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Note 13 - Leases

3 Months Ended

Mar. 31, 2021

13. Leases

Lessee arrangements

We lease approximately 32,106 square feet in our Bothell, Washington headquarters. In November of 2020, the Company entered into an amendment to the current lease agreement associated with this facility to extend the term of the lease until July 31, 2031. The amendment included a $2.6 million tenant allowance that the Company expects to receive as improvements are made between 2021 and 2023. This lease includes 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, 2031, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the amended lease agreement, our monthly base rent is approximately $65,000 at March 31, 2021, with scheduled annual increases each August. We are also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses.

We lease approximately 3,460 square feet in our Menlo Park, California location. The term of our lease continues until December 31, 2021. In accordance with the lease agreement, the monthly base rent is approximately $11,000 at March 31, 2021. We are also required to pay an amount equal to the Company’s proportionate electrical expenses and common area maintenance fees.

We lease approximately 9,932 square feet in our Albuquerque, New Mexico location. The term of our lease continues until December 31, 2021 with two options to extend the terms of the lease, each of which is for an additional period of three years, with the first extension term commencing, if at all, on December 1, 2021, and the second extension term commencing, if at all, December 1, 2024. In accordance with the lease agreement, the monthly base rent is approximately $9,000 at March 31, 2021, with an increase at the beginning of each extension term if the lease term is extended.

We lease approximately 106,998 square feet in our Detroit, Michigan location under a month-to-month arrangement. The monthly base rent is approximately $35,000 at March 31, 2021.

We lease approximately 49,300 square feet at three locations in the United States. The terms of the three leases go through February 28, 2026, March 31, 2024 and January 31, 2023, respectively, and have no options to extend the terms. In accordance with the first lease, the Company’s monthly base rent is approximately $14,000 at March 31, 2021, with scheduled increases each March. In accordance with the second lease, the Company’s monthly base rent is approximately $13,000 at March 31, 2021, with scheduled increases each April. In accordance with the third lease, the Company’s monthly base rent is approximately $8,000 at March 31, 2021. For each lease, the Company is also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses.

We lease approximately 16,153 square feet in the United States. The term of the lease continues until June 30, 2024 and has no option to extend the term. In accordance with the amended lease agreement, the Company’s monthly base rent is approximately $13,000 at March 31, 2021, with scheduled increases each July. The Company is also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses.

We lease approximately 26,800 square feet in the United States. The term of our lease begins on the earlier of the completion of certain work set forth in the agreement and June 1, 2021 and continues until the last day of the calendar month that occurs 10 years and 5 months after the lease begins. In accordance with the lease agreement, the monthly base rent is approximately $27,000 at commencement, with scheduled increases each June, and includes provisions for rent increases of approximately 2.5% on the first day of the first month that follows the first anniversary of the beginning of the lease of each year and on each anniversary date thereafter.

Operating leases recorded on our consolidated balance sheet are primarily related to our Bothell, Washington headquarters space lease and our SciSafe space leases in the United States. We have not included extension options in our ROU assets or lease liabilities as we are not reasonably certain we will enter into the renewal options in their current terms. Our Detroit, Michigan and Menlo Park, California lease are not recorded on our consolidated balance sheet as the term expires in one year or less.

Our financing lease is related to research equipment, machinery, and other equipment.

The table below presents certain information related to the weighted average discount rate and weighted average remaining lease term for the Company’s leases:

	March 31,			December 31,
(In thousands)	2021			2020
Weighted average discount rate - operating leases		3.8	%		3.3	%
Weighted average discount rate - finance leases		5.7	%		5.7	%
Weighted average remaining lease term - operating leases		8.7			1.5
Weighted average remaining lease term - finance leases		3.6			0.9

Operating cash paid for amounts included in the measurement of operating lease liabilities in the three months ended March 31, 2021 and 2020 were $537,000 and $217,000, respectively.

The components of lease expense for the three months ended March 31, 2021 is as follows:

	Three Months Ended
	March 31,
(In thousands)	2021		2020
Operating lease costs	$	460	$	170
Short-term lease costs		137		59
Total operating lease costs		597		229

Variable lease costs		128		79
Total lease expense	$	725	$	308

Maturities of our operating lease liabilities as of March 31, 2021 is as follows:

(In thousands)	Operating Leases			Financing Leases
2021	$	1,395		$	101
2022		1,760			135
2023		1,380			135
2024		1,201			77
2025		1,107			26
Thereafter		5,717			3
Total lease payments		12,560			477
Less: interest		(1,806	)		(47	)
Total present value of lease liabilities	$	10,754		$	430

Lessor arrangements

Rental arrangements

The Company generates revenue from the leasing of our evo cold chain systems, which are typically cloud-connected shippers with enabling cold chain cloud applications, to customers pursuant to rental arrangements entered into with the customer. Revenue from the rental of cold chain systems is within the scope of FASB ASC Topic 842, “Leases”. All customers leasing shippers currently do so under month-to-month rental arrangements. We account for these rental transactions as operating leases and record rental revenue on a straight-line basis over the rental term.

Embedded leases

BioLife enters into various customer service agreements (collectively, “Service Contracts”) with customers to provide biological and pharmaceutical storage services. In certain of these Service Contracts, the property, plant, and equipment or operating right-of-use assets used to store the customer product are used only for the benefit of one customer. This is primarily driven by the customer’s desire to ensure that sufficient storage capacity is available in a specific geographic location for a set period of time.

BioLife has assessed its Service Contracts and concluded that certain of the contracts for the storage of customer products met the criteria to be considered a leasing arrangement (“Embedded Leases”), with BioLife as the lessor. The specific Service Contracts that met the criteria were those that provided a single customer with the ability to substantially direct the use of BioLife property, plant, and equipment or operating right-of-use assets.

Under ASC 842, consistent with the previous guidance, BioLife will continue to recognize operating right-of-use asset embedded lessor arrangements on its Consolidated Balance Sheets in operating right-of-use assets.

None of the Embedded Leases identified by BioLife qualify as a sales-type or direct finance lease. None of the operating leases for which BioLife is the lessor include options for the lessee to purchase the underlying asset at the end of the lease term or residual value guarantees, nor are any such operating leases with related parties.