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ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report, before deciding to invest in our common stock. If any of the following risks materialize, our business, financial condition, results of operation and prospects will likely be materially and adversely affected. In that event, the market price of our common stock could decline and you could lose all or part of your investment.

Risks related to our financial condition

Despite our increasingly diversified customer base, we have historically depended on a limited number of customers and products in a limited number of market sectors; if we lose any of these large customers or if there are problems in those market sectors, our net product revenue and operating results could decline significantly.

During the years ended December 31, 2022 and 2021, we derived approximately 18% and 17% of our revenue from the same customer, respectively. During the year ended December 31, 2020, we derived approximately 13% of our revenue from a different customer. No other customer accounted for more than 10% of revenue in the years ended December 31, 2022, 2021 and 2020. In the years ended December 31, 2022, 2021, and 2020, we derived approximately 36%, 33%, and 60% of our revenue from CryoStor products, respectively. Additionally, during the years ended December 31, 2022 and 2021, we derived approximately 22% of our revenues in both years from our 780XLE freezers. Our principal customers may vary from period to period and such customers may not continue to purchase products from us at current levels or at all. Further, the inability of some of our customers to consummate anticipated purchases of our products due to changes in end-user demand, and other unpredictable factors that may affect customer ordering patterns could lead to significant reductions in net product revenue which could harm our business. Because our revenue and operating results are difficult to predict, we believe that period-to-period comparisons of our results of operations are not a good indicator of our future performance. Additionally, if revenue declines in a quarter, whether due to a delay in recognizing expected revenue, adverse economic conditions, supply chain issues or otherwise, our results of operations will be harmed because many of our expenses are relatively fixed. In particular, a large portion of our manufacturing costs, our research and development, sales and marketing and general and administrative expenses are not significantly affected by variations in revenue. Further, our cost of product revenue is dependent on product mix. If our quarterly operating results fail to meet investor expectations, the price of our common stock may decline.

We expect our operating results to fluctuate significantly from period to period.

Following our recent acquisitions, we have increased our fixed costs and now sell products having higher costs of product revenue than our biopreservation media products. We expect that the result of these acquisitions will make it more difficult to predict our revenue and operating results from period-to-period and that, as a result, comparisons of our results of operations are not currently and will not be for the foreseeable future a good indicator of our future performance. For example, if revenue declines in a quarter, whether due to a delay in recognizing expected revenue, adverse economic conditions, supply chain issues or otherwise, our results of operations in such period will be harmed because many of our expenses are now relatively fixed. In particular, a large portion of our manufacturing costs, research and development expenses, sales and marketing expenses and general and administrative expenses are not significantly affected by variations in revenue. Further, a shift in product revenue concentration away from our CryoStor products and towards other developing products with higher costs of product revenue will adversely affect our operating margin. If our quarterly operating results fail to meet investor expectations, the price of our common stock may decline.

Risks related to our acquisition strategy

If intangible assets and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.

In connection with the accounting for our completed acquisitions in recent years, we recorded a significant amount of intangible assets, including developed technology, in-process research and development, and customer relationships relating to the acquired product lines, and goodwill. Under generally accepted accounting principles in the United States, we must assess, at least annually and potentially more frequently, whether the value of indefinite-lived intangible assets and goodwill have been impaired. Intangible assets and goodwill are assessed for impairment in the event of an impairment indicator, as was the case in Q2 and Q4 of 2022 when a combination of three events (a significant decline in our market capitalization, the abandonment of an in-process research and development project within the asset group acquired in the acquisition of Global Cooling and our revised forecasts for net income and net cash flows to be generated by that asset group) constituted an interim triggering event as of June 30, 2022 and led to further decline as of the annual impairment testing date of October 1, 2022 that required further analysis with respect to, and resulted in, impairment charges to goodwill, indefinite-lived intangibles, and definite-lived intangibles. Any future reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.

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Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies.

As a part of our growth strategy, we have made and may continue to make selected acquisitions of complementary products and/or businesses. Any acquisition involves numerous risks and operational, financial, and managerial challenges, including the following, any of which could adversely affect our business, financial condition, or results of operations:

● inconsistencies in standards, controls, procedures, and policies;

In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal, and information technologies. There can be no assurance that any of the acquisitions we may make will be successful or will be, or will remain, profitable. Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all.

The integration of our acquisitions may result in significant accounting charges that adversely affect the announced results of our Company.

The financial results of our Company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our recent acquisitions. In addition to the anticipated cash charges, costs associated with the amortization of intangible assets are expected. The price of our common stock could decline to the extent our financial results are materially affected by the foregoing charges or if the foregoing charges are larger than anticipated.

Our recent acquisitions may result in unexpected consequences to our business and results of operations.

Although we believe that our acquired product lines will generally be subject to risks similar to those to which we are subject to in our existing operations, we may not have discovered all risks applicable to these businesses during the due diligence process. Some of these risks could produce unexpected and unwanted consequences for us. Undiscovered risks may result in us incurring financial liabilities, which could be material and have a negative impact on our business operations.

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We may engage in future acquisitions or other strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management.

We continue to actively evaluate opportunities and consider other strategic transactions to grow our portfolio of bioproduction tools and services for the cell and gene therapy and broader biopharma markets. In the event we engage in an acquisition or strategic transaction, including by making an investment in another company, we may need to acquire additional financing. Obtaining financing through the issuance or sale of additional equity and/or debt securities, if possible, may not be at favorable terms and may result in additional dilution to our current stockholders. Additionally, any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, an acquisition or strategic transaction may entail numerous operational and financial risks, including the risks outlined above and additionally:

● exposure to unknown financial or product liabilities;

● higher than expected acquisition and integration costs;

● write-downs of assets or goodwill or impairment charges;

● increased amortization expenses;

● inability to retain key employees of any acquired businesses.

Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition, and prospects.

Risks related to our business and operations

Healthcare reform measures could adversely affect our business.

The efforts of governmental and third-party payors to contain or reduce the costs of healthcare may adversely affect the business and financial condition of pharmaceutical and biotechnology companies, including ours. Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Efforts by governments and other third-party payors to contain or reduce the costs of healthcare through various means may limit our commercial opportunities and adversely affect our operating results and result in a decrease in the price of our common stock or limit our ability to raise capital.

If our products do not perform as expected or the reliability of the technology on which our products are based is questioned, we could experience lost revenue, delayed or reduced market acceptance of our products, increased costs, and damage to our reputation.

Our success depends on the market’s confidence that we can provide reliable, high-quality products to our customers. We believe that customers in our target markets are likely to be particularly sensitive to product defects and errors. Our reputation and the public image of our products and technologies may be impaired if our products fail to perform as expected. In the future, if our products experience, or are perceived to experience, a material defect or error, this could result in loss or delay of revenues, delayed market acceptance, damaged reputation, diversion of development resources, legal claims, increased insurance costs or increased service and warranty costs, any of which could harm our business. Such defects or errors could also narrow the scope of the use of our products, which could hinder our success in the market. Even after any underlying concerns or problems are resolved, any lingering concerns in our target market regarding our technology or any manufacturing defects or performance errors in our products could continue to result in lost revenue, delayed market acceptance, damaged reputation, increased service and warranty costs and claims against us.

We face significant competition.

The life sciences industry is highly competitive. We anticipate that we will continue to face increased competition as existing companies may choose to develop new or improved products and as new companies could enter the market with new technologies, any of which could compete with our product or even render our products obsolete. Many of our competitors are significantly larger than us and have greater financial, technical, research, marketing, sales, distribution and other resources than us. There can be no assurance that our competitors will not succeed in developing or marketing technologies and products that are more effective or commercially attractive than any that are being developed or marketed by us, or that such competitors will not succeed in obtaining regulatory approval, or introducing or commercializing any such products, prior to us. Such developments could have a material adverse effect on our business, financial condition and results of operations. Also, even if we can compete successfully, there can be no assurance that we can continue do so in a profitable manner.

We are dependent on outside suppliers for all our manufacturing supplies.

We rely on outside suppliers for all our manufacturing supplies, parts and components. There can be no assurance that, in the future, our current or alternative sources for manufacturing supplies will be able to meet all our demands on a timely basis. Unavailability of necessary components could require us to re-engineer our products to accommodate available substitutions, which could increase costs to us and/or have a material adverse effect on manufacturing schedules, products performance and market acceptance. In addition, an uncorrected defect or supplier’s variation in a component or raw material, either unknown to us or incompatible with our manufacturing process, could harm our ability to manufacture products. We might not be able to find a sufficient alternative supplier in a reasonable amount of time, or on commercially reasonable terms, if at all. If we fail to obtain a supplier for the components of our products, our operations could be disrupted.

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During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips for the manufacture of our ULT freezer products. During the year ended December 31, 2022, supply chain bottlenecks were mitigated through the diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.

Our success will depend on our ability to attract and retain key personnel.

In order to execute our business plan, we must attract, retain and motivate highly qualified managerial, scientific, manufacturing, and sales personnel. If we fail to attract and retain skilled scientific and sales personnel, our sales efforts will be hindered. Our future success depends to a significant degree upon the continued services of key scientific and technical personnel. If we do not attract and retain qualified personnel, we will not be able to achieve our growth objectives.

Difficulties in manufacturing could have an adverse effect upon our expenses and our product revenues.

