BIOLIFE SOLUTIONS INC - Quarter Report: 2019 March (Form 10-Q)

 

Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

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FORM 10-Q

 

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

For the quarterly period ended March 31, 2019

 

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

For the transition period from        to

 

 

Commission File Number 001-36362

 

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BioLife Solutions, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

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DELAWARE	94-3076866
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

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

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

 

(425) 402-1400

(Telephone number, including area code)

 

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

 

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

 

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

Large accelerated filer  ☐   Accelerated filer  ☑   Non-accelerated filer  ☐   Smaller reporting company  ☑

Emerging Growth Company  ☐  

 

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

 

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

 

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

 

Title of each class	Trading symbol	Name of exchange on which registered
BioLife Solutions, Inc. Common Shares	BLFS	NASDAQ Capital Market

 

As of May 1, 2019, 18,799,386 shares of the registrant’s common stock were outstanding.

 

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BIOLIFE SOLUTIONS, INC.

 

FORM 10-Q

 

FOR THE QUARTER ENDED MARCH 31, 2019

 

TABLE OF CONTENTS

 

PART I.  FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	3
	Statements of Operations (unaudited) for the three month periods ended March 31, 2019 and 2018	4
	Statements of Shareholders’ Equity (unaudited) for the three month periods ended March 31, 2019 and 2018	5
	Statements of Cash Flows (unaudited) for the three month periods ended March 31, 2019 and 2018	6
	Notes to Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	17
PART II.	OTHER INFORMATION	17
Item 6.	Exhibits	17
	Signatures	18
	Index to Exhibits	19

 

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		March 31,				December 31,
(In thousands, except per share and share data)		2019 (unaudited)				2018
Assets
Current assets
Cash and cash equivalents		$	31,824			$	30,657
Accounts receivable, trade, net of allowance for doubtful accounts of $0 at March 31, 2019 and December 31, 2018			2,927				3,045
Inventories			4,060				3,509
Prepaid expenses and other current assets			346				353
Total current assets			39,157				37,564
Property and equipment
Leasehold improvements			1,284				1,284
Furniture and computer equipment			704				706
Manufacturing and other equipment			1,803				1,657
Subtotal			3,791				3,647
Less: Accumulated depreciation			(2,424	)			(2,328	)
Net property and equipment			1,367				1,319
Operating lease right-of-use assets			1,196				—
Investment in SAVSU			6,317				6,548
Long-term deposits			36				36
Total assets		$	48,073			$	45,467
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$	1,264			$	720
Accrued expenses and other current liabilities			142				91
Accrued compensation			630				998
Lease liability - operating, current portion			651				—
Lease liability – financing, current portion			14				—
Deferred rent, current portion			—				130
Total current liabilities			2,701				1,939
Deferred rent, long-term			—				349
Long-term lease liability - operating			980				—
Long-term lease liability - financing			13				—
Other long-term liabilities			13				31
Total liabilities			3,707				2,319
Commitments and Contingencies (Note 8)
Shareholders’ equity
Common stock, $0.001 par value; 150,000,000 shares authorized, 18,717,095 and 18,547,406 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively			19				19
Additional paid-in capital			114,951				114,160
Accumulated deficit			(70,604	)			(71,031	)
Total shareholders’ equity			44,366				43,148
Total liabilities and shareholders’ equity		$	48,073			$	45,467

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		Three Month Period Ended March 31,
(In thousands, except per share and share data)		2019				2018
Product revenue		$	5,770			$	3,815
Cost of product sales			1,647				1,364
Gross profit			4,123				2,451
Operating expenses
Research and development			372				346
Sales and marketing			848				612
General and administrative			2,204				1,353
Acquisition costs			208				—
Total operating expenses			3,632				2,311
Operating income			491				140
Other income (expense), net
Interest income			171				8
Interest expense			(3	)			(1	)
Loss from equity-method investment in SAVSU			(232	)			(144	)
Total other income (expenses), net			(64	)			(137	)
Net income			427				3
Less: Preferred stock dividends			—				(106	)
Net income (loss) attributable to common stockholders		$	427			$	(103	)
Basic net income (loss) per common share		$	0.02			$	(0.01	)
Diluted net income (loss) per common share		$	0.02			$	(0.01	)
Weighted average shares outstanding used to compute basic earnings per share			18,648,397				14,098,610
Weighted average shares outstanding used to compute diluted earnings per share			24,358,475				14,098,610

