UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
þ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 20172019
¨☐ 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 | 94-3076866 |
(State or other jurisdiction of incorporation or organization) | (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:
COMMON STOCK, $0.001 PAR VALUE
Title of each class | Trading symbol ($) | Name of exchange on which registered |
Common Shares, par value $0.01 per share | BLFS | 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 þ☑
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 þ☑
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 þ☑ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and postsuch said files). Yes þ☑ No ¨☐
Indicate by check mark if disclosure
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 þ
☑ Emerging Growth Company ¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No þ☑
As of the registrant’s most recently completed second fiscal quarter, the aggregate market value of common equity (based on closing price on June 28, 2019 of $16.95 per share) held by non-affiliates was $15,192,728.approximately $230 million.
As of February 28, 2018, 14,120,998May 14, 2020, 23,999,516 shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders to be held in 2018, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.
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PART IFORWARD LOOKING STATEMENTS
References in this Form 10-K to “BioLife”, the “Company,” “we,” “us” or “our” refer to BioLife Solutions, Inc. The information in thisThis Annual Report on Form 10-K (“Form 10-K”) contains certain 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 statements related to our newly acquired products, customers, regulatory approvals, marketsthe potential utility of and market for our products and services, our ability to implement our business strategy and anticipated business and operations, in particular following the 2019 acquisitions, future financial and operational performance, our anticipated future growth strategy, including the acquisition of synergistic cell and gene therapy manufacturing tools and services or technologies or other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, controlling shareholdersfuture financial and trendsoperating 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 business that involvemanagement and are subject to significant risks and uncertainties. OurIf underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from the results discussed in the forward-looking statements.current expectations and projections. Factors that might cause such a difference include those discussed in “Business,”under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,Factors,” as well as those discussed elsewhere in this Annual Report onthe Form 10-K.
Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly relyplace undue reliance on suchthese forward-looking statements, when evaluatingwhich speak only as of the information presenteddate 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.
EXPLANATORY NOTE
Certain Information Included in this Form 10-K
This Form 10-K includes restated Consolidated Financial Statements for the year ended December 31, 2018 and for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019, June 30, 2019 and September 30, 2019 to reflect adjustments made to account for certain Warrants (as defined below) as a liability. The Warrants were previously recorded as equity as described below. In addition, as further described below, adjustments were made to quarterly results for 2019 related to accounting for certain market-based stock awards and the valuation of contingent consideration, in-process research and development technology, and goodwill for our Astero Bio Corporation (“Astero”) acquisition. This Annual Report on Form 10-K for the year ended December 31, 2019 provides restated quarterly data for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019, June 30, 2019 and September 30, 2019.
We have not filed and do not intend to file amendments to our previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected by the restatements of our Consolidated Financial Statements. Accordingly, as disclosed in our Current Report on Form 8-K filed April 30, 2020, the Company's previously issued financial statements for the periods from January 1, 2014 through September 30, 2019, including the Company’s previously issued audited financial statements for the year ended December 31, 2018, should no longer be relied upon, nor should any related reports of our then independent registered public accounting firm, Peterson Sullivan LLP, nor any previously furnished or filed reports, earnings releases, guidance, investor presentations, or similar communications of the Company regarding these periods be relied upon. Investors should rely only on the financial information and other disclosures, including the adjusted or restated financial information, included in this Form 10-K and subsequent filings, as applicable.
Background of Restatement
The Company in consultation with its Audit Committee, concluded that its previously issued Consolidated Financial Statements for the periods beginning with the first quarter of 2018 through the third quarter of 2019 (collectively, the “Affected Periods”) should be restated because of a misapplication in the guidance around accounting for Warrants and should no longer be relied upon as discussed above (the Audit Committee concluded that it was not necessary to restate the financial statements for any period prior to January 1, 2018). In connection with the restatement of the Consolidated Financial Statements for the Affected Periods, the Audit Committee further concluded to make certain other adjustments to our Consolidated Financial Statement for the periods beginning with the first quarter of 2019 through the third quarter of 2019 – see below and see Note 16: “Quarterly Financial Information (Unaudited)”to our Consolidated Financial Statements.
The reclassification of the Warrants did not have any impact on our liquidity, cash flows, revenues or costs of operating our business and the other non-cash adjustments to the Consolidated Financial Statements, in all of the Affected Periods, do not impact the amounts previously reported for the Company’s cash and cash equivalents, operating expenses or total cash flows from operations.
The warrants at issue are those certain warrants (“Warrants”) to purchase common stock of the Company that we issued to certain investors in a March 2014 public offering pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-192880) and pursuant to a note conversion agreement with certain note holders. Following issuance of the Warrants, the Company accounted for the Warrants in its financial statements as equity. The Warrants have an exercise price of $4.75 per share and expire in March 2021 unless previously exercised. A total of 6,910,283 Warrants were incorporatedissued in DelawareMarch 2014 and, as of December 31, 2019, there were 3,409,005 Warrants outstanding.
Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in 1987estimated fair value of the Warrants in accordance with Accounting Standards Codification 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Warrants generally provide that, in the event of a fundamental transaction under rule 13(e)-3, the holder may receive cash value for the Warrants calculated using a Black Scholes model with a volatility rate equal to the greater of (i) the historical 100-day look-back period or (ii) 100% equity volatility. As a result, the Warrant cannot be classified within equity according to generally accepted accounting principles. Instead, the Warrants issued by the Company should be recorded as a liability at fair value at the date of grant, and marked to market at each reporting period. Changes in fair value are recorded in earnings.
Also, during the preparation and audit of the Company’s Consolidated Financial Statements for fiscal 2019, the Company identified material errors impacting the first, second and third quarters of 2019 related to the valuation of contingent consideration, in-process research and development technology and goodwill for our Astero Bio Corporation (“Astero”) acquisition and valuation of market-based restricted stock awards.
COVID-19
The Company is filing this Form 10-K on a delayed basis in accordance with the order (the “Order”) promulgated by the Securities and Exchange Commission on March 25, 2020 in Release No. 34-88465 relating to the Exchange Act. The Company was unable to file the Form 10-K in a timely manner because the Seattle area, including the location of the Company’s corporate headquarters and its media production facility and warehouse was, and is currently, at an epicenter of the coronavirus outbreak in the United States. The Company has been following the recommendations of local health authorities to minimize exposure risk for its team members for the past several months, including the temporary closures of its offices and having team members work remotely, and, as a result, the Form 10-K was not able to be completed by the filing deadline. Reference is made to our disclosures in this Form 10-K regarding the impact of COVID-19 on the Company, including those disclosures discussed under the name Trans Time Medical Products, Inc. In 2002,heading “Risk Factors” herein.
BUSINESS |
The following discussion of our business contains forward-looking statements that involve risks and uncertainties. When used in this report, the Company, then knownwords “intend,” “anticipate,” “believe,” “estimate,” “plan” and “expect” and similar expressions as Cryomedical Sciences, Inc.,they relate to us are included to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements and engagedare a result of certain factors, including those set forth under “Risk Factors” and elsewhere in manufacturing and marketing cryosurgical products, completed a merger with our wholly-owned subsidiary, BioLifethis Form 10-K (“Form 10-K”).
References throughout this Form 10-K to “BioLife Solutions, Inc.”, which was engaged as a developer and marketer of biopreservation media products for cells and tissues. Following“BioLife”, “we”, “us”, “our”, or the merger, we changed our name“Company” refer to BioLife Solutions, Inc. and its subsidiaries, taken as a whole, unless the context otherwise indicates.
For a summary of recent developments, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Business Overview
We develop, manufacture and market a portfolio of biopreservationbioproduction tools for cells, tissues, and organs, including proprietary clinical gradeto the cell and tissue hypothermic storagegene therapy (“C&GT”) industry, which are designed to improve quality and cryopreservation freeze media.
de-risk biologic manufacturing and delivery. Our products are used in basic and applied research, on, and commercializationcommercial manufacturing of new biologic based therapies by maintainingbiologic-based therapies. Customers use our products to maintain the health and function of biologic source material during sourcing, manufacturing, storage, and finished products duringdistribution of cells and tissues.
We currently operate as one bioproduction tools business with product lines that support several steps in the biologic material manufacturing distribution, and patient delivery.delivery process. We have a diversified portfolio of tools that focus on biopreservation, frozen storage, and thawing of biologic materials. We have in-house expertise in cryobiology and continue to capitalize on opportunities to maximize the value of our product platform for our extensive customer base through both organic growth innovations and acquisitions.
Our Products
Our bioproduction tools are comprised of four main product offerings include:lines
● | Biopreservation media | |
● | Automated thawing devices | |
● | Cloud connected “smart” shipping containers | |
● | Freezer and storage technology and |
Biopreservation media
Our proprietary clinical gradebiopreservation media products, HypoThermosol® FRS and CryoStor® biopreservation media products are marketed to the regenerative medicine, biobanking, drug discovery markets including hospital-based stem cell transplant centers, pharmaceutical companies, cord blood and adult stem cell banks, hair transplant centers, and suppliers of cells to the drug discovery, toxicology testing and diagnostic markets, including private and public cell therapy companies. All of our biopreservation media products are serum-free and protein-free, fully defined, and are manufactured under current Good Manufacturing Practices (cGMP) using United States Pharmacopia (USP)/Multicompendial or the highest available grade components.
Our patented biopreservation media products, are formulated to reducemitigate preservation-induced, delayed-onset cell damage and death.death, which result when cells and tissues are subjected to reduced temperatures. Our platform enabling technology providescan provide our C&GT customers with significant shelf life extension of biologic source material and final cell products, and can also greatly improvesimprove post-preservation cell and tissue viability and function. Our biopreservation media is serum-free, protein-free, fully defined, and manufactured under current Good Manufacturing Practices (cGMP). We strive to source wherever possible, the highest available grade, multi-compendium raw materials. We estimate our media products have been incorporated in over 275 regenerative medicine400 customer clinical applications, including numerous chimeric antigen receptor (CAR) T cell and other T cell receptor (TCR) types.
On December 31, 2016, we restructured our biologistex CCM, LLC joint venture (“biologistex” or “SAVSU”) with Savsu Technologies, LLC (“STLLC”), whereby we contributed certain assets, including our outstanding loan owed by biologistex, and STLLC contributed certain assets, including all cold chain management intellectual property, into SAVSU. The new venture, SAVSU, is in the business of acquiring, developing, maintaining, owning, operating, leasing and selling an integrated platform of a cloud-based information service and precision thermal shipping products. Prior to the restructuring, we owned a 52% ownership interest in biologistex. As a result for consideration given by both parties, we owned a 45% interest in SAVSU, which was subsequently scheduled to be reduced to 25% on December 31, 2018. In addition, we agreed to provide certain sales and marketing services to SAVSU, in exchange for a commission on Company generated revenue. On January 22, 2018, as a result of SAVSU signing a global distribution agreement with World Courier, we amended our agreement with SAVSU to fix our equity position at 35%, prior to any dilution created by financing activities post December 31, 2016, and terminated the sales and marketing services agreement.
See our 2016 10-K “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details.
Products and Services Overview
Biopreservation Media
Stability (shelf life)(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.products and therapies. Limited stability is especially critical in the regenerative medicineC&GT field, where harvested cells and tissues will lose viability over time, if not maintained appropriately at normothermic body temperature (98.6ºF/37º(37ºC) or stored in a hypothermic state in an effective preservation medium, will lose viability over time.medium. Chilling (hypothermia) is used to reduce metabolism and delay degradation of harvested cells tissues, and organs.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 preservationbiopreservation media range from simple “balanced salt” (electrolyte) formulations to complex mixtures of electrolytes, energy substrates such as sugars, osmotic buffering agents and antibiotics. The limited stability which results from the use of these traditional biopreservation media formulations is a significant shortcoming that our optimized proprietary products address with great success.
Our scientific research activities over the last 20+ years enabled a detailed understanding of the molecular basis for the hypothermic and cryogenic (low-temperature induced) damage/destruction of cells through apoptosis and necrosis. This research led directly to the development of our HypoThermosol®HypoThermosol® FRS and CryoStor®CryoStor® technologies. Our patented preservationproprietary 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 preservationbiopreservation 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, utilizingprocessing. 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 and hence patient delivery processes.filings.
The results of independent testing demonstrate that our biopreservation media products significantly extend shelf-life and improve cell and tissue post-thaw viability and function, which may, in turn, improve clinical and commercial outcomes for existing and new cell and tissue therapy applications.function. Our products have demonstrated improved biopreservation outcomes, forincluding greatly extended shelf-life and post-thaw viability, across a broad array of cell and tissue types including stem cells isolated from umbilical and peripheral blood, bone marrow, adipose tissue, liver, tendon, and umbilical cord tissue, and also for induced pluripotent stem cells including hepatocytes, endothelial cells, and neuronal cells, hepatocytes isolated from non-transplantable livers, chondrocytes isolated from cartilage, and dermal fibroblasts and muscle cells isolated from tissue biopsies.types.
Competing biopreservation media products are often formulated with simple isotonic media cocktails, animal serum, potentially a single sugar or human protein. A key differentiator of our proprietary HypoThermosol FRS formulation is the engineered optimization of the key ionic component concentrations for low temperature environments, as opposed to normothermic body temperature around 37°C, as found in culture media or saline-based isotonic formulas. Competing cryopreservation freeze media is often comprised of a single permeating cryoprotectant such as dimethyl sulfoxide (“DMSO”). Our CryoStor formulations incorporate multiple permeating and non-permeating cryoprotectant agents which allow for multiple mechanisms of protection and reduces the dependence on a single cryoprotectant. We believe that our products offer significant advantages over in-house formulations, or commercial “generic” preservation media, including, time saving, improved quality of components, more rigorous quality control release testing, more cost effective and improved preservation efficacy.
Across a broad spectrum of cell and tissue types, our products have proven more effective in reducing post-preservation and post-thaw necrosis and apoptosis as compared to commercial and home-brew isotonic and extracellular formulations. This results in greatly extended shelf life and improved post-preservation viability.
Biopreservation Media Opportunity
According to Global Market Insights, “Biopreservation Market Size” published in September 2016, the total biopreservation market is expected to be $9.7 billion by 2024, with our current addressable media market expected to be $1.3 billion by 2024. Our current addressable portion of the market is the demand for reagents used to store, ship and freeze source material and manufactured doses of cell-based products and therapies.
Regenerative Medicine
The emerging field of regenerative medicine is unique in its aim to augment, repair, replace or regenerate organs and tissue that have been damaged by disease, injury or even the natural aging process. This rapidly evolving, interdisciplinary field is transforming healthcare by translating fundamental science into a variety of regenerative technologies including biologics, chemical compounds, materials and devices. It differs from other fields of medicine in the array of disciplines it brings together and in its ability to create or harness the body’s innate healing capacity.
We continue to educate the regenerative medicine market about the impact of effective biopreservation on the ability to create commercially viable manufactured products with participation in scientific conferences and industry trade events by exhibiting, presenting scientific and business lectures, and sponsoring industry association events. We are a corporate or affiliate member of the Alliance for Regenerative Medicine, the BEST Collaborative, and the International Society for Cellular Therapy.
We have secured a valuable position as a supplier of critical reagents to several commercial companies and estimate that our biopreservation media products are incorporated in over 275 applications for new cell and tissue-based regenerative medicine products and therapies. A significant number of applications involve CAR-T cells and other types of T cells and mesenchymal stem cells targeting blood cancers, solid tumors and other leading causes of death and disability. We estimate that annual revenue from each customer commercial application in which our products are used could range from $0.5 million to $2.0 million, if such application is approved and our customer commences large scale commercial manufacturing of the biologic based therapy.
Drug DiscoveryAutomated, Water-Free ThawingProducts
In April 2019, we acquired Astero Bio Corporation (“Astero”), to expand our bioprocessing tools portfolio and diversify our revenue streams. The Astero ThawSTAR® line includes automated vial and cryobag thawing products that control the heat and timing of the thawing process of biologic material. Our customizable, automated, water-free thawing products uses algorithmic programmed, heating plates to consistently bring biologic material from a frozen state to a liquid state in a controlled and consistent manner. This helps reduce damage during the temperature transition. The ThawSTAR products can reduce risks of contamination versus using a traditional water bath.
evo® Cloud Connected Shipping Containers
In August 2019, we acquired the remaining shares of SAVSU Technologies, Inc. (“SAVSU”) we did not previously own. SAVSU is a leading developer and supplier of next generation cold chain management tools for cell and gene therapies. The evo.is cloud app allows biologic products to be traced and tracked in real time. Our evo platform consists of rentable cloud-connected shippers and include technologies that enable tracking software provides real-time information on geolocation, payload temperature, ambient temperature, tilt of shipper, humidity, altitude, and real-time alerts when a shipper has been opened. Our internally developed evo.is software allows customers to customize alert notifications both in data measurements and user requirements. The evo Dry Vapor Shipper (“DVS”) is specifically marketed to cell and gene therapies. The evo DVS has improved form factor and ergonomics over the traditional dewar, including extended thermal performance, reduced liquid nitrogen recharge time, improved payload extractors and ability to maintain temperature for longer periods on its side.
We utilize couriers who already have established logistic channels and distribution centers. Our strategy greatly reduces the cash need to build out specialized facilities around the world. Our partnerships with several white glove couriers allow us to scale our sales and marketing effort by utilizing their salesforce. Our courier partnerships market our evo platform to their existing cell and gene therapy customers as a cost effective and innovative solution. We also market directly to our existing and prospective customers who can utilize the evo platform through our courier partnerships.
Liquid Nitrogen Freezer and Storage Devices
In November 2019, we acquired Custom Biogenic Systems, Inc. (“CBS”) a global leader in the design and manufacture of state-of-the-art liquid nitrogen laboratory freezers, cryogenic equipment and accessories. The addition of CBS allows for product line growth, diversification of revenue and reduction of supply chain costs for our evo dry vapor shippers.
Included in CBS’s product line of liquid nitrogen freezers are the Isothermal LN2 freezers, constructed with a patented system which stores liquid nitrogen in a jacketed space in the walls of the freezer. This dry storage method eliminates liquid nitrogen contact with stored specimens, reduces the risk of cross-contamination and provides increased user safety in a laboratory setting. To accommodate customer requirements, we offer customizable features including wide bodied and extended height.
Our freezer offerings also include high capacity rate freezers which are fully customizable to customer needs with temperature range of -180°C to +50°C and freezing rates of 0.01 to 99.9 per minute. Password protected software aids in compliance with 21 CFR Part 11 and unlimited programming capability, these high capacity rate freezers provide a searchable database for freeze run history and allow freeze data to be saved.
To accompany the offerings of cryogenic freezer equipment, we supply equipment for storing critically important biological materials. This storage equipment includes upright freezer racks, chest freezer racks, liquid nitrogen freezer racks, canisters/cassettes and frames as well as laboratory boxes and dividers. Due to our onsite design and manufacturing capability, racks and canisters can be customized to address customers’ varying requirements,
In order to provide customers with a proactive approach to safety and monitoring of equipment containing liquefied gas, CBS offers Versalert, a patented wireless remote asset monitoring system that can monitor and record temperatures from -200°C to +50°C, and monitor and record two additional variables using 0-5v or 4-20mA inputs. With an intelligent mesh network with three times the range of competing products, the system enables customers to view current equipment conditions and receive alarm notification on smartphones, tablets or personal computers and maintain permanent electronic records for regulatory compliance and legal verification.
Our customers in the drug screening market are pharmaceutical companies that growMarket Opportunity and preserve various cell types to measure pharmacologic effects and toxicity of new drug compounds, and also cell suppliers that provide preserved live cells for end-user testing in pharmaceutical companies. Our products specifically address this need by enhancing yield, viability and functionality of previously preserved cells.
BiobankingCompetition
The biobanking industry includes publicC&GT market has been rapidly expanding, treating diseases once thought incurable. According to the Alliance for Regenerative Medicine (“ARM”) there were currently over 1,000 ongoing clinical trials utilizing regenerative medicine at the end of 2019. ARM also states there were over $9.8 billion in total global financings in the regenerative market in 2019. The FDA predicts five to ten cell and private cord blood banks, adult stem cell banks, tissue banks, hair transplant centers, cryopreservation of platelets and biorepositories. To continue to generate awareness ofgene therapies per year will be approved. These technologies change the need for effective preservation, we are a sponsor and member of the AABBway physicians treat patients. The manufacturing, distribution and the Cord Blood Association.delivery process is significantly different from many other types of medicines and therapies. We also provide expertise when needed to the top biobanking enterprises.
Principal Products
HypoThermosol® FRSbiopreservation media is a novel, engineered, optimized hypothermic storage and shipping media product. This proprietary, optimized formulation mitigates temperature-induced molecular cell stress responses that occur during chilling and re-warming of biologics, intermediate products, and final cell products intended for research and clinical applications. Serum-free, protein-free HypoThermosol FRS is designed to provide maximum storage and shipping stability for biologics at 2° to 8°C. HypoThermosol FRS is manufactured under cGMP and is tested to USP <71> Sterility and USP <85> Endotoxin standards.
CryoStor®cryopreservation freeze media products have been designed to mitigate temperature-induced molecular cell stress responses during freezing and thawing. CryoStor proprietary freeze media products are intended for cryopreservation of biologics at subzero temperatures (most often utilized within the range of -80 to -196°C). All CryoStor products are pre-formulated with USP/EP grade DMSO, a permeating cryoprotective agent which helps mitigate damage from the formation of intracellular and extracellular ice. CryoStor is offered in several packages and pre-formulated with DMSO in final concentrations of 2%, 5%, and 10%. CryoStor is manufactured under cGMP and is tested to USP <71> Sterility and USP <85> Endotoxin standards.
BloodStor® freeze media is a series of generic cGMP freeze media products used to cryopreserve stem and other cells isolated from umbilical cord blood, peripheral blood, and bone marrow where the processing methods require addition of high concentration DMSO. BloodStor 55-5 is pre-formulated with 55% (w/v) DMSO USP/EP, 5% (w/v) Dextran-40 USP/EP, and Water for Injection (WFI) quality water. BloodStor 100 contains 100% (w/v) DMSO USP/EP. BloodStor 27 NaCl is pre-formulated with 27% (w/v) DMSO in saline USP-grade components and Water for Injection (WFI) quality water. BloodStor is manufactured under cGMP and tested to USP <71> Sterility and USP <85> Endotoxin standards.
Cell Thawing Media provides Dextran and saline for washing cryopreserved cells and tissues to dilute or remove cryoprotectants. Cell thawing media is pre-formulated with 10% Dextran 40 in 0.9% NaCl and 10% Dextran 40 in 5% Dextrose.
Competition
Biopreservation Media
We believe that in-house formulated biopreservation media, whereby the user purchases raw ingredients and manually mixes the ingredients, satisfies the large majority of the annual worldwide demand. Commercial competitors, in most cases, are supplying isotonic, non-optimized preservation media and include VWR, Sigma-Aldrich, Lonza, Life Technologies, STEMCELL Technologies, and several smaller companies. Several of our competitors also distribute our premium products. These and other companies may have developed or could in the future develop new technologies that compete with our products or even render our products obsolete.
We believe that our products offer significant advantages over in-house formulations including, time saving, improved quality of components, more rigorous quality control release testing, and improved preservation efficacy. We believe that a company’s competitive position in the markets we compete in is determined by product function, product quality, speed of delivery, technical support, price, and distribution capabilities. Our customers are diverse and may place varying degrees of importance on the competitive attributes listed above. While it is difficult to rank these attributes for all our customers in the aggregate, we believe we are well positioned to competeaddress many of the manufacturing difficulties in each category. We expect competition to intensify with respect to the areas in which we are involved as the market expandsprocess of producing cell and technical advances are made and become more widely known.gene therapies.
BUSINESS OPERATIONSThe Bioproduction Process
Our products currently fulfill several steps in the bioproduction process for cell and gene therapies. See the diagram below from an illustration of this process and our product roles. We now offer products that integrate into the critical steps of preservation, thawing, fixed storage, and transportable storage under controlled conditions.
Our Strategy
We intend to aggressively leverage the numerous relationships with the leading cell and gene therapy companies that use our media products to offer our expanded product portfolio of bioproduction tools. Over the last several years, we have built a strong reputation as a trusted supplier of critical tools used in cell and gene therapy manufacturing. We believe that our relationships and reputation could enable us to drive incremental revenue growth through the sale of additional products to a captive customer base.
Business Operations
Research and Development
Our research and activity is focused on evaluating new potential disruptive technologies which may be applicable throughout the cell and gene therapy manufacturing workflow. We routinely assess and analyze the strengths and weaknesses of competitive products and are typically engaged in business development discussions on an ongoing basis.
Sales and Marketing
We market and sell our products directly using ourthrough direct sales force and through our website atwww.biolifesolutions.com.third party distribution. Our products are also marketed and distributed by STEMCELL Technologies, Sigma-Aldrich,MilliporeSigma, VWR, Thermo Fisher and several other regional distributors under non-exclusive agreements. We are committedIn 2019, sales to becoming and remaining a trusted, critical supplierthird party distributors accounted for 46% of our revenue compared to our customers. This requires us to33% in 2018. We employ scientific team members in sales and support roles.roles because we believe that is what makes us a trusted and critical supplier to our customers. Our technical application support team consists of individuals with extensive experience in cell processing, biopreservation, freezing and cryobiology.thawing. We have also hired experienced field-based sales and customer care team members to support our growing product portfolio.
In each of the years 20172019 and 2016,2018, we derived approximately 12%15% of our product revenue from our relationship with one distributorcustomer and approximately 29% of our products.product revenue from two customers, respectively.
At December 31, 2017, two customers accounted for 41%The following table represents the Company’s total revenue by geographic area (based on the location of gross accounts receivable.the customer):
Year Ended December 31, | ||||||||
Revenue by customers’ geographic locations | 2019 | 2018 | ||||||
North America | 69 | % | 77 | % | ||||
Canada | 16 | % | 13 | % | ||||
Europe, Middle East, Africa (EMEA) | 14 | % | 8 | % | ||||
Other | 1 | % | 2 | % | ||||
Total revenue | 100 | % | 100 | % |
Manufacturing
Manufacturing and Distribution
Biopreservation Media - We maintain and operate two independent cGMP clean room production suites for ourmanufacturing sterile biopreservation media products. Since December 2009, ourOur quality management system (QMS) has remained(“QMS”) was certified to the ISO 13485:2003.2016 standard in 2018. Our QMS is compliantaligned with applicable sections of 21 CFR Part 820 - Quality System Regulation for Good Manufacturing Practice of medical devices, 21 CFR Parts 210 and 211 covering GMP- cGMP for Aseptic Production,Finished Pharmaceuticals, FDA Guidance - Sterile Drug Products, Volume 4, EU Guidelines Annex 1 for the- Manufacture of Sterile Medicinal Products, ISO 13408 for aseptic processing- Aseptic Processing of healthcare products,Healthcare Products, and ISO 14644 clean rooms- Clean Rooms and associated controlled environments. We rely on outside suppliers for all of our manufacturing supplies, parts and components.Associated Controlled Environments. To date, we have not experienced significant difficulties in obtaining raw materials for the manufacture of our biopreservation media products. Pursuant to our supply agreements, we are required to notify customers of any changes to our raw materials.
Automated Thawing – Our ThawSTAR automated, water-free thawing products are produced by a contract manufacturing organization (“CMO”) based in the United States. We believe this CMO has the skills, experience and capacity needed to meet our quality standards and demand expectations for the product line.
evo Cold Chain Products – Production of our evo cold chain management hardware products is performed by external CMOs and by personnel in our Albuquerque, New Mexico facility. We are currently engaged in a project to qualify our CBS facility as a secondary supplier of liquid nitrogen dewars for our evo product line.
Freezer and Storage – The majority of our CBS freezers and related accessories are manufactured in our facility in Bruce Township, Michigan. We are reliant on certain critical suppliers for some components.
Support
We provide product support through a combination of channels including phone, chat, web, social media, and email. These support services are delivered by our customer care and scientific teams. These teams are responsible for providing timely, high-quality technical expertise on all our products.
Product Approval RegulationRegulatory Status
None of ourOur media, thawing and evo products are not subject to any specific United States Food and Drug Administration (“FDA”) or other non-US pre-market approvalinternational 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®CryoStor, HypoThermosol FRS, BloodStor 27, and our Cell Thawing Media products, which provide the FDA with information regarding our manufacturing facility and process, our quality system, and 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.
There can be no assurance that we will not be required to obtain approval from the FDA or foreign regulatory authorities prior to marketing any ofOne freezer in our productsCustomer Biogenic Systems product line is currently regulated as a Class 2 medical device in the future.EU.
Principal Offices
Our principal executive offices are located at 3303 Monte Villa Parkway, Suite 310, Bothell, Washington 98021 and the telephone number is (425) 402-1400. Information about us is available on our website http://www.biolifesolutions.com. The information contained on our website or that can be accessed through our website does not constitute part
Intellectual Property
Currently, we have five issuedThe following table lists our granted and unexpired U.S. patents, two issued Australian patents, one issued European patent, one issued Japanese patent, and several pending patent applications.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.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.
Product Development
Currently, we employ a team of three researchers, all of whom hold Ph.D. degrees in molecular biology or related fields who are responsible for bringing new biopreservation products to market. We also conduct collaborative research with several leading academic and commercial entities in our strategic markets.
During 2017, we incurred costs of approximately $1.2 million on research and development activities. During 2016, we incurred costs of approximately $2.7 million on research and development activities, including $0.7 million in cost related to the development of internal use software which were capitalized by our joint venture, biologistex CCM, LLC. The capitalized costs related to biologistex internal use software are no longer included in our consolidated financial statements on or after December 31, 2016 due to the deconsolidation of biologistex. See Note 1 to the Company’s Consolidated Financial Statements in Item 8 for additional information about the biologistex joint venture restructuring on December 31, 2016.
Issued Patents | Patents Applied For | Registered Trademarks | |
Biopreservation media | 29 | 1 | 10 |
Automated thawing | 6 | 16 | 7 |
evo cold chain | 9 | 7 | 7 |
Freezers and accessories | 6 | 7 | 6 |
Total | 50 | 31 | 30 |
Employees
As of February 28, 2018,May 1, 2020, we had 40151 full time employees and 7 part-time employees. Our employees are not covered by any collective bargaining agreement. We consider relations with our employees to be good.
Corporate History
We were incorporated in Delaware in 1987 under the name Trans Time Medical Products, Inc. In 2002, the Company, then known as Cryomedical Sciences, Inc. was engaged in manufacturing and marketing cryosurgical products. It completed a merger with our wholly-owned subsidiary, BioLife Solutions, Inc., which was engaged as a developer and marketer of biopreservation media products for cells and tissues. Following the merger, we changed our name to BioLife Solutions, Inc.
Principal Offices; Available Information
Our principal executive offices are located at 3303 Monte Villa Parkway, Suite 310, Bothell, Washington 98021 and the telephone number is (425) 402-1400. We maintain a website athttp://www.biolifesolutions.com. The information contained on or accessible through our website is not part of this Annual Report on Form 10-K.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”). Any information we filed with the SEC may be accessed and copied at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. Information may be obtained by calling the SEC at 1-800-SEC-0330. 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.
RISK FACTORS |
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this annual report,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 Business
The majority of our net salesproduct revenue come from a relatively small number of customers and products in a limited number of market sectors; if we lose any of these customers or if there are problems in those market sectors, our net salesproduct revenue and operating results could decline significantly.
In each of the years 2017ended December 31, 2019 and 2016,2018, we derived approximately 12%15% of our revenue from our relationship with one distributor and approximately 29% of our products.revenue from two customers, respectively. No other customer accounted for more than 10% of revenue in 2017the years ended December 31, 2019 or 2016.2018. In the years ended December 31, 2019 and 2018, we derived approximately 73% and 88% of our revenue from CryoStor products, respectively. Due to our acquisitions in 2019, we expect both our revenue concentration related to CryoStor, and our customer concentration to be reduced for the year ended December 31, 2020. Our principal customers may vary from period to period and our principalsuch customers may not continue to purchase products from us at current levels or at all. Significantall (particularly as a result of the COVID-19 pandemic). Further, the inability of some of our customers to consummate anticipated purchases of our products due to changes in end-user demand, and other unpredictable factors that may affect customer ordering patterns could lead to significant reductions in net sales to any of these customers or our failure to make appropriate choices to the customers we serve,product revenue which could seriously harm our business. Because our revenue and operating results are difficult to predict (particularly as a result of the COVID-19 pandemic), we believe that period-to-period comparisons of our results of operations are not a good indicator of our future performance. Additionally, if revenue declines in a quarter, whether due to a delay in recognizing expected revenue, adverse economic conditions, the COVID-19 pandemic or otherwise, our results of operations will be harmed because many of our expenses are relatively fixed. In addition,particular, a large portion of our manufacturing costs, our research and development, sales and marketing and general and administrative expenses are not significantly affected by variations in revenue. Further, our cost of product revenue is dependent on product mix. If our quarterly operating results fail to meet investor expectations, the price of our common stock may decline.
We expect our operating results to fluctuate significantly from period to period.
Following our acquisitions in 2019, we focushave increased our sales to customers in only a few market sectors. Eachfixed costs and now sell products having higher costs of product revenue than our biopreservation media products. We expect that the result of these sectors is subjectacquisitions will make it more difficult to macroeconomicpredict 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, as well as trendsthe COVID-19 pandemic or otherwise, our results of operations will be harmed because many of our expenses are now relatively fixed. In particular, a large portion of our manufacturing costs, research and conditions thatdevelopment expenses, sales and marketing expenses and general and administrative expenses are sector specific. Shiftsnot significantly affected by variations in the performancerevenue. Further, a shift in product revenue concentration away from our CryoStor products and towards our new products with higher costs of a sector served by us, as well as the economic, business and/or regulatory conditions that affect the sector, or our failure to choose appropriate sectors can particularly impact us. Any weakness in the market sectors in which our customers are concentrated couldproduct revenue will adversely affect our business andoperating margin. If our quarterly operating results fail to meet investor expectations, the price of operations.our common stock may decline.
We have a history of losses and may never achieveengage in future acquisitions or maintain profitability.strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management.
In fiscal 2019, we acquired three companies and made investments in two other companies. We have incurred annual consolidated operating losses since inceptionare continuing to actively evaluate opportunities to grow our portfolio of cell and gene therapy tools. In the event we engage in an acquisition or strategic transaction, including by making an investment in another company, we may continueneed to incur operating losses. Foracquire additional financing. Obtaining financing through the fiscal years ended December 31, 2017 and December 31, 2016, we had consolidated net losses attributable to BioLifeissuance or sale of $2.5 million and $6.9 million, respectively. As of December 31, 2017, our consolidated accumulated deficit was approximately $74.0 million. Weadditional equity and/or debt securities, if possible, may not be ableat favorable terms and may result in additional dilution to successfully achieve or sustain profitability. Successful transition to profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure.
Wecurrent stockholders. Additionally, any such transaction may need additional capital to reach and maintain a sustainable level of positive cash flow and if we raise such additional capital through the issuance of equity or convertible debt securities, your ownership will be diluted, and equity securities issued may have rights, preferences and privileges superior to the shares of common stock.