We currently manufacture all of our biopreservation media products, freezer products and related components. We currently outsource the manufacturing of certain thaw products, certain cold chain products, two ULT freezer models, and components of our LN2 freezers. The manufacturing of our products is difficult and complex. To support our current and prospective clinical customers, we comply with and intend to continue to comply with cGMP in the manufacture of our products. Our ability to adequately manufacture and supply our products in a timely matter is dependent on the uninterrupted and efficient operation of our facilities and those of third parties producing raw materials and supplies upon which we rely in our manufacturing. The manufacture of our products may be impacted by:

● the ongoing capacity of our facilities;

● inclement weather and natural disasters;

● changes in forecasts of future demand for product components;

● potential facility contamination by microorganisms or viruses;

● updating of manufacturing specifications;

● product quality success rates and yields; and

● global viruses and pandemics, including COVID-19.

If efficient manufacture and supply of our products is interrupted, we may experience delayed shipments or supply constraints. If we are at any time unable to provide an uninterrupted supply of our products to customers, our customers may be unable to supply their end-products incorporating our products to their patients and other customers, which could materially and adversely affect our product revenue and results of operations.

While we are not currently subject to FDA or other regulatory approvals on substantially all of our products, if we become subject to regulatory requirements, the manufacture and sale of our products may be delayed or prevented, or we may become subject to increased expenses.

None of our products are subject to FDA. In particular, we are not required to sponsor formal prospective, controlled clinical-trials to establish safety and efficacy. A group of isothermal, standard, and carousel LN2 freezers in our freezers and thaw systems product line is currently regulated as Class 2 medical devices in the EU. Additionally, we comply with cGMP requirements. This is done solely to support our current and prospective clinical customers. However, there can be no assurance that we will not be required to obtain approval from the FDA, or foreign regulatory authorities, as applicable, prior to marketing any of our products in the future. Any such requirements could delay or prevent the sale of our products or may subject us to additional expenses.

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Our business may be subject to product liability claims or product recalls, which could be expensive and could result in a diversion of management’s attention.

Our business exposes us to potential product liability risks that are inherent in designing, manufacturing, and marketing our products. In particular, we are a supplier of bioproduction tools to the cell and gene therapy 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 cells and tissues, and component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks with respect to these or other products we manufacture or sell could result in an unsafe condition or injury. As a result, we face an inherent risk of damage to our reputation if one or more of our products are, or are alleged to be, defective. We may be exposed to risks from product liability and warranty claims in the event that our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in bodily injury and/or property damage. The outcome of litigation, particularly any class-action lawsuits, is difficult to quantify. Plaintiffs often seek recovery of very large or indeterminate amounts, including punitive damages. The magnitude of the potential losses relating to these lawsuits may remain unknown for substantial periods of time and the cost to defend against any such litigation may be significant. Accordingly, we could experience product liability losses in the future and incur significant costs to defend these claims.

In addition, if any of our products are, or are alleged to be, defective, we may voluntarily participate, or be required by applicable regulators, to participate in a recall of that product if the defect or the alleged defect relates to safety. In the event of a recall, we may experience lost sales and be exposed to individual or class-action litigation claims and reputational risk. Product liability, warranty and recall costs may have a material adverse effect on our business, financial condition and results of operations.

Insurance coverage is increasingly difficult to obtain or maintain.

While we currently maintain product liability insurance, directors’ and officers’ liability insurance, general liability insurance, and other types of insurance, first- and third-party insurance is increasingly more costly and narrower in scope, and we may be required to assume more risk in the future. If we are subject to third-party claims or suffer a loss or damage in excess of our insurance coverage, we may be required to share that risk in excess of our insurance limits. Furthermore, any first- or third-party claims made on our insurance policies may impact our future ability to obtain or maintain product liability insurance coverage at reasonable costs, if at all.

We are and may become the subject of various claims, litigation or investigations which could have a material adverse effect on our business, financial condition, results of operations or price of our common stock.

We are and may become subject to various claims (including “whistleblower” complaints), litigation or investigations, including commercial disputes and employee claims, and from time to time may be involved in governmental or regulatory investigations or similar matters. Any claims asserted against us or our management, regardless of merit or eventual outcome, could harm our reputation and have an adverse impact on our relationship with our clients, distribution partners and other third-parties and could lead to additional related claims. Furthermore, there is no guarantee that we will be successful in defending ourselves in pending or future litigation or similar matters under various laws. Any judgments or settlements in any pending litigation or future claims, litigation or investigation could have a material adverse effect on our business, financial condition, results of operations and price of our common stock.

Risks related to our intellectual property and cyber security

Expiration of our patents may subject us to increased competition and reduce our opportunity to generate product revenue.

The patents for our products have varying expiration dates and, when these patents expire, we may be subject to increased competition and we may not be able to recover our development costs. In some of the larger economic territories, such as the United States and Europe, patent term extension/restoration may be available. We cannot, however, be certain that an extension will be granted or, if granted, what the applicable time or the scope of patent protection afforded during any extended period will be. If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of our U.S. and non-U.S. patents.

Our proprietary rights may not adequately protect our technologies and products.

Our commercial success will depend on our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for our technologies and products in the United States and other countries. We will be able to protect our proprietary rights from unauthorized use by third-parties only to the extent that our proprietary technologies and products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

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We intend to apply for additional patents covering both our technologies and products, as we deem appropriate. We may, however, fail to apply for patents on important technologies or products in a timely fashion, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products and technologies. In addition, the patent positions of life science industry companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. As a result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot guarantee that:

● we were the first to file patent applications for these inventions;

● any of our pending patent applications will result in issued patents;

● any of our patents will be valid or enforceable;

The actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patents. Our ability to maintain and solidify our proprietary position for our products will depend on our success in obtaining effective claims and enforcing those claims once granted. Our issued patents and those that may be issued in the future, or those licensed to us, may be challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar products. We also rely on trade secrets to protect some of our technology, especially where it is believed that patent protection is inappropriate or unobtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or scientific and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods, and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents on all our products in every jurisdiction would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products. These products may compete with our products and may not be covered by any patent claims or other intellectual property rights.

The laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas and compete directly against us.

Our success will depend to a significant degree on our ability to secure and protect intellectual property rights and enforce patent and trademark protections relating to our technology. While we believe that the protection of patents and trademarks is important to our business, we also rely on a combination of copyright, trade secret, nondisclosure and confidentiality agreements, know-how and continuing technological innovation to maintain our competitive position. From time to time, litigation may be advisable to protect our intellectual property position. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Any litigation in this regard could be costly, and it is possible that we will not have sufficient resources to fully pursue litigation or to protect our intellectual property rights. This could result in the rejection or invalidation of our existing and future patents. Any adverse outcome in litigation relating to the validity of our patents, or any failure to pursue litigation or otherwise to protect our patent position, could materially harm our business and financial condition. In addition, confidentiality agreements with our employees, consultants, customers, and key vendors may not prevent the unauthorized disclosure or use of our technology. It is possible that these agreements will be breached or that they will not be enforceable in every instance, and that we will not have adequate remedies for any such breach. Enforcement of these agreements may be costly and time consuming. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States.

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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.

If we choose to go to court to stop someone else from using the inventions claimed in our patents or our licensed patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are invalid or unenforceable and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity or enforceability of these patents is upheld, the court will refuse to stop the other party on the grounds that such other party’s activities do not infringe our rights.

If we wish to use the technology claimed in issued and unexpired patents owned by others, we will need to obtain a license from the owner, enter into litigation to challenge the validity or enforceability of the patents or incur the risk of litigation in the event that the owner asserts that we infringed its patents. The failure to obtain a license to technology or the failure to challenge an issued patent that we may require to discover, develop or commercialize our products may have a material adverse effect on us.

If a third party asserts that we infringed its patents or other proprietary rights, we could face a number of risks that could seriously harm our results of operations, financial condition and competitive position, including:

The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant patent, and/or that the patent claims are invalid, and/or that the patent is unenforceable, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

U.S. patent laws as well as the laws of some foreign jurisdictions provide for provisional rights in published patent applications beginning on the date of publication, including the right to obtain reasonable royalties, if a patent subsequently issues and certain other conditions are met.

Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications, or that we were the first to invent the technology.

Patent applications filed by third parties that cover technology similar to ours may have priority over our patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party files a U.S. patent application on an invention similar to ours, we may elect to participate in or be drawn into an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position with respect to such inventions. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations. We cannot predict whether third parties will assert these claims against us, or whether those claims will harm our business. If we are forced to defend against these claims, whether they are with or without any merit and whether they are resolved in favor of or against us, we may face costly litigation and diversion of management’s attention and resources. As a result of these disputes, we may have to develop costly non-infringing technology, or enter into licensing agreements. These agreements, if necessary, may be unavailable on terms acceptable to us, if at all, which could seriously harm our business or financial condition.

Our inability to protect our systems and data from continually evolving cybersecurity risks or other technological risks, including as a result of breaches of our associated third parties, could affect our ability to conduct our business.

In conducting our business, we process, transmit and store sensitive business information and personal information about our customers, vendors, and other parties. This information may include account access credentials, credit and debit card numbers, bank account numbers, social security numbers, driver’s license numbers, names and addresses and other types of sensitive business or personal information. Some of this information is also processed and stored by our third-party service providers to whom we outsource certain functions and other agents, including our customers, which we refer to collectively as our associated third parties.

