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, 2005 Commission file number 0-18170
BIOLIFE SOLUTIONS, INC.
-----------------------
(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)
171 Front Street
Owego, NY 13827
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(Address of principal executive offices)
Issuer's telephone number, including area code: (607) 687-4487
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 14, 2005.
Transitional Small Business Disclosure Format (check one). Yes ___ No _X_
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Securities Exchange Act of 1934). Yes ___ No _X_
BIOLIFE SOLUTIONS, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2005
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Unaudited Balance Sheet at September 30, 2005................................................. 2
Unaudited Statements of Operations for the three and nine month periods ended
September 30, 2005 and September 30, 2004..................................................... 3
Unaudited Statements of Cash Flows for the nine month periods ended September 30, 2005
and September 30, 2004........................................................................ 4
Notes to Financial Statements................................................................. 5-8
Item 2. Management's Discussion and Analysis....................................................... 9-12
Item 3. Controls and Procedures..................................................................... 13
Part II. Other Information
Item 6. Exhibits.................................................................................... 14
Signatures.......................................................................................... 15
Certifications...................................................................................... 16-17
1
PART I
FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
BIOLIFE SOLUTIONS, INC.
BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30,
2005
------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 305,788
Receivables 54,139
Inventories 168,866
Prepaid expenses and other current assets 23,383
------------------
TOTAL CURRENT ASSETS 552,176
------------------
PROPERTY AND EQUIPMENT
Leasehold improvements 45,783
Furniture and computer equipment 39,760
Manufacturing and other equipment 213,196
------------------
TOTAL 298,739
Less: Accumulated depreciation and amortization (206,165)
------------------
NET PROPERTY AND EQUIPMENT 92,574
------------------
TOTAL ASSETS $ 644,750
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 166,581
LDC Loan - current maturities 25,777
Accrued expenses 66,154
------------------
TOTAL CURRENT LIABILITIES 258,512
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LONG TERM LIABILITIES
LDC Loan - less current maturities above 204,723
------------------
TOTAL CURRENT LIABILITIES 204,723
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series F convertible preferred stock, $.001 par value; 12,000
shares authorized, 12,000 shares issued and outstanding 12
Series G convertible preferred stock, $.001 par value; 80
shares authorized, 55 shares issued and outstanding 1
Common stock, $0.001 par value, 100,000,000 shares
authorized, 12,413,209 shares issued and outstanding 12,413
Additional paid-in capital 40,680,222
Accumulated deficit (40,511,133)
------------------
TOTAL STOCKHOLDERS' EQUITY 181,515
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 644,750
==================
See notes to financial statements
2
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
----------------------------------- -----------------------------------
REVENUE
Product sales $ 122,676 $ 84,215 $ 311,793 $ 225,305
Facilities fee - related party 24,386 35,651 66,112 72,617
Management fee - related party 13,412 19,608 36,362 39,939
Seminar fees - 1,400 - 2,475
Consulting revenue - 14,000 - 86,000
Grant revenue - - - 38,936
--------------- --------------- --------------- ---------------
TOTAL REVENUE 160,474 154,874 414,267 465,272
--------------- --------------- --------------- ---------------
OPERATING EXPENSES
Product sales 50,326 40,523 134,651 121,739
Sales and marketing 31,436 57,661 65,234 216,883
Research and development 6,430 36,855 19,315 100,394
General and administrative 230,208 173,297 649,362 686,467
--------------- --------------- --------------- ---------------
TOTAL EXPENSES 318,400 308,336 868,562 1,125,483
--------------- --------------- --------------- ---------------
OPERATING LOSS (157,926) (153,462) (454,295) (660,211)
--------------- --------------- --------------- ---------------
OTHER INCOME
Interest income 974 3,284 5,798 18,692
--------------- --------------- --------------- ---------------
TOTAL OTHER INCOME 974 3,284 5,798 18,692
--------------- --------------- --------------- ---------------
NET LOSS $ (156,952) $ (150,178) $ (448,497) $ (641,519)
=============== =============== =============== ===============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE:
TOTAL BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (0.01) $ (0.01) $ (0.04) $ (0.05)
=============== =============== =============== ===============
Basic and diluted weighted average common
shares used to compute net loss per
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 CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
