UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
For the quarterly period ended
ACT OF 1934
For the transition period from to
Commission File Number
BioLife Solutions, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of registrant’s principal executive offices, Zip Code)
(
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of exchange on which registered |
| | | |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit said files).
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 ☐
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
As of November 9, 2021,
BIOLIFE SOLUTIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED September 30, 2021
| PART I. FINANCIAL INFORMATION | 3 | |
| Item 1. |
3 |
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| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 |
3 |
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| 4 |
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| 5 |
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| 6 |
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| 7 |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
| Item 3. |
38 | |
| Item 4. |
38 | |
| PART II. |
39 |
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| Item 1. |
39 |
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| Item 1A. |
39 |
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| Item 2. |
39 |
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| Item 3. |
39 |
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| Item 4. |
39 |
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| Item 5. |
39 |
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| Item 6. |
40 |
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| 41 |
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BioLife Solutions, Inc.
Unaudited Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| (In thousands, except per share and share data) | 2021 | 2020 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, trade, net of allowance for doubtful accounts of and as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Assets held for rent, net | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Financing lease right-of-use assets, net | ||||||||
| Long-term deposits and other assets | ||||||||
| Investments | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Line of credit | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Lease liabilities, operating, current portion | ||||||||
| Lease liabilities, financing, current portion | ||||||||
| Debt, current portion | ||||||||
| Warrant liability, current portion | ||||||||
| Contingent consideration, current portion | ||||||||
| Total current liabilities | ||||||||
| Contingent consideration, long-term | ||||||||
| Lease liabilities, operating, long-term | ||||||||
| Lease liabilities, financing, long-term | ||||||||
| Debt, long-term | ||||||||
| Deferred tax liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 12) | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, par value; shares authorized, Series A, shares designated, and shares issued and outstanding as of September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, par value; shares authorized, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
BioLife Solutions, Inc.
Unaudited Condensed Consolidated Statements of Operations
| Three Months Ended |
Nine Months Ended |
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| September 30, |
September 30, |
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| (In thousands, except per share and share data) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Product revenue |
$ | $ | $ | $ | ||||||||||||
| Service revenue |
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| Rental revenue |
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| Total product, rental, and service revenue |
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| Costs and operating expenses: |
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| Cost of product revenue (exclusive of intangible assets amortization) |
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| Cost of service revenue (exclusive of intangible assets amortization) |
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| Cost of rental revenue (exclusive of intangible assets amortization) |
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| Research and development |
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| Sales and marketing |
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| General and administrative |
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| Intangible asset amortization |
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| Acquisition costs |
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| Change in fair value of contingent consideration |
( |
) | ( |
) | ( |
) | ||||||||||
| Total operating expenses |
||||||||||||||||
| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense): |
||||||||||||||||
| Change in fair value of warrant liability |
( |
) | ( |
) | ||||||||||||
| Change in fair value of investments |
||||||||||||||||
| Interest (expense) income, net |
( |
) | ( |
) | ||||||||||||
| Other expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gain on acquisition of Sexton Biotechnologies, Inc. | ||||||||||||||||
| Total other income, net |
||||||||||||||||
| (Loss) income before income tax benefit | ( |
) | ( |
) | ( |
) | ||||||||||
| Income tax benefit | ||||||||||||||||
| Net income (loss) | $ | $ | ( |
) | $ | $ | ||||||||||
| Net income (loss) attributable to common shareholders: | ||||||||||||||||
| Basic |
$ | $ | ( |
) | $ | $ | ||||||||||
| Diluted |
( |
) | ||||||||||||||
| Earnings (loss) per share attributable to common shareholders: | ||||||||||||||||
| Basic |
$ | $ | ( |
) | $ | $ | ||||||||||
| Diluted |
$ | $ | ( |
) | $ | $ | ||||||||||
| Weighted average shares used to compute earnings (loss) per share attributable to common shareholders: | ||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
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The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
BioLife Solutions, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| (In thousands) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
| Net income (loss) | $ | $ | ( |
) | $ | $ | ||||||||||
| Other comprehensive loss |
( |
) | ( |
) | ||||||||||||
| Comprehensive (loss) income |
$ | ( |
) | $ | ( |
) | $ | $ | ||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
BioLife Solutions, Inc.
Unaudited Condensed Consolidated Statements of Shareholders’ Equity
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||
| Series A | Series A | Accumulated | ||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Common | Additional | Other | Total | ||||||||||||||||||||||||||
| Stock | Stock | Stock | Stock | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | Capital | Loss | Deficit | Equity | ||||||||||||||||||||||||
| Balance, December 31, 2020 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock issued as consideration in GCI acquisition | - | - | - | - | ||||||||||||||||||||||||||||
| Stock issued as consideration in Sexton acquisition | - | - | - | - | - | |||||||||||||||||||||||||||
| Fees incurred for registration filings | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock option exercises | - | - | - | - | ||||||||||||||||||||||||||||
| Cashless exercises of warrants | - | - | - | - | - | |||||||||||||||||||||||||||
| Stock issued – on vested RSAs | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2021 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Three Months Ended September 30, 2021 |
||||||||||||||||||||||||||||||||
| Series A |
Series A |
Accumulated |
||||||||||||||||||||||||||||||
| Preferred |
Preferred |
Common |
Common |
Additional |
Other |
Total |
||||||||||||||||||||||||||
| Stock |
Stock |
Stock |
Stock |
Paid-in |
Comprehensive |
Accumulated |
Shareholders’ |
|||||||||||||||||||||||||
| (In thousands, except share data) |
Shares |
Amount |
Shares |
Amount |
Capital |
Income (Loss) |
Deficit |
Equity |
||||||||||||||||||||||||
| Balance, June 30, 2021 |
- | $ | - | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||
| Stock issued as consideration in Sexton acquisition |
- | - | - | - | - | |||||||||||||||||||||||||||
| Fees incurred for registration filings |
- | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||||||||||||
| Stock based compensation |
- | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock option exercises |
- | - | - | - | - | |||||||||||||||||||||||||||
| Stock issued – on vested RSAs |
- | - | - | - | - | - | ||||||||||||||||||||||||||
| Foreign currency translation |
- | - | - | - | - | ( |
) | - | ( |
) | ||||||||||||||||||||||
| Net income |
- | - | ||||||||||||||||||||||||||||||
| Balance, September 30, 2021 |
- | $ | - | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||
| Series A | Series A | Accumulated | ||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Common | Additional | Other | Total | ||||||||||||||||||||||||||
| Stock | Stock | Stock | Stock | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||||||||||||||||
| (In thousands, except share data) | Shares | Amount | Shares | Amount | Capital | Income | Deficit | Equity | ||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | - | $ | ( | ) | $ | |||||||||||||||||||||||
| Stock issued as 2019 bonus payout | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Sale of common stock, net of fees | - | - | - | - | ||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | |||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock option exercises | - | - | - | - | - | |||||||||||||||||||||||||||
| Cashless exercise of warrants | - | - | - | - | ||||||||||||||||||||||||||||
| Warrant exercises | - | - | - | - | - | |||||||||||||||||||||||||||
| Stock issued – on vested RSAs | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance, September 30, 2020 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Three Months Ended September 30, 2020 |
||||||||||||||||||||||||||||||||
| Series A |
Series A |
Accumulated |
||||||||||||||||||||||||||||||
| Preferred |
Preferred |
Common |
Common |
Additional |
Other |
Total |
||||||||||||||||||||||||||
| Stock |
Stock |
Stock |
Stock |
Paid-in |
Comprehensive |
Accumulated |
Shareholders’ |
|||||||||||||||||||||||||
| (In thousands, except share data) |
Shares |
Amount |
Shares |
Amount |
Capital |
Income |
Deficit |
Equity |
||||||||||||||||||||||||
| Balance, June 30, 2020 |
- | $ | - | $ | $ | $ | - | $ | ( |
) | $ | |||||||||||||||||||||
| Sale of common stock, net of fees |
- | - | - | - | ||||||||||||||||||||||||||||
| Common stock issued for services |
- | - | - | - | - | |||||||||||||||||||||||||||
| Stock based compensation |
- | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock option exercises |
- | - | - | - | - | |||||||||||||||||||||||||||
| Warrant exercises |
- | - | - | - | - | |||||||||||||||||||||||||||
| Stock issued – on vested RSAs | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net loss |
- | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balance, September 30, 2020 |
- | $ | - | $ | $ | $ | - | $ | ( |
) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
BioLife Solutions, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities | ||||||||
| Depreciation | ||||||||
| Amortization of intangible assets | ||||||||
| Stock-based compensation | ||||||||
| Non-cash lease expense | ||||||||
| Deferred income tax benefit | ( | ) | ||||||
| Change in fair value of contingent consideration | ( | ) | ||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Change in fair value of investments | ( | ) | ||||||
| Gain on acquisition of Sexton Biotechnologies, Inc. | ( | ) | ||||||
| Stock issued for services | ||||||||
| Loss on disposal of assets held for rent, net | ||||||||
| Other | ||||||||
| Change in operating assets and liabilities, net of effects of acquisitions | ||||||||
| Accounts receivable, trade, net | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Other | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Cash acquired in acquisition of Global Cooling, Inc. and Sexton Biotechnologies, Inc. | - | |||||||