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We are a regular target of malicious third-party attempts, some of which have been successful, to identify and exploit system vulnerabilities, and/or penetrate or bypass our security measures, in order to gain unauthorized access to our networks and systems or those of our associated third parties. Such access has led and could lead in the future to the compromise of sensitive, business, personal or confidential information or instructions to transfer funds by us or customers to unauthorized recipients. In the third quarter during the year ended December 31, 2022, we experienced an immaterial security breach that successfully redirected payments from BioLife customers to unauthorized bank accounts. As a result, we proactively employ multiple methods at different layers of our systems to defend our systems against intrusion and attack and to protect the data we collect. These measures have been breached in the past and we cannot be certain that they will be successful and sufficient to counter current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information.

Our computer systems and our associated third parties’ computer systems have been, and could be in the future, subject to breach, and our data protection measures may not prevent unauthorized access. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect. Threats to our systems and our associated third parties’ systems can derive and have derived from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Computer viruses and other malware can be distributed and has and could in the future infiltrate our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with our services or create a diversion for other malicious activities. Our defensive measures in the past, have not, and in the future, may not, prevent downtime, unauthorized access, or use of sensitive data. Further, while we select our third-party service providers carefully, and we seek to ensure that our customers adequately protect their systems and data, we do not control their actions and are not able to oversee their processes. Any problems experienced by our associated third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyber-attacks and security breaches, could adversely affect our ability to conduct our business and our financial condition.

We could also be subject to liability for claims relating to misuse of personal information, such as violation of data privacy laws. We cannot provide assurance that the contractual requirements related to security and privacy that we impose on our service providers who have access to customer data will be followed or will be adequate to prevent the unauthorized use or disclosure of data. Any failure to adequately enforce or provide these protective measures could result in liability, protracted and costly litigation, governmental intervention, and fines.

Risks related to our common stock

Our stock price and volume may be volatile, and purchasers of our securities could incur substantial losses.

Our common stock, traded on the NASDAQ Capital Market, may be volatile and has experienced price and volume fluctuations. For example, in the year ended December 31, 2022, the highest intra-day sale price of our common stock on NASDAQ was $38.01 per share and the lowest intra-day sale price of our common stock on NASDAQ was $10.40 per share. Our highest trading day volume was 3,276,000 shares traded and the lowest trading day volume was 138,800 shares traded. We may continue to incur substantial increases or decreases in our stock price and volume in the foreseeable future.

Our stock price and trading volume and the market prices and trading volume of many publicly traded companies, including emerging companies in the life sciences industry, have been, and can be expected to be, highly volatile. The future market price and trading volume of our common stock could be significantly impacted by numerous factors, including, but not limited to:

● Future sales of our common stock or other fundraising events;

● Sales of our common stock by existing shareholders;

● Developments concerning proprietary rights;

● Adverse litigation;

● Unfavorable legislation or regulatory decisions;

● Public concerns regarding our products;

● Variations in quarterly operating results;

● General trends in the health care industry;

● Global viruses, epidemics, and pandemics, including COVID-19

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A significant percentage of our outstanding common stock is held by one stockholder, and this stockholder therefore has significant influence on us and our corporate actions.

As of December 31, 2022, based on our review of public filings and the Company’s records, one of our existing stockholders, Casdin Capital, LLC (“Casdin”), owned 7,566,292 shares of our common stock, representing 18% of the issued and outstanding shares of common stock. Accordingly, this stockholder has had, and will continue to have, significant influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all our assets, election of directors and other significant corporate actions. In addition, without the consent of this stockholder where a stockholder vote may be necessary, we could be prevented from entering into transactions that could be beneficial to us.

Any future sales of our securities in the public markets or any future securities issuances in connection with our acquisition strategy may cause the trading price of our common stock to decline and could impair our ability to raise capital through future equity offerings.

Sales of a substantial number of shares of our common stock or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our common stock or other securities to decline and could materially impair our ability to raise capital through the sale of additional securities. If we issue additional securities in a public offering or a private placement, such sales or any resales of such securities could further adversely affect the market price of our common stock. The sale of a large number of shares of our common stock or other securities also might make it more difficult for us to sell equity or equity-related securities in the future at a time and at the prices that we deem appropriate.

We do not anticipate declaring any cash dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and earnings for use in the operation and expansion of our business.

Risks related to accounting matters

Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset impairment and fair value determinations, inventories, business combinations, leases, and litigation, are highly complex and involve many subjective assumptions, estimates, and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our reported or expected financial performance or financial condition and could require us to restate our prior financial statements and issue a non-reliance statement regarding our prior financial disclosures.

Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.

Section 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the company’s stock immediately before the ownership change. We may be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur larger federal income tax liability.

If we are unable to develop an effective system of internal controls, we may not be able to accurately and timely report financial results or prevent fraud. If we identify additional material weaknesses in our internal control over financial reporting or are unable to rectify the material weaknesses that we have identified, our ability to meet our reporting obligations and the trading price of our stock could be negatively affected.

As described in Item 9A — Controls and Procedures and elsewhere in this Form 10-K, Management identified material weaknesses in our internal control over financial reporting for the fiscal years ended December 31, 2022 and 2021.

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In the course of making our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022, we identified several material weaknesses. Material weaknesses were identified in relation to (i) inappropriately designed entity-level controls impacting the control environment, risk assessment, and monitoring activities to prevent or detect material misstatements to the consolidated financial statements attributed to an insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, ineffective identification and assessment or risks impacting internal control over financial reporting, and ineffective monitoring controls; (ii) information system logical access within certain key financial systems; (iii) accounting policies and procedures and related controls over certain financial statement areas; (iv) inadequate risk assessment, accounting policies, procedures, and related controls performed over the recognition and measurement of indirect tax liabilities. Because material weaknesses in internal control exist, the Company’s internal controls may not prevent, or detect and correct a material misstatement in its financial statements or disclosures.

In the course of making our assessment of the effectiveness of internal control over financial reporting as of December 31, 2021, we identified several material weaknesses. Material weaknesses were identified in relation to (i) inappropriately designed entity-level controls impacting the control environment, risk assessment, and monitoring activities to prevent or detect material misstatements to the consolidated financial statements attributed to an insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, ineffective identification and assessment or risks impacting internal control over financial reporting, and ineffective monitoring controls; (ii) information system logical access within certain key financial systems; (iii) accounting policies and procedures and related controls over complex financial statement areas; (iv) accounting policies, procedures, and related controls over assets held for lease; (v) accounting policies, procedures, and related controls over the preparation and review of projected financial information used in determining the valuation of acquired intangible assets and contingent consideration in business combinations as well as the quantitative impairment analysis of indefinite-lived intangible assets; and (vi) policies, procedures, and related controls over the presentation and disclosure of amounts presented in the consolidated financial statements in accordance with the applicable financial reporting requirements. Because material weaknesses in internal control exist, the Company’s internal controls may not prevent, or detect and correct a material misstatement in its financial statements or disclosures.

The aforementioned material weaknesses did not result in any identified material misstatements to our financial statements, and there were only immaterial changes to previously released financial results.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors.

While we are in the process of addressing our material weaknesses as disclosed herein, elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations or may lose confidence in our reported financial information. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and the NASDAQ Stock Market, we could face severe consequences from those authorities. In either case, it could result in a material adverse effect on our business or have a negative effect on the trading price of our common stock. Further, if we fail to remedy these deficiencies (or any other future deficiencies) or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of our financial statements will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of those controls.

Further, in the future, if we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC, the NASDAQ Stock Market or other regulatory authorities.

Risks related to COVID-19 and other disruptive events

Our financial condition and results of operations may be adversely affected by the COVID-19 pandemic.

We continue to closely monitor the impact of the COVID-19 global pandemic on all aspects of our business and geographies, including how it has and will impact our customers, team members, suppliers, vendors, business partners and distribution channels. The COVID-19 global pandemic has created significant volatility, uncertainty, and economic disruption, which may continue to affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.

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We are currently following the recommendations of local health authorities to minimize exposure risk for our team members and visitors. While we have implemented specific business continuity plans to reduce the impact of COVID-19 and believe that we have sufficient inventory to meet forecasted demand for the next six to nine months, there is no guarantee that our continuity plan will be successful or that our inventory will meet forecasted or actual demand.

Additional disruptions may occur for our customers or suppliers that may materially affect our ability to obtain supplies or other components for our products, produce our products or deliver inventory in a timely manner. This would result in lost product revenue, additional costs, or penalties, or damage our reputation. Similarly, COVID-19 could impact our customers and/or suppliers as a result of a health epidemic or other outbreak occurring in other locations which could reduce their demand for our products or their ability to deliver needed supplies for the production of our products.

We cannot predict at this time the full extent to which the COVID-19 pandemic will impact our business, results, and financial condition, which will depend on many factors that are not known at this time, as the situation is unprecedented and continues to evolve. These include, among others, the extent of harm to public health, including the duration of the pandemic, any potential subsequent waves of COVID-19 infection, the emergence of new variants of COVID-19, some of which may be more transmissible or virulent than the initial strain, and the availability and distribution of effective vaccines and medical treatments, further disruption to the manufacturing of and demand for our products, our ability to effectively manage inventory levels and adjust our production schedules to align with demand, impairments and other charges, the impact of the global business and economic environment on liquidity and the availability of capital, the costs incurred to keep our employees safe while maintaining continued operations, and our ability to effectively motivate and retain the necessary workforce. We are staying in close communication with our manufacturing facilities, employees, customers, and suppliers, and acting to mitigate the impact of this dynamic and evolving situation through a variety of measures, which may not be successful and are subject to the factors described above, many of which are uncertain or outside of our control. Even after the COVID-19 pandemic has subsided, we may continue to experience impacts to our business as a result of its global economic impact.

