10-Q 1 bioli20220630_10q.htm FORM 10-Q bioli20220630_10q.htm
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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from     to

 

 

Commission File Number 001-36362

 


BioLife Solutions, Inc.

(Exact name of registrant as specified in its charter)

biolife.jpg


 

Delaware

94-3076866

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

3303 Monte Villa Parkway, SUITE 310, Bothell, Washington, 98021

(Address of registrants principal executive offices, Zip Code)

 

(425) 402-1400

(Telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of exchange on which registered

BioLife Solutions, Inc. Common Shares

BLFS

NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit said files). Yes ☑  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☑  Accelerated filer ☐  Non-accelerated filer ☐  Smaller reporting company Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No ☑

 

As of August 1, 2022, 42,605,036 shares of the registrant’s common stock were outstanding.

 

 

 

BIOLIFE SOLUTIONS, INC.

 

FORM 10-Q

 

FOR THE QUARTER ENDED JUNE 30, 2022

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 
     

Item 1.

Unaudited Condensed Consolidated Financial Statements

3
     
 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

3
     
 

Unaudited Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2022 and 2021

4
     
 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and six month periods ended June 30, 2022 and 2021

5
     
 

Unaudited Condensed Consolidated Statements of Shareholders Equity for the three and six month periods ended June 30, 2022 and 2021

6-7
     
 

Unaudited Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2022 and 2021

8
     
 

Notes to Unaudited Condensed Consolidated Financial Statements

9
     

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

31
     

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

38
     

Item 4.

Controls and Procedures

39
     

PART II. OTHER INFORMATION

39
     

Item 1. 

Legal Proceedings

39
     

Item 1A.

Risk Factors

40
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40
     

Item 3.

Defaults Upon Senior Securities

40
     

Item 4.

Mine Safety Disclosures

40
     

Item 5.

Other Information

40
     

Item 6.

Exhibits

41
     
 

Signatures

42

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

BioLife Solutions, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

  

June 30,

  

December 31,

 

(In thousands, except per share and share data)

 

2022

  

2021

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $24,001  $69,860 

Restricted cash

  28   10 

Available-for-sale securities, current portion

  22,546   - 

Accounts receivable, trade, net of allowance for doubtful accounts of $458 and $275 as of June 30, 2022 and December 31, 2021, respectively

  31,257   23,217 

Inventories

  33,335   28,345 

Prepaid expenses and other current assets

  6,890   4,427 

Total current assets

  118,057   125,859 
         

Assets held for rent, net

  9,083   9,809 

Property and equipment, net

  19,117   17,657 

Operating lease right-of-use assets, net

  17,306   18,705 

Financing lease right-of-use assets, net

  367   440 

Long-term deposits and other assets

  323   325 

Available-for-sale securities, long-term

  489   - 

Equity investments

  4,372   4,372 

Intangible assets, net

  76,524   152,149 

Goodwill

  224,741   224,741 

Total assets

 $470,379  $554,057 
         

Liabilities and Shareholders Equity

        

Current liabilities:

        

Accounts payable

 $11,537  $14,945 

Accrued expenses and other current liabilities

  7,187   7,142 

Warranty liability

  8,722   9,398 

Lease liabilities, operating, current portion

  2,733   2,758 

Lease liabilities, financing, current portion

  153   149 

Debt, current portion

  1,363   862 

Contingent consideration, current portion

  1,603   5,127 

Total current liabilities

  33,298   40,381 
         

Contingent consideration, long-term

  1,912   4,900 

Lease liabilities, operating, long-term

  15,205   16,466 

Lease liabilities, financing, long-term

  213   291 

Debt, long-term

  6,188   6,353 

Deferred tax liabilities

  1,149   5,487 

Other long-term liabilities

  101   42 

Total liabilities

  58,066   73,920 
         

Commitments and Contingencies (Note 12)

          
         

Shareholders’ equity:

        

Preferred stock, $0.001 par value; 1,000,000 shares authorized, Series A, 4,250 shares designated, and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021

  -   - 

Common stock, $0.001 par value; 150,000,000 shares authorized, 42,536,734 and 41,817,503 shares issued and outstanding, respectively, as of June 30, 2022 and December 31, 2021

