|
|
|
||
(State or other jurisdiction of
incorporation) |
(Commission File Number)
|
(IRS Employer Identification No.)
|
|
|
|
|
Title of each class
|
Trading symbol
|
Name of exchange on which registered
|
|
|
The
|
Item 9.01
|
Financial Statements and Exhibits.
|
(a)
|
Financial Statements of Businesses Acquired.
|
(b)
|
Pro Forma Financial Information.
|
(d)
|
Exhibits.
|
Exhibit No.
|
Description
|
23.1
|
|
99.1
|
|
99.2
|
|
99.3
|
|
104
|
Cover Page Interactive Data File (formatted as Inline XBRL).
|
BioLife Solutions, Inc.
|
|||
Date: July 7, 2021
|
By:
|
/s/ Roderick de Greef
|
|
Name: Roderick de Greef
Title: Chief Financial and Chief Operating Officer
|
Exhibit 23.1
Consent of Independent Auditor
BioLife Solutions, Inc.
Bothell, Washington
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-233912 and 333-222433) and on Form S-8 (Nos. 333-222437, 333-205101, and 333-189551) of BioLife Solutions, Inc. of our report dated April 13, 2021 relating to the consolidated financial statements of Global Cooling, Inc., which appear in this Current Report on Form 8-K/A of BioLife Solutions, Inc.
/s/ Clark, Schaefer, Hackett & Co.
Columbus, Ohio
July 7, 2021
Exhibit 99.1
Global Cooling, Inc. and Subsidiary
Consolidated Financial Statements
December 31, 2020 and 2019
with Independent Auditors’ Report
TABLE OF CONTENTS
Independent Auditors’ Report |
1 |
Consolidated Financial Statements: |
|
Consolidated Balance Sheets |
3 - 4 |
Consolidated Statements of Operations |
5 |
Consolidated Statements of Stockholders’ Equity |
6 |
Consolidated Statements of Cash Flows |
7 |
Notes to the Consolidated Financial Statements |
8 - 21 |
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
of Global Cooling, Inc. and Subsidiary
Athens, Ohio
We have audited the accompanying consolidated financial statements of Global Cooling, Inc. (a Delaware Corporation) and Subsidiary (the Company), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Cooling, Inc. and Subsidiary as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ Clark, Schaefer, Hackett & Co.
Columbus, Ohio
April 13, 2021
Global Cooling, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2020 and 2019
|
|||||||||
2020 |
2019 |
||||||||
Assets | |||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 237,705 | 3,197,164 | ||||||
Accounts receivable, trade, net |
6,027,323 | 2,984,471 | |||||||
Receivables, other |
65,424 | - | |||||||
Inventory, net |
8,529,294 | 6,435,753 | |||||||
Prepaid expenses |
212,667 | 198,329 | |||||||
Total current assets |
15,072,413 | 12,815,717 | |||||||
Property and equipment: |
|||||||||
Machinery |
2,771,582 | 2,526,190 | |||||||
Furniture and equipment |
555,276 | 631,360 | |||||||
Computers and equipment |
683,591 | 776,164 | |||||||
Leasehold improvements |
665,652 | 641,295 | |||||||
Construction in progress |
394,290 | 149,389 | |||||||
5,070,391 | 4,724,398 | ||||||||
Less accumulated depreciation |
1,504,688 | 2,081,259 | |||||||
Total property and equipment |
3,565,703 | 2,643,139 | |||||||
Other assets: |
|||||||||
Deposits |
3,700 | 3,700 | |||||||
Other assets |
3,496 | 4,260 | |||||||
Notes receivable - related party |
374,000 | 374,000 | |||||||
Total other assets |
381,196 | 381,960 | |||||||
Total assets |
$ | 19,019,312 | 15,840,816 |
See notes to the consolidated financial statements.
Global Cooling, Inc. and Subsidiary
Consolidated Balance Sheets (continued)
December 31, 2020 and 2019
Liabilities and Stockholders' Equity |
||||||||
2020 |
2019 |
|||||||
Current liabilities: |
||||||||
Line of credit |
$ | 757,562 | 1,198,700 | |||||
Accounts payable - trade |
7,393,945 | 5,831,777 | ||||||
Customer advances |
2,479,658 | 222,530 | ||||||
Accrued compensation |
924,104 | 523,685 | ||||||
Other accrued expenses |
3,560,091 | 688,446 | ||||||
Long-term debt, current portion |
758,750 | - | ||||||
Deferred rent, current portion |
- | 11,745 | ||||||
Capital lease obligations, current portion |
28,826 | 23,460 | ||||||
Total current liabilities |
15,902,936 | 8,500,343 | ||||||
Long-term liabilities: |
||||||||
Deferred rent, less current portion |
116,415 | 93,964 | ||||||
Capital lease obligations, less current portion |
95,467 | 77,470 | ||||||
Convertible promissory notes payable |
1,500,000 | - | ||||||
Long-term debt, less current portion |
3,545,236 | 4,410,145 | ||||||
Total long-term liabilities |
5,257,118 | 4,581,579 | ||||||
Stockholders' equity: |
||||||||
Preferred stock - Series A, 100,000 shares authorized and 83,030 and 82,406 outstanding, par value $40, with liquidation preferences of $4,947,008 and $4,689,564 at December 31, 2020 and 2019, respectively. |
3,321,200 | 3,296,240 | ||||||
Preferred stock - Series B, 60,0000 shares authorized and 59,999 outstanding, par value $.01, with liquidation preferences of $8,345,693 and $512,455 at December 31, 2020 and 2019, respectively. |
600 | 600 | ||||||
Common stock - 600,000 shares authorized and 296,719 and 295,969 outstanding at December 31, 2020 and 2019, respectively, par $.01 |
2,967 | 2,960 | ||||||
Additional paid-in-capital |
22,165,623 | 21,408,435 | ||||||
Accumulated other comprehensive income, net of tax |
(114,441 | ) | (122,833 | ) | ||||
Retained deficits |
(27,789,316 | ) | (22,099,133 | ) | ||||
(2,413,367 | ) | 2,486,269 | ||||||
Non-controlling interest |
272,625 | 272,625 | ||||||
Total stockholders' equity |
(2,140,742 | ) | 2,758,894 | |||||
Total liabilities and stockholders' equity |
$ | 19,019,312 | 15,840,816 |
See notes to the consolidated financial statements.
Global Cooling, Inc. and Subsidiary
Consolidated Statements of Operations
Years Ended December 31, 2020 and 2019
2020 |
2019 |
|||||||
Sales, net of discounts and allowances |
$ | 39,282,868 | 35,209,161 | |||||
Cost of sales |
27,050,393 | 26,617,522 | ||||||
Gross profit |
12,232,475 | 8,591,639 | ||||||
Litigation settlement |
4,000,000 | - | ||||||
General and administrative expenses |
14,705,958 | 13,263,623 | ||||||
18,705,958 | 13,263,623 | |||||||
Loss from operations |
(6,473,483 | ) | (4,671,984 | ) | ||||
Other income (expense): |
||||||||
Debt forgiveness |
2,084,989 | - | ||||||
Ohio Bureau of Workers Compensation Dividends |
40,360 | - | ||||||
Other income |
15,120 | - | ||||||
Other expense |
(13,976 | ) | - | |||||
Interest income |
- | 20,758 | ||||||
Interest expense |
(598,254 | ) | (390,284 | ) | ||||
1,528,239 | (369,526 | ) | ||||||
Loss before income taxes |
(4,945,244 | ) | (5,041,510 | ) | ||||
Expense for income taxes |
- | (1,238,592 | ) | |||||
Net loss |
(4,945,244 | ) | (6,280,102 | ) | ||||
Other comprehensive loss - |
||||||||
Gain (loss) on foreign currency translation |
8,392 | (4,648 | ) | |||||
Total comprehensive loss |
$ | (4,936,852 | ) | (6,284,750 | ) |
See notes to the consolidated financial statements.
Global Cooling, Inc. and Subsidiary
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2020 and 2019
Accumulated |
||||||||||||||||||||||||||||
Additional |
Other |
Non- |
||||||||||||||||||||||||||
Preferred |
Common |
Paid-In |
Comprehensive |
Retained |
Controlling |
|||||||||||||||||||||||
Stock |
Stock |
Capital |
Loss |
Deficits |
Interest |
Total |
||||||||||||||||||||||
Balance as of January 1, 2019 |
$ | 3,234,207 | 2,781 | 17,997,465 | (118,185 | ) | (15,074,803 | ) | 265,504 | 6,306,969 | ||||||||||||||||||
Stock-based compensation on options |
- | - | 88,175 | - | - | - | 88,175 | |||||||||||||||||||||
Issuance of preferred stock |
153 | - | 1,867,545 | - | - | - | 1,867,698 | |||||||||||||||||||||
Stock options and warrant exercises |
62,480 | 179 | 718,143 | - | - | - | 780,802 | |||||||||||||||||||||
Accrued dividends on preferred stock |
- | - | 737,107 | - | (744,228 | ) | 7,121 | - | ||||||||||||||||||||
Loss on foreign currency translation |
- | - | - | (4,648 | ) | - | - | (4,648 | ) | |||||||||||||||||||
Net loss |
- | - | - | - | (6,280,102 | ) | - | (6,280,102 | ) | |||||||||||||||||||
Balance as of December 31, 2019 |
3,296,840 | 2,960 | 21,408,435 | (122,833 | ) | (22,099,133 | ) | 272,625 | 2,758,894 | |||||||||||||||||||
Stock-based compensation on options |
- | - | (26,819 | ) | - | - | - | (26,819 | ) | |||||||||||||||||||
Stock options and warrant exercises |
24,960 | 7 | 39,068 | - | - | - | 64,035 | |||||||||||||||||||||
Accrued dividends on preferred stock |
- | - | 744,939 | - | (744,939 | ) | - | - | ||||||||||||||||||||
Gain on foreign currency translation |
- | - | - | 8,392 | - | - | 8,392 | |||||||||||||||||||||
Net loss |
- | - | - | - | (4,945,244 | ) | - | (4,945,244 | ) | |||||||||||||||||||
Balance as of December 31, 2020 |
$ | 3,321,800 | 2,967 | 22,165,623 | (114,441 | ) | (27,789,316 | ) | 272,625 | (2,140,742 | ) |
See notes to the consolidated financial statements.
Global Cooling, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
2020 |
2019 |
|||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (4,945,244 | ) | (6,280,102 | ) | |||
Adjustments to reconcile net loss to net cash from operating activities: |
||||||||
Depreciation |
492,543 | 490,340 | ||||||
Debt forgiveness |
(2,084,989 | ) | ||||||
Change in deferred tax assets |
- | 1,238,592 | ||||||
Bad debt expense |
10,639 | 7,862 | ||||||
Provision for obsolete inventory |
- | 22,639 | ||||||
Deferred rent |
10,706 | 5,905 | ||||||
Stock-based compensation on options |
(26,819 | ) | 88,175 | |||||
Amortization of debt cost |
24,151 | 17,022 | ||||||
Effects of changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(3,053,491 | ) | 1,745,499 | |||||
Other receivable |
(65,424 | ) | - | |||||
Inventory, net |
(2,093,541 | ) | (2,576,418 | ) | ||||
Prepaid expenses |
(14,338 | ) | (707 | ) | ||||
Accounts payable - trade |
1,562,168 | 1,683,731 | ||||||
Other assets |
764 | (4,260 | ) | |||||
Customer advances |
2,257,128 | 6,309 | ||||||
Other accrued expenses |
2,871,645 | (318,846 | ) | |||||
Accrued compensation |
400,419 | (114,905 | ) | |||||
Net cash flows from operating activities |
(4,653,683 | ) | (3,989,164 | ) | ||||
Net cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(1,368,103 | ) | (1,211,462 | ) | ||||
Cash flows from financing activities: |
||||||||
Payments on capital lease obligations |
(23,641 | ) | (14,587 | ) | ||||
Borrowings (payments) on line of credit |
(571,448 | ) | (251,300 | ) | ||||
Proceeds from notes payable |
- | 1,750,000 | ||||||
Proceeds from payroll protection program loan and JobsOhio Loan | 2,084,989 | - | ||||||
Proceeds from convertible notes payable |
1,500,000 | - | ||||||
Payments of debt issuance cost |
- | (32,794 | ) | |||||
Issuance of preferred stock |
- | 1,867,698 | ||||||
Stock options and warrant exercises |
64,035 | 780,802 | ||||||
Net cash flows from financing activities |
3,053,935 | 4,099,819 | ||||||
Foreign currency translation adjustment |
8,392 | (4,648 | ) | |||||
Decrease in cash |
(2,959,459 | ) | (1,105,455 | ) | ||||
Cash and cash equivalents, beginning of year |
3,197,164 | 4,302,619 | ||||||
Cash and cash equivalents, end of year |
$ | 237,705 | 3,197,164 |
See notes to the consolidated financial statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following accounting principles and practices of Global Cooling, Inc. and Subsidiary (collectively, the Company) are set forth to facilitate the understanding of data presented in the consolidated financial statements.
Nature of operations
Global Cooling, Inc. is engaged primarily in the manufacturing and retail sales of environmentally friendly, ultra-low temperature freezers, which are currently used worldwide by life science, pharmaceutical, biomedical/clinical, and biotechnology customers. The Company also provides parts, maintenance, and repair services for the products they sell.
Global Cooling B.V. (GCBV), a Dutch Company, is a licensing company. GCBV licenses various intellectual properties to manufacturers worldwide. In 2008, Global Cooling, Inc. became a majority owner in GCBV.
Principles of consolidation
The consolidated financial statements include the accounts of Global Cooling, Inc. and GCBV. All inter-company balances and transactions have been eliminated in consolidation.
Basis of accounting
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Revenue recognition
The Company derives its revenues primarily from the sale of manufactured freezers. Revenues are recognized when control of these products are transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and freight cost charged to customers are reported within revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year.
Revenue from performance obligations satisfied at a point in time consists of the sale of manufactured freezers. For performance obligations related to the sale of manufactured freezers, control transfers to the customer at a point in time. The Company’s principal terms of sale are FOB Shipping Point and FOB Destination and the Company transfers control and records revenue for product sales either upon shipment or delivery to the customer, respectively.
The nature of the Company’s business gives rise to variable consideration, including allowances and returns that generally decrease the transaction price which reduces revenue. These variable amounts are generally credited to the customer, based on product returns or price concessions, and based upon the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are made based upon historical experience and known trends.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Shipping and freight cost
Shipping and freight costs incurred by the Company are included in cost of goods sold.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents.
Accounts receivable
The Company records accounts receivable when the control of the product is transferred to the customer and amounts are stated at the amount billed to the customer net of any allowance for doubtful accounts, as needed. Management provides for probable uncollectible amounts through a charge to bad debt expense in the consolidated statements of operations and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to receivables. Management has recorded an allowance for doubtful accounts of $853 and $12,345 as of December 31, 2020 and 2019, respectively.
Inventory
Inventory is valued at the lower of cost or net realizable value using the standard cost method, which approximates the first-in, first-out (“FIFO”) method. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in determining net realizable value and a reserve for obsolescence is recognized if necessary. Cost includes material, labor and applicable manufacturing overhead.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated remaining useful lives of the corresponding assets, which ranges from three to thirty-nine years. Expenditures for repairs or renewal and betterments that extend the useful lives of property and equipment are capitalized. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Warranty reserve
The Company accrued an estimate of its exposure to warranty claims based on current and historical product sales data and warranty cost incurred, which in management’s judgment, is adequate to absorb potential claims. Because of the inherent uncertainties in estimating warranty costs, it is at least reasonably possible that the estimate used will change within the near-term.
Advertising costs
The Company expenses advertising costs as incurred. Advertising expenses of $680,556 and $392,886 were recognized for the years ended December 31, 2020 and 2019, respectively.
Translation of foreign currencies
The current assets and liabilities of GCBV are translated at year end exchange rates, capital transactions are translated based on the historical exchange rate, and revenues and expenses are translated at average rates. Translation adjustments are reported as a separate component of stockholders’ equity.
Other comprehensive income
Comprehensive income is the total of net income plus gains and losses on foreign currency translation adjustments. Accumulated other comprehensive income consisting of accumulated foreign currency gains and losses, is reported in stockholder equity, net of tax.