Natural disasters, geopolitical unrest, war, terrorism, public health issues or other catastrophic events could disrupt the supply, delivery or demand of products, which could negatively affect our operations and performance.

We are subject to the risk of disruption by earthquakes, floods and other natural disasters, fire, power shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, public health issues, epidemics or pandemics and other events beyond our control and the control of the third parties on which we depend. Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, our employees, facilities, partners, suppliers, distributors or customers, and could decrease demand for our products, create delays and inefficiencies in our supply chain and make it difficult or impossible for us to deliver products to our customers. A catastrophic event that results in the destruction or disruption of our data centers or our critical business or information technology systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Our material office and manufacturing leases are detailed below:

Location Square Feet Principal Use Lease Expiration

Columbus, OH 1,807 Administrative offices January 2025

United States 12,500 Biological and pharmaceutical specimen storage January 2027

United States 26,600 Biological and pharmaceutical specimen storage March 2024

United States 16,153 Biological and pharmaceutical specimen storage June 2024

Netherlands 47,533 Biological and pharmaceutical specimen storage March 2026

We consider the facilities to be in a condition suitable for their current uses. Because of anticipated growth in the business and due to the increasing requirements of customers or regulatory agencies, we may need to acquire additional space or upgrade and enhance existing space. We believe that adequate facilities will be available upon the conclusion of our leases.

ITEM 3. LEGAL PROCEEDINGS

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.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Market information for common stock

Our common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “BLFS.”

Stockholders and dividends

As of March 21, 2023, there were approximately 202 holders of record of our common stock. We have never paid cash dividends on our common stock and do not anticipate that any cash dividends will be paid in the foreseeable future. We anticipate that we will retain all earnings, if any, to support our operations. Any future determination as to the payment of dividends will be at the sole discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements and other factors our Board of Directors deems relevant.

See Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

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Performance graph

The following graph shows the cumulative total stockholder return on our common stock with the cumulative total return of the S&P Small Cap 600 Index and our peer group, assuming an initial investment of $100 on December 31, 2017 and the reinvestment of all dividends.

Issuer repurchases of equity securities

Not applicable.

ITEM 6. RESERVED

Reserved.

This Form 10-K contains “forward-looking statements”. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about our products, including our newly acquired products, customers, regulatory approvals, the potential utility of and market for our products and services, our ability to implement our business strategy and anticipated business and operations, in particular following our acquisitions in recent years, future financial and operational performance, our anticipated future growth strategy, including the acquisition of synergistic cell and gene therapy manufacturing tools and services or technologies, or other companies or technologies, capital requirements, intellectual property, suppliers, joint venture partners, future financial and operating results, the impact of the COVID-19 pandemic, plans, objectives, expectations and intentions, revenues, costs and expenses, interest rates, outcome of contingencies, business strategies, regulatory filings and requirements, the estimated potential size of markets, capital requirements, the terms of any capital financing agreements and other statements that are not historical facts. You can find many of these statements by looking for words like “believes”, “expects”, “anticipates”, “estimates”, “may”, “should”, “will”, “could”, “plan”, “intend”, or similar expressions in this Form 10-K. We intend that such forward-looking statements be subject to the safe harbors created thereby.

These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections. Factors that might cause such a difference include those discussed under “Risk Factors”, as well as those discussed elsewhere in the Form 10-K.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K or, in the case of documents referred to or incorporated by reference, the date of those documents.

All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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We are a life sciences company that develops and commercializes innovative technologies used in the manufacture, storage and transportation of biological materials and provides storage solutions for biological and pharmaceutical materials.

We develop, manufacture, and market bioproduction tools and services to the cell and gene therapy (“CGT”) industry and broader biopharma market, which are designed to improve quality and de-risk biologic manufacturing, storage, and distribution. 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.

Our current portfolio of bioproduction tools and services are comprised of three revenue lines that contain seven main offerings: (i) cell processing (including biopreservation media for the preservation of cells and tissues, human platelet lysate media for the supplementation of cell expansion, cryogenic vials and automated fill machines that provide high-quality, efficient, and precise mixes of solutions), (ii) freezers and thaw systems (including a full line of mechanical ultra-low temperature (“ULT”), isothermal, and liquid nitrogen freezers and accessories, automated thaw devices which provide controlled, consistent thawing of frozen biologics in vials and cryobags), and (iii) storage and storage services (including biological and pharmaceutical storage services, and “smart”, cloud connected devices for transporting biologic payloads).

We currently operate as one bioproduction tools and services business which supports several steps in the biologic material manufacturing and delivery process. We have a diversified portfolio of tools and services that focus on biopreservation, cell processing, frozen biologic storage products and services, cold-chain transportation, 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.

The consolidated financial statements as of December 31, 2021 and for the years ended December 31, 2021 and 2020 have been corrected to correct immaterial prior period errors as discussed in Note 2, Correction of immaterial errors to our consolidated financial statements included in this Annual Report on Form 10-K. Accordingly, Management’s Discussion and Analysis reflects the impact of those corrections.

Sexton Biotechnologies, Inc. acquisition

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 530,502 newly issued shares of the Company’s common stock, subject to certain post-closing adjustments, of which 477,452 shares of Common Stock were issued to the Sexton Participating Holders at the Closing, and 53,050 shares of Common Stock, or approximately 10% of the Merger consideration, were deposited into an escrow account for indemnification and post-closing purchase price adjustment purposes. Prior to the merger, the Company held preferred stock in Sexton, which was accounted for using a measurement alternative that measures the securities at cost minus impairment, if any. The Company accounted for the merger as a step acquisition, which required remeasurement of the Company’s existing ownership in Sexton to fair value prior to completing the acquisition method of accounting. Using step acquisition accounting, the Company increased the value of its existing equity interest to its fair value, resulting in the recognition of a non-cash gain of $6.5 million, which was included in the gain on acquisition of Sexton Biotechnologies, Inc. in the Consolidated Statements of Operations in the year ended December 31, 2021. The Company utilized a market-based valuation approach to determine the fair value of the existing equity interest based on the total merger consideration offered and the Company’s stock price at acquisition.

The Sexton Merger was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the net tangible assets acquired was approximately $4.1 million, the deferred tax liability acquired was approximately $1.5 million, the fair value of the intangible assets acquired was approximately $8.8 million, and the residual goodwill was approximately $28.5 million. The fair value calculations required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.

Global Cooling, Inc. acquisition

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”).

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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”).

The aggregate merger consideration paid pursuant to the GCI Merger Agreement to the GCI Stockholders was 6,646,870 newly issued shares of common stock, provided, however, that the GCI Merger Consideration otherwise payable to GCI Stockholders is subject to the withholding of the GCI Escrow Shares (as defined below) and is subject to reduction for indemnification obligations. The GCI Merger Consideration allocable to one GCI stockholder was reduced by 10,400 shares to satisfy an outstanding note receivable of $374,000. In accordance with ASC 805, the Company recognized the settlement of pre-existing relationships in the forms of cash deposits, trade receivables, and trade payables, which are included in the consideration transferred. The GCI Merger Consideration is not subject to any purchase price adjustments.

At the GCI Closing, approximately nine percent (9%) of the GCI Merger Consideration (the “Escrow Shares”, along with any other dividends, distributions or other income on the GCI Escrow Shares, the “GCI Escrow Property”) otherwise issuable to the GCI Stockholders (allocated pro rata among the GCI Stockholders based on the GCI Merger Consideration otherwise issuable to them at the GCI Closing), was deposited into a segregated escrow account in accordance with an escrow agreement entered into in connection with the GCI Transactions (the “GCI Escrow Agreement”).

The GCI Escrow Property will be held for a period of up to twenty-four (24) months after the GCI Closing as the sole and exclusive source of payment for any post-GCI Closing indemnification claims (other than fraud claims), unless earlier released in accordance with the terms of the GCI Escrow Agreement.

The GCI Merger was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the net tangible assets acquired was $740,000, the deferred tax liability acquired was $24.1 million, the fair value of the intangible assets acquired was $120.5 million, and the residual goodwill was $137.8 million. The fair value calculations for intangible assets required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.

SciSafe Holdings, Inc. acquisition

On September 18, 2020, BioLife entered into a Stock Purchase Agreement, by and among the Company, SciSafe Holdings, Inc., a Delaware corporation, and the stockholders of SciSafe (collectively, the “SciSafe Sellers”), pursuant to which the Company agreed to purchase from the SciSafe Sellers one hundred percent (100%) of the issued and outstanding capital shares or other equity interests of SciSafe (the “SciSafe Acquisition”). The SciSafe Acquisition closed October 1, 2020.

In connection with the SciSafe Acquisition, the Company issued to the SciSafe Sellers 611,683 shares of common stock valued at $29.29 per share and a cash payment of $15 million, with $1.5 million held in escrow to account for adjustments for net working capital and as a security for, and a source of payment of, the Company’s indemnity rights. Pending the occurrence of certain events, the Company will issue to the SciSafe Sellers an additional 626,000 shares of common stock, which are issuable to SciSafe Sellers upon SciSafe achieving certain specified revenue targets in each year from 2021 to 2024. The revenue target set for 2022 was met and, therefore, has resulted in 116,973 shares of common stock becoming issuable to the SciSafe Sellers. These shares will be issued during the year ended December 31, 2023.