  43   42 

Additional paid-in capital

  597,810   585,397 

Accumulated other comprehensive loss, net of taxes

  (900)  (282)

Accumulated deficit

  (184,640)  (105,020)

Total shareholders’ equity

  412,313   480,137 

Total liabilities and shareholders’ equity

 $470,379  $554,057 

 

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

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands, except per share and share data)

 

2022

   

2021

   

2022

   

2021

 
                                 

Product revenue

  $ 34,170     $ 27,468     $ 64,558     $ 41,244  

Service revenue

    3,698       1,963       6,787       4,167  

Rental revenue

    2,665       1,773       5,407       2,640  

Total product, rental, and service revenue

    40,533       31,204       76,752       48,051  

Costs and operating expenses:

                               

Cost of product revenue (exclusive of intangible assets amortization)

    21,561       15,986       41,501       21,609  

Cost of service revenue (exclusive of intangible assets amortization)

    2,968       1,427       5,557       2,779  

Cost of rental revenue (exclusive of intangible assets amortization)

    1,665       1,141       3,582       1,716  

General and administrative

    11,351       7,146       22,546       11,974  

Sales and marketing

    5,415       3,142       10,306       5,164  

Research and development

    3,428       3,045       7,209       5,032  

Intangible asset impairment charges

    69,900       -       69,900       -  

Intangible asset amortization

    2,863       1,882       5,725       2,815  

Acquisition costs

    5       272       16       1,271  

Change in fair value of contingent consideration

    (2,361 )     1,718       (5,695 )     1,226  

Total operating expenses

    116,795       35,759       160,647       53,586  

Operating loss

    (76,262 )     (4,555 )     (83,895 )     (5,535 )
                                 

Other expense:

                               

Interest expense, net

    (9 )     (121 )     (173 )     (137 )

Other (expense) income, net

    (22 )     -       110       (1 )

Change in fair value of warrant liability

    -       -       -       (121 )

Total other expense, net

    (31 )     (121 )     (63 )     (259 )
                                 

Loss before income tax benefit

    (76,293 )     (4,676 )     (83,958 )     (5,794 )

Income tax benefit

    3,739       12,552       4,338       12,552  

Net (loss) income

  $ (72,554 )   $ 7,876     $ (79,620 )   $ 6,758  
                                 

Net (loss) income attributable to common shareholders:

                               

Basic

  $ (72,554 )   $ 7,661     $ (79,620 )   $ 6,543  

Diluted

    (72,554 )     7,668       (79,620 )     6,551  

Net (loss) income per share attributable to common shareholders:

                               

Basic

  $ (1.71 )   $ 0.20     $ (1.89 )   $ 0.18  

Diluted

  $ (1.71 )   $ 0.19     $ (1.89 )   $ 0.17  

Weighted average shares used to compute (loss) earnings per share attributable to common shareholders:

                               

Basic

    42,460,189       38,072,712       42,238,355       35,668,124  

Diluted

    42,460,189       40,390,098       42,238,355       38,275,603  

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

 

 

 

BioLife Solutions, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Loss

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 

(In thousands)

 

2022

   

2021

   

2022

   

2021

 
                                 

Net (loss) income

  $ (72,554 )   $ 7,876     $ (79,620 )   $ 6,758  
                                 

Other comprehensive (loss) income:

                               

Foreign currency translation adjustment, net of tax

    (422 )     3       (578 )     3  

Unrealized loss on available-for-sale securities, net of tax

    (40 )     -       (40 )     -  
                                 

Comprehensive (loss) income

  $ (73,016 )   $ 7,879     $ (80,238 )   $ 6,761  

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

 

 

 

BioLife Solutions, Inc.