| Payments related to the acquisition of SciSafe, net of cash acquired | - | ( | ) | |||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of assets held for lease | ( | ) | ( | ) | ||||
| Proceeds from sale of equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from Paycheck Protection Program ("PPP") Loan | ||||||||
| Payoff of PPP Loan | ( | ) | ||||||
| Proceeds from equipment loans | ||||||||
| Payments of contingent consideration | ( | ) | ||||||
| Proceeds from sale of common stock, net of million of costs in 2020 | ||||||||
| Fees paid related to issuance of common stock | ( | ) | - | |||||
| Proceeds from line of credit | ||||||||
| Payments on line of credit | ( | ) | ||||||
| Proceeds from exercise of common stock options | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Payments on financed insurance premium | ( | ) | ||||||
| Other | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | ( | ) | ||||||
| Cash, cash equivalents, and restricted cash – beginning of period | ||||||||
| Effects of currency translation on cash, cash equivalents, and restricted cash | ( | ) | ||||||
| Cash, cash equivalents, and restricted cash – end of period | $ | $ | ||||||
| Non-cash investing and financing activities | ||||||||
| Cashless exercise of warrants reclassified from warrant liability to common stock | $ | $ | ||||||
| Stock issued as consideration to acquire Global Cooling, Inc. and Sexton Biotechnologies, Inc. | $ | $ | ||||||
| Equipment acquired under operating leases | $ | $ | ||||||
| Equipment acquired under finance leases | $ | $ | ||||||
| Purchase of property and equipment not yet paid | $ | $ | ||||||
| Reclassification of warrant liabilities to equity upon exercise | $ | $ | ||||||
| Financing costs paid in a prior period | $ | $ | ||||||
| Stock issued as a prepayment of services | $ | $ | ||||||
| Stock issued as bonus consideration | $ | $ | ||||||
| Purchase of equipment with debt | $ | $ | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
BioLife Solutions, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization and significant accounting policies
Business
BioLife Solutions, Inc. (“BioLife”, “us”, “we”, “our”, or the “Company”) is a developer, manufacturer, and supplier of a portfolio of bioproduction tools and services including proprietary biopreservation media, automated thawing devices, cloud-connected shipping containers, ultra-low temperature mechanical freezers, cryogenic and controlled rate freezers and biological and pharmaceutical materials storage. Our CryoStor® freeze media and HypoThermosol® hypothermic storage media are optimized to preserve cells in the regenerative medicine market. These novel biopreservation media products are serum-free and protein-free, fully defined, and are formulated to reduce preservation-induced cell damage and death. Our Sexton cell processing product line includes human platelet lysates (“hPL”) for cell expansion reducing risk and improving downstream performance over fetal bovine serum, human serum, and other chemically defined media, CellSeal® cryogenic vials that are purpose-built rigid containers used in cell and gene therapy (“CGT”) that can be filled manually or with high throughput systems, and automated cell processing machines that bring multiple processes traditionally performed by manual techniques under a higher level of control to protect therapies from loss or contamination. Our ThawSTAR® product line is comprised of a family of automated thawing devices for frozen cell and gene therapies packaged in cryovials and cryobags. These products administer temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths. Our cryogenic freezer technology provides for controlled rate freezing and storage of biologic materials. Our ultra-low temperature mechanical freezers allow biological materials and vaccines to be stored at temperatures which range from negative 20℃ to negative 80℃. Our evo® shipping containers provide cloud-connected passive storage and transport containers for temperature-sensitive biologics and pharmaceuticals. Our biological and pharmaceutical materials storage services provide facilities that allow for real-time tracking of biologic materials and vaccines that can be stored at a wide range of temperatures.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates and assumptions by management affect the Company’s allowance for doubtful accounts, the net realizable value of inventory, fair value of warrant liability, 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 the recoverability of the Company’s net deferred tax assets and the related valuation allowance.
The Company regularly assesses these estimates; however, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.
Basis of presentation
The Unaudited Condensed Consolidated Financial Statements included herein have been prepared by BioLife in accordance with U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by U.S. GAAP. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2020.
The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, Astero Bio Corporation (“Astero,” and the Astero product line, “ThawStar” acquired on April 1, 2019), SAVSU Technologies, Inc. (“SAVSU” acquired on August 8, 2019), Arctic Solutions, Inc. doing business as Custom Biogenic Systems (“CBS” acquired on November 12, 2019), SciSafe Holdings, Inc. (“SciSafe” acquired on October 1, 2020), Global Cooling, Inc. doing business as Stirling Ultracold (“Global Cooling” or “GCI” acquired on May 3, 2021), and Sexton Biotechnologies, Inc. (“Sexton” acquired on September 1, 2021). All intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year.
Financial Statement Reclassification
Certain classifications on the Unaudited Condensed Consolidated Balance Sheets related to accrued expenses and other current liabilities, debt, current portion, and debt, long-term as of December 31, 2020 were reclassified to conform to current period presentation. These reclassifications have no impact on previously reported total revenue, net (loss) income, net assets, or total operating cash flows.
Segment reporting
The Company operates and manages its business as reportable and operating segment, which is the business of bioproduction tools and services. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.
Significant accounting policies
There have been no significant changes to the accounting policies during the nine months ended September 30, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K.
Liquidity and capital resources
On September 30, 2021 and December 31, 2020, we had $
Risks and uncertainties
On March 10, 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019 (“COVID-19”) a pandemic. The COVID-19 pandemic, and the resulting restrictions intended to slow the spread of COVID-19, including stay-at-home orders, business shutdowns and other restrictions, has affected the Company’s business in several ways. The CGT industry that BioLife services has a complex and highly controlled supply chain that has been impacted by COVID-19. Challenges faced include, but are not limited to, the diversion of healthcare industry resources towards studying and treating COVID-19, logistics operations slowing down on a global scale, and changing environments related to in-person sales efforts.
The Company may also experience other negative impacts of the COVID-19 outbreak such as the lack of availability of the Company’s key personnel, additional temporary closures of the Company’s office or the facilities of the Company’s business partners, customers, third party service providers or other vendors, the inability to travel to market and sell our products, and the interruption of the Company’s supply chain, distribution channels, liquidity and capital or financial markets.
Any disruption and volatility in the global capital markets as a result of the pandemic may increase the Company’s cost of capital and adversely affect the Company’s ability to access financing when and on terms that the Company desires. In addition, a potential recession resulting from the spread of COVID-19 could materially affect the Company’s business, especially if a recession results in higher unemployment causing potential patients to not have access to health insurance.
The ultimate extent to which the COVID-19 pandemic and its repercussions impact the Company’s business will depend on future developments, which are highly uncertain. However, the foregoing and other continued disruptions to the Company’s business as a result of COVID-19 could result in a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
On March 27, 2020, the President of the United States 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 tax 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 tax payments as allowed by the CARES Act. As of September 30, 2021, the amount of deferred social security tax payments was $
On March 11, 2021, the President of the United States signed into law the “American Rescue Plan Act of 2021” (the American Rescue Plan), which included additional economic stimulus and tax credits, including the expansion of the Employee Retention Credit.
In the SciSafe acquisition, the Company assumed a $
Concentrations of credit risk and business risk
We derived approximately
The following table represents the Company’s total revenue by geographic area (based on the location of the customer):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| Revenue by customers’ geographic locations | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| North America | % | % | % | % | ||||||||||||
| Europe, Middle East, Africa (EMEA) | % | % | % | % | ||||||||||||
| Other | % | % | % | % | ||||||||||||
| Total revenue | % | % | % | % | ||||||||||||
We derived approximately
As of September 30, 2021 and December 31, 2020, customers and customer accounted for approximately
As of September 30, 2021 and December 31, 2020, supplier accounted for
Recent accounting pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update amends guidance to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted including adoption in an interim period. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments ("ASU 2021-05"). The guidance in ASU 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under Accounting Standards Codification (“ASC”) 840. The lessor should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in ASC 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The amendments in ASU 2021-05 are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the timing and impact of the adoption of ASU 2021-05 on the Company’s consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which clarifies the accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. Specifically, ASU 2021-04 requires the issuer to treat a modification of an equity-classified warrant as an exchange of the original warrant. The difference between the fair value of the modified warrant and the fair value of the warrant immediately before modification is then recognized as an issuance cost or discount of the related transaction. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted. ASU 2021-04 should be applied prospectively to modifications or exchanges occurring after the effective date. Either the full or modified retrospective adoption method is allowed. We do not have any equity-classified written call options that would be subject to this guidance. Therefore, we do not expect any impact on our consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company adopted this guidance and it did not have a material impact on the company’s financial position, results of operation or cash flows.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform—Scope, which clarified the scope and application of the original guidance. The Company will adopt these standards when LIBOR is discontinued. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. The Company has not yet adopted this ASU and is evaluating the effect of adopting this new accounting guidance.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For Smaller Reporting Companies as defined by the SEC, ASU 2016-13 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.
