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 September 30, 2003
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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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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 BIOLIFE SOLUTIONS, INC. COMMON STOCK, PAR VALUE $.001 PER
SHARE, WERE OUTSTANDING AS OF NOVEMBER 12, 2003.
Transitional Small Business Disclosure Format (check one). Yes / / No / X /
BIOLIFE SOLUTIONS, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2003
INDEX
Page
No.
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Part I. Financial Information
Item 1. Financial Statements:
Balance Sheet at September 30, 2003 (unaudited) ................................................. 2
Unaudited Statements of Operations for the three- and nine-month periods ended September 30, 2003
and September 30, 2002 .......................................................................... 3
Unaudited Statements of Comprehensive Income (Loss) for the three- and nine-month periods ended
September 30, 2003 and September 30, 2002 ....................................................... 4
Unaudited Statements of Cash Flows for the nine-month periods ended September 30, 2003 and
September 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
Certification ........................................................................................ 17
PART I
FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
BIOLIFE SOLUTIONS, INC.
BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30,
2003
----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,748
Receivables 67,352
Inventories 1,502
Loan financing costs, net 134,471
Prepaid expenses and other current assets 10,743
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TOTAL CURRENT ASSETS 216,816
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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 (85,890)
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NET PROPERTY AND EQUIPMENT 123,207
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TOTAL ASSETS $ 340,023
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 530,293
Bank overdraft 11,903
Accrued expenses 169,576
Accrued salaries 517,777
Notes payable 725,824
Deferred revenue --
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TOTAL CURRENT LIABILITIES 1,955,373
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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 38,712,919
Accumulated deficit (38,906,431)
Accumulated other comprehensive loss (1,434,263)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,615,350)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 340,023
============
See notes to financial statements
2
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2002 2003 2002 2003
---- ---- ---- ----
REVENUE
Grant revenue $ 106,032 $ 114,873 $ 385,572 $ 241,126
Consulting revenue 30,000 16,000 110,720 153,360
Product sales 1,975 43,650 20,527 121,085
------------ ------------ ------------ ------------
TOTAL REVENUE 138,007 174,523 516,819 515,571
------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development 209,434 245,199 441,684 583,163
Sales and marketing 4,126 65,241 4,146 149,909
Product sales -- 3,598 25,646 12,932
General and administrative 134,520 413,304 417,068 1,148,326
------------ ------------ ------------ ------------
TOTAL EXPENSES 348,080 727,342 888,544 1,894,330
------------ ------------ ------------ ------------
OPERATING LOSS (210,073) (552,819) (371,725) (1,378,759)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense -- (16,250) -- (35,764)
Other income -- -- -- 3,200
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) -- (16,250) -- (32,564)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE (BENEFIT) PROVISION FOR TAXES (210,073) (569,069) (371,725) (1,411,323)
(BENEFIT) PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS (210,073) (569,069) (371,725) (1,411,323)
------------ ------------ ------------ ------------
DISCONTINUED OPERATIONS
Loss from discontinued operations, net (92,934) -- (1,547,824) --
Gain on disposal of cryosurgical assets, net -- -- 2,426,109 --
------------ ------------ ------------ ------------
TOTAL DISCONTINUED OPERATIONS (92,934) -- 878,285 --
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (303,007) $ (569,069) $ 506,560 $ (1,411,323)
============ ============ ============ ============
BASIC AND DILUTED NET (LOSS) INCOME PER
COMMON SHARE:
Loss from continuing operations $ (0.02) $ (0.05) $ (0.03) $ (0.11)
(Loss) gain from discontinued operations (0.01) -- 0.08 --
------------ ------------ ------------ ------------
TOTAL BASIC AND DILUTED NET (LOSS) INCOME
PER COMMON SHARE $ (0.02) $ (0.05) $ 0.04 $ (0.11)
============ ============ ============ ============
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)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
2002 2003 2002 2003
---- ---- ---- ----
NET (LOSS) INCOME $ (303,007) $ (569,069) $ 506,560 $(1,411,323)
----------- ----------- ----------- -----------
Unrealized gain on marketable securities 132,024 -- 283,252 --
----------- ----------- ----------- -----------
Other comprehensive income 132,024 -- 283,252 --
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ (170,983) $ (569,069) $ 789,812 $(1,411,323)
=========== =========== =========== ===========
See notes to financial statements
4
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDING
SEPTEMBER 30,
--------------------------
2002 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ 506,560 $(1,411,323)
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH
USED BY OPERATING ACTIVITIES
Gain on disposition of cryosurgical assets, net (2,426,109) --
Loss from discontinued operations 1,547,823 --
Depreciation 29,032 34,507
Amortization of loan financing costs 90,209 102,995
Write-down of inventory 25,685 --
Issuance of warrants and options for consulting
and professional services 188,241 138,512
CHANGE IN OPERATING NET ASSETS AND LIABILITIES NET OF