Income taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Reclassifications
Certain amounts in the 2019 financial statements have been reclassified to conform to the 2020 presentation.
2. |
INVENTORY: |
Inventory consists of the following at December 31:
2020 |
2019 |
|||||||
Raw material |
$ | 6,318,162 | 3,899,417 | |||||
Work in process |
1,475,730 | 1,371,539 | ||||||
Finished goods |
735,402 | 1,164,797 | ||||||
$ | 8,529,294 | 6,435,753 |
3. |
INCOME TAXES |
The income tax provision consisted of the following at December 31, 2020 and 2019:
2020 |
2019 |
|||||||
Deferred federal tax expense |
$ | 1,051,666 | 1,003,368 | |||||
Change in valuation allowance |
(1,051,666 | ) | (2,241,960 | ) | ||||
Total income tax expense |
$ | - | (1,238,592 | ) |
The components of the deferred tax assets at December 31, 2020 and 2019, are as follows:
2020 |
2019 |
|||||||
Deferred tax assets: |
||||||||
Deferred tax assets |
$ | 5,176,521 | 4,124,855 | |||||
Deferred tax liabilities |
(3,464 | ) | (3,464 | ) | ||||
Valuation allowance |
(5,173,057 | ) | (4,121,391 | ) | ||||
Net deferred tax assets |
$ | - | - |
Deferred tax assets are attributable to changes in certain valuation allowances, accrued expenses, and net operating loss carryforward. Deferred tax liabilities result from excess accumulated tax depreciation over book depreciation and differences in losses on assets disposed. Permanent differences result from deductions for life insurance, options compensation, and 50% of meals. The deferred tax assets include a federal net operating loss carryforward of $22,831,954 as of December 31, 2020. If not utilized, federal net operating loss carryforwards of $10,700,638 will expire between 2030 and 2037. Net operating loss carryforwards of $12,131,316 are available indefinitely. Certain changes in the Company’s ownership may occur in the future, which may result in limitations on the amount of loss carry forwards that can be utilized to offset taxable income in the future.
4. |
LINE OF CREDIT: |
Effective December 16, 2020, the Company obtained a line of credit with a bank which expires in June 2023. The outstanding balance bears interest at a floating rate equal the 3 month LIBOR rate plus 5.50%. The maximum allowed on the line of credit is $5,000,000. The line is secured by all the assets of the Company. The Company’s credit agreement with the bank contains certain restrictions and covenants. The Company must maintain a minimum level of availability on the line of credit. The covenants have been met by the Company as of December 31, 2020.
The Company maintained a line of credit with another bank through December 16, 2020. The outstanding balance bore interest at a floating rate equal the PRIME rate plus 1%. The maximum allowed on the line of credit was $2,000,000. The line was collateralized by 80% of accounts receivable and 40% of eligible inventory. The Company’s credit agreement with the bank contained certain restrictions and covenants. Under those restrictions, the Company had to obtain the consent of the bank to pay dividends or borrow from others. In addition, the Company had to maintain certain levels of excess availability on the line of credit. As of December 31, 2020, the covenants have been met.
5. |
PAYROLL PROTECTION PROGRAM LOAN: |
The Company received a Paycheck Protection Program (PPP) loan as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of $1,484,989 in April 2020. Under the terms of the loan, all or a portion of the loan may be forgiven in accordance with the program requirements. Repayments of unforgiven principal and interest at 1% were to begin in the tenth month following the end of the covered period, as defined, in equal installments over seventeen months. The Company received approval for the forgiveness of the entire amount of the PPP loan from the Small Business Administration in November 2020.
6. |
WORKFORCE RETENTION LOAN PROGRAM: |
In 2020, the Company received a Workforce Retention Loan of $600,000 through the JobsOhio program. Under the terms of the loan, all or a portion of the loan may be forgiven in accordance with the program requirements. The note is non-interest bearing. Repayments of unforgiven principal are to begin in the thirteenth month from disbursement of the loan, in equal installments over eighty-three months. The Company received approval of the forgiveness in the entire amount of the loan in December 2020.
7. |
CONVERTIBLE PROMISSORY NOTES: |
During 2020, the Company issued $1,500,000 of convertible promissory notes. The notes are subordinated to all other debts. The promissory notes and accrued interest automatically convert to shares in connection with the qualified financing or non-qualified financing event as defined in the debt agreements. The principal balance and accrued interest will convert at a discounted stock price. However, the discount was contingent upon an event that was not reasonably predictable at the time of debt issuance so no beneficial interest related to the discount conversion price was recorded. The notes accrue interest at a rate of 8% per year. If qualified financing or non-qualified financing is not completed by the end of the term of the notes, the Company will repay the investor’s total debt outstanding and accrued interest. As of December 31, 2020 the outstanding principal totaled $1,500,000 and accrued interest totaled $55,000.
8. |
LONG-TERM DEBT: |
Long-term debt consists of the following at December 31:
2020 |
2019 |
|||||||
Note payable to Enhanced Capital Ohio Rural Fund, LLC, interest only payable monthly, beginning November 2019 through February 2021, at an interest rate of 11.5%. Beginning March 1, 2021 payable in quarterly principal payments of $43,750 plus accrued interest through November 2021. Beginning December 1, 2021 payable in quarterly payments of $87,500 plus accrued interest, with a final balloon payment due September 7, 2023. The note was secured by substantially all assets of the Company. |
$ | 1,750,000 | 1,750,000 | |||||
Note payable to Advantage, interest only payable monthly, beginning December 2018 through December 30, 2020, at an interest rate of LIBOR (1.76% as of December 31, 2019) + 6.50%. Beginning March 1, 2021 payable in quarterly principal payments of $135,000 plus accrued interest, with a final balloon payment due September 7, 2023. The note was secured by substantially all assets of the Company.* |
2,750,000 | 2,750,000 | ||||||
4,500,000 | 4,500,000 | |||||||
Unamortized debt discount and debt issuance costs |
(196,014 | ) | (89,855 | ) | ||||
4,303,986 | 4,410,145 | |||||||
Less current portion |
758,750 | - | ||||||
$ | 3,545,236 | 4,410,145 |
*Subsequent to year-end, the terms of this note were renegotiated resulting in the delay of principal payments until 2023. Since the terms of the notes were changed prior to issuance of the financial statements, the estimated future maturities of long-term debt has been updated to reflect the revised terms.
Aggregate maturities of long-term debt for the next five years and thereafter are as follows:
Year Ending December 31: |
||||
2021 |
$ | 218,750 | ||
2022 |
350,000 | |||
2023 |
1,481,250 | |||
2024 |
1,400,000 | |||
2025 |
- | |||
Thereafter |
1,112,697 | |||
$ | 4,562,697 |
The Company must maintain a certain fixed coverage ratio and certain levels of EBITDA. These requirements were not met and they had been waived by the Banks.
9. |
WARRANTY RESERVE: |
The warranty liability is included in other accrued expenses in the accompanying consolidated balance sheets. Changes in the Company’s warranty liability were as follows:
2020 |
2019 |
|||||||
Warranty accrual, beginning of year |
$ | 437,410 | 484,805 | |||||
Additions to warranty accrual |
2,465,334 | 1,219,422 | ||||||
Actual warranty expenditures |
(2,327,265 | ) | (1,266,817 | ) | ||||
Warranty accrual, end of year |
$ | 575,479 | 437,410 |
10. |
STOCK OPTION PLAN: |
The Company maintains the Global Cooling, Inc. Stock Option Plan (the Plan) to further the long-term growth of the Company by offering competitive incentive compensation to key employees, non-employee directors and consultants of the Company. Options are granted at an exercise price that is at least equal to the fair value of the shares at the date of the grant. Under the terms of the Plan, the Company is authorized to grant incentive and nonqualified stock options as defined under the Internal Revenue Code. The Plan is administered by the Board of Directors (the Board). The Board selects the individuals to whom options will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the Plan. Options vest ratably over the required service period. Options granted under the Plan will expire no later than the tenth anniversary of the grant date.
The total number of awards available for grant under the Plan represents 140,000 and 100,000 shares of the Company’s common stock as of December 31, 2020 and 2019, respectively. At December 31, 2020, there were 79,450 options outstanding for this Plan, 35,074 options that have been exercised and 25,476 remaining shares available for grant under the Plan. At December 31, 2019, there were 57,521 options outstanding for this Plan, 34,324 options that have been exercised and 8,155 remaining shares available for grant under the Plan.
The fair values of the options granted to each employee were estimated on the date of the grant using the Black-Scholes-Merton option pricing model that uses the assumptions concerning expected volatility, expected term, and the expected risk-free rate of return. Expected volatility was estimated by management using similar public company data. The expected term of options granted is stated in the contract. Risk-free rates of return are yields for constant maturity U.S. Treasury Notes maturing approximately at the end of the option life.
The weighted-average grant date fair value of the options granted during 2020 and 2019 was $38.65 and $89.76. The weighted average remaining contractual life of options outstanding at December 31, 2020 and 2019 was approximately two and three years, respectively.
A summary of the status of the Plan as of December 31, 2020 and 2019 and changes during the years then ended were as follows:
Weighted |
||||||||
Average |
||||||||
Options |
Exercise Price |
|||||||
Outstanding at January 1, 2019 |
51,940 | $ | 89.76 | |||||
Granted |
20,500 | $ | 40.00 | |||||
Exercised |
(1,750 | ) | $ | 57.00 | ||||
Forfeited |
(13,169 | ) | $ | 79.36 | ||||
Outstanding at December 31, 2019 |
57,521 | |||||||
Granted |
37,100 | $ | 38.65 | |||||
Exercised |
(750 | ) | $ | 52.10 | ||||
Forfeited |
(14,421 | ) | $ | 71.27 | ||||
Outstanding at December 31, 2020 |
79,450 | $ | 62.08 | |||||
Options exercisable at December 31, 2020 |
31,780 | $ | 74.69 |
As of December 31, 2020 and 2019, there were total unrecognized compensation costs related to non-vested options granted under this plan of approximately $355,117 and $241,564. The costs are expected to be recognized as the options vest. The stock-based compensation on options that has been recognized for this plan was $(26,819) and $88,175 for the years ended December 31, 2020 and 2019, respectively.
11. |
PREFERRED STOCK |
At December 31, 2020 and 2019, the Company was authorized to issue up to 100,000 shares of Series A convertible preferred stock (Series A) with a par value of $40. During 2020 and 2019, the Company was authorized to issue up to 60,000 shares of Series B convertible preferred stock (Series B) with a par value of $.01.
The holders of Series A and Series B have various rights and preferences as follows:
Relative ranking
Series B shall rank senior to the Series A and the common stock with respect to the payment of dividends, if any, and redemption and upon liquidation, dissolution or winding up the Corporation. Series A shall rank senior to the Common Stock with respect to the payment of dividends, if any, and redemption and upon liquidation, dissolution or winding up the Corporation.
Voting
Each share of Series A and B has voting rights equal to an equivalent number of shares of common stock into which it is convertible and votes together as one class with the common stock.
Dividends
Dividends accrue at the per annum rate of 7% of the original issue price compounded annually for both Series A and Series B. Dividends shall accrue from day to day, whether or not earned or declared, and shall be cumulative. All accrued and unpaid cumulative dividends shall be paid before any dividends or other distribution is made to common stockholders. In addition, Series A and Series B are entitled to receive dividends in an amount equal to any cash dividend or distribution paid to common stockholders, when and if declared by the board of directors, based on the number of shares of common stock held on an as-if converted basis, or at a stated rate per share for dividends paid on any class or Series that is not convertible to common stock.
At December 31, 2020 and 2019, the cumulative and unpaid dividends related to the Series A were $1,625,808 or $19.58 per share and $1,393,324 or $16.91 per share, respectively. At December 31, 2020 and 2019, the cumulative and unpaid dividends related to the Series B were $1,024,910 or $17.08 per share and $512,455 or $8.54 per share, respectively. There is a class of preferred shares issued by the consolidated foreign subsidiary that are owned by non-controlling investors. Upon liquidation those investors would be entitled to their original investment and accumulated and unpaid dividends. At December 31, 2020 and 2019, the original investments and accumulated and unpaid dividends related to the preferred shares issued to the non-controlling investors were $272,625.
The cumulative and unpaid dividends are included in additional paid-in capital on the consolidated balance sheets until the dividends are declared for payment.
Conversion
Each share of preferred stock Series A and Series B is convertible, at the option of the holder, at any time, into shares of common stock based on the then effective conversion rate. The effective conversion rate is determined by dividing the original issue price by the conversion price. The conversion price is adjustable for certain diluting issuances or equity instruments. Applying the effective conversion rate at December 31, 2020, preferred stock is convertible into common shares on a share-for-share basis.
All outstanding shares of preferred stock shall automatically be converted into shares of common stock using the effective conversion rate upon the earlier of the closing of an initial public offering of the Company’s common stock in which the per share price is $200 (subject to appropriate adjustment in the event of a stock dividend, stock split, combination or other similar recapitalization with respect to common stock) and the gross proceeds to the Company are at least $25,000,000 or the vote or written consent of the holders of the outstanding Series A and Series B.
Liquidation
In the event of any dissolution, deemed liquidation or winding up of the Company, the Series A and Series B shall be entitled to receive liquidating distributions, before any distribution is made to common stockholders. The holders of shares of Series A and Series B then outstanding shall be entitled to receive an amount per share equal to the original issue price, plus any accrued but unpaid Series A and Series B dividends. If the distributable assets are insufficient to pay the holders of Series A and Series B in full, a pro rata distribution of the assets shall be made to the Series A, only after Series B has been paid in full.
After payment of the full Series A and Series B liquidation preference the preferred stockholders shall be entitled to participate on an as-if converted basis with the holders of the common shares as a single class in the distribution of the remaining assets of the Company.
Put Right
At any time following the five year anniversary of the first sale of Series B, a majority of the holders of preferred stock may elect to have some or all of their outstanding preferred shares redeemed by the Company at the greater of the Series A original issue price per share plus all declared but unpaid dividends or the fair market value of the shares. Management has determined the put right is not a mandatory redemption, and therefore, the preferred shares are classified as equity.
At December 31, 2020 and 2019, the following shares of Series A are reserved for issuance:
2020 |
2019 |
|||||||
Exercise of warrants issued |
- | 16,950 | ||||||
Total shares reserved and authorized, but not issued |
- | 16,950 | ||||||
Total shares issued |
83,030 | 82,406 | ||||||
Total shares committed |
83,030 | 99,356 |
12. |
STOCK WARRANTS |
Common Stock
Detachable common stock warrants were issued in conjunction with a note payable issued in 2018. The warrants are fully vested and have a term of ten years. Each common stock warrant can be redeemed for one share of common stock at an exercise price of $76.30 per share. The fair value of the warrants was insignificant, so no additional paid in capital and debt discount were recorded. The total warrants of 459 were exercisable during the year ended December 31, 2018.
Preferred Stock
A total of 18,512 detachable stock warrants were issued in accordance with the Series A Preferred Stock purchase agreement dated October 21, 2013 and the 2011 private placement memorandum and were fully vested. Each preferred stock warrant can be redeemed for one share of preferred stock at an exercise price of $40 per share.
In 2019, there were 1,562 warrants exercised at a price of $40 per share. The total warrants exercisable at December 31, 2019 were 16,590. The weighted average remaining contractual lives of warrants outstanding at December 31, 2019 was one year. In 2020, there were 624 warrants exercised at a price of $40 per share. The remaining warrants expired in March 2020.
13. |
COMMON STOCK: |
At December 31, 2020 and 2019, the Company was authorized to issue up to 600,000 shares of common stock, with a par value of $0.01, and the following shares of common stock are reserved for issuance:
2020 |
2019 |
|||||||
Exercise of stock options and other awards under equity plan |
79,450 | 57,521 | ||||||
Exercise of warrants issued |
459 | 459 | ||||||
Total shares reserved and authorized, but not issued |
79,909 | 57,980 | ||||||
Total shares issued |
296,719 | 295,969 | ||||||
Total shares committed |
376,628 | 353,949 |
14. |
RETIREMENT PLAN: |
The Company elected a Safe Harbor Profit Sharing Plan available to eligible employees, as defined by the plan document. Participating employees may elect to contribute a portion of their compensation, up to the maximum amount allowed by the Internal Revenue Service. Through April 2020, the Company made safe harbor contributions of 100% of the first 3% and 50% of the next 2% of participating employees’ eligible deferrals. The Company may make additional discretionary contributions to the Plan on behalf of the eligible employees. Employer safe harbor contributions of $80,525 and $206,960 were made for the years ended December 31, 2020 and 2019, respectively. No discretionary contributions were made by the Company for the years ended December 31, 2020 and 2019, respectively.
