Agreement shall be unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Amended Executive Employment Agreement as of the date and year first
above written.
Executive:
[NAME]
BIOLIFE SOLUTIONS, INC.
By: /s/
Michael Rice
Chief Executive Officer and
Chairman of the Board of Directors
2
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries
SAVSU Technologies, Inc.
Arctic Solutions, Inc. dba Custom Biogenic Systems
SciSafe Holdings, Inc.
Global Cooling, Inc.
Sexton Biotechnologies, Inc.
BioLife B.V.
Exhibit 21.1
Place of
Incorporation
Delaware
Delaware
Delaware
Delaware
Delaware
Netherlands
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
BioLife Solutions, Inc.
Bothell, Washington
We have issued our reports dated March 31, 2023, with respect to the consolidated financial statements and internal control over financial reporting
included in the Annual Report of BioLife Solutions, Inc. on Form 10-K for the year ended December 31, 2022. We consent to the incorporation by
reference of said reports in the Registration Statements of BioLife Solutions, Inc. on Forms S-3 (File Nos. 333-259249, 333-239637, 333-233912, 333-
222433, and 333-208912) and on Forms S-8 (File Nos. 333-267391, 333-222437, 333-205101, and 333-189551).
/s/ Grant Thornton LLP
Bellevue, Washington
March 31, 2023
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.2
BioLife Solutions, Inc.
Bothell, Washington
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-259249, 333-239637, 333-233912, 333-222433
and 333-208912) and Form S-8 (Nos. 333-267391, 333-222437, 333-205101, and 333-189551) of BioLife Solutions, Inc. of our report dated March 31,
2022 relating to the consolidated financial statements, which appears in this Form 10-K.
/s/ BDO USA, LLP
Seattle, Washington
March 31, 2023
CERTIFICATION PURSUANT TO
RULE 13a-14(a) or RULE 13d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.1
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: March 31, 2023
/s/ Michael Rice
Michael Rice
CERTIFICATION PURSUANT TO
RULE 13a-14(a) or RULE 13d-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.2
I, Troy Wichterman, 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: March 31, 2023
/s/ Troy Wichterman
Troy Wichterman
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, 2022, 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: March 31, 2023
/s/ Michael Rice
Michael Rice
Chief Executive Officer and Chairman of the Board of Directors
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, 2022, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Troy Wichterman, 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: March 31, 2023
/s/ Troy Wichterman
Troy Wichterman
Chief Financial Officer