2005 2004
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (448,497) $ (641,519)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES
Depreciation 49,051 43,953
Amortization of loan financing costs - 106,408
Stock-based compensation 17,050 -
CHANGE IN OPERATING ASSETS AND LIABILITIES
(INCREASE) DECREASE IN
Receivables 21,198 1,791,097
Inventories (74,547) (43,477)
Prepaid expenses and other current assets (20,458) (27,800)
INCREASE (DECREASE) IN
Accounts payable 81,544 (464,051)
Accrued expenses (69,117) (213,407)
---------------- ----------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (443,776) 551,204
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (12,620) (61,791)
---------------- ----------------
NET CASH USED BY INVESTING ACTIVITIES (12,620) (61,791)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 230,500 -
Principal payments on notes payable - (705,525)
---------------- ----------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 230,500 (705,525)
---------------- ----------------
NET DECREASE IN CASH (225,896) (216,112)
CASH - BEGINNING OF PERIOD 531,684 787,904
---------------- ----------------
CASH - END OF PERIOD $ 305,788 $ 571,792
================ ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ - $ 81,597
================ ================
See notes to financial statements
4
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
BioLife Solutions, Inc. ("BioLife" or the "Company") was incorporated in 1998 in
Delaware as a wholly owned subsidiary of Cryomedical Sciences, Inc.
("Cryomedical"), a company that was engaged in manufacturing and marketing
cryosurgical products. BioLife (a) provides cryopreservation process evaluation
services, and (b), based upon its patented HypoThermosol(R) platform technology,
develops, manufactures and markets proprietary cryopreservation solutions that
markedly improve the biological processing and preservation of cells and
tissues.
On June 25, 2002 the Company sold its cryosurgery product line and related
intellectual property assets to Irvine, CA-based Endocare, Inc., a public
company, in exchange for $2.2 million in cash and 120,022 shares of Endocare
restricted common stock. In conjunction therewith, Cryomedical's Board of
Directors approved merging BioLife into Cryomedical and changing its name to
BioLife Solutions, Inc. In September 2002, the merger and name change were
completed and the Company began to trade under the new ticker symbol, "BLFS" on
the OTCBB.
The Balance Sheet as of September 30, 2005, and the Statements of Operations for
the three month and nine month periods ended September 30, 2005 and 2004 and
Statements of Cash Flows for the nine month periods ended September 30, 2005 and
2004, 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, 2005, 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,
2004.
The results of operations for the three month and nine month periods ended
September 30, 2005 are not necessarily indicative of the operating results
anticipated for the full year.
5
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
B. FINANCIAL CONDITION
At September 30, 2005, the Company had stockholders' equity of approximately
$182,000 and a working capital surplus of approximately $294,000. To date, the
Company has been unable to generate sufficient income from operations to meet
its operating needs.
The Company believes it has sufficient funds to continue operations in the near
term. Future capital requirements will depend on many factors, including the
ability to market and sell the Company's product line, research and development
programs, the scope and results of clinical trials, the time and costs involved
in obtaining regulatory approvals, the costs involved in obtaining and enforcing
patents or any litigation by third parties regarding intellectual property, the
status of competitive products, the maintenance of our manufacturing facility,
the maintenance of sales and marketing capabilities, and the establishment of
collaborative relationships with other parties.
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 nor to amounts and classification of liabilities that may be necessary
should the Company be unable to continue as a going concern.
C. INVENTORIES
Inventories consisted of $143,281 of finished product and $25,585 of
manufacturing materials at September 30, 2005.
E. 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 issuable common shares were not
included in the diluted earnings per share amounts for the three month and nine
month periods ended September 30, 2005 and 2004 as their effect would have been
anti-dilutive.
F. AUTHORIZED SHARES
On 9/28/2005, the Stockholders approved an increase in the number of authorized
shares from 25,000,000 to 100,000,000 and approved an increase in the number of
shares reserved for issuance under the 1998 stock option plan from 4,000,000 to
10,000,000.
6
G. 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.
During the quarter ended September 30, 2005, the Company granted options to
employees and directors to purchase 2,660,000 shares of Common Stock for $.08
per share which was a price that was less than the fair market value ($.09) at
the date of grant. Compensation expense of $17,050 is reflected in the Statement
of Operations for the quarter ended September 30, 2005.