2. Fair value measurement
In accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC Topic 820”), the Company measures its cash and cash equivalents and investments at fair value on a recurring basis. The Company also measures certain assets and liabilities at fair value on a non-recurring basis when applying acquisition accounting. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3 – Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The fair value of the Astero Contingent Consideration liability was initially valued based on unobservable inputs using a Black-Scholes valuation model. These inputs included the estimated amount and timing of projected future revenue, a discount rate of
The fair value of the CBS Contingent Consideration liability was initially valued based on unobservable inputs using a Monte Carlo simulation. These inputs included the estimated amount and timing of projected future revenue, a discount rate of
The fair value of the SciSafe Contingent Consideration liability was initially valued based on unobservable inputs using a Monte Carlo simulation. These inputs included the estimated amount and timing of projected future revenue, a discount rate of
For the warrant liability, the significant Level 3 inputs included the contractual remaining term of the warrants and the volatility of the Company’s common stock. For the estimated term of the warrants, we used the actual terms of the warrants, which expired March 25, 2021. For the volatility of the Company’s stock as of December 31, 2020, we used historical volatility for the remaining term of each warrant. These amounts ranged from
There were no remeasurements to fair value during the nine months ended September 30, 2021 of financial assets and liabilities that are not measured at fair value on a recurring basis.
The following tables set forth the Company’s financial assets measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, based on the three-tier fair value hierarchy:
(In thousands)
| As of September 30, 2021 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Money market accounts | $ | $ | $ | $ | ||||||||||||
| Total | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration - business combinations | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2020 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Money market accounts | $ | $ | $ | $ | ||||||||||||
| Total | ||||||||||||||||
| Liabilities: | ||||||||||||||||
| Contingent consideration - business combinations | ||||||||||||||||
| Warrant liability | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair values of money market funds classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The fair values of contingent consideration and warrant liabilities classified as Level 3 were derived from management assumptions. There have been no transfers of assets or liabilities between the fair value measurement levels.
The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Beginning balance | $ | $ | ||||||
| Change in fair value recognized in net income (loss) | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Beginning balance | $ | $ | ||||||
| Exercised warrants | ( | ) | ( | ) | ||||
| Change in fair value recognized in net income (loss) | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
3. Acquisitions
Sexton acquisition
General terms and effects
On August 9, 2021, BioLife entered into an Agreement and Plan of Merger (the “Sexton Merger Agreement”) with BLFS Merger Sub, Inc., a Delaware corporation (“Sexton Merger Sub”), Fortis Advisors LLC, in its capacity as the representative of the stockholders of Sexton (the “Sexton Seller Representative”) and Sexton Biotechnologies, Inc., a Delaware corporation.
On September 1, 2021, the Company completed the merger of Sexton Merger Sub with and into Sexton and Sexton became a wholly-owned subsidiary of the Company (the “Sexton Merger”). As consideration for the Sexton Merger (the “Sexton Merger Consideration”), holders of common stock, preferred stock and options of Sexton, other than the Company (collectively, the “Sexton Participating Holders”), are entitled to receive an aggregate of
Total consideration transferred (in thousands, except number of shares and stock price):
| Merger consideration shares | ||||
| BioLife stock price (as of September 1, 2021) | $ | |||
| Value of issued shares | $ | |||
| plus: Fair value of BioLife’s existing investment in Sexton | $ | |||
| less: Net working capital adjustment | $ | ( | ) | |
| Merger Consideration | $ |
Transaction costs related to the acquisition are expensed as incurred and are not included in the calculation of consideration transferred.
Fair value of net assets acquired
As the Company finalizes its estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). The initial accounting is incomplete as of September 30, 2021 for the acquired assets and liabilities as the Company is currently in the process of completing the assessment of intangible assets, goodwill, income taxes, and other assets and liabilities including contractual rights and obligations acquired that continue to be evaluated based on facts that existed as of the acquisition date. Our valuations will be finalized when certain information arranged to be obtained has been received and our review of that information has been completed.
Under the acquisition method of accounting, the assets acquired and liabilities assumed from Sexton were estimated as of the merger date, at their respective fair values, and consolidated with those of BioLife. The estimated fair value of the net tangible assets acquired is approximately $
The table below represents the estimated fair value of the net assets acquired and liabilities assumed, which were recorded as of the merger date (amounts in thousands).
| Cash | $ | |||
| Accounts receivable, net | ||||
| Inventory | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment, net | ||||
| Operating lease right-of-use assets, net | ||||
| Developed technology | ||||
| Customer relationships | ||||
| Tradenames | ||||
| Non-compete agreements | ||||
| Goodwill | ||||
| Accounts payable | ( | ) | ||
| Lease liabilities, operating | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Other liabilities | ( | ) | ||
| Fair value of net assets acquired | $ |
The fair value of Sexton’s identifiable intangible assets and useful lives are as follows (amounts in thousands, except years):
| Fair Value | Useful Life (Years) | ||||||||
| Developed technology | $ | - | |||||||
| Customer relationships | |||||||||
| Tradenames | |||||||||
| Non-compete agreements | |||||||||
| 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 estimated fair values of developed technology were estimated using a multi-period excess earnings approach. The estimated fair values of customer relationships and non-compete agreements were estimated using a “with and without” approach, comparing projected cash flows under scenarios assuming the customer relationships and non-compete agreements were and were not in place. The estimated fair value of the tradenames is based on the relief from royalty method, which estimates the value of the trade names based on the hypothetical royalty payments that are saved by owning the asset.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset.
Acquired goodwill
The goodwill of $28.3 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. The goodwill recorded is not deductible for income tax purposes.
Global Cooling acquisition
General terms and effects
On March 19, 2021, the Company entered into an Agreement and Plan of Merger (the “GCI Merger Agreement”) with BLFS Merger Subsidiary, Inc., a Delaware corporation (“GCI Merger Sub”), Global Cooling, a Delaware corporation and Albert Vierling and William Baumel, in their capacity as the representatives of the stockholders of GCI (collectively, the “GCI Seller Representative”).
On May 3, 2021, pursuant to the GCI Merger Agreement, subject to the terms and conditions set forth therein, the transactions contemplated by the GCI Merger Agreement were consummated (the “GCI Closing”), GCI Merger Sub merged with and into GCI (the “GCI Merger” and, together with other transactions contemplated by the GCI Merger Agreement, the “GCI Transactions”), with GCI continuing as the surviving corporation in the GCI Merger and a wholly-owned subsidiary of the Company. In the GCI Merger, all of the issued and outstanding shares of capital stock of GCI immediately prior to the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (other than those properly exercising any applicable dissenter’s rights under Delaware law) were converted into the right to receive the GCI Merger Consideration (as defined below). The Company paid the GCI Merger Consideration to the holders of common stock and preferred stock of GCI (collectively, the “GCI Stockholders”).
Merger consideration
The aggregate merger consideration paid pursuant to the GCI Merger Agreement to the GCI Stockholders was
Total consideration transferred (in thousands, except number of shares, stock price, and consideration percentage):
| BioLife shares outstanding (as of March 19, 2021) | ||||
| Merger consideration percentage | % | |||
| Merger consideration shares | ||||
| less: Merger consideration shares withheld to satisfy outstanding GCI stockholder obligations to GCI | ||||
| Subtotal | ||||
| BioLife stock price (as of May 3, 2021) | $ | |||
| Value of issued shares | $ | |||
| plus: Settlement of BioLife prepaid deposits | $ | |||
| plus: Net settlement of BioLife accounts receivable | $ | |||
| Merger Consideration | $ |
Transaction costs related to the acquisition are expensed as incurred and are not included in the calculation of consideration transferred.
Escrow shares
At the GCI Closing, approximately nine percent (
The GCI Escrow Property will be held for a period of up to twenty-four (
Fair value of net assets acquired
As the Company finalizes its estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). The initial accounting is incomplete as of September 30, 2021 for the acquired assets and liabilities as the Company is currently in the process of completing the assessment of the tax attributes of the business combination. The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities and goodwill, which could have a material impact on the Company’s results of operations and financial position.
Under the acquisition method of accounting, the assets acquired and liabilities assumed from Global Cooling were estimated as of the merger date, at their respective fair values, and consolidated with those of BioLife. The estimated fair value of the net tangible assets acquired is approximately $
The table below represents the estimated fair value of the net assets acquired and liabilities assumed, which were recorded as of the merger date (amounts in thousands).
| Cash | $ | |||
| Accounts receivable, net | ||||
| Inventory | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment, net | ||||
| Operating lease right-of-use assets, net | ||||
| Financing lease right-of-use assets, net | ||||
| Long-term deposits and other assets | ||||
| Developed technology | ||||
| Customer relationships | ||||
| Tradenames | ||||
| Non-compete agreements | ||||
| In-process research and development | ||||
| Goodwill | ||||
| Accounts payable | ( | ) | ||
| Line of credit | ( | ) | ||
| Lease liabilities, operating | ( | ) | ||
| Lease liabilities, financing | ( | ) | ||
| Long-term debt | ( | ) | ||
| Deferred tax liability | ( | ) | ||
| Other liabilities | ( | ) | ||
| Fair value of net assets acquired | $ |
The fair value of Global Cooling’s identifiable intangible assets and useful lives are as follows (amounts in thousands, except years):
| Fair Value | Useful Life (Years) | |||||||
| Developed technology | $ | |||||||
| Customer relationships | ||||||||
| Tradenames | ||||||||
| Non-compete agreements | ||||||||
| In-process research and development | N/A | |||||||
| 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 estimated fair values of developed technology and in-process research and development were estimated using a multi-period excess earnings approach. The estimated fair values of customer relationships were estimated using the “distributor method”. The estimated fair value of the tradenames is based on the relief from royalty method, which estimates the value of the trade names based on the hypothetical royalty payments that are saved by owning the asset. The estimated fair values of non-compete agreements were estimated using a “with and without” approach, comparing projected cash flows under scenarios assuming the non-compete agreements were and were not in place. The fair value of inventory and property, plant and equipment were determined using the “market approach”.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset.
