Acquisitions

Astero Acquisition

April 1, 2019,

BioLife completed the acquisition of all the outstanding shares of Astero. Astero’s ThawSTAR product line is comprised of a family of automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. The products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths.

In connection with the Acquisition, the Company paid (i) a base payment in the amount of

$12.5

million consisting of (

) 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

2021.

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	$	12,521
Contingent consideration		1,491
Working capital adjustment		(71	)
Total consideration transferred	$	13,941

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	$	11
Accounts receivable, net		154
Inventory		456
Customer relationships		160
Tradenames		470
Developed technology		2,840
In-process research and development		650
Goodwill		9,515
Other assets		99
Accounts Payable		(250	)
Other liabilities		(164	)
Fair value of net assets acquired	$	13,941

The fair value of Astero’s identifiable intangible assets and estimated useful lives have been estimated as follows (amounts in thousands except years):

	Estimated Fair Value		Estimated Useful Life (Years)
Customer relationships	$	160		4
Tradenames		470		9
Developed technology		2,840	5	–	9
In-process research and development		650		N/A
Total identifiable intangible assets	$	4,120

Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into

one

three

approaches, referred to as the cost, market and income approaches. In any fair value measurement analysis, all

three

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

August 8, 2019,

we closed the acquisition of SAVSU pursuant to a Share Exchange Agreement. Pursuant to the Share Exchange Agreement, SAVSU Origin, LLC agreed to transfer to us and we agreed to acquire from the Seller

8,616

shares of common stock of SAVSU, representing the remaining

56%

of the outstanding shares of SAVSU that we did

not

previously own, in exchange for

1,100,000

shares of BioLife common stock. As a result of the acquisition, SAVSU became a wholly-owned subsidiary on

August 8, 2019,

the acquisition date.

Consideration transferred

The SAVSU acquisition was accounted for as a purchase of a business under FASB ASC Topic

805,

“Business Combinations”. The acquisition of

56%

of SAVSU was funded through a transfer of

1,100,000

shares of BioLife common stock, which had a fair value of

$18.12

per share or

$19.9

million at time of closing. The total value of

100%

of SAVSU consisting of the fair value of the stock issued and the fair value of our existing investment in SAVSU was

$35.8

million at time of closing. Prior to the acquisition, we accounted for our investment of SAVSU using the equity method of accounting which resulted in a recorded book value of

$5.8

million at the acquisition date. We remeasured to fair value the equity interest in SAVSU held immediately before the business combination. The fair value of our equity interest was determined to be

$15.9

million on our existing

44%

ownership based on the fair value of shares transferred at the time of acquisition for the

56%

we did

not

previously own. As a result, we recorded a non-operating gain of

$10.1

million.

Under the acquisition method of accounting, the assets acquired and liabilities assumed from SAVSU were recorded as of the acquisition date, at their respective fair values, and consolidated with those of BioLife. The fair value of the net tangible assets acquired is estimated to be approximately

$4.2

million, the fair value of the intangible assets acquired is estimated to be approximately

$12.2

million, and the residual goodwill is estimated to be approximately

$19.5

million. The fair value estimates required critical estimates, including, but

not

limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results

may

differ from these estimates.

Total consideration paid for the acquisition of SAVSU is as follows (amounts in thousands):

Stock consideration for 55.6% equity interest purchased

19,932

This stock consideration plus the fair value of our existing equity investment in SAVSU of

$15.9

million results in the total purchase price for accounting purposes of

$35.8

million.

Fair Value of Net Assets Acquired

August 7, 2019.

Cash and cash equivalents	$	1,251
Accounts receivable, net		753
Prepaid expenses and other current assets		19
Property, plant and equipment, net		546
Operating right-of-use asset		233
Assets held for lease		2,441
Customer relationships		80
Tradenames		1,320
Developed technology		10,750
Goodwill		21,037
Accounts Payable and accrued expenses		(807	)
Deferred tax liabilities		(1,541	)
Other liabilities		(232	)
Fair value of net assets acquired	$	35,850

The fair value of SAVSU’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	$	80			6
Tradenames		1,320			9
Developed technology		10,750		7	–	8
Total identifiable intangible assets	$	12,150

Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into

one

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

None

of the goodwill recorded is expected to be deductible for income tax purposes.

Custom Biogenic Systems Acquisition

November 10, 2019,

we entered into an Asset Purchase Agreement, by and among the Company, Arctic Solutions, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Custom Biogenic Systems, Inc., a Michigan corporation (“CBS Seller”), pursuant to which we agreed to purchase from the CBS Seller substantially all of CBS Seller’s assets, properties and rights (the “CBS Acquisition”). The CBS Seller, a privately held company with operations located near Detroit, Michigan, designs and manufactures liquid nitrogen laboratory freezers and cryogenic equipment and also offers a related cloud-based monitoring system that continuously assesses biologic sample storage conditions and alerts equipment owners if a fault condition occurs. The Acquisition closed on

November 12, 2019.

In connection with the CBS Acquisition, we paid to CBS Seller (i) a base payment in the amount of

$15.0

million, consisting of a cash payment of

$11.0

million paid at the closing of the CBS Acquisition, less a cash holdback escrow of

$550,000

to satisfy certain indemnification claims, and an aggregate number of shares of our common stock, with an aggregate fair value equal to

$4.0

million, less a holdback escrow of shares of Common Stock with an aggregate value equal to

$3.0

million to satisfy potential payments related to any product liability claims outstanding as of

March 13, 2019

and (ii) potential earnout payments in calendar years

2020,

2021,

2022,

2023

and

2024

of up to an aggregate of, but

not

exceeding,

$15.0

million payable to CBS Seller upon achieving certain specified revenue targets in each year for certain product lines.

The CBS acquisition was accounted for as a purchase of a business under FASB ASC Topic

805,

“Business Combinations”. Under the acquisition method of accounting, the acquired assets and liabilities assumed from CBS were recorded as of the acquisition date, at their fair values, and consolidated with BioLife. The fair value of the net tangible assets acquired is

$6.0

million, the fair value of the identifiable intangibles is

$6.8

million, and the residual goodwill is

$3.1

million. The fair value estimates required critical estimates, including, but

not

limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates. BioLife believes these estimates to be reasonable. Actual results

may

differ from these estimates.

Total consideration transferred (in thousands):

Cash consideration	$	11,000
Stock consideration		4,000
Contingent consideration		856
Total consideration transferred	$	15,856

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	$	1,044
Inventory		3,232
Prepaid expenses and other current assets		29
Property, plant and equipment, net		3,615
Customer relationships		560
Tradenames		800
Developed technology		5,430
Goodwill		3,085
Accounts Payable		(1,328	)
Other liabilities		(611	)
Fair value of net assets acquired	$	15,856

The fair value of CBS’s identifiable intangible assets and weighted average useful lives have been estimated as follows (amounts in thousands except years):

	Estimated Fair Value		Estimated Useful Life (Years)
Customer relationships	$	560		6
Tradenames		800		6
Developed technology		5,430		9
Total identifiable intangible assets	$	6,790

Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into

one

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 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

Revenue, Net Income and Pro Forma Presentation

The Company recorded revenue from Astero of

$1.2

million and a net loss of

$1.5

million from

April 1, 2019,

the date of acquisition, to

December 31, 2019.

The Company recorded revenue from SAVSU of

$692,000

and a net loss of

$1.7

million from

August 8, 2019,

the date of acquisition, to

December 31, 2019.

The Company recorded revenue from CBS of

$2.1

million and net income of

$187,000

from

November 12, 2019,

the date of acquisition, to

December 31, 2019.

The Company has included the operating results of the acquisitions in its consolidated statements of operations since their respective acquisition date. The following pro forma financial information presents the combined results of operations of Astero, SAVSU and CBS as if the acquisition had occurred on

January 1, 2018

after giving effect to certain pro forma adjustments. These pro forma adjustments include amortization expense on the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity compensation issued to employees and the income tax effect of the adjustments made. In addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair value were excluded from pro forma net income in

2019.

The following pro forma financial information does

not

reflect any adjustments for anticipated expense savings resulting from the acquisition and is

not

necessarily indicative of the operating results that would have actually occurred had the transactions been consummated on

January 1, 2018

or of future results. Common stock equivalents are excluded since the effect is anti-dilutive due to the Company’s pro forma net losses. Common stock equivalents include unvested restricted stock, stock options and warrants:

	Year Ended December 31, (unaudited)
(In thousands)	2019			2018
Total revenue	$	37,728		$	32,353
Net income (loss)		(3,160	)		(3,397	)
Loss per share:
Basic and diluted	$	(0.16	)	$	(0.20	)