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, 2003 Commission file number 0-18170
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BIOLIFE SOLUTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 94-3076866
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(State of Incorporation) (IRS Employer I.D. Number)
Suite 144 - Science III.
SUNY Park
Binghamton, NY 13902
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(Address of principal executive offices)
Issuer's telephone number, including area code: (607) 777-4415
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
12,413,209 SHARES OF BIOLIFE SOLUTIONS, INC. COMMON STOCK, PAR VALUE $.001 PER
SHARE, WERE OUTSTANDING AS OF AUGUST 12, 2003.
Transitional Small Business Disclosure Format (check one). Yes No X
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BIOLIFE SOLUTIONS, INC.
FORM 10-QSB
QUARTER ENDED JUNE 30, 2003
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Balance Sheet at June 30, 2003 (unaudited).................................................. 2
Unaudited Statements of Operations for the three- and six-month periods ended
June 30, 2003 and June 30, 2002............................................................. 3
Unaudited Statements of Comprehensive Income (Loss) for the three- and six-
month periods ended June 30, 2003 and June 30, 2002......................................... 4
Unaudited Statements of Cash Flows for the six-month periods ended
June 30, 2003 and June 30, 2002............................................................. 5
Notes to Financial Statements............................................................... 6-10
Item 2. Management's Discussion and Analysis..................................................... 11-13
Item 3. Controls and Procedures.................................................................. 14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K......................................................... 15
Signatures....................................................................................... 16
Exhibit Index ................................................................................... 17
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOLIFE SOLUTIONS, INC.
BALANCE SHEETS
(UNAUDITED)
JUNE 30,
2003
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,287
Receivables 77,136
Inventories 3,003
Loan financing costs, net 187,400
Prepaid expenses and other current assets 10,743
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TOTAL CURRENT ASSETS 293,569
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PROPERTY AND EQUIPMENT
Furniture and computer equipment 31,266
Manufacturing and other equipment 177,831
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TOTAL 209,097
Less: Accumulated depreciation and amortization (74,474)
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NET PROPERTY AND EQUIPMENT 134,623
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TOTAL ASSETS $ 428,192
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 442,904
Accrued expenses 113,422
Accrued salaries 330,834
Notes payable 725,824
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TOTAL CURRENT LIABILITIES 1,612,984
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $.001 par value per share; 1,000,000 shares authorized,
12,000 shares issued and outstanding 12
Common stock, $0.001 par value per share, 25,000,000 shares
authorized, 12,413,209 shares issued and outstanding 12,413
Additional paid-in capital 38,574,408
Accumulated deficit (38,337,362)
Accumulated other comprehensive loss (1,434,263)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,184,792)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 428,192
============
See notes to financial statements
2
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDING SIX MONTHS ENDING
JUNE 30, JUNE 30,
2002 2003 2002 2003
-------------- ------------ ------------ ------------
REVENUE
Grant revenue $ 41,907 $ 25,898 $ 279,040 $ 126,253
Consulting revenue 40,360 36,000 80,720 137,360
Product sales 16,858 50,870 18,552 77,435
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TOTAL REVENUE 99,125 112,768 378,312 341,048
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OPERATING EXPENSES
Research and development 133,228 161,622 231,770 337,963
Sales and marketing -- 45,621 -- 84,669
Product sales 25,685 8,733 25,646 9,334
General and administrative 270,563 377,999 282,547 735,023
------------ ------------ ------------ ------------
TOTAL EXPENSES 429,476 593,975 539,963 1,166,988
------------ ------------ ------------ ------------
OPERATING LOSS (330,351) (481,207) (161,651) (825,940)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense -- (13,264) -- (19,514)
Other income -- -- -- 3,200
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TOTAL OTHER INCOME (EXPENSE) -- (13,264) -- (16,314)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE (BENEFIT) PROVISION FOR INCOME TAXES (330,351) (494,471) (161,651) (842,254)