The SciSafe Acquisition was accounted for as a purchase of a business under FASB ASC Topic 805, Business Combinations. The fair value of the contingent consideration was $3.7 million, the fair value of the net tangible assets acquired was $2.8 million, the deferred tax liability was $3.3 million, the fair value of the intangible assets acquired was $12.1 million, and the residual goodwill was $24.9 million. The fair value calculations for intangible assets required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates, revenue volatility, and royalty rates.

Critical accounting policies and estimates

We have identified the policies and estimates below as being critical to our business operations and the understanding of our results of operations. These policies require management’s most difficult, subjective, or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The impact of any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition,” including in the “Results of Operations” section, where such policies affect our reported and expected financial results. Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

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Revenue recognition

To determine revenue recognition for contractual arrangements that we determine are within the scope of Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contracts with Customers, we perform the following five steps: (i) identify each contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to our performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price, taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 90 days.

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. Shipping and handling costs are classified as part of cost of product revenue in the Consolidated 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. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method, depending on the facts and circumstances relative to the contract. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component or variable consideration as of and during the years ended December 31, 2022, 2021, and 2020.

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.

Business combinations

Amounts paid for acquisitions are allocated to the tangible and intangible assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and deferred revenue obligations. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Operations. The fair value of contingent consideration includes estimates and judgments made by management regarding the probability that future contingent payments will be made, the extent of royalties to be earned in excess of the defined minimum royalties, etc. Management updates these estimates and the related fair value of contingent consideration at each reporting period based on the estimated probability of achieving the earnout targets and applying a discount rate that captures the risk associated with the expected contingent payments. To the extent our estimates change in the future regarding the likelihood of achieving these targets we may need to record material adjustments to our accrued contingent consideration. Changes in the fair value of contingent consideration are recorded in our Consolidated Statements of Operations. We use the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, etc. We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors. We believe the estimated purchased customer relationships, developed technologies, trademarks, tradenames, patents, and in process research and development amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the assets.

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Intangible assets and goodwill

Intangible assets

Intangible assets with a definite life are amortized over their estimated useful lives using the straight-line method and the amortization expense is recorded within intangible asset amortization in the Consolidated Statements of Operations. If the estimate of a definite-lived intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Definite-lived intangible assets and their related estimated useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable.

Indefinite-lived intangibles are carried at the initially recorded fair value less any recognized impairment. In-process research and development (“IPR&D”) is initially capitalized at fair value as an intangible asset with an indefinite life. When the IPR&D project is complete, it is reclassified as a definite-lived intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned, a charge would be recorded for the value of the related intangible asset to our Consolidated Statement of Operations in the period it is abandoned. Indefinite-lived intangibles are tested annually for impairment. Impairment assessments are conducted more frequently if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for the Company’s products or changes in the size of the market for the Company’s products. If impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future discounted cash flows expected to result from the use and disposition of the asset.

Goodwill

We test goodwill for impairment on an annual basis, and between annual tests if events and circumstances indicate it is more likely than not that the fair value of our goodwill is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the Company’s market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator. Goodwill is tested for impairment in the fourth quarter of each year, or more frequently as warranted by events or changes in circumstances mentioned above. Accounting guidance also permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. If, after this qualitative assessment, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing would be necessary. A quantitative assessment is performed if the qualitative assessment results in a more likely than not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value. The Company operates as one reporting unit as of the goodwill impairment measurement date in the fourth quarter of 2022.

Warranty guarantees

Our freezer and thaw and certain cell processing products are warranted to provide assurance that the product will function as expected and to ensure customer confidence in design and overall quality. Warranty coverage on our products is generally provided for specified periods of time and on select products' hours of usage, and generally covers parts, labor, and other expenses for non-maintenance repairs. Warranty coverage generally does not cover operator abuse or improper use.

At the time of sale, we recognize expense and record a warranty accrual by product line for estimated costs in connection with forecasted future warranty claims. Our estimate of the cost of future warranty claims is based primarily on the estimated number of products under warranty, historical average costs incurred to service warranty claims, the trend in the historical ratio of warranty claims for each part covered, and the historical length of time between the sale and resulting warranty claim. If applicable, historical claims experience may be adjusted for known product design improvements or for the impact of unusual product quality issues. We periodically assess the adequacy of our warranty accruals based on changes in our estimates and assumptions and record any necessary adjustments if the cost of actual claim experience differs from our estimate and indicates that adjustments to our warranty accrual are necessary. Factors that could have an impact on actual future claims and our warranty accrual include, but are not limited to, items such as performance of new products; product failure rates; factors impacting product usage, such as changes in sales volumes and shifts in product mix; manufacturing quality and product design issues, including significant manufacturing or design defects not discovered until after the product is delivered to customers; higher or lower than expected service and component part costs to satisfactorily address the repair, and, if applicable, changes to the warranty coverage periods. Additionally, from time to time, we also establish warranty accruals for our estimate of the costs necessary to settle major rework campaigns on a product-specific basis during the period in which the circumstances giving rise to the major rework campaign become known and when the costs to satisfactorily address the situation are both probable and estimable. The warranty accrual for the cost of a major rework campaign is primarily based on an estimate of the cost to repair each affected unit and the number of affected units expected to be repaired.

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We believe that our analysis of historical warranty claim trends and knowledge of potential manufacturing and/or product design improvements or issues provide sufficient information to establish a reasonable estimate for the cost of future warranty claims at the time of sale and our warranty accruals as of the date of our Consolidated Balance Sheets. We believe that our $8.3 million warranty accrual as of December 31, 2022 is adequate and historically has been adequate; however, due to the inherent uncertainty in the accrual estimation process, including forecasting future warranty claims, costs associated with servicing future warranty claims, and unexpected major rework campaigns that may arise in the future, our actual warranty costs incurred may differ from our warranty accrual estimate. An unexpected increase in warranty claims and/or in the costs associated with servicing those claims would result in an increase in our warranty accruals and a decrease in our net earnings.

Contingent consideration

We estimate the acquisition date fair value of the acquisition-related contingent consideration using various valuation approaches, including option pricing models and Monte Carlo simulations, as well as significant unobservable inputs, reflecting the Company’s assessment of the assumptions market participants would use to value these liabilities. The fair value of the contingent consideration is remeasured each reporting period, with any change in the value recorded in our Consolidated Statements of Operations as change in fair value of contingent consideration.

Stock-based compensation

We measure and record compensation expense using the applicable accounting guidance for share-based payments related to stock options, time-based restricted stock, market-based restricted stock awards and performance-based awards granted to our directors and employees. The fair value of market-based restricted stock awards is estimated at the date of grant using the Monte Carlo Simulation model. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. In valuing our market-based stock awards, significant judgment is required in determining the expected volatility of our common stock. Expected volatility for our market-based restricted stock awards is based on the historical volatility of our own stock and the stock of companies within our defined peer group. Further, our expected volatility may change in the future, which could substantially change the grant-date fair value of future awards and, ultimately, the expense we record. The fair value of restricted stock, including performance awards, without a market condition is estimated using the current market price of our common stock on the date of grant.

We expense stock-based compensation for stock options, restricted stock awards, and performance awards over the requisite service period. For awards with only a service condition, we expense stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with a market condition, we expense over the vesting period regardless of the value that the award recipients will ultimately receive.

Provision for income taxes

The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative loss and its forecasted losses in the near-term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes, the Company determined that the Company’s recorded deferred tax liabilities as of December 31, 2022 would be a sufficient source of taxable income to realize all of its deferred tax assets except for a portion of its net operating loss carryforwards. As a result, a full valuation allowance on its deferred tax assets was recorded as of December 31, 2022. The Company will continue to assess the realizability of its assets going forward and will adjust the valuation allowance as needed.

The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. The Company is generally subject to examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available.

The Company applies judgment in the determination of the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. As of December 31, 2022, the Company has an unrecognized tax benefit of $610,000 related to tax attributes being carried forward. The Company is generally subject to examination by U.S. federal and local income tax authorities for all tax years in which loss carryforward is available.

As of December 31, 2022, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $128.6 million, which is available to reduce future taxable income. Approximately $39.5 million of NOL will expire from 2023 through 2037, and approximately $89.1 million of NOL will be carried forward indefinitely. The NOL carryforwards are subject to an annual limitation in the event of certain cumulative changes in the ownership interest. This limits the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Subsequent ownership changes may further affect the limitation in future years.

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Recent accounting standards update

See Note 1: “Organization and significant accounting policies – recent accounting pronouncements,” to our Consolidated Financial Statements included in this report for more information.

Discussions of 2020 results and year-to-year comparisons between 2021 and 2020 that are omitted in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022.

Results of operations

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying Consolidated Financial Statements and the related footnotes thereto.

Revenue

Revenue for years ended December 31, 2022, 2021, and 2020 were comprised of the following:

Product revenue

Service revenue

Freezer and thaw 74 - - 74 - % - - %

Rental revenue

Revenue growth in the year ended December 31, 2022, as compared to the year ended December 31, 2021, was driven primarily by organic growth in our cell processing product and storage and cold chain services rental product lines, which grew by 45% and 51%, respectively. During the year ended December 31, 2021, revenues diversified significantly compared to the year ended December 31, 2020. This diversification was primarily driven by the acquisition of Global Cooling and Sexton in May and September of 2021, respectively. Most notably, the Company’s freezer and thaw revenues increased by 318% as a result of the acquisition of Global Cooling and growth in LN2 freezer sales in 2021.