Unaudited Condensed Consolidated Statements of Shareholders Equity

 

  

Six Months Ended June 30, 2022

 
  

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, 2021

  -  $-   41,817,503  $42  $585,397  $(282) $(105,020) $480,137 

Fees incurred for registration filings

  -   -   -   -   (76)  -   -   (76)

Stock-based compensation

  -   -   -   -   11,372   -   -   11,372 

Stock option exercises

  -   -   154,504   -   301   -   -   301 

Stock issued – on vested RSAs

  -   -   500,597   1   -   -   -   1 

Contingent consideration shares issued

  -   -   64,130   -   816   -   -   816 

Foreign currency translation

  -   -   -   -   -   (578)  -   (578)

Unrealized loss on available-for-sale securities

  -   -   -   -   -   (40)  -   (40)

Net loss

  -   -   -   -   -   -   (79,620)  (79,620)

Balance, June 30, 2022

  -  $-   42,536,734  $43  $597,810  $(900) $(184,640) $412,313 

 

  

Three Months Ended June 30, 2022

 
  

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, March 31, 2022

  -  $-   42,331,082  $42  $591,002  $(438) $(112,086) $478,520 

Fees incurred for registration filings

  -   -   -   -   (24)  -   -   (24)

Stock based compensation

  -   -   -   -   5,973   -   -   5,973 

Stock option exercises

  -   -   24,571   -   43   -   -   43 

Stock issued – on vested RSAs

  -   -   116,951   1   -   -   -   1 

Contingent consideration shares issued

  -   -   64,130   -   816   -   -   816 

Foreign currency translation

  -   -   -   -   -   (422)  -   (422)

Unrealized loss on available-for-sale securities

  -   -   -   -   -   (40)  -   (40)

Net loss

  -   -   -   -   -   -   (72,554)  (72,554)

Balance, June 30, 2022

  -  $-   42,536,734  $43  $597,810  $(900) $(184,640) $412,313 

 

  

Six Months Ended June 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

  -  $-   33,039,146  $33  $302,598  $-  $(97,385) $205,246 

Stock issued as consideration in GCI acquisition

  -   -   6,636,470   7   232,734   -   -   232,741 

Stock-based compensation

  -   -   -   -   4,024   -   -   4,024 

Stock option exercises

  -   -   387,759   1   607   -   -   608 

Stock issued – on vested RSAs

  -   -   427,315   -   -   -   -   - 

Cashless exercises of 79,100 warrants

  -   -   70,030   -   2,901   -   -   2,901 

Foreign currency translation

  -   -   -   -   -   3   -   3 

Net income

  -   -   -   -   -   -   6,758   6,758 

Balance, June 30, 2021

  -  $-   40,560,720  $41  $542,864  $3  $(90,627) $452,281 

 

   

Three Months Ended June 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

   

Deficit

   

Equity

 
Balance, March 31, 2021     -     $ -       33,634,194     $ 34     $ 307,246     $ -     $ (98,503 )   $ 208,777  

Stock issued as consideration in GCI acquisition

    -       -       6,636,470       7       232,734       -       -       232,741  

Stock based compensation

    -       -       -       -       2,520       -       -       2,520  

Stock option exercises

    -       -       224,894       -       364       -       -       364  

Stock issued – on vested RSAs

    -       -       65,162       -       -       -       -       -  

Foreign currency translation

    -       -       -       -       -       3       -       3  

Net income

    -       -       -       -       -       -       7,876       7,876  

Balance, June 30, 2021

    -     $ -       40,560,720     $ 41     $ 542,864     $ 3     $ (90,627 )   $ 452,281  

 

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

 

 

 

BioLife Solutions, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

  

Six Months Ended

 
  

June 30,

 

(In thousands)

 

2022

  

2021

 

Cash flows from operating activities

        

Net (loss) income

 $(79,620) $6,758 

Adjustments to reconcile net (loss) income to net cash used in operating activities

        

Intangible asset impairment charges

  69,900   - 

Stock-based compensation

  11,372   4,024 

Amortization of intangible assets

  5,725   2,815 

Depreciation

  3,257   1,895 

Non-cash lease expense

  1,308   1,047 

Change in fair value of warrant liability

  -   121 

Loss on disposal of property and equipment, net

  35   - 

(Gain) loss on disposal of assets held for rent, net

  (264)  102 

Deferred income tax benefit

  (4,338)  (12,552)