15. |
OPERATING LEASES: |
The Company leases equipment and various warehouse, office, and operating facility space under operating leases with terms expiring in various years through March 2028. The following is a schedule by years of future minimum rentals under the leases at December 31, 2020:
Year Ending December 31: |
||||
2022 |
$ | 318,174 | ||
2023 |
311,859 | |||
2024 |
323,859 | |||
2025 |
326,633 | |||
Thereafter |
1,092,303 | |||
$ | 2,372,828 |
The operating facility lease provides for escalating lease payments. The Company accrued the rent associated with this escalating payments and is amortizing the accrual ratably over the remainder of the lease. Rental expense for the years ended December 31, 2020 and 2019 approximated $455,000 and $400,000, respectively.
16. |
CAPITAL LEASES: |
The Company has acquired certain office equipment and equipment under capital leases. The leases expire at various dates through November 2025. As of December 31, 2020 and 2019, the equipment and related accumulated amortization recorded under the capital lease that was included in the accompanying balance sheet is as follows:
2020 |
2019 |
|||||||
Machinery and equipment |
$ | 150,458 | 118,045 | |||||
Less accumulated depreciation |
(39,846 | ) | (20,730 | ) | ||||
$ | 110,612 | 97,315 |
Minimum future lease payments under the capital leases remaining at December 31, 2020 are as follows:
Year Ending December 31: |
||||
2021 |
$ | 36,122 | ||
2022 |
36,122 | |||
2023 |
36,122 | |||
2024 |
22,995 | |||
2025 |
10,087 | |||
Total minimum payments |
$ | 141,448 | ||
Less amounts representing imputed interest (5.25% - 6.7%) |
17,155 | |||
Present value of minimum lease payments |
124,293 | |||
Less current portion |
28,826 | |||
$ | 95,467 |
Amortization of assets held under the capital lease is included in depreciation expense.
17. |
CONCENTRATIONS: |
Global Cooling, Inc. maintains its cash balances in two financial institutions. Deposits in interest-bearing and non-interest-bearing accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution. From time to time, the Company may have balances that exceed the insured limit but has not experienced any losses. Global Cooling B.V. maintains its cash balances at an international financial institution. Cash balances are insured by the Deposit Guarantee and Investor Compensation Act up to $100,000 per institution. The Company has not experienced any such losses and believes it is not exposed to any significant credit risk.
For the years ended December 31, 2020 and 2019, the Company had sales to one customer that made up 59% and 61% of the total sales, respectively and 34% and 46% of total receivables, respectively. Customer balances are continually monitored to minimize the risk of loss.
18. |
SUPPLEMENTAL CASH FLOW INFORMATION: |
Cash paid during the years ended December 31, 2020 and 2019 for interest amounted to $521,743 and $361,610, respectively.
The Company assumed debt on the line of credit to pay for $130,310 in closing cost related to the line of credit assumed in December 2020.
During 2020 and 2019, the company purchased property and equipment through capital leases in the amount of $47,004 and $103,454, respectively.
19. |
RISK AND UNCERTAINTIES: |
An outbreak of a novel strain of coronavirus (COVID-19) has disrupted supply chains and affected production and sales across a range of industries. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak. Impact of the customers, employees, and vendors cannot be predicted, and the extent to which COVID-19 may impact the Company’s financial condition or results of the operations is uncertain at this time.
20. |
SETTLEMENT OF LITIGATION: |
In 2019, the Company filed a complaint against a former supplier for violations of an established contract. The supplier also made counterclaims against the Company. The parties to this litigation agreed to negotiate a settlement through mediation based on the terms of the agreement which was concluded on September 15, 2020. As a result of the mediation, all claims and counterclaims have been terminated. The consolidated statements of operations includes a separately stated expense of $4,000,000 related to the settlement of this litigation. The terms of payment required the Company to pay $900,000 on or before September 15, 2020 and $400,000 on or before October 15, 2020. The remaining balance was to be paid by the Company monthly at a rate of $600 per qualifying freezer, as defined in the settlement agreement, shipped to a customer. Upon payment of $1,000,000 the rate per qualifying freezer will be reduced to $300. Any settlement sum not paid within 42 months of the agreement is due in full to the supplier.
21. |
SUBSEQUENT EVENTS: |
The accompanying consolidated financial statements consider events through April 13, 2021, the date on which the consolidated financial statements were available to be issued.
During 2020, the Company entered into negotiations with a third-party that would result in the sale of Global Cooling, Inc. On March 19, 2021 the Board voted to approve the sale of the Company pending final approval of the stockholders. As of the date of these financial statements, the final vote by the stockholders has not occurred. Management has made no changes, other than the vesting of stock options as of December 31, 2020, on the reporting value of the assets or liabilities that may occur as a result of the change in control in the preparation of the financial statements.
Exhibit 99.2
Global Cooling, Inc. and Subsidiary
Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
TABLE OF CONTENTS
Consolidated Financial Statements (Unaudited): | |
Balance Sheets as of March 31, 2021 and December 31, 2020 (Unaudited) | 1-2 |
Statements of Operations for the three months ended March 31, 2021 and 2020 (Unaudited) | 3 |
Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2021 and 2020 (Unaudited) | 4 |
Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited) | 5 |
Notes to the Consolidated Financial Statements (Unaudited) | 6-17 |
Global Cooling, Inc. and Subsidiary
Consolidated Balance Sheet (Unaudited)
March 31, 2021 and December 31, 2020
March 31, |
December 31, |
||||||||
2021 |
2020 |
||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 45,719 | 237,705 | ||||||
Accounts receivable, trade, net |
7,540,313 | 6,027,323 | |||||||
Receivables, other |
55,424 | 65,424 | |||||||
Notes receivable - related party |
374,000 | - | |||||||
Inventory, net |
13,147,430 | 8,529,294 | |||||||
Prepaid expenses |
172,306 | 212,667 | |||||||
Total current assets |
21,335,192 | 15,072,413 | |||||||
Property and equipment: |
|||||||||
Machinery |
2,813,437 | 2,771,582 | |||||||
Furniture and equipment |
555,276 | 555,276 | |||||||
Computers and equipment |
687,049 | 683,591 | |||||||
Leasehold improvements |
665,652 | 665,652 | |||||||
Construction in progress |
518,714 | 394,290 | |||||||
5,240,128 | 5,070,391 | ||||||||
Less accumulated depreciation |
1,648,733 | 1,504,688 | |||||||
Total property and equipment |
3,591,395 | 3,565,703 | |||||||
Other assets: |
|||||||||
Deposits |
3,700 | 3,700 | |||||||
Other assets |
3,084 | 3,496 | |||||||
Notes receiavble - related party |
- | 374,000 | |||||||
Total other assets |
6,784 | 381,196 | |||||||
Total assets |
$ | 24,933,371 | 19,019,312 |
See accompanying notes to the unaudited consolidated financial statements
Global Cooling, Inc. and Subsidiary
Consolidated Balance Sheet (Unaudited) (continued)
March 31, 2021 and December 31, 2020
March 31, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Liabilities and Stockholders' Equity (Deficit) |
||||||||
Current liabilities: |
||||||||
Line of credit |
$ | 3,428,491 | 757,562 | |||||
Accounts payable - trade |
10,004,533 | 7,393,945 | ||||||
Customer advances |
2,647,471 | 2,479,658 | ||||||
Accrued compensation |
1,231,717 | 924,104 | ||||||
Other accrued expenses |
3,302,365 | 3,560,091 | ||||||
Long-term debt, current portion |
262,500 | 758,750 | ||||||
Capital lease obligations, current portion |
29,324 | 28,826 | ||||||
Total current liabilities |
20,906,401 | 15,902,936 | ||||||
Long-term liabilities: |
||||||||
Deferred rent |
121,102 | 116,415 | ||||||
Capital lease obligations, less current portion |
87,947 | 95,467 | ||||||
Convertible promissory notes payable |
1,500,000 | 1,500,000 | ||||||
Long-term debt, less current portion |
4,129,087 | 3,545,236 | ||||||
Total long-term liabilities |
5,838,136 | 5,257,118 | ||||||
Stockholders' equity: |
||||||||
Preferred stock - Series A, 100,000 shares authorized and 83,030 outstanding, par value $40, with liquidation preferences of $5,005,129 and $4,947,008, respectively |
3,321,200 | 3,321,200 | ||||||
Preferred stock - Series B, 60,0000 shares authorized and 59,999 outstanding, par value $.01, with liquidation preferences of $8,473,806 and $8,345,693, respectively |
600 | 600 | ||||||
Common stock - 600,000 shares authorized and 297,094 and 296,719 oustanding, respectively, par $.01 |
2,971 | 2,967 | ||||||
Additional paid-in-capital |
22,433,902 | 22,165,623 | ||||||
Accumulated other comprehensive income, net of tax |
(116,856 | ) | (114,441 | ) | ||||
Retained deficit |
(27,686,433 | ) | (27,789,316 | ) | ||||
(2,044,616 | ) | (2,413,367 | ) | |||||
Non-controlling interest |
233,450 | 272,625 | ||||||
Total stockholders' equity (deficit) |
(1,811,166 | ) | (2,140,742 | ) | ||||
Total liabilities and stockholders' equity (deficit) |
$ | 24,933,371 | 19,019,312 |
See accompanying notes to the unaudited consolidated financial statements
Global Cooling, Inc. and Subsidiary
Consolidated Statement of Operations (Unaudited)
Three months ended March 31, 2021 and 2020
2021 |
2020 |
|||||||
Sales, net of discounts and allowances |
$ | 18,463,487 | 6,842,071 | |||||
Cost of sales |
13,624,018 | 5,813,532 | ||||||
Gross profit |
4,839,469 | 1,028,539 | ||||||
General and administrative expenses |
4,318,230 | 3,226,219 | ||||||
Income from operations |
521,239 | (2,197,680 | ) | |||||
Other income (expense): |
||||||||
Other expense |
(826 | ) | - | |||||
Interest income |
4,757 | 5,127 | ||||||
Interest expense |
(275,228 | ) | (131,522 | ) | ||||
(271,297 | ) | (126,395 | ) | |||||
Net income (loss) |
249,942 | (2,324,075 | ) | |||||
Other comprehensive income (loss) - |
||||||||
Income (loss) on foreign currency translation |
(2,415 | ) | 21 | |||||
Total comprehensive income (loss) |
$ | 247,527 | (2,324,054 | ) |
See accompanying notes to the unaudited consolidated financial statements
Global Cooling, Inc. and Subsidiary
Consolidated Statement of Stockholders’ Equity (Unaudited)
Three months ended March 31, 2021 and 2020
Accumulated |
||||||||||||||||||||||||||||
Additional |
Other |
Non- |
||||||||||||||||||||||||||
Preferred |
Common |
Paid-In |
Comprehensive |
Retained |
Controlling |
|||||||||||||||||||||||
Stock |
Stock |
Capital |
Loss |
Deficit |
Interest |
Total |
||||||||||||||||||||||
Balance as of January 1, 2020 |
$ | 3,296,840 | 2,960 | 21,408,435 | (122,833 | ) | (22,099,133 | ) | 272,625 | 2,758,894 | ||||||||||||||||||
Stock-based compensation on options |
- | - | 30,015 | - | - | - | 30,015 | |||||||||||||||||||||
Warrant exercises |
24,960 | - | - | - | - | - | 24,960 | |||||||||||||||||||||
Accrued dividends on preferred stock |
- | - | 128,114 | - | (128,114 | ) | - | - | ||||||||||||||||||||
Gain on foreign currency translation |
- | - | - | 21 | - | - | 21 | |||||||||||||||||||||
Net Loss |
- | - | - | - | (2,324,075 | ) | - | (2,324,075 | ) | |||||||||||||||||||
Balance as of March 31, 2020 |
3,321,800 | 2,960 | 21,566,564 | (122,812 | ) | (24,551,322 | ) | 272,625 | 489,815 | |||||||||||||||||||
Balance as of January 1, 2021 |
3,321,800 | 2,967 | 22,165,623 | (114,441 | ) | (27,789,316 | ) | 272,625 | (2,140,742 | ) | ||||||||||||||||||
Stock-based compensation on options |
- | - | 58,160 | - | - | - | 58,160 | |||||||||||||||||||||
Stock options and warrant exercises |
- | 4 | 23,885 | - | - | - | 23,889 | |||||||||||||||||||||
Accrued dividends on preferred stock |
- | - | 186,234 | - | (147,059 | ) | (39,175 | ) | - | |||||||||||||||||||
Loss on foreign currency translation |
- | - | - | (2,415 | ) | - | - | (2,415 | ) | |||||||||||||||||||
Net Income |
- | - | - | - | 249,942 | - | 249,942 | |||||||||||||||||||||
Balance as of March 31, 2021 |
$ | 3,321,800 | 2,971 | 22,433,902 | (116,856 | ) | (27,686,433 | ) | 233,450 | (1,811,166 | ) |
See accompanying notes to the unaudited consolidated financial statements
Global Cooling, Inc. and Subsidiary
Consolidated Statement of Cash Flows (Unaudited)
Three months ended March 31, 2021 and 2020
2021 |
2020 |
|||||||
Cash flows from operating activities: |
||||||||
Net Income (loss) |
$ | 249,942 | $ | (2,324,075 | ) | |||
Adjustments to reconcile net income to net cash flows used in operating activities: |
||||||||
Depreciation |
144,044 | 151,187 | ||||||
Bad debt expense |
(853 | ) | 5,098 | |||||
Provision for obsolete inventory |
119,426 | 49,856 | ||||||
Deferred rent |
4,687 | 10,328 | ||||||
Stock-based compensation on options |
58,160 | 30,015 | ||||||
Amortization of debt cost |
38,904 | 6,037 | ||||||
Effects of changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(1,512,137 | ) | 86,154 | |||||
Other receivable |
10,000 | 7,626 | ||||||
Inventory, net |
(4,737,562 | ) | 1,338,208 | |||||
Prepaid expenses |
40,361 | 37,916 | ||||||
Accounts payable - trade |
2,610,588 | (785,144 | ) | |||||
Other assets |
412 | - | ||||||
Customer advances |
167,813 | - | ||||||
Other accrued expenses |
(257,726 | ) | (105,934 | ) | ||||
Accrued compensation |
307,613 | (224,120 | ) | |||||
Net cash flows used in operating activities |
(2,756,328 | ) | (1,716,848 | ) | ||||
Net cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(169,736 | ) | (62,986 | ) | ||||
Cash flows from financing activities: |
||||||||
Payments on capital lease obligations |
(7,022 | ) | (4,336 | ) | ||||
Borrowings on line of credit |
2,670,929 | 725,000 | ||||||
Proceeds from notes payable |
62,697 | - | ||||||
Payments of debt issuance cost |
(14,000 | ) | - | |||||
Stock options and warrant exercises |
23,889 | 24,960 | ||||||
Net cash flows from financing activities |
2,736,493 | 745,624 | ||||||
Foreign currency translation adjustment |
(2,415 | ) | 21 | |||||
Decrease in cash |
(191,986 | ) | (1,034,189 | ) | ||||
Cash and cash equivalents, beginning of year |
237,705 | 3,197,164 | ||||||
Cash and cash equivalents, end of year |
$ | 45,719 | $ | 2,162,975 |
See accompanying notes to the unaudited consolidated financial statements
1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
The following accounting principles and practices of Global Cooling, Inc. and Subsidiary (collectively, the Company) are set forth to facilitate the understanding of data presented in the consolidated financial statements.
Nature of operations
Global Cooling, Inc. is engaged primarily in the manufacturing and retail sales of environmentally friendly, ultra-low temperature freezers, which are currently used worldwide by life science, pharmaceutical, biomedical/clinical, and biotechnology customers. The Company also provides parts, maintenance, and repair services for the products it sells.