Acquired goodwill
The goodwill of $
The Company recorded revenue from Sexton of $
The following unaudited pro forma financial information presents the combined results of operations of Sexton as if the acquisition had occurred on January 1, 2020 after giving effect to certain pro forma adjustments. These pro forma adjustments include intangible amortization, stock-based compensation expense and salary expense related to a key employee, and the income tax effect of the adjustments made:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands) | 2021 | 2020 (unaudited) | 2021 (unaudited) | 2020 (unaudited) | ||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
The following unaudited pro forma financial information presents the combined results of operations of Global Cooling as if the acquisition had occurred on January 1, 2020 after giving effect to certain pro forma adjustments. These pro forma adjustments include intangible amortization, amortization of increased inventory basis, depreciation expense, lease expense, transaction costs, interest expense, stock-based compensation expense and salary expense related to a key employee, and the income tax effect of the adjustments made:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands) | 2021 (unaudited) | 2020 (unaudited) | 2021 (unaudited) | 2020 (unaudited) | ||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
4. Inventory
Inventory consists of the following as of September 30, 2021 and December 31, 2020:
| (In thousands) | 2021 | 2020 | ||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
5. Assets held for rent
Assets held for rent consist of the following as of September 30, 2021 and December 31, 2020:
| (In thousands) | 2021 | 2020 | ||||||
| Shippers placed in service | $ | $ | ||||||
| Fixed assets held for rent | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net | ||||||||
| Shippers and related components in production | ||||||||
| Total | $ | $ | ||||||
Shippers and related components in production include shippers complete and ready to be deployed and placed in service upon a customer order, shippers in the process of being assembled, and components available to build shippers. We recognized $
6. Goodwill and intangible assets
Goodwill
Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. Goodwill acquired in a business combination is determined to have an indefinite useful life and is not amortized, but instead is tested for impairment at least annually in accordance with ASC 350. The Company has not identified any triggering events which indicate an impairment of goodwill in the nine months ended September 30, 2021.
Intangible assets
Intangible assets, net consisted of the following as of September 30, 2021:
| (In thousands, except weighted average useful life) | September 30, 2021 | |||||||||||||||
| Finite-lived intangible assets: | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Weighted Average Useful Life (in years) | ||||||||||||
| Customer Relationships | $ | $ | ( | ) | $ | |||||||||||
| Tradenames | ( | ) | ||||||||||||||
| Technology - acquired | ( | ) | ||||||||||||||
| Non-compete agreements | ( | ) | ||||||||||||||
| In-process research and development⁽¹⁾ | - | N/A | ||||||||||||||
| 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.
Intangible assets, net consisted of the following as of December 31, 2020:
| December 31, 2020 | ||||||||||||||||
| Finite-lived intangible assets: | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Weighted Average Useful Life (in years) | ||||||||||||
| Customer Relationships | $ | $ | ( | ) | $ | |||||||||||
| Tradenames | ( | ) | ||||||||||||||
| Technology - acquired | ( | ) | ||||||||||||||
| Non-compete agreements | ( | ) | ||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | |||||||||||
Amortization expense for finite-lived intangible assets was $
| (In thousands) | ||||
| For the Years Ending December 31, | Estimated Amortization Expense | |||
| 2021 (3 months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total | $ | |||
7. Line of credit and long-term debt
At September 30, 2021 the Company maintained a line of credit, which was assumed in the acquisition of Global Cooling, with a bank which had an original expiration date of June 2023. The outstanding balance bore interest at a floating rate equal to the 3-month LIBOR rate plus
Long-term debt consisted of the following as of September 30, 2021 and December 31, 2020:
| September 30, | December 31, | ||||||||||||
| (In thousands) | Maturity Date | Interest Rate | 2021 | 2020 | |||||||||
| 2019 term loan | Sep-23 | % | $ | $ | |||||||||
| 2018 term loan | Sep-23 | % | |||||||||||
| Insurance premium financing | Apr-22 | % | |||||||||||
| Paycheck Protection Program loan | May-22 | % | |||||||||||
| Freezer equipment loan | Dec-25 | % | |||||||||||
| Manufacturing equipment loans | Oct-25 | % | |||||||||||
| Freezer installation loan | Various | % | |||||||||||
| Other loans | Various | Various | |||||||||||
| Total debt | |||||||||||||
| Less: Unamortized debt issuance costs | ( | ) | |||||||||||
| Total debt, net of unamortized debt issuance costs | $ | $ | |||||||||||
The 2019 and 2018 term loans are secured by substantially all assets of Global Cooling.
As of September 30, 2021, the scheduled maturities of loans payable for each of the next five years and thereafter were as follows:
| (In thousands) | Amount | |||
| 2021 (3 months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total | $ | |||
Debt covenants and default provisions
The line of credit, 2019 term loan, and 2018 term loan assumed in the acquisition of Global Cooling contain affirmative and negative covenants that are customary for financings of their respective types. As of September 30, 2021, the Company was not in compliance with certain reporting and financial covenants. To remedy the non-compliance related to the financial covenants associated with the line of credit, the Company paid off the entirety of the outstanding balance on the line of credit and all related interest on October 14, 2021. To remedy the non-compliance related to the financial covenants associated with the 2019 and 2018 term loans, the Company entered into amended and restated term notes.
On October 1, 2021, the Company entered into amended and restated term notes (the “Loan Agreements”) with Advantage Capital (“Advantage”) and Enhanced Capital (“Enhanced”). Pursuant to the Loan Agreements, Advantage provided two term notes in the amount of $
8. Share-based compensation
Service vesting-based stock options
The following is a summary of service vesting based stock option activity for the nine months ended September 30, 2021, and the status of stock options outstanding as of September 30, 2021:
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Shares | Wtd. Avg. Exercise Price | |||||||
| Outstanding as of beginning of year | $ | |||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Expired | ( | ) | ||||||
| Outstanding as of September 30, 2021 | $ | |||||||
| Stock options exercisable as of September 30, 2021 | $ | |||||||
We recognized $
Performance-based stock options
The following is a summary of performance-based stock option activity under our stock option plan for the nine months ended September 30, 2021, and the status of performance-based stock options outstanding as of September 30, 2021:
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Shares | Wtd. Avg. Exercise Price | |||||||
| Outstanding as of beginning of year | $ | |||||||
| Exercised | ( | ) | ||||||
| Outstanding as of September 30, 2021 | $ | |||||||
| Stock options exercisable as of September 30, 2021 | $ | |||||||
There were
Restricted stock
Service vesting-based restricted stock
The following is a summary of service vesting-based restricted stock activity for the nine months ended September 30, 2021, and the status of unvested service vesting-based restricted stock outstanding as of September 30, 2021:
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Shares | Wtd. Avg. Grant Date Fair Value | |||||||
| Outstanding as of beginning of year | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-vested as of September 30, 2021 | $ | |||||||
The aggregate fair value of the service vesting-based awards granted was $
We recognized $
Performance-based restricted stock
We recognized stock compensation benefit of $
Market-based restricted stock
The following is a summary of market-based restricted stock option activity under our stock option plan for the nine months ended September 30, 2021 and the status of market-based restricted stock options outstanding as of September 30, 2021:
| Nine Months Ended | ||||||||
| September 30, 2021 | ||||||||
| Shares | Wtd. Avg. Grant Date Fair Value | |||||||
| Outstanding as of beginning of year | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Non-vested as of September 30, 2021 | $ | |||||||
On February 25, 2019, the Company granted
On March 25, 2020, the Company granted
On February 8, 2021, the Company granted
On May 3, 2021, the Company granted
We recognized $
We recorded total stock compensation expense for the three and nine months ended September 30, 2021 and 2020, as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Research and development costs | $ | $ | $ | $ | ||||||||||||
| Sales and marketing costs | ||||||||||||||||
| General and administrative costs | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
9. Warrants
In March 2014, in a registered public offering and in accordance with a separate note conversion agreement with certain note holders, the Company issued warrants to purchase
In May 2016, in connection with a credit facility with WAVI Holding AG, a significant stockholder of the Company, the Company issued a warrant to purchase
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
On March 25, 2021, all remaining outstanding warrants were exercised via a “cashless” exercise. As a result of the cashless exercise, the Company issued an aggregate of
The following table summarizes warrant activity for the nine months ended September 30, 2021:
| Shares | Wtd. Avg. Exercise Price | |||||||
| Outstanding as of December 31, 2020 | $ | |||||||
| Exercised | ( | ) | ||||||
| Outstanding and exercisable as of September 30, 2021 | $ | |||||||
10. Income taxes
The Company accounts for income taxes under ASC Topic 740 – Income Taxes. Under this standard, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The Company’s tax provision for interim periods is determined using an estimate of the annual effective income tax rate, adjusted for discrete items, if any, that occur in the relevant period. The income tax benefit of $
The income tax benefit of $
The Company’s US projected effective income tax rate without discrete items was
Realization of deferred tax assets is dependent upon the generation of future taxable income, the timing and amount of which are uncertain. In determining the need for a valuation allowance, the Company’s management evaluates both positive and negative evidence when concluding whether it is more likely than not that deferred tax assets are realizable. After reviewing the evidence available, the Company’s management believes there is uncertainty regarding the future realizability of the U.S. net operating loss carryforward and is projecting a partial valuation allowance of $
In connection with the Global Cooling acquisition on May 3, 2021, the Company recognized a deferred tax liability estimated to be $
Future utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation in the event of a change in ownership as set forth in Section 382 of the Internal Revenue Code of 1986, as amended. It is possible that there have been past changes in ownership as defined under Section 382, which would limit the Company’s ability to utilize NOLs and other tax attributes. The Company is currently in the process a completing a Section 382 study and a state nexus study, which may result in adjustments to the accounting for the acquisition of Global Cooling and Sexton.