EFFECTS FROM DISPOSITION OF CRYOSURGICAL ASSETS
(INCREASE) DECREASE IN
Accounts receivable 9,650 (22,686)
Inventory 49,252 (1,502)
Prepaid and other current assets (12,552) 7,852
INCREASE (DECREASE) IN
Accounts payable (923,934) 358,627
Increase in bank overdraft 11,903
Accrued expenses (128,750) 63,775
Accrued salaries -- 272,970
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CASH PROVIDED (USED) BY CONTINUING OPERATIONS (1,044,893) (444,370)
CASH USED IN DISCONTINUED OPERATIONS (1,292,748) --
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (2,337,641) (444,370)
----------- -----------
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 --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 434,780 400,000
Principal payments on notes payable (220,763) (20,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 214,017 380,000
----------- -----------
NET (DECREASE) INCREASE IN CASH (13,029) (64,370)
CASH - BEGINNING OF PERIOD 286,105 67,118
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CASH - END OF PERIOD $ 273,076 $ 2,748
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
NONCASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued for payment of loan financing costs $ -- $ 211,713
=========== ===========
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 which 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(R) 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 of 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 September 30, 2003, and the Statements of
Operations for the three- and nine-month periods ended September 30, 2003 and
2002 and Statements of Cash Flows for the nine-month periods ended September 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 September 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. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto, 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 nine-month periods ended
September 30, 2003 are not necessarily indicative of the operating results
anticipated for the full year.
6
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
B. Financial Condition
At September 30, 2003, the Company had a deficiency in stockholders'
equity of approximately $1,615,000 and a working capital deficiency of
approximately $1,739,000. 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.
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
On October 1, 2003, the Court of Chancery in and for New Castle County,
Delaware awarded the Company damages in the amount of $1,648,935, plus
prejudgment interest (the full amount sought by the Company), in the Company's
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 on June 24, 2002. On November 7,
2003, Endocare filed a notice of appeal with the Supreme Court of the State of
Delaware. The Company's application for attorneys' fees is being held in
abeyance while the matter is appealed. The Company presently is proceeding to
execute upon its judgment.
7
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
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
(see Note C).
There were no results from discontinued operations for the three- and
nine-months ended September 30, 2003.
E. Inventories
Inventories consist of $1,502 of finished HypoThermosol solutions at
September 30, 2003.
F. Notes Payable and Issuance of Warrants
At September 30, 2003, notes payable consisted of the following:
Notepayable to a stockholder, unsecured, bearing interest at
10%, 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. $ 250,000
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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.
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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
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8
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
In August 2003, the Company issued to employees, its legal counsel and
a consultant, five-year warrants to purchase an aggregate of 1,558,329 shares of
the Company's common stock at $0.08 per share. The warrants were issued in
consideration for salaries and professional services. The Company recorded
additional-paid-in-capital on the balance sheet of $138,512 and related expense
in the Statement of Operations to reflect the fair market value of warrants
issued.
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 nine-month
periods ended September 30, 2003 and 2002 as their effect would have been
anti-dilutive.
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:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------------
2002 2003 2002 2003
---- ---- ---- ----
Income (Loss) as reported $ (303,007) $ (569,069) $ 506,560 $(1,411,323)
Compensation expense based on fair value,
net of related tax effects (20,056) (26,921) (60,168) (80,763)
---------- ---------- ----------- -----------
Pro forma net income (loss) $ (323,063) $ (595,990) $ 446,392 $(1,492,086)
========== ========== =========== ===========
Basic and diluted net income (loss) per share as reported $ (0.02) $ (0.05) $ 0.04 $ (0.11)
========== ========== =========== ===========
Pro forma $ (0.03) $ (0.05) $ 0.04 $ (0.12)
========== ========== =========== ===========
This disclosure is in accordance with Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure.
9
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
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.
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 solutions
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.
On October 1, 2003, the Court of Chancery in and for New Castle County,
Delaware awarded the Company damages in the amount of $1,648,935, plus
prejudgment interest (the full amount sought by the Company), in the Company's
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 on June 24, 2002. On November 7,
2003, Endocare filed a notice of appeal with the Supreme Court of the State of
Delaware. The Company's application for attorneys' fees is being held in
abeyance while the matter is appealed. The Company presently is proceeding to
execute upon its judgment.