Global Cooling B.V. (GCBV), a Dutch Company, is a licensing company. GCBV licenses various intellectual properties to manufacturers worldwide. In 2008, Global Cooling, Inc. became a majority owner in GCBV.
Principles of consolidation
The consolidated financial statements include the accounts of Global Cooling, Inc. and GCBV. All inter-company balances and transactions have been eliminated in consolidation.
Basis of accounting
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Revenue recognition
The Company derives its revenues primarily from the sale of manufactured freezers. Revenues are recognized when control of these products are transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and services. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and freight cost charged to customers are reported within revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. Costs incurred to obtain a contract will be expensed as incurred when the amortization period is less than a year.
Revenue from performance obligations satisfied at a point in time consists of the sale of manufactured freezers. For performance obligations related to the sale of manufactured freezers, control transfers to the customer at a point in time. The Company’s principal terms of sale are FOB Shipping Point and FOB Destination and the Company transfers control and records revenue for product sales either upon shipment or delivery to the customer, respectively.
The nature of the Company’s business gives rise to variable consideration, including allowances and returns that generally decrease the transaction price which reduces revenue. These variable amounts are generally credited to the customer, based on product returns or price concessions, and based upon the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are made based upon historical experience and known trends.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Shipping and freight cost
Shipping and freight costs incurred by the Company are included in cost of sales.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents.
Accounts receivable
The Company records accounts receivable when the control of the product is transferred to the customer and amounts are stated at the amount billed to the customer net of any allowance for doubtful accounts, as needed. Management provides for probable uncollectible amounts through a charge to bad debt expense in the consolidated statements of operations and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that remain outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to receivables. Management has recorded an allowance for doubtful accounts of $77,831 and $853 as of March 31, 2021 and December 31, 2020, respectively.
Inventory
Inventory is valued at the lower of cost or net realizable value using the standard cost method, which approximates the first-in, first-out (“FIFO”) method. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in determining net realizable value and a reserve for obsolescence is recognized if necessary. Cost includes material, labor and applicable manufacturing overhead.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated remaining useful lives of the corresponding assets, which ranges from three to thirty-nine years. Expenditures for repairs or renewal and betterments that extend the useful lives of property and equipment are capitalized. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Warranty reserve
The Company accrues an estimate of its exposure to warranty claims based on current and historical product sales data and warranty cost incurred, which in management’s judgment, is adequate to absorb potential claims. Because of the inherent uncertainties in estimating warranty costs, it is at least reasonably possible that the estimate used will change within the near-term.
Advertising costs
The Company expenses advertising costs as incurred. Advertising expenses of $107,105 and $188,845 were recognized for the three months ended March 31, 2021 and March 31, 2020, respectively.
Translation of foreign currencies
The current assets and liabilities of GCBV are translated at year end exchange rates, capital transactions are translated based on the historical exchange rate, and revenues and expenses are translated at average rates. Translation adjustments are reported as a separate component of stockholders’ equity.
Other comprehensive income
Comprehensive income is the total of net income plus gains and losses on foreign currency translation adjustments. Accumulated other comprehensive income consisting of accumulated foreign currency gains and losses, is reported in stockholder equity, net of tax.
Income taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
2. |
INVENTORY: |
Inventory consists of the following:
March 31, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Raw material |
$ | 8,384,838 | 6,318,162 | |||||
Work in process |
2,836,792 | 1,475,730 | ||||||
Finished goods |
1,925,800 | 735,402 | ||||||
$ | 13,147,430 | 8,529,294 |
3. |
INCOME TAXES |
The income tax provision (benefit) consisted of the following for the three months ended March 31, 2021 and 2020:
2021 |
2020 |
|||||||
Deferred federal tax expense |
$ | 78,096 | 467,024 | |||||
Change in valuation allowance |
(78,096 | ) | (467,024 | ) | ||||
Total income tax provision (benefit) |
$ | - | - |
The components of the deferred tax asset is as follows:
March 31, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Deferred tax assets: |
||||||||
Deferred tax assets |
$ | 5,098,425 | 5,176,521 | |||||
Deferred tax liabilities |
(3,464 | ) | (3,464 | ) | ||||
Valuation allowance |
(5,094,961 | ) | (5,173,057 | ) | ||||
Net deferred tax assets |
$ | - | - |
Deferred tax assets are attributable to changes in certain valuation allowances, accrued expenses, and net operating loss carryforward. Deferred tax liabilities result from excess accumulated tax depreciation over book depreciation and differences in losses on assets disposed. Permanent differences result from deductions for life insurance, options compensation, and 50% of meals. The deferred tax assets include a federal net operating loss carryforward of $21,464,789 as of March 31, 2021. If not utilized, federal net operating loss carryforwards of $10,700,638 will expire between 2030 and 2037. Net operating loss carryforwards of $10,764,151 are available indefinitely. Certain changes in the Company’s ownership, which may result in limitations on the amount of loss carry forwards that can be utilized to offset future taxable income.
4. |
LINE OF CREDIT: |
Effective December 16, 2020, the Company maintains a line of credit with a bank which expires in June 2023. The outstanding balance bears interest at a floating rate equal the 3 month LIBOR rate plus 5.50%. The maximum allowed on the line of credit is $5,000,000. The line is secured by all the assets of the Company. The Company’s credit agreement with the bank contains certain restrictions and covenants. The Company must maintain a minimum level of availability on the line of credit. The covenants have been met by the Company as of March 31, 2021.
5. |
CONVERTIBLE PROMISSORY NOTES: |
In 2020, the Company issued $1,500,000 of convertible promissory notes. The notes are subordinated to all other debts. The promissory notes and accrued interest automatically convert to shares in connection with a qualified financing or non-qualified financing event as defined in the debt agreements. The principal balance and accrued interest will convert at a discounted stock price. However, the discount is contingent upon an event that was not reasonably predictable at the time of debt issuance so no beneficial interest related to the discounted conversion price was recorded. The notes accrue interest at a rate of 8% per year. If a qualified financing or non-qualified financing is not completed by July 15, 2022, the maturity date of the notes, the Company will repay the investor’s total debt outstanding and accrued interest. As of March 31, 2021 the outstanding principal totaled $1,500,000 and accrued interest totaled $85,000. As of December 31, 2021 the outstanding principal totaled $1,500,000 and accrued interest totaled $55,000.
6. |
LONG-TERM DEBT: |
Long-term debt consists of the following:
March 31, |
December 31, |
||||||||
2021 |
2020 |
||||||||
Note payable to Enhanced Capital Ohio Rural Fund, LLC, interest only payable monthly, beginning November 2019 through May 2021, at an interest rate of LIBOR (.019% as of March 31, 2021) plus 6.5%. Beginning June 1, 2021 payments of quarterly principal payments of $43,750 plus accrued interest are due through November 2021. Beginning December 1, 2021 payments of quarterly principal payments of $87,500 plus accrued interest are due, with a final balloon payment due September 7, 2023. The note is secured by substantially all assets of the Company. |
$ | 1,750,000 | 1,750,000 | ||||||
Note payable to Advantage, interest only payable monthly, beginning March 31, 2021 through December 18, 2027, at an interest rate of LIBOR (0.19% as of March 31, 2021) + 6.50%. On July 17, 2023, a principal payment of $300,000 is due. On July 17, 2024, a principal payment of $1,400,000 is due. On December 18, 2027 a balloon payment of the remaining principal is due. The note is secured by substantially all the assets of the Company. |
2,812,697 | 2,750,000 | |||||||
4,562,697 | 4,500,000 | ||||||||
Unamortized debt discount and debt issuance costs |
(171,110 | ) | (196,014 | ) | |||||
4,391,587 | 4,303,986 | ||||||||
Less current portion |
262,500 | 758,750 | |||||||
$ | 4,129,087 | 3,545,236 |
Aggregate maturities of long-term debt (including convertible promissory notes described in Note 5) for the next five years and thereafter are as follows:
Twelve Months Ending March 31: |
||||
2022 |
$ | 262,500 | ||
2023 |
1,850,000 | |||
2024 |
1,437,500 | |||
2025 |
1,400,000 | |||
2026 |
- | |||
Thereafter |
1,112,697 | |||
$ | 6,062,697 |
The Company must maintain a certain fixed coverage ratio and certain levels of EBITDA. These requirements were met as of March 31, 2021.
7. |
WARRANTY RESERVE: |
The warranty liability is included in other accrued expenses in the accompanying consolidated balance sheet. Changes in the Company’s warranty liability were as follows:
March 31, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Warranty accrual, beginning of year |
$ | 575,479 | 437,410 | |||||
Additions to warranty accrual |
1,122,955 | 2,465,334 | ||||||
Actual warranty expenditures |
(1,002,966 | ) | (2,327,265 | ) | ||||
Warranty accrual, end of year |
$ | 695,468 | 575,479 |
8. |
STOCK OPTION PLAN: |
The Company maintains the Global Cooling, Inc. Stock Option Plan (the Plan) to further the long-term growth of the Company by offering competitive incentive compensation to key employees, non-employee directors and consultants of the Company. Options are granted at an exercise price that is at least equal to the fair value of the shares at the date of the grant. Under the terms of the Plan, the Company is authorized to grant incentive and nonqualified stock options as defined under the Internal Revenue Code. The Plan is administered by the Board of Directors (the Board). The Board selects the individuals to whom options will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the Plan. Options vest ratably over the required service period. Options granted under the Plan will expire no later than the tenth anniversary of the grant date.
The total number of awards available for grant under the Plan represents 140,000 shares of the Company’s common stock as of March 31, 2021 and December 31, 2020. At March 31, 2021, there were 79,075 options outstanding for this Plan, 35,449 options that have been exercised and 25,476 remaining shares available for grant under the Plan. At December 31, 2020, there were 79,450 options outstanding for this Plan, 35,074 options that have been exercised and 25,476 remaining shares available for grant under the Plan
The fair values of the options granted to each employee were estimated on the date of the grant using the Black-Scholes-Merton option pricing model that uses the assumptions concerning expected volatility, expected term, and the expected risk-free rate of return. Expected volatility was estimated by management using similar public company data. The expected term of options granted is stated in the contract. Risk-free rates of return are yields for constant maturity U.S. Treasury Notes maturing approximately at the end of the option life.
The weighted average remaining contractual life of options outstanding at March 31, 2021 and December 31, 2020 was approximately two years.
A summary of the status of the Plan as of December 31, 2020 and changes during the year then ended were as follows:
Weighted |
||||||||
Average |
||||||||
Options |
Exercise Price |
|||||||
Outstanding at January 31, 2020 |
57,521 | $ | 79.36 | |||||
Granted |
37,100 | $ | 38.65 | |||||
Exercised |
(750 | ) | $ | 52.10 | ||||
Forfeited |
(14,421 | ) | $ | 17.27 | ||||
Outstanding at December 31, 2020 |
79,450 | $ | 62.08 | |||||
Options exercisable at December 31, 2020 |
31,780 | $ | 74.69 |
A summary of the status of the Plan as of March 31, 2021 and changes during the three months then ended were as follows:
Weighted |
||||||||
Average |
||||||||
Options |
Exercise Price |
|||||||
Outstanding at December 31, 2020 |
79,450 | $ | 57.46 | |||||
Exercised |
(375 | ) | $ | 39.50 | ||||
Outstanding at March 31, 2021 |
79,075 | $ | 62.19 | |||||
Options exercisable at March 31, 2021 |
38,387 | $ | 70.41 |
As of March 31, 2021 and December 31, 2020, there were total unrecognized compensation costs related to non-vested options granted under this plan of approximately $296,587 and $355,117, respectively. The costs are expected to be recognized as the options vest. The stock-based compensation on options that has been recognized for this plan was $58,160 and $30,015 for the three months ended March 31, 2021 and March 30, 2020, respectively.
9. |
PREFERRED STOCK |
At March 31, 2021, the Company was authorized to issue up to 100,000 shares of Series A convertible preferred stock (Series A) with a par value of $40. The Company was authorized to issue up to 60,000 shares of Series B convertible preferred stock (Series B) with a par value of $.01.
The holders of Series A and Series B have various rights and preferences as follows:
Relative ranking
Series B shall rank senior to the Series A and the common stock with respect to the payment of dividends, if any, and redemption and upon liquidation, dissolution or winding up the Corporation. Series A shall rank senior to the Common Stock with respect to the payment of dividends, if any, and redemption and upon liquidation, dissolution or winding up the Corporation.
Voting
Each share of Series A and B has voting rights equal to an equivalent number of shares of common stock into which it is convertible and votes together as one class with the common stock.
Dividends
Dividends accrue at the per annum rate of 7% of the original issue price compounded annually for both Series A and Series B. Dividends shall accrue from day to day, whether or not earned or declared, and shall be cumulative. All accrued and unpaid cumulative dividends shall be paid before any dividends or other distribution is made to common stockholders. In addition, Series A and Series B are entitled to receive dividends in an amount equal to any cash dividend or distribution paid to common stockholders, when and if declared by the board of directors, based on the number of shares of common stock held on an as-if converted basis, or at a stated rate per share for dividends paid on any class or Series that is not convertible to common stock.
At March 31, 2021 and December 31, 2020, the cumulative and unpaid dividends related to the Series A were $1,683,929 or $20.28 per share and $1,625,808 or $19.58, respectively. At March 31, 2021 and December 31, 2020, the cumulative and unpaid dividends related to the Series B were $1,153,023 or $19.22 per share and $1,024,910 or $17.08 per share. There is a class of preferred shares issued by the consolidated foreign subsidiary that are owned by non-controlling investors. Upon liquidation those investors would be entitled to their original investment and accumulated and unpaid dividends. At March 31, 2021 and December 31, 2020, the original investments and accumulated and unpaid dividends related to the preferred shares issued to the non-controlling investors were $233,450 and $272,625.
The cumulative and unpaid dividends are included in additional paid-in capital on the consolidated balance sheets until the dividends are declared for payment.
Conversion
Each share of preferred stock Series A and Series B is convertible, at the option of the holder, at any time, into shares of common stock based on the then effective conversion rate. The effective conversion rate is determined by dividing the original issue price by the conversion price. The conversion price is adjustable for certain diluting issuances or equity instruments. Applying the effective conversion rate at March 31, 2021, preferred stock is convertible into common shares on a share-for-share basis.
All outstanding shares of preferred stock shall automatically be converted into shares of common stock using the effective conversion rate upon the earlier of the closing of an initial public offering of the Company’s common stock in which the per share price is $200 (subject to appropriate adjustment in the event of a stock dividend, stock split, combination or other similar recapitalization with respect to common stock) and the gross proceeds to the Company are at least $25,000,000, or the vote or written consent of the holders of the outstanding Series A and Series B.
Liquidation
In the event of any dissolution, deemed liquidation or winding up of the Company, the Series A and Series B shall be entitled to receive liquidating distributions, before any distribution is made to common stockholders. The holders of shares of Series A and Series B then outstanding shall be entitled to receive an amount per share equal to the original issue price, plus any accrued but unpaid Series A and Series B dividends. If the distributable assets are insufficient to pay the holders of Series A and Series B in full, a pro rata distribution of the assets shall be made to the Series A, only after Series B has been paid in full.
After payment of the full Series A and Series B liquidation preference the preferred stockholders shall be entitled to participate on an as-if converted basis with the holders of the common shares as a single class in the distribution of the remaining assets of the Company.
Put Right
At any time following the five year anniversary of the first sale of Series B, a majority of the holders of preferred stock may elect to have some or all of their outstanding preferred shares redeemed by the Company at the greater of the Series A original issue price per share plus all declared but unpaid dividends or the fair market value of the shares. Management has determined the put right is not a mandatory redemption, and therefore, the preferred shares are classified as equity.
10. |
COMMON STOCK WARRANTS |
Detachable common stock warrants were issued in conjunction with a note payable issued in 2018. The warrants are fully vested and have a term of ten years. Each common stock warrant can be redeemed for one share of common stock at an exercise price of $76.30 per share. The fair value of the warrants was insignificant, so no additional paid in capital and debt discount were recorded. The total warrants of 459 were exercisable during the year ended December 31, 2018.
