Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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FORM 10-Q

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

For the quarterly period ended March 31, 20182019

☐    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

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BioLife Solutions, Inc.

(Exact name of registrant as specified in its charter)

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3303 MONTE VILLA PARKWAY, SUITE 310, BOTHELL, WASHINGTON, 98021

(Address of registrant’s principal executive offices, Zip Code)

(425) 402-1400

(Telephone number, including area code)

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post said files). Yes  ☑   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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  ☑

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

As of May 8, 2018, 15,104,7431, 2019, 18,799,386 shares of the registrant’s common stock were outstanding.

BIOLIFE SOLUTIONS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 20182019

TABLE OF CONTENTS

1. Organization and Significant Accounting Policies

Business

BioLife Solutions, Inc. (“BioLife,” “us,” “we,” “our,” or the “Company”) is a leading developer, manufacturer and marketersupplier of proprietary clinical grade cellbiopreservation media and tissueautomated thawing devices for cells and gene therapies. Our CryoStor^® freeze media and HypoThermosol^® hypothermic storage and cryopreservation freeze media. Our proprietary HypoThermosol® and CryoStor® platform of solutionsshipping media are highly valued in the regenerative medicine, biobanking and drug discovery and regenerative medicine markets. OurThese novel biopreservation media products are serum-free and protein-free, fully defined, and are formulated to reduce preservation-induced cell damage and death. Our enabling technology providesdeath; offering commercial companies and clinical researchers significant improvement in shelf life and post-preservation viability and functionfunction. Our recently acquired ThawSTAR™ product line is comprised of cells, tissues,a family of automated thawing devices for frozen cell and organs. Additionally,gene therapies packaged in cryovials and cryobags. These products improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths. See Note 11 for our direct, distributor, and contract customers, we perform custom formulation, fill, and finish services. more information.

Basis of Presentation

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full year. These financial statements and accompanying notes should be read in conjunction with the financial statements and notes thereto in our Annual Report on Form 10-K10-K for the year ended December 31, 2017 2018 on file with the SEC.

There have been no material changes to our significant accounting policies except as described below as compared to the significant accounting policies described in the financial statements in our Annual Report on Form 10-K10-K for the year ended December 31, 2017, except the adoption of Accounting Standards Update (ASU) No.2014-09, Revenue from Contracts with Customers (Topic 606).2018.

Significant Accounting Policies Update

Revenue Recognition

On January 1, 2018, we adoptedIn February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) (“ASU”) No.2014-09, Revenue from Contracts 2016-02, Leases: Topic 842 (“ASU 2016-02”) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with Customers (Topic 606)classification affecting the pattern of expense recognition in the Statements of Operations. Lessor accounting is largely unchanged under ASU 2016-02.

We adopted ASU 2016-02 and related ASUs (collectively ASC 842) effective January 1, 2019 using the additional transition option for the modified retrospective approach applied to those contracts in effect as of method and did not restate comparative periods. Consequently, periods before January 1, 2018. Under this transition method, results for reporting periods beginning after January 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and2019 will continue to be reported in accordance with the prior accounting guidance, ASC 840, Leases. We elected the package of practical expedients, which permits us to retain prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. We also elected the practical expedient to combine lease and non-lease components for all of our historical accounting under Topic 605, Revenue Recognition.leases other than net lease real estate leases.

The adoption of this standard resulted in the recording of operating lease right-of-use assets of $1.3 million and short-term and long-term lease liabilities of $1.8 million as of January 1, 2019. The difference between right-of-use assets and lease liabilities relates to liabilities of $0.5 million for deferred rent and lease incentives liabilities that were included on our Balance Sheet prior to adoption of ASC 842. These amounts were eliminated at the time of adoption and are included in the lease liabilities. Adoption of the new standardASC 842 did not have ana material impact on the amounts reported in our financial statementsCompany’s net earnings and there were had no other significant changes impacting the timing or measurement of our revenue or our business processes and controls. impact on cash flows.