If we are unable to achieve profitability sufficient to permitrequire us to fundincur 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 other planned actions, wefinancial results. For example, an acquisition or strategic transaction may be required to raise additional capital. Thereentail numerous operational and financial risks, including the risks outlined above and additionally:
● | exposure to unknown liabilities; |
● | disruption of our business and diversion of our management's time and attention in order to 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 such capital would be available on favorable terms,we will undertake or at all. Ifsuccessfully complete any transactions of the nature described above, and any transactions that we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership held by existing stockholders may be reduced, and the market price of our common stockdo complete could fall due to an increased number of shares available for sale in the market. Further, our board has the authority to establish the designation of additional shares of preferred stock that may be convertible into common stock without any action by our stockholders, and to fix the rights, preferences, privileges and restrictions, including voting rights, of such shares. Any such additional shares of preferred stock may have rights, preferences and privileges senior to those of outstanding common stock, and the issuance and conversion of any such preferred stock would further dilute the percentage ownership of our stockholders. Debt financing, if available, may involve restrictive covenants, which may limit our operating flexibility with respect to certain business matters. If we are unable to secure additional capital as circumstances require, we may not be able to fund our planned activities or continue our operations.
There is uncertainty surrounding our continued ability to successfully commercialize our HypoThermosol® FRS and CryoStor® biopreservation media products.
Our growth depends on our continued ability to successfully develop, commercialize and market our HypoThermosol® FRS, CryoStor®, and BloodStor® biopreservation media products. Even in markets that do not require us to obtain regulatory approvals, our products will not be used unless they present an attractive alternative to competitive products and the benefits and cost savings achieved through their use outweigh the cost of our products. If we are unable to develop and sustain a market for our products, this will have a material adverse effect on our business, results of operations, financial condition and prospects.
If intangible assets and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.
In connection with the accounting for our completed acquisitions in 2019, we recorded a significant amount of intangible assets, including developed technology and customer relationships relating to the acquired product lines, and goodwill. Under U.S. GAAP, we must assess, at least annually and potentially more frequently, whether the value of intangible assets and goodwill has been impaired. Intangible assets and goodwill will be assessed for impairment in the event of an impairment indicator. Any reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.
Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies.
As a part of our growth strategy, we may make selected acquisitions of complementary products and/or businesses. Any acquisition involves numerous risks and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, or results of operations:
difficulties in integrating new operations, technologies, products, and personnel;
problems maintaining uniform procedures, controls and policies with respect to our financial accounting systems;
lack of synergies or the inability to realize expected synergies and cost-savings;
difficulties in managing geographically dispersed operations, including risks associated with entering foreign markets in which we have no or limited prior experience;
underperformance of any acquired technology, product, or business relative to our expectations and the price we paid;
negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges;
the potential loss of key employees, customers, and strategic partners of acquired companies;
claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction;
• | the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; | |
the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders;
the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is low or volatile which could preclude us from completing any such acquisitions;
diversion of management’s attention and company resources from existing operations of the business;
inconsistencies in standards, controls, procedures, and policies;
the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies;
assumption of, or exposure to, historical liabilities of the acquired business, including unknown contingent or similar liabilities that are difficult to identify or accurately quantify; and
risks associated with acquiring intellectual property, including potential disputes regarding acquired companies’ intellectual property.
In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal, and information technologies. There can be no assurance that any of the acquisitions we may make will be successful or will be, or will remain, profitable. Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all.
Healthcare reform measures could adversely affect our business.
The efforts of governmental and third-party payors to contain or reduce the costs of healthcare may adversely affect the business and financial condition of pharmaceutical and biotechnology companies, including ours. Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to continuesell our products profitably. Efforts by governments and growother third-party payors to contain or reduce the costs of healthcare through various means may limit our business.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.
The successIf 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 HypoThermosol® FRSproducts, increased costs and CryoStor® biopreservation mediadamage to our reputation.
Our success depends on the market’s confidence that we can provide reliable, high-quality products is dependent,to our customers. We believe that customers in part, on successful customer regulatory approvalsour target markets are likely to be particularly sensitive to product defects and commercial successerrors. Our reputation and the public image of new regenerative medicineour products and therapies.technologies may be impaired if our products fail to perform as expected. Although our products are tested prior to shipment, defects or errors could nonetheless occur in our products. In the future, if our products experience, or are perceived to experience, a material defect or error, this could result in loss or delay of revenues, delayed market acceptance, damaged reputation, diversion of development resources, legal claims, increased insurance costs or increased service and warranty costs, any of which could harm our business. Such defects or errors could also narrow the scope of the use of our products, which could hinder our success in the market. Even after any underlying concerns or problems are resolved, any lingering concerns in our target market regarding our technology or any manufacturing defects or performance errors in our products could continue to result in lost revenue, delayed market acceptance, damaged reputation, increased service and warranty costs and claims against us.
Our HypoThermosol® FRS and CryoStor® biopreservation media products are marketed to biotechnology companies and research institutions engaged in research and development
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.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 couldcan continue do so in a profitable manner.
We are dependent on outside suppliers for all our manufacturing supplies.
We rely on outside suppliers for all our manufacturing supplies, parts and components. Although we believe we could develop alternative sources of supply for most of these components within a reasonable period of time, there can be no assurance that, in the future, our current or alternative sources will be able to meet all our demands on a timely basis.basis, particularly given the uncertainty surrounding the COVID-19 pandemic. Unavailability of necessary components could require us to re-engineer our products to accommodate available substitutions, which could increase costs to us and/or have a material adverse effect on manufacturing schedules, products performance and market acceptance. In addition, an uncorrected defect or supplier’s variation in a component or raw material, either unknown to us or incompatible with our manufacturing process, could harm our ability to manufacture products. We might not be able to find a sufficient alternative supplier in a reasonable amount of time, or on commercially reasonable terms, if at all. If we fail to obtain a supplier for the components of our products, our operations could be disrupted.
Our investment in SAVSU may be adversely impacted by the failure of SAVSU.
We own a minority equity interest in SAVSU and we have limited control over management decisions. Accordingly, our ability to profit from our equity interest in SAVSU will be largely dependent on the current management of SAVSU. SAVSU faces all the inherent risks associated with the development, marketing and operation of a new product line. In addition, we face the risk that SAVSU will not be able to fulfill product orders based on our sales effort. If SAVSU fails to fulfill its obligations due to strategic business interests, financial condition or otherwise, SAVSU may be required to raise additional capital, which will dilute our ownership, or SAVSU may not be able to continue its operations, in which case we may suffer losses.
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.
If we were to be successfully sued related to our products, operations or other activities, we could face substantial liabilities that may exceed our resources.
We may be held liable if any of our products or operations cause injury or death. We are subject to certain litigation described under “Item 3. Legal Proceedings”, and may also face other types of litigation, including those related to alleged breaches of contract or applicable laws or of our duties to third parties. We currently maintain commercial general and umbrella liability policies and a product liability insurance policy. When necessary for our products, we intend to obtain additional product liability insurance. Insurance coverage may be prohibitively expensive, may not fully cover potential liabilities or may not be available in the future. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products. If we were to be sued for any injury caused by or associated with our products or operations or in connection with other matters, or if our existing litigation proceeds, the litigation could consume substantial time and attention of our management, and the resulting liability could have a material adverse effect on us.
Regulatory or other difficultiesDifficulties in manufacturing could have an adverse effect upon our expenses and our product revenues.
We currently manufacture all of our biopreservation media products, freezer products and related components. We currently outsource most of the manufacturing of our ThawSTAR and evo products. The manufacturemanufacturing of theseour products is difficult complex and highly regulated.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 and in a timely manner manufacture and supply our biopreservation media 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 |
● | global viruses and pandemics, including the current COVID-19 pandemic. |
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 salesrevenue and results of operations.
WeWhile we are registered withnot currently subject to FDA as a contract manufacturer. Our contract-manufacturing customers may require us to comply with cGMP requirements and may audit our compliance with cGMP standards. If a customer finds us to be out of compliance with cGMP standards, this could have a material adverse effector other regulatory approvals on our ability to retain and attract contract manufacturing customers.
Ifproducts, if we become subject to additional 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 or other regulatory approvals.FDA. In particular, we are not required to sponsor formal prospective, controlled clinical-trials to establish safety and efficacy. Additionally, we comply with cGMP requirements. This is done solely to support our current and prospective clinical customers. However, there can be no assurance that we will not be required to obtain approval from the FDA, or foreign regulatory authorities, as applicable, prior to marketing any of our products in the future. Any such requirements could delay or prevent the sale of our products or may subject us to additional expenses.
We may be adversely affected if we violate privacy and security regulations or suffer a data breach.
Federal and state laws protect the confidentiality of certain patient health information, including patient records, and restrict the unauthorized use and disclosure of such information. In particular, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing privacy, security, and breach notification regulations (collectively, HIPAA Standards), govern the use and disclosure of protected health information by “covered entities,” which are healthcare providers that submit electronic claims, health plans and healthcare clearinghouses, as well as their “business associates” and their subcontractors. Our employee health benefit plans are considered “covered entities” and, therefore, are subject to the HIPAA Standards.
We may be adversely affected if our internal control over financial reporting fails or is circumvented.
We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. We are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting, but as a smaller reporting company we are exempt from the requirement to have our independent accountants attest to our internal control over financial reporting. If it were to be determined that our internal control over financial reporting is not effective, such shortcoming could have an adverse effect on our business and financial results and the price of our common stock could be negatively affected. This reporting requirement could also make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. 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. Any failure or circumvention of the controls and procedures or failure to comply with regulation concerning control and procedures could have a material effect on our business, results of operation and financial condition. Any of these events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively affect the market price of our shares, increase the volatility of our stock price and adversely affect our ability to raise additional funding. The effect of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board and our board committees and as executive officers.
Risks Related to Our Intellectual Property
Expiration of our patents may subject us to increased competition and reduce or eliminate our opportunity to generate product revenue.
The patents for our products have varying expiration dates and, when these patents expire, we may be subject to increased competition and we may not be able to recover our development costs. In some of the larger economic territories, such as the United States and Europe, patent term extension/restoration may be available. We cannot, however, be certain that an extension will be granted or, if granted, what the applicable time or the scope of patent protection afforded during any extended period will be. If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of our U.S. and non-U.S. patents.
US Patent 6,045,990, which provides patent coverage relating to HypoThermosol®HypoThermosol FRS, will expireexpired in April 2019, and its foreign patent counterparts will expireexpired in July 2019, reducing2019. This may reduce the barrier to entry for competition for this product, which may materially affect the pricing of HypoThermosol®HypoThermosol FRS and our ability to retain market share. We may file extensions for this patent. We hold various trade secrets and other confidential know-how related to the manufacturing and testing of our products which limit our exposure uponto the expiration of US patent 6,045,990.
Our proprietary rights may not adequately protect our technologies and products.
Our commercial success will depend on our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for our technologies and products in the United States and other countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies and products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We intend to apply for additional patents covering both our technologies and products, as we deem appropriate. We may, however, fail to apply for patents on important technologies or products in a timely fashion, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products and technologies. In addition, the patent positions of life science industry companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. As a result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot guarantee that:
● | we were the first to make the inventions covered by each of our issued patents and pending patent applications; |
● | we were the first to file patent applications for these inventions; |
● | 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.
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-partythird 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.
Risks RelatedOur inability to protect our systems and data from continually evolving cybersecurity risks or other technological risks, including as a result of breaches of our associated third parties, could affect our ability to conduct our business.
In conducting our business, we process, transmit and store sensitive business information and personal information about our customers, vendors, and other parties. This information may include account access credentials, credit and debit card numbers, bank account numbers, social security numbers, driver’s license numbers, names and addresses and other types of sensitive business or personal information. Some of this information is also processed and stored by our third-party service providers to whom we outsource certain functions and other agents, including our customers, which we refer to collectively as our associated third parties.
We are a regular target of malicious third-party attempts to identify and exploit system vulnerabilities, and/or penetrate or bypass our security measures, in order to gain unauthorized access to our Common Stocknetworks and Other Securitiessystems or those of our associated third parties. Such access could lead to the compromise of sensitive, business, personal or confidential information. As a result, we proactively employ multiple methods at different layers of our systems to defend our systems against intrusion and attack and to protect the data we collect. However, we cannot be certain that these measures will be successful and will be sufficient to counter all current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information.
Our computer systems and our associated third parties’ computer systems could be in the future, subject to breach, and our data protection measures may not prevent unauthorized access. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect. Threats to our systems and our associated third parties’ systems can derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Computer viruses and other malware can be distributed and could infiltrate our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with our services or create a diversion for other malicious activities. Our defensive measures may not prevent downtime, unauthorized access or use of sensitive data. Further, while we select our third party service providers carefully, and we seek to ensure that our customers adequately protect their systems and data, we do not control their actions and are not able to oversee their processes. Any problems experienced by our associated third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyber-attacks and security breaches, could adversely affect our ability to conduct our business and our financial condition.
We could also be subject to liability for claims relating to misuse of personal information, such as violation of data privacy laws. We cannot provide assurance that the contractual requirements related to security and privacy that we impose on our service providers who have access to customer data will be followed or will be adequate to prevent the unauthorized use or disclosure of data. Any failure to adequately enforce or provide these protective measures could result in liability, protracted and costly litigation, governmental intervention and fines.
The market for our common stock is limited and our stock price is volatile.
Our common stock, traded on the NASDAQ Capital Market, is volatile and has historically traded at low average daily volumes, resulting in a limited market for the purchaseexperienced price and salevolume fluctuations.
The market prices of many publicly traded companies, including emerging companies in the life sciences industry, have been, and can be expected to be, highly volatile. The future market price of our common stock could be significantly impacted by numerous factors, including, but not limited to:
● | Future sales of our common stock or other fundraising events; |
● | Sales of our common stock by existing shareholders; |
● | Changes in our capital structure, including stock splits or reverse stock splits; |
● | 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 the current COVID-19 pandemic; and |
● | Other factors outside of our |
A significant percentage of our outstanding common stock is held by two stockholders, and these stockholders therefore have significant influence on us and our corporate actions.
As of December 31, 2017,2019, two of our existing stockholders, Taurus4757 GmbH (“Taurus”) and WAVI Holdings AG (“WAVI”), beneficially owned, collectively, approximately 57.1%4.7 million shares of our common stock, representing 22% of the issued and outstanding shares.shares of common stock and warrants to purchase 3.9 million shares of our common stock and options to purchase 68,000 shares of our common stock. Taurus and WAVI were previously secured lenders to our Company, and the chairman of Taurus, Mr. Girschweiler, is a member of our board.board of directors. Accordingly, these stockholders have had, and will continue to have, significant influence in determining the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers, consolidations and the sale of all or substantially all our assets, election of directors and other significant corporate actions. In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us.
We may be at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following an extraordinary corporate action or a decline in the market price of its securities. This risk is especially relevant for us because our stock price and those of other biotechnology and life sciences companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. We do maintain insurance, but the coverage may not be sufficient and may not be available in all instances.
Anti-takeover provisions in our charter documents and under Delaware law could make a third-party acquisition of us difficult.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include the ability of our board to designate the terms of and issue new series of preferred stock without stockholder approval and to amend our bylaws without stockholder approval. Further, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless certain specific requirements are met as set forth in Section 203. Collectively, these provisions could make a third-party acquisition of us difficult or could discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.
Future sales or the potential forAny future sales of our securities in the public markets may cause the trading price of our common stock to decline and could impair our ability to raise capital through future equity offerings.
Sales of a substantial number of shares of our common stock or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common stock or other securities to decline and could materially impair our ability to raise capital through the sale of additional securities. WeIn addition to the 3.9 million warrants to purchase shares of our common stock owned by Taurus and WAVI, we have a substantial number ofan additional 88,000 warrants exercisable to purchase shares of common stock outstanding. Many of the shares of common stock issuable upon exercise of those warrantsoutstanding which will be freely tradable.tradable upon exercise. We have agreed to use our best efforts to keep a registration statement registering the issuance and resale of many such shares effective during the term of the warrants. In addition, we have a significant number of shares of our common stock reserved for issuance pursuant to other outstanding options and rights. If such shares are issued upon exercise of options, warrants or other rights, or if we issue additional securities in a public offering or a private placement, such sales or any resales of such securities could further adversely affect the market price of our common stock. The sale of a large number of shares of our common stock or other securities also might make it more difficult for us to sell equity or equity-related securities in the future at a time and at the prices that we deem appropriate.
Securities or industry analysts may not publish favorable research or reports about our business or may publish no information, which could cause our stock price or trading volume to decline.
The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us and our business. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who cover us issue an adverse opinion regarding our stock price, our business or stock price would likely decline. If one or more of these analyst cease coverage of our company or fail to regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
We do not anticipate declaring any cash dividends on our common stock.
We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and earnings for use in the operation and expansion of our business.
Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset impairment and fair value determinations, inventories, business combinations and intangible asset valuations, leases, and litigation, are highly complex and involve many subjective assumptions, estimates, and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our reported or expected financial performance or financial condition and could require us to restate our prior financial statements and issue a non-reliance statement regarding our prior financial disclosures.
Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.
Section 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the company’s stock immediately before the ownership change. We may be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur larger federal income tax liability.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud. If we identify a material weakness in our internal control over financial reporting, our ability to meet our reporting obligations and the trading price of our stock could be negatively affected.
As described in Item 9A — Controls and Procedures and elsewhere in this Form 10-K, in connection with the restatement of our Consolidated Financial Statements, we identified a material weakness in our internal control over financial reporting with regard to having sufficient technical resources to appropriately analyze and account for complex financial instruments and complex share-based awards. With regard to our prior interpretation of ASC 480, “Distinguishing Liabilities from Equity”, as it related to the initial classification and subsequent accounting of our registered Warrants as equity instruments dating back to March 2014. Upon a reassessment, we determined that we should have accounted for these Warrants as liabilities instead of equity. This material weakness with regard to lacking sufficient technical resources also affected our ability to appropriately value and account for share based payment instruments with market-based vesting provisions under ASC 718, “Stock Compensation”. We determined that we should have used a Monte Carlo simulation to value share based payment instruments with a market-based vesting condition. Given this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2019.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors.
While we plan on addressing our material weakness as disclosed herein, elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations or may lose confidence in our reported financial information. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and The Nasdaq Stock Market, we could face severe consequences from those authorities. In either case, it could result in a material adverse effect on our business or have a negative effect on the trading price of our common stock. Further, if we fail to remedy this deficiency (or any other future deficiencies) or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of our financial statements will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of those controls.
Further, in the future, if we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC, The Nasdaq Stock Market or other regulatory authorities.
Our financial condition and results of operations for fiscal 2020 may be adversely affected by the recent COVID-19 outbreak.
The Seattle area, including the location of our corporate headquarters and our media production facility and warehouse, was an early location of coronavirus cases in the U.S. We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While we have implemented specific business continuity plans to reduce the potential impact of COVID-19 and believe that we have sufficient inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that our continuity plan, once in place, will be successful or that our inventory will meet forecasted or actual demand.
We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19 could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition and prospects.
The restatement of our historical financial statements has consumed a significant amount of our time and resources and may continue to do so.
As described herein, we have restated our Consolidated Financial Statements for the periods discussed herein. The restatement process was highly time and resource-intensive and involved substantial attention from management, as well as significant legal and accounting costs. Although we have now completed the restatement, we cannot guarantee that we will have no further inquiries from the SEC or The Nasdaq Stock Market regarding our restated Consolidated Financial Statements or matters relating thereto.
Any future inquiries from the SEC or The Nasdaq Stock Market as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself.
Further, many companies that have been required to restate their historical financial statements have experienced a decline in stock price and stockholder lawsuits related thereto.
Natural disasters, geopolitical unrest, war, terrorism, public health issues or other catastrophic events could disrupt the supply, delivery or demand of products, which could negatively affect our operations and performance.
We are subject to the risk of disruption by earthquakes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, public health issues, epidemics or pandemics and other events beyond our control and the control of the third parties on which we depend. Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, our employees, facilities, partners, suppliers, distributors or customers, and could decrease demand for our products, create delays and inefficiencies in our supply chain and make it difficult or impossible for us to deliver products to our customers. A catastrophic event that results in the destruction or disruption of our data centers or our critical business or information technology systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected.
UNRESOLVED STAFF COMMENTS |
Not applicable.
PROPERTIES |
We lease approximately 30,000 square feet of property being used in current operations in our Bothell, Washington principal location which containsOur material office and manufacturing storage and laboratory facilities.leases are detailed below:
Location | Square Feet | Principal Use | Lease Expiration | ||||
Bothell, WA | 32,106 | Corporate headquarters, manufacturing, research and development, marketing and administrative offices | July 2021 | ||||
Menlo Park, CA | 1,250 | Research and development, and administrative offices | July 2020 | ||||
Albuquerque, NM | 9,932 | Manufacturing, research and development, and administrative offices | December 2021 | ||||
Bruce Township, MI | 106,998 | Manufacturing, research and development, and administrative offices | November 2020 |
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 prior to the expiry of the lease in 2021.space. We believe that adequate facilities will be available upon the conclusion of our leases.
All our products and services are manufactured or provided from our Bothell, Washington facility.
LEGAL PROCEEDINGS |
Additional information regardingFrom 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 properties is contained in Note 9 to the Financial Statements included in this Annual Report on Form 10-K.business, financial condition or results of operations.
We are party to a number of lawsuits that were brought against the Company by former employees in 2007 and have been previously disclosed in our public filings. As of the date of this annual report, we do not believe that these legal proceedings are material to the Company. For more information relating to these lawsuits, reference is made to our annual report on Form 10-K for the year ended December 31, 2016.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Price Range of Common Stock
Our common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “BLFS.”
As of March 6, 2018,May 5, 2020, there were approximately 332161 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.
The following table sets forth the range of high and low quarterly closing sales prices of our common stockSee Item 12 for the periods indicated:
High | Low | |||||||
Year ended December 31, 2017 | ||||||||
4th Quarter | $ | 6.90 | $ | 4.98 | ||||
3rd Quarter | 5.71 | 2.62 | ||||||
2nd Quarter | 2.40 | 2.02 | ||||||
1st Quarter | 2.27 | 1.62 | ||||||
Year ended December 31, 2016 | ||||||||
4th Quarter | $ | 1.83 | $ | 1.45 | ||||
3rd Quarter | 2.37 | 1.57 | ||||||
2nd Quarter | 1.96 | 1.47 | ||||||
1st Quarter | 2.10 | 1.57 |
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2017 relating to allregarding securities authorized for issuance under our equity compensation plans:
Plan category | Number of securities to (in thousands) | Weighted Average exercise price of outstanding options | Number of granted restricted stock awards outstanding (in thousands) | Number of securities (in thousands) | ||||||||||||
Equity compensation plans not approved by security holders (1) | 665 | $ | 1.27 | –– | –– | |||||||||||
1998 performance incentive plan | 7 | $ | 0.70 | –– | –– | |||||||||||
Second amended and restated 2013 performance incentive plan | 2,718 | $ | 1.92 | 379 | 1,003 |
(1) Represents shares of common stock issuable pursuant to non-plan stock option agreements entered into prior to the adoption of our 2013 Performance Incentive Plan. Prior to the adoption of our 2013 Performance Incentive Plan, we granted certain individuals stock options pursuant to stock option agreements that were not issued under a stockholder-approved plan. Each agreement entitles the holder to purchase from us a fixed number of shares of common stock at a fixed purchase price per share for a fixed period of time, which may not exceed ten (10) years. The specific terms and conditions of each option, including when the right to exercise the option vests, the number of shares subject to the option, the exercise price per share, the method of exercise, exercisability following termination, disability and death, and adjustments upon stock splits, combinations, mergers, consolidation and like events are specified in each agreement. In the event of a liquidation of the Company, or a merger, reorganization, or consolidation of the Company with any other corporation in which we are not the surviving corporation or we become a wholly-owned subsidiary of another corporation, any unexercised options shall be deemed canceled unless the surviving corporation elects to assume the options or to issue substitute options in place thereof. In the event of the forgoing, the holder will have the right to exercise the option during a ten-day period immediately prior to such liquidation, merger, or consolidation.plans.
Issuer Repurchases of Equity Securities
Not applicable.
SELECTED CONSOLIDATED FINANCIAL DATA |
Not applicable.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements”. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products and services, our ability to implement our business strategy and anticipated business and operations, in particular following the 2019 acquisitions, future financial and operational performance, our anticipated future growth strategy, including the acquisition of synergistic cell and gene therapy manufacturing tools and services or technologies, or other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, future financial and operating results, the impact of the COVID-19 pandemic, plans, objectives, expectations and intentions, revenues, costs and expenses, interest rates, outcome of contingencies, business strategies, regulatory filings and requirements, performance and market acceptance of our products, 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 Annual Report on 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 Annual Report on 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 Annual Report on 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 Annual Report on 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.
Recent DevelopmentsRestatement
Restructuring Amended and Restated Biologistex Operating Agreement:
On January 22, 2018, the Company and STLLC amended their arrangement with respect to their SAVSU joint venture. As described in more detail below, in exchange for the Company’s agreement to terminate that certain Services Agreement, dated December 31, 2016 (the “Services Agreement”), between the Company and STLLC relating to the provision of services by the Company to SAVSU in exchange initially for cash payments and thereafter for a portion of SAVSU’s future revenues, STLLC agreed to (i) revise a provision of that certain Contribution Agreement, dated December 31, 2016 (the “Contribution Agreement”), between the Company and STLLC eliminating the requirement that the Company transfer a portion of its equity of SAVSU to STLLC on December 31, 2018 and (ii) amend a provision of that certain Amended and Restated Operating Agreement of biologistex, dated December 31, 2016 (the “Operating Agreement”), reflecting the percentage of profits and losses that each of the Company and STLLC will share in of SAVSU.
On January 22, 2018, in consideration of the Company’s agreement to terminate the Services Agreement, the Company and STLLC entered into Amendment No. 1 to Contribution Agreement (the “Contribution Agreement Amendment”) and Amendment to the Amended and Restated Operating Agreement of biologistex CCM, LLC (the “Operating Agreement Amendment”).
Pursuant to the Contribution Agreement Amendment, the parties agreed to amend a provisiondiscussed in the Contribution Agreement that required the CompanyExplanatory Note and Note 2: “Restatement of Consolidated Financial Statements” to transfer to STLLC a portion of its equity stake in SAVSU which would have reduced the Company’s ownership in SAVSU from 40% to 25% on December 31, 2018. As a result of the Contribution Agreement Amendment, the Company will now maintain a 35% ownership stake in SAVSU, subject to ordinary dilution.
Pursuant to the Operating Agreement Amendment, the parties agreed to amend the profit sharing provision of the Operating Agreement. As a result of the Operating Agreement Amendment, the Company will receive 35% of the profitsthis Form 10-K, we are amending and losses of SAVSU, subject to ordinary dilution, moving forward. Prior to the Operating Agreement Amendment, the Company would have been entitled to receive 40% of the profitsrestating our audited consolidated financial statements and losses of SAVSUrelated disclosures for the fiscal year ended December 31, 2018 presented in this Form 10-K along with our unaudited consolidated financial statements and would have been entitled to receive 25% ofrelated disclosures for the profits and losses beginning January 1,quarters ended March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019, June 30, 2019 and continuing thereafter.
Exchange of debt into Series A Preferred Stock
On JuneSeptember 30, 2017, the Company and WAVI agreed2019 (see Note 16; “Quarterly Financial Information (Unaudited)” to exchange the Company’s previously issued promissory note (the “Note”) in the name of WAVI in the amount of $4,250,000 including principal and accrued interest thereon through June 1, 2017 for 4,250 shares of the Company’s newly designated Series A Preferred Stock (the “Series A Preferred Stock,” and the exchange transaction, the “Exchange”)our consolidated financial statements). The Exchange was exempt from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. As a result of the Exchange, the Note has been deemed immediately canceled and the Company no longer has any obligations under the Note. There is no additional consideration payable in connection with the Exchange.
Overview
Management’sThe following discussion and analysis provides additional insight intoof our financial condition and results of operations incorporates the Companyrestated amounts. For this reason, the data set forth in this section may not be comparable to discussion and is provided as a supplement to, and should be readdata in conjunction with, our audited financial statements and accompanying footnotes thereto.previously filed Annual Report on Form 10-K for the year ended December 31, 2018.
We striveare a life sciences company that develops and commercializes innovative technologies used in the manufacture, storage and transportation of biological drugs.
We develop, manufacture and market bioproduction tools to be the leading provider of biopreservation tools for cells, tissues,cell and organs;gene therapy industry, which are designed to facilitateimprove quality and de-risk biologic manufacturing and delivery. Our products are used in basic and applied research, and commercializationcommercial manufacturing of newbiologic based therapies by maintaining the health and function of biologic source material during sourcing, manufacturing, storage, distribution, and patient delivery of cells and tissues.
Our current portfolio of bioprocessing tools includes our biopreservation media for the preservation of cells and tissues, automated thaw devices which provide controlled, consistent thawing of frozen biologics in vials and cryobags, a line of “smart”, cloud connected devices for transporting biologic payloads at a variety of temperature ranges and a full line of isothermal and liquid nitrogen freezers and accessories for freezing and storage of biologic samples.
We currently operate as one bioproduction tools business with product lines that serve the continuum in the biologic drug manufacturing and delivery process. We have a diversified portfolio of tools that focus on the freezing and thawing process of biologic drugs. We have in-house expertise in cryobiology and continue to capitalize on opportunities to maximize the value of our product platform for our extensive customer base through both organic growth innovations and acquisitions.
Astero Bio Corporation Acquisition
On April 1, 2019, BioLife completed the acquisition of all the outstanding shares of Astero. Astero’s ThawSTAR product line is comprised of a family of automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. The products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths.
The Astero Acquisition was accounted for as a purchase of a business under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification No. (“ASC”) 805, “Business Combinations.” In connection with the Acquisition, the Company paid (i) a base payment in the amount of $12.5 million consisting of (x) an initial cash payment of $8.0 million at the closing of the transactions contemplated by the Purchase Agreement, subject to adjustment for working capital, net debt and transaction expenses, and (y) a deferred cash payment that was paid into escrow of $4.5 million payable upon the earlier of Astero meeting certain product development milestones or one year after the date of the Closing and (ii) earnout payments in calendar years 2019, 2020 and 2021 of up to an aggregate of $3.5 million, which shall be payable upon Astero achieving certain specified revenue targets in each year and a separate earnout payment of $5.0 million for calendar year 2021 which shall be payable upon Astero achieving a cumulative revenue target over the three-year period from 2019 to 2021.
SAVSU Technologies, Inc. Acquisition
On August 7, 2019, the Company consummated the acquisition (the “SAVSU Acquisition”) of the remaining shares of SAVSU Technologies, Inc., a Delaware corporation, pursuant to a Share Exchange Agreement (the “Exchange Agreement”) by and among the Company, SAVSU and SAVSU Origin LLC, a Delaware limited liability company (“Origin”). Pursuant to the Exchange Agreement, Origin agreed to transfer to the Company and the Company agreed to acquire from Origin 8,616 shares of common stock of SAVSU, representing the remaining 56% of the outstanding shares of SAVSU that the Company did not own, in exchange for 1,100,000 shares of common stock of the Company. On August 8, 2019, the Company completed the SAVSU Acquisition, and SAVSU became a wholly owned subsidiary of the Company.
SAVSU is a leading developer and supplier of next generation cold chain management tools for C&GT. The evo® cloud connect platform allows biologic products to be traced and tracked in real time. Our evo platform consists of rentable cloud connected shippers and evo technology tracking software provides real-time information on geolocation, payload temperature, ambient temperature, tilt of shipper, humidity, altitude, and real-time alerts when a shipper has been opened. Our internally developed evo software allows customers to customize alert notifications both in data measurements and user requirements. The evo Dry Vapor Shipper (“DVS”) is specifically marketed to C&GT companies. The evo DVS has improved form factor and ergonomics over the traditional dewar, including extended thermal performance, reduced liquid nitrogen recharge time, improved payload extractors and ability to maintain temperature for longer periods on its side. The evo DVS does not require to be shipped in a pallet format, enabling shipping on narrow-bodied aircraft which is not an option for competitors who use palletized shipments. Our integrated system of internal and external packing innovations reduces risk of payload breakage due to shock while in transportation.
The SAVSU Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The Company paid to Origin 1,100,000 shares of unregistered common stock totaling $19.9 million (based on a share price of $18.12 at the time of acquisition) for the 56% we did not previously own.
Custom Biogenic Systems, Inc. Acquisition
On November 10, 2019, we entered into an Asset Purchase Agreement, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc., a Michigan corporation (“CBS Seller”), pursuant to which we agreed to purchase from the CBS Seller substantially all of CBS Seller’s assets, properties and rights (the “CBS Acquisition”). The CBS Seller, a privately held company with operations located near Detroit, Michigan, designs and manufactures liquid nitrogen laboratory freezers and cryogenic equipment and also offers a related cloud-based monitoring system that continuously assesses biologic sample storage conditions and alerts equipment owners if a fault condition occurs. The Acquisition closed on November 12, 2019.
In connection with the CBS Acquisition, we paid to CBS Seller (i) a base payment in the amount of $15.0 million, consisting of a cash payment of $11.0 million paid at the closing of the CBS Acquisition, less a cash holdback escrow of $550,000 to satisfy certain indemnification claims, and an aggregate number of shares of our common stock, with an aggregate fair value equal to $4.0 million, less a holdback escrow of shares of Common Stock with an aggregate value equal to $3.0 million to satisfy potential payments related to any product liability claims outstanding as of March 13, 2019 and (ii) potential earnout payments in calendar years 2020, 2021, 2022, 2023 and 2024 of up to an aggregate of, but not exceeding, $15.0 million payable to CBS Seller upon achieving certain specified revenue targets in each year for certain product lines.
The CBS acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. Under the acquisition method of accounting, the acquired assets and liabilities assumed from CBS were recorded as of the acquisition date, at their fair values, and consolidated with BioLife. The preliminary fair value of the net tangible assets acquired is $6.0 million, the preliminary fair value of the identifiable intangibles is $6.8 million, and the preliminary residual goodwill is $3.1 million. The fair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates.
Critical Accounting Policies and Estimates
We have identified the policies and estimates below as being critical to our business operations and the understanding of our results of operations. These policies require management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The impact of and any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition,” including in the “Results of Operations” section, where such policies affect our reported and expected financial results. Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
Revenue Recognition
We generate revenue from the sale of our products, primarily to customers within the C&GT market. Under ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”). To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method, depending on the facts and circumstances relative to the contract. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component or variable consideration as of and during the year ended December 31, 2019.
Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company recognizes product revenue under the terms of each customer agreement upon transfer of control to the customer, which occurs at a point in time.
Inventories
We value inventory at the lower of cost or net realizable value, using the first-in first-out method. We review our inventory at least quarterly and record a provision for excess and obsolete inventory based on our estimates of expected product revenue volume, production capacity and expiration dates of raw materials, work-in-process and finished products during manufacturing, distributionproducts. We write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and clinical administration.inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order and tested for quality specifications prior to shipment.