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(In thousands, except share data)		Preferred Stock Shares – Series A				Preferred Stock Amount – Series A				Common Stock Shares				Common Stock Amount				Additional Paid-in Capital				Accumulated Deficit				Total Shareholders’ Equity
Balance, December 31, 2017			4,250			$	––				14,021,422			$	14			$	84,036			$	(73,958	)		$	10,092
Stock based compensation																			373								373
Stock option/warrant exercises											62,438				––				73								73
Stock issued – on vested RSUs											55,614				––												––
Stock issued for services											5,939				––				36								36
Preferred stock dividends																							(106	)			(106	)
Net income																							3				3
Balance, March 31, 2018			4,250			$	––				14,145,413			$	14			$	84,518			$	(74,061	)		$	10,471
Balance, December 31, 2018			––				––				18,547,406			$	19			$	114,160			$	(71,031	)		$	43,148
Stock based compensation															––				606								606
Stock option/warrant exercises											104,697				––				185								185
Stock issued – on vested RSUs											64,992				––				––								––
Net income																							427				427
Balance, March 31, 2019			––			$	––				18,717,095			$	19			$	114,951			$	(70,604	)		$	44,366

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		Three Month Period Ended March 31,
(In thousands)		2019				2018
Cash flows from operating activities
Net income		$	427			$	3
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			98				78
Stock-based compensation expense			606				373
Amortization of operating lease liability			(43	)			—
Interest expense – finance type lease			2				—
Amortization of deferred rent related to lease incentives			—				(32	)
Loss from equity-method investment in SAVSU			232				144
Change in operating assets and liabilities
(Increase) Decrease in
Accounts receivable, trade			118				(23	)
Inventories			(551	)			10
Prepaid expenses and other current assets			6				12
Increase (Decrease) in
Accounts payable			553				(69	)
Accrued compensation and other current liabilities			(302	)			(101	)
Deferred rent			—				(3	)
Net cash provided by operating activities			1,146				392
Cash flows from investing activities
Purchase of property and equipment			(156	)			(41	)
Net cash used in investing activities			(156	)			(41	)
Cash flows from financing activities
Payments on equipment loan			(4	)			(3	)
Payments on capital lease obligation/finance lease			(4	)			(3	)
Proceeds from exercise of common stock options and warrants			185				73
Cash received in advance of issuance of stock on warrant exercises			—				57
Payments of preferred stock dividends			—				(106	)
Net cash provided by financing activities			177				18
Net increase in cash and cash equivalents			1,167				369
Cash and cash equivalents - beginning of period			30,657				6,663
Cash and cash equivalents - end of period		$	31,824			$	7,032
Non-cash investing and financing activities
Stock issued for services provided in prior period included in liabilities at year-end		$	—			$	36
Purchase of equipment with debt		$	—			$	18
Series A preferred stock dividends accrued not yet paid		$	—			$	106
Purchase of property & equipment not yet paid		$	46			$	—

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1. Organization and Significant Accounting Policies

 

Business

 

BioLife Solutions, Inc. (“BioLife,” “us,” “we,” “our,” or the “Company”) a leading developer, manufacturer and supplier of proprietary biopreservation media and automated thawing devices for cells and gene therapies. Our CryoStor^® freeze media and HypoThermosol^® hypothermic storage and shipping media are highly valued in the regenerative medicine, biobanking and drug discovery markets. These novel biopreservation media products are serum-free and protein-free, fully defined, and are formulated to reduce preservation-induced cell damage and death; offering commercial companies and clinical researchers significant improvement in shelf life and post-preservation viability and function. Our recently acquired 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 improve the quality of administration of high-value, temperature-sensitive biologic therapies to patients by standardizing the thawing process and reducing the risks of contamination and overheating, which are inherent with the use of traditional water baths. See Note 11 for more information.

 

Basis of Presentation

 

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

 

There have been no material changes to our significant accounting policies except as described below as compared to the significant accounting policies described in the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

Significant Accounting Policies Update

 

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

 

We adopted ASU 2016-02 and related ASUs (collectively ASC 842) effective January 1, 2019 using the additional transition option for the modified retrospective method and did not restate comparative periods. Consequently, periods before January 1, 2019 will continue to be reported in accordance with the prior accounting guidance, ASC 840, Leases. We elected the package of practical expedients, which permits us to retain prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. We also elected the practical expedient to combine lease and non-lease components for all of our leases other than net lease real estate leases.

 

The adoption of this standard resulted in the recording of operating lease right-of-use assets of $1.3 million and short-term and long-term lease liabilities of $1.8 million as of January 1, 2019. The difference between right-of-use assets and lease liabilities relates to liabilities of $0.5 million for deferred rent and lease incentives liabilities that were included on our Balance Sheet prior to adoption of ASC 842. These amounts were eliminated at the time of adoption and are included in the lease liabilities. Adoption of ASC 842 did not have a material impact on the Company’s net earnings and had no impact on cash flows.