The fair value of each option granted was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 4.40%, no dividend yield, 67%
volatility, and expected lives of ten years.
The following table illustrates the effect on net loss and loss 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,
2005 2004 2005 2004
Net Income (Loss) as reported $ (156,952) $ (150,178) $ (448,497) $ (641,519)
Add: Stock-based compensation costs included
in reported net loss 17,050 - 17,050 -
Less: Stock-based compensation costs under
SFAS No. 123 (138,563) (17,805) (174,172) (53,415)
---------------- ----------------- ----------------- -----------------
Pro forma net loss $ (278,465) $ (167,983) $ (605,619) $ (694,934)
================ ================= ================= =================
Basic and diluted net loss per share as reported $ (0.01) $ (0.01) $ (0.04) $ (0.05)
================ ================= ================= =================
Pro forma $ (0.02) $ (0.01) $ (0.05) $ (0.06)
================ ================= ================= =================
7
H. ADJUSTMENT
During the quarter ended September 30, 2005, the Company determined that certain
inventory had not been accounted for at June 30, 2005. This error caused net
loss and loss per share to be overstated by $58,718 and $.01 for the three and
six months ended June 30, 2005. The following represents the amounts as reported
and as adjusted for the periods ended June 30, 2005:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2005 JUNE 30, 2005
Net loss as reported $ (187,483) $ (350,260)
=========== ===========
Basic and diluted loss per share
as reported $ (.02) $ (.03)
=========== ===========
Net loss as adjusted $ (128,766) $ (291,543)
=========== ===========
Basic and diluted loss per share
as adjusted $ (.01) $ (.02)
=========== ===========
The company has filed a form 10-QSB/A for the quarter ended June 30, 2005 to
reflect this adjustment.
I. RECLASSIFICATIONS
Certain amounts in the quarter and nine month period ended September 30, 2004
have been reclassified to conform to the September 2005 presentation.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto set forth elsewhere herein.
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(R), GelStor(TM) and
CryoStor(TM) 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, which 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(R), CryoStor(TM) and GelStor(TM)
line of solutions to companies and labs engaged in pre-clinical research, and to
academic institutions.
On May 12, 2005, the Company signed an Exclusive Private Labeling and
Distribution Agreement with VWR International, Inc., a global leader in the
distribution of scientific supplies, pursuant to which the Company will
manufacture its HypoThermosol(R) and CryoStor(TM) product lines under the VWR
label for sale to non-clinical customers via the 1,400 person VWR worldwide
sales force. The Company maintains the right to sell its products to
non-clinical customers under its own label.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
2005 AND 2004
REVENUE
Revenue for the quarter ended September 30, 2005 increased $5,601, or 4%, to
$160,475, compared to $154,874 for the quarter ended September 30, 2004. The
shift in focus toward product sales resulted in an 46% increase in product sales
in the third quarter of 2005 as compared to the third quarter of 2004. While
product sales rose, consulting revenue declined as a result of the scheduled
completion of contracts with consulting clients. In addition, grant revenue
declined as the Company shifted focus toward product sales from research and
development activities. For the quarter ended September 30, 2005, the Company
received management and facilities fees totaling $37,798, as compared to $55,259
for the quarter ended September 30, 2004, as a result of the research agreement
between the Company and Cell Preservation Services, Inc. (CPSI), pursuant to
which the Company receives facilities and management fees from CPSI in exchange
for the use of BioLife facilities and management services in connection with the
research performed on behalf of CPSI. CPSI is a company formed by Dr. John M.
Baust, a former Biolife employee and the son of Dr. John G. Baust, President of
BioLife.
Revenue for the nine month period ended September 30, 2005 decreased $51,005, or
11%, to $414,267, compared to $465,272 for the nine month period ended September
30, 2004. The shift in focus toward product
9
sales resulted in a 38% increase in product sales for the nine month period
ended September 30, 2005, compared to the nine month period ended September 30,
2004. While product sales rose, consulting revenue declined as a result of the
scheduled completion of contracts with consulting clients. In addition, the
shift in focus toward product sales resulted in a decline in grant revenue of
$38,936 from the nine month period ended September 30, 2004. For the nine month
period ended September 30, 2005, the Company received management and facilities
fees totaling $102,474 as compared to $112,555 for the nine month period ended
September 30, 2004, as a result of the research agreement between the Company
and CPSI.