To determine revenue recognition for contractual arrangements that we determine are within the scope of Topic 606, we perform the following five steps: (i) identify each contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to our performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. Our revenues are primarily generated from the sale of our biopreservation media products. We generally recognize product revenue, including shipping and handling charges billed to customers, when we transfer control of our products to our customers as our contracts have a single performance obligation (transfer of control generally occurs upon shipment of our product). We are not required to disclose the value of unsatisfied performance obligations as our contracts have a duration of one year or less.

We invoice and receive payment from our customers after we recognize revenue, resulting in receivables from our customers that are presented as accounts receivable on our balance sheet. Accounts receivable consist of short-term amounts due from our customers (generally 30 to 90 days) and are stated at the amount we expect to collect. We establish an allowance for doubtful accounts based on our assessment of the collectability of specific customer accounts. Changes in accounts receivable are primarily due to the timing and magnitude of orders of our products, the timing of when control of our products is transferred to our customers and the timing of cash collections.

Equity Method Investments

We account for our ownership in our biologistex CCM, LLC joint ventureSAVSU Technologies, Inc. (“SAVSU”) using the equity method of accounting. This method states that if the investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity method. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying value in the balance sheet and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of other income (expense), net in the statements of operations. Our effective ownership in SAVSU was effectively reduced from 35% to 26.7% during44.4% at March 31, 2019 and December 31, 2018. For the three months ended March 31, 2018 due to additional cash contributions made by the majority owner, SAVSU Technologies LLC. For the three months ended March 31, 2018 2019 and 2017,2018, SAVSU’s net loss totaled $538,413$522,000 and $509,706, of which our ownership resulted in a $143,756 and $229,368 loss, respectively which was recorded as “Loss from equity-method investment in SAVSU.”$538,000, respectively.

Concentrations of credit risk and business risk

In the three months ended March 31, 2018, 2019, we derived approximately 30%34% of our product revenue from two customers. In the three months ended March 31, 2017, 2018, we derived approximately 21%30% of our product revenue from two customers. No other customer accounted for more than 10% of revenue in the three months ended March 31, 2018 2019 or 2017. At 2018. In the three months ended March 31, 2019 and 2018, we derived approximately 90% and 86%, of our revenue from CryoStor products, respectively. At March 31, 2019, two customers accounted for approximately 34%45% of total gross accounts receivable. At December 31, 2017, two2018, three customers accounted for approximately 41%71% of total gross accounts receivable. 

Revenue from customers located in Canada represented 23% and in all other foreign countries represented 13% and 22%17% of total revenue during the three months ended March 31, 2018 2019. Revenue from customers located in Canada represented 12% and 2017, respectively.in all other foreign countries represented 13% of total revenue during the three months ended March 31, 2018. All revenue from foreign customers are denominated in United States dollars. 

Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The updated guidance clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. We adopted the new standard on January 1, 2018, with no material impact on our financial statements.

In February 2016, the FASB issued Accounting Standards Update No.2016-02, Leases: Topic 842 (ASU 2016-02) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Under the new guidance, leases will continue to be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Statements of Operations. Lessor accounting is largely unchanged under ASU 2016-02. Adoption of ASU 2016-02 is required for fiscal reporting periods beginning after December 15, 2018, including interim reporting periods within those fiscal years with early adoption being permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. While the Company expects adoption of ASU 2016-02 to lead to a material increase in the assets and liabilities recorded on its Balance Sheet, the Company is still evaluating the overall impact on its financial statements.

In January 2016, the FASB issued Accounting Standards Update No.2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities: Topic 825 (ASU 2016-01). The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. We adopted the new standard on January 1, 2018, with no material impact on our financial statements.

With the exception of the new standards discussed above, thereThere have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our Financial Statements.

2. Fair Value Measurement  

In accordance with FASB ASCAccounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures,” (“ASC Topic 820”), the Company measures its cash and cash equivalents and short-term investments at fair value on a recurring basis. 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-tierthree-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.

As of March 31, 2018 2019 and December 31, 2017, 2018, the Company does not have liabilities that are measured at fair value.