 

Equity Method Investments

 

We account for our ownership in SAVSU Technologies, Inc. (“SAVSU”) using the equity method of accounting. This method states that if the investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity method. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying value in the balance sheet and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of other income (expense), net in the statements of operations. Our effective ownership in SAVSU was 44.4% at March 31, 2019 and December 31, 2018. For the three months ended March 31, 2019 and 2018, SAVSU’s net loss totaled $522,000 and $538,000, respectively.

 

Concentrations of credit risk and business risk

 

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

 

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

 

Recent Accounting Pronouncements

 

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our Financial Statements.

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2. Fair Value Measurement  

 

In accordance with FASB Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures,” (“ASC Topic 820”), the Company measures its cash and cash equivalents and short-term investments at fair value on a recurring basis. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

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

 

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

 

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

 

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

 

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

 

(In thousands)

 

 

 

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

 

3. Inventory  

 

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

 

 

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4. Deferred Rent  

 

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

 

 

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

 

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

 

5. Share-based Compensation          

 

Service Vesting-Based Stock Options

 

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

 

 

We recognized stock compensation expense of $144,000 and $153,000 related to service vesting-based options during the three month periods ending March 31, 2019 and 2018, respectively. As of March 31, 2019, there was $31.0 million of aggregate intrinsic value of outstanding service vesting-based stock options, including $26.5 million of aggregate intrinsic value of exercisable service vesting-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2019. This amount will change based on the fair market value of the Company’s stock. During the quarters ended March 31, 2019 and 2018 intrinsic value of service vesting-based awards exercised was $1.4 million and $270,000, respectively. The weighted average remaining contractual life of service vesting-based options outstanding and exercisable at March 31, 2019 is 5.4 years and 5.3 years, respectively. Total unrecognized compensation cost of service vesting-based stock options at March 31, 2019 of $374,000 is expected to be recognized over a weighted average period of 1.4 years.

 

Performance-based Stock Options

 

The Company’s Board of Directors implemented a Management Performance Bonus Plan for 2017. Based on achieving varying levels of specified revenue for the year ended December 31, 2017, up to 1,000,000 options to purchase shares of the Company’s common stock may be vested. The options have an exercise price of $1.64, and if revenue levels for 2017 were met, would vest 50% on the release of the Company’s audited financial statements for 2017, and 50% one year thereafter. If the minimum performance targets were not achieved, no options would vest. On February 27, 2018, the Company’s Board of Directors determined that, subject to the completion of the 2017 audit, the specified revenue target had been achieved. Accordingly, 999,997 options to purchase shares of the Company’s common stock vest as follows: 50% of the options vested on March 8, 2018 and the remaining 50% vested on March 8, 2019.

 

We recognized stock compensation expense of none and $125,000 related to performance-based options during the three month periods ending March 31, 2019 and 2018, respectively. As of March 31, 2019, there was $15.7 million of aggregate intrinsic value of outstanding and exercisable performance-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2019. This amount will change based on the fair market value of the Company’s stock. During the quarters ended March 31, 2019 and 2018 there were no performance-based options exercised. The weighted average remaining contractual life of performance-based options outstanding and exercisable at March 31, 2019, is 2.7 years. There is no unrecognized compensation cost of performance-based stock options at March 31, 2019. There were 964,997 performance-based stock options outstanding at the beginning and ending of the three month period ending March 31, 2019.

 

There were no stock options granted to employees and non-employee directors in the three month periods ended March 31, 2019 and 2018.

 

 

Restricted Stock

 

Service vesting-based restricted stock

 

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

 

 

The aggregate fair value of the service vesting-based awards granted during the three months ended March 31, 2019 and 2018 was $2.6 million and $1.0 million, respectively, which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate fair value of the service vesting-based restricted stock awards that vested was $853,000 and $307,000 for the three months ended March 31, 2019 and March 31, 2018, respectively.

 

We recognized stock compensation expense of $255,000 and $95,000 related to service vesting-based restricted stock awards for the three months ended March 31, 2019 and March 31, 2018, respectively. As of March 31, 2019, there was $3.5 million in unrecognized compensation costs related to service vesting-based restricted stock awards. We expect to recognize those costs over 3.6 years.