A change in the estimated timing or amount of demand for our products could result in additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised estimate of inventory valuations.
Assets held for rent
Assets held for rent consists of all evo shippers and related components, in process of being assembled, and evo shippers and accessories complete and ready to be deployed and placed in service upon a customer order. Our customers rent the shippers per a rental agreement, which includes access to the evo.is cloud based tracking and information app. We retain ownership of the evo shippers and the evo tracking software platform. At the end of the rental agreement, the customer returns the shipper to the Company. Once an evo shipper is deployed and placed in service with a customer, we depreciate the cost of the evo shippers and related accessories over an estimated useful life of three years.
Business combinations
Amounts paid for acquisitions are allocated to the tangible and intangible assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and deferred revenue obligations. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of comprehensive income. The fair value of contingent consideration includes estimates and judgments made by management regarding the probability that future contingent payments will be made, the extent of royalties to be earned in excess of the defined minimum royalties, etc. Management updates these estimates and the related fair value of contingent consideration at each reporting period based on the estimated probability of achieving the earnout targets and applying a discount rate that captures the risk associated with the expected contingent payments. To the extent our estimates change in the future regarding the likelihood of achieving these targets we may need to record material adjustments to our accrued contingent consideration. Changes in the fair value of contingent consideration are recorded in our consolidated statements of operations. We use the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, etc. We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors. We believe the estimated purchased customer relationships, developed technologies, trademark/tradename, patents, and in process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the assets.
Intangible Assets and Goodwill
Intangible assets
Intangible assets with a definite life are amortized over their estimated useful lives using the straight-line method and the amortization expense is recorded within intangible asset amortization in the consolidated statements of operations. Intangible assets and their related estimated useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products. If impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future discounted cash flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company continues to believe that its definite-lived intangible assets are recoverable at December 31, 2019.
Goodwill
We test goodwill for impairment on an annual basis, and between annual tests if events and circumstances indicate it is more likely than not that the fair value of our goodwill is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the Company’s market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator. Goodwill is tested for impairment as of December 31st of each year, or more frequently as warranted by events or changes in circumstances mentioned above. Accounting guidance also permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. If, after this qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing would be necessary. A quantitative assessment is performed if the qualitative assessment results in a more likely than not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value. The Company operates as one reporting unit as of the goodwill impairment measurement date of December 31, 2019. As a result of our 2019 quantitative assessment, we concluded that goodwill does not need to be impaired as of December 31, 2019.
Contingent Consideration
We estimate the acquisition date fair value of the acquisition-related contingent consideration using various valuation approaches, including option pricing models and Monte Carlo simulations, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market participants would use to value these liabilities. The fair value of the contingent consideration is remeasured each reporting period, with any change in the value recorded in our consolidated statements of operations as change in fair value of contingent consideration.
Stock-based Compensation
We measure and record compensation expense using the applicable accounting guidance for share-based payments related to stock options, time-based restricted stock, and performance-based awards granted to our directors and employees. The fair value of stock options is determined by using the Black-Scholes option-pricing model. The fair value of market-based restricted stock awards is estimated, at the date of grant, using the Monte Carlo Simulation model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing our stock options and market-based stock awards, significant judgment is required in determining the expected volatility of our common stock and the expected life that individuals will hold their stock options prior to exercising. Expected volatility for stock options is based on the historical and implied volatility of our own common stock while the volatility for our market-based restricted stock awards is based on the historical volatility of our own stock and the stock of companies within our defined peer group. Further, our expected volatility may change in the future, which could substantially change the grant-date fair value of future awards and, ultimately, the expense we record. The fair value of restricted stock, including performance awards, without a market condition is estimated using the current market price of our common stock on the date of grant.
We expense stock-based compensation for stock options, restricted stock awards, and performance awards over the requisite service period. For awards with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with a market condition, we expense over the vesting period regardless of the value that the award recipients ultimately receive.
Provision for Income Taxes
We maintain a full valuation allowance on our net deferred tax assets. The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss and its forecasted losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, “Accounting for Income Taxes”, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its assets will be maintained. The Company will continue to assess the realizability of its assets going forward and will adjust the valuation allowance as needed.
The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available.
The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. As of December 31, 2019, the Company had no uncertain tax positions.
As of December 31, 2019, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $44.7 million, which is available to reduce future taxable income. Approximately $34.9 million of NOL will expire from 2020 through 2037, and approximately $9.8 million of NOL will be carried forward indefinitely. The NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Subsequent ownership changes may further affect the limitation in future years.
Recent Accounting Standards Update
See Note 1: “Organization and Significant Accounting Policies – Recent Accounting Pronouncements,” to our consolidated financial statements included in this report for more information.
Results of Operations
The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.
Overview for 2017Revenue
In 2017,2019, we reported financial results that were consistent with the continued execution ofacquired three companies which resulted in increased revenue diversification compared to prior years, in which nearly all revenue was derived from our long-term plans. We believe we are the market leader for pre-formulated, clinical grade biopreservation media products. Our patented biopreservation media products are formulatedproduct line. Although our revenues in 2019 were more diversified, both in terms of product and customer concentration, a trend we expect to reduce preservation-induced, delayed-onset cell damage and death. Our platform enabling technology provides our customers significant shelf life extension of biologic source material and final cell products, and greatly improved post-preservation cell, and tissue, viability and function. Our productssee continue to be widely adopted by this segment. We believe that our products have been incorporated in over 275 applications for new cell and tissue-based regenerative medicine products and therapies.2020, we did realize quarterly fluctuations based on large customer ordering patterns, which is something we expect will continue in 2020.
We continue to implement strategies that will increase awareness of the needRevenue for improved biopreservation.
Our strategies to achieve this objective include:
Utilize Existing Biopreservation Media Sales, Distribution and Manufacturing Infrastructure. We have developed a direct sales and distribution network for our products which we utilize to expand sales to existing customers and to gain additional customers. We believe that our products have been incorporated into over 275 applications for new cell and tissue-based regenerative medicine products and therapies. A significant number involve CAR-T cells and other types of T cells and mesenchymal stem cells targeting blood cancers, solid tumors and other leading causes of death and disability. In 2017, key customer announcements included:
Financial Performance Summary for 2017
Comparison of Annual Results of Operations
Percentage comparisons have been omitted within the following table where they are not considered meaningful.
Revenue and Gross Margin
Our revenue and gross margin for the years ended December 31, 20172019, and 20162018 were as follows (in thousands):comprised of the following:
Year Ended December 31, | ||||||||||||
2017 | 2016 | % Change | ||||||||||
Total Revenue | $ | 11,021 | $ | 8,227 | 34 | % | ||||||
Cost of sales | 4,275 | 3,448 | 24 | % | ||||||||
Gross profit | $ | 6,746 | $ | 4,779 | 41 | % | ||||||
Gross margin % | 61.2 | % | 58.1 | % |
Year Ended December 31, | |||||||||
(In thousands) | 2019(1) | 2018 | |||||||
Biopreservation media | $ | 23,358 | $ | 19,742 | |||||
Automated thawing | 1,184 | –– | |||||||
evo shippers | 692 | –– | |||||||
Freezers and accessories | 2,137 | –– | |||||||
Total revenue | $ | 27,371 | $ | 19,742 |
(1) | 2019 revenue includes automated thawing revenue related to Astero from April 1, 2019 through December 31, 2019; evo shipper rental revenue related to SAVSU from August 8, 2019 through December 31, 2019; and freezer and accessory revenue related to CBS from November 12, 2019 through December 31, 2019. |
CoreFor 2019, revenue increased by $7.6 million, or 39%, compared with 2018. The increase is due to the acquisitions throughout 2019, and an increase in product revenue of our biopreservation media products. Product Sales.revenue of our biopreservation media products in 2019 increased $3.6 million, or 18% compared with 2018. Our corebiopreservation media products are sold through both direct and indirect channelscontinued to thebe adopted by customers in the biobanking, drug discovery,C&GT market and regenerative medicine markets. Sales to our customers in 2017 increased compared to 2016 due to the combination of increased volume of liters sold (6,105 compared to 5,159), andwe realized a higher average selling price per liter ($1,805in 2019 compared to $1,594). The revenue increase was primarily in sales to2018. Revenue is impacted by the relatively high degree of customer concentration, the timing of orders, the development efforts of our regenerative medicine customers or end-users and distributors, which increased 54% and 30%, respectively, in 2017 compared to 2016. Revenue from the regenerative medicine market and our distributors should continue to increase in the next one to five years as some customers receive regulatory and marketing approvals for their clinical cellbiologics that incorporate our products, which may result in significant quarterly fluctuations. Such quarterly fluctuations are expected, but they may not be predictive of future revenue or otherwise indicative of a trend.
Costs and tissue-based products.Operating Expenses
Total costs and operating expenses for years ended December 31, 2019 and 2018 were comprised of the following:
Year Ended December 31, | ||||||||||||||||
(In thousands, except percentages) | 2019 | 2018 | $ Change | % Change | ||||||||||||
Cost of revenue | $ | 8,760 | $ | 6,217 | $ | 2,543 | 41 | % | ||||||||
Research and development | 3,168 | 1,298 | 1,870 | 144 | % | |||||||||||
Sales and marketing | 4,701 | 2,615 | 2,086 | 80 | % | |||||||||||
General and administrative | 8,893 | 5,950 | 2,943 | 49 | % | |||||||||||
Intangible asset amortization | 1,079 | –– | 1,079 | –– | % | |||||||||||
Acquisition costs | 940 | –– | 940 | –– | % | |||||||||||
Change in fair value of contingent consideration | 50 | –– | 50 | –– | % | |||||||||||
Total costs and operating expenses | $ | 27,591 | $ | 16,080 | $ | 11,511 | 72 | % |
Cost of Sales.Revenue Cost of sales consists of raw materials, labor and overhead expenses. Cost of sales in 2017 increased compared to 2016 due to increased sales volume and higher direct overhead and raw material costs per liter.
Gross Margin. Gross marginIn 2019 cost of revenue increased $2.5 million, or 41% when compared to 2018, due primarily to the increase in revenue mentioned above. We expect that cost of product revenue may fluctuate in future quarters based on production volumes and product mix. The product lines acquired in 2019 have a higher cost of product revenue than our biopreservation media products.
Cost of product revenue as a percentage of revenue increased to 61.2%was 32%, and 31% for 2019 and 2018, respectively. Cost of product revenue in 2017 compared to 58.1%2019 includes $289,000 in 2016. Gross margininventory step-up related amortization recorded in the purchase accounting of our Astero and CBS acquisitions. The increase in cost of product revenue as a percentage of revenue increased in 2017, due tois a higher average selling price per liter sold and an increase in higher margin product mix, partially offset by an increase of direct overhead and raw materials.
Revenue Concentration. In eachresult of the years 2017inventory step-up, and 2016, we derived approximately 12%higher costs of ourproduct revenue from our relationship with one distributoras a percentage of our products. Revenue from customers located in foreign countries represented 16% and 17% of total revenue during the years ended December 31, 2017 and 2016, respectively. All sales to foreign customers are denominated in United States dollars.
Operating Expenses
Our operating expenses for the years ended December 31, 2017product lines acquired in 2019 through the Astero, Savsu and 2016 were as follows (in thousands):CBS acquisitions.
Year Ended December 31, | ||||||||||||
2017 | 2016 | % Change | ||||||||||
Operating Expenses: | ||||||||||||
Research and development | $ | 1,194 | $ | 2,028 | (41 | )% | ||||||
Sales and marketing | 2,086 | 3,010 | (31 | )% | ||||||||
General and administrative | 4,522 | 4,592 | (2 | )% | ||||||||
Operating Expenses | 7,802 | 9,630 | (19 | )% | ||||||||
% of revenue | 71 | % | 117 | % |
Research and Development.Development Expenses Research
During 2019 and 2018 research and development expenses consist(“R&D”) expense consisted primarily of salaries and other personnel-related expenses,costs, consulting and other outside services, laboratory supplies, and other costs. We expense all research and development costs as incurred except for the costs associated with the development of customized internal-use software systems, which were capitalized in 2016. Research and development expenses for 2017 decreased compared to 2016 due primarily to the biologistex restructuring ($902,969), as well as lowerexternal product development costs, partially offset by an increase in share-based compensation expense. In 2016, we capitalized $0.7services.
R&D expense increased $1.9 million in costs associated2019, or 144%, compared with 2018. The increase is primarily due to our three acquisitions in 2019 and stock compensation expense.
We expect our R&D expense to increase as we continue to expand, develop and refine the development of our biologistex web application.product lines we acquired in 2019.
Sales and Marketing.Marketing Expenses
Sales and marketing expenses consistexpense (“S&M”) consists primarily of salaries, trade association sponsorships, and other personnel-related expenses, consulting,costs, stock compensation expense, trade shows, sales commissions and advertising.
In 2019, S&M expense increased $2.1 million, or 80%, compared with 2018. The decrease in salesincrease reflects the S&M costs we absorbed related to our acquisitions, stock compensation expense and marketing expenses in 2017 compared to 2016 was primarily due to the biologistex restructuring ($1,294,544), partially offset by an increase in share-based compensationour direct selling costs.
We expect S&M expense tradeshow related expenses and travel costs.to increase, as we expand our direct selling efforts to support the broader product line offerings resulting from our 2019 acquisitions.
General and Administrative Expenses.Expenses
General and administrative expenses consist(“G&A”) expense consists primarily of personnel-related expenses, non-cash stock-based compensation for administrative personnel and members of the board of directors, professional fees, such as accounting and legal, and corporate insurance.
In 2019, G&A expenses increased by $2.9 million, or 49%, compared with 2018. The decrease in generalincrease reflects the assumption of G&A expenses related to our 2019 acquisitions, and the continued buildout of our administrative expenses in 2017 comparedinfrastructure, primarily through increased headcount and information technology expenditures, to 2016 was primarily due to the biologistex restructuring ($214,301), lower investor relations fees,support expected future growth and lower legal fees, partially offset by an increase in share-basedstock compensation expense.
We expect G&A expense to increase reflecting the infrastructure and costs related to supporting the larger expected enterprise created as a result of our 2019 acquisitions.
Intangible asset amortization expense
Amortization expense consists of charges related to the amortization of intangible assets associated with acquisitions, Astero, SAVSU and CBS in which we acquired definite-lived intangible assets.
Acquisition costs
Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs related to our Astero, SAVSU and CBS acquisitions.
Change in fair value of contingent consideration
Change in fair value of contingent consideration consists of changes in estimated fair value of our potential earnouts related to our Astero acquisition.
Other Income (Expenses)and Expenses
Total other expenses for years ended December 31, 2019 and 2018 were comprised of the following:
Year Ended December 31, | ||||||||||||||||
(In thousands, except percentages) | 2019 | 2018 (restated) | $ Change | % Change | ||||||||||||
Change in fair value of warrant liability | $ | (12,835 | ) | $ | (28,271 | ) | $ | 15,436 | 55 | % | ||||||
Interest income (expense), net | 501 | 276 | 225 | 81 | % | |||||||||||
Other | (13 | ) | –– | (13 | ) | –– | ||||||||||
Loss on equity method investment – SAVSU | (739 | ) | (672 | ) | (67 | ) | (10 | %) | ||||||||
Gain on acquisition - SAVSU | 10,108 | –– | 10,108 | –– | ||||||||||||
Total other income (expenses) | $ | (2,978 | ) | $ | (28,667 | ) | $ | 25,689 | 90 | % |
Change in fair value of warrant liability.Reflects the changes in fair value associated with the periodic “mark to market” valuation of certain warrants that were issued in 2014. See Note 1: “Organization and Significant Accounting Policies” of our accompanying consolidated financial statements “Certain Warrants which have Features that may Result in Cash Settlement” for more information.
Interest Income.Income. We earn interest on cash held in our money market account. We had a higher weighted average cash balance in our money market account for the year ended December 31, 2019 compared to 2018.
Interest Expense.Expense In 2017 and 2016, interest. Interest expense wasis related to our credit facility financing arrangement entered in May 2016 which was subsequently converted to preferred stock in June 2017.
Amortization of Deferred Financing Costs. Amortization of deferred financing costs represented the amortization of the allocated value of the detachable warrants associated with the credit facility financing arrangement entered into in May 2016 which was subsequently converted to preferred stock in June 2017.
Financing Costs and Write off of deferred financing costs.The financing costs in 2017 were due to various SEC filings related to potential stock issuances. The 2016 costs were due to the write off of deferred costs related to Registration Statement on Form S-3 filed with the SEC on January 8, 2016.
Loss on disposal of property and equipment.The loss on asset disposal was the disposal of property and equipment at net book value.
Loss on deconsolidation of biologistex.As a result of our Contribution Agreement with STLLC, BioLife no longer has a controlling financial interest over the biologistex JV, as defined under ASC 810,Consolidation, and has deconsolidated biologistex as of December 31, 2016. This resulted in a loss on deconsolidation of $2.8 million, which includes approximately $0.1 million in related restructuring charges. The loss on deconsolidation includes derecognizing the carrying amounts of biologistex’s assets and liabilities that were previously consolidated on BioLife’s consolidated balance sheet and the impact recorded to the retained interest in biologistex. Subsequent to deconsolidation, BioLife accounts for ownership in SAVSU using the equity method, which has been initially reflected at the fair value of our ownership interest on BioLife’s balance sheet as of December 31, 2016. See Note 1 to the Company’s Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.financing.
Loss on equity method investment.investment. The non-cash loss in the amount of $1.0 million associated with our proportionate share of the net loss incurred by SAVSU for the period based on our 45% ownership in our investment in SAVSU. AsSAVSU prior to our acquisition of December 31, 2016, we had no obligationthe remaining shares of SAVSU and subsequent consolidation of SAVSU in our financial statements.
Gain on acquisition of SAVSU. The non-cash gain associated with our equity investment in SAVSU due to provide any future funding to SAVSU.the acquisition of the remaining shares of SAVSU and subsequent consolidation of SAVSU in our financial statements.
Liquidity and Capital Resources
On December 31, 2017,2019, we had $6.7$6.4 million in cash and cash equivalents, compared to $1.4$30.7 million at December 31, 2016. 2018. The reduction in cash is primarily due to the cash payments associated with the 2019 acquisitions of Astero and CBS. We acquired Astero on April 1, 2019 for $12.5 million in cash and contingent consideration of up to $8.5 million (which payment requirement has not been triggered or otherwise paid to date). We anticipate paying $484,000 for the earnout related to 2019 revenues of Astero in early 2020. On August 8, 2019, we acquired SAVSU for 1,100,000 shares of common stock. On November 12, 2019, we acquired CBS for $11.0 million in cash, $4.0 million in shares of our common stock, and up to $15.0 million in contingent consideration payable in cash or stock (which payment requirement has not been triggered or otherwise paid to date).
Based on our current expectations with respect to our future revenue and expenses, and preferred stock dividend payments, we expectbelieve that our current level of cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next twelve12 months. IfHowever, if our revenues do not grow as expected, including as a result of the COVID-19 pandemic, and if we are not able to manage expenses sufficiently, we may be required to obtain additional equity or debt financing.
We continuefinancing if our cash resources are depleted. Further, the Company may choose to monitor and evaluate opportunities to strengthen our balance sheet and competitive position over the long term. These actions may include acquisitions or other strategic transactions that we believe would generate significant advantages and substantially strengthen our business. The consideration we pay in such transactions may include, among other things, shares of our common stock, other equity or debt securities of our Company or cash. We may elect to seekraise additional capital through a debt or equity financing in anticipationan attempt to mitigate the heightened level of business uncertainty caused by the COVID-19 pandemic, or in connection with, such transactionsorder to pursue additional acquisition or to fund or invest in any operations acquired thereby. Westrategic investment opportunities. Additional capital, if required, may also seek equity or debt financing opportunistically for these purposesnot be available on reasonable terms, if we believe that market conditions are conducive to obtaining such financing.at all.
Net Cash Provided by/Used In Operating ActivitiesFlows
Year Ended December 31, | ||||||||||||
(In thousands) | 2019 | 2018 (restated) | $ Change | |||||||||
Operating activities | $ | 1,213 | $ | 2,348 | $ | (1,135 | ) | |||||
Investing activities | (27,018 | ) | (6,500 | ) | (20,518 | ) | ||||||
Financing activities | 1,596 | 28,146 | (26,550 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | (24,209 | ) | $ | 23,994 | $ | (48,203 | ) |
During
Operating Activities
In 2019, our operating activities provided cash of $1.2 million reflecting a net loss of $1.7 million and non-cash charges totaling $6.6 million primarily related to depreciation, amortization, gain on acquisition of SAVSU, changes in fair value contingent consideration, income tax benefit related to the year ended December 31, 2017, we generated $605,000acquisition of SAVSU, fair value change in warrant liability and stock-based compensation charges. An increase in accounts receivable used $290,000 of cash from operations, comparedand was primarily driven by the 39% year-to-date increase in revenues and an increase in inventory used $3.7 million to support future revenue. These cash items used for operating activities were offset by cash items provided by operating activities that included an increase in accounts payable and accrued liabilities of $1.4 million. The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts.
For 2018, our operating activities provided cash of $4.3$2.3 million reflecting net loss of $25.0 million and non-cash charges totaling $30.7 million primarily related to fair value change in warrant liability, depreciation, amortization of deferred rent related to lease incentives, loss in our equity investment in SAVSU and stock-based compensation charges. An increase in receivables consumed $2.0 million of cash and was primarily driven by the 79% year-to-date increase in revenues. An increase in inventory levels to accommodate future revenue growth used $1.7 million of cash. The remaining cash flow provided by operations resulted from net favorable changes in various other working capital accounts.
Investing Activities
Our investing activities used $27.0 million of cash during 2019. We used $12.4 million, gained $1.3 million, and used $11.0 million in cash for the Astero, SAVSU, and CBS acquisitions, respectively. We also invested $1.0 million and $1.5 million in our strategic investments in iVexSol and Sexton Bio, respectively. Capital expenditures used $2.3 million as we continue to invest in our manufacturing facilities and increase in SAVSU’s assets held for rent.
For 2018, our investing activities used $6.5 million of cash, including $6.0 million for the year ended December 31, 2016. Operating cash generated in 2017 was the resultpurchase of an increase in gross margin due to an increase in liters sold and a higher average selling price per liter. We also decreased operating cash expenses, primarily as a resultadditional shares of the SAVSU restructuring.
Net Cash Provided by/Used In Investing Activities
Net cash used by investing activities was $0.1 million in 2017 and cash provided by investing activities was $0.4 million in 2016.SAVSU. The use of cash in 2017remaining $500,000 was used to purchase equipment. Cash provided by investing activities in 2016 was derived from proceeds from the maturity of available-for-sale securities. In addition, during 2016, we used $1.1 million in cash related to the development of the biologistex software system and $0.1 million related tofor purchases of equipment.
Net Cash Provided by Financing Activities
NetIn 2019, cash provided by financing activities was $4.8of $1.6 million included $1.8 million from the proceeds of warrant and $3.2 million in 2017 and 2016, respectively. stock option exercises.
In 2017, cash provided by2018, our financing activities was the resultprovided $28.1 million of $1.0cash. We received proceeds of $20.0 million in proceeds from the last tranchesale of our Credit Facility Agreementstock to an institutional investor, $12.9 million from the proceeds of outstanding warrant and $4.0 million in proceeds from stock option and warrant exercises, partially offset by payments of preferred dividends, costs associated with potential stock issuances and equipment financing and leasing. In 2016, cash provided by financing activities was the result of borrowings of $3.0 million from our Credit Facility Agreement, $0.3 million from exercises of warrants and stock options and $0.1exercises. We used $4.3 million in cash to redeem Series A preferred shares and $436,000 related to costs associated with a potential stock offering, including filing an S-3 registration statement.dividend payments on Series A preferred shares.
Critical Accounting Policies and Significant Judgments and EstimatesPeriod subsequent to year-end
Management’s discussionThe Seattle area, including the location of our corporate headquarters and analysisour media production facility and warehouse, was at the epicenter of the coronavirus outbreak in the U.S. We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While we are currently implementing specific business continuity plans to reduce the potential impact of COVID-19 and believe that we have sufficient inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that our continuity plan, once in place, will be successful or that our inventory will meet forecasted demand.
We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19 could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates, including, but not limited to those related to accounts receivable allowances, determination of fair value of share-based compensation, contingencies, income taxes, and expense accruals. We base our estimates on historical experience and on other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Share-based Compensationprospects.
We account for share-based compensation by estimating the fair value of share-based compensation using the Black-Scholes option pricing model on the date of grant. We utilize assumptions related to stock price volatility, stock option term and forfeiture rates that are based upon both historical factors as well as management’s judgment. Non-cash compensation expense is recognized on a straight-line basis over the applicable requisite service period of one to four years, based on the fair value of such share-based awards on the grant date.
Income Taxes
We follow the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and on the expected future tax benefits to be derived from net operating loss carryforwards measured using current tax rates. A valuation allowance is established if it is more likely than not that some portion or all the deferred tax assets will not be realized. We have not recorded any liabilities for uncertain tax positions or any related interest and penalties. Our tax returns are open to audit for the years ending December 31, 2013 to 2017.
Equity Method Accounting
We accountexperienced an increase in demand for our investment in SAVSU using the equity method of accounting. This method states that if the investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity method. Significant influence is generally deemed to exist if the Company’s ownership interestbiopreservation media products in the voting stocklatter half of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying valueMarch 2020, which we attribute to our customers’ desire to secure inventory in the consolidated balance sheet andface of wide-spread uncertainty. However, the ultimate future impact of COVID-19 on our business is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of other income (expense), net in the consolidated statements of operations.subject to significant uncertainty.
Off-Balance Sheet Arrangements
As of December 31, 2017, we didWe do not have any special purpose entities or off-balance sheet financing arrangements.
Contractual ObligationsCapital Requirements
For information regarding our current contingencies and commitments, see note 9 toOur future capital requirements will depend on many factors, including the consolidated financial statements included in Item 8.following:
● | the expansion of our cell and gene therapy tools business; |
● | the ability to sustain product revenue and profits of our cell and gene therapy products; | |
● | The degree to which we implement additional automated production equipment throughout our facilities; |
● | our ability to acquire additional cell and gene therapy products; |
● | the scope of and progress made in our research and development activities |
● | the extent of any share repurchase activity; and |
● | the success of any proposed financing efforts. |
Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 12 months. We expect operating expenses in the year ending December 31, 2020 to increase as we continue to expand our C&GT tools business. We expect to incur continued spending related to the development and expansion of our product lines and expansion of our commercial capabilities for the foreseeable future. Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional cell and gene therapy products and technologies to complement our existing manufacturing capabilities, and continued investment in our intellectual property portfolio.
We actively evaluate various strategic transactions on an ongoing basis, including acquiring complementary products, technologies or businesses that would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our stockholders, and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Further, the Company may choose to raise additional capital through a debt or equity financing in an attempt to mitigate the heightened level of business uncertainty caused by the COVID-19 pandemic. Additional capital may not be available on reasonable terms, if at all.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
Not applicable.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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REPORTREPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMFIRMS
To theShareholders and Board of Directors and Shareholders
BioLife Solutions, Inc.
Bothell, Washington
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheetssheet of BioLife Solutions, Inc. and Subsidiary (“the Company”(the “Company”) as of December 31, 2017 and 2016,2019, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years thenyear ended December 31, 2019, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as ofat December 31, 2017 and 2016,2019, and the results of its operations and its cash flows for each of the years thenyear ended December 31, 2019, in conformity with accounting principles generally accepted in the United States.States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated May 15, 2020 expressed an adverse opinion thereon.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of the Accounting Standards Codification Topic 842, “Leases.”
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)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 auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BDO USA, LLP
We have served as the Company's auditor since 2019.
Seattle, Washington
May 15, 2020
To the Board of Directors and Shareholders
BioLife Solutions, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of BioLife Solutions, Inc. ("the Company") as of December 31, 2018, the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Restatement of Previously Issued Financial Statements
As discussed in Note 2 to the financial statements, the Company has restated its 2018 financial statements to correct an error.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, anOur audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 auditsaudit 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 audits provideaudit provides a reasonable basis for our opinion.
/S/ PETERSON SULLIVAN LLP
We have served as the Company’sCompany's auditor since 2007. until 2019.
Seattle, Washington
March 9, 201815, 2019, except for the effects of the restatement discussed in Note 2 to the financial statements, as to which the date is May 15, 2020
Consolidated Balance Sheets
December 31, | December 31, | |||||||
(In thousands, except per share and share data) | 2019 | 2018 (restated) | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 6,448 | $ | 30,657 | ||||
Accounts receivable, trade, net of allowance for doubtful accounts of $68 and $0 at December 31, 2019 and 2018, respectively | 5,345 | 3,045 | ||||||
Inventories | 10,972 | 3,509 | ||||||
Prepaid expenses and other current assets | 1,348 | 353 | ||||||
Total current assets | 24,113 | 37,564 | ||||||
Assets held for rent, net | 3,922 | –– | ||||||
Property and equipment, net | 5,572 | 1,319 | ||||||
Operating lease right-of-use assets, net | 1,040 | –– | ||||||
Long-term deposits and other assets | 50 | 36 | ||||||
Investments | 2,500 | –– | ||||||
Equity method investment in SAVSU | –– | 6,548 | ||||||
Intangible assets, net | 21,982 | –– | ||||||
Goodwill | 33,637 | –– | ||||||
Total assets | $ | 92,816 | $ | 45,467 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 3,119 | $ | 720 | ||||
Accrued expenses and other current liabilities | 3,369 | 1,219 | ||||||
Lease liabilities, operating, current portion | 804 | –– | ||||||
Contingent consideration, current portion | 377 | –– | ||||||
Total current liabilities | 7,669 | 1,939 | ||||||
Warrant liability | 39,602 | 28,516 | ||||||
Contingent consideration, long term | 1,537 | –– | ||||||
Lease liabilities, operating, long-term | 550 | –– | ||||||
Other long-term liabilities | 4 | 380 | ||||||
Total liabilities | 49,362 | 30,835 | ||||||
Commitments and Contingencies (Note 12) | ||||||||
Shareholders’ equity | ||||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0 shares issued and outstanding at December 31, 2019 and 2018 | –– | –– | ||||||
Common stock, $0.001 par value; 150,000,000 shares authorized, 20,825,452 and 18,547,406 shares issued and outstanding at December 31, 2019 and 2018, respectively | 21 | 19 | ||||||
Additional paid-in capital | 143,485 | 113,008 | ||||||
Accumulated deficit | (100,052 | ) | (98,395 | ) | ||||
Total shareholders’ equity | 43,454 | 14,632 | ||||||
Total liabilities and shareholders’ equity | $ | 92,816 | $ | 45,467 |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 6,663,318 | $ | 1,405,826 | ||||
Accounts receivable, trade, net of allowance for doubtful accounts of $5,575 and $0 at December 31, 2017 and 2016, respectively | 1,021,315 | 1,193,646 | ||||||
Inventories | 1,846,746 | 1,757,784 | ||||||
Prepaid expenses and other current assets | 399,502 | 270,814 | ||||||
Total current assets | 9,930,881 | 4,628,070 | ||||||
Property and equipment | ||||||||
Leasehold improvements | 1,284,491 | 1,284,491 | ||||||
Furniture and computer equipment | 682,466 | 650,912 | ||||||
Manufacturing and other equipment | 1,148,006 | 922,220 | ||||||
Subtotal | 3,114,963 | 2,857,623 | ||||||
Less: Accumulated depreciation | (2,008,927 | ) | (1,670,245 | ) | ||||
Net property and equipment | 1,106,036 | 1,187,378 | ||||||
Investment in SAVSU | 1,070,120 | 2,075,000 | ||||||
Long-term deposits | 36,166 | 36,166 | ||||||
Total assets | $ | 12,143,203 | $ | 7,926,614 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 690,702 | $ | 710,719 | ||||
Accrued expenses and other current liabilities | 200,548 | 116,399 | ||||||
Accrued compensation | 491,432 | 175,829 | ||||||
Deferred rent, current portion | 130,216 | 130,216 | ||||||
Total current liabilities | 1,512,898 | 1,133,163 | ||||||
Promissory note payable to related party, net of discount of $155,996 at December 31, 2016 | –– | 2,844,004 | ||||||
Accrued interest, related party | –– | 97,857 | ||||||
Deferred rent, long-term | 492,207 | 685,450 | ||||||
Other long-term liabilities | 45,512 | –– | ||||||
Total liabilities | 2,050,617 | 4,760,474 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Shareholders’ equity | ||||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 4,250 and 0 shares issued and outstanding at December 31, 2017 and 2016, respectively | 4 | –– | ||||||
Common stock, $0.001 par value; 150,000,000 shares authorized, 14,021,422 and 12,863,824 shares issued and outstanding at December 31, 2017 and 2016, respectively | 14,021 | 12,864 | ||||||
Additional paid-in capital | 84,036,444 | 74,355,645 | ||||||
Accumulated deficit | (73,957,883 | ) | (71,202,369 | ) | ||||
Total BioLife Solutions, Inc. shareholders’ equity | 10,092,586 | 3,166,140 | ||||||
Total liabilities and shareholders’ equity | $ | 12,143,203 | $ | 7,926,614 |
The accompanying Notes to consolidated Financial Statements are an integral part of these consolidated financial statements
Consolidated Statements of Operations
Years Ended December 31, | ||||||||
2019 | 2018 (restated) | |||||||
(In thousands, except per share and share data) | ||||||||
Product revenue | $ | 26,844 | $ | 19,742 | ||||
Rental revenue | 527 | –– | ||||||
Total product and rental revenue | 27,371 | 19,742 | ||||||
Costs and operating expenses: | ||||||||
Cost of product and rental revenue (exclusive of intangible assets amortization) | 8,760 | 6,217 | ||||||
Research and development | 3,168 | 1,298 | ||||||
Sales and marketing | 4,701 | 2,615 | ||||||
General and administrative | 8,893 | 5,950 | ||||||
Intangible assets amortization | 1,079 | –– | ||||||
Acquisition costs | 940 | –– | ||||||
Change in fair value of contingent consideration | 50 | –– | ||||||
Total operating expenses | 27,591 | 16,080 | ||||||
Operating income (loss) | (220 | ) | 3,662 | |||||
Other income (expenses) | ||||||||
Change in fair value of warrant liability | (12,835 | ) | (28,271 | ) | ||||
Interest income | 506 | 281 | ||||||
Interest expense | (5 | ) | (5 | ) | ||||
Other expenses | (13 | ) | –– | |||||
Loss from equity-method investment in SAVSU | (739 | ) | (672 | ) | ||||
Gain on acquisition of SAVSU | 10,108 | –– | ||||||
Total other expenses | (2,978 | ) | (28,667 | ) | ||||
Net loss before provision for income taxes | (3,198 | ) | (25,005 | ) | ||||
Income tax (benefit) | (1,541 | ) | –– | |||||
Net loss | (1,657 | ) | (25,005 | ) | ||||
Less: Preferred stock dividends and accumulated deficit impact of preferred stock redemption | – | (339 | ) | |||||
Net income (loss) attributable to common stockholders | (1,657 | ) | (25,344 | ) | ||||
Earnings per share attributable to common stockholders: | ||||||||
Basic and Diluted | $ | (0.09 | ) | $ | (1.56 | ) | ||
Weighted average shares used to compute earnings per share attributable to common stockholders: | ||||||||
Basic and Diluted | 19,460,299 | 16,256,465 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
Consolidated Statements of OperationsShareholders’ Equity
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Product sales | $ | 11,021,821 | $ | 8,226,992 | ||||
Cost of product sales | 4,275,348 | 3,448,294 | ||||||
Gross profit | 6,746,473 | 4,778,698 | ||||||
Operating expenses | ||||||||
Research and development | 1,193,415 | 2,028,465 | ||||||
Sales and marketing | 2,086,426 | 3,009,537 | ||||||
General and administrative | 4,522,479 | 4,592,235 | ||||||
Total operating expenses | 7,802,320 | 9,630,237 | ||||||
Operating loss | (1,055,847 | ) | (4,851,539 | ) | ||||
Other income (expenses) | ||||||||
Interest income | 350 | 2,420 | ||||||
Interest expense | (190,069 | ) | (100,000 | ) | ||||
Loss on deconsolidation of biologistex | –– | (2,785,910 | ) | |||||
Loss from equity-method investment in SAVSU | (1,004,880 | ) | –– | |||||
Financing costs and write off of deferred financing costs | (108,664 | ) | (86,736 | ) | ||||
Amortization of debt discount | (155,996 | ) | (218,394 | ) | ||||
Loss on disposal of property and equipment | –– | (1,213 | ) | |||||
Total other income (expenses) | (1,459,259 | ) | (3,189,833 | ) | ||||
Net Loss | (2,515,106 | ) | (8,041,372 | ) | ||||
Net Loss attributable to non-controlling interest | –– | 1,165,926 | ||||||
Net Loss attributable to BioLife Solutions, Inc. | (2,515,106 | ) | (6,875,446 | ) | ||||
Less: Preferred stock dividends | (212,500 | ) | –– | |||||
Net loss attributable to common stockholders | $ | (2,727,606 | ) | $ | (6,875,446 | ) | ||
Basic and diluted net loss per common share attributable to BioLife Solutions, Inc. | $ | (0.21 | ) | $ | (0.54 | ) | ||
Basic and diluted weighted average common shares used to calculate net loss per common share | 13,263,881 | 12,642,996 |
(In thousands, except share data) | Preferred | Preferred | Common | Common | Additional | Accumulated | Total (Deficit) | |||||||||||||||||||||
Balance, December 31, 2017 (restated) | 4,250 | $ | — | 14,021,422 | $ | 14 | $ | 63,505 | $ | (73,051 | ) | $ | (9,532 | ) | ||||||||||||||
Series A preferred stock redemption | (4,250 | ) | — | — | — | (4,241 | ) | (9 | ) | (4,250 | ) | |||||||||||||||||
Stock based compensation | — | — | — | — | 1,519 | — | 1,519 | |||||||||||||||||||||
Stock issued for private equity transaction – Casdin Capital, net of legal fees of $85,000 | — | — | 1,428,571 | 2 | 19,913 | — | 19,915 | |||||||||||||||||||||
Stock option exercises | — | — | 365,983 | — | 508 | — | 508 | |||||||||||||||||||||
Warrant exercises (restated) | — | — | 2,608,844 | 3 | 31,768 | — | 31,771 | |||||||||||||||||||||
Stock issued – on vested RSUs | — | — | 116,647 | — | — | — | — | |||||||||||||||||||||
Stock issued for services | — | — | 5,939 | — | 36 | — | 36 | |||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | (330 | ) | (330 | ) | |||||||||||||||||||
Net loss (restated) | — | — | — | — | — | (25,005 | ) | (25,005 | ) | |||||||||||||||||||
Balance, December 31, 2018 (restated) | — | $ | — | 18,547,406 | $ | 19 | $ | 113,008 | $ | (98,395 | ) | $ | 14,632 | |||||||||||||||
Stock based compensation | — | — | — | — | 3,043 | — | 3,043 | |||||||||||||||||||||
Shares issued in acquisitions | — | — | 1,334,219 | 1 | 23,931 | — | 23,932 | |||||||||||||||||||||
Stock option exercises | — | — | 697,010 | 1 | 1,180 | — | 1,181 | |||||||||||||||||||||
Warrant exercises | — | — | 121,000 | — | 2,323 | — | 2,323 | |||||||||||||||||||||
Stock issued – on vested RSUs | — | — | 125,817 | — | — | — | — | |||||||||||||||||||||
Net loss | — | — | — | — | — | (1,657 | ) | (1,657 | ) | |||||||||||||||||||
Balance, December 31, 2019 | — | $ | — | 20,825,452 | $ | 21 | $ | 143,485 | $ | (100,052 | ) | $ | 43,454 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
Consolidated Statements of Comprehensive LossCash Flows
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net Loss | $ | (2,515,106 | ) | $ | (8,041,372 | ) | ||
Other comprehensive income | ||||||||
Unrealized gain on available-for-sale investments | –– | 451 | ||||||
Total other comprehensive income | –– | 451 | ||||||
Comprehensive Loss | $ | (2,515,106 | ) | $ | (8,040,921 | ) | ||
Comprehensive loss attributable to non-controlling interest | –– | 1,165,926 | ||||||
Comprehensive Loss attributable to BioLife Solutions, Inc. | $ | (2,515,106 | ) | $ | (6,874,995 | ) |
Years Ended December 31, | ||||||||
(In thousands) | 2019 | 2018 (restated) | ||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (1,657 | ) | $ | (25,005 | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 718 | 338 | ||||||
Amortization of intangible assets | 1,079 | — | ||||||
Stock-based compensation | 3,043 | 1,519 | ||||||
Non cash lease expense | 512 |
| — | |||||
Loss from equity method investment in SAVSU | 739 | 672 | ||||||
Gain on acquisition of SAVSU | (10,108 | ) | — | |||||
Change in fair value of contingent consideration | 50 | — | ||||||
Deferred income tax benefit | (1,541 | ) | — | |||||
Change in fair value of warrant liability | 12,835 | 28,271 | ||||||
Other | 15 | (127 | ) | |||||
Change in operating assets and liabilities | ||||||||
Accounts receivable, trade, net | (290 | ) | (2,024 | ) | ||||
Inventories | (3,777 | ) | (1,662 | ) | ||||
Prepaid expenses and other current assets | (704 | ) | (104 | ) | ||||
Accounts payable | 768 | (11 | ) | |||||
Accrued expenses and other current liabilities | (246 | ) | 497 | |||||
Other liabilities | (81 | ) | — | |||||
Other | (142 | ) | (16 | ) | ||||
Net cash provided by operating activities | 1,213 | 2,348 | ||||||
Cash flows from investing activities | ||||||||
Cash acquired in acquisition of SAVSU | 1,251 | — | ||||||
Acquisition of Astero Bio, net of cash acquired | (12,439 | ) | — | |||||
Payments related to the acquisition of CBS | (11,000 | ) | — | |||||
Investment in Sexton | (1,500 | ) | — | |||||
Investment in iVexSol convertible debt | (1,000 | ) | — | |||||
Purchase of property and equipment | (675 | ) | (500 | ) | ||||
Purchase of assets held for lease | (1,655 | ) | — | |||||
Investment in SAVSU | — | (6,000 | ) | |||||
Net cash used in investing activities | (27,018 | ) | (6,500 | ) | ||||
Cash flows from financing activities | ||||||||
Stock issue from private equity transaction | — | 20,000 | ||||||
Proceeds from exercise of common stock options | 1,181 | 508 | ||||||
Proceeds from exercise of warrants | 574 | 12,392 | ||||||
Payments for redemption of preferred stock | — | (4,250 | ) | |||||
Payments of preferred stock dividends | — | (436 | ) | |||||
Other | (159 | ) | (68 | ) | ||||
Net cash provided by financing activities | 1,596 | 28,146 | ||||||
Net increase (decrease) in cash and cash equivalents | (24,209 | ) | 23,994 | |||||
Cash and cash equivalents – beginning of year | 30,657 | 6,663 | ||||||
Cash and cash equivalents – end of year | $ | 6,448 | $ | 30,657 | ||||
Non-cash investing and financing activities | ||||||||
Purchase of property and equipment not yet paid | $ | 29 | $ | 54 | ||||
Stock issued as consideration to acquire SAVSU | 19,932 | — | ||||||
Stock issued as consideration to acquire assets of CBS | 4,000 | — | ||||||
Stock issued for services in prior period included in liabilities at prior year-end | — | 36 | ||||||
Reclassification of warrant liabilities to equity upon exercise | 1,749 | 19,378 | ||||||
Receivables converted to equity investment in SAVSU | �� | — | 150 | |||||
Purchase of equipment with debt | — | 18 | ||||||
Legal fees for private equity transaction not yet paid | — | 44 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Significant Accounting Policies Business BioLife Solutions, Inc. (“BioLife,” “us,” “we,” “our,” or the “Company”) is a leading developer, manufacturer and biologic materials. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly assesses these estimates, however, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Astero Bio Corporation (“Astero” or “ThawStar” acquired on April 1, 2019), SAVSU Technologies, Inc. (“SAVSU” acquired on August 8, 2019), and Arctic Solutions, Inc. dba Custom Biogenic Systems (“CBS” acquired on November 12, 2019). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates and manages its business as one reportable and operating segment, which is the business of bioproduction tools. The Company’s Chief Executive Officer and Chief Financial and Operating Officer, who are the chief operating decision makers, review financial information on an aggregate basis for purposes of allocating and evaluating financial performance. All long-lived assets are maintained in the United States of America. Liquidity and capital resources As of December 31, 2019, we had $6.4 million in cash and cash equivalents, compared to $30.7 million at December 31, 2018. The reduction in cash is primarily due to the cash payments associated with the 2019 acquisitions of Astero and CBS. We acquired Astero on April 1, 2019 for $12.5 million in cash and contingent consideration of up to $8.5 million (which payment requirement has not been triggered or otherwise paid to date). We anticipate paying $484,000 for the earnout related to 2019 revenues of Astero in early 2020. On August 8, 2019, we acquired SAVSU for 1,100,000 shares of common stock. On November 12, 2019, we acquired CBS for $11.0 million in cash, $4.0 million in shares of our common stock, and up to $15.0 million in contingent consideration payable in cash or stock (which payment requirement has not been triggered or otherwise paid to date). Based on our current expectations with respect to our future revenue and expenses, we believe that our current level of cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next 12 months. However, if our revenues do not grow as expected, including as a result of the COVID-19 pandemic, and if we are not able to manage expenses sufficiently, we may be required to obtain additional equity or debt financing if our cash resources are depleted. Further, the Company may choose to raise additional capital through a debt or equity financing in an attempt to mitigate the heightened level of business uncertainty caused by the COVID-19 pandemic, or in order to pursue additional acquisition or strategic investment opportunities. Additional capital, if required, may not be available on reasonable terms, if at all. Revenue recognition To determine revenue recognition for contractual arrangements that we determine are within the scope of Financial Accounting Standards Board (“FASB”) Topic 606, “Revenue from Contracts with Customers”, we perform the following five steps: (i) identify each contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to our performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. Our revenues are primarily generated from the sale of our biopreservation media, ThawStar, and freezer products. We generally recognize product revenue, including shipping and handling charges billed to customers, when we transfer control of our products to our customers (transfer of control generally occurs upon shipment of our product). Shipping and handling costs are classified as part of cost of product revenue in the statement of operations. We are not required to disclose the value of unsatisfied performance obligations as our contracts have a duration of one year or less. The Company also generates revenue from the leasing of our evo cold chain systems, which are typically cloud-connected shippers with enabling cold chain cloud applications, to customers pursuant to rental arrangements entered into with the customer. Revenue from the rental of cold chain systems is not within the scope of FASB ASC Topic 606 as it is within the scope of FASB ASC Topic 842, “Leases”. All customers leasing shippers currently do so under month-to-month rental arrangements. We account for these rental transactions as operating leases and record rental revenue on a straight-line basis over the rental term. These rental arrangements may contain both lease and non-lease components. We have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component as the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease. The following table presents revenues by product line: Year Ended December 31, (In thousands) 2019 2018 Biopreservation media Automated thaw evo shippers Freezers and accessories Total revenue Risks and Uncertainties The Company evaluates its operations periodically to determine if any risks and uncertainties exist that could impact its operations in the near term. The Company does not believe that there are any significant risks which have not already been disclosed in the consolidated financial statements. A loss of certain suppliers could temporarily disrupt operations, although alternate sources of supply exist for these items. The Company has mitigated these risks by building finished good and raw material inventory from certain key suppliers. See Note 17: “Subsequent Events” for more information regarding the impact of COVID-19. Earnings per share The Company considers its unexercised warrants and unvested restricted shares, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of earnings per share pursuant to the two-class method. Basic The following table presents computations of basic and diluted earnings per share under the two class method: Year Ended December 31, (In thousands, except share and earnings per share data) 2019 2018 (restated) Numerator: Net loss attributable to BioLife Solutions ) ) Less: Preferred stock dividends and accumulated deficit impact of preferred stock redemption ) Basic net loss attributable to common stockholders ) ) Denominator: Basic and diluted weighted average shares outstanding Basic and diluted earnings per share attributable to common stockholders ) ) The following table sets forth the number of shares excluded from the computation of diluted loss per share, Year Ended December 31, 2019 2018 (restated) Stock options and restricted stock awards Warrants Total Cash and cash equivalents 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. Inventories Inventories relate to the Company’s cell and gene therapy products. The Company values inventory at cost or, if lower, net realizable value, using the first-in, first-out method. The Company reviews its inventories at least quarterly and records a provision for excess and obsolete inventory based on its estimates of expected product revenue volume, production capacity and expiration dates of raw materials, work-in-process and finished products. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. A change in the estimated timing or amount of demand for the Company’s products could result in additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised estimate of inventory valuations. Work-in-process and finished products inventories consist of material, labor, outside testing costs and manufacturing overhead. Accounts receivable Accounts receivable consist of short-term amounts due from our customers (generally 30 to 90 days) and are stated at the amount we expect to collect. We establish an allowance for doubtful accounts based on our assessment of the collectability of specific customer accounts. Changes in accounts receivable are primarily due to the timing and magnitude of orders of our products, the timing of when control of our products is transferred to our customers and the timing of cash collections. Accounts receivable are stated at principal amount, do not bear interest, and are generally unsecured. We provide an allowance for doubtful accounts based on an evaluation of customer account balances past due ninety days from the date of invoicing. Accounts considered uncollectible are charged against the established allowance. Investments We Non-marketable equity securities are equity securities without a readily determinable fair value. At December 31, 2019 this investment is comprised of $1.5 million in Series A Preferred Stock in Sexton BioTechnologies, Inc. (“Sexton”) This investment is measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any. The preferred stock is also convertible at our option into common stock at a price of $0.33 per share. As of December 31, 2019, management believes there are no In September of 2019 the company invested $1.0 million in a convertible note receivable of iVexSol, Inc. (“iVexSol”). The Company has made an irrevocable election to record this convertible note in its entirety at fair value utilizing the fair value option available under U.S. GAAP. The company believes that carrying this investment at fair value better portrays the economic substance of the investment. Under the fair value option, gains and losses on the convertible note are included in unrealized gains/(losses) on investments within net earnings each reporting period. Gains/(losses) related to this convertible note were not material for the The following table represents the difference between the fair value and Fair value as of December 31, 2019 Unpaid principal balance as of December 31, 2019 Fair value carry amount (over)/under Equity Method Investments Property and equipment Property and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining lease term of the respective assets. Gains or losses on disposals of property and equipment are recorded within income from operations. Costs of repairs and maintenance are included as part of operating expenses unless they are incurred in relation to major improvements to existing property and equipment, at which time they are capitalized. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. If the sum of the expected future cash flows (undiscounted and before interest) from the use of the assets is less than the net book value of the asset an impairment could exist and the amount of the impairment loss, if any, will generally be measured as the difference between the net book value of the assets and their estimated fair values. There were no impairment losses recognized during the years ended December 31, 2019 and 2018. Our customers rent Assets held for rent are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. If the sum of the expected future cash flows (undiscounted and before interest) from the use of the assets is less than the net book value of the asset an impairment could exist and the amount of the impairment loss, if any, will generally be measured as the difference between In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases: ASC Topic 842, “Leases” (“ASU 2016-02”) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated Statements of Operations. Lessor accounting is largely unchanged under ASU 2016-02. We The adoption of this standard resulted in the recording of operating lease right-of-use assets of $1.3 million and short-term and long-term lease liabilities of $1.8 million as of January 1, 2019. The difference between right-of-use assets and lease liabilities relates to Income taxes We account for income taxes using an asset and liability method which generally requires recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of differences between tax bases of assets and liabilities, and financial reporting amounts, based upon enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. We evaluate the likelihood of realization of deferred tax assets and provide an allowance where, in management’s opinion, it is more likely than not that the asset will not be realized. We determine any uncertain tax positions based on a determination of whether and how much of a tax benefit taken in the Company’s tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. Judgment is applied in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We have not recorded any liabilities for uncertain tax positions or any related interest and penalties. Our tax returns are open to audit for years ending December 31, Advertising Advertising costs are expensed as incurred and totaled Concentrations of credit risk and business risk In The following table represents the Company’s total revenue by geographic area (based on the location of the customer): Year Ended December 31, Revenue by customers’ geographic locations 2019 2018 United States % % Canada % % Europe, Middle East, Africa (EMEA) % % Other % % Total revenue % % At December 31, Research and development Research and development costs are expensed as incurred. We We expense stock-based compensation for stock options, restricted stock awards, and performance awards over the requisite service period. For awards with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with a market condition, we expense over the vesting period regardless of the value that the award recipients ultimately receive. Business Combinations, Goodwill and Intangible Assets Business Combinations The Company accounts for business acquisitions using the acquisition method as required by FASB ASC Topic 805, “Business Combinations”. The Company’s identifiable assets acquired and liabilities, including identified intangible assets, assumed in a business combination are recorded at their acquisition date fair values. The valuation requires management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets. Critical estimates in valuing intangible assets include, but are not limited to: ● future expected cash flows, including revenue and expense projections; ● discount rates to determine the present value of recognized assets and liabilities and; ● revenue volatility to determine contingent consideration using option pricing models The Company’s estimates of fair value are based upon assumptions it believes to be reasonable, but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. While the Company uses its best estimates and assumptions to value assets acquired and liabilities assumed as of the acquisition date, the estimates are inherently uncertain and subject to refinement. Goodwill is The Company estimates the acquisition date fair value of the 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 Goodwill Goodwill represents the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. Goodwill is not amortized but is tested for impairment at least annually. The Company reviews goodwill for impairment annually at the end of its fourth fiscal quarter and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be less than its carrying amount (a triggering event). The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in FASB ASC Topic 350, “Intangibles – Goodwill and Other”. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative goodwill impairment test is unnecessary and goodwill is considered to be unimpaired. However, if based on the qualitative assessment the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed with performing the quantitative goodwill impairment test. In performing the quantitative goodwill impairment test, the Company determines the fair value of each reporting unit and compares it to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company records an impairment loss equal to the difference. As of December 31, 2019, management believes there are no indications of impairment. Intangible Assets Intangible assets consist of developed technology, customer relationships, and tradenames and trademarks, resulting from the Company’s acquisitions. Intangible assets are recorded at fair value on the date of Certain Warrants which have Features that may Result in Cash Settlement expected remaining life of the warrants. The risk-free interest rate Year Ended December 31, 2019 2018 Risk free interest rate % % Expected dividend yield % % Expected lives Expected volatility % % Recent accounting pronouncements In August In In In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”, which clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt the standard prospectively on January 1, 2020. The Company does not expect the adoption of ASU 2. Restatement of Consolidated Financial Statements Background In As a result, Impact of the Restatement The All of the following adjustments relate to marking the Warrants to fair value at period end. The effects of the restatement on the following financial statement line items as of and for the periods indicated are summarized in the following tables: Balance Sheet (In thousands) As Previously Reported Adjustments As Restated As of December 31, 2018 Warrant liability Total liabilities Additional paid in capital ) Accumulated deficit ) ) ) Total shareholders’ equity ) Statement of Operations (In thousands, except per share data) As Previously Reported Adjustments As Restated For the year ended December 31, 2018 Change in fair value of warrants ) ) Total other expense ) ) ) Net income (loss) ) ) Net income (loss) attributable to common stockholders ) ) Basic net income (loss) per common share ) ) Diluted net income (loss) per common share ) ) Statement of Shareholders’ Equity / Deficit (In thousands) As Previously Reported Adjustments As Restated From March 31, 2014 to January 1, 2018 Additional paid-in capital ) Accumulated deficit ) ) Total shareholders’ equity / (deficit) ) Statement of Cash Flows (In thousands) As Previously Reported Adjustments As Restated For the year ended December 31, 2018 Net income (loss) ) ) Change in fair value of warrant liability 3. Fair Value Measurement In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” (“ASC Topic 820”), the Company measures its cash and cash equivalents and Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Level 3 – Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. As of December 31, There were no remeasurements to fair value during the year ended December 31, 2019 of financial assets and liabilities that are not measured at fair The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, (In thousands) As of December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Money market accounts Convertible debt held at fair value Total Liabilities: Contingent consideration - business combinations Warrant liability Total As of December 31, 2018 Level 1 Level 2 Level 3 Total Assets: Money market accounts Liabilities: Warrant liability (restated) The fair values of Year ended December 31, (In thousands) 2019 Beginning balance Purchases Change in fair value recognized in net income Total The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs: Year ended December 31, (In thousands) 2019 Beginning balance Additions Change in fair value recognized in net income Payments earned, reclassified to accrued liabilities ) Total The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs: (In thousands) Year ended December 31, 2019 Year ended December 31, 2018 (restated) Beginning balance (as restated) Exercised warrants ) ) Change in fair value recognized in net income Ending balance 4. Inventories Inventories consist of the following at December 31, (In thousands) 2019 2018 5. Assets held for rent (In thousands) December 31, 2019 Shippers placed in service Accumulated depreciation ) Net Shippers and related components in production Total 6. Leases Year Ended December 31, We lease approximately We lease approximately 1,250 square feet in our Menlo Park, California location. The term of our lease continues until July 1, 2020. In accordance with the lease agreement, the monthly base rent is approximately $5,000 at December 31, 2019. We are also required to pay an amount equal to the Company’s proportionate electrical expenses. We lease approximately 9,932 square feet in our Albuquerque, New Mexico location. The term of our lease continues until December 31, 2021 with two options to extend the terms of the lease, each of which is for an additional period of three years, with the first extension term commencing, if at all, on December 1, 2021, and the second extension term commencing, if at all, December 1, 2024. In accordance with the lease agreement, the monthly base rent is approximately $9,000 at December 31, 2019, with a monthly increase if the term is extended. We lease approximately 106,998 square feet in our Detroit, Michigan location. The term of our lease continues until November 30, 2020 with one option to extend the term of the lease, for an additional sixty months, with the extension term commencing, if at all, on November 12, 2020. These extension options are not accounted for under ASC Topic 842, “Leases” because we are not reasonably certain we will enter into the renewal options in their current terms and the current term is less than 12 months. With adequate notice prior to expiration of the option notice period, we have the right to purchase the premises for a purchase price that is mutually acceptable to landlord and tenant as agreed to by the parties on or before the expiration of the option notice period. In the event that the parties are unable to mutually agree on the option purchase price then each party shall obtain, at its sole cost and expense, an appraisal of the premises and the option purchase price will be the average of the two appraisals. For the avoidance of doubt, tenant’s right to elect to purchase the premises for the option purchase price shall terminate upon the expiration of the option notice period, but tenant shall not be obligated to close on the purchase of the premises prior to the expiration of the initial term. In accordance with the lease agreement, the monthly base rent is approximately $15,000 at December 31, 2019, with scheduled annual increases if the term is extended. Operating leases recorded on our consolidated balance sheet are primarily related to our Bothell, Washington headquarters space lease and our Albuquerque, New Mexico, SAVSU, space lease. We have not included extension options in our ROU assets or lease liabilities as we are not reasonably certain we will enter into the renewal options in their current terms. Our Detroit, Michigan and Menlo Park, California lease are not recorded on our consolidated balance sheet as the term expires in one year or less. Our financing lease is related to research equipment. We used a weighted average discount rate of 6.5%, our market collateralized borrowing rate, and 8.1%, the weighted average implied interest on our leases, to determine our operating and financing lease liabilities, respectively. The weighted average remaining term of our operating and financing leases are 1.8 years and 1.2 years, respectively. We initially recognized $1.3 million in operating lease right of use assets and initially recognized $1.8 million in operating lease liabilities. Through the SAVSU acquisition we acquired $232,000 in operating lease right of use assets and acquired $232,000 in operating lease liabilities. The operating lease costs recognized in the year ended December 31, 2019 were $663,000, which consist of $612,000 in operating lease costs and $51,000 in short-term lease costs, we did not have any variable lease costs. The operating lease cash paid in the year ended December 31, 2019 of $778,000. Rent expense for the year ended December 31, 2018, was recognized under prior GAAP (ASC 840) and amounted to $809,000. Maturities of our operating lease liabilities as of December 31, 2019 is as follows: (In thousands) Operating Leases Financing Leases 2020 2021 Total lease payments Less: interest ) ) Total present value of lease liabilities The following (In thousands) Operating Leases 2019 2020 2021 Total 7. Deferred Rent We eliminated our deferred rent at January 1, 2019 as a result of the (In thousands) 2018 Landlord-funded leasehold improvements Less accumulated amortization ) Total (current portion $130 December 31, 2018) Straight line rent adjustment Total deferred rent During the year ended December 31, 2018, the Company recorded $127,000 in deferred rent amortization of these landlord funded leasehold improvements. Straight line rent adjustment for the year ended December 31, 2018 represents the difference between cash rent payments and the recognition of rent expense on a straight-line basis over the terms of the lease. 8. Goodwill and Intangible Assets Goodwill The following table represents the changes in the carrying value of goodwill for the year ended December 31, 2019: (In thousands) Goodwill Balance as of December 31, 2018 Goodwill related to Astero acquisition Goodwill related to SAVSU acquisition Goodwill related to CBS acquisition Balance as of December 31, 2019 Intangible Assets Intangible assets, net consisted of the following at December 31, 2019: (In thousands, except weighted average useful life) December 31, 2019 Finite-lived intangible assets: Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Useful Life (in years) Customer Relationships ) Tradenames ) Technology – acquired ) In-process R&D(1) Total intangible assets ) (1) In-process R&D represents the fair value of incomplete research and development that has not yet reached technological feasibility. We will amortize the asset upon technological feasibility, which has been placed in service in the second quarter of 2020. Amortization expense for finite-lived intangible assets was $1.1 million for the year ended December 31, 2019. In-process research and development was put into service in the second quarter of 2020, as such we have included the amortization in the schedule below based on an estimated life of 9 years. As of December 31, (In thousands) For the Years Ended December 31, Estimated Amortization Expense 2020 2021 2022 2023 2024 Thereafter Total 9. Income Taxes The provision (benefit) for income taxes consists of the following: Year Ended December 31, (In thousands) 2019 2018 Federal State Total current tax provision Federal ) State Total deferred tax provision ) Provision (benefit) for income taxes ) In connection with the 2019 SAVSU Acquisition, the Company recognized a deferred tax liability of $1.5 million on acquired intangible assets. As a result, the Company recorded an income tax benefit of $1.5 million for the release of valuation allowance on our existing U.S. deferred tax assets as a result of the offset of deferred tax liabilities established for intangible assets from the acquisition. A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows: Year Ended December 31, (In thousands) 2019 2018 Tax on net income at federal statutory rate % % Change in valuation allowance %) % Stock-based compensation % % Section 162(m) limitation on executive compensation %) %) Book loss on equity method investment %) %) Fair value change in warrant liability %) %) Gain on stock acquisition % % Transaction costs %) % Tax credits % % Expired net operating losses %) % Other % % Total % % The principal components of the Company’s net deferred tax assets are as follows: December 31, (In thousands) 2019 2018 Deferred tax assets related to: Net operating loss carryforward Stock-based compensation Accruals and reserves Inventory Lease liabilities Tax credit carryforward –– Other –– Total deferred tax assets Deferred tax liabilities related to: Intangibles ) –– Right-of-use assets ) –– Fixed assets ) ) Total deferred tax liabilities ) ) Total deferred taxes Less: valuation allowance ) ) Net deferred taxes –– –– The Company maintains a full valuation allowance on its net deferred tax assets. The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative book losses, not including transaction gains, as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, “Accounting for Income Taxes”, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its deferred tax assets will be maintained. The Company will continue to assess the realizability of its deferred tax assets going forward and will adjust the valuation allowance as needed. Our valuation allowance increased by $0.4 million from 2018 to 2019, primarily due to increases in the net operating loss carryforwards and stock compensation deferred tax assets offset by an increase in the deferred tax liabilities for intangibles. Our valuation allowance decreased by $0.4 million from 2017 to 2018, primarily due to a decrease in the deferred tax asset for net operating loss carryforwards. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available. The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. As of December 31, 2019, the Company had no uncertain tax positions. As of December 31, 2019, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $44.7 million, which is available to reduce future taxable income. Approximately $34.9 million of NOL will expire from 2020 through 2036, and approximately $9.8 million of NOL will be carried forward indefinitely. The NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The Company is planning to complete a study during 2020 to determine whether the net operating losses are subject to such limitations. Subsequent ownership changes may further affect the limitation in future years. 