(BENEFIT) PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (330,351) (494,471) (161,651) (842,254)
------------ ------------ ------------ ------------
DISCONTINUED OPERATIONS
Loss from discontinued operations, net (944,046) -- (1,454,890) --
Gain on disposal of cryosurgical assets, net 2,426,109 -- 2,426,109 --
------------ ------------ ------------ ------------
TOTAL DISCONTINUED OPERATIONS 1,482,063 -- 971,219 --
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ 1,151,712 $ (494,471) $ 809,568 $ (842,254)
============ ============ ============ ============
BASIC AND DILUTED NET (LOSS) INCOME PER
COMMON SHARE:
Loss from continuing operations $ (0.03) $ (0.04) $ (0.01) $ (0.07)
Loss from discontinued operations (0.08) -- (0.12) --
Gain on disposition of cryosurgical assets 0.20 -- 0.20 --
------------ ------------ ------------ ------------
TOTAL BASIC AND DILUTED NET (LOSS) INCOME PER
COMMON SHARE $ 0.09 $ (0.04) $ 0.07 $ (0.07)
============ ============ ============ ============
Basic and diluted weighted average common
shares used to compute net (loss) income
per share 12,413,209 12,413,209 12,413,209 12,413,209
============ ============ ============ ============
See Notes to financial statements
3
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
QUARTER ENDING SIX MONTHS ENDING
JUNE 30, JUNE 30,
2002 2003 2002 2003
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NET INCOME (LOSS) $1,151,712 $ (494,471) $ 809,568 $ (842,254)
Unrealized gain on marketable
securities 151,228 -- 151,228 --
---------- ---------- ---------- ----------
Other comprehensive income 151,228 -- 151,228 --
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COMPREHENSIVE INCOME (LOSS) $1,302,940 $ (494,471) $ 960,796 $ (842,254)
========== ========== ========== ==========
See Notes to financial statements
4
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDING
JUNE 30, JUNE 30,
2002 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 809,568 $ (842,254)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
USED BY OPERATING ACTIVITIES
Gain on disposition of cryosurgical assets, net (2,426,109) --
Loss from discontinued operations 1,454,890 --
Depreciation 15,769 23,091
Amortization of loan financing costs -- 50,066
Write-down of inventory 25,685 --
Issuance of warrants and options for consulting
and professional services 188,241 --
CHANGE IN OPERATING NET ASSETS AND LIABILITIES NET OF
EFFECTS FROM DISPOSITION OF CRYOSURGICAL ASSETS
(INCREASE) DECREASE IN
Accounts receivable 9,650 (32,470)
Inventory 23,566 (3,003)
Prepaid and other current assets (4,092) 7,852
INCREASE (DECREASE) IN
Accounts payable 56,497 271,238
Accrued expenses 194,137 7,621
Deferred financing costs 103,086 --
Accrued salaries -- 86,028
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CASH PROVIDED (USED) BY CONTINUING OPERATIONS 450,888 (431,831)
CASH USED IN DISCONTINUED OPERATIONS (1,225,173) --
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NET CASH USED BY OPERATING ACTIVITIES (774,285) (431,831)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of cryosurgical assets 2,200,000 --
Purchase of property and equipment (89,405) --
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NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES 2,110,595 --
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 410,000 400,000
Principal payments on notes payable (60,000) (20,000)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 350,000 380,000
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NET INCREASE (DECREASE) IN CASH 1,686,310 (51,831)
CASH - BEGINNING OF YEAR 286,105 67,118
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CASH - END OF YEAR $ 1,972,415 $ 15,287
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NON CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued for payment of loan financing costs $ -- $ 211,713
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See Notes to financial statements
5
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
Incorporated in 1998 as a wholly owned subsidiary of Cryomedical
Sciences, Inc. ("Cryomedical"), BioLife Solutions, Inc. ("BioLife" or the
"Company") develops, manufactures and markets low temperature technologies for
use in preserving and prolonging the viability of cellular and genetic material
for use in cell therapy and tissue engineering. The Company's patented
HypoThermosol(R) platform technology is used to provide customized preservation
solutions designed to significantly prolong cell, tissue and organ viability.
These solutions, in turn, could improve clinical outcomes for new and existing
cell and tissue therapy applications, as well as for organ transplantation. The
Company currently markets its HypoThermosol line of solutions directly and
through a distributor to companies and labs engaged in pre-clinical research,
and to academic institutions.
In May 2002, Cryomedical implemented a restructuring and
recapitalization program designed to shift its focus away from cryosurgery
towards addressing preservation and transportation needs in the biomedical
marketplace. On June 25, 2002 the Company completed the sale of its cryosurgery
product line and related intellectual property assets to Irvine, CA-based
Endocare, Inc., a public company. In the transaction, the Company transferred
ownership of all of its cryosurgical installed base, inventory, and related
intellectual property, in exchange for $2.2 million in cash and 120,022 shares
of Endocare restricted common stock. In conjunction with the sale of
Cryomedical's cryosurgical assets, Cryomedical's Board of Directors also
approved merging BioLife into Cryomedical and changing its name to BioLife
Solutions, Inc. In September 2002, Cryomedical changed its name to BioLife
Solutions, Inc. and began to trade under the new ticker symbol, "BLFS" on the
OTCBB.
The Balance Sheet as of June 30, 2003 and the Statements of Operations
and Statements of Cash Flows for the three- and six-month periods ended June 30,
2003 and 2002, 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, 2003, 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. These financial statements should be
read in conjunction with the financial statements and notes thereto for the year
ended December 31, 2002 included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2002.
The results of operations for the three- and six-month periods ended
June 30, 2003 are not necessarily indicative of the operating results
anticipated for the full year.
B. FINANCIAL CONDITION
At June 30, 2003, the Company had a deficiency in stockholders' equity
of approximately $1,185,000 and a working capital deficiency of approximately
$1,319,000. The Company has been unable to generate sufficient income from
operations in order to meet its operating needs. In addition, the Company has
approximately $726,000 in debt maturing in the next twelve months. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
6
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
In order to continue its operations, the Company will need to secure
funding in the immediate short term. In this respect, the Company is currently
involved in litigation against Endocare, Inc., seeking to recover damages that
it believes it suffered when Endocare failed to register its common shares that
the Company received in the sale of the Company's cryosurgical assets in June
2002. In addition to this litigation, the Company is also pursuing other
financing initiatives, including the sale of equity securities, the issuance of
debt, and other alternatives. The Company can make no assurances that it will
either be successful in its litigation against Endocare, or in raising capital.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants. Other
arrangements, if necessary to raise additional funds, may require the Company to
relinquish rights to certain of its technologies, products, marketing
territories or other assets. The failure to raise capital when needed will have
a significant negative effect on the Company's financial condition and may force
the Company to curtail or cease its activities.
These financial statements assume that the Company will be able to
continue as a going concern. If the Company is unable to continue as a going
concern, the Company may be unable to realize its assets and discharge its
liabilities in the normal course of business. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or to amounts and classification of liabilities that may
be necessary should the Company be unable to continue as a going concern.
C. LEGAL PROCEEDINGS
BioLife is currently involved in a lawsuit against Endocare, Inc.,
arising out of Endocare's failure to register 120,022 shares of its stock as
part of the transaction by which the Company sold its cryosurgical equipment
assets to Endocare in a transaction that closed on June 24, 2002. In the
lawsuit, the Company is claiming damages of $1,648,935, comprising the proceeds
that could have been realized had Endocare properly registered the Stock within
the time frame set forth in the Registration Rights Agreement entered into
between the parties. Endocare filed an answer and counterclaim, seeking damages
of over $5,000,000 as a result of various alleged breaches by the Company of the
Asset Purchase Agreement entered into between the parties. Trial in this matter
began on March 31, 2003 and concluded on April 3, 2003. As of the date of this
Form 10-QSB, the presiding judge has not yet declared a verdict. The Company is
confident of the merits of its claims (and the merits of its defenses to
Endocare's counterclaims) and intends to prosecute the case vigorously. However,
there can be no guarantee that the Company will prevail in these matters.
D. SALE OF CRYOSURGICAL ASSETS
On June 25, 2002 the Company completed the sale of its cryosurgery
product line and related intellectual property assets to Irvine, CA-based
Endocare, Inc. In the transaction, which was originally announced on May 29,
2002, the Company transferred ownership of all of its cryosurgical installed
base, inventory, and related intellectual property, in exchange for $2.2 million
in cash and 120,022 shares of Endocare common stock (valued at $1,434,263 on
June 25, 2002). There is currently litigation between the companies.
There were no results from discontinued operations for the three- and
six-months ended June 30, 2003.
7
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
E. INVENTORIES
Inventories consist of $3,003 of finished HypoThermosol product at June
30, 2003.
F. NOTES PAYABLE AND ISSUANCE OF WARRANTS
At June 30, 2003, notes payable consisted of the following:
Note payable to a stockholder, unsecured, bearing interest at 10%, originally
due March 2003, now due April 2004. The note granted a warrant to the payee
to purchase 1,000,000 shares of common stock at $0.25 per share, as
additional consideration for the loan. In April 2003, when this note was
extended for 12-months, the warrants to purchase 1,000,000 shares of common
stock were repriced to $0.08 per share as consideration for the 12-month
extension. $ 250,000
Note payable to equipment vendor, unsecured, non-interest bearing, payable in
monthly installments of $10,000, due October 2003. The Company is currently 75,824
in default of the note.
Note payable to a stockholder, unsecured, bearing interest at 10%, due May 2004.
The note granted a warrant to the payee to purchase 500,000 shares of common
stock at $0.08 per share, as additional consideration for the loan. 100,000
Note payable to a stockholder, unsecured, bearing interest at 10%, due May 2004.
The note granted a warrant to the payee to purchase 750,000 shares of common
stock at $0.08 per share, as additional consideration for the loan. 150,000
Note payable to a stockholder, unsecured, bearing interest at 10%, due May 2004.
The note granted a warrant to the payee to purchase 250,000 shares of common
stock at $0.08 per share, as additional consideration for the loan. 50,000
Note payable to a stockholder, unsecured, bearing interest at 10%, due March
2004. The note granted a warrant to the payee to purchase 500,000 shares of
common stock at $0.08 per share, as additional consideration for the loan. 100,000
---------
Total notes payable $ 725,824
=========
G. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated by dividing the net
income (loss) attributable to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
calculated by dividing income from continuing operations by the weighted average
number of shares outstanding, including potentially dilutive securities such as
preferred stock, stock options and warrants. Potential common shares were not
included in the diluted earnings per share amounts for the three- and six-month
periods ended June 30, 2003 and 2002 as their effect would have been
anti-dilutive.
8
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
H. STOCK OPTIONS
In accounting for stock options to employees, the Company follows the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, as opposed to the fair value method
prescribed by Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation. The following table illustrates the effect on net
income and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123:
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2003 2002 2003
Income (Loss) as reported $ 1,151,712 $ (494,471) $ 809,568 $ (842,254)
Compensation expense based on fair value,
net of related tax effects (20,056) (26,921) (40,112) (53,842)
-------------- --------------- -------------- ---------------
Pro forma net income (loss) $ 1,131,656 $ (521,392) $ 769,456 $ (896,096)
============== =============== ============== ===============
Basic and diluted net income (loss) per share as reported $ 0.09 $ (0.04) $ 0.07 $ (0.07)
============== =============== ============== ===============
Pro forma $ 0.09 $ (0.04) $ 0.06 $ (0.07)
============== =============== ============== ===============
This disclosure is in accordance with Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure.
H. RECLASSIFICATIONS
Certain 2002 amounts have been reclassified to conform to the 2003
presentation.
I. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." This Statement
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. This Statement is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30,
2003. This pronouncement is not expected to have a material impact on the
Company's financial position or results of operations.
9
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments, including mandatorily redeemable
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for the Company for the
third quarter of Fiscal 2003. This pronouncement is not expected to have a
material impact on the Company's financial position or results of operations.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
Company's financial statements and notes thereto set forth elsewhere herein. The
discussion of the results from operations includes only the Company's continuing
operations.
BioLife has pioneered the next generation of preservation solutions
designed to maintain the viability and health of cellular matter and tissues
during freezing, transportation and storage. Based on the Company's proprietary
bio-packaging technology and a patented understanding of the mechanism of
cellular damage and death, these products enable the biotechnology and medical
community to address a growing problem that exists today. The expanding practice
of cell and gene therapy has created a need for products that ensure the
biological viability of mammalian cell and tissue material during transportation
and storage. The Company believes that the HypoThermosol and CryoStor products
it is selling today are a significant step forward in meeting these needs.
The Company's line of preservation solutions is composed of complex
synthetic, aqueous solutions containing, in part, minerals and other elements
found in human blood that are necessary to maintain fluids and chemical balances
throughout the body at near freezing temperatures. The solutions preserve cells
and tissue in low temperature environments for extended periods after removal of
the cells through minimally invasive biopsy or surgical extraction, as well as
in shipping the propagated material for the application of cell or gene therapy
or tissue engineering. BioLife has entered into research agreements with several
emerging biotechnology companies engaged in the research and commercialization
of cell and gene therapy technology and has received several government research
grants in partnership with academic institutions to conduct basic research,
which could lead to further commercialization of technology to preserve human
cells, tissues and organs.
The Company currently markets its HypoThermosol line of solutions
directly and through a distributor to companies and labs engaged in pre-clinical
research and to academic institutions.
On June 25, 2002, the Company completed the sale of its cryosurgery
product line and related intellectual property assets to Irvine,
California-based Endocare, Inc. In the transaction, the Company transferred
ownership of all of its cryosurgical installed base, inventory and related
intellectual property in exchange for $2.2 million in cash and 120,022 shares of
Endocare restricted common stock.
RESULTS OF OPERATIONS
FOR THE THREE- AND SIX-MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
Revenue. For the three-months ended June 30, 2003 revenue from
continuing operations increased $13,643, or 14%, to $112,768, compared to
$99,125 for the three-months ended June 30, 2002. This increase is attributable
to substantially higher product sales, offset by lower grant and consulting
revenue. For the six-months ended June 30, 2003, revenue from continuing
operations decreased $37,264, or 10%, to $341,048, compared to $378,312 for the
six-months ended June 30, 2002. The decrease is attributable to lower grant
revenue, resulting from less grant related activities in the period, offset by
higher consulting revenue and product sales.
Cost of product sales. Cost of product sales for the three-months ended
June 30, 2003 totaled $8,733, compared to $25,685 for the three-months ended
June 30, 2002. The comparable period reflects a charge to inventory, making a
comparison between the two periods difficult. Cost of product sales for the
six-months ended June 30, 2003 totaled $9,334, compared to $25,646 for the
six-months ended June 30, 2002. This comparable period also reflects the
inventory charge.
11
Research and development. Expenses relating to research and development
for the three-months ended June 30, 2003 increased $28,394, or 21%, to $161,622,
compared to $133,228 for the three-months ended June 30, 2002. The increase in
research and development expense reflects higher salary and travel and
facilities expense in the period, offset by lower consulting fees, and lab
supplies. Expenses relating to research and development for the six-months ended
June 30, 2003 increased $106,193, or 46%, to $337,963, compared to $231,770 for
the six-months ended June 30, 2002. The increase in research and development
expense reflects higher salary, legal and travel expense in the period, offset
by lower consulting fees, and lab supplies.
Sales and marketing. For the three- and six-months ended June 30, 2003,
sales and marketing expense was $45,621 and $84,669, respectively, compared to
no sales and marketing expense incurred for the three- and six-months ended June
30, 2002. The Company's principal sales and marketing expense components are
salary and travel related expenses, reflecting an active sales and marketing
organization.
General and administrative expense. For the three-months ended June 30,
2003, general and administrative expense increased $107,436, or 40%, to
$377,999, compared to $270,563 for the three-months ended June 30, 2002. The
increase in general and administrative expense is attributable to higher legal
expense incurred in the period, a direct result of our lawsuit against Endocare,
as well as higher insurance, accounting and consulting costs. These increases
were offset by lower salary expense as a result of lower G&A headcount. For the
six-months ended June 30, 2003, general and administrative expense increased
$452,476, or 160%, to $735,023, compared to $282,547 for the six-months ended
June 30, 2002. The increase in general and administrative expense is
attributable to higher legal expense incurred in the period, a direct result of
our lawsuit against Endocare, as well as other general and administrative
expenses which have been fully absorbed by continuing operations, including
higher insurance, consulting and accounting costs.
Discontinued operations. On June 25, 2002, all of the cryosurgical
assets, including customer receivables, inventory, fixed assets and intangible
assets related to the cryosurgical business, were sold to Endocare for a
combination of cash and restricted common stock of the purchaser. For the three-
and six-months ended June 30, 2003 there were no results from the operation of
cryosurgical assets, compared to a loss of $944,046 and $1,454,890, for the
three- and six-months ended June 30, 2002.
Operating expenses and net income. For the three-months ended June 30,
2003, operating expenses increased $164,499, or 38%, to $593,975, compared to
$429,476 for the three-months ended June 30, 2002. For the six-months ended June
30, 2003, operating expenses increased $627,025, or 116%, to $1,166,988,
compared to $539,963 for the six-months ended June 30, 2002. The Company
reported a net loss of $494,471 for the three months ended June 30, 2003,
compared to net income of $1,151,712 for the three months ended June 30, 2002.
For the six-months ended June 30, 2003, the Company reported a net loss of
$842,254, compared to net income of $809,568 for the six months ended June 30,
2002. The Company's reported net income or loss for the three- and six-months
ended June 30, 2003 and 2002 includes results from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, the Company had cash and cash equivalents of $15,287,
compared to cash and cash equivalents of $67,118 at December 31, 2002. In order
to continue its operations, the Company will need to secure funding in the
immediate short term. In this respect, the Company is currently involved in
litigation against Endocare, Inc., seeking to recover damages that it believes
it suffered when Endocare failed to register its common shares that the Company
received in the sale of the Company's cryosurgical assets in June 2002. In
addition to this litigation, the Company is also pursuing other financing
initiatives, including the sale of equity securities, the issuance of debt, or
12
other alternatives. The Company can make no assurances that it will be
successful in either its litigation against Endocare, or in raising capital.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants. Other
arrangements, if necessary to raise additional funds, may require the Company to
relinquish rights to certain of its technologies, products, marketing
territories or other assets. The failure to raise capital when needed will have
a significant negative effect on the Company's financial condition and may force
the Company to curtail or cease its activities.
There were no capital expenditures related to continuing operations
during the six-month period ended June 30, 2003, compared to $89,405 in the
six-month period ended June 30, 2002.
In March 2003, the Company borrowed $100,000 under a 12-month
promissory note agreement with an existing stockholder. In connection with this
debt raise, the Company issued warrants to purchase 500,000 shares of the
Company's Common Stock at $0.08 per share. In April 2003, the Company extended
payment on a $250,000 12-month promissory note agreement with an existing
stockholder. The payment of this note was extended to April 2004. As
consideration for the 12-month extension, the warrants to purchase 1,000,000
shares of common stock were repriced to $0.08 per share from $0.25 per share. In
May 2003, the Company borrowed an aggregate of $300,000 under three 12-month
promissory note agreements with existing shareholders. In connection with this
debt raise, the Company issued warrants to purchase 1,500,000 shares of the
Company's Common Stock at $0.08 per share. Loan financing costs of $187,400 have
been recorded in the accompanying balance sheet as of June 30, 2003.
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 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 10-KSB for the year ended
December 31, 2002. Assumptions relating to the foregoing involve judgments 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.
13
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of the Company's
management, including the principal executive officer/principal financial
officer, the Company has evaluated the effectiveness of the design and operation
of the Company's disclosure controls and procedures within 90 days of the filing
date of this quarterly report, and, based on his evaluation, the Company's
principal executive officer/principal financial officer has concluded that these
controls and procedures are effective. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files under the Exchange Act is accumulated and communicated to the
Company's management, including the principal executive officer/principal
financial officer, to allow timely decisions regarding required disclosure.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350
(b) Reports on Form 8-K
None
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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.
BioLife Solutions, Inc.
-----------------------
(Registrant)
Date: August 14, 2003 By: /s/ John G. Baust
-------------------------------------
John G. Baust, PhD
President and Chief Executive Officer
(Principal Executive Officer )
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- -------------------------------------------------------------
31.1* Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1* Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350
* Filed herewith
17