THERMOGENESIS CORP

In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”. The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and the accounting for measuring certain purchased options and forward contracts to acquire investments. It is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial statements.

In March 2021, ImmuneCyte completed an acquisition to acquire Boyalife’s Cellular Therapy Division, for 12,000,000 shares in ImmuneCyte and Shangai KDWinfo Technology Co. Ltd. For 500,000 shares in ImmuneCyte. Following the acquisitions, the Company’s ownership percentage in ImmuneCyte decreased from 18.79% to 8.64%.  The Company performed an analysis of the transaction and noted that none of the factors supporting significant influence changed as a result of the acquisition.  Therefore, it was concluded that significant influence remains and the Company will continue to account for the transaction using the equity method.  The Company recognized a dilution gain of $262,000 representing its share of the net assets acquired by ImmuneCyte.  However, as of the quarter ended March 31, 2021, the Company had accumulated losses of $428,000 in its investment in ImmuneCyte.  As the accumulated losses were greater than the dilution gain, no entry was recorded by the Company for its investment in ImmuneCyte for the quarter ended March 31, 2021.

On April 21, 2020, the Company entered into a promissory note and received a Paycheck Protection Program loan “PPP Loan” from the Small Business Association “SBA”, which was established under the CARES Act. The Company received net proceeds of $646,000 from the PPP Loan. The term of the PPP Loan is two years with an interest rate of 1.00% per annum, which was deferred for the first six months of the term of the loan or after an application is filed for loan forgiveness, whichever is later. Each monthly payment shall be in the amount which would fully amortize the principal balance outstanding under the PPP Loan. Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note of the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of the amount outstanding under the PPP Loan. In late December 2020, the Company applied with the SBA for forgiveness of the PPP Loan and was notified on March 30, 2021 that the SBA had approved our application to forgive the entire amount of the loan and accrued interest. For the three months ended March 31, 2021, the Company recorded a gain on extinguishment of debt of $652,000 representing the principal and accrued interest for the PPP Loan.

Net revenues for the three months ended March 31, 2021 were $1,517,000 compared to $3,200,000 for the three months ended March 31, 2020, a decrease of $1,683,000 or 53%.  The decrease was driven by AXP® disposable sales which declined by approximately $1,900,000 with approximately 900 fewer cases sold in the first quarter of 2021 as compared to 2020.  The primary driver of the decrease was the COVID-19 pandemic which has had a significant impact on our sales since it began over a year ago.  As the pandemic has begun to subside in the first quarter of 2021, we are hopeful that the industry will start to turn around in the second quarter.  Inquiries for orders increased in March and we currently expect revenue to rebound in the second quarter and return to pre-pandemic levels by the end of 2021.  The decrease was offset by approximately $250,000 more in BioArchive® sales, primarily due to increased service revenue in the first quarter of 2021 as compared to 2020.

During 2020, the Company received a loan totalling net proceeds of $646,000 from the SBA under the Payment Protection Program of the CARES Act, in response to the Coronavirus pandemic described above. The CARES Act permits that a loan may be forgiven if certain criteria are met. In March 2021, the SBA approved the Company’s application to forgive the entire amount of the debt.