COST OF PRODUCT SALES
For the quarter ended September 30, 2005, the cost of product sales was $50,326
as compared to $40,523 for the quarter ended September 30, 2004. For the nine
month period ended September 30, 2005, the cost of product sales was $134,651 as
compared to $121,739 for the nine month period ending September 30, 2004. This
increase was primarily due to an increase in product sales volume as well as
increases in labor and raw materials expenditures necessary for fulfillment of
the VWR agreement including new labeling requirements and new packaging
requirements.
RESEARCH AND DEVELOPMENT
Expenses relating to research and development for the quarter ended September
30, 2005 declined $30,425, or 83%, from the previous quarter ended September 30,
2004. This decrease in research and development costs was due to the shift of
grant related research activities to CPSI pursuant to the research agreement.
Three former employees of BioLife became CPSI employees to perform grant related
research and development work. In addition, depreciation and facilities expenses
were recorded as General and Administrative expenses in 2005, rather than
Research and Development expenses, as the Company's focus shifted away from
research and development to product sales.
Expenses relating to research and development for the nine month period ended
September 30, 2005 declined $81,079 or 81% from the previous nine month period
ended September 30, 2004. This decrease in research and development costs was in
large part due to the shift of grant related research activities to CPSI
pursuant to the research agreement. Three former employees of BioLife became
CPSI employees to perform grant related research and development work. In
addition, depreciation and facilities expenses were recorded as General and
Administrative expenses in 2005, rather than Research and Development expenses,
as the Company's focus shifted away from research and development to product
sales.
SALES AND MARKETING
For the quarter ended September 30, 2005, sales and marketing expenses decreased
$26,225, or 45%, to $31,436, compared to $57,661 for the quarter ended September
30, 2004. The decrease in sales and marketing expense was due primarily to the
resignation of Alan Rich, Vice President of Sales, on January 31, 2005. In
addition, the Company hired a Marketing Manager on June 13, 2005.
For the nine month period ended September 30, 2005, sales and marketing expenses
decreased $151,649, or 70%, to $65,234, compared to $216,883 for the nine month
period ended September 30, 2004. The decrease in sales and marketing expense was
due primarily to the resignation of Alan Rich, Vice President of Sales, on
January 31, 2005. In addition to the reduction in salaries and insurance
expenses, trade show attendance fees, advertising, and sales related travel
expenses were reduced.
GENERAL AND ADMINISTRATIVE EXPENSE
For the quarter ended September 30, 2005, general and administrative expense
increased $56,911, or 33%, to $230,208, compared to $173,297 for the quarter
ended September 30, 2004. Facilities expenses for the quarter ended September
30, 2005 totaled $23,659. There were no facilities expenses recorded as General
and Administrative expenses for the quarter ended September 30, 2004 as
facilities expenses were recorded as Research and Development expenses.
Similarly, depreciation totaled $6,207 for the quarter ended September
10
30, 2005, while depreciation was recorded as Research and Development expenses
for the quarter ended September 30, 2004. In addition, the Company incurred
additional production and legal fees related to the printing, mailing, and
tracking of the Proxy solicitation and annual report for the shareholder meeting
held September 28, 2005
For the nine month period ended September 30, 2005, general and administrative
expense decreased $37,105, or 5% to $649,362, compared to $686,467 for the nine
month period ended September 30, 2004. This decrease was due in large part to
amortization of previously capitalized loan financing costs of $106,408
associated with note obligations that were paid during the first quarter of
2004. Legal fees totaled $48,448 for the nine month period ending September 30,
2005, as compared to $100,379 for the nine month period ending September 30,
2004. These additional legal fees incurred in 2004 were related to the Endocare
lawsuit. There were several items that partially offset the additional legal
fees and amortization expense incurred in the third quarter of 2004. The Company
was able to negotiate and write off $57,844 in liabilities during the first
quarter of 2004. In addition, the Company incurred additional production and
legal fees related to the printing, mailing, and tracking of the Proxy
solicitation and annual report for the shareholder meeting dated September 28,
2005. There were no facilities expenses recorded as General and Administrative
expenses for the nine months ended September 30, 2004 as facilities expenses
were recorded as Research and Development expenses during that period.