Change in fair value of contingent consideration

  (5,695)  1,226 

Other

  200   175 
         

Change in operating assets and liabilities, net of effects of acquisitions

        

Accounts receivable, trade, net

  (8,128)  (8,494)

Inventories

  (4,990)  1,283 

Prepaid expenses and other assets

  (1,492)  2,370 

Accounts payable

  (3,402)  (2,790)

Accrued expenses and other current liabilities

  (1,033)  (681)

Warranty liability

  (676)  (3,201)

Net cash used in operating activities

  (17,841)  (5,902)
         

Cash flows from investing activities

        

Cash acquired in acquisition of Global Cooling, Inc.

  -   43 

Proceeds from sale of equipment

  -   1 

Purchases of assets held for rent

  (774)  (4,280)

Purchases of property and equipment

  (3,491)  (4,407)

Investment in available-for-sale securities

  (23,075)  - 

Net cash used in investing activities

  (27,340)  (8,643)
         

Cash flows from financing activities

        

Proceeds from exercise of common stock options

  301   608 

Proceeds from line of credit

  -   11,800 

Proceeds from equipment loans

  -   1,282 

Payments on line of credit

  -   (12,738)

Fees incurred for registration filings

  (76)  - 

Payments on equipment loans

  (247)  - 

Payments on financed insurance premium

  (458)  (187)

Other

  10   (380)

Net cash (used in) provided by financing activities

  (470)  385 
         

Net decrease in cash, cash equivalents, and restricted cash

  (45,651)  (14,160)

Cash, cash equivalents, and restricted cash – beginning of period

  69,870   90,456 

Effects of currency translation on cash, cash equivalents, and restricted cash

  (190)  3 

Cash, cash equivalents, and restricted cash – end of period

 $24,029  $76,299 

Non-cash investing and financing activities

        

Cashless exercise of warrants reclassified from warrant liability to common stock

 $-  $2,901 
Cashless issuance of SciSafe earnout shares $816  $- 

Stock issued as consideration to acquire Global Cooling, Inc.

 $-  $232,741 

Equipment acquired under operating leases

 $243  $6,971 

Equipment acquired under finance leases

 $-  $440 

Purchase of property and equipment not yet paid

 $102  $- 

Cash interest paid

 $121  $- 

 

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 cell processing fill machines, closed system cryogenic vials, human platelet lysate (“hPL”) growth 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 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 hPL media, for cell expansion reducing risk and improving downstream performance inherent with the use of fetal bovine serum and human serum, and CellSeal® cryogenic vials, which are purpose-built rigid containers used as a primary final package for cells used in research and clinical applications. These vials 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 cells from loss or contamination. Our ThawSTAR® product line is comprised of a family of automated thawing devices for frozen biologic material packaged in cryovials and cryobags. These products help to reduce thawing related damage to temperature-sensitive biologic materials by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths. Our cryogenic freezer technology provides for controlled rate freezing and cryogenic storage of biologic materials. Our ultra-low temperature mechanical freezers allow biological materials to be stored at temperatures which range from negative 20℃ to negative 86℃. Our evo® shipping containers provide cloud-connected passive storage and transport containers for temperature-sensitive biologics and pharmaceuticals. Our biological and pharmaceutical materials storage services provide facilities that allow for real-time tracking of biologic materials 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 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, fair value of marketable debt securities, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves, certain accrued expenses, share-based compensation, contingent consideration from business combinations, and the recoverability of the Company’s 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, 2021.

 

The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, 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), BioLife Solutions B.V. (formed on April 1, 2021), 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.

 

9

 

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.

 

Foreign currency translation

 

The Company translates items presented on its Unaudited Condensed Consolidated Balance Sheet, Unaudited Condensed Consolidated Statements of Operations, Unaudited Condensed Consolidated Statements of Shareholders’ Equity, and Unaudited Condensed Consolidated Statements of Cash Flows into U.S. dollars. For the Company’s subsidiaries that operate in a local currency functional environment, all assets and liabilities are translated into U.S. dollars using current exchange rates at the balance sheet date; revenue and expenses are translated using average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of Accumulated Other Comprehensive Loss in the Unaudited Condensed Consolidated Statements of Shareholders' Equity.