10. Warrants In March 2014, pursuant to a to a registered public offering and note conversion agreement with certain note holders, the Company issued warrants to purchase 6,910,283 shares of common stock at $4.75 per share. The warrants expire in March 2021. In May 2016, in connection with our WAVI credit facility, The following table summarizes warrant activity for the years ended December 31, 2019 and 2018: Year Ended Year Ended December 31, 2019 December 31, 2018 Wtd. Avg. Wtd. Avg. Exercise Exercise Shares Price Shares Price Outstanding at beginning of year Exercised ) ) Outstanding and exercisable at end of year 11. Stock-Based Compensation Stock Compensation Plans Our stock-based compensation programs are long-term retention programs that are intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. We have the following stock-based compensation plans and programs: During 2013, we adopted the 2013 Performance Incentive Plan (the “2013 Plan”), which allows us to grant options or restricted stock units to all employees, including executive officers, outside consultants and non-employee directors. An aggregate of 3.1 million shares of common stock were initially reserved for issuance under the 2013 Plan. In May 2017, the shareholders approved an increase in the number of shares available for issuance to 4.1 million shares. As of December 31, 2019, there were outstanding options to purchase 2.1 million shares of Company common stock and 553,000 unvested restricted stock awards outstanding under the 2013 Plan. The Company also issued, outside any approved compensation plans, non-incentive stock options. As of December 31, 2019, there were 188,000 such options outstanding which were fully vested prior to 2018. Issuance of Shares When options and warrants are exercised, it is the Company’s policy to issue new shares. Stock Option Activity Service Vesting-Based Stock Options The following is a summary of service vesting-based stock option activity for 2019 and 2018, and the status of service vesting-based stock options outstanding at December 31, 2019 and 2018: Year Ended Year Ended December 31, 2019 December 31, 2018 Wtd. Avg. Wtd. Avg. Exercise Exercise Shares Price Shares Price Outstanding at beginning of year Granted –– –– –– –– Exercised ) ) Forfeited ) ) Expired - vested –– –– –– –– Outstanding at end of year Stock options exercisable at year end We recognized stock compensation expense related to performance-based options of $370,000 and $509,000 during the year ended December 31, 2018. None was recognized in the year ended December 31, 2019 and 2018. As of December 31, 2019, there was $22.3 million of aggregate intrinsic value of outstanding service vesting-based stock options, including $20.9 million of aggregate intrinsic value of exercisable service vesting-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. This amount will change based on the fair market value of the Company’s stock. Intrinsic value of service vesting-based awards exercised during the years ended December 31, 2019 and 2018 was $7.1 million and $3.8 million, respectively. There were no service based-vesting options granted during the years ended December 31, 2019 and 2018. The weighted average remaining contractual life of service vesting-based options outstanding and exercisable at December 31, 2019 is 5.0 years and 5.4 years, respectively. Total unrecognized compensation cost of service vesting-based stock options at December 31, 2019 of $148,000 is expected to be recognized over a weighted average period of 1.1 years. The following table summarizes information about service vesting-based stock options outstanding at December 31, 2019: Range of Number Outstanding at Weighted Average Weighted Average Performance-based Stock Options The Company’s Board of Directors implemented a Management Performance Bonus Plan for 2017. Based on achieving varying levels of specified revenue for the year ending December 31, 2017, up to 1,000,000 options to purchase shares of the Company’s common stock may be vested. The options have an exercise price of $1.64, and if revenue levels for 2017 were met. If the minimum performance targets are not achieved, no options will vest. On February 27, 2018, the Company’s Board of Directors determined that the specified revenue target had been achieved. Accordingly, 999,997 options to purchase shares of the Company’s common stock vested in 2017 and The following is a summary of performance-based stock option activity under our stock option plans for 2019 and Year Ended Year Ended December 31, 2019 December 31, 2018 Wtd. Avg. Wtd. Avg. Exercise Exercise Shares Price Shares Price Outstanding at beginning of year Granted –– –– –– –– Exercised ) ) Outstanding at end of year Stock options exercisable at year end We recognized stock compensation expense related to performance-based options of $509,000 during the year ended December 31, 2018. None was recognized in the year ended December 31, 2019. As of December 31, 2019, there was $10.7 million of aggregate intrinsic value outstanding and exercisable performance-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s There were no stock options granted to employees and non-employee directors in the year ending December 31, 2019 and 2018. Restricted Stock Service vesting-based restricted stock The following is a summary of service vesting-based restricted stock activity for the year ended December 31, 2019 and 2018, and the status of unvested service vesting-based restricted stock outstanding at December 31, 2019 and 2018: Year Ended Year Ended December 31, 2019 December 31, 2018 Wtd. Avg. Wtd. Avg. Grant Date Grant Date Shares Fair Value Shares Fair Value Outstanding at beginning of year Granted Vested ) ) Forfeited ) ) Non-vested at end of year The aggregate fair value of the service vesting-based awards granted during the years ended December 31, 2019 and 2018 was $5.3 million and $1.3 million, respectively, which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate fair value of the service vesting-based awards that vested during the years ended December 31, 2019 and 2018 was $1.9 million and $1.1 million, respectively. We recognized stock compensation expense of $1.2 million and $413,000 related to service vesting-based awards during the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, there was $4.9 million in unrecognized compensation costs related to service vesting-based awards. We expect to recognize those costs over 3.3 years. Market-based restricted stock On February 25, 2019 the Company granted 94,247 shares and on April 1, 2019 granted 29,604 shares of market-based stock to its executives in the form of restricted stock. The shares granted contain a market condition based on Total Shareholder Return (“TSR”). The TSR market condition measures the Company’s performance against a peer group. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 69%, 0% dividend yield and a risk-free interest rate of 2.5%. The historical volatility was based on the most recent 2-year period for the Company and correlated with the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest is based on the yield on the U.S. Treasury Strips as of the Measurement Date with a maturity consistent with the 2-year term associated with the market condition of the award. The fair value of this award will be expensed on a straight-line basis over the grant date to the vesting date of December 31, 2020. For the period ended December 31, 2019, the aggregate grant date fair value of the market-based restricted stock awards was $3.3 million. We recognized stock compensation expense of $1.5 million for the year ended December 31, 2019 related to market-based restricted stock awards. As of December 31, 2019, there was $1.8 million in unrecognized non-cash compensation costs related to market-based restricted stock awards expected to vest. We expect to recognize those costs over 1 year. Total Stock Compensation Expense We recorded total stock compensation expense for the years ended December 31, 2019 and 2018, as follows: Year Ended December 31, (In thousands) 2019 2018 Research and development costs Sales and marketing costs General and administrative costs Cost of product revenue Total 12. Commitments and Contingencies Employment agreements We have employment agreements with our Chief Executive Officer, Chief Financial and Operating Officer, Chief Litigation From time to time, the Company is subject to various legal proceedings that arise in the ordinary course of business, none of which are currently material to the Company’s business. The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property. As a result, the Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Management is not aware of any pending or threatened litigation. Indemnification As permitted under Delaware law and in accordance with the Company’s bylaws, the Company is required to indemnify its officers and directors for certain errors and occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its directors. The Company believes the fair value of the indemnification rights and agreements is minimal. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of December 31, 2019. 13. Acquisitions Astero Acquisition On In connection with the Acquisition, the Company paid (i) a Consideration transferred The Astero Acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. The Astero Acquisition was funded through payment of approximately $12.5 million in cash and under the terms of the share purchase agreement, Astero shareholders are eligible to receive up to an additional $8.5 million of contingent consideration in cash over the next three years based on attainment of specific revenue targets. Under the acquisition method of accounting, the assets acquired and liabilities assumed from Astero were recorded as of the acquisition date, at their respective fair values, and consolidated with those of BioLife. The fair value of the contingent consideration of $1.5 million was determined using an option pricing model. The fair value of the net tangible assets acquired is estimated to be approximately $324,000, the fair value of the intangible assets acquired is estimated to be approximately $4.1 million, and the residual goodwill is estimated to be approximately $9.5 million. The fair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates. Total consideration recorded for the acquisition of Astero is as follows (amounts in thousands): Cash consideration Contingent consideration Working capital adjustment ) Total consideration transferred Fair Value of Net Assets Acquired The table below represents the purchase price allocation to the net assets acquired based on their estimated fair values (amounts in thousands). Such amounts were estimated using the most recent financial statements from Astero as of March 31, 2019. Cash and cash equivalents Accounts receivable, net Inventory Customer relationships Tradenames Developed technology In-process research and development Goodwill Other assets Accounts Payable ) Other liabilities ) Fair value of net assets acquired The fair value of Astero’s identifiable intangible assets and estimated useful lives have been estimated as follows (amounts in thousands except years): Estimated Fair Value Estimated Useful Life (Years) Customer relationships Tradenames Developed technology Total identifiable intangible assets Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was determined by third-party appraisal primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. The fair value of inventories was determined using both the cost approach and the market approach. Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more significant assumptions inherent in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate. Acquired Goodwill The goodwill of $9.5 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. All but $1.1 million of the goodwill recorded is not expected to be deductible for income tax purposes. SAVSU Acquisition On August 8, 2019, we closed the acquisition of SAVSU pursuant to a Share Exchange Agreement. Pursuant to the Consideration transferred The SAVSU acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. The acquisition of 56% of SAVSU was funded through a transfer of 1,100,000 shares of BioLife common stock, which had a fair value of $18.12 per share or $19.9 million at time of closing. The total value of 100% of SAVSU consisting of the fair value of the stock issued and the fair value of our existing Under the acquisition method of accounting, the assets acquired and liabilities assumed from SAVSU were recorded as of the acquisition date, at their respective fair values, and consolidated with those of BioLife. The fair value of the net tangible assets acquired is estimated to be approximately $4.2 million, the fair value of the intangible assets acquired is estimated to be approximately $12.2 million, and the residual goodwill is estimated to be approximately $19.5 million. The fair value estimates required critical estimates, including, Total consideration paid for the acquisition of SAVSU is as follows (amounts in thousands): Stock consideration for 55.6% equity interest purchased This stock consideration plus the fair value of our existing equity investment in SAVSU of $15.9 million results in the total purchase price for accounting purposes of Fair Value of Net Assets Acquired The table below represents the purchase price allocation to the net assets acquired based on their estimated fair values (amounts in thousands). Such amounts were estimated using the most recent financial statements from SAVSU as of August 7, 2019. Cash and cash equivalents Accounts receivable, net Prepaid expenses and other current assets Property, plant and equipment, net Operating right-of-use asset Assets held for lease Customer relationships Tradenames Developed technology Goodwill Accounts Payable and accrued expenses ) Deferred tax liabilities ) Other liabilities ) Fair value of net assets acquired The fair value of SAVSU’s identifiable intangible assets and Estimated Fair Value Estimated Useful Life (Years) Customer relationships Tradenames Developed technology Total identifiable intangible assets Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was determined primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. The fair value of assets held for rent and property, plant and equipment was determined using both the cost approach and the market approach. Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more significant assumptions inherent in the in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate. Acquired Goodwill The goodwill of $21.0 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes. Custom Biogenic Systems Acquisition On November 10, 2019, we entered into an Asset Purchase Agreement, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc., a Michigan corporation (“CBS Seller”), pursuant to which we agreed to purchase from the CBS Seller substantially all of CBS Seller’s assets, properties and rights (the “CBS Acquisition”). The CBS Seller, a privately held company with operations located near Detroit, Michigan, designs and manufactures liquid nitrogen laboratory freezers and cryogenic equipment and also offers a related cloud-based monitoring system that continuously assesses biologic sample storage conditions and alerts equipment owners if a fault condition occurs. The Acquisition closed on November 12, 2019. In connection with the CBS Acquisition, we paid to CBS Seller (i) a base payment in the amount of $15.0 million, consisting of a cash payment of $11.0 million paid at the closing of the CBS Acquisition, less a cash holdback escrow of $550,000 to satisfy certain indemnification claims, and an aggregate number of shares of our common stock, with an aggregate fair value equal to $4.0 million, less a holdback escrow of shares of Common Stock with an aggregate value equal to $3.0 million to satisfy potential payments related to any product liability claims outstanding as of The CBS acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, “Business Combinations”. Under the acquisition method of accounting, the acquired assets and liabilities assumed from CBS were recorded as of the Total consideration transferred (in thousands): Cash consideration Stock consideration Contingent consideration 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). Such amounts were estimated using the most recent financial statements from CBS as of November 11, 2019. Accounts receivable, net Inventory Prepaid expenses and other current assets Property, plant and equipment, net Customer relationships Tradenames Developed technology Goodwill Accounts Payable ) Other liabilities ) Fair value of net assets acquired The fair value of CBS’s identifiable intangible assets and weighted average useful lives have been estimated as follows (amounts in thousands except years): Estimated Fair Value Estimated Useful Life (Years) Customer relationships Tradenames Developed technology Total identifiable intangible assets Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches deemed most relevant will then be selected for use in the fair value measurement of that asset. The fair value of identifiable intangible assets was determined primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. The fair value of inventories was determined using both the cost approach and the market approach and the fair value of property, plant and equipment was determined using the cost and market approach. Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset. Some of the more significant assumptions inherent in valuing the contingent consideration, include, but are not limited to (i) the amount and timing of projected future revenue, (ii) the volatility rate selected to measure the risks inherent in the revenue, and (iii) risk free interest rate. Acquired Goodwill The goodwill of $3.1 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. All of the goodwill recorded is expected to be deductible for income tax purposes. Revenue, Net Income and Pro Forma Presentation The Company recorded revenue from Astero of $1.2 million and a net loss of $1.5 million from April 1, 2019, the date of acquisition, to December 31, 2019. The Company recorded revenue from SAVSU of $692,000 and a net loss of $1.7 million from August 8, 2019, the date of acquisition, to December 31, 2019. The Company recorded revenue from CBS of $2.1 million and net income of $187,000 from November 12, 2019, the date of acquisition, to December 31, 2019. The Company has included the operating results of the acquisitions in its consolidated statements of operations since their respective acquisition date. The following pro forma financial information presents the combined results of operations of Astero, SAVSU and CBS as if the acquisition had occurred on January 1, 2018 after giving effect to certain pro forma adjustments. These pro forma adjustments include amortization expense on the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity compensation issued to The following pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and Year Ended December 31, (unaudited) (In thousands) 2019 2018 Total revenue Net income (loss) ) ) Loss per share: Basic and diluted ) ) 14. Consolidated Balance Sheet Detail Property and Equipment Property and equipment consist of the following: December 31, (In thousands) 2019 2018 Property and equipment Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation ) ) Net property and equipment Depreciation expense for property and equipment was Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following: December 31, (In thousands) 2019 2018 Accrued expenses and other current liabilities Other payables Accrued compensation Deferred revenue –– Deferred rent, current portion –– Other Total accrued expenses and other current liabilities 15. Employee Benefit Plan The Company sponsors a 401(k) defined contribution plan for its employees. This plan provides for pre-tax and post-tax contributions for all employees. Employee contributions are voluntary. Employees may contribute up to 100% of their annual compensation to this plan, as limited by an annual maximum amount as determined by the Internal Revenue Service. The Company matches employee contributions in amounts to be determined at the Company’s sole discretion. The Company made $158,000 and no contributions to the plan for the years ended December 31, 2019 and 2018. 16. Quarterly Financial Information (Unaudited) In addition to the warrant liability misstatement described in Note 2: “Restatement of Consolidated Financial Statements”, we identified the following adjustments described below for the quarters ended March 31, June 30 and September 30, 2019. On March 25, 2019 and April 1, 2019, we granted restricted stock awards with market-based vesting provisions see Note 11: “Stock-Based Compensation”. These awards were inappropriately valued. In the accompanying quarterly information, we valued these market-based awards using a Monte Carlo simulation. This resulted in a change in stock compensation expense decrease of $75,000, increase of $172,000 and increase of $175,000 for the quarters ended March 31, June 30, and September 30 2019. We discovered a computational error in the calculation in the fair value contingent consideration related to the Astero acquisition. The correction of this error is corrected in the consolidated balance sheet Financial Statement Reclassification Certain operating expenses related to cost of revenue and intangible amortization related to acquisitions were reclassified from research and development and sales and marketing to conform to the presentation of those operating expenses in the statement of operations for the year ended December 31, The Consolidated Balance Sheets (unaudited) Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $6 at March 31, 2018 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Investment in SAVSU Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Deferred rent, current portion Total current liabilities Deferred rent, long-term Warrant liability (a) Other long-term liabilities Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 4,250 shares issued and outstanding at March 31, 2018 Common stock, $0.001 par value; 150,000,000 shares authorized, 14,145,413 shares issued and outstanding at March 31, 2018 Additional paid-in capital (a) Accumulated deficit (a) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $0 at June 30, 2018 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Investment in SAVSU Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Deferred rent, current portion Total current liabilities Deferred rent, long-term Warrant liability (a) Other long-term liabilities Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 4,250 shares issued and outstanding at June 30, 2018 Common stock, $0.001 par value; 150,000,000 shares authorized, 16,107,505 shares issued and outstanding at June 30, 2018 Additional paid-in capital (a) Accumulated deficit (a) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $0 at September 30, 2018 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Investment in SAVSU Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Deferred rent, current portion Total current liabilities Deferred rent, long-term Warrant liability (a) Other long-term liabilities Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 4,250 shares issued and outstanding at September 30, 2018 Common stock, $0.001 par value; 150,000,000 shares authorized, 18,237,425 shares issued and outstanding at September 30, 2018 Additional paid-in capital (a) Accumulated deficit (a) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $0 at March 31, 2019 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Operating lease right-of-use assets Investment in SAVSU Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Lease liability - operating, current position Lease liability - financing, current position Total current liabilities Long-term lease liability - operating Long-term lease liability - financing Warrant liability (a) Other long-term liabilities Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0 shares issued and outstanding at March 31, 2019 Common stock, $0.001 par value; 150,000,000 shares authorized, 18,717,095 shares issued and outstanding at March 31, 2019 Additional paid-in capital (a) Accumulated deficit (a) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $26 at June 30, 2019 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Operating lease right-of-use assets Investment in SAVSU Intangible assets, net (c) Goodwill (b),(c) Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Lease liability - operating, current position Lease liability - financing, current position Contingent consideration - current (b) Total current liabilities Long-term lease liability - operating Long-term lease liability - financing Warrant liability (a) Other long-term liabilities Contingent consideration - long-term Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0 shares issued and outstanding at June 30, 2019 Common stock, $0.001 par value; 150,000,000 shares authorized, 18,898,609 shares issued and outstanding at June 30, 2019 Additional paid-in capital (a) Accumulated deficit (a),(d) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Balance Sheet (In thousands, except share and per share data) As Previously Reported Adjustments As Restated Assets Current assets Cash and cash equivalents Accounts receivable, trade, net of allowance for doubtful accounts of $68 at September 30, 2019 Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Leasehold improvements Furniture and computer equipment Manufacturing and other equipment Subtotal Less: Accumulated depreciation Net property and equipment Assets held for rent, net Operating lease right-of-use assets Investment in SAVSU Intangible assets, net (c) Goodwill (b),(c) Long-term deposits Total assets Liabilities and Shareholders’ Equity Current liabilities Accounts payable Accrued expenses and other current liabilities Accrued compensation Lease liability - operating, current position Lease liability - financing, current position Contingent consideration - current (b) Total current liabilities Long-term lease liability - operating Long-term lease liability - financing Warrant liability (a) Other long-term liabilities Contingent consideration - long-term Total liabilities Commitments and Contingencies Shareholders’ equity (deficit) Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0 shares issued and outstanding at September 30, 2019 Common stock, $0.001 par value; 150,000,000 shares authorized, 20,344,825 shares issued and outstanding at June 30, 2019 Additional paid-in capital (a) Accumulated deficit (a),(d) Total shareholders’ equity (deficit) Total liabilities and shareholders’ equity Consolidated Statements of Operations (unaudited) (In thousands, except per share and share data) Statement of Operations As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of revenue Research and development Sales and marketing General and administrative Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) Interest income Interest expense Loss from equity-method investment in SAVSU Total other income (expenses) Net income (loss) Less: Preferred stock dividends Net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted (In thousands, except per share and share data) Statement of Operations Statement of Operations As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of revenue Research and development Sales and marketing General and administrative Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) (a) Interest income Interest expense Loss from equity-method investment in SAVSU Total other income (expenses) Net income (loss) Less: Preferred stock dividends Net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted (In thousands, except per share and share data) Statement of Operations Statement of Operations As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of revenue Research and development Sales and marketing General and administrative Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) (a) Interest income Interest expense Loss from equity-method investment in SAVSU Total other income (expenses) Net income (loss) Less: Preferred stock dividends Net income (loss) attributable to common stockholders Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted (In thousands, except per share and share data) Statement of Operations As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of revenue (e) Research and development (d),(e) Sales and marketing (d),(e) General and administrative (d) Acquisition Costs Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) Interest income Interest expense Loss from equity-method investment in SAVSU Total other income (expenses) Income (loss) before provision for income taxes Income taxes Net income (loss) Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted (In thousands, except per share and share data) Statement of Operation Statement of Operations As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of product revenue (exclusive of intangible assets amortization) (d),(e) (d),(e) Research and development (d),(e) (d),(e) Sales and marketing (d),(e) (d),(e) General and administrative (d) (d) Amort of Intangibles (e) (e) Acquisition Costs Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) (a) Interest income Interest expense Other Expense Loss from equity-method investment in SAVSU Gain on Acquisition of SAVSU Total other income (expenses) Income (loss) before provision for income taxes Income taxes Net income (loss) Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted (In thousands, except per share and share data) Statement of Operations Statement of Operations As Previously Reported Adjustments As Restated As Previously Reported Adjustments As Restated Revenue Operating expenses Cost of product and rental revenue (exclusive of intangible assets amortization) (d),(e) (d),(e) Research and development (d),(e) (d),(e) Sales and marketing (d),(e) (d),(e) General and administrative (d) (d) Amort of Intangibles (e) (e) Acquisition Costs Total operating expenses Operating income (loss) Other income (expenses) Change in fair value of warrant liability (a) (a) Interest income Interest expense Other Expense Loss from equity-method investment in SAVSU Gain on Acquisition of SAVSU Total other income (expenses) Income (loss) before provision for income taxes Income taxes Net income (loss) Net income (loss) attributable to common stockholders: Basic Diluted Earnings per share attributable to common stockholders: Basic Diluted Weighted average shares used to compute earnings per share attributable to common stockholders: Basic Diluted Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 30, 2018 Adjustments Restated Cash flows from operating activities Net income (a) Adjustments to reconcile net income to net cash provided by operating activities Depreciation Stock-based compensation Amortization of deferred rent related to lease incentives Amortization of debt discount Loss from equity method investment in SAVSU Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets (Increase) Decrease in Accounts payable Accrued compensation and other current liabilities Deferred rent Net cash provided by operating activities Cash flows from investing activities Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities Payments on equipment loan Payments on capital lease obligation Proceeds from exercise of common stock options and warrants Payments of preferred stock dividends Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Stock issued for services provided in prior period included in liabilities at year-end Purchase of equipment with debt Series A preferred stock dividends accrued not yet paid Reclassification of warrant liabilities to equity upon exercise Six Months Ended June 30, 2018 Adjustments Restated Cash flows from operating activities Net income (loss) (a) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation Stock-based compensation Stock issued for services Amortization of deferred rent related to lease incentives Loss from equity method investment in SAVSU Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets Accounts payable Accrued compensation and other current liabilities Deferred rent Net cash provided by operating activities Cash flows from investing activities Investment in equity investment SAVSU Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities Payments on equipment loan Payments on capital lease obligation Proceeds from exercise of common stock options and warrants Payments of preferred stock dividends Payments for redemption of preferred stock Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Series A preferred stock dividends accrued not yet paid Stock issued for services provided in prior period included in liabilities at year-end Receivables converted to equity investment in SAVSU Purchase of equipment with debt Purchase of property and equipment not yet paid Reclassification of warrant liabilities to equity upon exercise Nine Months Ended September 30, 2018 Adjustments Restated Cash flows from operating activities Net income (loss) (a) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation Stock-based compensation Stock issued for services Write off of deferred financing costs Amortization of deferred rent related to lease incentives Loss from equity method investment in SAVSU Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets Accounts payable Accrued compensation and other current liabilities Deferred rent Net cash provided by operating activities Cash flows from investing activities Investment in equity investment SAVSU Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from private equity transaction Payments on equipment loan Payments on capital lease obligation Proceeds from exercise of common stock options and warrants Payments of preferred stock dividends Payments for redemption of preferred stock Deferred costs related to security issuance Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Series A preferred stock dividends accrued not yet paid Stock issued for services provided in prior period included in liabilities at year-end Receivables converted to equity investment in SAVSU Purchase of equipment with debt Legal fees for private equity transaction not yet paid Purchase of property and equipment not yet paid Reclassification of warrant liabilities to equity upon exercise Three Months Ended March 30, 2019 Adjustments Restated Cash flows from operating activities Net income (loss) (a) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation Stock-based compensation (d) Amortization of operating lease liability Interest expense - finance type lease Loss from equity method investment in SAVSU Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets (Increase) Decrease in Accounts payable Accrued compensation and other current liabilities Net cash provided by operating activities Cash flows from investing activities Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities Payments on equipment loan Payments on capital lease obligation Proceeds from exercise of common stock options and warrants Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Stock issued for services provided in prior period included in liabilities at year-end Purchase of equipment with debt Series A preferred stock dividends accrued not yet paid Purchase of property and equipment not yet paid Reclassification of warrant liabilities to equity upon exercise Six Months Ended June 30, 2019 Adjustments Restated Cash flows from operating activities Net income (loss) (a) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation Stock-based compensation (d) Amortization of deferred rent related to lease incentives Amortization of operating lease liability Interest expense - finance type lease Loss from equity method investment in SAVSU Amortization of intangible assets Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets (Increase) Decrease in Accounts payable Accrued compensation and other current liabilities Deferred rent Other liabilities Net cash provided by operating activities Cash flows from investing activities Payments related to the Astero Bio Acquisition, net of cash acquired Investment in equity investment SAVSU Purchase of property and equipment Net cash used in investing activities Cash flows from financing activities Payments on equipment loan Payments on capital lease obligation Proceeds from exercise of common stock options and warrants Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Series A preferred stock dividends accrued not yet paid Stock issued for services provided in prior period included in liabilities at year-end Receivables converted to equity investment in SAVSU Purchase of equipment with debt Purchase of property and equipment not yet paid Reclassification of warrant liabilities to equity upon exercise Nine Months Ended September 30, 2019 Adjustments Restated Cash flows from operating activities Net income (loss) (a) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation Loss on disposal of property and equipment Stock-based compensation (d) Amortization of operating lease liability Interest expense - finance type lease Loss from equity method investment in SAVSU Gain on acquisition of SAVSU Amortization of intangible assets Change in fair value of warrant liability (a) Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade, net Inventories Prepaid expenses and other current assets Other assets, net (Increase) Decrease in Accounts payable Accrued compensation and other current liabilities Other liabilities Net cash provided by operating activities Cash flows from investing activities Cash acquired on acquisition of SAVSU Payments related to the Astero Bio Acquisition, net of cash acquired Investment in iVexSol Purchase of property and equipment Purchase of assets held for rent Net cash used in investing activities Cash flows from financing activities Proceeds from private equity transaction Payments of costs related to Stock Issuances Payments on equipment loan Payments on finance lease obligation Proceeds from exercise of common stock options and warrants Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents – beginning of period Cash and cash equivalents – end of year Non-cash investing and financing activities Purchase of equipment with debt Purchase of property and equipment not yet paid Stock issued as consideration to acquire SAVSU Reclassification of warrant liabilities to equity upon exercise b. Adjustments related to change in fair value of Astero contingent consideration at acquisition. c. Adjustments related to change in valuation of in-process research and development acquired technology from the Astero acquisition d. Adjustments related to change in valuation method of market-based restricted stock awards. e. Adjustments related to cost of revenue and intangible amortization were reclassified from research and development and sales and marketing to conform to the presentation of those operating expenses in the statement of operations for the year ended December 31, 2019 17. Subsequent Events COVID-19 On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The virus and actions taken to mitigate its spread have had and are expected to continue to have a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates and conducts its business. In particular, the Seattle area, including the location of our corporate headquarters and our media production facility and warehouse, is at one of the epicenters of the coronavirus outbreak in the U.S. We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While we have implemented specific business continuity plans to reduce the potential impact of COVID-19 and believe that we have sufficient biopreservation media inventory to meet previously forecasted demand for the next six to nine months, there is no guarantee that our continuity plan, once in place, will be successful or that our inventory will meet forecasted or actual demand. We have already experienced certain disruptions to our business such as temporary closure of our offices and similar disruptions may occur for our customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19 could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand for our products or their ability to deliver needed supplies for the production of our products. The extent to which COVID-19 or any other health epidemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. Accordingly, COVID-19 could have a material adverse effect on our business, results of operations, financial condition and prospects. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. As of March 30, 2020, the company started deferring the employer side of social security payments. We will pay back 50% of our total deferred payments in 2021 and the remaining 50% in 2022. We determined that we met the original eligibility requirements per the guidelines original established by the U.S. federal government as part of the CARES Act for the Pursuant to the Paycheck Protection Program (the “PPP”). As such, on April 20, 2020, the Company received $2,175,320 in support from the PPP. Because the U.S. government subsequently changed its position and guidelines related to the PPP and publicly traded companies, the Company repaid the load on April 29, 2020. Casdin Financing On May 14, 2020, the Company entered into a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company (“Casdin”), pursuant to which Casdin agreed to invest $20 million in the Company at a price per share of $10.50. The transaction is expected to close on or before May 26, 2020, subject to ordinary closing conditions. Pursuant to the terms of the share purchase agreement, at closing, the Company will issue to Casdin 1,904,762 shares of Company common stock. The Company has also granted Casdin certain registration rights requiring the Company to file a registration statement with the Securities and Exchange Commission covering the resale by the Casdin of the shares issued in the transaction. Cashless warrant exercises On May 14, 2020, the Company entered into separate warrant exercise agreements with WAVI Holding AG and Taurus4757 GmbH pursuant to which the warrant holders immediately exercised their respective warrants via a “cashless” exercise as agreed to by the Company. As a result of the cashless exercise, the Company issued an aggregate of 2,747,970 shares of Company common stock upon cashless exercise of an aggregate of 3,871,405 warrants. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting The Company’s independent registered public accounting firm, BDO USA, LLP, who audited the consolidated financial statements included in this annual report, has issued an adverse audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, as shown below, BDO USA, LLP’s report on the consolidated financial statements appears under Part II, item 8 of this Annual Report on Form 10-K. In accordance with guidance issued by the Securities and Exchange (c) Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. (d) Remediation We plan to devote resources to the remediation and improvement of our internal control over financial reporting, in particular over handling of complex financial accounting issues. As the Company enters into transactions that involve complex accounting issues, it will consult with third party professionals with expertise in these matters as necessary to ensure appropriate accounting treatment for such transactions. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors BioLife Solutions, Inc. Bothell, Washington Opinion on Internal Control over Financial Reporting We have audited BioLife Solutions, Inc. (the “Company’s”) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. We do not express an opinion or any form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2019, the related consolidated statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements” and our report dated May 15, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to the Company’s failure to design and maintain effective controls surrounding reviews of complex equity transactions has been identified and described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report dated May 15, 2020, on those consolidated financial statements. As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SAVSU Technologies, Inc. (“SAVSU”), which was acquired on August 8, 2019, and Custom Biogenic Systems, Inc. (“CBS”), which was acquired on November 12, 2019, and which are included in the consolidated balance sheets of the Company as of December 31, 2019, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended. Together, these acquisitions constituted 44% of assets (excluding goodwill and intangible assets related to the transaction, which were integrated into the Company's systems and control environment) as of December 31, 2019, and approximately 10% of revenues for the year ended December 31, 2019. Management did not assess the effectiveness of internal control over financial reporting of SAVSU and CBS because of the timing of the acquisitions. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of SAVSU and CBS. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of /S/ BDO USA, LLP Seattle, Washington May 15, 2020 OTHER INFORMATION On May 14, 2020, the Company entered into a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company (“Casdin”), pursuant to which Casdin agreed to invest $20 million in the Company at a price per share of $10.50. The transaction is expected to close on or before May 26, 2020, subject to ordinary closing conditions. Pursuant to the terms of the share purchase agreement, at closing, the Company will issue to Casdin 1,904,762 shares of Company common stock. The Company has also granted Casdin certain registration rights requiring the Company to file a registration statement with the Securities and Exchange Commission covering the resale by the Casdin of the shares issued in the transaction. On May 14, 2020, the Company entered into separate warrant exercise agreements with WAVI Holding AG and Taurus4757 GmbH pursuant to which the warrant holders immediately exercised their respective warrants via a “cashless” exercise as agreed to by the Company. As a result of the cashless exercise, the Company issued an aggregate of 2,747,970 shares of Company common stock upon cashless exercise of an aggregate of 3,871,405 warrants. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE The following table and text set forth the names and ages of our Name Age Position and Offices With the Company Todd Berard 51 Chief Marketing Officer Roderick de Greef 59 Chief Operating Officer and Chief Financial Officer Karen Foster 60 Chief Quality Officer James Mathers 61 Chief Revenue Officer Aby J. Mathew, Ph.D. 48 Executive Vice President and Chief Scientific Officer Michael Rice 57 Chief Executive Officer, President, and Director Raymond Cohen 61 Chairman of the Board Thomas Girschweiler 62 Director Andrew Hinson 56 Director Joseph Schick 58 Director Todd Berard has been Chief Marketing Officer since December 2019. Before his appointment as Chief Marketing Officer, Mr. Berard had served as Vice President of Marketing since February 2015 and Senior Director of Marketing since July 2014. Previous to BioLife, Mr. Berard served as Director of Marketing at Verathon Medical; a division of Roper Inc., from September 2010 until July 2014, overseeing the global marketing, product development, and product launch strategies for a portfolio of six medical device brands. He also managed all strategic partnerships for product development and helped guide the organization through several key product launches and the corporate acquisition. At Verathon, Mr. Berard oversaw a creative and product management team of 12. Responsibilities included all global marketing initiatives and campaigns, strategy, product portfolio management, and strategic planning. He has over twenty years of experience in life sciences, health care, medical devices, and technology; working for both global leaders and small technology startups, including the University of Washington School of Medicine, DuPont, and Medtronic. He has a Bachelor of Science Degree in Biochemistry from the University of Vermont and an MBA from the University of Washington Foster School of Business. Roderick de Greef has been Chief Financial Officer since May 2016. In December 2019, Mr. de Greef was additionally appointed Chief Operating Officer. He was appointed interim Chief Financial Officer and interim Secretary in March 2016. Previously, Mr. de Greef served as a director of the Company from June 2000 through November 2013, and provided the Company with strategic and financial consulting services from July 2007 through August 2011. Since February 2019, Mr. de Greef has served as a director, chairman of the Audit Committee of the board of directors of Indonesia Energy Corporation Limited, an oil and gas exploration and production company. Mr. de Greef served Pareteum Corporation., a mobile communications company, as a director, chair of the Audit Committee and member of the Nominating and Corporate Governance Committee and Compensation Committee from September 2015 to September 2017, and also from January 2008 to October 2011. From November 2013 to October 2014, Mr. de Greef served as the president and sole director of Cambridge Cardiac Technologies, Inc. a privately held successor to Cambridge Heart, Inc. From November 2008 to October 2013, Mr. de Greef was the chairman of the board of Cambridge Heart, Inc., a manufacturer of non-invasive diagnostic cardiology products. From November 2003 to May 2013, Mr. de Greef served as a director, member of the Audit Committee and chairman of the Compensation Committee of Endologix, Inc. From 2001 to 2006, Mr. de Greef served as Executive Vice President and Chief Financial Officer of NASDAQ listed Cardiac Science, Inc., which in 2004 was ranked as the 4th fastest growing technology company in North America on Deloitte & Touche’s Fast 500 listing. Mr. de Greef received his MBA degree from the University of Oregon, and a B.A in Economics and International Relations from San Francisco State University. Mr. de Greef has extensive experience in corporate finance and the business world in general as well as serving as an officer and director of public companies. Karen Foster has been Chief Quality Officer since December 2019. Before her appointment as Chief Quality Officer, Ms. Foster had served as Vice President, Operations since April 2016. From 2003 to early 2016, Ms. Foster was Vice President of Laboratory Operations and Site Leader at ViaCord, LLC, a family cord blood bank, and subsidiary of PerkinElmer Inc. Over a 25-year career, Ms. Foster has managed manufacturing and quality operations in several capacities for companies including ViaCord, Pfizer, Inc. (formerly Pharmacia Corporation) and Amersham Pharmacia Biotech, Inc. (formerly Phamacia Biotech, Inc.). She holds an MBA from the University of Wisconsin-Milwaukee (specialization in Operations Management), an M.S. in Zoology from University of Wisconsin-Milwaukee (specialization in Microbiology) and a B.S. in Biological Sciences from Michigan Technological University. James Mathers has been Chief Revenue Officer since December 2019. Before his appointment as Chief Revenue Officer, Mr. Mathers had served as the Vice President, Global Sales, since May 2016. Mr. Mathers has more than 30 years of successful sales leadership and entrepreneurial experience in high growth medical and applied technology organizations. Mr. Mathers’ expertise lies in the building of scalable sales organizations in support of rapid market adoption of disruptive technologies. From October 2009 to December 2016, Mr. Mathers was Principal/Founder of the Mathers Group, a business consulting services firm for operational consultancy for physician owned specialty cancer centers and brokerage services for the acquisition and/or sale of radiation oncology capital equipment. From April 2013 to July 2014, Mr. Mathers was the Area Sales Director for MAKO Surgery/Stryker Orthopedics where he was responsible for the sales of RIO orthopedic robotics capital equipment for knee and hip replacement. From December 2011 to April 2013, Mr. Mathers was Director, Business Development for AMAMARK Healthcare responsible for sales revenue for outsourced clinical engineering functions. Previously, Mr. Mathers served in various global sales, marketing and business development leadership positions at Mako Surgical/Stryker Orthopedics, BrainLAB, Cardiac Science, Johnson & Johnson and Baxter Healthcare. Mr. Mathers has a Bachelor of Arts in Biology and Pre-Medicine from the University of Pennsylvania and an MBA from Pepperdine University. Aby J. Mathew, Ph.D. has been Executive Vice President and Chief Scientific Officer since December 2019. Before his appointment as Executive Vice President and Chief Scientific Officer, Mr. Mathew had served as Chief Technical Officer. Dr. Mathew was part of the founding team of BioLife Solutions, Inc., and has been employed by BioLife since 2000. Dr. Mathew is a co-developer of BioLife’s biopreservation media solutions and co-inventor on issued and pending patents related to methods, devices, and formulations for the preservation of cells, tissues, and organs. He holds a Ph.D. in Biological Sciences from Binghamton University and a B.S. in Microbiology from Cornell University. Dr. Mathew has been researching low temperature biopreservation since 1994, and his studies contributed to the development of BioLife’s current commercial HypoThermosol® and CryoStor® product platforms and intellectual property foundation. Dr. Mathew is currently active in, or previously a member of, AABB (formerly the American Association of Blood Banks), BEST (the Biomedical Excellence for Safer Transfusion collaborative), the International Society for Cell Therapy (ISCT), the Alliance for Regenerative Medicine (ARM), Tissue Engineering & Regenerative Medicine International Society (TERMIS), Society for Cryobiology, International Society for Biological and Environmental Repositories (ISBER), American Society for Cell Biology, and the Society for In Vitro Biology. Dr. Mathew is a member of, the Board of Directors, and Advisory Panel, of the Parent’s Guide to Cord Blood Foundation, the Scientific Advisory Board of HemaCare Corporation, the founding Board of Directors of the Cord Blood Association, the NIST-AMTech National Cell Manufacturing Consortium, the California Institute for Regenerative Medicine (CIRM) Clinical Advisory Panel, the Business Advisory Board of RoosterBio Inc., and the Scientific Advisory Board of SAVSU Technologies. Dr. Mathew has obtained UCLA Corporate Governance Program Certification. Michael Rice has been President and Chief Executive Officer and a director of the Company since August 2006, and was chairman of the Board from August 2007 to November 2013. Mr. Rice has more than 30 years of leadership and entrepreneurial experience in the medical and high-tech industries. He was most recently the senior business development manager for medical and wireless products at AMI Semiconductor, from October 2004 to August 2006. From October 2000 to August 2006, Mr. Rice also served as the director of marketing and business development at Cardiac Science, Inc., a manufacturer of automated external defibrillators. Prior to that, from May 1998 to October 2000, he was the Vice President, Sales and Marketing for TEGRIS Corporation, a privately held network services provider. Mr. Rice also spent 12 years, from May 1986 to May 1998 at Physio Control Corporation in several sales and marketing management roles prior to its acquisition by Medtronic Inc. The Board has determined that Mr. Rice is qualified to serve as a director because it values management’s insight. Raymond W. Cohen joined the Board in May 2006 and has served as Chairman of the Board since November 2013. Mr. Cohen is an accredited public company director with extensive operating and corporate governance experience holding positions on the boards of publicly listed life science companies. Mr. Cohen currently serves as the Chief Executive Officer and member of the board of directors of Axonics Modulation Technologies, Inc., (NASDAQ: AXNX), a manufacturer of neuromodulation devices. From mid-2010 to late 2012, Mr. Cohen served as Chief Executive Officer of Vessix Vascular, Inc. until Vessix was acquired by Boston Scientific Corporation. Previously, from 1997 to 2006, Mr. Cohen served as Chairman and Chief Executive Officer of NASDAQ listed Cardiac Science, Inc., which in 2004 was ranked as the 4th fastest growing technology company in North America on Deloitte & Touche’s Fast 500 listing. In 2008, Mr. Cohen was named by AeA as the Private Company Life Science CEO of the Year. Mr. Cohen was named Entrepreneur of the Year in 2002 by the Orange County Business Journal and was a finalist for Ernst & Young’s Entrepreneur of the Year in the medical company category in 2004. Mr. Cohen holds a B.S. in Business Management from Binghamton University. The board has determined that Mr. Cohen is qualified to serve as a director because of his extensive experience with public companies. Thomas Girschweiler was a member of our Andrew Hinson joined the Board in February 2007. Mr. Hinson currently serves as a consultant to the biotechnology industry specializing in matters of clinical and regulatory affairs. Mr. Hinson served as Vice President of Clinical and Regulatory Affairs for LoneStar Heart, Inc. from 2004 to 2016. Mr. Hinson previously served as the Senior Director of research and clinical development at AnGes MG, Inc. (TSE: 4563) a biotechnology firm engaged in the development and commercialization of novel gene and cell therapies for the treatment of cardiovascular disease. Prior to that Mr. Hinson had a long career with Procter & Gamble Pharmaceutical (NYSE:PG) holding multiple technical and management positions in research, clinical development and medical affairs. Mr. Hinson has diverse experience in the cell and gene therapy markets and extensive experience with regulatory affairs and clinical development of new therapies for cardiac, neurologic, and gastrointestinal diseases. The Board has determined that Mr. Hinson is qualified to serve as a director because of his experience and knowledge of companies in the biotechnology space. Joseph Schick joined the Board in November 2013. He has 13 years of experience as a Chief Financial Officer spanning four different mid-sized companies in various industries. Prior to his experience as a Chief Financial Officer, Mr. Schick worked in various roles for seven years at Expedia (NASDAQ: EXPE), including Senior Vice President of Finance. From this background, Mr. Schick has significant experience with SEC reporting, strategic planning, and mergers and acquisitions. Mr. Schick started his career with Arthur Andersen and is a CPA who received his B.S. in Accounting from the University of Illinois. He is also on various non-profit boards and completed the Director Certification program at UCLA. The Board has determined that Mr. Schick is qualified to serve as a director because of his financial experience with public companies. Except as otherwise provided by law, each director shall hold office until either their successor is elected and qualified, or until he or she sooner dies, resigns, is removed or becomes disqualified. Officers serve at the discretion of the Board. There are no family relationships between any of our directors or executive officers and any other of our directors or executive officers. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC reports of beneficial ownership and reports of changes in beneficial ownership in the Company’s securities. Based solely upon a review of Forms 3, 4 and 5, and amendments thereto, filed electronically with the SEC during the year ended December 31, 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. Our Board presently consists of five members. Our Board has determined three of our directors– Messrs. Cohen, Hinson, and Schick – to be independent under the rules of the NASDAQ Stock Market, after taking into consideration, among other things, those transactions described under “Certain Transactions”. Mr. Cohen serves as Chairman of the Board and is an independent director. The Board does not have a lead director; however, recognizing that the Board is composed almost entirely of outside directors, in addition to the Board’s strong committee system (as described more fully below), we believe this leadership structure is appropriate for the Company and allows the Board to maintain effective oversight of management. At each annual meeting of stockholders, members of our Board are elected to serve until the next annual meeting and until their successors are duly elected and qualified. Committees of the Board of Directors The Board has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each committee operates pursuant to a written charter that may be viewed on our The following table sets forth the current composition of the three standing committees of our Board: Name Board Audit Compensation Nominating Mr. Rice X Mr. Cohen Chair X Chair X Mr. Hinson X X X Chair Mr. Schick (financial expert) X Chair X X Mr. Girschweiler X Audit Committee. Our Audit Committee’s role includes the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; and our compliance with related legal, regulatory and ethical requirements. The Audit Committee oversees the appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, In addition, the Audit Committee’s role includes meeting to review our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm. The Audit Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at the Company’s expense. The Board has determined that all members of our Audit Committee meet the independence and financial literacy standards of the NASDAQ Stock Market and applicable SEC rules. The Board of Directors has determined that Mr. Schick is an “audit committee financial expert” as defined by the rules of the SEC. Compensation Committee. The purpose of the Compensation Committee is to discharge its fiduciary responsibilities relating to the compensation of executive officers, the organizational structure, succession, retention and training policies and review and oversight of benefit programs. Our Compensation Committee is responsible for reviewing the recommendations of our Chief Executive Officer and Chief Financial Officer, making recommendations to the Board regarding the compensation of our executive officers, and ensuring that the total compensation paid to the executive officers is reasonable and competitive, and does not promote excessive risk taking. In making its recommendation to the Board, the Compensation Committee considers the results of the most recent stockholder advisory vote on executive compensation. The Chief Executive Officer may not be present during voting or deliberation on his compensation. The Compensation Committee is also responsible for reviewing and making recommendations to the Board regarding director and committee member compensation. In addition, the Compensation Committee approves and has oversight over our bonus plans for executive officers and/or stock-based compensation plans and oversight of our overall compensation plans and benefit programs, including approval and oversight of grants. In discharge of its duties related to administration of executive bonus plans, the Compensation Committee may, subject to the terms of each plan, delegate authority to management for the day-to-day non-material administration of such plans. Further, the Compensation Committee may, subject to the terms of each plan, delegate authority to management to make grants to non-executive officers under stock-based compensation plans. The Compensation Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at the Company’s expense. The Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the six factors outlined in Rule 10C-1 of the Exchange Act. In considering and determining compensation levels, the Compensation Committee reviews independent and externally generated compensation data, in accordance with Rule 10C-1 of the Exchange Act. The members of the Compensation Committee are independent directors within the meaning of the listing standards of the NASDAQ Stock Market. Nominating and Governance Committee. Our Nominating and Governance Committee’s primary purpose is to evaluate candidates for membership on our Board and make recommendations to our Board regarding candidates; make recommendations with respect to the composition of our Board and its committees; provide guidance to our human resources, legal, and finance departments relating to director orientation programs; recommend corporate governance principles applicable to the Company; manage periodic review, discussion and evaluation of the performance of our Board, its committees and its members and oversee and monitor compliance with our Code of Business Conduct and Ethics. The Nominating and Governance Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at the Company’s expense. All members of our Nominating and Governance Committee are independent under the listing standards of the NASDAQ Stock Market. The Nominating and Governance Committee will consider candidates recommended by stockholders in accordance with the procedures set forth in our Bylaws, and prior to the date it recommends a slate of director nominees to the Board. Pursuant to the Nominating and Governance Committee Charter, there is no difference in the manner in which a nominee recommended by a stockholder or otherwise is evaluated. In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board’s mix of skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board at that point in time. In reviewing potential candidates, the Committee will also consider all relationships between any proposed nominee and any of our stockholders, competitors, customers, suppliers or other persons with a relationship to the Company. The Nominating and Governance Committee believes that each candidate should be an individual who has demonstrated exceptional ability and judgment, who are willing and able to make a sufficient time commitment to the Company, and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the stockholders. The Nominating and Governance Committee’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance Committee may, from time to time, retain, for a fee, one or more third-party search firms to identify suitable candidates. The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on the same criteria. The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and Governance Committee believe that it is essential that the Board members represent diverse viewpoints. Codes of Business Conduct and Ethics We believe in sound corporate governance practices and have always encouraged our employees, including officers and directors to conduct business in an honest and ethical manner. Additionally, it has always been our policy to comply with all applicable laws and provide accurate and timely disclosure. Accordingly, the Board has adopted a formal written code of ethics for all employees. The Board has adopted an additional corporate code of ethics for its Chief Executive Officer, Chief Financial Officer and other senior financial officers, which is intended to be a “code of ethics” as defined by applicable SEC EXECUTIVE COMPENSATION Summary Compensation Table Name and Principal Year Salary Bonus Stock All Other Compensation ($) (f) Total Michael Rice 2019 President, Chief Executive Officer and Director 2018 Aby J. Mathew 2019 Executive Vice President and Chief Scientific Officer 2018 Roderick de Greef 2019 Chief Operating Officer and Chief Financial Officer 2018 (1) Reflects base salary earned in each applicable period. (2) Performance bonus earned in 2019 was paid out in 12,991 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020. (3) Represents fair value of 35,497 shares of time-vested restricted stock and 35,497 market-based restricted stock granted on February 25, 2019. The time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers. (4) Represents 18,750 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder vesting quarterly over 3 years. (6) Performance bonus earned in 2019 was paid out in 5,144 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020. (7) Represents fair value of 16,598 shares of time-vested restricted stock and 16,598 market-based restricted stock granted on February 25, 2019. The time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers. (8) Represents 15,208 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder vesting quarterly over 3 years. (9) Performance bonus earned in 2019 was paid out in 4,933 restricted stock awards in lieu of cash, which will fully vest on September 25, 2020. (10) Represents fair value of 15,776 shares of time-vested restricted stock and 15,776 performance-based restricted stock granted on February 25, 2019. The time-vested stock award vested 1/4 of the shares on February 25, 2020 with the remainder vesting quarterly over 3 years. The market-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers. (11) Represents 14,583 shares of time-vested stock granted on January 1, 2018. This award vested 1/4 of the shares on January 1, 2019 with the remainder vesting quarterly over 3 years. Narrative Disclosure to Summary Compensation Table The Company entered into an employment agreement with Michael Rice, Chief Executive Officer, effective January 1, 2018 for a salary of $450,000 per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $517,500 effective January 1, 2019. With consideration to the recommendations of FW Cook described above, on February 23, 2019, the Compensation Committee approved a salary increase to $530,000 effective February 15, 2019. The agreement provides that if Mr. Rice’s employment is terminated without “Cause” (other than by reason of death or disability) or if he resigns for “Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. Rice’s employment is terminated upon or within 90 days following a “Change in Control”, Mr. Rice is entitled to a lump sum payment equal to 24 months’ salary and an amount equal to the cost of 24 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums. The Company entered into an employment agreement with Aby Mathew, Ph.D., Chief Technology Officer, effective January 1, 2018 for a salary of $365,000 per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $419,750 effective January 1, 2019. The agreement provides that if Mr. Mathew’s employment is terminated without “Cause” (other than by reason of death or disability) or if he resigns for “Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. Mathew’s employment is terminated upon or within 90 days following a “Change in Control”, Mr. Mathew is entitled to a lump sum payment equal to 12 months’ salary and an amount equal to the cost of 12 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums. The Company entered into an employment agreement with Roderick de Greef, Chief Financial Officer, effective January 1, 2018 for a salary of $350,000 per year. Subsequently, on November 19, 2018, the Compensation Committee approved a salary increase to $402,500 effective January 1, 2019. The agreement provides that if Mr. de Greef’s employment is terminated without “Cause” (other than by reason of death or disability) or if he resigns for “Good Reason,” he is entitled to a lump sum payment equal to 12 months’ salary, an amount equal to the cost of 12 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums and unvested stock options, awards, or other equity grants shall immediately fully vest; If Mr. de Greef’s employment is terminated upon or within 90 days following a “Change in Control”, Mr. de Greef is entitled to a lump sum payment equal to 18 months’ salary and an amount equal to the cost of 18 months’ medical insurance premiums at a monthly amount equal to the amount of COBRA coverage in effect as of the termination date, plus a tax gross-up amount with respect to such premiums. For purposes of each of these employment agreements, a “Change in Control” means (i) the consummation of a merger or consolidation of the Company with or into another entity, (ii) the dissolution, liquidation or winding up of the Company or (iii) the sale of all or substantially all of the Company’s assets. The foregoing notwithstanding, a merger or consolidation of the Company shall not constitute a “Change in Control” if immediately after such merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent corporation of such continuing or surviving entity, will be owned by the persons who were 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 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 Outstanding Equity Awards at December 31, 2019 The following table sets forth information concerning the outstanding equity awards as of December 31, 2019 granted to the named executive officers. OPTION AWARDS Name (a) Number of Number of Equity Option Option Michael Rice 229,226 –– –– 1.64 12/20/2021(2) Michael Rice 375,000 –– –– 2.06 5/4/2025(3) Michael Rice 93,750 6,250 –– 1.90 3/15/2026(4) Michael Rice 70,833 29,167 –– 1.78 2/7/2022(5) Aby J. Mathew 37,966 –– –– 1.40 2/5/2020(1) Aby J. Mathew 55,451 –– –– 1.12 2/11/2021(1) Aby J. Mathew 197,707 –– –– 1.64 12/20/2021(2) Aby J. Mathew 17,857 –– –– 1.40 2/15/2022(1) Aby J. Mathew 10,000 –– –– 3.70 4/21/2024(1) Aby J. Mathew 229,837 –– –– 2.06 5/4/2025(6) Roderick de Greef 6,919 –– –– 1.64 12/20/2021(2) Roderick de Greef 43,750 6,250 –– 1.76 3/4/2026(7) Roderick de Greef 79,625 24,375 –– 1.81 5/3/2026(8) (1) This award is fully vested. (2) This award is fully vested. (3) This award is fully vested. (4) This award vested 1/4 of the total shares on March 15, 2017 and, thereafter, vested and continues to vest in 36 equal monthly increments. (5) This award vested 1/4 of the total shares on February 7, 2018 and, thereafter, has vested and continues to vest in 36 equal monthly increments. (6) This award vested 1/4 of the total shares on May 4, 2016 and, thereafter, has vested and will continue to vest in 36 equal monthly increments. (7) This award vested 1/4 of the total shares on March 4, 2017 and, thereafter, has vested and will continue to vest in 36 equal monthly increments. (8) This award vested 1/4 of the total shares on May 3, 2017 and, thereafter, has vested and will continue to vest in 36 equal monthly increments. Name (a) Grant Date (b) 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) ($) 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 ($) Michael Rice 1/1/2018 10,547(2) 170,650 –– –– Michael Rice 2/25/2019 35,497(3) 574,341 35,497(4) 574,341 Aby J. Mathew 1/1/2018 8,555(5) 138,420 –– –– Aby J. Mathew 2/25/2019 16,598(6) 268,556 16,598(4) 268,556 Roderick de Greef 1/1/2018 8,203(7) 132,725 –– –– Roderick de Greef 2/25/2019 15,776(8) 255,256 15,776(4) 255,256 (1) The dollar amounts shown in columns (d) and (f) are determined by multiplying the number of shares or units shown in column (c) or (e), as applicable, by $16.18, the closing price of BioLife’s common stock on December 31, 2019. (2) 10,547 unvested time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. Rice continues to be employed with BioLife through the vesting dates. (3) 35,497 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments, provided that Mr. Rice continues to be employed with BioLife through the vesting dates. (4) The target number of market-based RSAs is shown. Between 0% and 200% of the target number of market-based RSAs vest depending on BioLife’s Relative Total Shareholder Return (“TSR”) compared to a group of 20 peers over the relevant two-year performance period. (5) 8,555 unvested time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. Mathew continues to be employed with BioLife through the vesting dates. (6) 16,598 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments, provided that Mr. Mathew continues to be employed with BioLife through the vesting dates. (7) 8,203 time-based RSAs subject to this award are scheduled to vest in 9 equal quarterly increments, provided that Mr. de Greef continues to be employed with BioLife through the vesting dates. (8) 15,776 time-based RSAs subject to this award are schedule to vest 1/4 on 2/25/2020 and, thereafter, will vest in 12 equal quarterly increments, provided that Mr. de Greef continues to be employed with BioLife through the vesting dates. Director Compensation Each of our Annual Audit Committee Chairman $ 10,000 Nominating and Governance Committee Chairman $ 5,000 A total of $315,000 in cash director compensation was recorded during the year ended December 31, 2019. The following table sets forth information regarding compensation earned by our non-employee directors for the year ended December 31, 2019. Name(1) Annual Cash ($) Board and Total Compensation Raymond Cohen Thomas Girschweiler –– Andrew Hinson Joseph Schick (1) Michael Rice did not receive any additional compensation for his services as a director. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of May 1, 2020, certain information Name and Address of Beneficial Owner Common Percentage Directors and Executive Officers Thomas Girschweiler(1) 3,115,299 13.7 % Michael Rice (Officer and Director)(2) 852,298 3.9 % Aby J. Mathew (Officer) (3) 724,009 3.3 % Roderick de Greef (Officer)(4) 128,993 0.6 % Andrew Hinson (Director)(5) 50,175 0.2 % Raymond Cohen (Director) (6) 23,388 0.1 % Joseph Schick (Director) (7) 11,875 0.1 % Total shares owned by Executive Officers and Directors (10 persons) (8) 5,600,466 22.5 % 5% Stockholders Walter Villiger(9) 5,642,797 24.0 % WAVI Holding AG(10) 5,092,797 22.2 % Taurus4757 GmbH(11) 3,064,496 13.5 % Casdin Capital, LLC (12) 2,468,571 11.6 % Shares of Common Stock subject to options and warrants that are exercisable or will be exercisable within 60 days of May 1, 2020 are deemed outstanding for computing the (1) Includes options to purchase 46,428 shares of Common Stock issuable upon exercise of stock options exercisable within 60 days from May 1, 2020, 4,375 share of Common Stock to be issued pursuant to a restricted stock award, 1,520,302 shares of Common Stock held indirectly through Mr. Girschweiler’s wholly-owned entity named Taurus4757 GmbH and 1,544,194 shares of Common Stock issuable upon exercise of warrants held by Taurus4757 GmbH. (2) Includes options to purchase 637,559 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 81,524 shares of Common Stock to be issued pursuant to restricted stock awards. (3) Includes options to purchase 510,852 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 51,661 shares of Common Stock to be issued pursuant to restricted stock awards. (4) Includes options to purchase 70,919 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 49,442 shares of Common Stock to be issued pursuant to restricted stock awards. (5) Includes options to purchase 35,714 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 4,375 shares of Common Stock to be issued pursuant to a restricted stock award. (6) Includes 6,563 shares of Common Stock to be issued pursuant to a restricted stock award. (7) Includes options to purchase 5,000 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 4,375 shares of Common Stock to be issued pursuant to a restricted stock award. (8) Includes the securities listed in footnotes 1-7, in addition to 49,660 shares of Common Stock, options to purchase 557,532 shares of Common Stock issuable under stock options exercisable within 60 days from May 1, 2020 and 87,237 shares of Common Stock to be issued pursuant to restricted stock awards held by executive officers of the Company that are not named executive officers. (9) Includes 3,315,586 shares of Common Stock held indirectly through Mr. Villiger’s wholly-owned entity named WAVI Holding AG, 550,000 shares of Common Stock issuable upon exercise of warrants held by Mr. Villiger and 1,777,211 shares of Common Stock issuable upon exercise of warrants held by WAVI Holding AG. The business address of Mr. Villiger is Hurdnerstrasse 10 Postfach 8640 Hurden Switzerland V8. (10) Includes 1,777,211 shares of Common Stock issuable upon exercise of warrants. The business address of WAVI Holding AG is Paradiesstrasse 25 Jona V8 CH 8645. (11) Includes 1,544,194 shares of Common Stock issuable upon exercise of warrants. The business address of Taurus4757 GmbH is Wissmannstrasse 15, CH-8057 Zurich, Switzerland. (12) Based on a Schedule 13G/A filed on February 6, 2020. Consists of 2,468,571 shares of Common Stock. The business address of Casdin Capital, LLC is 1350 Avenue of the Americas, Suite 2405, New York, New York 10019. Equity Compensation Plan Information The following table sets forth information as of December 31, 2019 relating to all our equity compensation plans: Plan category Number of securities to exercise options (in thousands) Weighted Average Number of Number of securities (in thousands) Equity compensation plans not approved by security holders (1) 188 $ 1.41 –– –– Second amended and restated 2013 performance incentive plan 2,120 $ 1.90 937 464 (1) Represents shares of common stock issuable pursuant to non-plan stock option agreements entered into prior to the adoption of our 2013 Performance Incentive Plan. Prior to the adoption of our 2013 Performance Incentive Plan, we granted certain individuals stock options pursuant to stock option agreements that were not issued under a stockholder-approved plan. Each agreement entitles the holder to purchase from us a fixed number of shares of common stock at a fixed purchase price per share for a fixed period of time, which may not exceed ten (10) years. The specific terms and conditions of each option, including when the right to exercise the option vests, the number of shares subject to the option, the exercise price per share, the method of exercise, exercisability following termination, disability and death, and adjustments upon stock splits, combinations, mergers, consolidation and like events are specified in each agreement. In the event of a liquidation of the Company, or a merger, reorganization, or consolidation of the Company with any other corporation in which we are not the surviving corporation or we become a wholly-owned subsidiary of another corporation, any unexercised options shall be deemed canceled unless the surviving corporation elects to assume the options or to issue substitute options in place thereof. In the event of the forgoing, the holder will have the right to exercise the option during a ten-day period immediately prior to such liquidation, merger, or consolidation. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Since January 1, 2018, there has not been, nor has there been proposed, any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than as described above under the headings “Executive Compensation” and “Board of Directors—Director Compensation” and other than the transactions described below. Each of the transactions described below was reviewed and approved or ratified by On May 17, 2018 we redeemed from WAVI 25%, or 1,063 shares of Series A Redeemable Preferred stock outstanding for $1,063,000. On November 27, 2018 we redeemed the remaining 3,187 shares of Series A Redeemable Preferred stock outstanding for $3,187,000. There are no Series A shares outstanding and no accrued preferred dividends as of December 31, 2018. Director Independence Our board of directors is responsible for determining the independence of our directors. For purposes of determining director independence, our board of directors has applied the definitions set forth in NASDAQ Rule 5605(a)(2) and the related rules of the SEC. Based upon its evaluation, our board of directors has affirmatively determined that the following directors meet the standards of independence: Mr. Cohen, Mr. Schick, and Mr. Hinson. PRINCIPAL Independent Registered Public Accounting Firm Fees The 2019 Audit fees(1) Audit related fees(2) Tax fees(3) All other fees(4) Total The following table sets forth the aggregate fees billed by our previous independent accountants, Peterson Sullivan, for professional services rendered in the fiscal years ended December 31, 2019 and 2018. 2019 2018 Audit fees(5) Audit related fees(2) Tax fees(3) All other fees(4) Total (1) Audit fees consist of professional services for the audit of our annual financial statements, audit of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagement for those fiscal years. (2) Audit-related fees consist of assurance and related services reasonably related to the performance of the audit or review of our financial statements that are not reported under the heading Audit fees above. In the years ended December 31, 2019 and 2018, we incurred Audit-related fees in connection with audits and reviews of companies we acquired. (3) There were no fees paid that would be considered “Tax fees” in 2019 or 2018. Fees to be disclosed under this category would be for professional services for tax compliance, tax advice, and tax planning. (4) There were no fees paid that would be considered “All Other fees” in 2019 or 2018. Fees to be disclosed under this category would be for products and services other than those described under the headings Audit fees, Audit-related fees and Tax fees above. (5) Audit fees consist of professional services for the audit of our annual financial statements, audit of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, and review of financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagement for those fiscal years. Audit Committee Pre-Approval Policies and Procedures The Audit Committee must pre-approve all services to be performed for us by our independent auditors. Pre-approval is EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Financial Statements (Included Under Item 8): The Index to the Financial Statements is included on page 28 of this Annual Report on Form 10-K and is incorporated herein by reference. (2) Financial Statement Schedules: None. (b) Exhibits Exhibit Document 2.1†* 2.2† 2.3†* 3.1 3.2 3.3 3.4 4.1 10.1** 10.2** 10.3 10.4 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 23.1 23.2 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 101.INS XBRL Instance Document (filed herewith) 101.SCH XBRL Taxonomy Extension Schema (filed herewith) 101.CAL XBRL Taxonomy Extension Calculation Linkbase (filed herewith) 101.DEF XBRL Taxonomy Extension Definition Linkbase (filed herewith) 101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith) 101.PRE XBRL Taxonomy Extension Presentation Linkbase (filed herewith) * Certain sensitive financial, commercial and strategic information relating to the Company has been redacted in the marked portions of the exhibit. ** Management contract or compensatory plan or arrangement. † The exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. (c) Excluded financial statements: None. FORM 10-K Summary The Company has elected not to include a summary pursuant to this Item 16. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 15, 2020 BIOLIFE SOLUTIONS, INC. /s/ Michael Rice Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: May 15, 2020 /s/ Michael Rice Chief Executive Officer and President Date: May 15, 2020 /s/Roderick de Roderick de Greef Chief Financial Officer (principal financial Date: May 15, 2020 /s/ Raymond Cohen Chairman of the Board of Directors Date: May 15, 2020 /s/Thomas Girschweiler Thomas Girschweiler Director Date: May 15, 2020 /s/ Andrew Hinson Director Date: May 15, 2020 /s/Joseph Schick Joseph Schick Director BioLife Solutions, Inc.Consolidated StatementsTable of Shareholders’ Equity BioLife Solutions, Inc. Shareholder’s Equity Preferred
Stock
Shares –
Series A Preferred
Stock
Amount –
Series A Common
Stock
Shares Common
Stock
Amount Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss Accumulated
Deficit Total BioLife
Solutions,
Inc.