 

Performance-based restricted stock

 

In 2019, we engaged an independent executive compensation firm, FW Cook, to review current compensation practices and make updated recommendations to the Compensation Committee and the full Board of Directors. With consideration to the recommendations of FW Cook, including an evaluation of the compensation practices of a like-situated peer group of public life science companies, our Compensation Committee recommended and our Board of Directors approved a compensation program which included apportioning a portion of management’s equity compensation to performance-based restricted stock awards. Specifically, our executive officers were granted service-based restricted stock awards (94,247 shares of restricted stock in the aggregate vesting over four years) and performance-based restricted stock awards (94,247 shares of restricted stock in the aggregate). The performance-based restricted stock awards will vest as to between 0% and 200% of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on January 1, 2019 through December 31, 2020 as compared to the total shareholder return of 20 of our peers (such peers having been determined by our Compensation Committee with assistance of FW Cook immediately prior to the grant date). The 94,247 performance-based restricted stock awards will be awarded if we are in the 50th percentile of total shareholder return versus the peer group. The maximum number of performance-based restricted stock awards that may be granted (188,494 shares in the aggregate) will be awarded if we are in the 80th percentile of total shareholder return versus the peer group and no units will be awarded for less than 30th percentile of total shareholder return versus the peer group.

 

During the three month period ended March 31, 2019, we assumed 94,247 performance-based restricted stock awards will be awarded with a grant-date fair value of $17.84. The aggregate fair value of the performance-based restricted stock awards was $1.7 million. We recognized stock compensation expense of $207,000 for the three months ended March 31, 2019. As of March 31, 2019, there was $1.5 million in unrecognized non-cash compensation costs related to performance-based restricted stock awards. We expect to recognize those costs over 1.8 years.

 

We recorded total stock compensation expense for the three month periods ended March 31, 2019 and 2018, as follows:

 

  

 

6. Warrants  

 

At March 31, 2019 and December 31, 2018, we had 4,075,005 and 4,080,005 warrants outstanding, respectively and exercisable with a weighted average exercise price of $4.35 at the end of each period. During the three month period ended March 31, 2019, 5,000 warrants were exercised with a weighted average exercise price of $4.75, yielding $24,000 in proceeds to the Company. 

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7. Net Income (Loss) per Common Share                  

 

Basic earnings per share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutive common stock equivalents outstanding as determined by the treasury method during the period. In periods when we have a net loss, common stock equivalents are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect. For the three month period ended March 31, 2019, we excluded a nominal amount of unvested stock awards from our calculation of diluted weighted average shares because they were antidilutive. For the three month period ended March 31, 2018, we excluded 3.3 million common stock options, 6.7 million warrants, and 338,000 unvested stock awards from our calculation of diluted weighted average shares because they were antidilutive.

 

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

 

 

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8. Commitments and Contingencies

 

Employment agreements

 

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

 

Litigation

 

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

 

9. Revenue

 

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

 

The following table disaggregates revenue by market segment and distributors:

 

 

 

10. Leases

 

Our operating leases are primarily related to our Bothell, Washington headquarters space lease. The term of our lease continues until July 31, 2021 with two options to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1, 2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. We have not included these extension options in our ROU assets or lease liabilities as we are reasonably certain we will not enter into the renewal option in their current terms. Our financing lease is related to research equipment. We used a weighted average discount rate of 6.5%, our market collateralized borrowing rate, and 8.1%, the weighted average implied interest on our leases, to determine our operating and financing lease liabilties, respectively. The weighted average remaining term of our operating and financing leases are 2.3 years and 1.9 years, respectively. The operating lease costs and cash paid in the three months ended March 31, 2019 was $142,000 and $186,000, respectively.

 

Maturities of lease liabilities as of March 31, 2019

 

 

 

 

11. Subsequent Event

 

On April 1, 2019, we closed the previously announced transaction for the acquisition of 100% of Astero Bio Corporation ("Astero"), an innovator in the design, development and commercialization of novel automated thawing devices for cell and gene therapies, for an upfront cash payment of $8 million. This transaction is expected to further strengthen BioLife's position as a leading supplier of disruptive, enabling solutions used in the manufacture, storage and distribution of cell and gene therapies. We believe Astero's ThawSTAR product line broadens BioLife's bioproduction tools portfolio and increases the Company's footprint and engagement level in its customers' cell and gene therapy manufacturing workflow. Under the terms of the share purchase agreement, Astero shareholders are eligible to receive up to an additional $4.5 million in cash based on the completion of certain product development milestones and an additional $8.0 million in cash over the next three years based on attainment of specific revenue targets.

 

We incurred $208,000 of related acquisition costs for the three month period ending March 31, 2019, which are reflected in our Statement of Operations. We expect to report Astero as a consolidated entity as of April 1, 2019. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting.

 

Due to the limited time since the acquisition date and the effort required to assess the fair value of assets acquired and liabilities assumed, the initial accounting for the business combination is incomplete at the time of this filing. As a result, the Company is unable to provide the amounts recognized for the major classes of assets acquired and liabilities assumed, acquisition contingencies and goodwill. Also, the Company is unable to provide pro forma revenues and earnings of the combined entity. This information is expected to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

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