11. Net (loss) income per common share
The Company considers its unexercised warrants and unvested restricted shares, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of earnings per share pursuant to the two-class method. Basic earnings per share for the two classes of stock (common stock and warrants) is calculated by dividing net income by the weighted average number of shares of common stock and warrants outstanding during the reporting period. Diluted earnings per share is calculated using the weighted average number of shares of common stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two-class method and the treasury stock method, whichever is more dilutive. In periods when we have a net loss, common stock equivalents are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.
The following table presents computations of basic and diluted earnings per share under the two-class method:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands, except share and earnings per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Basic earnings (loss) per common share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ||||||||||
| Amount attributable to unvested restricted shares | ( | ) | ( | ) | ( | ) | ||||||||||
| Amount attributable to warrants outstanding | ( | ) | ( | ) | ||||||||||||
| Net income (loss) allocated to common shareholders | ( | ) | ||||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average common shares issued and outstanding | ||||||||||||||||
| Basic earnings (loss) per common share | $ | $ | ( | ) | $ | $ | ||||||||||
| Diluted earnings (loss) per common share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ||||||||||
| Amount attributable to unvested restricted shares | ( | ) | ( | ) | ||||||||||||
| Amount attributable to warrants | ( | ) | ( | ) | ||||||||||||
| Less: gain related to change in fair value of warrants | ( | ) | ||||||||||||||
| Diluted earnings (loss) per common share | ( | ) | ||||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average common shares issued and outstanding | ||||||||||||||||
| Dilutive potential common shares from: | ||||||||||||||||
| Stock options | ||||||||||||||||
| Restricted shares | ||||||||||||||||
| Warrants | ||||||||||||||||
| Diluted weighted average shares issued and outstanding | ||||||||||||||||
| Diluted earnings (loss) per common share | $ | $ | ( | ) | $ | $ | ||||||||||
The following table sets forth the number of weighted-average common shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Stock options and restricted stock awards | ||||||||||||||||
| Warrants | ||||||||||||||||
| Total | ||||||||||||||||
12. Commitments and contingencies
Employment agreements
We have employment agreements with certain key employees. None of these employment agreements is for a definitive period, but rather each will continue indefinitely until terminated in accordance with its terms. The agreements provide for a base annual salary, payable in monthly (or shorter) installments. Under certain conditions and for certain of these officers, we may be required to pay additional amounts upon terminating the employee or upon the employee resigning for good reason.
Litigation
From time to time, the Company is subject to various legal proceedings that arise in the ordinary course of business, none of which are currently material to the Company’s business. The Company’s industry is characterized by frequent claims and litigation, including claims regarding intellectual property. As a result, the Company may be subject to various legal proceedings from time to time. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Management is not aware of any pending or threatened litigation.
Indemnification
As permitted under Delaware law and in accordance with the Company’s bylaws, the Company is required to indemnify its officers and directors for certain errors and occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its directors. The Company believes the fair value of the indemnification rights and agreements is minimal. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of September 30, 2021.
13. Revenue
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. The Company primarily recognizes product revenues, service revenues, and rental revenues. Product revenues are generated from the sale of biopreservation media, ThawStar, and freezer products. We recognize product revenue, including shipping and handling charges billed to customers, when we transfer control of our products to our customers (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. Service revenues are generated from the storage of biological and pharmaceutical materials. We recognize service revenues over time as services are performed or ratably over the contract term.
The Company also generates revenue from the leasing of our property, plant, and equipment, operating right-of-use assets, and evo cold chain systems to customers pursuant to service contracts or rental arrangements entered into with the customer. Revenue from these arrangements is not within the scope of FASB ASC Topic 606 as it is within the scope of FASB ASC Topic 842, Leases. All customers leasing shippers currently do so under month-to-month rental arrangements. We account for these rental transactions as operating leases and record rental revenue on a straight-line basis over the rental term.
Total bioproduction tools and services revenue for three and nine months ended September 30, 2021 and 2020 was comprised of the following:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands, except percentages) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Product revenue | ||||||||||||||||
| Freezer and thaw | $ | $ | $ | $ | ||||||||||||
| Cell processing | ||||||||||||||||
| Storage and cold chain services | ||||||||||||||||
| Service revenue | ||||||||||||||||
| Storage and cold chain services | ||||||||||||||||
| Rental revenue | ||||||||||||||||
| Storage and cold chain services | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
The following table includes estimated rental revenue expected to be recognized in the future related to embedded leases as well as estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting periods. The Company is electing not to disclose the value of the remaining unsatisfied performance obligation with a duration of one year or less as permitted by the practical expedient in ASU 2014-09, Revenue from Contracts with Customers. The estimated revenue in the following table does not include contracts with the original durations of one year or less, amounts of variable consideration attributable to royalties, or contract renewals that are unexercised as of September 30, 2021.
The balances in the table below are partially based on judgments involved in estimating future orders from customers subject to the exercise of material rights pursuant to respective contracts:
| Year Ending December 31, | ||||||||||||||||||||
| (In thousands) | 2021 | 2022 | 2023 | 2024 | Total | |||||||||||||||
| Rental revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Service revenue | $ | $ | $ | $ | $ | |||||||||||||||
14. Leases
Lessee arrangements
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
We lease approximately
Operating leases recorded on our Unaudited Condensed Consolidated Balance Sheets are primarily related to our Bothell, Washington headquarters space lease and our SciSafe space leases in the United States. 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; Menlo Park, California; Columbus, Ohio; and Nelsonville, Ohio leases are not recorded on our Unaudited Condensed Consolidated Balance Sheets as the term expires in one year or less.
Our financing leases relate to research equipment, machinery, and other equipment.
The table below presents certain information related to the weighted average discount rate and weighted average remaining lease term for the Company’s leases:
| September 30, | December 31, | |||||||
| (In thousands) | 2021 | 2020 | ||||||
| Weighted average discount rate - operating leases | % | % | ||||||
| Weighted average discount rate - finance leases | % | % | ||||||
| Weighted average remaining lease term in years - operating leases | ||||||||
| Weighted average remaining lease term in years - finance leases | ||||||||
Operating cash paid for amounts included in the measurement of operating lease liabilities in the three and nine months ended September 30, 2021 was $
The components of operating lease expense for the three and nine months ended September 30, 2021 are as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Operating lease costs | $ | $ | $ | $ | ||||||||||||
| Short-term lease costs | ||||||||||||||||
| Total operating lease costs | ||||||||||||||||
| Variable lease costs | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
Maturities of our operating lease liabilities as of September 30, 2021 are as follows:
| (In thousands) | Operating Leases | Financing Leases | ||||||
| 2021 (3 months remaining) | $ | $ | ||||||
| 2022 | ||||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: interest | ( | ) | ( | ) | ||||
| Total present value of lease liabilities | $ | $ | ||||||
Lessor arrangements
Rental arrangements
The Company 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 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.
Embedded leases
BioLife enters into various customer service agreements (collectively, “Service Contracts”) with customers to provide biological and pharmaceutical storage services. In certain of these Service Contracts, the property, plant, and equipment or operating right-of-use assets used to store the customer product are used only for the benefit of one customer. This is primarily driven by the customer’s desire to ensure that sufficient storage capacity is available in a specific geographic location for a set period of time.
BioLife has assessed its Service Contracts and concluded that certain of the contracts for the storage of customer products met the criteria to be considered a leasing arrangement (“Embedded Leases”), with BioLife as the lessor. The specific Service Contracts that met the criteria were those that provided a single customer with the ability to substantially direct the use of BioLife property, plant, and equipment or operating right-of-use assets.
