BioLife Solutions (BLFS) 10QSB 2001 Q2 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-QSB

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2001 Commission file number 0-18170

CRYOMEDICAL SCIENCES, INC.
(Exact name of small business issuer as specified in its charter)

Delaware	94-3076866
(State of Incorporation)	(IRS Employer I.D. Number)

125 Townpark Drive
Suite 300
Kennesaw, GA 30144
(Address of principal executive offices)

Issuer’s telephone number, including area code: (770) 420-8237

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

      Yes X        No

12,413,209 shares of Cryomedical Sciences, Inc. Common Stock, par value $.001 per share, were outstanding as of July 31, 2001.

CRYOMEDICAL SCIENCES, INC.
FORM 10-QSB
QUARTER ENDED JUNE 30, 2001

INDEX

Part I.     Financial Information				Page No.
		Item 1.     Financial Statements
			Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000		3
			Consolidated Statements of Operations for the three-month and six month periods ended June 30, 2001 and June 30, 2000 (unaudited)		4
			Consolidated Statements of Cash Flows for the three-month and six-month periods ended June 30, 2001 and 2000 (unaudited)		5
			Notes to Consolidated Financial Statements		6
		Item 2.     Management’s Discussion and Analysis or Plan of Operation			7-9
Part II.     Other Information
	Item 6.     Exhibits and Reports on Form 8-K				10
Signatures					11

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PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

			June 30,			December 31,
			2001			2000
			(unaudited)
ASSETS
Current assets
	Cash and cash equivalents		$	125,228		$	2,150,112
	Receivables, net allowance for doubtful accounts
		of $18,325 and $13,018, respectively		171,513			86,956
	Inventories			607,731			653,945
	Prepaid expenses and other current assets			119,799			135,547
		Total current assets		1,024,271			3,026,560
Fixed assets, net accumulated depreciation of $2,007,993 and      $1,879,927, respectively				473,403			433,655
Intangible assets, net of accumulated amortization of $67,244 and      $46,634, respectively				491,710			512,320
Other assets				3,717			16,284
		Total assets	$	1,993,101		$	3,988,819
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Accounts payable		$	537,015		$	120,066
	Accrued expenses			268,425			225,195
	Extended warranties — current portion			0			4,146
	Capital leases — current portion			5,048			10,858
		Total current liabilities		810,488			360,265
		Total liabilities		810,488			360,265
Stockholders’ equity
	Preferred stock, $.001 par value per share, 1,000,000 authorized;      0 shares issued and outstanding			—			—
	Common stock, par value $.001 per share, 25,000,000 shares      authorized; 12,413,209 issued and outstanding			12,413			12,413
	Additional paid-in capital			36,916,868			36,916,868
	Accumulated deficit			(35,746,668	)		(33,300,727	)
		Total stockholders’ equity		1,182,613			3,628,554
		Total liabilities and stockholders’ equity	$	1,993,101		$	3,988,819

See notes to consolidated financial statements

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CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

		Three-months ended						Six-months ended
		June 30,						June 30,
		2001			2000			2001			2000
		(unaudited)						(unaudited)
Revenues		$	313,180		$	233,906		$	789,129		$	633,063
Cost of sales			151,785			134,154			413,832			267,580
Gross profit			161,395			99,752			375,297			365,483
Expenses
	Research and development		628,460			450,155			1,077,945			636,780
	Sales and marketing		506,569			55,750			968,686			91,185
	General and administrative		382,034			488,555			778,752			681,234
Total expenses			1,517,063			994,460			2,825,383			1,409,199
Operating loss			(1,355,668	)		(894,708	)		(2,450,086	)		(1,043,716	)
Interest income			5,803			46,286			28,087			48,699
Interest expense			(20,748	)		(5,312	)		(23,942	)		(12,719	)
Net loss		$	(1,370,613	)	$	(853,734	)	$	(2,445,941	)	$	(1,007,736	)
Net loss per common share		$	(0.11	)	$	(0.10	)	$	(0.20	)	$	(0.13	)
Weighted average number of common   shares outstanding			12,413,209			8,174,025			12,413,209			7,472,443

See notes to consolidated financial statements

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CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

				Six-months ended
				June 30,
				2001			2000
				(unaudited)
Cash flows from operating activities:
	Net loss			$	(2,445,941	)	$	(1,007,736	)
Adjustments to reconcile net loss to net cash used in    operating activities:
		Depreciation			128,065			112,561
		Amortization			20,610			13,846
		Provision for bad debt			12,203			10,081
		Write off of accounts receivable			(6,896	)		(9,437	)
		Loss on disposal of fixed assets			—			14,579
		Changes in operating assets and liabilities:
			(Increase) decrease in receivables		(89,864	)		93,955
			Decrease in inventories		46,214			234,863
			Decrease (increase) in prepaid and other current assets		15,748			(169,058	)
			Decrease (increase) in other assets		12,567			(4,508	)
			Increase (decrease) in accounts payable		416,949			(169,465	)
			Increase (decrease) in accrued expenses		43,230			(186,251	)
			Increase in unearned revenue		—			(7,802	)
			Decrease in extended warranties		(4,146	)		(4,974	)
			Decrease in deferred rent		—			(7,399	)
Net cash used in operating activities					(1,851,261	)		(1,086,745	)
Cash flows from investing activities:
	Increase in intangible assets				—			(15,000	)
	Purchase of equipment				(167,813	)		(21,192	)
Net cash used in investing activities					(167,813	)		(36,192	)
Cash flows from financing activities:
	Decrease in capital leases				(5,810	)		(17,949	)
	Issuance of common stock				—			5,518,442
	Increase in line of credit				—			900,000
Net cash (used in) provided by financing activities					(5,810	)		6,400,493
Net (decrease) increase in cash and cash equivalents					(2,024,884	)		5,277,556
Cash and cash equivalents at beginning of period					2,150,112			7,952
Cash and cash equivalents at end of period				$	125,228		$	5,285,508
Supplemental Cash Flow Information:
			Cash paid for interest	$	23,942		$	12,719

See notes to consolidated financial statements

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CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.	GENERAL
	Cryomedical Sciences, Inc. (the “Company”) is engaged in the research, development, marketing and manufacture of products for use in the field of cryoablation and preservation of cells, tissues and organs in low temperature environments.
	The Consolidated Balance Sheet as of June 30, 2001, the Consolidated Statements of Operations for three-month and six-month periods ended June 30, 2001 and 2000, and the Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2001 and 2000, have been prepared without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2001, and for all periods then ended, have been recorded. All adjustments recorded were of a normal recurring nature.
	Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2000 included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2000.
	The results of operations for the three-month and six-month periods ended June 30, 2001 are not necessarily indicative of the operating results anticipated for the full year.
B.	NET LOSS PER SHARE
	Net loss per share is based on the weighted average number of common shares outstanding during the periods ended June 30, 2001 and 2000. No effect has been given to unexercised stock options or warrants because the effect would be anti-dilutive.
C.	INVENTORIES

Inventories consist of the following:	June 30, 2001		December 31, 2000
Raw materials and purchased parts	$	374,021	$	264,254
Work in process		8,595		9,643
Finished goods		225,115		380,048
	$	607,731	$	653,945

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The Company has developed cryosurgical systems called the CMS AccuProbe^® System (the “AccuProbe”), the CMS Blizzard™ Series (the “Blizzard”), and the Cryo-Lite^® Series (the “Cryo-Lite”). The AccuProbe, the Blizzard and the Cryo-Lite are sophisticated cryosurgical devices designed to freeze and destroy diseased tissue. They are particularly applicable where diseased tissue cannot be removed surgically or where surgery is likely to have extensive adverse side effects. The Company plans to utilize its AccuProbe, Blizzard and Cryo-Lite in the various fields for which the devices have received clearance from the United States Food and Drug Administration (the “FDA”).

The Company completed initial development of the AccuProbe in 1992 and has marketed this system to hospitals, surgeons and radiologists in the United States and abroad. In addition to the AccuProbe, the Company sells single use probes and other disposables used with the AccuProbe and offers service warranty contracts. Although the Cryo-Lite received FDA clearance in July 1997 and the Blizzard received FDA clearance in February 1998, no Blizzard or Cryo-Lite devices have been shipped for commercial sale.

The Company is also attempting to develop and commercialize a series of hypothermic preservative solutions (the “Solutions”). Some of these Solutions are designed to maintain the fluid and chemical balances of human organs while body temperature is significantly lowered. Other Solutions have been developed that may be utilized in preserving certain cells and tissues utilized by scientists in research laboratory and academic institutions. All of these Solutions continue to be tested in laboratory settings. Commercialization of certain Solutions is presently being pursued for those markets not subject to FDA regulations through the Company’s wholly-owned subsidiary, BioLife Solutions, Inc. (“BioLife”), formed in 1998. At present, development of the Solutions for human organ transplantation is in the laboratory and preclinical stage. The Company is seeking funds from various government and non-government granting agencies as well as third party investors to continue the development of the Solutions.

Results of Operations

Revenues for the three-month and six-month periods ended June 30, 2001 totaled $313,180 and $789,129, compared to $233,906 and $633,063, for the comparable periods of the prior year, respectively. This represents an increase of 34% and 25%, respectively. The increase in revenues in these periods reflects an increase in the number of CMS AccuProbe^® Systems and accessories sold during this period.