11. |
COMMON STOCK: |
At March 31, 2021, the Company was authorized to issue up to 600,000 shares of common stock, with a par value of $0.01, and the following shares of common stock are reserved for issuance:
Exercise of stock options and other awards under equity plan |
79,075 | |||
Exercise of warrants issued |
459 | |||
Total shares reserved and authorized, but not issued |
79,534 | |||
Total shares issued |
297,094 | |||
Total shares committed |
376,628 |
12. |
RETIREMENT PLAN: |
The Company elected a Safe Harbor Profit Sharing Plan available to eligible employees, as defined by the plan document. Participating employees may elect to contribute a portion of their compensation, up to the maximum amount allowed by the Internal Revenue Service. The Company made safe harbor contributions of 100% of the first 3% and 50% of the next 2% of participating employees’ eligible deferrals. The Company may make additional discretionary contributions to the Plan on behalf of the eligible employees. Employer safe harbor contributions of $87,400 and $59,535 were made for the three months ended March 31, 2021 and 2020, respectively. No discretionary contributions were made by the Company for the three months ended March 31, 2021 and March 31, 2020, respectively.
13. |
OPERATING LEASES: |
The Company leases equipment and various warehouse, office, and operating facility space under operating leases with terms expiring in various years through March 2028. The following is a schedule by years of future minimum rentals under the leases at March 31, 2021:
Twelve Months Ending March 31: |
||||
2022 |
$ | 312,854 | ||
2023 |
320,859 | |||
2024 |
332,859 | |||
2025 |
331,469 | |||
2026 |
340,202 | |||
Thereafter |
427,050 | |||
$ | 2,065,293 |
The operating facility lease provides for escalating lease payments. The Company accrued the rent associated with the escalating payments and is amortizing the accrual ratably over the remainder of the lease. Rental expense for the three months ended March 31, 2021 and 2020 approximated $124,000 and 111,800, respectively.
14. |
CAPITAL LEASES: |
The Company has acquired certain office equipment and equipment under capital leases. The leases expire at various dates through November 2025. As of March 31, 2021, the equipment and related accumulated amortization recorded under the capital lease that was included in the accompanying balance sheet is as follows:
March 31, |
December 31, |
|||||||
2021 |
2020 |
|||||||
Machinery and equipment |
$ | 150,458 | 150,458 | |||||
Less accumulated depreciation |
(47,369 | ) | (39,846 | ) | ||||
$ | 103,089 | 110,612 |
Minimum future lease payments under the capital leases remaining at March 31, 2021 are as follows:
Twelve Months Ending March 31: |
||||
2022 |
$ | 36,122 | ||
2023 |
36,122 | |||
2024 |
36,122 | |||
2025 |
16,716 | |||
2026 |
7,337 | |||
Total minimum payments |
$ | 132,419 | ||
Less amounts representing imputed interest (5.25% - 6.7%) |
15,148 | |||
Present value of minimum lease payments |
117,271 | |||
Less current portion |
29,324 | |||
$ | 87,947 |
Amortization of assets held under the capital lease is included in depreciation expense.
15. |
CONCENTRATIONS: |
Global Cooling, Inc. maintains its cash balances in two financial institutions. Deposits in interest-bearing and non-interest-bearing accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution. From time to time, the Company may have balances that exceed the insured limit but has not experienced any losses. Global Cooling B.V. maintains its cash balances at an international financial institution. Cash balances are insured by the Deposit Guarantee and Investor Compensation Act up to $100,000 per institution. The Company has not experienced any such losses and believes it is not exposed to any significant credit risk.
For the three months ended March 31, 2021, the Company had sales to two customers that made up 54% of the total sales and 41% of total receivables, respectively. For the three months ended March 30, 2020, the Company had sales to two customers that made up 62% of the total sales and 41% of total receivables, respectively. Customer balances are continually monitored to minimize the risk of loss.
16. |
SUPPLEMENTAL CASH FLOW INFORMATION: |
Cash paid during the three months ended March 31, 2021 and 2020 for interest amounted to $175,122 and $131,522, respectively.
On February 12, 2021, the Company refinanced the note payable with Advantage Capital in the amount of $2,750,000 with the issuance of a new note payable in the amount of $2,750,000.
17. |
RISK AND UNCERTAINTIES: |
An outbreak of a novel strain of coronavirus (the coronavirus pandemic) has disrupted supply chains and affected production and sales across a range of industries. The extent of the impact of the coronavirus pandemic on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak. Impact of the customers, employees, and vendors cannot be predicted, and the extent to which the coronavirus pandemic may impact the Company’s financial condition or results of the operations remains uncertain at this time.
18. |
SETTLEMENT OF LITIGATION: |
In 2019, the Company filed a complaint against a former supplier for violations of an established contract. The supplier also made counterclaims against the Company. The parties to this litigation agreed to negotiate a settlement through mediation based on the terms of the agreement which was concluded on September 15, 2020. As a result of the mediation, all claims and counterclaims have been terminated. In 2020, the Company recorded a liability and litigation expense related to the settlement of this litigation. The terms of the agreement required the Company to pay $900,000 on or before September 15, 2020 and $400,000 on or before October 15, 2020. The remaining balance is to be paid by the Company monthly at a rate of $600 per qualifying freezer, as defined in the settlement agreement, shipped to a customer. Upon payment of $1,000,000 the rate per qualifying freezer will be reduced to $300. Any settlement sum not paid within 42 months of the agreement is due in full to the supplier. As of March 31, 2021 the remaining liability to be paid was $2,091,600.
19. |
SUBSEQUENT EVENTS: |
The accompanying consolidated financial statements consider events through July 7, 2021, the date on which the consolidated financial statements were available to be issued.
During 2020, the Company entered into negotiations with a third-party that would result in the sale of Global Cooling, Inc. On March 19, 2021 the Board voted to approve the sale of the Company pending final approval of the stockholders. The final vote by the stockholders occurred on May 3, 2021 at which time the sale was approved. Management has made no changes on the reporting value of the assets or liabilities that may occur as a result of the change in control in the preparation of the financial statements.
Upon the closing of the sale on May 3, 2021, the non-vested options described in Note 8 became vested and were exercised and the convertible notes described in Note 5 and all cumulative and unpaid dividends described in Note 9 were converted to shares of Company stock. All Company outstanding shares were exchanged for shares of the acquiring Company.
On June 30, 2021, the Company entered into an agreement to settle the remaining litigation settlement liability detailed in Note 18 of $1,705,200 for a discounted amount of $1,530,000, resulting in a gain on litigation settlement of $175,200.
Exhibit 99.3
Unaudited Pro Forma Condensed Combined Financial Information
GCI Merger
General Terms and Effects
On March 19, 2021, BioLife Solutions, Inc. (the “Company”), a Delaware corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BLFS Merger Subsidiarity, Inc., a Delaware corporation (“Merger Sub”), Global Cooling, Inc., a Delaware corporation (“GCI” or “Global Cooling”) and Albert Vierling and William Baumel, in their capacity as the representatives of the stockholders of GCI (collectively, the “Seller Representative”).
On May 3, 2021, pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, the transactions contemplated by the Merger Agreement were consummated (the “Closing”), Merger Sub merged with and into GCI (the “Merger” and, together with other transactions contemplated by the Merger Agreement, the “Transactions”), with GCI continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. In the 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 Merger Consideration (as defined below). The Company paid the Merger Consideration to the holders of common stock and preferred stock of GCI (collectively, the “GCI Stockholders”).
Merger Consideration
The aggregate merger consideration paid pursuant to the Merger Agreement to the GCI Stockholders was 6,646,870 newly issued shares of common stock, $0.001 par value per share (“Company Common Stock”), of the Company, which represents 19.9% of the Company Common Stock issued and outstanding immediately prior to March 19, 2021 (excluding for the avoidance of doubt any of the Company’s non-vested restricted stock awards) (the “Merger Consideration” and such shares the “Merger Consideration Shares”); provided, however, that the Merger Consideration otherwise payable to GCI Stockholders is subject to the withholding of the Escrow Shares (as defined below) and is subject to reduction for indemnification obligations. The Merger Consideration allocable to one GCI stockholder was reduced by 10,400 shares to satisfy an outstanding note receivable of $374,000. The Merger Consideration is not subject to any purchase price adjustments.
Escrow Shares
At the Closing, approximately nine percent (9%) of the Merger Consideration (the “Escrow Shares”, along with any other dividends, distributions or other income on the Escrow Shares, the “Escrow Property”) otherwise issuable to the GCI Stockholders (allocated pro rata among the GCI Stockholders based on the Merger Consideration otherwise issuable to them at the Closing), was deposited into a segregated escrow account in accordance with an escrow agreement to be entered into in connection with the Transactions (the “Escrow Agreement”).
The Escrow Property will be held for a period of up to twenty-four (24) months after the Closing as the sole and exclusive source of payment for any post-Closing indemnification claims (other than fraud claims), unless earlier released in accordance with the terms of the Escrow Agreement.
SCI Acquisition
On September 18, 2020, BioLife entered into a Stock Purchase Agreement, by and among the Company, SciSafe Holdings, Inc. (“SciSafe” or “SCI”), a Delaware corporation, and the stockholders of SciSafe (collectively, the “SciSafe Sellers”) in accordance with the Stock Purchase Agreement, 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 “Acquisition”). The SciSafe Acquisition closed October 1, 2020. At the closing of the Acquisition, the Company issued to the 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 Sellers an additional 626,000 shares of common stock, which shall be issuable to Sellers upon SciSafe achieving certain specified revenue targets in each year from 2021 to 2024. The purchase price was subject to a post-closing working capital adjustment of approximately $53,000.
Unaudited Pro Forma Combined Financial Statements
The Merger is being accounted for as a business combination using the acquisition method with BioLife as the accounting acquirer in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Under this method of accounting, the merger consideration will be allocated to GCI’s assets acquired and liabilities assumed based upon their estimated fair values at the date of completion of the Merger. The process of valuing the net assets of GCI immediately prior to the Merger, as well as evaluating accounting policies for conformity, is preliminary. Any differences between the estimated fair value of the consideration transferred and the estimated fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, the merger consideration allocation and related adjustments reflected in this unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value. Further, the unaudited pro forma combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. Accordingly, the unaudited pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed. The unaudited pro forma adjustments have been made solely for the purpose of providing unaudited pro forma combined financial information. Differences between these preliminary estimates and the final accounting, expected to be completed after the closing of the Merger, will occur and these differences could have a material impact on the accompanying unaudited pro forma combined financial information and the combined company’s future results of operations and financial position. In addition, differences between the preliminary and final amounts as of the closing date of the Merger will likely occur as a result of the amount of cash used for the Company’s operations, changes in the fair value of the Company’s common stock, and other changes in the Company’s assets and liabilities.
The unaudited pro forma combined balance sheet data assumes that the Merger took place on March 31, 2021 and combines the historical balance sheets of Global Cooling and BioLife as of such date. The unaudited pro forma combined statements of operations and comprehensive loss for the year-ended December 31, 2020 and the three months ended March 31, 2021 assume that the Acquisition and Merger took place as of January 1, 2020 and combine the historical results of BioLife, SciSafe, and Global Cooling for the periods then ended. The unaudited pro forma combined financial information was prepared in accordance with GAAP and pursuant to the rules and regulations of Article 11 of SEC Regulation S-X, which were amended in May 2020.
The unaudited pro forma combined financial information is provided for illustrative purposes only, does not necessarily reflect what the actual consolidated results of operations would have been had the acquisition occurred on the dates assumed and may not be useful in predicting the future consolidated results of operations or financial position. The Company’s results of operations and actual financial position may differ significantly from the unaudited pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the three companies. The unaudited pro forma combined financial information is preliminary and has been prepared for illustrative purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had BioLife, SciSafe, and Global Cooling been a combined company during the specified periods. The actual results reported in periods following the Merger may differ significantly from those reflected in the unaudited pro forma combined financial information presented herein for a number of reasons, including, but not limited to, differences in the assumptions used to prepare this unaudited pro forma financial information.
The unaudited pro forma combined financial information, including the notes thereto, should be read in conjunction with the separate historical financial statements of BioLife and Global Cooling. BioLife’s consolidated statements of operations for the year ended December 31, 2020 and three months ended March 31, 2021 and consolidated balance sheet as of March 31, 2021 are derived from BioLife Form 10-K for the year ended December 31, 2020 and Form 10-Q for the three months ended March 31, 2021, respectively.