Revenue concentrations with one customer increased to 18% in the year ended December 31, 2022 from 17% from the same customer in the year ended December 31, 2021, primarily as a result of increased sales to a prominent international distributor. Revenue concentrations with one customer increased to 17% in the year ended December 31, 2021 from 13% from a different customer in the year ended December 31, 2020, primarily as a result of concentrations of freezer sales to a prominent international distributor.

In the year ended December 31, 2022, revenue increased by $42.6 million, or 36%, from the year ended December 31, 2021. Of this increase, $27.7 million, or 23%, of the increase was driven by organic growth. Of the $27.7 million, $19.4 million is derived from our cell processing product line, $1.6 million from our freezer and thaw product and services product lines, and $6.7 million from our storage and cold chain services product line. The remaining $14.9 million, or 13%, was driven by earning full year revenues from the acquisitions of Global Cooling and Sexton compared to partial revenues earned during the prior year.

Revenue is impacted by the relatively high degree of customer concentration, the timing of orders, the development efforts of our customers or end-users and regulatory approvals for biologics that incorporate our products, which may result in significant quarterly fluctuations. Such fluctuations are expected, but they may not be predictive of future revenue or otherwise indicative of a trend.

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Costs and operating expenses

Total costs and operating expenses for years ended December 31, 2022, 2021, and 2020 were comprised of the following:

Intangible asset impairment charges 110,364 - - 110,364 - % - - %

Cost of product, rental, and service revenue

In the year ended December 31, 2022, cost of product, rental, and service revenue increased $25.8 million or 31% from the year ended December 31, 2021. This increase was primarily driven by increased sales.

We expect the cost of product, rental, and service revenue to fluctuate in future quarters based on production volumes, product mix, and the impact of any future acquisitions.

Cost of product, rental, and service revenue as a percentage of revenue was 70%, 69%, and 43% for the years ended December 31, 2022, 2021, and 2020, respectively. Cost of product, rental, and service revenue in the years ended December 31, 2022, 2021, and 2020 includes $251,000, $1.1 million, and $411,000, respectively, in inventory step-up expense recorded in the purchase accounting of our Global Cooling, CBS, and AsteroBio Corporation (“Astero”) acquisitions.

The cost of product, rental, and service revenue as a percentage of revenue was relatively consistent between the years ended December 31, 2022 and 2021, at 70% and 69%, respectively. Despite these percentages being relatively consistent, the Company experienced decreases in warranty expenses in the year ended December 31, 2022 that were offset by increases in material and overhead costs driven by increases in personnel expenses, including stock-based compensation expenses, during the year. Additionally, material cost increases derived from our difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips for the manufacture of our ULT freezer products due to the effects of COVID-19 during the year ended December 31, 2021 were mitigated during the current year. Through the diversification of suppliers, we experienced improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.

Research and development expenses

During the years ended December 31, 2022, 2021, and 2020, research and development (“R&D”) expense consisted primarily of personnel-related costs, consulting, and external product development services.

R&D expense increased $3.0 million in the year ended December 31, 2022, or 25%, compared with the year ended December 31, 2021. The increase is primarily due to $2.5 million of increased personnel costs in cash and stock-based compensation expenses from the full year ownership of Global Cooling and Sexton.

We expect sustained R&D expense increases through the year ended December 31, 2023 as we continue to expand, develop, and refine our product lines, particularly in the completion of our GCI vault project.

Sales and marketing expenses

Sales and marketing expense (“S&M”) consisted primarily of personnel-related costs, stock based compensation expense, trade shows, sales commissions, and advertising.

S&M expense increased $7.6 million in the year ended December 31, 2022, or 54%, compared with the year ended December 31, 2021. The increase is primarily due to $5.0 million of increased personnel expenses from cash and stock compensation. The increase was also driven by a $1.5 million increase in advertising and trade show costs from the expansion of our product outreach.

We expect S&M expense to increase as we expand our product line offerings and our presence in the markets in which we participate.

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General and administrative expenses

General and administrative (“G&A”) expense consists primarily of personnel-related expenses, non-cash stock-based compensation for administrative personnel and members of the board of directors, professional fees, such as accounting and legal, and corporate insurance.

In the year ended December 31, 2022, G&A expenses increased by $14.0 million, or 42%, compared with the year ended December 31, 2021. Of this increase, $7.7 million, or 55%, was driven by increased personnel expenses from cash and stock-based compensation. The remaining costs primarily relate to an increase of $3.2 million in professional services fees and $1.2 million on the losses incurred from asset disposal.

We expect G&A expense to increase as we continue to execute on our growth strategy.

Intangible asset impairment charges

Intangible asset impairment charges consist of the impairments incurred of $69.9 million and $40.5 million during the quarter ended June 30, 2022 and impairment assessment date of October 1, 2022, respectively. These impairment charges impacted both definite and indefinite-lived intangible assets acquired during the acquisition of Global Cooling. See Note 11: Goodwill and intangible assets of our accompanying Consolidated Financial Statements for more information on the events and assessment leading to these non-cash impairment charges during the year ended December 31, 2022.

Intangible asset amortization expense

Amortization expense consists of charges related to the amortization of intangible assets associated with the acquisitions of Global Cooling, Custom Biogenic Systems (“CBS”), SciSafe, Sexton, SAVSU Technologies, Inc. (“SAVSU”), and Astero in which we acquired definite-lived intangible assets.

Acquisition costs

Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs related to our Global Cooling, SciSafe, 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 SciSafe, CBS, and Astero acquisitions.

Other income and expenses

Total other income and expenses for the years ended December 31, 2022, 2021, and 2020 were comprised of the following:

Change in fair value of warrant liability. Reflects the changes in fair value associated with the periodic “mark-to-market” valuation of certain warrants that were issued in 2014. See Note 1: “Organization and Significant Accounting Policies” of our accompanying Consolidated Financial Statements “Certain Warrants which have Features that may Result in Cash Settlement” for more information.

Change in fair value of investments. Reflects fair value adjustments to our investment in iVexSol.

Interest (expense) income, net. Interest expense incurred in the year ended December 31, 2022 related primarily to the loan obtained in September 2022 and two loans that were assumed in the acquisition of Global Cooling. We also earn interest on cash held in our money market account. Increases in interest expenses during the year ended December 31, 2022 can also be attributed to the increases in interest rates set by the United States Federal Reserve, causing the variable interest component on our 2022 term loan to be exposed to increasing interest rates.

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Gain on acquisition of Sexton Biotechnologies, Inc. Reflects the non-cash gain associated with our investment in Sexton due to the step-acquisition of the remaining shares of Sexton and subsequent consolidation of Sexton in our financial statements.

Income Tax Benefit

Income tax benefit for the years ended December 31, 2022, 2021 and 2020 was as follows:

Effective tax rate 4 % 69 % 255 %

The income tax benefit recognized in the year ended December 31, 2022 primarily related to losses generated in 2022. Our effective tax rate for 2022 was lower than the U.S. statutory rate of 21% primarily due to the change in our valuation allowance.

The income tax benefit recognized in the year ended December 31, 2021 primarily related to losses generated in 2021 and the recognition of the release of our valuation allowance related to the acquisition of Global Cooling. Our effective tax rate for 2021 was higher than the U.S. statutory rate of 21% primarily due to windfall benefits on stock compensation, 162(m) limitations on executive compensation, and the change in our valuation allowance.

Liquidity and capital resources

We believe our cash, cash equivalents, restricted cash, cash generated from operations, available-for-sale securities, and credit lines will satisfy, for at least the next twelve months from the date of this filing, our liquidity requirements, both globally and domestically, including the following: working capital needs, capital expenditures, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations. We have not identified any material liquidity concerns as a result of the COVID-19 pandemic.

On December 31, 2022, we had $64.1 million in cash, cash equivalents, and available-for-sale securities, compared to $69.9 million as of December 31, 2021. The decrease in cash and cash equivalents is primarily due to significant investments made in available-for-sale securities, increased investment in property, plant, and equipment, decrease in working capital related accounts compared to the prior year, offset by the draw of $20 million during Q3 2022 on a term loan.

On September 20, 2022, the Company, and certain of its subsidiaries, entered into a term loan agreement, which provided for up to $50 million in aggregate principal to be drawn. The agreement provides for borrowings of up to $30 million upon closing and options to borrow up to $10 million between closing and June 30, 2023, up to $10 million upon the achievement of certain revenue milestones, and an additional $10 million upon the Company’s request subject to fulfilling certain requirements of the lender. The Company borrowed $20 million upon closing. For additional information on terms, see Note 13: Long-term debt.

On March 10, 2023, Silicon Valley Bank (“SVB”), the issuer of our term loan, was closed upon the appointment of the Federal Deposit Insurance Corporation (“FDIC”) as the receiver of SVB. In addition to the term loan, we have deposit accounts held at SVB captured within our cash, cash equivalents, and available-for-sale securities. However, as of March 13, 2023, all deposit amounts, regardless of amount in excess of FDIC-insured limits, were guaranteed to customers, mitigating any liquidity constraints.

On May 22, 2020, the Company closed on a share purchase agreement with Casdin Capital LLC, a current stockholder of the Company, pursuant to which Casdin invested $20.0 million in the Company at $10.50 per share.