Shareholders’
Equity Non-
Controlling
Interest
Equity Total
Shareholders’
Equity Balance, December 31, 2015 –– $ –– 12,448,391 $ 12,447 $ 72,823,398 $ (451 ) $ (64,326,923 ) $ 8,508,471 $ 1,350,900 $ 9,859,371 Stock-based compensation 776,994 776,994 776,994 Stock options/warrant exercises 246,164 247 246,033 246,280 246,280 Stock Issued – on vested RSUs 84,894 86 (86 ) –– –– Warrants Issued with Debt - WAVI 374,390 374,390 374,390 Stock Issued for Services 84,375 84 134,916 135,000 135,000 Other comprehensive income 451 451 451 Elimination of remaining non-controlling interest equity on deconsolidation (184,974 ) (184,974 ) Net loss (6,875,446 ) (6,875,446 ) (1,165,926 ) (8,041,372 ) Balance, December 31, 2016 12,863,824 12,864 74,355,645 –– (71,202,369 ) 3,166,140 –– 3,166,140 Cumulative-effect adjustment resulting from adoption of ASU 2016-09 27,908 (27,908 ) –– –– Vesting of JV related stock-based compensation 22,317 22,317 22,317 Series A preferred stock issued on conversion of related party note and accrued interest on June 30, 2017, net of stock issuance costs of $9,303 4,250 4 4,240,693 4,240,697 4,240,697 Stock based compensation 1,270,203 1,270,203 1,270,203 Stock option/warrant exercises 1,045,719 1,046 3,977,290 3,978,336 3,978,336 Stock issued – on vested RSUs 51,563 51 (51 ) –– –– Stock issued for services 60,316 60 142,439 142,499 142,499 Preferred stock dividends (212,500 ) (212,500 ) (212,500 ) Net loss (2,515,106 ) (2,515,106 ) (2,515,106 ) Balance, December 31, 2017 4,250 $ 4 14,021,422 $ 14,021 $ 84,036,444 $ –– $ (73,957,883 ) $ 10,092,586 $ — $ 10,092,586 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements
Contents26Consolidated Statements of Cash Flows Years Ended December 31, 2017 2016 Cash flows from operating activities Net loss $ (2,515,106 ) $ (8,041,372 ) Adjustments to reconcile net loss to net cash provided by/(used in) operating activities Depreciation 338,682 368,102 Loss on disposal of property and equipment –– 1,213 Stock-based compensation expense 1,270,203 776,994 Stock issued for services 106,874 135,000 Write off of deferred financing costs 67,664 86,736 Amortization of debt discount 155,996 218,394 Loss on deconsolidation of biologistex –– 2,785,910 Loss from equity-method investment in SAVSU 1,004,880 –– Amortization of deferred rent related to lease incentives (126,998 ) (126,997 ) Accretion and amortization on available for sale investments –– 1,792 Change in operating assets and liabilities (Increase) Decrease in Accounts receivable, trade 172,331 (264,357 ) Inventories (88,962 ) (290,838 ) Prepaid expenses and other current assets (180,663 ) 73,255 Increase (Decrease) in Accounts payable 20,580 233,482 Accrued compensation and other current liabilities 293,743 (410,151 ) Accrued interest 152,143 97,857 Deferred rent (66,245 ) 27,989 Net cash provided by/(used in) operating activities 605,122 (4,326,991 ) Cash flows from investing activities Sales/maturities of available-for-sale investments –– 1,650,000 Costs associated with internal use software development –– (1,113,675 ) Purchase of property and equipment (143,767 ) (143,533 ) Net cash provided by/(used in) investing activities (143,767 ) 392,792 Cash flows from financing activities Proceeds from note payable to related party 1,000,000 3,000,000 Proceeds from exercise of common stock options and warrants 3,978,336 278,503 Payments on equipment loan (13,081 ) –– Payments on capital lease obligation (10,901 ) –– Payments related to preferred stock issuance (9,303 ) –– Payments of preferred stock dividends (106,250 ) –– Deferred costs paid related to potential stock issuance (42,664 ) (111,736 ) Net cash provided by financing activities 4,796,137 3,166,767 Net increase/(decrease) in cash and cash equivalents 5,257,492 (767,432 ) Cash and cash equivalents - beginning of year 1,405,826 2,173,258 Cash and cash equivalents - end of year $ 6,663,318 $ 1,405,826 Non-cash investing and financing activities Series A preferred stock dividends accrued not yet paid $ 106,250 $ –– Stock issued for services in prior period included in liabilities at year-end 35,624 –– Preferred stock issued to convert related party note payable and accrued interest 4,250,000 –– Capital lease obligations incurred for purchase of equipment 52,327 –– Purchase of equipment with debt 39,243 –– Debt discount related to warrants –– 374,390 Deferred costs related to potential stock issuances not yet paid –– 26,975 Purchase of property and equipment not yet paid 22,003 –– The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements 27marketersupplier of a portfolio of bioproduction tools including; proprietary clinical gradebiopreservation media, automated thawing devices, cloud-connected shipping containers, and freezer technology for cell and tissuegene therapies. Our CryoStor® freeze media and HypoThermosol® hypothermic storage and cryopreservation freeze media. Our proprietary HypoThermosol® and CryoStor® platform of solutions are highly valuedoptimized to preserve cells in the biobanking, drug discovery, and regenerative medicine markets. Ourmarket. 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 enabling technology providesdeath; offering commercial companies and clinical researchers significant improvement in shelf life and post-preservation viability and functionfunction. Our ThawSTAR® product line is comprised of cells, tissues,a family of automated thawing devices for frozen cell and organs. Additionally, for our direct, distributor,gene therapies packaged in cryovials and contract customers, we perform custom formulation, fill,cryobags. These products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and finish services.Restructuringreducing the risks of biologistex On December 31, 2016, we entered into a Contribution Agreement (the “Contribution Agreement”) with Savsu Technologies, LLC, a Delaware limited liability company (“STLLC”)contamination and biologistex CCM, LLC, a Delaware limited liability company (“biologistex” or “SAVSU”). The closing of the transactions contemplated by the Contribution Agreement occurred on December 31, 2016 (the “Closing Date”), simultaneouslyoverheating, which are inherent with the entrance into the Contribution Agreement. biologistex is a joint venture entered into by the Companyuse of traditional water baths. Our evo shipping containers are innovative high-performance cloud-connected passive storage and STLLC in 2014transport containers for the purposetemperature-sensitive biologics and pharmaceuticals.Our cryogenic freezer technology, provides for controlled rate freezing and storage of acquiring, developing, maintaining, owning, operating, leasing and selling an integrated platform of a cloud-based information service and precision thermal shipping products based on STLLC’s next generation EVO smart container shipment platform. Prior to the Closing Date, biologistex was owned 52% by the Company and 48% by STLLC. Pursuant to the Contribution Agreement, STLLC contributed certain of its patent and trademark rights, personal property and related contracts to biologistex in exchange for the issuance from biologistex to STLLC of an additional 7% membership interest in biologistex, so that upon the closing thereunder, STLLC owned 55% of biologistex and the Company owned 45% of biologistex. Other than liabilities for obligations to be performed pursuant to the contracts which were contributed to biologistex by STLLC, biologistex did not assume any liabilities of STLLC in connection with the Contribution Agreement. In connection with the Contribution Agreement, we (i) contributed to biologistex as a capital contribution outstanding loans owed by biologistex to the Company in the aggregate amount of $6,557,776 and (ii) terminated any requirement which the Company may have had to purchase any additional inventory from STLLC or contribute any inventory to biologistex.As a result of the Contribution Agreement, we deconsolidated the biologistex joint venture from our balance sheet on December 31, 2016 and began accounting for our investment in SAVSU using the equity method. We recognized a $2.8 million loss on deconsolidation (including approximately $0.1 million in related restructuring charges), which consisted of a $2.2 million gain on derecognizing the assets, liabilities and equity of biologistex from our consolidated financial statements and a $5.0 million loss related to the remeasurement of the retained fair value of our investment in SAVSU. We derived the fair value of our retained investment in SAVSU using level 3 measurements in the fair value hierarchy using a midpoint between a discounted cash flow analysis and a discounted price to revenues multiples. As part of the fair value analysis, we applied a range of discount rates of 30% - 50% to multiple cash flow and terminal value scenarios. An increase in discount rate would result in a decrease in fair value. In addition, we used a range of revenue multiples of 2 times revenue – 6 times revenue, which were applied to a risk adjusted revenue projection. A decrease in revenue multiple would result in a decrease in fair value.On January 22, 2018, the Company and STLLC amended their arrangement with respect to SAVSU. As described in more detail below, in exchange for the Company’s agreement to terminate that certain Services Agreement, dated December 31, 2016 (the “Services Agreement”), between the Company and SAVSU relating to the provision of services by the Company to SAVSU in exchange initially for cash payments and thereafter for a portion of SAVSU’s future revenues, STLLC agreed to (i) revise a provision of that the Contribution Agreement, between the Company and STLLC eliminating the requirement that the Company transfer a portion of its equity of SAVSU to STLLC on December 31, 2018 and (ii) amend a provision of that certain Amended and Restated Operating Agreement of biologistex, dated December 31, 2016 (the “Operating Agreement”), reflecting the percentage of profits and losses that each of the Company and STLLC will share in of SAVSU.On January 22, 2018, in consideration of the Company’s agreement to terminate the Services Agreement, the Company and STLLC entered into Amendment No. 1 to Contribution Agreement (the “Contribution Agreement Amendment”) and Amendment to the Amended and Restated Operating Agreement of biologistex CCM, LLC (the “Operating Agreement Amendment”).Pursuant to the Contribution Agreement Amendment, the parties agreed to amend a provision in the Contribution Agreement that required the Company to transfer to STLLC a portion of its equity stake in SAVSU which would have reduced the Company’s ownership in SAVSU from 40% to 25% on December 31, 2018. As a result of the Contribution Agreement Amendment, the Company will now maintain a 35% ownership stake in SAVSU, subject to ordinary dilution.Pursuant to the Operating Agreement Amendment, the parties agreed to amend the profit sharing provision of the Operating Agreement. As a result of the Operating Agreement Amendment, the Company will receive 35% of the profits and losses of SAVSU, subject to ordinary dilution, moving forward. Prior to the Operating Agreement Amendment, the Company would have been entitled to receive 40% of the profits and losses of SAVSU for the fiscal year ended December 31, 2018 and would have been entitled to receive 25% of the profits and losses beginning January 1, 2019 and continuing thereafter.NetSignificant estimates and assumptions by management affect the Company’s allowance for doubtful accounts, the net realizable value of inventory, fair value of warrant liability, valuation of market based awards, valuations and purchase price allocations related to investments and business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets, estimated fair values of intangible assets and goodwill, amortization methods and periods, certain accrued expenses, share-based compensation, contingent consideration from business combinations, tax reserves and recoverability of the Company’s net deferred tax assets, and related valuation allowance. $ 23,358 $ 19,742 1,184 — 692 — 2,137 — $ 27,371 $ 19,742 net lossearnings per common share for the two classes of stock (common stock and warrants) is calculated by dividing the net loss attributable to common stockholdersincome by the weighted average number of shares of common sharesstock and warrants outstanding during the period, excluding, unvested restricted stock outstanding during thereporting period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutiveof common stock equivalents outstanding during the period. Common stock equivalents are excluded for the years ending December 31, 2017 and 2016 since the effect is anti-dilutive due to the Company’s net losses. Common stock equivalents include unvested restricted stock, stock options and warrants.Basic weighted average common shares outstanding, andplus the potentially dilutive securitieseffect of common equivalent shares outstanding determined under both the two class method and the treasury stock method, whichever is more dilutive. $ (1,657 $ (25,005 — (339 (1,657 (25,344 19,460,299 16,256,465 $ (0.09 $ (1.56 computations because they are antidilutive, are as follows for the years ended December 31, 2017 and 2016:their inclusion would have been anti-dilutive: 2017 2016 Basic and diluted weighted average common stock shares outstanding 13,263,881 12,642,996 Potentially dilutive securities excluded from loss per share computations: Common stock options 3,390,009 2,513,861 Common stock purchase warrants 6,688,849 7,603,141 Unvested Restricted Stock 237,926 98,439 2,564,456 2,819,306 2,903,813 2,551,507 5,520,495 5,370,813 paid $37,926periodically invest in securities of private companies to promote business and strategic objectives. These investments are measured and recorded as follows:cashindications of impairment for interestSexton.yearsyear ended December 31, 20172019. The fair value of the Note on the date of investment was determined to be equal to its principal amount. Interest income related to this Note is recorded separately from other changes in its fair value within interest income each period.2016, respectively.the unpaid principal balance of the convertible note as of December 31, 2019:29 $1,000,000 $1,000,000 $— Subsequent to the deconsolidation of biologistex onEquity method investments at December 31, 2016, we account2018, consist entirely of our investment in SAVSU. We accounted for our investmentownership in SAVSU using the equity method of accounting.accounting prior to our acquisition of the remaining ownership interest in SAVSU on August 8, 2019. This method states that if the investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity method. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying value in the consolidated balance sheet and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of other income (expense), net in the consolidated statements of operations. For the year ended December 31, 2017,period prior to acquisition, January 1, 2019 through August 7, 2019, SAVSU’s net loss totaled $2.2 million of which our 45% ownership resulted in a $1.0 million loss which was recorded as “Loss from equity-method investment in SAVSU.” We did not record any equity method income or loss related to SAVSU for$1.7 million. For the year ended December 31, 2016. Our retained investment in SAVSU was initially recorded at fair value as of December 31, 2016 and our proportionate share of the2018, SAVSU’s net loss as reported by SAVSU for the period accounted for on the equity method in 2016 is included in our consolidated net loss which had no activity as of December 31, 2016.As of December 31, 2017, SAVSU had current assets and total assets of $0.6 million and $3.3 million, respectively and liabilities of $0.2totaled $1.9 million. As of December 31, 2016, SAVSU had current assets and total assets of $0.5 million and $3.2 million, respectively and no material liabilities. The carrying value of our investment in SAVSU is in excess of the underlying equity in net assets of SAVSU as of December 31, 2016, due to the company’s investment recorded at fair value while the underlying net assets of SAVSU are recorded at historical cost. The carrying value of our investment in SAVSU is less than the underlying equity in net assets of SAVSU as of December 31, 2017, as STLLC made additional contributions to SAVSU in 2017 as capital contributions and there were no changes in ownership percentages. Net assets of SAVSU include significant unrecorded internally developed intangibles contributed by STLLC at December 31, 2017 and 2016.InventoriesInventories represent biopreservation solutions, raw materials used to make biopreservation solutions and are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“FIFO”) method.Accounts receivableAccounts receivable are stated at principal amount, do not bear interest, and are generally unsecured. We provide an allowance for doubtful accounts based on an evaluation of customer account balances past due ninety days from the date of invoicing. Accounts considered uncollectible are charged against the established allowance.30DeferredAssets held for rentForAssets held for rent are carried at cost less accumulated depreciation. These assets consist of evo shippers and related components in production shippers complete and ready to be deployed and placed in service upon a customer order, shippers in the process of being assembled, and components available to build shippers. When the shipper is sent to our operating leases,customers, we recognizedepreciate the cost of the shippers over its estimated useful life of three years.expensethe shippers per a rental agreement. Each agreement provides for fixed monthly rent. Rental revenue and fees are recognized over the rental term on a straight-line basis overbasis. We retain the termsownership of the leasesshippers and accordingly, we recordthe evo tracking software platform. At the end of the rental agreement, the customer returns the shipper to the company.cash rent payments and the recognition of rent expense as a deferred rent liability. Landlord-funded leasehold improvements, to the extent the improvements are not landlord property upon lease termination, are also recorded as deferred rent liabilities and are amortized as a reduction of rent expense over the non-cancelable termnet book value of the related operating lease.assets and their estimated fair values. There were no impairment losses recognized during the years ended December 31, 2019 and 2018.RevenueLease Accountingrecognize product revenue, including shippingadopted ASU 2016-02 and handling charges billedrelated ASUs (collectively Accounting Standards Codification (“ASC”) 842) effective January 1, 2019 using the modified retrospective method and did not restate comparative periods. Consequently, periods before January 1, 2019 will continue to customers, upon shipmentbe reported in accordance with the prior accounting guidance, ASC 840, “Leases”. We elected the package of product when titlepractical expedients, which permits us to retain prior conclusions about lease identification, lease classification and riskinitial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. We also elected the practical expedient to combine lease and non-lease components for all of loss passour leases other than net lease real estate leases.customers. Shippingliabilities of $0.5 million for deferred rent and handling costs are classified as part of cost of product sales. We may also receive fees fromlease incentives liabilities that were included on our contract manufacturing customers for validation of the manufacturing process. This typically occursBalance Sheet prior to production for those customersadoption of ASC Topic 842, “Leases”. These amounts were eliminated at the time of adoption and revenue is recognized upon successful completionare included in the lease liabilities. Adoption of all obligations related toASC Topic 842, “Leases”did not have a material impact on the validation process.Company’s net earnings and had no impact on cash flows.20142016 to 2017.2019.$38,708$43,000 and $74,916$30,000 for the years ended December 31, 20172019 and 2016,2018, respectively.Fair valueeach of the years 20172019 and 2016,2018, we derived approximately 12%15% of our revenue from our relationship with one distributorcustomer and 29% of our products. Revenuerevenue from two customers, located in foreign countries represented 16% and 17% of total revenue during the years ended December 31, 2017 and 2016, respectively. All revenue from foreign customers are denominated in United States dollars. 69 77 16 13 14 8 1 2 100 100 2017,2019, two customers accounted for 41%25% of gross accounts receivable. At December 31, 2016,2018, three customers accounted for 45%71% of gross accounts receivable. No other customers accounted for more than 10% of our gross accounts receivable. In the years 2019 and 2018, we derived approximately 74% and 88%, respectively, of our revenue from CryoStor products.Stock BasedStock-based Compensationusemeasure and record compensation expense using the applicable accounting guidance for share-based payments related to stock options, time-based restricted stock, and performance-based awards granted to our directors and employees. The fair value of stock options, including performance awards, without a market condition is determined by using the Black-Scholes option pricing modeloption-pricing model. The fair value of restricted stock awards with a market condition is estimated, at the date of grant, using the Monte Carlo Simulation model. The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing our methodstock options, significant judgment is required in determining the expected volatility of valuationour common stock and the expected life that individuals will hold their stock options prior to exercising. Expected volatility for stock option awards. Restrictedoptions is based on the historical and implied volatility of our own common stock unit grants are valued atwhile the volatility for our restricted stock awards with a market condition is based on the historical volatility of our own stock and the stock of companies within our defined peer group. Further, our expected volatility may change in the future, which could substantially change the grant-date fair value of future awards and, ultimately, the expense we record. The fair value of restricted stock, including performance awards, without a market condition is estimated using the current market price of our common stock on the date of grant. Share-basedbased oncalculated 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.portionacquisition-related contingent consideration using various valuation approaches, including option pricing models, as well as significant unobservable inputs, reflecting the Company’s assessment of the stock-based award that will vest duringassumptions market participants would use to value these liabilities. The fair value of the contingent consideration is remeasured each reporting period, with any change in the value recorded as other income or expense.adjusted for forfeitures. Ourin which the adjustments are recognized. Upon the conclusion of the measurement period or final determination of the fair value of stock option awardsthe assets acquired, liabilities assumed, or contingent consideration, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.grant using an option pricing modelacquisition and amortized over their estimated useful lives on a straight-line basis. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products. If impairment indicators are present, the Company determines whether the underlying intangible asset is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but arerecoverable through estimated future undiscounted cash flows. If the asset is not limitedfound to be recoverable, it is written down to the expected life of the award, expected stock price volatility over the term of the award and historical and projected exercise behaviors. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period estimates are revised. Although theestimated fair value of stock option awards is determined in accordance with authoritative guidance, the Black-Scholes option pricing model requires the input of highly subjective assumptions and other reasonable assumptions could provide differing results. Share-based compensation expense is recognized ratably over the applicable requisite service periodasset based on the fair valuesum of such share-based awards on the grant date.future discounted cash flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company continues to believe that its definitive-lived intangible assets are recoverable at December 31, 2019.31TheWarrants that include cash settlement features are recorded as liabilities at their estimated fair value of options at the date of grantissuance 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 determined underbased, in part, upon inputs for which there is little or no observable market data, requiring the Black-Scholes option pricing model. DuringCompany 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 years ended December 31, 2017volatility of our common stock at the date of issuance, and 2016,at each subsequent reporting period, based on historical volatility that matches the following weighted-average assumptions were used:Assumptions 2017 2016 Risk-free rate 2.12 % 1.51 % Annual rate of dividends –– –– Historical volatility 74 % 75 % Expected life 5.7 years 7.0 years wasis based on the U.S. Treasury zero-coupon yield curve in effect aton the timegrant date for a maturity similar to the expected remaining life of grant. We do not anticipate declaring dividends in the foreseeable future. Volatility waswarrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on historical data. We utilize the simplified method in determining option lives. The simplified method is used due to the fact that we have had significant structural changes in our business such that our historical exercise data may not provide a reasonable basisrate, which we anticipate to estimate option lives. Our stock price volatility and option lives involve management’s best estimatesremain at zero. The assumptions used in calculating the time of such determination, all of which impact theestimated fair value of the option calculated underwarrants represent our best estimates. However, these estimates involve inherent uncertainties and the Black-Scholes model and, ultimately, the expense that will be recognized over the lifeapplication of the option.Management adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Update No. 2016-09 on January 1, 2017. Due to the adoption of ASU 2016-09 an accounting policy change was made to account for forfeitures as they occur and not estimated.management judgment. As a result, we had a cumulative-effect adjustment to accumulated deficitif factors change and additional paiddifferent assumptions are used, the warrant liability and the change in capitalestimated fair value could be materially different. The following is our weighted average assumptions used in the Black Scholes calculations of $27,908 resulting from adoption. The estimated forfeiture rate derived from historical employee termination data applied for 2016 was approximately 8.1%.the warrants: 1.9 2.6 0.0 0.0 1.7 2.8 70.3 63.4 2016,2018, the FASB issued Accounting Standards Update No. 2016-15,ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 includes amendments that aim to improve the effectiveness of fair value measurement disclosures. The amendments in this guidance modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, “Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements,” including the consideration of Cash Flows (Topic 230): Classification of Certain Cash Receiptscosts and Cash Payments (ASU 2016-15).benefits. The updated guidance clarifies how companies present and classify certain cash receipts and cash paymentsamendments become effective for the Company in the statement of cash flows. Adoption of ASU 2016-15 is required for fiscal reporting periods beginning afteryear ending December 15, 2017, including interim reporting periods within those fiscal years with31, 2020 and early adoption beingis permitted. We do not expectThe Company will adopt this guidance in the adoptionfirst quarter of ASU 2016-152020 and expects there to have abe no material impact on ourits consolidated financial statements.March 2016,December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU-2016-09). The updated guidancefor Income Taxes.” ASU 2019-12 simplifies and changes how companies account for certain aspects of share-based payment awards to employees, includingthe accounting for income taxes forfeitures,by removing certain exceptions to the general principles in Topic 740, including, but not limited to, the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and statutoryincome or a gain from other items, the exceptions related to the recognition of a deferred tax withholding requirements, as well as classification of certain itemsliability related to an equity method investment and the exception to methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. ASU 2019-12 becomes effective for the Company in the statement of cash flows.year ended December 31, 2021, including interim periods. The Company adopted ASU-2016-09 atis considering early adoption in 2020. Due to the beginning offull valuation allowance on the first quarter of 2017. Due toCompany’s net deferred tax assets, the Company is currently expecting no material impact from the adoption of ASU 2016-09 an accounting policy change was made to account for forfeitures as they occur and not estimated. No other material changes resulted from adopting ASU 2016-09. We used the modified retrospective method for this adoption.In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases: Topic 842 (ASU 2016-02) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Statements of Operations. Lessor accounting is largely unchanged under ASU 2016-02. Adoption of ASU 2016-02 is required for fiscal reporting periods beginning after December 15, 2018, including interim reporting periods within those fiscal years with early adoption being permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. While the Company expects adoption of ASU 2016-02 to lead to a material increase in the assets and liabilities recorded2019-12 on its Balance Sheet, the Company is still evaluating the overall impact on itsconsolidated financial statements.JanuaryJune 2016, the FASB issued Accounting Standards UpdateASU No. 2016-01, Recognition and2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial AssetsInstruments.” ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and Financial Liabilities: Topic 825 (ASU 2016-01). The updated guidance enhancesrequires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For Smaller Reporting Companies as defined by the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. Adoption ofSEC, ASU 2016-012016-13 is requiredeffective for fiscal reporting periodsyears beginning after December 15, 2017,2022, including interim reporting periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements. 2016-012018-15 to haveresult in a material impact onchange to its financial statements.November 2015,March 2014, pursuant to a registered public offering and note conversion agreement with certain note holders of the FASBCompany, the Company issued Accounting Standards Update No. 2015-17, Balance Sheet Classificationwarrants (“Warrants”) to purchase common stock of Deferred Taxes: Topic 740 (ASU 2015-17). Current GAAP requires the deferred taxesCompany. These Warrants were initially classified as equity. The Warrants included a cash settlement feature that could arise in certain very limited events, therefore, the Company is now of the view that the Warrants should have been accounted for each jurisdiction to be presented as a net current asset or liability, recorded at fair value at the date of issuance, and net noncurrent asset or liability. This requires a jurisdiction-by-jurisdiction analysis based onmarked to market at each reporting period. All changes in fair value should have been recorded in earnings. The company has evaluated the financial statement impact of changing the warrant classification of the assetsfrom equity to liability for previously reported periods and liabilities to which the underlying temporary differences relate, or, in the case of loss or credit carryforwards, based on the period in which the attributeconcluded that this impact is expected to be realized. Any valuation allowance is then required to be allocated on a pro rata basis, by jurisdiction, between current and noncurrent deferred tax assets. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. material.each jurisdiction will now only have one net noncurrent deferred tax asset or liability. the amounts previously reported for the periods ended March 31, June 30, September 30 and December 31, 2018 and March 31, June 30, and September 30 2019 are restated in these financial statements, collectively known as the “Affected Periods.” See Note 16: “Quarterly Financial Information (Unaudited)” for more information on further restatements affecting quarterly periods.guidance does not changecumulative effect of these adjustments on the existing requirement that only permits offsetting withinCompany’s previously-reported accumulated deficit and total shareholders’ equity was an increase of $27.4 million and a jurisdiction. The Company adopted ASU-2015-17 atdecrease of $28.5 million, respectively, as of the beginning of the first quarter of 2017 which had no significant impact on the financial statements as the net deferred tax assets are fully reserved.32In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory: Topic 330 (ASU 2015-11). Topic 330 previously required an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU 2015-11 requires that inventory measured using either the first-in, first-out (FIFO) or average cost method be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU-2015-11 at the beginning of the first quarter of 2017 which had no significant impact on the financial statements.On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes effective for us in the first quarter of fiscal 2018. Based on our analysis thus far, we believe the impact of adopting the new guidance will be immaterial to our annual and interim financial statements. The Company will also be required to make additional disclosures under the new guidance. We continue to assess the impact on all areas of our revenue recognition, disclosure requirements, and changes that may be necessary to our internal controls over financial reporting. We will adopt this standard in the first quarter of 2018.With the exception of the new standards discussed above, there have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our Financial Statements.2.Accumulated Other Comprehensive LossThe following table shows the changes in Accumulated Other Comprehensive Loss by component for the yearsyear ended December 31, 20172018. These adjustments do not impact the amounts previously reported for the Company’s cash and 2016:cash equivalents, net cash used for operating activities, revenue or operating expenses in any of the Affected Periods. 2017 2016 Beginning balance $ –– $ (451 ) Unrealized Gain on investments, current period –– 451 Ending balance $ –– $ –– $ — $ 28,516 $ 28,516 $ 2,319 $ 28,516 $ 30,835 $ 114,160 $ (1,152 $ 113,008 $ (71,031 $ (27,364 $ (98,395 $ 43,148 $ (28,516 $ 14,632 $ — $ (28,271 $ (28,271 $ (396 $ (28,271 $ (28,667 Net income (loss) before provision for income taxes $ 3,266 $ (28,271 ) $ (25,005 ) $ 3,266 $ (28,271 $ (25,005 $ 2,927 $ (28,271 $ (25,344 $ 0.18 $ (1.74 $ (1.56 $ 0.14 $ (1.70 $ (1.56 $ 84,036 $ (20,531 $ 63,505 $ (73,958 $ 907 $ (73,051 $ 10,092 $ (19,624 $ (9,532 ) $ 3,266 $ (28,271 $ (25,005 $ — $ 28,271 $ 28,271 3.short-term investments at fair value on a recurring basis. The company also measures certain assets and liabilities at fair value on a non-recurring basis when applying acquisition accounting. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows:2017 and 2016,2019, the Company does not havevalued the Astero and CBS contingent consideration and warrant liabilities at fair value. As of December 31, 2018, the Company valued warrant liabilities at fair value.value.value on a recurring basis.20172019 and December 31, 2016,2018, based on the three-tier fair value hierarchy:As of December 31, 2017 Level 1 Level 2 Total Bank deposits $ 6,610,183 $ — $ 6,610,183 Money market funds 53,135 — 53,135 Total Cash and cash equivalents $ 6,663,318 $ — $ 6,663,318 As of December 31, 2016 Level 1 Level 2 Total Bank deposits $ 1,352,541 $ — $ 1,352,541 Money market funds 53,285 — 53,285 Total Cash and cash equivalents $ 1,405,826 $ — $ 1,405,826 $ 6,448 $ — $ — $ 6,448 — — 1,000 1,000 6,448 — 1,000 7,448 — — 1,914 1,914 $ — $ — $ 39,602 $ 39,602 — — 41,516 41,516 33 $ 30,657 $ — $ — $ 30,657 $ — $ — $ 28,516 $ 28,516 bank deposits and money market funds classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The Company has no Level 2 orfair values of investments and contingent consideration classified as Level 3 assets. The Company did notwere derived from management assumptions (see Note 1 – “Organization and Significant Accounting Policies.”) There have anybeen no transfers of assets or liabilities between Level 1 and Level 2 of the fair value hierarchy duringmeasurement levels. The following table presents the years ended December 31, 2017 and 2016.changes in investments held at fair value which are measured using Level 3 inputs: $ — 1,000 — $ 1,000 $ — 2,347 50 (483 $ 1,914 $ 28,516 $ 19,623 (1,749 (19,378 12,835 28,271 $ 39,602 $ 28,516 4.20172019 and 2016:2018: 2017 2016 Raw materials $ 582,816 $ 531,053 $ 2,979 $ 1,453 Work in progress 453,890 370,740 1,896 652 Finished goods 810,040 855,991 6,097 1,404 Total $ 1,846,746 $ 1,757,784 $ 10,972 $ 3,509 5.Deferred RentDeferredAssets held for rent consistsconsist of the following at December 31, 2017 and 2016:2019: 2017 2016 Landlord-funded leasehold improvements $ 1,124,790 $ 1,124,790 Less accumulated amortization (629,525 ) (502,527 ) Total (current portion $130,216 at December 31, 2017 and 2016) 495,265 622,263 Straight line rent adjustment 127,158 193,403 Total deferred rent $ 622,423 $ 815,666 $ 3,073 (174 2,899 1,023 $ 3,922 DuringShippers and related components in production include shippers complete and ready to be deployed and placed in service upon a customer order, shippers in the years ended December 31, 2017process of being assembled, and 2016, the Company recorded $126,998 and $126,997, respectively,components available to build shippers. We recognized $174,000 in deferreddepreciation expense related to assets held for rent amortization of landlord funded leasehold improvements.In addition, during the year ended December 31, 2017, the company recorded a reduction of deferred rent of $66,245, and during the year ended December 31, 2016, the Company recorded an increase of deferred rent of $27,989, which represented the difference between cash rent payments and the recognition of rent expense on a straight-line basis over the terms of the lease.6.Income TaxesIncome tax benefit reconciled to tax calculated at statutory rates is as follows: 2017 2016 Federal tax (benefit) on consolidated net loss at statutory rate $ (855,136 ) $ (2,734,067 ) Change in valuation allowance (3,419,114 ) 38,090 Add back tax benefit on loss attributable to non-controlling interest in subsidiary –– 396,415 Book loss related to joint venture deconsolidation –– 900,910 Basis limited on joint venture loss –– 429,450 Basis difference related to investment in joint venture (110,114 ) 705,500 Return to provision (1,037,754 ) –– Discrete due to joint venture deconsolidation –– 245,854 Federal rate change true-up 5,421,298 –– Other 820 17,848 Benefit for income taxes, net $ –– $ –– 34At December 31, 2017 and 2016, the components of the Company’s deferred taxes are as follows: 2017 2016 Deferred tax assets (liabilities) Net operating loss carryforwards $ 8,162,123 $ 11,956,967 Accrued compensation 31,844 35,249 Depreciation 42,688 46,975 Section 263a inventory adjustment 29,171 43,787 Stock-based compensation 688,148 765,928 Outside basis difference in joint venture (224,725 ) (705,500 ) Other 28,232 33,189 Total 8,757,481 12,176,595 Less: Valuation allowance (8,757,481 ) (12,176,595 ) Net deferred tax asset $ –– $ –– On December 22, 2017, “H.R.1”, known as the “Tax Cuts and Jobs Act”, was signed into law in the United States. Among other items, H.R.1 reduces the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective January 1, 2018. As a result, the Company revalued its net deferred tax asset at the new lower tax rate. The Company has reduced the value of the deferred tax asset before valuation allowance by $5.4 million.The Company has the following net operating loss tax carryforwards available at December 31, 2017:Year of Expiration Net Operating
Losses 2018 $ 1,425,000 2019 1,234,000 2020 2,849,000 2021 4,168,000 2023 1,217,000 2024 646,000 2025 589,000 2026 873,000 2027 2,607,000 2028 2,512,000 2029 2,196,000 2030 1,232,000 2031 1,028,000 2032 437,000 2033 37,000 2034 6,409,000 2035 3,093,000 2036 4,995,000 2037 1,320,000 Total $ 38,867,000 Based on historical losses and potential future changes in the ownership of the Company, the utilization of such loss and tax credit carryforwards could be substantially limited.7.WarrantsThe following table summarizes warrant activity for the years ended December 31, 2017 and 2016: Year Ended Year Ended December 31, 2017 December 31, 2016 Wtd. Avg. Wtd. Avg. Exercise Exercise Shares Price Shares Price Outstanding at beginning of year 7,603,141 $ 4.46 7,195,997 $ 4.60 Granted –– –– 550,000 1.75 Exercised (914,292 ) 4.18 (142,856 ) 0.84 Forfeited/Expired –– –– –– –– Outstanding and exercisable at end of year 6,688,849 $ 4.50 7,603,141 $ 4.46 35On May 12, 2016, we issued 550,000 warrants with an exercise price of $1.75 and an expiration date of May 12, 2021 in connection with the credit facility agreement with WAVI Holdings, AG (“WAVI”). The Company recorded a debt discount related to the value of the warrants in the amount of $374,390. The debt discount amount recorded related to the warrants was determined based on the relative fair value of the note payable and the warrants. The outstanding warrants have expiration dates between March 2021 and May 2021.8.Stock-Based CompensationStock Compensation PlansOur 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 1998, we adopted the 1998 Stock Option Plan (the “1998 Plan”). An aggregate of 285,714 shares of common stock were reserved for issuance upon the exercise of options granted under the 1998 Plan. In September 2005, the shareholders approved an increase in the number of shares available for issuance to 714,285 shares. The 1998 Plan expired on August 31, 2008. The options are exercisable for up to ten years from the grant date. As of December 31, 2017, there were outstanding options to purchase 7,142 share of Company common stock under the 1998 Plan.Subsequent to the expiration of the 1998 Plan, the Company issued, outside of the 1998 Plan, non-incentive stock options for an aggregate of 1,243,584 shares of Company common stock. Of this amount, 665,105 remain outstanding at December 31, 2017.During 2013, we adopted the 2013 Performance Incentive Plan (the “2013 Plan”), which allows us to grant options or restricted stock units to all employees, including executive officers, outside consultants and non-employee directors. An aggregate of 3.1 million shares of common stock were initially reserved for issuance upon the exercise of options granted under the 2013 Plan. In May 2017, the shareholders approved an increase in the number of shares available for issuance to 4.1 million shares. Option vesting periods are generally four years for the 2013 Plan. Options granted under this plan generally expire ten years from the effective date of grant. As of December 31, 2017, there were outstanding options to purchase 2,717,762 shares of Company common stock and 237,926 unvested restricted stock awards outstanding under the 2013 Plan.Issuance of SharesWhen options and warrants are exercised, it is the Company’s policy to issue new shares.Stock Option ActivityService Vesting-Based Stock OptionsThe following is a summary of service vesting-based stock option activity under our stock option plans for 2017 and 2016, and the status of service vesting-based stock options outstanding at December 31, 2017 and 2016: Year Ended Year Ended December 31, 2017 December 31, 2016 Wtd. Avg. Wtd. Avg. Exercise Exercise Shares Price Shares Price Outstanding at beginning of year 2,513,861 $ 1.78 2,555,263 $ 1.80 Granted 155,000 2.93 739,000 1.80 Exercised (131,427 ) 1.17 (103,308 ) 1.22 Forfeited (52,932 ) 3.45 (469,856 ) 2.15 Expired - vested (94,490 ) 1.78 (207,238 ) 1.50 Outstanding at end of year 2,390,012 $ 1.85 2,513,861 $ 1.78 Stock options exercisable at year end 1,583,585 $ 1.72 1,329,392 $ 1.66 We recognized stock compensation expense of $611,705 and $612,440 related to service vesting-based options during the year ended December 31, 2017 and 2016, respectively. Weighted average fair value of service vesting-based options granted was $1.91 and $1.26 per share for the years ended December 31, 2017 and 2016, respectively.During the year ended December 31, 2017, service vesting-based options covering 131,427 shares of common stock with a total intrinsic value of $91,817 were exercised. During the year ended December 31, 2016, service vesting-based options covering 103,308 shares of common stock with a total intrinsic value of $51,302 were exercised.As of December 31, 2017, there was $9,936,441 of aggregate intrinsic value of outstanding service vesting-based stock options, including $6,793,545 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 2017 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 as of December 31, 2017. This amount will change based on the fair market value of the Company’s stock.The following table summarizes information about service vesting-based stock options outstanding at December 31, 2017:Range of
Exercise Prices Number Outstanding at
December 31, 2017 Weighted Average
Remaining
Contractual Life Weighted Average
Exercise Price $ 0.49-$1.00 17,855 1.17 $ 0.60 $ 1.01-$1.50 645,108 2.75 $ 1.23 $ 1.51-$2.50 1,632,408 7.56 $ 1.93 $ 2.51-$8.60 94,641 7.89 $ 4.94 2,390,012 6.22 $ 1.85 The weighted average remaining contractual life of exercisable service vesting-based options at December 31, 2017, is 5.6 years. Total unrecognized compensation cost of service vesting-based stock options at December 31, 2017 of $1,174,003 is expected to be recognized over a weighted average period of 2.2 years.Performance-based Stock OptionsThe Company’s Board of Directors implemented a Management Performance Bonus Plan for 2017. Based on achieving varying levels of specified revenue for the year ending December 31, 2017, up to 1,000,000 options to purchase shares of the Company’s common stock may be vested. The options have an exercise price of $1.64, and if revenue levels are met, vest 50% on the release of the Company’s audited financial statements for 2017, and 50% one year thereafter. If the minimum performance targets are not achieved, no options will vest. On February 27, 2018, the Company’s Board of Directors determined that, subject to the completion of the 2017 audit, the specified revenue target had been achieved. Accordingly, 999,997 options to purchase shares of the Company’s common stock will vest as follows: 50% of the options vested on March 8, 2018 and the remaining 50% will vest on March 8, 2019.We recognized stock compensation expense36Restricted StockThe following is a summary of unvested restricted stock activity for 2017 and 2016, and the status of unvested restricted stock outstanding at December 31, 2017 and 2016: Year Ended Year Ended December 31, 2017 December 31, 2016 Wtd. Avg. Wtd. Avg. Grant Date Grant Date Shares Fair Value Shares Fair Value Outstanding at beginning of year 98,439 $ 1.90 –– $ –– Granted 207,350 1.76 200,000 1.90 Vested (51,563 ) 1.90 (84,894 ) 1.90 Forfeited (16,300 ) 1.76 (16,667 ) 1.90 Non-vested at end of year 237,926 $ 1.79 98,439 $ 1.90 The aggregate fair value of the awards granted during the years ended December 31, 2017 and 2016 was $364,936 and $380,000, respectively, which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate fair value of the restricted stock awards that vested during the years ended December 31, 2017 and 2016 was $154,219 and $156,564, respectively.We recognized stock compensation expense of $149,494 and $164,554 related to restricted stock awards during the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, there was $344,279 in unrecognized compensation costs related to restricted stock awards. We expect to recognize those costs over 2.6 years.We recorded total stock compensation expense for the years ended December 31, 2017 and 2016, as follows: 2017 2016 Research and development costs $ 236,972 $ 151,849 Sales and marketing costs 230,461 176,878 General and administrative costs 638,346 426,035 Cost of product sales 164,424 2,794 Joint venture restructuring charges –– 19,438 Total $ 1,270,203 $ 776,994 9.Commitments and ContingenciesLeases30,00032,106 square feet in our Bothell, Washington headquarters. The term of our lease continues until July 31, 2021 with two options to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1, 2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the amended lease agreement, our monthly base rent is approximately $58,000$63,000 at December 31, 2017,2019, with scheduled annual increases each August and again in October for the most recent amendment. We are also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses. $ 873 $ 15 559 3 1,432 18 (78 (1 $ 1,354 $ 17 is a schedule oftable provides the future minimum lease payments required under noncancelable operating leases with lease terms in excess of one year at December 31, 2018 in accordance with ASC 840: $ 748 764 452 1,964 facility leasesimplementation of ASU 2016-02. Deferred rent consists of the following at December 31, 2018: $ 1,125 (757 368 111 $ 479 $ — 9,515 21,037 3,085 $ 33,637 $ 800 $ (51 $ 749 5.6 2,590 (123 2,467 8.1 19,020 (904 18,116 8.4 650 — 650 9.0 $ 23,060 $ (1,078 $ 21,982 8.3 2017:2019, the Company expects to record the following amortization expense:Year Ending December 31 2018 $ 704,000 2019 718,000 2020 733,000 2021 433,000 Total $ 2,588,000 $ 2,788 2,825 2,825 2,795 2,770 7,979 $ 21,982 37 — — — — — — (1,541 — — — (1,541 — $ (1,541 — 21 21 (5 2 74 3 (17 (1 (5 (1 (82 (24 64 — (4 — 5 — (5 — 1 — 47 — $ 9,495 $ 7,381 1,110 664 192 181 88 42 208 101 152 4 11,249 8,369 (2,217 (218 (108 (24 (2,543 (24 8,706 8,345 (8,706 (8,345 Rental expense for thisleasethe Company issued a warrant to purchase 550,000 shares of common stock at $1.75 per share. The warrant was immediately exercisable and expires in May 2021. 4,080,005 $ 4.35 6,688,849 $ 4.50 (121,000 4.75 (2,608,844 4.75 3,959,005 $ 4.33 4,080,005 $ 4.35 2,043,402 $ 1.91 2,390,012 $ 1.85 (469,510 1.72 (330,983 1.36 (3,437 5.69 (15,627 4.34 1,570,455 $ 1.96 2,043,402 $ 1.91 1,465,599 $ 1.94 1,661,999 $ 1.87
Exercise Prices
December 31, 2019
Remaining
Contractual Life
Exercise Price $0.49 - 1.00 3,571 1.91 $ 0.49 $1.01 - 1.50 175,199 1.32 $ 1.24 $1.51 - 2.50 1,328,367 5.46 $ 1.94 $2.51 - 8.60 63,318 5.71 $ 4.42 1,570,455 5.00 $ 1.96 2016 totaled $755,3872018.$832,110, respectively. These amounts include2018, and the status of performance-based stock options outstanding at December 31, 2019 and 2018: 964,997 $ 1.64 999,997 $ 1.64 (227,500 1.64 (35,000 1.64 737,497 $ 1.64 964,997 $ 1.64 737,497 $ 1.64 465,001 $ 1.64 proportionate shareclosing stock price on the last trading day of property taxesthe quarter and other operating expenses as definedthe exercise price, multiplied by the lease. number of shares) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. This amount will change based on the fair market value of the Company’s stock. Intrinsic value of performance-based awards exercised during the years ending December 31, 2019 and 2018 was $3.7 million and $285,000, respectively. The weighted average remaining contractual life of performance-based options outstanding and exercisable at December 31, 2019, is 2.0 years. 279,919 $ 5.00 237,926 $ 1.79 309, 218 17.15 181,268 7.02 (125,818 4.57 (116,647 1.81 (33,920 12.88 (22,628 3.95 429,399 $ 13.25 279,919 $ 5.00 $ 571 $ 260 711 269 1,584 809 177 181 $ 3,043 $ 1,519 TechnologyScience Officer, Chief Quality Officer, Chief Marketing Officer, Chief Revenue Officer, Vice President, of Operations, Vice President of Marketing,Freezer Technologies, and Vice President, ofCold Chain Technologies Sales. None of these employment agreements is for a definitive period, but rather each will continue indefinitely until terminated in accordance with its terms. The agreements provide for a base annual salary, payable in monthly (or shorter) installments. In addition, the agreement with the Chief Executive Officer provides for incentive bonuses at the discretion of the Board of Directors. Under certain conditions and for certain of these officers, we may be required to pay additional amounts upon terminating the officer or upon the officer resigning for good reason.10.Preferred StockJune 30, 2017, we modified our existing credit facilityApril 1, 2019, BioLife completed the acquisition of all the outstanding shares of Astero. Astero’s ThawSTAR product line is comprised of a family of automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. The products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with WAVI,the use of traditional water baths.principal stockholderbase payment in the amount of $12.5 million consisting of (x) an initial cash payment of $8.0 million at the closing of the Company.transactions contemplated by the Purchase Agreement, subject to adjustment for working capital, net debt and transaction expenses, and (y) a deferred cash payment that was paid into escrow of $4.5 million payable upon the earlier of Astero meeting certain product development milestones or one year after the date of the Closing and (ii) earnout payments in calendar years 2019, 2020 and 2021 of up to an aggregate of $3.5 million, which shall be payable upon Astero achieving certain specified revenue targets in each year and a separate earnout payment of $5.0 million for calendar year 2021 which shall be payable upon Astero achieving a cumulative revenue target over the three-year period from 2019 to 2021. $ 12,521 1,491 (71 $ 13,941 $ 11 154 456 160 470 2,840 650 9,515 99 (250 (164 $ 13,941 $ 160 4 470 9 2,840 5 – 9 In-process research and development 650 N/A $ 4,120 modification, WAVIShare Exchange Agreement, SAVSU Origin, LLC agreed to transfer to us and we agreed to acquire from the Seller 8,616 shares of common stock of SAVSU, representing the remaining 56% of the outstanding shares of SAVSU that we did not previously own, in exchange itsfor 1,100,000 shares of BioLife common stock. As a result of the acquisition, SAVSU became a wholly-owned subsidiary on August 8, 2019, the acquisition date.credit facility,investment in SAVSU was $35.8 million at time of closing. Prior to the acquisition, we accounted for our investment of SAVSU using the equity method of accounting which resulted in a recorded book value of $5.8 million at the acquisition date. We remeasured to fair value the equity interest in SAVSU held immediately before the business combination. The fair value of our equity interest was determined to be $15.9 million on our existing 44% ownership based on the fair value of shares transferred at the time of acquisition for the 56% we did not previously own. As a result, we recorded a non-operating gain of $10.1 million.$4.25but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates.$ 19,932 principal$35.8 million. $ 1,251 753 19 546 233 2,441 80 1,320 10,750 21,037 (807 (1,541 (232 $ 35,850 accruedestimated useful lives have been estimated as follows (amounts in thousands except years): $ 80 6 1,320 9 10,750 7 – 8 $ 12,150 June 1, 2017,March 13, 2019 and (ii) potential earnout payments in calendar years 2020, 2021, 2022, 2023 and 2024 of up to an aggregate of, but not exceeding, $15.0 million payable to CBS Seller upon achieving certain specified revenue targets in each year for 4,250 sharescertain product lines.Company’s Series A Preferred Stock, which has a fixed, aggregate statedacquisition date, at their fair values, and consolidated with BioLife. The fair value of $4.25the net tangible assets acquired is $6.0 million, the fair value of the identifiable intangibles is $6.8 million, and the residual goodwill is $3.1 million. The preferred sharesfair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates. $ 11,000 4,000 856 $ 15,856 $ 1,044 3,232 29 3,615 560 800 5,430 3,085 (1,328 (611 $ 15,856 $ 560 6 800 6 5,430 9 $ 6,790 WAVI are not convertible into any other form of equityemployees and can only be redeemed at the stated value of $4.25 million at times and in amounts solely determined by the Company. The preferred shares also carry an annual cash dividend of 10%income tax effect of the outstanding statedadjustments made. In addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair value calculatedwere excluded from pro forma net income in 2019.payable in arrearsis not necessarily indicative of the operating results that would have actually occurred had the transactions been consummated on a quarterly basis. The preferred shares have a liquidation preferenceJanuary 1, 2018 or of $4.25 million overfuture results. Common stock equivalents are excluded since the common shareholders. No additional considerationeffect is anti-dilutive due to the Company’s pro forma net losses. Common stock equivalents include unvested restricted stock, stock options and warrants: $ 37,728 $ 32,353 (3,160 (3,397 $ (0.16 $ (0.20 $ 2,112 $ 1,284 794 706 5,187 1,657 8,093 3,647 (2,521 (2,328 $ 5,572 $ 1,319 provided to WAVI$544,000 and $338,000 for entering into this agreement. The exchange resulted in no gain or loss on the transaction. As ofyears ended December 31, 2017, we accrued a dividend of $106,250 on the preferred stock which is included in accrued2019 and 2018, respectively. $ 302 $ 62 1,018 — 1,554 998 324 130 171 29 $ 3,369 $ 1,219 atas of June 30 and September 30, 2019 presented below. This change resulted in a decrease of $439,000 in contingent consideration and increase of $439,000 in goodwill and other intangible assets as of June 30 and September 30, 2019.2017. 2019. These reclassifications have no impact on previously reported total revenue, net income (loss), net assets, or total cash flows.dividend was paid subsequenteffect of the adjustments on the restated balance sheets, statements of operations, and statements of cash flows for the quarters ended March 31, June 30, and September 30, 2019 and 2018 is presented below. Earnings per shares has been corrected to year end on January 2, 2018.reflect all adjustments including the effect of participating securities.
March 31, 2018 $ 7,033 $ - $ 7,033 1,043 - 1,043 1,837 - 1,837 331 - 331 10,244 - 10,244 - 1,284 - 1,284 692 - 692 1,195 - 1,195 3,171 - 3,171 (2,084 ) - (2,084 ) 1,087 - 1,087 926 - 926 36 - 36 $ 12,293 $ - $ 12,293 586 - 586 204 - 204 392 - 392 130 - 1,312 - 1,312 457 - 457 - 14,725 14,725 52 - 52 1,821 14,725 16,546 - - - 14 - 14 84,518 (20,501 ) 64,017 (74,060 ) 5,776 (68,284 ) 10,472 (14,725 ) (4,253 ) $ 12,293 $ - $ 12,293
June 30, 2018 $ 14,167 $ - $ 14,167 2,166 - 2,166 2,122 - 2,122 352 - 352 18,807 - 18,807 - 1,284 - 1,284 693 - 693 1,230 - 1,230 3,207 - 3,207 (2,163 ) - (2,163 ) 1,044 - 1,044 1,900 - 1,900 36 - 36 $ 21,787 $ - $ 21,787 843 - 843 173 - 173 518 - 518 130 - 1,664 - 1,664 423 - 423 - 32,599 32,599 45 - 45 2,132 32,599 34,731 - - - 16 - 16 92,654 (10,892 ) 81,762 (73,015 ) (21,707 ) (94,722 ) 19,655 (32,599 ) (12,944 ) $ 21,787 $ - $ 21,787
September 30, 2018 $ 32,381 $ - $ 32,381 2,699 - 2,699 2,911 - 2,911 298 - 298 38,289 - 38,289 - 1,284 - 1,284 706 - 706 1,511 - 1,511 3,501 - 3,501 (2,234 ) - (2,234 ) 1,267 - 1,267 6,857 - 6,857 36 - 36 $ 46,449 $ - $ 46,449 1,090 - 1,090 162 - 162 713 - 713 130 - 2,095 - 2,095 386 - 386 - 50,425 50,425 38 - 38 2,519 50,425 52,944 - - - 18 - 18 115,776 (3,021 ) 112,755 (71,864 ) (47,404 ) (119,268 ) 43,930 (50,425 ) (6,495 ) $ 46,449 $ - $ 46,449
March 31, 2019 $ 31,824 $ - $ 31,824 2,927 - 2,927 4,060 - 4,060 346 - 346 39,157 - 39,157 1,284 - 1,284 704 - 704 1,803 - 1,803 3,791 - 3,791 (2,424 ) - (2,424 ) 1,367 - 1,367 1,196 - 1,196 6,317 - 6,317 36 - 36 $ 48,073 $ - $ 48,073 1,264 - 1,264 142 - 142 630 - 630 651 - 651 14 - 14 2,701 - 2,701 980 - 980 13 - 13 - 48,106 48,106 13 - 13 3,707 48,106 51,813 - - - 19 - 19 114,951 (1,154 ) 113,797 (70,604 ) (46,952 ) (117,556 ) 44,366 (48,106 ) (3,740 ) $ 48,073 $ - $ 48,073
June 30, 2019 $ 19,617 $ - $ 19,617 3,832 - 3,832 5,306 - 5,306 384 - 384 29,139 - 29,139 1,284 - 1,284 577 - 577 1,733 - 1,733 3,594 - 3,594 (2,276 ) - (2,276 ) 1,318 - 1,318 1,079 - 1,079 6,100 - 6,100 4,446 (430 ) 4,016 9,524 (9 ) 9,515 136 - 136 $ 51,742 $ (439 ) $ 51,303 876 - 876 204 - 204 963 - 963 665 - 665 14 - 14 371 70 441 3,093 70 3,163 806 - 806 10 - 10 - 44,194 44,194 7 - 7 1,560 (509 ) (b) 1,051 5,476 43,755 49,231 - - - 19 - 19 116,013 (656 ) 115,357 (69,766 ) (43,538 ) (113,304 ) 46,266 (44,194 ) 2,072 $ 51,742 $ (439 ) $ 51,303
September 30, 2019 $ 21,205 $ - $ 21,205 4,313 - 4,313 5,694 - 5,694 855 - 855 32,067 - 32,067 - 1,599 - 1,599 588 - 588 2,247 - 2,247 4,434 - 4,434 (2,298 ) - (2,298 ) 2,136 - 2,136 2,976 2,976 1,177 - 1,177 1,000 - 1,000 16,485 (430 ) 16,055 28,351 (9 ) 28,342 36 - 36 $ 84,228 $ (439 ) $ 83,789 1,570 - 1,570 642 - 642 1,576 - 1,576 771 - 771 14 - 14 371 70 441 4,944 70 5,014 753 - 753 6 - 6 - 41,771 41,771 3 - 3 1,560 (509 ) (b) 1,051 7,266 41,332 48,598 - - 20 - 20 137,392 814 138,206 (60,450 ) (42,585 ) (103,035 ) 76,962 (41,771 ) 35,191 $ 84,228 $ (439 ) $ 83,789
Three Months Ending March 31, 2018 $ 3,815 $ - $ 3,815 1,364 - 1,364 346 - 346 612 - 612 1,353 - 1,353 3,675 - 3,675 140 - 140 - 4,870 4,870 8 - 8 (1 ) - (1 ) (144 ) - (144 ) (137 ) 4,870 4,733 3 4,870 4,873 (106 ) - (106 ) $ (103 ) $ 4,870 $ 4,767 $ (103 ) $ 3,250 $ 3,147 $ (103 ) $ (179 ) $ (282 ) $ (0.01 ) $ 0.23 $ 0.22 $ (0.01 ) $ (0.01 ) $ (0.02 ) 14,098,610 - 14,098,610 14,098,610 - 14,098,610
Three Months Ending June 30, 2018
Six Months Ending June 30, 2018 $ 5,178 $ - $ 5,178 $ 8,993 $ - $ 8,993 1,537 - 1,537 2,901 - 2,901 325 - 325 671 - 671 641 - 641 1,253 - 1,253 1,390 - 1,390 2,744 - 2,744 3,893 - 3,893 7,569 - 7,569 1,285 - 1,285 1,424 - 1,424 �� - (27,485 ) (27,485 ) - (22,615 ) (22,615 ) 32 - 32 41 - 41 (1 ) - (1 ) (1 ) - (1 ) (177 ) - (177 ) (321 ) - (321 ) (146 ) (27,485 ) (27,631 ) (281 ) (22,615 ) (22,896 ) 1,139 (27,485 ) (26,346 ) 1,143 (22,615 ) (21,472 ) (93 ) - (93 ) (200 ) - (200 ) 1,046 (27,485 ) (26,439 ) 943 (22,615 ) (21,672 ) $ 1,046 $ (27,485 ) $ (26,439 ) $ 943 $ (22,614 ) $ (21,672 ) $ 1,046 $ (27,485 ) $ (26,439 ) $ 943 $ (22,614 ) $ (21,672 ) $ 0.07 $ (1.81 ) $ (1.74 ) $ 0.06 $ (1.54 ) $ (1.48 ) $ 0.05 $ (1.79 ) $ (1.74 ) $ 0.05 $ (1.53 ) $ (1.48 ) 15,180,169 - 15,180,169 14,642,378 - 14,642,378 20,374,358 (5,194,189 ) 15,180,169 19,063,595 (4,421,217 ) 14,642,378
Three Months Ending September 30, 2018
Nine Months Ending September 30, 2018 $ 5,293 $ - $ 5,293 $ 14,286 $ - $ 14,286 1,606 - 1,606 4,507 - 4,507 312 - 312 983 - 983 725 - 725 1,978 - 1,978 1,455 - 1,455 4,199 - 4,199 4,098 - 4,098 11,667 - 11,667 1,195 - 1,195 2,619 - 2,619 - (25,696 ) (25,696 ) - (48,311 ) (48,311 ) 80 - 80 121 - 121 (1 ) - (1 ) (4 ) - (4 ) (43 ) - (43 ) (363 ) - (363 ) 36 (25,696 ) (25,660 ) (246 ) (48,311 ) (48,557 ) 1,231 (25,696 ) (24,465 ) 2,373 (48,311 ) (45,938 ) (80 ) - (80 ) (279 ) - (279 ) 1,151 (25,696 ) (24,545 ) 2,094 (48,311 ) (46,217 ) $ 1,151 $ (25,696 ) $ (24,545 ) $ 2,094 $ (48,311 ) $ (46,217 ) $ 1,151 $ (25,696 ) $ (24,545 ) $ 2,094 $ (48,311 ) $ (46,217 ) $ 0.07 $ (1.49 ) $ (1.42 ) $ 0.13 $ (3.11 ) $ (2.98 ) $ 0.05 $ (1.47 ) $ (1.42 ) $ 0.10 $ (3.08 ) $ (2.98 ) 17,273,412 - 17,273,412 15,529,026 - 15,529,026 23,656,633 (6,383,221 ) 17,273,412 21,051,219 (5,522,193 ) 15,529,026
Three Months Ending March 31, 2019 $ 5,770 $ - $ 5,770 1,647 - 1,647 372 (13 ) 359 848 (11 ) 837 2,204 (51 ) 2,153 208 - 208 5,279 (75 ) 5,204 491 75 566 - (19,663 ) (19,663 ) 171 - 171 (3 ) - (3 ) (232 ) - (232 ) (64 ) (19,663 ) (19,727 ) 427 (19,588 ) (19,161 ) - - - 427 (19,588 ) (19,161 ) $ 427 $ (19,588 ) $ (19,161 ) $ 427 $ (19,588 ) $ (19,161 ) $ 0.02 $ (1.05 ) $ (1.03 ) $ 0.02 $ (1.05 ) $ (1.03 ) 18,648,397 - 18,648,397 24,358,475 (5,710,078 ) 18,648,397
Three Months Ending June 30, 2019
Six Months Ending June 30, 2019 $ 6,701 $ - $ 6,701 $ 12,471 $ - $ 12,471 1,958 10 1,968 3,606 10 3,616 739 (48 ) 691 1,111 (61 ) 1,050 928 17 945 1,776 6 1,782 2,118 89 2,207 4,321 38 4,359 - 104 104 - 104 104 39 - 39 247 - 247 5,782 172 5,954 11,061 97 11,158 919 (172 ) 747 1,410 (97 ) 1,313 - 3,586 3,586 - (16,077 ) (16,077 ) 137 - 137 307 - 307 (1 ) - (1 ) (4 ) - (4 ) - - - - - - (217 ) - (217 ) (448 ) - (448 ) - - - - - - (81 ) 3,586 3,505 (145 ) (16,077 ) (16,222 ) 838 3,414 4,252 1,265 (16,174 ) (14,909 ) - - - - - - 838 3,414 4,252 1,265 (16,174 ) (14,909 ) $ 838 $ 2,587 $ 3,425 $ 1,265 $ (16,174 ) $ (14,909 ) $ 838 $ (293 ) $ 545 $ 1,265 $ (16,174 ) $ (14,909 ) $ 0.04 $ 0.14 $ 0.18 $ 0.07 $ (0.87 ) $ (0.80 ) $ 0.03 $ (0.01 ) $ 0.02 $ 0.05 $ (0.85 ) $ (0.80 ) 18,819,459 - 18,819,459 18,734,401 - 18,734,401 24,539,299 - 24,539,299 24,439,959 (5,705,558 ) 18,734,401
Three Months Ending September 30, 2019
Nine Months Ending September 30, 2019 $ 6,604 $ - $ 6,604 $ 19,075 $ - $ 19,075 2,084 10 2,094 5,690 20 5,710 1,309 (277 ) 1,032 2,420 (338 ) 2,082 1,259 (9 ) 1,250 3,035 (3 ) 3,032 2,258 90 2,348 6,579 128 6,707 - 361 361 - 465 465 291 - 291 538 - 538 7,201 175 7,376 18,262 272 18,534 (597 ) (175 ) (772 ) 813 (272 ) 541 - 1,128 1,128 - (14,949 ) (14,949 ) 110 - 110 417 - 417 (1 ) - (1 ) (5 ) - (5 ) (13 ) - (13 ) (13 ) - (13 ) (291 ) - (291 ) (739 ) - (739 ) 10,108 - 10,108 10,108 - 10,108 9,913 1,128 11,041 9,768 (14,949 ) (5,181 ) 9,316 953 10,269 10,581 (15,221 ) (4,640 ) - - - - - - 9,316 953 10,269 10,581 (15,221 ) (4,640 ) $ 9,316 $ (936 ) $ 8,380 $ 10,581 $ (15,221 ) $ (4,640 ) 9,316 (454 ) 8,862 10,581 (15,221 ) (4,640 ) $ 0.47 $ (0.05 ) $ 0.42 $ 0.55 $ (0.79 ) $ (0.24 ) $ 0.37 $ (0.02 ) $ 0.35 $ 0.43 $ (0.67 ) $ (0.24 ) 19,735,364 - 19,735,364 19,071,722 - 19,071,722 25,343,112 - 25,343,112 24,705,424 (5,633,702 ) 19,071,722 (In thousands) As Previously Reported $ 3 $ 4,870 $ 4,873 78 - 78 373 - 373 (32 ) - (32 ) - - - 144 - 144 - (4,870 ) (4,870 ) (23 ) - (23 ) 10 - 10 12 - 12 (69 ) - (69 ) (101 ) - (101 ) (3 ) - (3 ) 392 - 392 (41 ) - (41 ) (41 ) - (41 ) (2 ) - (2 ) (3 ) - (3 ) 130 - 130 (106 ) - (106 ) 19 - 19 370 - 370 - 6,663 - 6,663 $ 7,033 $ - $ 7,033 $ 36 $ - $ 36 18 - 18 106 - 106 $ - $ 29 $ 29 (In thousands ) As Previously Reported $ 1,143 $ (22,615 ) $ (21,472 ) 161 - 161 748 - 748 (63 ) - (63 ) 321 - 321 - 22,615 22,615 (1,145 ) - (1,145 ) (275 ) - (275 ) (103 ) - (103 ) 168 - 168 6 - 6 (6 ) - (6 ) 955 - 955 (1,000 ) - (1,000 ) (61 ) - (61 ) (1,061 ) - (1,061 ) (5 ) - (5 ) (7 ) - (7 ) 8,899 - 8,899 (213 ) - (213 ) (1,063 ) - (1,063 ) 7,611 - 7,611 7,505 - 7,505 - 6,663 - 6,663 $ 14,168 $ - $ 14,168 $ 93 $ - $ 93 36 - 36 150 - 150 18 - 18 20 - 20 $ - $ 9,639 $ 9,639 (In thousands) As Previously Reported $ 2,373 $ (48,311 ) $ (45,938 ) 245 - 245 1,131 - 1,131 (95 ) - (95 ) 363 - 363 - 48,311 48,311 (1,678 ) - (1,678 ) (1,064 ) - (1,064 ) (49 ) - (49 ) 343 - 343 205 - 205 (11 ) - (11 ) 1,763 - 1,763 (6,000 ) - (6,000 ) (339 ) - (339 ) (6,339 ) - (6,339 ) 20,000 - 20,000 (9 ) - (9 ) (10 ) - (10 ) 11,725 - 11,725 (306 ) - (306 ) (1,063 ) - (1,063 ) (43 ) - (43 ) 30,294 - 30,294 25,718 - 25,718 - 6,663 - 6,663 $ 32,381 $ - $ 32,381 $ 80 $ - $ 80 36 - 36 150 - 150 18 - 18 43 - 43 49 - 49 $ - $ 17,509 $ 17,509 (In thousands) As Previously Reported $ 427 $ (19,588 ) $ (19,161 ) 98 - 98 606 (75 ) 531 (43 ) - (43 ) 2 - 2 232 - 232 - 19,663 19,663 118 - 118 (551 ) - (551 ) 6 - 6 553 - 553 (302 ) - (302 ) 1,146 - 1,146 (156 ) - (156 ) (156 ) - (156 ) (4 ) - (4 ) (4 ) - (4 ) 185 - 185 177 - 177 1,167 - 1,167 30,657 - 30,657 $ 31,824 $ - $ 31,824 $ - $ - $ - - - - - - - 46 - 46 $ - $ 73 $ 73 (In thousands) As Previously Reported $ 1,265 $ (16,174 ) $ (14,909 ) 209 - 209 1,252 97 1,349 - - - (87 ) - (87 ) 2 - 2 448 - 448 104 - 104 - 16,077 16,077 (632 ) - (632 ) (1,341 ) - (1,341 ) (32 ) - (32 ) - (36 ) - (36 ) (20 ) - (20 ) - - - (53 ) - (53 ) 1,079 - 1,079 (12,438 ) - (12,438 ) - - - (267 ) - (267 ) (12,705 ) - (12,705 ) (8 ) - (8 ) (7 ) - (7 ) 600 - 600 585 - 585 (11,041 ) - (11,041 ) 30,657 - 30,657 $ 19,616 $ - $ 19,616 $ - $ - $ - - - - - - - - - - 4 - 4 $ - $ 400 $ 400 (In thousands) As Previously Reported $ 10,581 $ (15,221 ) $ (4,640 ) 373 - 373 13 - 13 1,907 272 2,179 (132 ) - (132 ) 2 - 2 739 - 739 (10,108 ) - (10,108 ) 465 - 465 - 14,949 14,949 (372 ) - (372 ) (1,730 ) - (1,730 ) (272 ) - (272 ) (87 ) - (87 ) 377 - 377 558 - 558 (98 ) - (98 ) 2,216 - 2,216 1,251 - 1,251 (12,439 ) - (12,439 ) (1,000 ) - (1,000 ) (356 ) - (356 ) (453 ) - (453 ) (12,997 ) - (12,997 ) - - (44 ) - (44 ) (12 ) - (12 ) (9 ) - (9 ) 1,394 - 1,394 1,329 - 1,329 (9,452 ) - (9,452 ) - 30,657 - 30,657 $ 21,205 $ - $ 21,205 $ 146 $ - $ 146 53 - 53 19,932 - 19,932 $ - $ 1,695 $ 1,695 a. Adjustments related to recording certain warrants as liabilities, see Note 2: “Restatement of Consolidated Financial Statements”. We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to ourOur management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. During the year ended December 31, 2017 we carried out an evaluation, under the supervision and with the participation of our management, includingChief Executive Officer and Chief Financial Officer, evaluated the chief executive officer and chief financial officer, as required by the rules and regulations under the Exchange Act, of the effectiveness of the design and operation of our disclosure controls and procedures as(as defined in RuleRules 13a-15(e) and 15d-15(e) under the Exchange Act.Act) as of the end of the period covered by this Form 10-K. Based on thisthat evaluation, our chief executive officerChief Executive Officer and chief financial officerChief Financial Officer concluded that as of December 31, 2017, our disclosure controls and procedures as of the end of the period covered by this Form 10-K were effective.not effective, due to the material weakness in our internal controls over financial reporting described below.overOver Financial Reportingas(as defined in RulesRule 13a-15(f) of the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 framework). Based on our assessment under the framework in Internal Control—Integrated Framework (2013 framework), our management concluded that our internal control over financial reporting was not effective as of December 31, 2019 due to the existence of a material weakness in our internal controls over complex equity transactions. A material weakness in internal control is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with GAAP such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected. In the course of making our assessment of the effectiveness of internal control over financial reporting, we identified a material weakness in our internal control over financial reporting. The material weakness related to having insufficient technical resources to appropriately analyze and account for complex financial instruments, specifically with regard to our prior interpretation of ASC 480, “Distinguishing Liabilities from Equity”, as it related to the initial classification and subsequent accounting of our Warrants as equity instruments dating back to March 2014, and ASC 718, “Stock Compensation” as it related to the accounting for stock awards with market-based vesting conditions. Errors in the accounting for these transactions resulted in the restatement of previously issued financial statements.Act.Commission, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management’s evaluation of internal control over financial reporting excluded the internal control activities of SAVSU Technologies, Inc. (“SAVSU,” acquired on August 8, 2019), and Custom Biogenic Systems, Inc. (“CBS,” acquired on November 12, 2019) as discussed in Note 12, “Acquisitions,” of the Notes to the Consolidated Financial Statements. We have included the financial results of these in the consolidated financial statements from the date of acquisition. These acquired businesses constituted approximately 44% of our total consolidated assets (excluding goodwill and intangible assets related to the transactions, which were integrated into our systems and control environment) and 10% of the total consolidated revenue included in our consolidated financial statements as of and for the year ended December 31, 2019.the financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. This processA company’s internal control over financial reporting includes those policies and procedures that (i)(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii)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 our management and directors;directors of the company; and (iii)(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of ourthe company’s assets that could have a material effect on ourthe financial statements.the internal control over financial reportingeffectiveness to future periods are subject to the risk that the internal controlcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Our management, includingchiefdirectors and executive officers as of May 1, 2020. The Board is comprised of only one class. Also provided herein are brief descriptions of the business experience of each director and executive officer during the past five years (based on information supplied by them) and chief financial officer, conductedan 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 design effectivenessability or integrity of such person, including any of the legal proceedings identified in Item 401(f) of Regulation S-K.internal control over financial reporting basedBoard from 2003 to March 2014 and joined the Board again in May 2015. Mr. Girschweiler has been engaged in corporate financing activities on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committeehis own behalf since 1996. From 1981 to 1996, he was an investment banker with Union Bank of Sponsoring OrganizationsSwitzerland. Mr. Girschweiler is a graduate of the Treadway Commission,Swiss Banking School. The Board has determined that Mr. Girschweiler is qualified to serve as a director because of his experience in corporate financing activities and his status as a significant shareholder.2017. Based2019, the Company believes that all Section 16(a) filings applicable to its directors, officers, and 10% stockholders were filed on a timely basis during the year ended December 31, 2019, except that each of Raymond Cohen and Walter Villiger filed one late Form 4 with Mr. Cohen’s Form 4 reporting two transactions and Mr. Villiger’s Form 4 reporting two transactions.assessment, we conclude that aswebsite at www.biolifesolutions.com. The inclusion of December 31, 2017 our internal control over financial reporting was effective.This annual reportweb site address in this Annual Report does not include an attestation reportor incorporate by reference the information on our web site into this Annual Report.
and
Governanceregarding internal control over financial reporting. Management’s report was not subject to attestationincluding 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 pursuantthe 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.that permitrules. The Code of Ethics is publicly available on our website at http://investors.biolifesolutions.com/corporate-governance. The Company undertakes to provide to any person without charge, upon written request, a copy of our code of ethics by writing to Secretary, BioLife Solutions Inc., 3303 Monte Villa Parkway, Suite 310, Bothell, Washington, 98021. The code of ethics is designed to deter wrongdoing and promote honest and ethical conduct and compliance with applicable laws and regulations. These codes also incorporate what we expect from our executives so as to enable us to provide only management’s reportaccurate and timely disclosure in this annual report.our filings with the SEC and other public communications. Any amendments made to the Code of Ethics will be available on our website. ChangesThe following Summary Compensation Table sets forth certain information regarding the compensation, for services rendered in Internal Control over Financial Reportingall capacities to us during 2019 and 2018, of our current principal executive officer and our two other most highly compensated executive officers at the end of 2019 (together, the “named executive officers”).
Positions
(a)
(b)
($)
(c)(1)
($)
(d)
Awards
($)
(e)
($)
(g) 530,000 119,250 (2) 1,592,520 (3) — 2,241,770 450,000 67,500 112,500 (4) 61,937 (5) 691,397 419,750 47,222 (6) 744,644 (7) — 1,211,616 365,000 54,750 91,248 (8) — 510,998 402,500 45,281 (9) 707,767 (10) — 1,155,548 350,000 52,500 87,498 (11) — 489,998 (5) Amounts represent vacation payout to cover taxes on stock awards for vesting periods in 2018 ThereEmployment Agreementsno changesthe 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.affected,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.reasonably likelysubstantially inconsistent with or materially diminish the executive officer’s position prior to materially affect,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.
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(c)
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
Exercise
Price ($)
(e)
Expiration
Date
(f)
(d)
(f) internal control over financial reportingnon-employee directors, during the three monthsyear ended December 31, 2017.2019, non-employee directors were compensated with an annual retainer fee of $50,000. In addition, the Board Chairman was compensated an additional $100,000 for the year. Committee chairpersons were compensated with additional annual retainers as follows:
RetainerLimitations on Controls
Retainer
Committee
Chair Fees
($)
($) 50,000 100,000 150,000 50,000 50,000 50,000 5,000 55,000 50,000 10,000 60,000 Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that our objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.ITEM 9B.OTHER INFORMATIONNone.39Certain information required by Part III is omitted from this Form 10-K in that we will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2018 Annual Meeting (the “Proxy Statement”) no later than 120 days after the end of the fiscal year covered by this Form 10-K, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. In addition, we have adopted a code of ethics which can be reviewed and printed from our websitewww.biolifesolutions.com.ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEThe information required by this Item is incorporated herein by reference to the Proxy Statement.ITEM 11.EXECUTIVE COMPENSATIONThe information required by this Item is incorporated herein by reference to the Proxy Statement.ITEM 12. requiredregarding the beneficial ownership of Common Stock by this Item(i) each stockholder known by the Company to be the beneficial owner of more than 5% of the outstanding shares thereof; (ii) each director of the Company; (iii) each named executive officer of the Company; and (iv) all of the Company’s current directors and executive officers (including executive officers that are not named executive officers) as a group. This table is incorporated hereinbased upon information supplied by referenceofficers, directors, and principal stockholders and Schedule 13D(s) and Schedule 13G(s) filed with the SEC.
Stock
of ClassProxy Statement.number of shares beneficially owned. The percentage of the outstanding shares held by a person holding such options or warrants includes those currently exercisable or exercisable within 60 days of May 1, 2020, but such options and warrants are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, we believe that the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Unless otherwise indicated, the business address of each person listed is in care of 3303 Monte Villa Parkway, #310, Bothell, WA 98021.
be issued upon
of outstanding
exercise price of
outstanding
options
granted restricted
stock awards
outstanding
(in thousands)
remaining available
for future issuanceThe information requiredCertain Relationships and Related Transactionsthis Itemthe Audit Committee of the Board. It is incorporated hereinanticipated 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 reference toour Audit Committee and a majority of the Proxy Statement.independent and disinterested members of the Board.ACCOUNTANTACCOUNTING FEES AND SERVICESinformation requiredfollowing table sets forth the aggregate fees billed by this Itemour current independent accountants, BDO, for professional services rendered in the fiscal year ended December 31, 2019. BDO did not provide any services in 2018. $ 214,645 –– –– –– $ 214,645 $ 84,224 $ 177,000 76,022 6,350 –– –– –– –– $ 160,246 $ 183,350 incorporated herein by referencegranted 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 Proxy Statement.chairman of the Audit Committee to pre-approve services, in which case the chairman communicates such pre-approval to the full Audit Committee at its next meeting. The Audit Committee also may approve the additional unanticipated services by either convening a special meeting or acting by unanimous written consent. During the years ended December 31, 2019 and 2018, all services billed by BDO and PS were pre-approved by the Audit Committee in accordance with this policy.
NumberReference is made to the IndexMarch 9, 2018MichaelMichael Rice Rice
(principal executive officer) and DirectorMarch 9, 2018MichaelMichael Rice Rice
(principal executive officer) and DirectorMarch 9, 2018greefGreef
officer and principal accounting officer)March 9, 2018RaymondRaymond Cohen CohenMarch 9, 2018March 9, 2018AndrewAndrew Hinson HinsonMarch 9, 201841Index of ExhibitsSee Exhibit Index below for exhibits filed as part of this Annual Report on Form 10-K.42*Confidential treatment has been granted with respect to certain portions of this exhibit pursuant to an order granted by the SEC.**Management contract or compensatory plan or arrangement.43