 

Segment reporting

 

The Company views its operations and makes decisions regarding how to allocate resources and manages its business as one reportable segment and one reporting unit. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

 

Significant accounting policies

 

The following describes an update to the Company’s accounting policies for investments. For a full discussion of significant accounting policies, including additional information regarding the Company’s accounting policies for investments, refer to the Notes to the Consolidated Financial Statements included within the Company’s 2021 Form 10-K.

 

The Company classifies its investment in marketable debt securities as “available-for-sale.” Available-for-sale securities are carried at fair value with unrealized holding gains or losses recorded in other comprehensive income, net of tax. Gains or losses are included in earnings in the period in which they are realized. The cost of securities sold is determined based on the specific identification method. The cost of available-for-sale debt securities is adjusted for premiums and discounts, with the accretion or amortization of such amounts included as a portion of interest. Available-for-sale debt securities with an original maturity date less than one year are classified as current investments. Available-for-sale debt securities with an original maturity date exceeding one year are classified as long-term.

 

Liquidity and capital resources

 

On June 30, 2022 and December 31, 2021, we had $47.0 million and $69.9 million in cash, cash equivalents, and available-for-sale securities, respectively. Based on our current expectations with respect to our future revenue and expenses, we believe that our current level of cash, cash equivalents, and other liquid assets will be sufficient to meet our liquidity needs for at least the next twelve months from the date of the filing of this Form 10-Q. 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.

 

Risks and uncertainties

 

COVID-19 pandemic

 

Our domestic and international operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused in the U.S. and international markets. Many businesses and countries, including the U.S., continue to apply preventative and precautionary measures to mitigate the spread of the virus including government orders and other restrictions on the conduct of business operations.

 

In the six months ended June 30, 2022 and year ended December 31, 2021, we experienced supply chain disruptions due to the effects of COVID-19 on our suppliers of sheet metal and electronic components that incorporate semiconductor chips. These supply chain disruptions decreased our profitability as a result of increased supplier pricing and production stoppages. We cannot be assured that a continued or prolonged global pandemic will not have other negative impacts on our manufacturing and shipping processes or our product costs. The extent to which the COVID-19 pandemic affects our future financial results and operations will depend on future developments which are highly uncertain and cannot be predicted, including the recurrence, severity and/or duration of the ongoing pandemic, and current or future domestic and international actions to contain and treat COVID-19.

 

The Company 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.

 

10

 

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.

 

Concentrations of credit risk and business risk

 

Significant customers are those that represent more than 10% of the Company’s total revenues or gross accounts receivable balances for the periods and as of each balance sheet date presented. For each significant customer, revenue as a percentage of total revenues and gross accounts receivable as a percentage of total gross accounts receivable as of the periods presented were as follows:

 

  

Accounts Receivable

  

Revenue

 
  

June 30,

  

December 31,

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

  

2022

  

2021

 

Customer A

  17

%

  21

%

  *   *   *   * 

Customer B

  16

%

  11

%

  20

%

  *   20

%

  * 

 

* less than 10%

 

Revenue from foreign customers is denominated in United States dollars or euros.

 

The following table represents the Company’s total revenue by geographic area (based on the location of the customer):

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 

Revenue by customers geographic locations

 

2022

  

2021

  

2022

  

2021

 

United States

  75

%

  82

%

  77

%

  80

%

Europe, Middle East, Africa (EMEA)

  17

%

  10

%

  17

%

  11

%

Canada

  5

%

  5

%

  3

%

  6

%

Other

  3

%

  3

%

  3

%

  3

%

Total revenue

  100

%

  100

%

  100

%

  100

%

 

In the three and six months ended June 30, 2022 and 2021, no suppliers accounted for more than 10% of purchases.

 

As of June 30, 2022 and December 31, 2021, no suppliers accounted for more than 10% of our accounts payable.

 

Recent accounting pronouncements 

 

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions. The FASB issued ASU 2022-03 to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption permitted. BioLife Solutions is evaluating when to adopt the amendments in ASU 2022-03. BioLife Solutions does not expect a material impact as a result of adopting this amendment.