Accounting rules require evaluation of certain assumptions, estimates, or determination of financial statement classifications. The accounting policies of Global Cooling may materially vary from those of BioLife. During preparation of the unaudited pro forma combined financial information, management has performed a preliminary analysis and is not aware of any material differences other than those presented in the unaudited pro forma combined financial statements, and accordingly, this unaudited pro forma combined financial information assumes no material differences in accounting policies other than those presented. Following the Merger, management will conduct a final review of Global Cooling accounting policies in order to determine if differences in accounting policies require adjustment or reclassification of Global Cooling results of operations or reclassification of assets or liabilities to conform to BioLife’s accounting policies and classifications. As a result of this review, management may identify differences that, when conformed, could have a material impact on these unaudited pro forma combined financial statements.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2021
(In thousands) |
Historical BioLife |
Historical Global Cooling |
Global Cooling Pro Forma Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||
Assets |
|||||||||||||||||
Current assets |
|||||||||||||||||
Cash and cash equivalents |
$ | 89,012 | $ | 46 | $ | - | $ | 89,058 | |||||||||
Restricted cash |
53 | - | - | 53 | |||||||||||||
Accounts receivable, trade, net |
10,669 | 7,595 | (615 | ) |
5(a) |
17,649 | |||||||||||
Inventories |
11,666 | 13,148 | 1,000 |
5(b) |
25,814 | ||||||||||||
Prepaid expenses and other current assets |
5,143 | 546 | (2,598 | ) |
5(c), 5(d) |
3,091 | |||||||||||
Total current assets |
116,543 | 21,335 | (2,213 | ) | 135,665 | ||||||||||||
Assets held for rent, net |
6,503 | - | - | 6,503 | |||||||||||||
Property and equipment, net |
11,231 | 3,591 | (571 | ) |
5(e) |
14,251 | |||||||||||
Operating lease right-of-use assets, net |
10,524 | - | 1,789 |
5(f) |
12,313 | ||||||||||||
Financing lease right-of-use assets, net |
430 | - | 117 |
5(f) |
547 | ||||||||||||
Long-term deposits and other assets |
356 | 7 | - | 363 | |||||||||||||
Investments |
5,872 | - | - | 5,872 | |||||||||||||
Intangible assets, net |
30,116 | - | 120,590 |
5(g) |
150,706 | ||||||||||||
Goodwill |
58,449 | - | 135,785 |
5(h) |
194,234 | ||||||||||||
Total assets |
$ | 240,024 | $ | 24,933 | $ | 255,497 | $ | 520,454 | |||||||||
Liabilities and Shareholders’ Equity |
|||||||||||||||||
Current liabilities |
|||||||||||||||||
Accounts payable |
$ | 4,276 | $ | 10,005 | $ | (615 | ) |
5(a) |
$ | 13,666 | |||||||
Accrued expenses and other current liabilities |
8,146 | 7,210 | (2,052 | ) |
5(c), 5(f), 5(i) |
13,304 | |||||||||||
Line of credit |
- | 3,428 | - | 3,428 | |||||||||||||
Lease liabilities, operating, current portion |
1,455 | - | 208 |
5(f) |
1,663 | ||||||||||||
Lease liabilities, financing, current portion |
114 | - | 29 |
5(f) |
143 | ||||||||||||
Term loan, current portion |
- | 263 | - | 263 | |||||||||||||
Contingent consideration, current portion |
2,390 | - | - | 2,390 | |||||||||||||
Total current liabilities |
16,381 | 20,906 | (2,430 | ) | 34,857 | ||||||||||||
Contingent consideration, long-term |
4,271 | - | - | 4,271 | |||||||||||||
Lease liabilities, operating, long-term |
9,299 | - | 1,686 |
5(f) |
10,985 | ||||||||||||
Lease liabilities, financing, long-term |
316 | - | 88 |
5(f) |
404 | ||||||||||||
Term loan, long-term |
- | 4,129 | - | 4,129 | |||||||||||||
Convertible promissory notes payable |
- | 1,500 | (1,500 | ) |
5(j) |
- | |||||||||||
Deferred tax liability |
- | - | 15,028 |
5(k) |
15,028 | ||||||||||||
Other long-term liabilities |
980 | 209 | (224 | ) |
5(f) |
965 | |||||||||||
Total liabilities |
31,247 | 26,744 | 12,648 | 70,639 | |||||||||||||
Preferred stock |
- | 3,322 | (3,322 | ) |
5(l) |
- | |||||||||||
Common stock |
34 | 3 | 3 |
5(l), 5(m) |
40 | ||||||||||||
Additional paid-in capital |
307,246 | 22,434 | 210,301 |
5(l), 5(n) |
539,981 | ||||||||||||
Accumulated other comprehensive income |
- | (117 | ) | 117 |
5(l) |
- | |||||||||||
Accumulated deficit |
(98,503 | ) | (27,687 | ) | 35,984 |
5(i), 5(k), 5(l) |
(90,206 | ) | |||||||||
Non-controlling interest |
- | 234 | (234 | ) |
5(l) |
- | |||||||||||
Total shareholders’ equity |
208,777 | (1,811 | ) | 242,849 | 449,815 | ||||||||||||
Total liabilities and shareholders’ equity |
$ | 240,024 | $ | 24,933 | $ | 255,497 | $ | 520,454 |
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2021
Historical BioLife |
Historical Global Cooling |
Global Cooling Pro Forma Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||
(In thousands, except per share and share data) |
||||||||||||
Product revenue |
$ |
13,776 |
$ |
18,463 |
$ |
(361) |
5(a) |
$ |
31,878 |
|||
Rental revenue |
2,204 |
- |
- |
2,204 |
||||||||
Service revenue |
867 |
- |
- |
867 |
||||||||
Total product and rental revenue |
16,847 |
18,463 |
(361) |
34,949 |
||||||||
Costs and operating expenses: |
||||||||||||
Cost of product revenue (exclusive of intangible assets amortization) |
5,622 |
13,624 |
(367) |
5(a), 5(e) |
18,879 |
|||||||
Cost of rental revenue (exclusive of intangible assets amortization) |
1,353 |
- |
- |
1,353 |
||||||||
Cost of service revenue (exclusive of intangible assets amortization) |
575 |
- |
- |
575 |
||||||||
Research and development |
1,987 |
568 |
- |
2,555 |
||||||||
Sales and marketing |
2,021 |
1,346 |
4 |
5(f) |
3,371 |
|||||||
General and administrative |
4,830 |
2,404 |
166 |
5(f), 5(o) |
7,400 |
|||||||
Intangible asset amortization |
933 |
- |
1,426 |
5(g) |
2,359 |
|||||||
Acquisition costs |
998 |
- |
- |
998 |
||||||||
Change in fair value of contingent consideration |
(491) |
- |
- |
(491) |
||||||||
Total operating expenses |
17,828 |
17,942 |
1,229 |
36,999 |
||||||||
Operating income (loss) |
(981) |
521 |
(1,590) |
(2,050) |
||||||||
Other income (expense) |
||||||||||||
Change in fair value of warrant liability |
(121) |
- |
- |
(121) |
||||||||
Interest expense, net |
(16) |
(270) |
30 |
5(j) |
(256) |
|||||||
Other income (expense) |
- |
(1) |
- |
(1) |
||||||||
Total other income (expense) |
(137) |
(271) |
30 |
(378) |
||||||||
Net loss before provision for income taxes |
(1,118) |
250 |
(1,560) |
(2,428) |
||||||||
Income tax benefit (expense) |
- |
- |
364 |
5(p) |
364 |
|||||||
Net income (loss) |
$ |
(1,118) |
$ |
250 |
$ |
(1,196) |
$ |
(2,064) |
||||
Net income (loss) attributable to stockholders |
||||||||||||
Basic |
(1,118) |
250 |
(1,196) |
(2,064) |
||||||||
Diluted |
(1,118) |
(2,064) |
||||||||||
Earnings (loss) per share attributable to common stockholders: |
||||||||||||
Basic |
$ |
(0.03) |
$ |
(0.05) |
||||||||
Diluted |
$ |
(0.03) |
$ |
(0.05) |
||||||||
Weighted average shares used to compute earnings (loss) per share attributable to common stockholders: |
||||||||||||
Basic and Diluted |
33,236,818 |
6,647,697 |
5(q) |
39,884,515 |
||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Fiscal Year Ended December 31, 2020
Historical BioLife |
Historical September 30, 2020 SciSafe |
SciSafe Pro Forma Transaction Accounting Adjustments |
Pro Forma Adjusted for SciSafe |
Historical Global Cooling |
Global Cooling Pro Forma Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||
(In thousands, except per share and share data) |
|||||||||||||||||||||
Product revenue |
$ |
44,540 |
$ |
- |
$ |
- |
$ |
44,540 |
$ |
39,282 |
$ |
(874) |
5(a) |
$ |
82,948 |
||||||
Rental revenue |
1,795 |
- |
- |
1,795 |
- |
- |
1,795 |
||||||||||||||
Service revenue |
1,752 |
4,526 |
- |
6,278 |
- |
- |
6,278 |
||||||||||||||
Total product and rental revenue |
48,087 |
4,526 |
- |
52,613 |
39,282 |
(874) |
91,021 |
||||||||||||||
Costs and operating expenses: |
|||||||||||||||||||||
Cost of product revenue (exclusive of intangible assets amortization) |
18,058 |
- |
- |
18,058 |
27,050 |
72 |
5(a), 5(b), 5(e) |
45,180 |
|||||||||||||
Cost of rental revenue (exclusive of intangible assets amortization) |
1,367 |
- |
- |
1,367 |
- |
- |
1,367 |
||||||||||||||
Cost of service revenue (exclusive of intangible assets amortization) |
1,221 |
3,127 |
170 |
6(a), 6(b) |
4,518 |
- |
- |
4,518 |
|||||||||||||
Research and development |
6,720 |
- |
- |
6,720 |
2,612 |
(2) |
5(e) |
9,330 |
|||||||||||||
Sales and marketing |
6,413 |
153 |
11 |
6(b) |
6,577 |
4,105 |
18 |
5(e), 5(f) |
10,700 |
||||||||||||
General and administrative |
14,607 |
867 |
1,214 |
6(b), 6(c) |
16,688 |
7,988 |
648 |
5(e), 5(f), 5(o) |
25,324 |
||||||||||||
Intangible asset amortization |
3,033 |
- |
789 |
6(d) |
3,822 |
- |
5,703 |
5(g) |
9,525 |
||||||||||||
Acquisition costs |
668 |
- |
- |
668 |
- |
201 |
5(i) |
869 |
|||||||||||||
Change in fair value of contingent consideration |
1,575 |
- |
- |
1,575 |
- |
- |
1,575 |
||||||||||||||
Litigation settlement |
- |
- |
- |
- |
4,000 |
- |
4,000 |
||||||||||||||
Total operating expenses |
53,662 |
4,147 |
2,184 |
59,993 |
45,755 |
6,639 |
112,387 |
||||||||||||||
Operating loss |
(5,575) |
379 |
(2,184) |
(7,380) |
(6,473) |
(7,513) |
(21,366) |
||||||||||||||
Other income (expense) |
|||||||||||||||||||||
Change in fair value of warrant liability |
3,601 |
- |
- |
3,601 |
- |
- |
3,601 |
||||||||||||||
Change in fair value of investments |
1,319 |
- |
- |
1,319 |
- |
- |
1,319 |
||||||||||||||
Interest income (expense), net |
58 |
(49) |
49 |
6(e) |
58 |
(598) |
55 |
5(j) |
(485) |
||||||||||||
Other income (expense) |
- |
- |
- |
- |
2,126 |
- |
2,126 |
||||||||||||||
Total other income (expense) |
4,978 |
(49) |
49 |
4,978 |
1,528 |
55 |
6,561 |
||||||||||||||
Net loss before provision for income taxes |
(597) |
330 |
(2,135) |
(2,402) |
(4,945) |
(7,458) |
(14,805) |
||||||||||||||
Income tax benefit (expense) |
3,264 |
(95) |
498 |
6(f) |
3,667 |
- |
10,238 |
5(k), 5(p) |
13,905 |
||||||||||||
Net income (loss) |
$ |
2,667 |
$ |
235 |
$ |
(1,637) |
$ |
1,265 |
$ |
(4,945) |
$ |
2,780 |
$ |
(900) |
|||||||
Net income (loss) attributable to stockholders |
|||||||||||||||||||||
Basic |
2,450 |
235 |
(1,637) |
1,265 |
(4,945) |
2,780 |
(900) |
||||||||||||||
Diluted |
(954) |
(900) |
|||||||||||||||||||
Earnings (loss) per share attributable to common stockholders: |
|||||||||||||||||||||
Basic |
$ |
0.09 |
$ |
(0.03) |
|||||||||||||||||
Diluted |
$ |
(0.03) |
$ |
(0.13) |
|||||||||||||||||
Weighted average shares used to compute earnings (loss) per share attributable to common stockholders: |
|||||||||||||||||||||
Basic and Diluted |
27,306,258 |
459,598 |
6(g) |
6,647,697 |
5(q) |
34,413,553 |
|||||||||||||||
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. |
Description of the Transactions |
GCI Merger
General Terms and Effects
On March 19, 2021, BioLife Solutions, Inc., a Delaware corporation, entered into an Agreement and Plan of Merger with BLFS Merger Subsidiarity, Inc., a Delaware corporation, Albert Vierling and William Baumel, in their capacity as the representatives of the stockholders of GCI (collectively, the “Seller Representative”) and GCI, Inc., a Delaware corporation.
On May 3, 2021, pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, the transactions contemplated by the Merger Agreement were consummated (the “Closing”), Merger Sub merged with and into GCI (the “Merger” and, together with other transactions contemplated by the Merger Agreement, the “Transactions”), with GCI continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. In the 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 Merger Consideration (as defined below). The Company paid the Merger Consideration to the holders of common stock and preferred stock of GCI (collectively, the “GCI Stockholders”).
Merger Consideration
The aggregate merger consideration paid pursuant to the Merger Agreement to the GCI Stockholders was 6,646,870 newly issued shares of common stock, $0.001 par value per share (“Company Common Stock”), of the Company, which represents 19.9% of the Company Common Stock issued and outstanding immediately prior to March 19, 2021 (excluding for the avoidance of doubt any of the Company’s non-vested restricted stock awards) (the “Merger Consideration” and such shares the “Merger Consideration Shares”); provided, however, that the Merger Consideration otherwise payable to GCI Stockholders is subject to the withholding of the Escrow Shares (as defined below) and is subject to reduction for indemnification obligations. The Merger Consideration allocable to one GCI stockholder was reduced by 10,400 shares to satisfy an outstanding note receivable of $374,000. The Merger Consideration is not subject to any purchase price adjustments.
Escrow Shares
At the Closing, approximately nine percent (9%) of the Merger Consideration (the “Escrow Shares”, along with any other dividends, distributions or other income on the Escrow Shares, the “Escrow Property”) otherwise issuable to the GCI Stockholders (allocated pro rata among the GCI Stockholders based on the Merger Consideration otherwise issuable to them at the Closing), was deposited into a segregated escrow account in accordance with an escrow agreement to be entered into in connection with the Transactions (the “Escrow Agreement”).
The Escrow Property will be held for a period of up to twenty-four (24) months after the Closing as the sole and exclusive source of payment for any post-Closing indemnification claims (other than fraud claims), unless earlier released in accordance with the terms of the Escrow Agreement.
SCI 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”) in accordance with the Stock Purchase Agreement, 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 “Acquisition”). The Acquisition closed October 1, 2020. At the closing of the Acquisition, the Company issued to the 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 Sellers an additional 626,000 shares of common stock, which shall be issuable to Sellers upon SciSafe achieving certain specified revenue targets in each year from 2021 to 2024. The purchase price was subject to a post-closing working capital adjustment of approximately $53,000.
2. |
Basis of Presentation |
The unaudited pro forma condensed combined financial statements and these notes present the unaudited pro forma condensed combined financial position and results of operations of BioLife (after giving effect to the Merger with GCI, the Acquisition of SCI, and adjustments described in these notes, subject to the assumptions and limitations described herein), and are intended to illustrate the impact of the Merger on BioLife.
The Merger will be and the Acquisition was accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification ("ASC") 805, "Business Combinations" ("ASC 805"). Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their acquisition date fair value. For pro forma purposes, the fair value of GCI's identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value as of March 31, 2021.
Transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The accompanying unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X.
The unaudited pro forma condensed combined financial statements do not reflect any cost savings, operating synergies or the impact of restructuring actions that the combined company may achieve as a result of the Merger or Acquisition, or the costs necessary to achieve such cost savings, operating synergies or restructuring actions.
The unaudited pro forma condensed combined financial statements and these notes have been prepared using the acquisition method of accounting under ASC 805, based on the historical financial statements, including the related notes, of BioLife, GCI, and SCI. The unaudited pro forma condensed combined balance sheet as of March 31, 2021 reflects the Merger as if it had been completed on March 31, 2021 and combines the consolidated balance sheets of BioLife and GCI as of March 31, 2021. The unaudited pro forma statements of operations reflect the Merger and Acquisition as if they occurred on January 1, 2020. The unaudited pro forma statement of operations for the year ended December 31, 2020 combines the statement of operations of BioLife for the year ended December 31, 2020, the statement of operations of GCI for the year ended December 31, 2020, and the unaudited statement of operations of SCI for the nine months ended September 30, 2020. The unaudited pro forma statement of operations for the three months ended March 31, 2021 combines the statement of operations of BioLife for the three months ended March 31, 2021 and the statement of operations of GCI for the three months ended March 31, 2021.
The historical financial statements of BioLife, GCI, and SCI have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are transaction accounting adjustments which are necessary to account for the Merger and the Acquisition, in accordance with U.S. GAAP. The unaudited pro forma adjustments are based upon available information and certain assumptions that our management believe are reasonable.
The unaudited pro forma condensed combined financial statements and these notes include unaudited pro forma adjustments based on preliminary valuations of assets and liabilities of GCI. These adjustments are preliminary and will be revised as additional information becomes available and additional valuation work is performed. The final purchase price allocations will be based on the fair value of the assets acquired and the liabilities assumed as of the closing of the Merger. For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed in determining the final purchase price allocations, BioLife will apply U.S. GAAP for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date. The fair value measurements will utilize estimates based on key assumptions in connection with the Merger, including historical and current market data. The final purchase price allocation will be determined after the completion of the Merger, and the final allocations may differ materially from those presented in the unaudited pro forma financial statements and these notes.
Included in the historical statement of operations of Global Cooling for the year ended December 31, 2020 are the following nonrecurring items for which no adjustment has been made:
· |
Litigation settlement expense was recognized related to a mediation agreement between Global Cooling and a former supplier in the amount of $4.0 million. |
· |
Gain on debt extinguishments were recognized related to the Paycheck Protection Program and JobsOhio Workforce Retention Loan programs in the amount of approximately $2.1 million. |
3. |
Estimated consideration and preliminary purchase price allocation |
GCI Merger
BioLife will account for the Merger as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of GCI will be recorded as of the acquisition date, at their fair values, and consolidated with BioLife. The preliminary fair value of the net tangible liabilities acquired is $21.4 million, the preliminary fair value of the identifiable intangibles is $120.6 million, and the preliminary residual goodwill is $135.8 million. The fair value estimates required critical estimates, including, but not limited to, future expected cash flows, revenue and expense projections, discount rates and revenue volatility. BioLife believes these estimates to be reasonable. Actual results may differ from these estimates.
The following table summarizes the components of the estimated consideration (in thousands, except number of shares, stock price, and consideration percentage):
BioLife shares outstanding (as of March 19, 2021) |
33,401,359 | |||
Merger consideration percentage |
19.9 | % | ||
Merger consideration shares |
6,646,870 | |||
less: Merger consideration shares withheld to satisfy outstanding GCI stockholder obligations to GCI |
10,400 | |||
Subtotal |
6,636,470 | |||
BioLife stock price (as of May 3, 2021) |
$ | 35.07 | ||
Value of issued shares |
$ | 232,741 | ||
plus: Settlement of BioLife prepaid deposits |
$ | 2,224 | ||
plus: Net settlement of BioLife accounts receivable |
$ | 16 | ||
Merger Consideration |
$ | 234,981 |
Transaction costs related to the acquisition are expensed as incurred and are not included in the calculation of consideration transferred.