Under ASC 842, consistent with the previous guidance, BioLife will continue to recognize operating right-of-use asset embedded lessor arrangements on its Unaudited Condensed Consolidated Balance Sheets in operating right-of-use assets.
None of the Embedded Leases identified by BioLife qualify as a sales-type or direct finance lease. None of the operating leases for which BioLife is the lessor include options for the lessee to purchase the underlying asset at the end of the lease term or residual value guarantees, nor are any such operating leases with related parties.
15. Unaudited Condensed Consolidated Balance Sheet detail
Property and equipment
| September 30, | December 31, | |||||||
| (In thousands) | 2021 | 2020 | ||||||
| Property and equipment | ||||||||
| Leasehold improvements | $ | $ | ||||||
| Furniture and computer equipment | ||||||||
| Manufacturing and other equipment | ||||||||
| Construction in-progress | ||||||||
| 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:
| September 30, | December 31, | |||||||
| (In thousands) | 2021 | 2020 | ||||||
| Accrued expenses | $ | $ | ||||||
| Accrued taxes | ||||||||
| Accrued compensation | ||||||||
| Warranty reserve liability | ||||||||
| Deferred revenue, current | ||||||||
| Other | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
Warranty reserve liability
We reserve estimated exposures on known claims, as well as on a portion of anticipated claims, for product warranty and rework cost, based on historical product liability claims. Claim costs are deducted from the accrual when paid. Factors that could have an impact on the warranty accrual in any given period include the following: changes in manufacturing quality, changes in product costs, changes in product mix and any significant changes in sales volume.
A rollforward of our warranty liability is as follows:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
| Beginning balance | $ | $ | ||||||
| Warranty reserve acquired in the acquisition of Global Cooling | ||||||||
| Provision for warranties
| ||||||||
| Settlements of warranty claims | ( | ) | ( | ) | ||||
| Ending Balance | $ | $ | ||||||
16. 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
17. Subsequent events
On October 8, 2021, the Company entered into an amendment to the current lease agreement associated with our Bothell, Washington location. The amendment expands the leased premises by approximately
On October 31, 2021, the Company entered into a lease agreement associated with our Albuquerque, New Mexico location. The lease agreement extends the current lease through December 31, 2022. In accordance with the lease, the monthly base rent will increase to approximately $
Item 2. Management’s discussion and analysis of financial condition and results of operations
Forward looking statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products and services, our ability to implement our business strategy and anticipated business and operations, in particular following our 2019, 2020, and 2021 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, financial condition, results of operations, liquidity, business strategies, regulatory filings and requirements, the estimated potential size of markets, capital requirements, the terms of any capital financing agreements, cost savings, objectives of management 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 Quarterly Report on Form 10-Q. 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. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K as of and for the fiscal year ended December 31, 2020 filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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.
Overview
Management’s discussion and analysis provides additional insight into the Company and is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2020 filed with the SEC.
We develop, manufacture, and market bioproduction tools and services to the cell and gene therapy (“CGT”) industry, which are designed to improve quality and de-risk biologic manufacturing and delivery. We also provide biological and pharmaceutical storage services to the CGT industry. Our products are used in basic and applied research, and commercial manufacturing of biologic-based therapies. Customers use our products to maintain the health and function of biologic material during sourcing, manufacturing, storage, and distribution of vaccines, cells, and tissues.
We currently operate as one bioproduction tools and services business with product lines that support several steps in the biologic material manufacturing, storage, and delivery process. We have a diversified portfolio of tools and services 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 and services are comprised of three revenue lines that contain six main offerings:
| ● |
Cell processing |
| ○ |
Biopreservation media |
|
| ○ |
Human platelet lysate media (“hPL”), cryogenic vials, and automated cell-processing fill machines |
| ● |
Freezers and thaw systems |
| ○ |
Freezer and storage technology and related components |
|
| ○ |
Automated thawing devices |
| ● |
Storage and cold chain services |
| ○ |
Biological and pharmaceutical material storage |
|
| ○ |
Cloud connected “smart” shipping containers |
Biopreservation media
Our proprietary biopreservation media products, HypoThermosol® FRS and CryoStor®, are formulated to mitigate preservation-induced, delayed-onset cell damage and death, which result when cells and tissues are subjected to reduced temperatures. Our technology can provide our CGT customers with significant shelf-life extension of biologic source material and final cell products, and can also greatly improve post-preservation cell and tissue viability and function. Our biopreservation media 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 525 customer clinical applications, including numerous chimeric antigen receptor (CAR) T cell and other cell types.
Stability (i.e. shelf-life) and functional recovery are crucial aspects of academic research and clinical practice in the biopreservation of biologic-based source material, intermediate derivatives, and isolated/derived/expanded cellular products and therapies. Limited stability is especially critical in the CGT field, where harvested cells and tissues will lose viability over time, if not maintained appropriately at normothermic body temperature (37ºC) or stored in a hypothermic state in an effective preservation medium. Chilling (hypothermia) is used to reduce metabolism and delay degradation of harvested cells and tissues. However, subjecting biologic material to hypothermic environments induces damaging molecular stress and structural changes. Although cooling successfully reduces metabolism (i.e., lowers demand for energy), various levels of cellular damage and death occur when using suboptimal methods. Traditional biopreservation media range from simple “balanced salt” (electrolyte) formulations to complex mixtures of electrolytes, energy substrates such as sugars, osmotic buffering agents and antibiotics. The limited stability, which results from the use of these traditional biopreservation media formulations, is a significant shortcoming that our optimized proprietary products address with great success.
Our scientific research activities over the last 20+ years enabled a detailed understanding of the molecular basis for the hypothermic and cryogenic (low-temperature induced) damage/destruction of cells through apoptosis and necrosis. This research led directly to the development of our HypoThermosol® FRS and CryoStor® technologies. Our proprietary biopreservation media products are specifically formulated to:
| ● |
Minimize cell and tissue swelling |
|
| ● |
Reduce free radical levels upon formation |
|
| ● |
Maintain appropriate low temperature ionic balances |
|
| ● |
Provide regenerative, high energy substrates to stimulate recovery upon warming |
|
| ● |
Avoid the creation of an acidic state (acidosis) |
|
| ● |
Inhibit the onset of apoptosis and necrosis |
A key feature of our biopreservation media products is their “fully-defined” profile. All of our cGMP products are serum-free, protein-free and are formulated and filled using aseptic processing. We strive to use USP/Multicompendial grade or the highest quality available synthetic components. All of these features benefit prospective customers by facilitating the qualification process required to incorporate our products into their regulatory filings.
The results of independent testing demonstrate that our biopreservation media products significantly extend shelf-life and improve cell and tissue post-thaw viability and function. Our products have demonstrated improved biopreservation outcomes, including greatly extended shelf-life and post-thaw viability, across a broad array of cell and tissue types.
Competing biopreservation media products are often formulated with simple isotonic media cocktails, animal serum, potentially a single sugar or human protein. A key differentiator of our proprietary HypoThermosol FRS formulation is the engineered optimization of the key ionic component concentrations for low temperature environments, as opposed to normothermic body temperature around 37°C, as found in culture media or saline-based isotonic formulas. Competing cryopreservation freeze media is often comprised of a single permeating cryoprotectant such as dimethyl sulfoxide (“DMSO”). Our CryoStor formulations incorporate multiple permeating and non-permeating cryoprotectant agents which allow for multiple mechanisms of protection and reduces the dependence on a single cryoprotectant. We believe that our products offer significant advantages over in-house formulations, or commercial “generic” preservation media, including, time saving, improved quality of components, more rigorous quality control release testing, more cost effective and improved preservation efficacy.
We estimate that annual revenue from each customer commercial application in which our products are used could range from $500,000 to $2.0 million, if such application is approved and our customer commences large scale commercial manufacturing of the biologic based therapy.
Human platelet lysate media, cryogenic vials and automated cell-processing fill machines
In September 2021, we acquired Sexton Biotechnologies, Inc., a producer of bioproduction tools. Sexton's bioproduction tools portfolio includes human platelet lysates (“hPL”) for cell expansion reducing risk and improving downstream performance over fetal bovine serum, human serum, and other chemically defined media, CellSeal® closed system vials that are purpose-built rigid containers used in CGT that can be filled manually or with high throughput systems, and automated cell processing machines bring multiple processes traditionally performed by manual techniques under a higher level of control to protect therapies from loss or contamination.
Compressor-free ultra low temperature (ULT) freezers
In May 2021, we acquired Global Cooling, Inc. (“Global Cooling”), a manufacturer of class defining ultra-low temperature freezers. Global Cooling carries a portfolio of freezers that range in size from portable units to stationary upright freezers to accommodate a wide variety of use cases. Users can configure these freezers to achieve temperatures between -20°C and -86°C. The portfolio was designed to be environmentally friendly and energy efficient, using as little as 2.8 kWh/day at temperatures of -80°C. The freezers do not use compressor-based or cascade refrigeration systems. Instead, they use patented free-piston Stirling engine technology that uses fewer moving parts, resulting in maintenance cost savings for end users.