 

In March 2022, the FASB issued ASU No. 2022-02 Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings and requires disclosure of current-period gross write-offs by year of loan origination. Additionally, ASU 2022-02 updates the accounting for credit losses under ASC 326 and adds enhanced disclosures with respect to loan refinancings and restructurings in the form of principal forgiveness, interest rate concessions, other-than-insignificant payment delays, or term extensions when the borrower is experiencing financial difficulties. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. We are currently evaluating the impact ASU 2022-02 will have on our consolidated 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 financial instruments at fair value on a recurring basis. The carrying values of certain of our financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of their short maturities. The carrying value of our marketable debt securities, which are accounted for as available-for-sale, are classified within either Level 1 or Level 2 in the fair value hierarchy because we use quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. The carrying values of our long-term debt, which is classified within Level 2 in the fair value hierarchy, approximates fair value as our borrowings with lenders are at interest rates that approximate market rates for comparable loans. The Company also measures certain assets and liabilities at fair value on a non-recurring basis when applying acquisition accounting. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

 

Level 3 – Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

 

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 26.0%, a risk-free rate of approximately 1.74% and revenue volatility of 70%. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, changes used in the assumptions for projected future revenue and revenue volatility would be accompanied by a directionally similar change in the fair value measurement. Conversely, changes in the discount rate would be accompanied by a directionally opposite change in the related fair value measurement. However, due to the contingent consideration having a maximum payout amount, changes in these assumptions would not affect the fair value of the contingent consideration if they increase (decrease) beyond certain amounts. Subsequent to the acquisition date, at each reporting period, the Contingent Consideration Liability is re-measured to fair value with changes recorded in the Change in Fair Value of Contingent Consideration in the Unaudited Condensed Consolidated Statements of Operations. During the most recent re-measurement of the Contingent Consideration Liability as of December 31, 2021, the Company used a discount rate of 21.0%, a risk-free rate of 0.23% and revenue volatility of 63%. This Contingent Consideration Liability is included in the Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 in the amount of $140,000.

 

The fair value of the SciSafe Contingent Consideration Liability was initially valued based on unobservable inputs using a Monte Carlo simulation. These inputs included the estimated amount and timing of projected future revenue, a discount rate of 4.5%, a risk-free rate of approximately 0.20%, asset volatility of 60%, and revenue volatility of 15%. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, changes used in the assumptions for projected future revenue and revenue volatility would be accompanied by a directionally similar change in the fair value measurement. Conversely, changes in the discount rate would be accompanied by a directionally opposite change in the related fair value measurement. However, due to the contingent consideration having a maximum payout amount, changes in these assumptions would not affect the fair value of the contingent consideration if they increase (decrease) beyond certain amounts. At the acquisition date, the contingent consideration was determined to have a fair value of $3.7 million. Subsequent to the acquisition date, the Contingent Consideration Liability was re-measured to fair value with changes recorded in the Change in Fair Value of Contingent Consideration in the Unaudited Condensed Consolidated Statements of Operations. During the most recent re-measurement of the Contingent Consideration Liability as of June 30, 2022, the Company used a discount rate of 11.0%, a risk-free rate of approximately 2.9%, asset volatility of 69%, and revenue volatility of 30%. This Contingent Consideration Liability is included in the Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 in the amounts of $3.4 million and $9.9 million, respectively. The changes in fair value of contingent consideration associated with this liability are included within the Change in Fair Value of Contingent Consideration in the Unaudited Condensed Consolidated Statements of Operations. These changes were $2.4 million and $5.7 million for the three and six months ended June 30, 2022, respectively, and $1.8 million and $1.3 million for the three and six month periods ended June 30, 2021, respectively. During the three and six months ended June 30, 2022, the first hurdle associated with this liability was satisfied and 64,130 shares were issued as payment.

 

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. On that date, all remaining warrants were exercised via a “cashless” exercise and the warrant liability was revalued to its intrinsic value, as the Company’s stock price was observable as of that date.

