THERMOGENESIS HOLDINGS, INC. Certain statements contained in this section and other parts of this Annual
Report on Form 10-K which are not historical facts are forward looking
statements and are subject to certain risks and uncertainties. Our actual
results may differ significantly from the projected results discussed in the
forward-looking statements. Factors that might affect actual results include,
but are not limited to, those discussed in ITEM 1A "RISK FACTORS" and other
factors identified from time to time in our reports filed with the
General Overview
The Company develops and commercializes a range of automated technologies for
cell-banking, cell-processing, and cell-based therapeutics. Since the 1990's
The Company provides the AutoXpress® and BioArchive® platforms for automated clinical bio-banking, PXP® platform for point-of-care cell-based therapies and CAR-TXpress™ platform for large scale cell manufacturing services. All product lines are reporting as a single reporting segment in the financial statements.
See the "Business" section in Part I, Item 1 of this Form 10-K for additional information.
Reverse Stock Split
On
All historical share amounts disclosed herein have been retroactively restated to reflect the reverse split and subsequent share exchange. No fractional shares were issued as a result of the reverse stock split, as fractional shares of common stock were rounded up to the nearest whole share.
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Table of Contents
Results of Operations
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net Revenues
Net revenues for the year ended
Revenues were comprised of the following:
Years Ended December 31,
2022 2021
AXP $ 6,391,000 $ 5,138,000
BioArchive 2,215,000 2,345,000
CAR-TXpress 1,129,000 1,284,000
Manual Disposables 655,000 421,000
Other 93,000 106,000
$ 10,483,000 $ 9,294,000
Gross Profit
The Company's gross profit was
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
Research and Development Expenses
Research and development expenses were
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Table of Contents Interest Expense
Interest expense decreased to
Gain on Extinguishment of Debt
The Company recorded a gain of extinguishment of debt of
Liquidity and Capital Resources
At
The Company has a Revolving Credit Agreement with
The Company also has an unsecured convertible promissory note with an accredited
investor pursuant to which the Company issued and sold to such investor with an
original principal amount of
The Company has incurred historical losses from operations and expects to continue to incur operating losses in the near future. We anticipate opening our new CDMO facility in 2023 and increasing cash from operations. The Company will need to raise additional capital to grow its business, fund operating expenses and make interest payments. The Company's ability to fund its liquidity needs is subject to various risks, many of which are beyond its control. The Company may seek additional funding through debt borrowings, sales of debt or equity securities or strategic partnerships. The Company cannot guarantee that such funding will be available on a timely basis, in needed quantities or on terms favorable to the Company, if at all. These factors and other indicators raise substantial doubt about the Company's ability to continue as a going concern within one year from the filing date of this report.
We manage the concentration of credit risk with our customers and distributors through a variety of methods including, pre-shipment deposits, credit reference checks and credit limits. Although management believes that our customers and distributors are sound and creditworthy, a severe adverse impact on their business operations could have a corresponding material effect on their ability to pay timely and therefore on our net revenues, cash flows and financial condition.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to stock-based compensation, depreciation, fair values of intangibles and goodwill, bad debts, inventories, warranties, and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. See Note 3 "Summary of Significant Accounting Policies" to the Notes to the Consolidated Financial Statements contained in Item 8. We believe the following policies are critical and require significant judgement by the Company:
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Table of Contents Revenue Recognition
The Company's revenues primarily consist of device sales and service revenue.
Device Sales
Device sales include devices and consumables for BioArchive, AXP, CAR-TXpress and manual disposables. Revenue is recognized when control of the devices passes to the customer, and the Company's performance obligation has been satisfied.
Service Revenue
Service revenue principally consists of maintenance contracts for BioArchive, AXP and CAR-TXpress products. Devices sold have warranty periods of one to two years. After the warranty expires, the Company offers separately priced annual maintenance contracts. Under these contracts, customers pay in advance. These prepayments are recorded as deferred revenue and recognized over time as the contract performance obligations are satisfied.
Revenue is recognized based on the following five-step process as outlined in the Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers": (i) Identify the Contract with the Customer; (ii) Identify Performance Obligations in the Contract; (iii) Determine the Transaction Price; (iv) Allocate the Transaction Price; and (v) Satisfaction of the Performance Obligations (and Recognize Revenue).
Revenues are recorded net of discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues. Most sales are made with FOB origin shipping terms, with title and control of the goods passing to the customer at the time of shipment. Payments from domestic customers are normally due in two months or less after the title transfers, the service contract is executed, or the services have been rendered. For international customers, payment terms may extend up to 120 days. All sales have fixed pricing and there are currently no variable components included in the Company's revenue.
Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does not have any material contract assets. When invoicing occurs prior to revenue recognition, a contract liability is recorded (as deferred revenue on the consolidated balance sheet).
Except for limited exceptions, there is no right of return provided for distributors or customers. For distributors, the Company has no control over the movement of goods to the end customer. The Company's distributors control the timing, terms and conditions of the transfer of goods to the end customer. Additionally, for sales of products made to distributors, the Company considers a number of factors in determining when revenue is recognized. These factors include, but are not limited to, whether the payment terms offered to the distributor are considered to be non-standard, the distributor's history of adhering to the terms of its contractual arrangements with the Company, whether the Company has a pattern of granting concessions for the benefit of the distributor, and whether there are other conditions that may indicate that the sale to the distributor is not substantive.
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Table of Contents Inventories
We value inventory at the lower of cost or net realizable value. Cost is determined on a first in first out basis. This policy requires us to make estimates regarding the net realizable value of our inventory, including an assessment of excess or obsolete inventory. Our determination of excess and obsolete inventory requires judgement, which is based on several factors, including demand forecasts, prior sales history, and industry trends. For disposable items with an expiration date, we consider the remaining shelf life in our analysis. Based on our evaluation, an allowance is recorded for inventory which we believe may ultimately not be sold to customers. We update our evaluation every quarter, increasing or decreasing the allowance based on the most current information available at the time. If our actual demand is less than anticipated, we may be required to take additional obsolete inventory charges, decreasing our gross margin and adversely impacting net operating results.
In addition, we sometimes purchase inventory in large quantities to obtain purchase discounts from our suppliers. This leads the Company to split inventory between short term and long term. The Company uses judgement and the forecasted demand information available to determine whether inventory should be recorded as long term.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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