Liquid nitrogen freezers 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.
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.
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. Versalert has an intelligent mesh network system that 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.
Automated, water-free thawing products
In April 2019, we acquired Astero Bio Corporation (“Astero”), to expand our bioprocessing tools portfolio and diversify our revenue streams. The Astero ThawSTAR® line includes automated vial and cryobag thawing products that control the heat and timing of the thawing process of biologic material. Our customizable, automated, water-free thawing products uses algorithmic programmed, heating plates to consistently bring biologic material from a frozen state to a liquid state in a controlled and consistent manner. This helps reduce damage during the temperature transition. The ThawSTAR products can reduce risks of contamination versus using a traditional water bath.
Biological and pharmaceutical storage
In October 2020, we acquired SciSafe Holdings, Inc. (“SciSafe”), a premier provider of biological and pharmaceutical storage. In addition to providing storage services, SciSafe provides cold chain logistics that ensures materials are kept at target temperatures from the moment that the materials leave the customer’s premises to their ultimate return. State-of-the-art monitoring systems employed by SciSafe allow for customers to monitor the storage temperatures of their materials throughout the entire logistics chain.
We operate five storage facilities in the USA and one facility in the Netherlands.
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.
Critical accounting policies and estimates
A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a description of our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our Unaudited Condensed Consolidated Financial Statements, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 1 to the Unaudited Condensed Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.
Results of operations
The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements and the related footnotes thereto.
Revenues
Total bioproduction tools and services revenue for three and nine months ended September 30, 2021 and 2020 was comprised of the following:
| Three Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change |
||||||||||||
| Product revenue |
||||||||||||||||
| Freezer and thaw |
$ | 17,610 | $ | 3,371 | $ | 14,239 | 422 | % |
||||||||
| Cell processing |
11,505 | 7,414 | 4,091 | 55 | % |
|||||||||||
| Storage and cold chain services |
86 | 19 | 67 | 353 | % |
|||||||||||
| Service revenue |
||||||||||||||||
| Storage and cold chain services |
2,250 | - | 2,250 | - | % |
|||||||||||
| Rental revenue |
||||||||||||||||
| Storage and cold chain services |
2,349 | 475 | 1,874 | 395 | % |
|||||||||||
| Total revenue |
$ | 33,800 | $ | 11,279 | $ | 22,521 | 200 | % |
||||||||
| Nine Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change |
||||||||||||
| Product revenue |
||||||||||||||||
| Freezer and thaw |
$ | 40,021 | $ | 9,237 | $ | 30,784 | 333 | % |
||||||||
| Cell processing |
30,131 | 22,753 | 7,378 | 32 | % |
|||||||||||
| Storage and cold chain services |
293 | 30 | 263 | 877 | % |
|||||||||||
| Service revenue |
||||||||||||||||
| Storage and cold chain services |
6,417 | - | 6,417 | - | % |
|||||||||||
| Rental revenue |
||||||||||||||||
| Storage and cold chain services |
4,989 | 1,341 | 3,648 | 272 | % |
|||||||||||
| Total revenue |
$ | 81,851 | $ | 33,361 | $ | 48,490 | 145 | % |
||||||||
Product revenue
Product revenue was $29.2 million for the three months ended September 30, 2021, representing an increase of $18.4 million, or 170%, compared with 2020, and was $70.4 million for the nine months ended September 30, 2021, representing an increase of $38.4 million, or 120%, compared with 2020.
Product revenue from our cell processing products increased by $4.1 million and $7.4 million, or 55% and 32%, respectively, in the three and nine months ended September 30, 2021 compared with the same period in 2020. In addition to our recent acquisition of Sexton generating an additional $425,000 for this product line, our cell processing products continued to be adopted by customers in the CGT market and we realized a higher selling price per liter in the three months ended September 30, 2021 compared to 2020.
Product revenue from our freezer and thaw products increased by $14.2 million and $30.8 million, or 422% and 333%, respectively, in the three and nine months ended September 30, 2021 compared with the same period in 2020. The acquisition of Global Cooling in Q2 2021 contributed $14.0 million and $27.3 million, or 416% and 296% of the total freezer and thaw revenue growth, to the three and nine months ended September 30, 2021. Other significant contributors to this growth include isothermal freezer sales and the launch of our High-Capacity Rate Freezer line in the nine months ended September 30, 2021.
Service revenue
Service revenue was $2.3 million and $6.4 million for the three and nine months ended September 30, 2021. There was no service revenue in the three and nine months ended September 30, 2020. The increase in service revenues is directly attributable to the acquisition of SciSafe in Q4 2020.
Rental revenue
Rental revenue was $2.3 million and $5.0 million for the three and nine months ended September 30, 2021, representing an increase of $1.9 million and $3.6 million, or 395% and 272%, compared with 2020. Increases in rental revenues are attributable to increased rental volumes to existing customers in our evo® shipping line and the leasing of dedicated storage spaces and other assets through SciSafe, which was acquired in Q4 2020.
Costs and operating expenses
Total costs and operating expenses for three and nine months ended September 30, 2021 and 2020 were comprised of the following:
| Three Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change |
||||||||||||
| Cost of product, rental, and service revenue |
$ | 24,864 | $ | 4,826 | $ | 20,038 | 415 | % |
||||||||
| Research and development |
3,219 | 1,725 | 1,494 | 87 | % |
|||||||||||
| Sales and marketing |
4,065 | 1,588 | 2,477 | 156 | % |
|||||||||||
| General and administrative |
10,081 | 3,503 | 6,578 | 188 | % |
|||||||||||
| Intangible asset amortization |
2,525 | 706 | 1,819 | 258 | % |
|||||||||||
| Acquisition costs |
345 | 179 | 166 | 93 | % |
|||||||||||
| Change in fair value of contingent consideration |
(140 | ) | (2 | ) | (138 | ) | 6,900 | % |
||||||||
| Total operating expenses |
$ | 44,959 | $ | 12,525 | $ | 32,434 | 259 | % |
||||||||
| Nine Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change |
||||||||||||
| Cost of product, rental, and service revenue |
$ | 50,968 | $ | 13,893 | $ | 37,075 | 267 | % |
||||||||
| Research and development |
8,250 | 4,865 | 3,385 | 70 | % |
|||||||||||
| Sales and marketing |
9,228 | 4,530 | 4,698 | 104 | % |
|||||||||||
| General and administrative |
22,058 | 9,916 | 12,142 | 122 | % |
|||||||||||
| Intangible asset amortization |
5,340 | 2,100 | 3,240 | 154 | % |
|||||||||||
| Acquisition costs |
1,616 | 417 | 1,199 | 288 | % |
|||||||||||
| Change in fair value of contingent consideration |
1,086 | (1,528 | ) | 2,614 | (171 | )% |
||||||||||
| Total operating expenses |
$ | 98,546 | $ | 34,193 | $ | 64,353 | 188 | % |
||||||||
Cost of product, rental, and service revenue
Cost of revenue increased $20.0 million and $37.1 million, or 415% and 267%, respectively, compared to the same periods in 2020, due primarily to the acquisitions of Global Cooling, SciSafe, and Sexton. In addition to the acquisitions, the Company experienced higher than expected warranty expense and material costs. We expect that cost of product revenue may fluctuate in future quarters based on production volumes and product mix.
Cost of revenue as a percentage of revenue was 74% and 62% for the three and nine months ended September 30, 2021, respectively, and 43% and 42% for the three and nine months ended September 30, 2020, respectively. The increase in cost of revenue as a percentage of revenue is a result of increased revenues from lower margin product lines acquired in the 2020 and 2021 acquisitions.
Research and development expenses
Research and development (“R&D”) expense consist primarily of salaries and other personnel-related costs, non-cash stock-based expense, consulting, and external product development services.
R&D expense for the three and nine months ended September 30, 2021 increased $1.5 million and $3.4 million, or 87% and 70%, respectively, compared with the same period in 2020. The increase is primarily due to our acquisition of Global Cooling in Q2 2021, increased headcount and non-cash stock expense, research material purchases, consulting fees, and a payment to PanTHERA, a company in which BioLife holds an invested interest, for development milestones achieved.
We expect our R&D expense to increase as we continue to expand, develop, and refine the product lines we acquired in 2019, 2020, and 2021.
Sales and marketing expenses
Sales and marketing expense (“S&M”) consists primarily of salaries and other personnel-related costs, non-cash stock-based expense, consulting, trade shows, travel, sales commissions, and advertising.
S&M expense for the three and nine months ended September 30, 2021 increased $2.5 million and $4.7 million, or 156% and 104%, respectively, compared with the same period in 2020. The increase is primarily due to our acquisitions of Global Cooling in Q2 2021 and SciSafe in Q4 2020, increased headcount and non-cash stock-based expense, advertising, content creation, consulting fees, and an increase commission expense as a result of increased revenues.
We expect S&M expense to increase, as we expand our direct selling efforts to support the broader product line offerings resulting from our acquisitions in 2019, 2020, and 2021.