The following tables set forth the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2018 2019 and December 31,2017, 2018, based on the three-tierthree-tier fair value hierarchy:

(In thousands)

The fair values of bank depositscash and money market fundscash equivalents classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The Company has no level 2 or level 3 financial assets. The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the three months ended March 31, 2018 2019 and the twelve months ended December 31,2017. 2018.

3. Inventory  

Inventory consists of the following at March 31, 2018 2019 and December 31,2017: 2018:

4. Deferred Rent  

Deferred rent consists of the following at March 31, 2018 and December 31, 2017:2018. We eliminated our deferred rent at January 1, 2019 as a result of the implementation of ASU 2016-02 (see Note 10):

During the three month periods ended March 31, 2018 2019 and 2017,2018, the Company recorded $31,749none and $31,750,$32,000, respectively, in deferred rent amortization of these landlord funded leasehold improvements.

Straight line rent adjustment for the three months ended March 31, 2018 represents the difference between cash rent payments and the recognition of rent expense on a straight-line basis over the terms of the lease.

5. Share-based Compensation      

Service Vesting-BasedVesting-Based Stock Options

The following is a summary of service vesting based stock option activity for the three month period ended March 31, 2018, 2019, and the status of stock options outstanding at March 31, 2018:2019:

6. Warrants  

At March 31, 2018 2019 and December 31, 2017, 2018, we had 6,676,8494,075,005 and 6,688,8494,080,005 warrants outstanding, respectively and exercisable with a weighted average exercise price of $4.50$4.35 at the end of each period. During the three month period ended March 31, 2018, 12,0002019, 5,000 warrants were exercised with a weighted average exercise price of $4.75,$4.75, yielding $57,000$24,000 in proceeds to the Company in which the stock was issued April 3, 2018. Subsequent to quarter end through May 8, 2018, an additional 920,116 warrants were exercised with a weighted average exercise priceCompany.

7. Net LossIncome (Loss) per Common Share          

Basic net lossearnings per common share is calculated by dividing the net lossincome (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutive common stock equivalents outstanding as determined by the treasury method during the period. CommonIn periods when we have a net loss, common stock equivalents are excluded forfrom our calculation of earnings per share as their inclusion would have an antidilutive effect. For the three month periodsperiod ended March 31, 2019, we excluded a nominal amount of unvested stock awards from our calculation of diluted weighted average shares because they were antidilutive. For the three month period ended March 31, 2018, and 2017, since the effect is anti-dilutive due to the Company’s net losses attributable towe excluded 3.3 million common stockholders. Common stock equivalents include stock options, 6.7 million warrants, and 338,000 unvested restricted stock.stock awards from our calculation of diluted weighted average shares because they were antidilutive.

The following table shows the calculation of basic and diluted earnings per shares:

8. Commitments and Contingencies

Leases

We lease approximately 30,000 square feet in our Bothell, Washington headquarters. The term of our lease continues until July 31, 2021 with two options to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1, 2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the amended lease agreement, our monthly base rent is approximately $58,000 at March 31, 2018, with scheduled annual increases each August and again in October for the most recent amendment. We are also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses.

Employment agreements

We have employment agreements with our Chief Executive Officer, Chief Financial Officer, Chief Technology Officer, Vice President of Operations, Vice President of Marketing, and Vice President of Sales. None of these employment agreements isare for a definitive period, but rather each will continue indefinitely until terminated in accordance with its terms. The agreements provide for a base annual salary, payable in monthly (or shorter) installments. Under certain conditions and for certain of these officers, we may be required to pay additional amounts upon terminating the officer or upon the officer resigning for good reason. 

Litigation

From time to time, the Company is subject to various legal proceedings that arise in the ordinary course of business, none of which are currently material to the Company’s business.

9. Preferred Stock

As of March 31, 2018, we accrued a dividend of $106,250 on the preferred stock which is included in accrued expenses and other current liabilities in the balance sheet at March 31, 2018. The dividend was paid subsequent to quarter end on April 2, 2018. 

10.9. Revenue

We currently operate as one operating segment focusing on biopreservation media.tools.

The following table disaggregates revenue by market segment and distributors: