6. Warrants  

At June 30, 2017 March 31, 2018 and December 31, 2016, 2017, we had 7,460,2836,676,849 and 7,603,1416,688,849 warrants outstanding, respectively and exercisable with a weighted average exercise price of $4.53 and $4.46, respectively. The outstanding warrants have expiration dates between March 2021 and May 2021.$4.50 at the end of each period. During the three month period ended June 30, 2017, 142,858March 31, 2018, 12,000 warrants were exercised with a weighted average exercise price of $1.12.$4.75, yielding $57,000 in proceeds to the Company in which the stock was issued April 3, 2018. Subsequent to quarter end through May 8, 2018, an additional 920,116 warrants were exercised with a weighted average exercise price of $4.75, yielding $4.4 million in proceeds to the Company.

7. Net Loss per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus dilutive common stock equivalents outstanding during the period. Common stock equivalents are excluded for the three and six month periods ended June 30, 2017 March 31, 2018 and 2016,2017, since the effect is anti-dilutive due to the Company’s net losses.losses attributable to common stockholders. Common stock equivalents include stock options, warrants and warrants.unvested restricted stock.

Basic weighted average common shares outstanding, and the potentially dilutive securities excluded from loss per share computations because they are anti-dilutive, are as follows as of June 30, 2017 March 31, 2018 and 2016,2017, respectively:

8. Commitments and Contingencies

Leases

We lease approximately 30,000 square feet in our Bothell, Washington headquarters. The term of our lease continues until July 31, 2021 with two options to extend the term of the lease, each of which is for an additional period of five years, with the first extension term commencing, if at all, on August 1, 2021, and the second extension term commencing, if at all, immediately following the expiration of the first extension term. In accordance with the amended lease agreement, our monthly base rent is approximately $57,000$58,000 at June 30, 2017, March 31, 2018, with scheduled annual increases each August and again in October for the most recent amendment. We are also required to pay an amount equal to the Company’s proportionate share of certain taxes and operating expenses.

Employment agreements

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

Litigation

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

On June 30, 2017, we modified our existing credit facility withWAVI Holding AG, ("WAVI"), a principal stockholder of the Company.  Pursuant to the modification, WAVI agreed to exchange its existing credit facility, including $4.25 million of principal and accrued interest outstanding as of June 1, 2017, for 4,250 shares of the Company's Series A9. Preferred Stock which has

As of March 31, 2018, we accrued a fixed, aggregate stated value of $4.25 million. The preferred shares being issued to WAVI are not convertible into any other form of equity and can only be redeemed at the stated value of $4.25 million at times and in amounts solely determined by the Company. The preferred shares also carry an annual cash dividend of 10% of the outstanding stated value, calculated and payable in arrears on a quarterly basis. The preferred shares have a liquidation preference over the common shareholders. No additional consideration was provided to WAVI for entering into this agreement. The exchange resulted in no gain or loss on the transaction. In both the three and six months ended June 30, 2017 we did not pay or accrue any dividends$106,250 on the preferred stock.stock which is included in accrued expenses and other current liabilities in the balance sheet at March 31, 2018. The dividend was paid subsequent to quarter end on April 2, 2018. 

10.Revenue

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

The following table disaggregates revenue by market segment and distributors:

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements”. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management and other statements that are not historical facts. You can find many of these statements by looking for words like “believes,” “expects,” “anticipates,” “estimates,” “may,” “should,” “will,” “could,” “plan,” “intend,” or similar expressions in this Quarterly Report on Form 10-Q. We intend that such forward-looking statements be subject to the safe harbors created thereby. Examples of these forward-looking statements include, but are not limited to:

These forward-looking statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections. These risks and uncertainties include those factors described in greater detail in the risk factors disclosed in our Form 10-K for the fiscal year ended December 31, 20162017 filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.

All subsequent written or oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable U.S. securities law. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Overview

Management’s discussion and analysis provides additional insight into the Company and is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the fiscal year ended December 31, 20162017 filed with the SEC.

We were incorporated in Delaware in 1987 under the name Trans Time Medical Products, Inc. In 2002, the Company, then known as Cryomedical Sciences, Inc., and engaged in manufacturing and marketing cryosurgical products, completed a merger with our wholly-owned subsidiary, BioLife Solutions, Inc., which was engaged as a developer and marketer of biopreservation media products for cells and tissues. Following the merger, we changed our name to BioLife Solutions, Inc.

Our proprietary, clinical grade HypoThermosol® FRS and CryoStor® biopreservation media products are marketed to the regenerative medicine, biobanking and drug discovery markets, including hospital-based stem cell transplant centers, pharmaceutical companies, cord blood and adult stem cell banks, hair transplant centers, and suppliers of cells to the drug discovery, toxicology testing and diagnostic markets. All of our biopreservation media products are serum-free and protein-free, fully defined, and are manufactured under current Good Manufacturing Practices (cGMP) using United States Pharmacopia (USP)/Multicompendial or the highest available grade components.

Our patented biopreservation media products are formulated to reduce preservation-induced, delayed-onset cell damage and death. Our platform enabling technology provides our customers significant shelf life extension of biologic source material and final cell products, and also greatly improved post-preservation cell, tissue, and organ viability and function.

The discoveries made by our scientists and consultants relate to how cells, tissues, and organs respond to the stress of hypothermic storage, cryopreservation, and the thawing process. These discoveries enabled the formulation of innovative biopreservation media products that protect biologic material from preservation-related cellular injury, much of which is not apparent immediately after return to normothermic body temperature. Our product formulations have demonstrated notable reduction in apoptotic (programmed) and necrotic (pathologic) cell death mechanisms and are enabling the clinical and commercial development of dozens of innovative regenerative medicine products.

Additionally, as of March 31, 2018, we ownowned a 45%26.7% interest in our joint venture, biologistex CCM, LLC dba SAVSU Technologies (“SAVSU”), a Delaware limited liability company. Our ownership was effectively reduced from 35% to 26.7% during the three months ended March 31, 2018 due to additional cash contributions made by SAVSU Technologies LLC (“STLLC”). SAVSU is in the business of acquiring, developing, maintaining, owning, operating, marketing and selling an integrated platform of a cloud-based information service and precision thermal shipping products. The evo™ line is a line of “smart shippers” designed for the shipment of materials, which must be maintained frozen, at 2-8˚C and/or controlled room temperature temperatures and where near real time monitoring of temperature, location, and payload status information is necessary. A sophisticated electronics package embedded in the evo provides streaming data to the biologistexSAVSU web-based application; where real time shipment status, history, and reports can be generated. Designed for small volume shipments; it fills a critical need in chain-of-custody scenarios for temperature sensitive shipments of cells, tissues, and other cell based products. On December 31, 2016, we restructured our biologistex CCM, LLC joint venture (“biologistex” prior to December 31, 2016 or “SAVSU” December 31, 2016 and thereafter) with Savsu Technologies, LLC (“STLLC”), whereby we contributed certain assets, including our outstanding loan owed by biologistex, and STLLC contributed certain assets, including all cold chain management intellectual property, into SAVSU. Prior to the restructuring, we owned a 52% ownership interest in biologistex. As a result for consideration given by both parties, we own a 45% interest in SAVSU, which is subsequently reduced to 40% on December 31, 2017 and then to 25% on December 31, 2018.

Highlights for the SecondFirst Quarter of 20172018

Results of Operations

Our revenue, results of operations and cash balances are likely to fluctuate significantly from quarter-to-quarter. These fluctuations are due to a number of factors, specifically the progress of our customers’ clinical trials, where the pace of enrollment affects customer orders for our products. The majority of our net sales come from a relatively small number of customers and a limited number of market sectors. Each of these sectors is subject to macroeconomic conditions as well as trends and conditions that are sector specific. Any weakness in the market sectors in which our customers are concentrated could affect our business and results of operations.

Comparison of Results of Operations for the Three and Six Month Periods Ended June 30, 2017March 31, 2018 and 20162017

Percentage comparisons have been omitted within the following table where they are not considered meaningful.

Revenue and Gross Margin

Biopreservation Media Product Sales. Our core products are sold through both direct and indirect channels to customers in the regenerative medicine, biobanking and drug discovery markets. Sales of our core proprietary products in the three and six months ended June 30, 2017March 31, 2018 increased 29% and 28%, respectively,61% compared to the same periodsperiod in 2016,2017, due primarily to an increase in volume and selling price per liter sold due to increased orders from the regenerative medicine segment. Revenue growth for the secondfirst quarter was driven by a 31%100% year over year increase from customers in the regenerative medicine segment.segment due to increased demand from late stage cell therapy customers as well as a 37% increase in sales to our distributors. We expect to see continued growth in adoption and use of our proprietary biopreservation media products.

Cost of Sales. Cost of sales consists of raw materials, labor and overhead expenses. Cost of sales in the three and six months ended June 30, 2017March 31, 2018 increased compared to the same periodsperiod in 20162017 due to increased sales of our proprietarybiopreservation media products and write-off of raw materials partially offset by lower overhead costs per liter sold in the three and six months ended June 30, 2017.March 31, 2018.

Gross Margin. Gross margin as a percentage of revenue was 63% and 62%64% in the three and six months ended June 30, 2017,March 31, 2018 compared to 56% and 57%61% in the three and six months ended June 30, 2016.March 31, 2017. The increase in margin is due to higher average selling price per liter sold.

Revenue Concentration.In the three and six months ended June 30, 2017,March 31, 2018, we did not derive 10% or morederived approximately 30% of our product revenue from any one customer.two customers. In the three and six months ended June 30, 2016,March 31, 2017, we derived approximately 12% and 12%, respectively,21% of our product revenue from one customer.two customers. No other customer accounted for more than 10% of revenue in the three and six months ended June 30, 2016.March 31, 2018 or 2017.

Operating Expenses

Our operating expenses for the three and six month periods ended June 30,March 31, 2018 and 2017 and 2016 were:

Research and Development.Research and development expenses consist primarily of salaries and other personnel-related expenses, consulting and other outside services, laboratory supplies, and other costs. We expense all research and development costs as incurred, with the exception of the costs associated with the development of customized internal-use software systems that were capitalized in 2016.incurred. Research and development expenses for the three and six months ended June 30, 2017 decreasedMarch 31, 2018 increased compared to the three and six months ended June 30, 2016,March 31, 2017, due primarily to the restructuring of our biologistex joint venture ($301,094 and $498,204, respectively) which was partially offset by an increase in stock-based compensation related to new grants of performance based stock options and restricted stock.increased payroll expenses. 

Sales and Marketing.Sales and marketing expenses consist primarily of salaries and other personnel-related expenses, consulting, trade shows and advertising. Sales and marketing expenses for the three and six months ended June 30, 2017 decreasedMarch 31, 2018 increased compared to the three and six months ended June 30, 2016,March 31, 2017, due primarily to the restructuring of our biologistex joint venture ($377,239 and $691,021, respectively) which waspayroll expenses partially offset by an increase inlower tradeshow and travel expenses and stock-based compensation related to new grants of performance based stock options and restricted stock.expenses.

General and Administrative Expenses. General and administrative expenses consist primarily of personnel-related expenses, non-cash stock-based compensation for administrative personnel and members of the board of directors, professional fees, such as accounting and legal, and corporate insurance. General and administrative expenses for the three and six months ended June 30, 2017 decreasedMarch 31, 2018 increased compared to the three and six months ended June 30,March 31, 2017, due primarily to severance fees paid out to terminated executivesan increase in the first quarter of 2016, a decrease inpayroll expenses, taxes, investor relations consulting, stock compensation expense and conferences, deconsolidationinformation technology expenses.

Other Income (Expenses)(Expense)

Interest Expense.expense.The interest expense in the three and six months ended June 30,March 31, 2018 is due to equipment financing. Interest expense in the three months ended March 31, 2017 is due to the note payable related to the credit facility financing arrangement entered into in May 2016.

Amortization of debt discount.The amortization of short-term debt discount in the three and six months ended June 30,March 31, 2017 is due to the amortization of the allocated value of the detachable warrants associated with the credit facility financing on arrangement entered into in May 2017 which was fully amortized May 31, 2017.2016.

Loss on equity method investment. The non-cash loss associated with our proportionate share of the net loss incurred byin our investment in SAVSU for the period based on our 26.7% ownership as of March 31, 2018 and our 45% ownership in our investment in SAVSU. Asas of DecemberMarch 31, 2016 we have no obligation to provide any future funding to SAVSU.

Write off of deferred financing costs.The write off of deferred financing costs in the three and six months ended June 30, 2016 is due to the write off of deferred capital costs related to Registration Statement on Form S-3 filed with the SEC on January 8, 2016.2017.

Interest income. The reductionincrease in interest income in the three and six months ended June 30, 2017March 31, 2018 compared to the same periodsperiod in 20162017 is due to the lower average short-term investments balanceincreased cash balances in 20172018 compared to 2016.2017.

Liquidity and Capital Resources

On June 30, 2017,March 31, 2018, we had $2.3$7.0 million in cash and cash equivalents, compared to cash and cash equivalents of $1.4$6.7 million at December 31, 2016.2017. During the three month period ended March 31, 2018, 12,000 warrants were exercised with a weighted average exercise price of $4.75, yielding $57,000 in proceeds to the Company in which the stock was issued April 3, 2018. Subsequent to quarter end through May 8, 2018, an additional 920,116 warrants were exercised with a weighted average exercise price of $4.75, yielding $4.4 million in proceeds to the Company. Based on our current expectations with respect to our revenue and operating expenses, we expect that our current level of cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next twelve months. If our revenues do not grow as expected and/or we are not able to manage our expenses sufficiently, including making dividend payments pursuant to the terms of the preferred stock issued to WAVI, we may need to obtain additional equity or debt financing. We may also seek equity or debt financing opportunistically if we believe that market conditions are conducive to obtaining such financing. We currently have an S-3 registration statement filed with the SEC which may be utilized to obtain additional financing.

We continue to monitor and evaluate opportunities to strengthen our balance sheet and competitive position over the long term. These actions may include acquisitions or other strategic transactions that we believe would generate significant advantages and substantially strengthen our business. The consideration we pay in such transactions may include, among other things, shares of our common stock, other equity or debt securities of our Company or cash. We may elect to seek debt or equity financing in anticipation of, or in connection with, such transactions or to fund or invest in any operations acquired thereby.