RESULTS OF OPERATIONS
FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
Revenue. For the three-months ended September 30, 2003 revenue from
continuing operations increased $36,516, or 26%, to $174,523, compared to
$138,007 for the three-months ended September 30, 2003. The increase was due to
higher National Institutes of Health ("NIH") grant revenue and sales of
HypoThermosol, offset by lower revenue from corporate consulting contracts. For
the nine-months ended September 30, 2003, revenue was $515,571, compared to
$516,819 for the nine-months ended September 30, 2002. Higher product sales and
consulting revenue in the period was offset by lower NIH grant revenue as
compared to a year ago.
Cost of product sales. Cost of product sales for the three-months ended
September 30, 2003 totaled $3,598, compared to no cost of product sales for the
three-months ended September 30, 2002. Cost of product sales for the nine-months
ended September 30, 2003 totaled $12,932, compared to $25,646 for the
nine-months ended September 30, 2002. This comparable period reflects a charge
to inventory, making a comparison between the two periods difficult.
11
Research and development. Expenses relating to research and development
for the three-months ended September 30, 2003 increased $35,765, or 17%, to
$245,199, compared to $209,434 for the three-months ended September 30, 2002.
The increase in research and development expense was due primarily to higher
salary-related expense. Expenses relating to research and development for the
nine-months ended September 30, 2003 increased $141,479, or 32%, to $583,163,
compared to $441,684 for the nine-months ended September 30, 2002. The increase
in research and development expenditure for the nine month period was due to an
overall higher level of product development activity reflected in higher salary
expense, consulting fees, legal expenses relating to the Company's intellectual
property portfolio and expenditure on travel.
Sales and marketing. For the three-months ended September 30, 2003,
sales and marketing expense increased $61,115, to $65,241, compared to $4,126
for the three-months ended September 30, 2002. The increase in sales and
marketing expense was the direct result of more employees. For the nine-months
ended September 30, 2003, sales and marketing expense increased $145,763, to
$149,909, compared to $4,146 for the nine-months ended September 30, 2002. The
increase was due to the increase in employees and an overall increase in sales
and marketing activity compared to a year ago.
General and administrative expense. For the three-months ended
September 30, 2003, general and administrative expense increased $278,784, or
207%, to $413,304, compared to $134,520 for the three-months ended September 30,
2003. 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.
For the nine-months ended September 30, 2003, general and administrative expense
increased $731,298, or 175%, to $1,148,366, compared to $417,068 for the
nine-months ended September 30, 2003. The increase in general and administrative
expense was attributable to higher legal expense incurred in the period and
higher insurance, accounting and consulting 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 nine-months ended September 30, 2003 there were no results from the
operation of cryosurgical assets, compared to losses of $92,934 and $1,547,824,
for the three- and nine-months ended September 30, 2002, respectively.
Operating expenses and net income. For the three-months ended September
30, 2003, operating expenses increased $379,262, or 109%, to $727,342, compared
to $348,080 for the three-months ended September 30, 2002. For the nine-months
ended September 30, 2003, operating expenses increased $1,005,786, or 113%, to
$1,894,330, compared to $888,544 for the nine-months ended September 30, 2002.
The Company reported a net loss of $569,069 for the three months ended September
30, 2003, compared to a net loss of $303,007 for the three months ended
September 30, 2003. The company reported a net loss of $1,411,323 for the nine-
months ended September 30, 2003, compared to net income of $506,560 for the
nine-months ended September 30, 2002. The Company's reported net income or loss
for the three and nine months ended September 30, 2002 includes results
from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2003, the Company had cash and cash equivalents of
$2,748, 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
12
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 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 nine-month period ended September 30, 2003, compared to $89,405 in
the nine-month period ended September 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. Also in March 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. In
May 2002, 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.
FORWARD LOOKING INFORMATION
The information set forth in this Report (and other reports issued by
the Company and its officers from time to time) contains 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
Within 90 days prior to the date of filing this Form 10-Q, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the CEO/CFO, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Securities Exchange Act of 1934 Rule 13a-14. Based upon the
evaluation, the Company's CEO/CFO concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Company's
periodic SEC filings.
The Company does not expect that its disclosure controls and procedures
will prevent all error and all fraud. A control procedure, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control procedure are met. Because of the inherent
limitations in all control procedures, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any control
procedure also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control procedure, misstatements due to
error or fraud may occur and not be detected.
Subsequent to the date of the Company's evaluation, there have been no
significant changes in the Company's internal controls or in other factors that
could affect internal controls, nor were any corrective actions required with
regard to significant deficiencies and material weaknesses.
14
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
15
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: November 14, 2003 By: /s/ John G. Baust, PhD.
--------------------------------
John G. Baust, PhD
President and Chief Executive Officer
(Principal Executive Officer )
16
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