The table below represents the estimated preliminary purchase price allocation to the net assets acquired based on their estimated fair values, as well as the associated estimated useful lives of the acquired intangible assets (amounts in thousands). Such amounts were estimated using the financial statements from GCI as of March 31, 2021.
Cash |
$ | 46 | ||
Accounts receivable, net |
7,280 | |||
Inventory |
14,148 | |||
Prepaid expenses and other current assets |
172 | |||
Property, plant and equipment, net |
3,020 | |||
Operating lease right-of-use assets, net |
1,789 | |||
Financing lease right-of-use assets, net |
117 | |||
Long-term deposits and other assets |
7 | |||
Developed technology |
18,190 | |||
Customer relationships |
7,020 | |||
Tradenames |
26,640 | |||
Non-compete agreements |
1,240 | |||
In-process research and development |
67,500 | |||
Goodwill |
135,785 | |||
Accounts payable |
(9,674 |
) |
||
Line of credit |
(3,428 |
) |
||
Lease liabilities, operating |
(1,894 |
) |
||
Lease liabilities, financing |
(117 |
) |
||
Long-term debt |
(4,392 |
) |
||
Deferred tax liability |
(23,526 |
) |
||
Other liabilities |
(4,942 |
) |
||
Fair value of net assets acquired |
$ | 234,981 |
The fair value of GCI’s identifiable intangible assets, weighted average useful lives, and annual amortization expense have been preliminarily estimated as follows (amounts in thousands):
Estimated Fair Value |
Estimated Useful Life (Years) |
Amortization Method |
Global Cooling Pro Forma Amortization Adjustment |
||||||||
Developed technology |
$ |
18,190 |
6 |
Straight-line |
$ |
3,032 |
|||||
Customer relationships |
7,020 |
11 |
- |
12 |
Straight-line |
585 |
|||||
Tradenames |
26,640 |
15 |
Straight-line |
1,776 |
|||||||
Non-compete agreements |
1,240 |
4 |
Straight-line |
310 |
|||||||
In-process research and development |
67,500 |
N/A |
Not applicable |
N/A |
|||||||
Total |
$ |
120,590 |
$ |
5,703 |
These preliminary estimates of fair value and estimated useful lives will likely differ from final amounts the Company will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements. A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of goodwill of approximately $12.1 million and annual amortization expense of approximately $570,000, assuming an overall weighted average useful life of 11.3 years.
Fair value measurement methodologies used to calculate the value of any asset can be broadly classified into one of three approaches, referred to as the cost, market and income approaches. In any fair value measurement analysis, all three approaches must be considered, and the approach or approaches deemed most relevant will then be selected for use in the fair value measurement of that asset. The estimated fair values of developed technology and in-process research and development were estimated using a multi-period excess earnings approach. The estimated fair values of customer relationships were estimated using the “distributor method”. The estimated fair value of the tradenames is based on the relief from royalty method, which estimates the value of the trade names based on the hypothetical royalty payments that are saved by owning the asset. The estimated fair values of non-compete agreements were estimated using a “with and without” approach, comparing projected cash flows under scenarios assuming the non-compete agreements were and were not in place. The fair value of inventory and property, plant and equipment were determined using the “market approach”.
Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include, but are not limited to (i) the amount and timing of projected future cash flows (including revenue and expenses), (ii) the discount rate selected to measure the risks inherent in the future cash flows, (iii) the assessment of the asset’s life cycle, and (iv) the competitive trends impacting the asset.
These preliminary estimates of fair value and estimated useful lives may be different from the amounts included in the final acquisition accounting, and the difference could have a material impact on the accompanying unaudited pro forma condensed combined financial statements.
4. |
Reclassifications |
Certain reclassifications were directly applied to the pre-acquisition historical financial statements of Global Cooling to conform to the financial statement presentation of BioLife. No reclassifications were made to the pre-acquisition historical financial statements of SciSafe.
Reclassifications in the Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2021 are as follows:
(In thousands) |
Global Cooling Before Reclassification |
Reclassifications |
Global Cooling After Reclassification |
||||||||||
Assets |
|||||||||||||
Current assets |
|||||||||||||
Cash and cash equivalents |
$ | 46 | $ | - | $ | 46 | |||||||
Accounts receivable, trade, net |
7,540 | 55 |
(a) |
7,595 | |||||||||
Receivables, other |
55 | (55 | ) |
(a) |
- | ||||||||
Inventories |
13,148 | - | 13,148 | ||||||||||
Prepaid expenses and other current assets |
- | 546 |
(b) |
546 | |||||||||
Prepaid expenses |
172 | (172 | ) |
(b) |
- | ||||||||
Notes receivable, related party |
374 | (374 | ) |
(b) |
- | ||||||||
Total current assets |
21,335 | - | 21,335 | ||||||||||
Assets held for rent, net |
|||||||||||||
Property and equipment, net |
3,591 | - | 3,591 | ||||||||||
Long-term deposits and other assets |
- | 7 |
(c) |
7 | |||||||||
Deposits |
4 | (4 | ) |
(c) |
- | ||||||||
Other assets |
3 | (3 | ) |
(c) |
- | ||||||||
Total assets |
24,933 | - | 24,933 | ||||||||||
Liabilities and Shareholders’ Equity |
|||||||||||||
Current liabilities |
|||||||||||||
Accounts payable |
10,005 | - | 10,005 | ||||||||||
Accrued expenses and other current liabilities |
- | 7,210 |
(d) |
7,210 | |||||||||
Customer advances |
2,647 | (2,647 | ) |
(d) |
- | ||||||||
Accrued compensation |
1,232 | (1,232 | ) |
(d) |
- | ||||||||
Other accrued expenses |
3,302 | (3,302 | ) |
(d) |
- | ||||||||
Capital lease obligations, current portion |
29 | (29 | ) |
(d) |
- | ||||||||
Line of credit |
3,428 | - | 3,428 | ||||||||||
Term loan, current portion |
263 | - | 263 | ||||||||||
Total current liabilities |
20,906 | - | 20,906 | ||||||||||
Deferred rent, long-term |
121 | (121 | ) |
(e) |
- | ||||||||
Capital lease obligations, long-term |
88 | (88 | ) |
(e) |
- | ||||||||
Term loan, long-term |
4,129 | - | 4,129 | ||||||||||
Convertible promissory notes payable |
1,500 | - | 1,500 | ||||||||||
Other long-term liabilities |
- | 209 |
(e) |
209 | |||||||||
Total liabilities |
26,744 | - | 26,744 | ||||||||||
Preferred stock |
3,322 | - | 3,322 | ||||||||||
Common stock |
3 | - | 3 | ||||||||||
Additional paid-in capital |
22,434 | - | 22,434 | ||||||||||
Accumulated other comprehensive income |
(117 | ) | - | (117 | ) | ||||||||
Accumulated deficit |
(27,687 | ) | - | (27,687 | ) | ||||||||
Non-controlling interest |
234 | - | 234 | ||||||||||
Total shareholders’ equity |
(1,811 | ) | - | (1,811 | ) | ||||||||
Total liabilities and shareholders’ equity |
$ | 24,933 | $ | - | $ | 24,933 |
(a) |
Reflects the reclassification of balances in “Receivables, other” to “Accounts receivable, trade, net”. |
(b) |
Reflects the reclassification of balances in “Prepaid expenses” and “Notes receivable, related party” to “Prepaid expenses and other current assets”. |
(c) |
Reflects the reclassification of balances in “Deposits” and “Other assets” to “Long-term deposits and other assets”. |
(d) |
Reflects the reclassification of balances in “Customer advances”, “Accrued compensation”, “Other accrued expenses”, and “Capital lease obligations, current portion” to “Accrued expenses and other current liabilities”. |
(e) |
Reflects the reclassification of balances in “Deferred rent, long-term” and “Capital lease obligations, long-term” to “Other long-term liabilities”. |
Reclassifications in the Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2021 are as follows:
Historical Global Cooling |
Reclassifications |
Global Cooling After Reclassification |
|||||||||||
(In thousands, except per share and share data) |
|||||||||||||
Product revenue |
$ | - | $ | 18,463 |
(a) |
$ | 18,463 | ||||||
Sales, net of discounts and allowances |
18,463 | (18,463 | ) |
(a) |
- | ||||||||
Total product and rental revenue |
18,463 | - | 18,463 | ||||||||||
Costs and operating expenses: |
|||||||||||||
Cost of product revenue (exclusive of intangible assets amortization) |
- | 13,624 |
(b) |
13,624 | |||||||||
Cost of sales |
13,624 | (13,624 | ) |
(b) |
- | ||||||||
Research and development |
- | 568 |
(c) |
568 | |||||||||
Sales and marketing |
- | 1,346 |
(c) |
1,346 | |||||||||
General and administrative |
4,318 | (1,914 | ) |
(c) |
2,404 | ||||||||
Total operating expenses |
17,942 | - | 17,942 | ||||||||||
Operating income |
521 | - | 521 | ||||||||||
Other income (expense) |
|||||||||||||
Other expense |
(1 | ) | 1 |
(d) |
- | ||||||||
Interest expense |
(275 | ) | 275 |
(e) |
- | ||||||||
Interest income |
5 | (5 | ) |
(e) |
- | ||||||||
Interest income (expense), net |
- | (270 | ) |
(e) |
(270 | ) | |||||||
Other income (expense) |
- | (1 | ) |
(d) |
(1 | ) | |||||||
Total other income (expense) |
(271 | ) | - | (271 | ) | ||||||||
Net income before provision for income taxes |
250 | - | 250 | ||||||||||
Income tax benefit (expense) |
- | - | - | ||||||||||
Net income |
$ | 250 | $ | - | $ | 250 |
(a) |
Reflects the reclassification of amounts in “Sales, net of discounts and allowances” to “Product revenue”. |
(b) |
Reflects the reclassification of amounts in “Cost of sales” to “Cost of product revenue”. |
(c) |
Reflects the reclassification of amounts in “General and administrative” to “Research and development” and “Sales and marketing”. |
(d) |
Reflects the reclassification of amounts in “Other expense” to “Other income (expense)”. |
(e) |
Reflects the reclassification of amounts in “Interest expense” and “Interest income” to “Interest income (expense), net”. |
Reclassifications in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2020 are as follows:
Historical Global Cooling |
Reclassifications |
Global Cooling After Reclassification |
|||||||||||
(In thousands, except per share and share data) |
|||||||||||||
Product revenue |
$ | - | $ | 39,282 |
(a) |
$ | 39,282 | ||||||
Sales, net of discounts and allowances |
39,282 | (39,282 | ) |
(a) |
- | ||||||||
Total product and rental revenue |
39,282 | - | 39,282 | ||||||||||
Costs and operating expenses: |
|||||||||||||
Cost of product revenue (exclusive of intangible assets amortization) |
- | 27,050 |
(b) |
27,050 | |||||||||
Cost of sales |
27,050 | (27,050 | ) |
(b) |
- | ||||||||
Research and development |
- | 2,612 |
(c) |
2,612 | |||||||||
Sales and marketing |
- | 4,105 |
(c) |
4,105 | |||||||||
General and administrative |
14,705 | (6,717 | ) |
(c) |
7,988 | ||||||||
Litigation settlement |
4,000 | - | 4,000 | ||||||||||
Total operating expenses |
45,755 | - | 45,755 | ||||||||||
Operating loss |
(6,473 | ) | - | (6,473 | ) | ||||||||
Other income (expense) |
|||||||||||||
Debt forgiveness |
2,085 | (2,085 | ) |
(d) |
- | ||||||||
Ohio bureau of workers compensation dividends |
40 | (40 | ) |
(d) |
- | ||||||||
Other income |
15 | (15 | ) |
(d) |
- | ||||||||
Other expense |
(14 | ) | 14 |
(d) |
- | ||||||||
Interest expense |
(598 | ) | 598 |
(e) |
- | ||||||||
Interest income (expense), net |
- | (598 | ) |
(e) |
(598 | ) | |||||||
Other income (expense) |
- | 2,126 |
(d) |
2,126 | |||||||||
Total other income (expense) |
1,528 | - | 1,528 | ||||||||||
Net loss before provision for income taxes |
(4,945 | ) | - | (4,945 | ) | ||||||||
Income tax benefit (expense) |
- | - | - | ||||||||||
Net loss |
$ | (4,945 | ) | $ | - | $ | (4,945 | ) |
(a) |
Reflects the reclassification of amounts in “Sales, net of discounts and allowances” to “Product revenue”. |
(b) |
Reflects the reclassification of amounts in “Cost of sales” to “Cost of product revenue”. |
(c) |
Reflects the reclassification of amounts in “General and administrative” to “Research and development” and “Sales and marketing”. |
(d) |
Reflects the reclassification of amounts in “Debt forgiveness”, “Ohio bureau of workers compensation dividends”, “Other income”, and “Other expense” to “Other income (expense)”. |
(e) |
Reflects the reclassification of amounts in “Interest expense” to “Interest income (expense), net”. |
5. |
Pro Forma Adjustments (GCI Merger) |
This note should be read in conjunction with Notes 1 and 2. Adjustments included in the Global Cooling pro forma transaction accounting adjustments column of the unaudited pro forma condensed combined statements of operations and the unaudited pro forma condensed combined balance sheet include the following:
(a) |
Reflects approximately $874,000 and $361,000 of sale and purchase transactions that occurred between BioLife and its subsidiaries and GCI during the year ended December 31, 2020 and the three months ended March 31, 2021, respectively, and related Accounts Receivable and Accounts Payable balances of $615,000 as of March 31, 2021. |
(b) |
Reflects the estimated step-up of GCI inventory by $1.0 million from carrying value. The fair value calculation is preliminary and subject to change. The step-up in inventory will increase cost of sales as inventory is sold. The increase is reflected in the unaudited pro forma condensed combined statements of operation, as all inventory is anticipated to be sold within one year of the acquisition date. |