Gross profit for all products for the three-month and six-month periods ended June 30, 2001 totaled $161,395 or 51% of revenues and $375,297 or 48% of revenues, compared to gross profits of $99,752, or 43% of revenues and $365,483 or 58% of revenues for the comparable periods of the prior year, respectively. In 2001, gross profit as a percent of revenues decreased in the 1st quarter and increased in the 2nd quarter compared to the prior year periods due to changes in production volume and expenses, and the mix of product sales.

Research and development expenses for the three-month and six-month periods ended June 30, 2001 totaled $628,460 and $1,077,945, compared to $450,155 and $636,780, for the comparable period of the prior year, respectively. This represents increases of 40% and 69% during the three-months and six-months ended June 30, 2001, respectively. Research and development expenses increased as a

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result of expenditures for clinical trials related to the Hypothermosol™ solutions and other expenses related to the development of the 800 series Accuprobe system.

Sales and marketing expenses for the three-month and six-month periods ended June 30, 2001 totaled $506,569 and $968,686, compared to $55,750 and $91,185 for the comparable periods of the prior year, respectively. This represents increases of 809% and 962% from the prior year periods, respectively. Sales and marketing expenses increased over the comparable period of the previous year due to an increase in the number of marketing and sales personnel, an increase in sales commissions, and an increase in trade shows, travel and related expenses.

General and administrative expenses for the three-month and six-month periods ended June 30, 2001 totaled $382,034 and $778,752, compared to $488,555 and $681,234 for the comparable periods of the prior year. This represents a decrease of 22% and an increase of 14%, respectively, from the prior year periods. General and administrative expenses increased during the six-months ended June 30, 2001 as a result of increases in personnel costs. This increase was offset in the three-months ended June 30, 2001 as a result of decreases in consulting and legal expenses.

Operating expenses for the three-month and six-month periods ended June 30, 2001 totaled $1,517,063, and $2,825,383, compared to $994,460 and $1,409,199 for the comparable periods of the prior year, representing an increase of 52% and 100% from the prior year periods, respectively. The Company sustained a net loss of $1,370,613 and $2,445,941 for the three-month and six-month periods ended June 30, 2001, compared to a net loss of $853,734 and $1,007,736, for the comparable periods of the prior year.

Liquidity and Capital Resources

At June 30, 2001, the Company had cash and cash equivalents totaling $125,228 and working capital of $213,783, as compared to $2,150,112 and $2,666,295, respectively, at December 31, 2000. The decrease in the Company’s cash and working capital positions from December 31, 2000 was due primarily to net losses during the period.

Capital expenditures for equipment totaled $167,813, in the period ended June 30, 2001, compared to $21,192 in the comparable period of the prior year. The Company does not expect to spend more than $300,000 in total for equipment in the year ending December 31, 2001.

The Company believes that sales for the remainder of the 2001 fiscal year may be greater than the level experienced in the comparable prior year periods due to the favorable reimbursement environment created by HCFA’s new coverage policy for cryosurgery of the prostate. However, the level of increased sales, if any, will depend in part on the Company’s ability to implement manufacturing and testing protocols for its products, increase sales and marketing efforts, and reestablish its education and retraining programs.

Additional capital will be necessary to ensure the Company's viability. In this respect, the Company currently is pursuing an additional equity financing. There can be no assurance that any such transaction will be available on terms acceptable to the Company, if at all, or that any financing transaction will not be dilutive to current stockholders. If the Company is not able to raise additional funds, it may be required to significantly curtail or cease its operating activities. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

Forward Looking Information

The information set forth in this Report (and other reports issued by the Company and its officers from time to time) contain certain statements concerning the Company’s future results, future performance, intentions, objectives, plans and expectations that are or may be deemed to be “forward-looking statements.” Such statements are made in reliance upon safe harbor provisions of the Private

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Securities Litigation Act of 1995. These forward-looking statements are based on current expectations that involve numerous risks and uncertainties, including those risks and uncertainties discussed in the Company’s Annual Report on Form 10KSB for the year ended December 31, 2000. Assumptions relating to the foregoing involve judgements with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. Although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, the Company cannot assure you that the results discussed or implied in such forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in such forward-looking statements, the inclusion of such statements should not be regarded as a representation by the Company or any other person that the Company’s objectives and plans will be achieved. Words such as “believes,” “anticipates,” “expects,” “intends,” “may,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. The Company undertakes no obligations to revise any of these forward-looking statements.

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Part II – Other Information

Item 6.     Exhibits and Reports on Form 8-K

(a)	Exhibits
11.1	Employment Agreement with J. Andrew Greuling
(b)	Reports on Form 8-K
There were no reports on Form 8-K filed during the three-months ended June 30, 2001.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Cryomedical Sciences, Inc.

Date: August 14, 2001 By: /s/ Andrew Grueling
Andrew Grueling
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)

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