 

12

 

There were no remeasurements to fair value during the three and six months ended June 30, 2022 of financial assets and liabilities that are not measured at fair value on a recurring basis.

 

The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, based on the three-tier fair value hierarchy:

 

(In thousands)

As of June 30, 2022

 

Level 1

  

Level 2

  

Level 3

  

Total

 

Assets:

                

Cash equivalents:

                

Money market accounts

 $17,086  $-  $-  $17,086 

Corporate debt securities

  -   2,242   -   2,242 

Non-U.S. government agency securities

  -   748   -   748 

Marketable debt securities:

                

U.S. government securities

  10,335   -   -   10,335 

Corporate debt securities

  -   11,515   -   11,515 

Other debt securities

  -   1,185   -   1,185 

Total

  27,421   15,690   -   43,111 

Liabilities:

                

Contingent consideration - business combinations

  -   -   3,515   3,515 

Debt

  -   7,551   -   7,551 

Total

 $-  $7,551  $3,515  $11,066 

 

As of December 31, 2021

 

Level 1

  

Level 2

  

Level 3

  

Total

 

Assets:

                

Money market accounts

 $63,873  $-  $-  $63,873 

Total

  63,873   -   -   63,873 

Liabilities:

                

Contingent consideration - business combinations

  -   -   10,027   10,027 

Debt

  -   7,215   -   7,215 

Total

 $-  $7,215  $10,027  $17,242 

 

The fair values of money market funds classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The fair values of investments and contingent consideration classified as Level 3 were derived from management assumptions (see Note 1 – “Organization and Significant Accounting Policies.”) There have been no transfers of assets or liabilities between the fair value measurement levels.

 

The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:

 

  

Six Months Ended

 
  

June 30,

 

(In thousands)

 

2022

  

2021

 

Beginning balance

 $10,027  $7,152 

Change in fair value recognized in net (loss) income

  (5,695)  1,226 

Payment of contingent consideration earned

  (817)  - 

Ending balance

 $3,515  $8,378 

 

The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs:

 

  

Six Months Ended

 
  

June 30,

 

(In thousands)

 

2022

  

2021

 

Beginning balance

 $-  $2,780 

Exercised warrants

  -   (2,901)

Change in fair value recognized in net (loss) income

  -   121 

Ending balance

 $-  $- 

 

 

 

3. Investments

 

Available-for-sale securities

 

The Company’s portfolio of available-for-sale marketable securities consists of the following:

 

   

June 30, 2022

 
   

Amortized

   

Gross unrealized

   

Estimated

 

(In thousands)

 

Cost

   

Gains

   

Losses

   

Fair Value

 

Available-for-sale securities, current portion

                               

U.S. government securities

  $ 10,361     $ -     $ 26     $ 10,335  

Corporate debt securities

    11,524       -       8       11,516  

Other debt securities

    699       -       4       695  

Total short-term

    22,584       -       38       22,546  
                                 

Available-for-sale securities, long-term

                               

Other debt securities

    491       -       2       489  
                                 

Total marketable securities

  $ 23,075     $ -     $ 40     $ 23,035  

 

There were no outstanding available-for-sale marketable securities as of December 31, 2021.

 

The contractual maturities of our available-for-sale marketable securities as of June 30, 2022 are as follows:

 

   

Amortized

   

Estimated

 

(In thousands)

 

Cost

   

Fair Value

 

Due in one year or less

  $ 22,584     $ 22,546  

Due after one year through five years

    491       489  

Total

  $ 23,075     $ 23,035  

 

Equity investments

 

We periodically invest in securities of private companies to promote business and strategic objectives. At June 30, 2022 and December 31, 2021, we held non-marketable equity securities without a readily determinable fair value, comprised of $3.4 million in Series A-1 and A-2 Preferred Stock in iVexSol, Inc. and $995,000 in Series E Preferred Stock in PanTHERA CryoSolutions, Inc.

 

 

4. Inventory

 

Inventory consists of the following as of June 30, 2022 and December 31, 2021:

 

(In thousands)

 

2022

   

2021

 

Raw materials

  $ 18,457     $ 17,252  

Work in progress

    4,791       5,015  

Finished goods