(c) |
Reflects cash deposits of approximately $2.2 million paid by BioLife in 2020 to GCI for freezer purchases. These deposits were recorded in deferred revenue on GCI’s balance sheet as of March 31, 2021. Under ASC 805, these deposits will be treated as effectively settled as a result of the transaction and are included in the Merger Consideration. |
(d) |
Reflects related party notes receivable of $374,000 that was settled in the close of the transaction. |
(e) |
Reflects the amount by which the estimated fair market value of GCI’s fixed assets fell below their net historical cost basis by $571,000 and related adjustments to depreciation of approximately $53,000 and $6,000 for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. The fair value calculation is preliminary and subject to change and will be depreciated over the remaining useful life of the assets. |
(f) |
Reflects estimated operating lease assets and liabilities of approximately $1.8 million and $1.9 million, respectively, and finance lease assets and liabilities of approximately $117,000 to be recorded under ASC 842 and related differences in lease expense of $22,000 for the year ended December 31, 2020 and $11,000 for the three months ended March 31, 2021 between ASC 840 and ASC 842. |
(g) |
Reflects the preliminary fair value estimate of identifiable intangible assets to be acquired by BioLife of approximately $120.6 million and estimated amortization expense of $1.4 million for the three months ended March 31, 2021. The fair value calculation is preliminary and subject to change. The identifiable intangible assets include developed technology, customer relationships, trade names, non-compete agreements, and in-process research and development (“IPR&D”). The fair values of the developed technology, customer relationships, trade names, and non-compete agreements were determined primarily using the “income approach,” which requires a forecast of all the expected future cash flows. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the related project. Therefore, no pro forma adjustment has been made to the historical amortization expense for IPR&D in the unaudited pro forma combined statements of operations. The IPR&D intangible assets are subject to testing for impairment annually and upon other triggering events. |
(h) |
Reflects the adjustments to record goodwill related to the transaction. |
(i) |
Reflects $201,000 of transaction costs that are anticipated to be incurred related to the Merger that were neither accrued nor paid through March 31, 2021. |
(j) |
Reflects convertible promissory notes payable by GCI in the amount of $1.5 million that were converted to GCI common stock prior to the closing of the transaction and related interest expense of $55,000 and $30,000 incurred during the year ended December 31, 2020 and the three months ended March 31, 2021, respectively. |
(k) |
Reflects the estimated tax impacts of the Merger to net deferred tax liabilities and the related income tax expense from acquired intangibles. At March 31, 2021, BioLife had $8.5 million in deferred tax assets that were fully reduced by a valuation allowance. The Company estimates that approximately $23.5 million of deferred tax liabilities will be recognized on acquired intangible assets. The valuation allowance is anticipated to be released in full, which will result in $8.5 million of income tax benefit. These estimates are preliminary and are subject to change. Actual results may differ materially from these estimates. |
(l) |
Reflects the elimination of historical equity of GCI. |
(In thousands) |
March 31, 2021 |
|||
Elimination of Global Cooling preferred stock |
$ | (3,322 | ) | |
Elimination of Global Cooling common stock |
(3 | ) | ||
Elimination of Global Cooling additional paid-in capital |
(22,434 | ) | ||
Elimination of Global Cooling accumulated other comprehensive income |
117 | |||
Elimination of Global Cooling historical accumulated deficit |
27,687 | |||
Elimination of Global Cooling non-controlling interest |
(234 | ) | ||
Total adjustment to Global Cooling historical equity |
$ | 1,811 |
(m) |
Reflects the par value of the common stock to be issued to GCI shareholders as consideration for the transaction (in thousands except share, exchange ratio, and par value). |
Global outstanding common stock, including estimated shares to be issued in connection with Global stock options to be exercisable under the assumption of a cashless conversion into Global common stock |
364,991 | |||
Number of shares to be issued in connection with Global preferred Series A stock conversion into Global common stock |
96,013 | |||
Number of shares to be issued in connection with Global preferred Series B stock conversion into Global common stock |
82,365 | |||
Number of shares to be issued in connection with convertible notes stock conversion into Global common stock |
16,479 | |||
Total Global common stock prior to exchange |
559,848 | |||
x: exchange ratio |
11.85 | |||
Total number of shares held by Global stockholders post Merger |
6,636,470 | |||
Total number of shares held by BioLife stockholders post Merger |
33,729,573 | |||
Total number of outstanding common stock of combined company |
40,366,043 | |||
BioLife common stock par value |
$ | 0.001 | ||
Par value of combined company outstanding common stock |
$ | 40 | ||
Less: par value of BioLife stock |
$ | 34 | ||
Pro forma adjustment |
$ | 6 |
(n) |
Reflects the fair value of the stock to be issued as Merger Consideration less it’s par value. |
(o) |
Reflects compensation adjustments of approximately $641,000 and $160,000 for the year ended December 31, 2020 and three months ended March 31, 2021, respectively, related to one key executive retained from GCI. |
(p) |
Reflects the income tax effect of unaudited pro forma adjustments at a statutory rate of 23.3% of approximately $1.7 million and $364,000 in the year ended December 31, 2020 and three months ended March 31, 2021, respectively. |
(q) |
Reflects the number of shares anticipated to be issued as Merger Consideration as adjusted for 10,400 shares to be withheld from issuance in order to satisfy outstanding notes receivable from one GCI stockholder and 11,227 shares that are expected to vest within the first year subsequent to the Merger related to stock compensation to one key executive retained from GCI. |
6. |
Pro Forma Adjustments (SCI Acquisition) |
This note should be read in conjunction with Notes 1 and 2. Adjustments included in the SciSafe pro forma transaction accounting adjustments column of the unaudited pro forma condensed combined statement of operations include the following:
(a) |
Represents the estimated annual depreciation impact of adjusting SciSafe’s fixed assets to fair market value by $405,000 from historical cost basis. |
(b) |
Represents stock award expense for the stock compensation paid in the transaction and stock awards to SciSafe management and employees. |
(c) |
Represents salary increase of $150,000 for the twelve months ended December 31, 2020 related to one key executive retained from SciSafe. |
(d) |
Reflects the annual amortization impact of identifiable intangible assets acquired by BioLife of approximately $12.1 million. The identifiable intangible assets include non-compete agreements, customer relationships, and trade names. |
(e) |
Reflects interest expense incurred prior to the acquisition between January 1, 2020 and September 30, 2020 on amounts owed to related parties that were settled in the transaction. |
(f) |
Reflects the income tax impact of the unaudited pro forma adjustments at a statutory rate of 23.3%. |
(g) |
Reflects the number of additional weighted-average shares that would have been outstanding in the year ended December 31, 2020 had the SciSafe transaction occurred on January 1, 2020. |
Document And Entity Information |
May 03, 2021 |
---|---|
Document Information [Line Items] | |
Entity, Registrant Name | BIOLIFE SOLUTIONS, INC. |
Document, Type | 8-K/A |
Document, Period End Date | May 03, 2021 |
Entity, Incorporation, State or Country Code | DE |
Entity, File Number | 001-36362 |
Entity, Tax Identification Number | 94-3076866 |
Entity, Address, Address Line One | 3303 Monte Villa Parkway |
Entity, Address, City or Town | Bothell |
Entity, Address, State or Province | WA |
Entity, Address, Postal Zip Code | 98021 |
City Area Code | 425 |
Local Phone Number | 402-1400 |
Written Communications | false |
Soliciting Material | false |
Pre-commencement Tender Offer | false |
Pre-commencement Issuer Tender Offer | false |
Entity, Emerging Growth Company | false |
Title of 12(b) Security | Common Stock |
Trading Symbol | BLFS |
Security Exchange Name | NASDAQ |
Amendment Description | Form 8-K/A date of report 05-03-21 |
Amendment Flag | true |
Entity, Central Index Key | 0000834365 |
?7/]V2#09,0C(D81)F)YNQ]=;J-W6W6O))7PY<,AJX7O ETY=R
M6,[G[^_O<_?%G"]Z>>OHZ"@_PCH97:DL6'>FXJ@C7%6U8)K[>2B-*V*!PR=U
M9^OIPKBJ1[D=S-8,F)WK^7=Y501M+,LP+:-H)7OG2P$IYKD72.K9;%(_<-+F
M!W6M_!]7ERV[SP8TKLQ'T@ 9AK$ ''/Y1[[XVOS,B\%]8*N+P94 A[CF(98;G$6SE1D"C6W+?9VJ#8\[&!X^!>@1(A/WV"+B7
M][*/Q!JBW4\#XK N]W0RB;;1S+W8'9@ST'0B69%D/_]B[1\<*SLMKLQ5&LH0
MTU#0]],4+W2,0DI?:=EIDTZ1^M-VB6YS[]9%S%1JZ>2)X%FKQ.L 9CS@A1JO
MJH=;*NSO%O/+)*S[@,Q@+#!5 /F"?]T'\6(NL_'PD. L_@+6@N[+"\"RL0-QO[6
M:,:4Z'Q14I[?9US]+RWF;2E6T&_.W /&G/!O$ MFS$'K9#0_ RX5Q)BKQ[2ZQ=U4!G9E8-]1
M _N5O"TE* 74D8/KRM=D 8-S$!O=FFWT +N
MUPBD7R\ROHQ0]U<%Y6^56;?: @(OX\+VR_L+*09>609^T**==A.].R4J/L\!
MLF+?U:&7)E8$IEJ^YT,Q<,7 ]Y2![W";P"Q6C@7M/-6I1N7$KG:UBSJ,_ .8FV-Q0620D0]/!Q[,XM%QK2%P'$8&3\3B([A!)KS49)1,QP8LU&2!4/(I
M&7!GPH;X\S],6)+\$*<)?_"9.;:!Z=T_P0 >")8PZA&YF]U.X*Z>@Z5\'F L
MK)GAHI(\,3C+QAC(8KGAK<17;S(% !KK+8&WAP&)B^A[\\P9\MJ_1+6#C)
MD).C?QV1@R^G)_]Z#[M#S@(?SC#<3XJD9,")@=#DX9=-^?D1P>^'G\/\< 9.
MX!'<9P&<@6%%C3^XE$EG= >'-B.((Z!8HC<:/9H-S -F&A,& GQS?GM>W)L^E)[I:U>
MB_9[?13=CJ \[#M*_.\
ME*HT9%-0D+A0E6J!5T/!TT^[37RNU*6H9-6HIF[W<9,@LJN5(ZL>@-VLUO
MA5Q&NO@ !UCGT>)X\^8*W&OP&T"LM15NQ+T6@)Z&U>SD8CW
M\LP^$6NZM/G(,?QB\8BNA>[ZCR\5_YY-E6;> AIT::?3D0!X< L93F/6X5]
M+\_:N[#OF>T[[J/T<(NV#12-*MT![6H2[%IB[0UI3QU1=20-OF:#WC>7+71S
M0MC/!;,]UHY3CMW"WRJQ W>,S,O,O#!0J=;I'PY!,P/I6@FKA4A,2:;F,R1&
M553:[P\.!]'[28P,F)(!4_4.F"KX8D)I^C^=:[7;XYOMUL% .^KEF@PS5DJ%:*7E1!AKM
M] 9U.EV6P5HR6*NN^O"2^5EE,&1\EHS/DO%9,CZK)AI4QFYW[L.#]62K5C2:Y$I2SH_[(.7CCNJ!C\"?G&8*9X
M.<;D,\FNA&7"L+XD7NNWS"E>*O("%Z>!PEC%WS#T#::!]T',1*_S*R^&Q70+
M2WOEU+0**\,3/;Z'N64&>4%754%.@PZ&(XRE@T_2:05.R,64%\H*?)-7R:*[
MOCVJ%TL'G0[M:T-1 \8/\C5 GE)\LW2;7*$W\6?WB!-
M.0U<'K^%'RX3OH 5]^#/5NK=87D\9SIEK@CEFB^8;_J8RL6T\5P3?^*?VI[.
M6X.W_V"/A,T7EO/(, 6.[=C'T:]D8KK,\)TP"0R&A@465MY;*[,7]M[CV6'N
MT 1CD[""(?O)7,/T, N-:6!]8ATK3> ?03]Z/F%_(F\!'<'W3773)?>Z%;"H
M!6\&K^1?Q]\F815$_)DW I.!Z'?ITI:)A'QG]PUQ">4C6@2*93
M"[H<6IR9,#NIG)'LS?ZEIR"GQR1TGS4./U[$G'8/@XZ4N=1(^ K.S^4&!SV2
M7 6 :$!R'BE,6#^3CR12&W++>7AQ#FY"O R R869_W;874+)& [6YD)N2<*A2B2R1G?*KX3+(;:S)N/G;=P]FP"\WBLAJZ,C21\X;/+Q'N%Y@4OD(UJJO80 +
M0!"H+1Q8RV!ES&TD-[W6@>LT>VZ.#2/N00>2A@Z7,]'V8 :]LZL]+MQ^5XDO
M!O%U&EX /$OP)H" Z(C_&;,9YNJ2HJ4L,U,U*)C6$1I?VNRB0:P R-%1SE(U
M5.Y??$9)7T$W)=IBHY\2<[A_8%20K
M\ TP[B<)/BSEX:+VEDC+UH!MCND OSZ**=_H'X9:9',LB[7Q*,:"/]-]+F>D
MJH$WQW?,,>EA_]"5!5C;94&=IW[%,0"I_>+X)M\B:Q6)-MIMQTC
MNMYHA7B-2V477M]564@KZBCS0>D7W[8?@-Q_,7%=I
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M@Q=3AS-1 9LU05D\S'KA;-UEX;"\]G#(42(U+ Y/@3(/31E%+O"NDU>#YUJ
M'1#P]=RT:@5XNV4 T#7::O1HJUFO F5UER[CI@+!)+ ,'X1%1Y3=QO8"+ALS
MVP.1CW ;?F>4V,Q']=PW?BHTW" :'FA:B[9:Y5;A?K]O,%C040)KZS6W6"UD
MV5$JJ6\U_+MAOL%M +\A&W&3^RK K;H!;@=ZEW9[?=K4MAB>OKB"K "F'0?1
MFD:W'0 B-_I]JI6*RL\13.&A;>N%1*P0";<38%@=64^G+:U)FR6;^G8:J"HC
M[<%9]CI4[VPQ<%99^C8D\UTZ-JS:]EW'LM !PFV?N
PA:OJ?YR!
M=S7F#OD*GZ0VO1":VL9+"TRUR>HK7@J^J,-9S@(J@!%*('H6H$S'%KN$U6R4
M<%1@39O&4IZJA*3=$I+J57EU/\Q?,WM_V+&(>UZ I1]4ZR*E#"J
8TS!'3:^'KSO"NO5O5
M2M\I*L:FJ?6HUFU5*&1*^;R67X9F'2[#2[U4!=*_1GO;C(DOS\=>$_IO*?K?
M)/WKS=K1?[WQOZWH?Z/TWZ&=9K-6]%]C_+_#@F#&R&=N'6Y!0>&O&[DLK^EA
M1QM]G38;6[Q5JL'"SMD8EF[1#L?I/7N5\B.8RC8'K#Y3N-Y=G?:J'[:G?$0;
M\1%E^'F$(X5,7>>!#V%(C!E@'J!)PM^#9:C1DS07>F&8IHOU:WU1GA,=39[G
MF%R4H@VKV'(O^;+H-<+EA+Z?"4:S_#Q'Z:+"S[%DW.XA.8RR#P
M164EV_$%6+F
Q[83=C[*"-I?G-H .0SP/3&FWG(=%O=!Z":!P\M7BS2D
M2_%>+N%81QSBC0A9B#K'Q
T%,;8QCH\LDT+Y2R
M=288""I.S_ JK./B?7 10H((T/20:\^8+(V4Y
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M;&+!M/(73&O1@B5#>[:N65%SNWOR6+F["\E$?5B90IJVM/V?F
_.BK:;VVU'A9,T>]77>%] !ZBM."K*.,[(*3MQP.-A35'IL->N\^$V'G0L
M-X/6ALU0DZ,)D'_PDX>'#*>J[E"S)?+?E?)?I/QK:NODO]WXWY/R7ZC\*[3;
M;Y?\MQO_^U+^BY3_;H?"I+9*_EN,_SPG+L]@TX9=T-+HR:XZH)W\4O(R>K*)
M#%O!H+)QBAH
!4LZ%=Y-]57DD\59?PS_)CEH2G]A&7;U*U
M4D)3A*;*@Z8&5+""H%0UH%2':I.6$D*V8?@,$F4(QT_W7-L;.ZHF'B70$-9^]7K&&.(
MI,>*;L],ZT2^SYS+H_21Y!:/+_!&LCE\,XIYN/Q>A Y:8@\GR31#CGDT7H*E
M5#0K?C@>G=PM04\+E"2^'_EZ2"!K(0U->6-R4M%@4@ J[?"%P; %IP\_S_3_
M8]]R;M=0B:&*3OAJ.PCC$OCU!-A
Q\D5J1!&%-L0'NCGYGEGENSLKVPUEJ
ML1#5W?Q\LL^FKB/O3L5<5YF\B6$%4_E'*%(D44678.AKW4/5,R&[]&21^AC6
M&":Y*=H2M;M:?]"MK>#4W1;%2:M3_;'NQTY+*4"G%UJO7YZ3W?E,.=?HQN=&
M%HK?D%5;N?V$%_/B,3&7FX(P8>&BV=8ZK?+DPU9*-.MN-S_+)(O$91M:=/.;
M?4>"6K2@-K7!!=E0LJ'K">HH2I4B02U<4$N4#%4I,:V]/4UD6@T)ZA8NF!VM
M?5&>0RJ5$LVZ6]!W7-4D8;[^8W9[/(EHT2+::FO=5GG* U1*1NMN/K_(C.0$
MRJVS>![!]0I@CR\Z9;''.=<354H!U-U(OQJ^^9"ZPC6C!%;NE=!UT0M/*/@'
M]'NNZ%-:9;%T\''!PJPI4-'"N;)EIKB/*I'=?'S[1W85LL4%"3^1:RT_ N%/
MM_7AV]>XL21[X)6!W(U+?F$'<^^.1V>N\[#X(1908S:IP5RR,5>S:N&Z
MA9KSIX;\)TNIAE\M$.#W=]D$0"IN/?UO7ZX_"_O[4@+$=,C6Q L,I*F+[37F
M<5>,
EB%J=#!=4:0AW_EFZ]'@U?!-YSRWN$)Z
M./%QS[T.YRN/\*^A<%'6Z"@<\&2U