On July 7, 2020, the Company closed its public offering of 5,951,250 shares of common stock at the public offering price of $14.50 per share, which includes the shares purchased pursuant to the exercise in full of the underwriters' option to purchase up to an additional 776,250 shares of its common stock. The net proceeds from the public offering to BioLife, after deducting underwriting discounts and commissions and estimated underwriter offering expenses of $6.1 million, were approximately $80.2 million.

On October 1, 2020, we acquired SciSafe for $15.0 million in cash, 611,683 shares of common stock, and up to 626,000 additional shares of common stock as contingent consideration. As of December 31, 2022 and 2021, 116,973 shares and 64,130 shares were earned, respectively. These shares will be issued during the year ended December 31, 2023.

Cash flows

(In thousands) 2022 2021 $ Change % Change

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Operating activities

In the year ended December 31, 2022, our operating activities used cash of $8.5 million reflecting net loss of $139.8 million and non-cash charges totaling $146.2 million primarily related to impairment of intangible assets, depreciation, amortization, changes in fair value of contingent consideration, deferred income tax benefit, stock-based compensation, and non-cash lease charges. An increase in accrued expenses and current liabilities of $5.7 million was primarily driven by a $3.7 million non-income tax liability estimated for sales taxes owed and approximately $1.8 million increase in accrued compensation for increased headcount compared to the prior year. The increase in accrued expenses and current liabilities was offset by a $6.9 million reduction in warranty liability and $1.6 million reduction in accounts payable.

In the year ended December 31, 2021, our operating activities used cash of $4.6 million reflecting net loss of $8.9 million and non-cash charges totaling $6.6 million primarily related to depreciation, amortization, changes in the fair value of investments, changes in fair value of contingent consideration, deferred income tax benefit, stock-based compensation, and non-cash lease charges. An increase in accounts receivable of $10.1 million was primarily driven by the 148% year-to-date increase in revenues. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

Investing activities

Our investing activities used $58.1 million of cash in the year ended December 31, 2022. We invested $44.6 million in available-for-sale securities in addition to continued investment in capital expenditures and purchases of assets held for rent, using an additional $13.9 million.

Our investing activities used $13.2 million of cash in the year ended December 31, 2021. We acquired $1.6 million in cash in the acquisitions of Global Cooling and Sexton. Capital expenditures and purchases of assets held for rent used $14.8 million as we continue to invest in our manufacturing and storage facilities.

Financing activities

In the year ended December 31, 2022, cash provided by financing activities was $16.3 million. The increase in cash provided by financing activities compared to the prior year is primarily due to drawing $20 million on a term loan obtained on September 20, 2022, offset by payments on outstanding debt of $1.7 million and payments on financed insurance premiums of $1.4 million.

In the year ended December 31, 2021, cash used by financing activities was $2.8 million. We used $4.2 million to pay off the line of credit assumed in the acquisition of Global Cooling. Other significant cash flows include $1.6 million provided by lenders to finance equipment for our continued expansion, $1.4 million provided by the exercise of stock options, and $1.0 million used to pay financed insurance premiums.

Contractual obligations

Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, accounts receivable collections, inventory management, and the timing of tax and other payments. As a result, the impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with such factors. Despite these uncertainties, we believe that our balances of cash, cash equivalents, available-for-sale securities, and restricted cash in addition to our cash flows from operations are adequate to meet our liquidity requirements in the next 12 months.

The following summarizes certain of our contractual obligations as of December 31, 2022 and the effect such obligations are expected to have on our cash flows in the next fiscal year:

Long-term debt, including interest

These amounts represent expected cash payments, including principal and interest. Debt obligations are described in Note 13 of the Consolidated Financial Statements. As of December 31, 2022, our total obligations were $25.6 million, of which $1.8 million was short-term.

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Lease obligations

We have various operating and financing lease agreements for office space, warehouses, manufacturing, research equipment, machinery, and production locations as well as vehicles and other equipment. Lease obligations are described in Note 6 of the Consolidated Financial Statements. As of December 31, 2022, our total obligations were $18.1 million, of which $3.0 million was short-term.

Purchase obligations

Purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable pricing provisions and the approximate timing of the transactions. As of December 31, 2022, our total obligations were $507,000, of which $304,000 was short-term.

Purchase orders or contracts for the purchase of supplies and other goods and services are not included in the discussion above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current procurement or developmental needs and fulfilled by our vendors within short time horizons.

Capital requirements

Our future capital requirements will depend on many factors, including the following:

● the expansion of our cell and gene therapy tools and services business

● our ability to acquire additional cell and gene therapy products and services;

● the scope of and progress made in our research and development activities; and

● the success of any proposed financing efforts.

Absent acquisitions of additional products, product candidates, or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 12 months as of the date of this filing. We expect operating expenses in the year ending December 31, 2023 to increase as we continue to expand our CGT tools business. We expect to incur continued spending related to the research and development of new technology, expansion of our existing product lines, and expansion of our commercial capabilities for the foreseeable future, with an increased emphasis on the development of new products during the year ended December 31, 2023. Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional cell and gene therapy products and technologies to complement our existing manufacturing capabilities, and continued investment in our intellectual property portfolio.

We actively evaluate various strategic transactions on an ongoing basis, including acquiring complementary products, technologies or businesses that would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our stockholders, and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, if at all.

Impacts of COVID-19

Our domestic and international operations have been and continue to be affected by the ongoing global pandemic of COVID-19 and the resulting volatility and uncertainty it has caused in the U.S. and international markets.

During year ended December 31, 2021, we experienced difficulties in obtaining sheet metal and electrical components incorporating semiconductor chips for the manufacture of our ULT freezer products due to the effects of COVID-19. These supply chain disruptions decreased the Company’s profitability as a result of increased supplier pricing and production stoppages. During the year ended December 31, 2022, supply chain bottlenecks were mitigated through the diversification of suppliers, resulting in improved pricing from the year ended December 31, 2021. We were still experiencing constraints in supply for semiconductor chips as of December 31, 2022. Though our costs to obtain semiconductor components normalized throughout the year, we were still experiencing constraints in obtaining electrical component parts. These constraints are expected to improve through diversification of our semiconductor supply chain partnerships. We have sufficient supply for electrical component parts within our operations for the foreseeable future.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign currency exchange risk

The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency exchange rates. Approximately 2% of the Company's consolidated net sales in the year ended December 31, 2022 were made in euros. The Company is exposed to market risk primarily from foreign exchange rate fluctuations of the euro as compared to the U.S. dollar as the financial position and operating results of the Company's foreign operations are translated into U.S. dollars for consolidation.

Month-end exchange rates between the euro and the U.S. dollar, which have not been weighted for actual sales volume in the applicable months in the periods, were as follows:

Year Ended December 31,

The Company's exposure to foreign exchange rate fluctuations also arises from trade receivables and intercompany payables denominated in one currency in the financial statements, but receivable or payable in another currency.

The Company does not enter into foreign currency forward contracts to reduce its exposure to foreign currency rate changes on forecasted intercompany sales transactions or on intercompany foreign currency denominated balance sheet positions. Foreign currency transaction gains and losses are included in "Other income (expense)" in the Consolidated Statements of Operations. The effect of translating net assets of foreign subsidiaries into U.S. dollars are recorded on the Consolidated Balance Sheet as part of "Accumulated other comprehensive loss, net of taxes".

The effects of a hypothetical 10% appreciation in the U.S. dollar from December 31, 2022 levels against the euro are as follows (in thousands):

Decrease in translation of 2022 earnings into U.S. dollars $ 85

Decrease in translation of net assets of foreign subsidiaries $ 107

Interest rate risk

Our exposure to market risk for changes in interest rates relates primarily to our investments in available-for-sale securities and our long-term debt. We invest our excess cash in investment grade short to intermediate-term fixed income securities. These securities may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses if forced to sell securities that have declined in market value due to changes in interest rates. Our long-term debt primarily bears interest at a fixed rate, with a variable component subject to an interest rate ceiling. Fluctuations in interest rates therefore do not materially impact our consolidated financial statements from long-term debt. For additional information about our available-for-sale securities and long-term debt, see Notes 4 and 13 to the consolidated financial statements in Part II, Item 8 of this Annual Report.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page No.

Consolidated Balance Sheets 40

Consolidated Statements of Operations 41

Consolidated Statements of Comprehensive (Loss) Income 42

Consolidated Statements of Shareholders’ Equity 43

Consolidated Statements of Cash Flows 44

Notes to Consolidated Financial Statements 45

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

BioLife Solutions, Inc.

Bothell, Washington

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of BioLife Solutions, Inc. and subsidiaries (the “Company”) as of December 31, 2022, the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 31, 2023 expressed an adverse opinion.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Global Cooling, Inc. Intangible Asset Impairment

As described further in Note 11 to the consolidated financial statements, the Company has intangible assets that were acquired in the Global Cooling, Inc. (“GCI”) purchase. Definite-lived intangible assets and their related estimated useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. Indefinite-lived intangibles are tested annually for impairment. If impairment indicators are present, the Company determines whether the underlying intangible asset is recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is written down to the estimated fair value of the asset based on the sum of the future discounted cash flows expected to result from the use and disposition of the asset. We identified the quantitative fair value assessment of the GCI intangible assets as a critical audit matter.

The principal considerations for our determination that the impairment assessment of the GCI intangible assets is a critical audit matter are that the impairment assessment requires the Company to utilize subjective assumptions to estimate the discounted cash flows attributable to the GCI intangible assets, such as revenue growth rates, forecasted expenses, royalty rates, and discount rates. The estimation process required a high degree of auditor judgement and an increased extent of effort.