General and administrative expenses
General and administrative (“G&A”) expense consists primarily of personnel-related costs, non-cash stock-based expense for administrative personnel and members of the board of directors, professional fees, such as accounting and legal, and corporate insurance.
G&A expenses for the three and nine months ended September 30, 2021 increased $6.6 million and $12.1 million, or 188% and 122%, respectively, compared with the same period in 2020. The increase reflects the assumption of G&A expenses related to our acquisitions of Global Cooling in Q2 2021 and SciSafe in Q4 2020, increased headcount and non-cash stock-based compensation expense, insurance expense, accounting fees, and information technology 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 growth strategy.
Intangible asset amortization expense
Amortization expense consists of charges related to the amortization of intangible assets associated with the acquisitions of Astero, SAVSU, CBS, SciSafe, Global Cooling, and Sexton in which we acquired definite-lived intangible assets.
Acquisition costs
Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs incurred related to our Astero, SAVSU, CBS, SciSafe, Global Cooling, and Sexton acquisitions.
Change in fair value of contingent consideration
Change in fair value of contingent consideration consists of changes in estimated fair value of our potential earnouts related to our Astero, CBS, and SciSafe acquisitions.
Other income and expense
Total other income and expenses for the three and nine months ended September 30, 2021 and 2020 were comprised of the following:
| Three Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change |
||||||||||||
| Change in fair value of warrant liability |
$ | - | $ | (1,005 | ) | $ | 1,005 | (100 | )% |
|||||||
| Interest (expense) income, net |
(194 | ) | 13 | (207 | ) | (1,592 | )% |
|||||||||
| Other expense |
(7 | ) | (5 | ) | (2 | ) | 40 | % |
||||||||
| Gain on acquisition of Sexton Biotechnologies, Inc. | 6,451 | - | 6,451 | - | % |
|||||||||||
| Total other income, net | $ | 6,250 | $ | 113 | $ | 6,137 | 5,431 | % |
||||||||
| Nine Months Ended |
||||||||||||||||
| September 30, |
||||||||||||||||
| (In thousands, except percentages) |
2021 |
2020 |
$ Change |
% Change | ||||||||||||
| Change in fair value of warrant liability |
$ | (121 | ) | $ | 4,467 | $ | (4,588 | ) | (103 | )% |
||||||
| Interest (expense) income, net |
(331 | ) | 59 | (390 | ) | (661 | )% |
|||||||||
| Other expense |
(7 | ) | (9 | ) | 2 | (22 | )% |
|||||||||
| Gain on acquisition of Sexton Biotechnologies, Inc. | 6,451 | - | 6,451 | - | % |
|||||||||||
| Total other income, net | $ | 5,992 | $ | 5,627 | $ | 365 | 6 | % |
||||||||
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. All outstanding warrants were exercised via a “cashless” exercise on March 25, 2021. Due to the change in our stock price during the nine months ended September 30, 2020 from December 31, 2019, we had a lower warrant liability and a corresponding unrealized, non-cash gain of $4.5 million due to the change in fair value of our warrant liability.
Interest income (expense), net. We earn interest on cash held in our money market account. Interest expense in the three and nine months ended September 30, 2021 grew compared to 2020 due to debt acquired in the acquisition of Global Cooling and equipment financing.
Gain on acquisition of Sexton Biotechnologies, Inc. Reflects the markup in the carrying value of BioLife’s investment in Sexton to fair value as a result of incremental equity acquisition.
Liquidity and capital resources
On September 30, 2021 and December 31, 2020, we had $75.1 million and $90.4 million in cash and cash equivalents, respectively. 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 foreseeable future. However, the Company may choose to raise additional capital through a debt or equity financing in order to pursue additional acquisition or strategic investment opportunities. Additional capital, if required, may not be available on reasonable terms, if at all.
Cash flows
| Nine Months Ended |
||||||||||||
| September 30, |
||||||||||||
| (In thousands) |
2021 |
2020 |
$ Change |
|||||||||
| Operating activities |
$ | (3,819 | ) | $ | 4,388 | $ | (8,207 | ) | ||||
| Investing activities |
(10,650 | ) | (2,658 | ) | (7,992 | ) | ||||||
| Financing activities |
(673 | ) | 100,806 | (101,479 | ) | |||||||
| Net (decrease) increase in cash and cash equivalents | $ | (15,142 | ) | $ | 102,536 | $ | (117,678 | ) | ||||
Net cash (used in) provided by operating activities
During the nine months ended September 30, 2021, net cash used by operating activities was $3.8 million compared to net cash provided by operating activities of $4.4 million for the nine months ended September 30, 2020. The increase in cash used by operating activities was the result of the timing of collection and disbursement of working capital related items in accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities.
Net cash used in investing activities
Net cash used by investing activities totaled $10.7 million during the nine months ended September 30, 2021 compared to $2.7 million for the nine months ended September 30, 2020. The increase in cash used by investing activities was the result of increased purchases of equipment and assets held for rent to facilitate future revenue growth, primarily related to the expansion and establishment of SciSafe facilities in the US and Europe.
Net cash (used in) provided by financing activities
Net cash used by financing activities totaled $673,000 during the nine months ended September 30, 2021, compared to net cash provided by financing activities of $100.8 million during the nine months ended September 30, 2020. Net cash used by financing activities in the nine months ended September 30, 2021 was primarily the result of net payments on the line of credit, payments on financed insurance premiums, and payments on loans proceeds received from equipment loans, offset by proceeds received from the exercise of stock options. Net cash provided by financing activities in the nine months ended September 30, 2020 was primarily the result of our $86 million capital raise in July of 2020 net of $6.2 million of issuance costs and our $20 million sale of common stock to Casdin Capital.
Off-balance sheet arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements.
Contractual obligations
We previously disclosed certain contractual obligations and contingencies and commitments relevant to us within the financial statements and Management Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC. There have been no significant changes to these obligations in the three and nine months ended September 30, 2021.
Item 3. Quantitative and qualitative disclosures about market risk
Not applicable.
Item 4. Controls and procedures
Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Form 10-Q were not effective, due to the material weakness in our internal controls over financial reporting. As previously reported, we identified a material weakness in our internal control over financial reporting as of December 31, 2019 with regard to our controls over the accounting for financial instruments containing characteristics of both liabilities and equity. Although substantial progress has been made in remediating this material weakness, it has not been fully remediated as of September 30, 2021, and therefore this control weakness continues to constitute a material weakness. Specifically, due to insufficient technical resources, the Company’s controls were not operating effectively to allow management to timely identify errors related to the recording of certain transactions involving financial instruments as previously described.
Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Control. 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.
Remediation. With respect to the material weakness described above, management has continued to test and evaluate the elements of the remediation plan implemented to date. These elements include:
| ● |
Implementing a risk assessment process by which management identifies transactions involving financial instruments that give rise to specific risks of inappropriate accounting; |
| ● |
Hiring of additional resources, including third-party consultants, to address complex accounting matters primarily related to the expanding scope of our business operations; and, |
| ● |
Enhancing the design and implementation of key internal controls in response to identified risks. |
Based on management’s review and the oversight of the Audit Committee, we have determined that, although substantial progress has been made in remediating this material weakness, the weakness has not been fully remediated as of September 30, 2021.
As we continue to evaluate and test the remediation plan outlined above, we may also identify additional measures to address the material weakness or modify certain of the remediation procedures described above. We also may implement additional changes to our internal control over financial reporting as may be appropriate in the course of remediating the material weakness. Management, with the oversight of the Audit Committee, will continue to take steps necessary to remedy the material weakness to reinforce the overall design and capability of our control environment.
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.
The matters discussed in this Quarterly Report on Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances, over many of which BioLife has little or no control. A number of important risks and uncertainties, including those identified under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2020 and in subsequent filings, could cause our actual results to differ materially from those in the forward-looking statements. There are no material changes to the risk factors described in our Annual Report on Form 10-K for the period ended December 31, 2020.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
None.
None.
| Exhibit No. |
Description |
|
| 10.1* |
Employment Agreement dated November 4, 2021 between the Company and Troy Wichterman (filed herewith) |
|
| 10.2* |
||
| 31.1 |
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 31.2 |
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 32.1 |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
| 32.2 |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
| 101.INS |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
|
| * |
Management contract or compensatory plan or arrangement. |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
BIOLIFE SOLUTIONS, INC. |
|
|
|
|
|
|
| Date: November 15, 2021 |
/s/ Troy Wichterman |
|
|
Troy Wichterman |
|
|
Chief Financial Officer |
| (Duly authorized officer and principal | |
| financial and accounting officer) |
BIOLIFE SOLUTIONS, INC.
INDEX TO EXHIBITS
| Exhibit No. |
Description |
|
| 10.1* |
Employment Agreement dated November 4, 2021 between the Company and Troy Wichterman (filed herewith) |
|
| 10.2* |
Amended Employment Agreement dated November 4, 2021 between the Company and Roderick de Greef (filed herewith) |
|
| 31.1 |
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 31.2 |
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
| 32.1 |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
| 32.2 |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
| 101.INS |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
|
| * |
Management contract or compensatory plan or arrangement. |