Our audit procedures related to the GCI intangibles included the following, among others.

Consolidated Financial Statements - Impact of Internal Control over Financial Reporting

As described in Management’s Report on Internal Control Over Financial Reporting, material weaknesses were identified as of December 31, 2022. The prevention, detection, and correction of material misstatements of the consolidated financial statements, is dependent, in part, on management (i) designing and maintaining an effective control environment, including maintaining sufficient resources within the accounting and financial reporting department to review complex financial reporting transactions; and updating and distributing accounting policies and procedures across the organization (ii) designing and implementing effective information and communication process to identify and assess the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting and (iii) designing and implementing effective process-level control activities and general information technology controls related to financial reporting processes. We identified the impact on our audit of the material weaknesses related to the control environment, information and communication, and control activities (“material weaknesses”), as further described in Management’s Report, as a critical audit matter.

The principal consideration for our determination that the impact on our audit of the material weaknesses is a critical audit matter is that especially challenging auditor judgment was required in designing audit procedures and evaluating audit evidence due to the ineffective system of internal control over financial reporting, which affects substantially all consolidated financial statement account balances and disclosures.

Our audit procedures related to the material weaknesses included the following, among others.

● We selected larger sample sizes for tests of details.

● We increased the extent of supervision over the execution of audit procedures.

/s/ GRANT THORNTON LLP

We have served as the Company's auditor since 2022.

Bellevue, Washington

March 31, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

BioLife Solutions, Inc.

Bothell, Washington

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of BioLife Solutions, Inc. (the “Company”) as of December 31, 2021, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

We served as the Company's auditor from 2019 to 2022.

Seattle, Washington

March 31, 2022

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BioLife Solutions, Inc.

Consolidated Balance Sheets

December 31,

(In thousands, except per share and share data) 2022 2021

Assets

Current assets:

Restricted cash 31 10

Available-for-sale securities, current portion 43,260 -

Prepaid expenses and other current assets 6,879 4,656

Operating lease right-of-use assets, net 15,292 18,705

Financing lease right-of-use assets, net 272 440

Long-term deposits and other assets 281 325

Available-for-sale securities, long term 1,332 -

Liabilities and Shareholders’ Equity

Current liabilities:

Accrued expenses and other current liabilities 9,782 6,870

Lease liabilities, operating, current portion 2,860 2,758

Lease liabilities, financing, current portion 158 149

Contingent consideration, current portion 2,138 5,127

Contingent consideration, long-term 2,318 4,900

Lease liabilities, operating, long-term 14,962 16,466

Lease liabilities, financing, long-term 126 291

Other long-term liabilities 10 42

Commitments and Contingencies (Note 12)

Shareholders’ equity:

Accumulated other comprehensive loss, net of taxes (679 ) (282 )

Total liabilities and shareholders’ equity $ 450,229 $ 554,286

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements

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BioLife Solutions, Inc.

Consolidated Statements of Operations

Years Ended December 31

(In thousands, except per share and share data) 2022 2021 2020

Costs and operating expenses:

Intangible asset impairment charges 110,364 - -

Change in fair value of contingent consideration (4,754 ) 2,875 1,575

Other income (expense):

Change in fair value of warrant liability - (121 ) 3,601

Change in fair value of investments 697 - 1,319

Interest (expense) income, net (687 ) (485 ) 40

Gain on acquisition of Sexton Biotechnologies, Inc. - 6,451 -

Net (loss) income attributable to common shareholders:

(Loss) earnings attributable to common shareholders:

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements

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BioLife Solutions, Inc.

Consolidated Statements of Comprehensive (Loss) Income

Years Ended December 31

Unrealized loss on available-for-sale securities, net of tax (50 ) - -

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements

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BioLife Solutions, Inc.

Consolidated Statements of Shareholders’ Equity

Series A Series A Accumulated

Preferred Preferred Common Common Additional Other Total

Stock Stock Stock Stock Paid-in Comprehensive Accumulated Shareholders’

Stock issued as 2019 bonus payout - - - - 314 - - 314

Stock-based compensation - - - - 5,981 - - 5,981

Common stock issued for services - - 3,175 - 60 - - 60

Stock issued – on vested RSAs - - 208,858 - - - - -

Fees incurred for registration filings - - - - (186 ) - - (186 )

Stock issued – on vested RSAs - - 672,290 1 - - - 1

Foreign currency translation - - - - - (282 ) - (282 )

Stock issued as consideration for SciSafe earnout - - 64,130 - 817 - - 817

Fees incurred for registration filings - - - - (131 ) - - (131 )

Stock issued – on vested RSAs - - 788,952 1 (1 ) - - -

Other comprehensive loss - - - - - (397 ) - (397 )

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements

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BioLife Solutions, Inc.

Consolidated Statements of Cash Flows

Year Ended December 31,

Cash flows from operating activities

Impairment of intangible assets 110,364 - -

Amortization of loan costs 18 121 -

Change in fair value of contingent consideration (4,754 ) 2,875 1,575

Change in fair value of warrant liability - 121 (3,601 )

Change in fair value of investments (697 ) - (1,319 )

Accretion of investments (447 ) - -

Gain on acquisition of Sexton Biotechnologies, Inc. - (6,451 ) -

Stock issued for services - - 60

Loss on disposal of assets held for rent, net 773 609 365

Loss on disposal of property and equipment, net 745 482 -

Forgiveness of loans payable - (284 ) -

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

Prepaid expenses and other current assets 26 2,663 (50 )

Accrued expenses and other current liabilities 1,787 (3,936 ) 780

Net cash used in operating activities (8,488 ) (4,593 ) 6,645

Cash flows from investing activities

Investment in iVexSol preferred stock - - (1,000 )

Investment in PanTHERA Cryosolutions - - (995 )

Deposits on property and equipment - - (2,672 )

Deposits on assets held for rent - - (362 )

Proceeds from sale of marketable securities 420 - -

Maturities of marketable securities 8,500 - -

Investment in available-for-sale securities (53,116 ) - -

Proceeds from sale of equipment - 5 35

Cash flows from financing activities

Proceeds from Paycheck Protection Program ("PPP") Loan - - 2,175

Payoff of PPP Loan - - (2,175 )

Proceeds from term loan 20,000 - -

Payments on term loan (1,666 ) - -

Proceeds from equipment loans - 1,550 984

Payments on equipment loans (498 ) (214 ) -

Payments of contingent consideration - - (483 )

Fees paid related to issuance of common stock (131 ) (145 ) -

Proceeds from line of credit - 27,306 -

Payments on line of credit - (31,536 ) -

Proceeds from exercise of common stock options 323 1,418 1,472

Proceeds from exercise of warrants - - 40

Payments on financed insurance premium (1,375 ) (1,033 ) -

Non-cash investing and financing activities

Equipment acquired under operating leases $ 243 $ 6,875 $ 8,096

Equipment acquired under finance leases $ - $ 440 $ -

Purchase of property and equipment not yet paid $ 478 $ 197 $ -

Unrealized gains and losses on available-for-sale-securities $ 50 - -

Reclassification of warrant liabilities to equity upon exercise $ - $ - $ 110

Stock issued as consideration to acquire SciSafe $ 817 $ - $ 17,916

Stock issued as bonus consideration $ - $ - $ 314

Cash interest paid $ 586 $ 452 $ -

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements

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NOTES TO 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 help 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 cryogenic 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°C to negative 86°C. 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, sales tax liabilities, 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, warranty reserves, certain accrued expenses, share-based compensation, contingent consideration from business combinations, and the provision for income taxes.

The Company regularly assesses these estimates; however, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Basis of presentation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, SAVSU Technologies, Inc. (“SAVSU”), Arctic Solutions, Inc. doing business as CBS, 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.

All long-lived assets are maintained in the United States of America and the Netherlands.

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Foreign currency translation

The Company translates balance sheet and income statement items 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 quarterly exchange rates which approximate to average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of accumulated other comprehensive (loss) income in 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 and evaluating financial performance.

Revenue recognition

To determine revenue recognition for contractual arrangements that we determine are within the scope of Financial Accounting Standards Board (“FASB”) Topic 606,Revenue from Contracts with Customers, we perform the following five steps: (i) identify each contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to our performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price, taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 90 days. During the year ended December 31, 2022, the Company recognized approximately $511,000 of revenue that was included in the deferred revenue balance at the beginning of the year.

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, at a point in time when we transfer control of our products to our customers, which is upon shipment for substantially all transactions. Shipping and handling costs are classified as part of cost of product revenue in the Consolidated 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. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method, depending on the facts and circumstances relative to the contract. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of and during the year ended December 31, 2022.

The Company 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 a customer’s 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. These agreements may include extension and termination clauses. These Service Contracts do not allow for customers to purchase the underlying assets.

The Company 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 the Company 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 the Company’s property, plant, and equipment or operating right-of-use assets.

Under ASC 842, consistent with the previous guidance, the Company recognizes operating right-of-use asset embedded lessor arrangements on its Consolidated Balance Sheets in Operating right-of-use assets.

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BLFS US Equity

BLFS · 10-K · period ended 2022-12-31

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 6. RESERVED

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLFS US Equity☆

BLFS · 10-K · period ended 2022-12-31

ITEM 1A. RISK FACTORS

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. PROPERTIES

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

ITEM 6. RESERVED

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLFS US Equity