Similarly, depreciation totaled $18,895 for the quarter ended September 30,
2005, while depreciation was recorded as Research and Development expenses for
the quarter ended September 30, 2004.
OPERATING EXPENSES AND NET INCOME
For the quarter ended September 30, 2005, operating expenses increased $10,065,
or 3%, to $318,401, compared to $308,336 for the quarter ended September 30,
2004. The Company reported a net loss of $(156,952) for the quarter ended
September 30, 2005, compared to a net loss of ($150,178) for the quarter ended
September 30, 2004.
For the nine month period ended September 30, 2005, operating expenses decreased
$256,921, or 23%, to $868,562, compared to $1,125,483 for the nine month period
ended September 30, 2004. The Company reported a net loss of $(448,497) for the
nine month period ended September 30, 2005, compared to a net loss of ($641,519)
for the nine month period ended September 30, 2004.
CASH AND CASH EQUIVALENTS
At September 30, 2005, the Company had cash and cash equivalents of $305,788,
compared to cash and cash equivalents of $571,792 at September 30, 2004. At
September 30, 2005, the Company had a working capital surplus of $319,441,
compared to a working capital surplus of $573,765 at September 30, 2004. The
decrease in the Company's cash and working capital position compared to
September 30, 2004 was due to the inability of the Company to generate
sufficient income from operations to meet its operating needs. In addition, the
Company made capital improvements and expenditures to support product sales
growth. In addition, the Company secured a loan from Tioga County LDC in the
amount of $230,500 to support its working capital needs and enhance production
capabilities to support the distribution agreement with VWR International.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter of 2005, the Company generated $122,676 in product
sales, the highest product sales quarter since inception. This represents a 21%
increase over the previous high product sales quarter (second quarter of 2005)
of $101,754. While the increasing product sales appear promising, the Company
has been unable to support its operations solely from revenue generated from
product sales. In February 2004, the Company collected $1.88 million from its
lawsuit settlement with Endocare. This settlement has provided the necessary
cash flow to support operating activities to date.
In September 2005, the Company secured a loan from the Tioga County LDC in the
amount of $230,500 to support its working capital needs and enhance production
capabilities to support the distribution agreement with
11
VWR International. The loan is a 7 year note with an annual interest rate of 5%
requiring monthly payments of $3,258.
During the nine month period ended September 30, 2005, net cash used by
operating activities was $443,776 as compared to net cash provided by operating
activities of $551,204 for the nine month period ended September 30, 2004. The
net cash provided from operating activities for the nine month period ending
September 30, 2004 resulted primarily from the collection of the Endocare
settlement and was partially offset by the reduction in accounts payable, loans
payable, accrued expenses, and accrued salaries.
Net cash used in investing activities totaled $12,620 for the nine month period
ended September 30, 2005 as the Company purchased new equipment and made
leasehold improvements to support the manufacturing facility and product sales.
The Company believes it has sufficient funds to continue operations in the near
term. Future capital requirements will depend on many factors, including the
ability to market and sell our product line, research and development programs,
the scope and results of clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in obtaining and enforcing
patents or any litigation by third parties regarding intellectual property, the
status of competitive products, the maintenance of our manufacturing facility,
the maintenance of sales and marketing capabilities, and the establishment of
collaborative relationships with other parties.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations are based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses and related disclosures. On an ongoing basis,
the Company evaluates estimates, including those related to bad debts,
inventories, fixed assets, income taxes, contingencies and litigation. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis of the Company's judgments on the carrying value
of assets and liabilities. Actual results may differ from these estimates under
different assumptions or conditions.
The Company believes that following accounting policies involves more
significant judgments and estimates in the preparation of the financial
statements. The Company maintains an allowance for doubtful accounts for
estimated losses that may result from the inability of its customers to make
payments. If the financial condition of the Company's customers were to
deteriorate, resulting in their inability to make payments, the Company may be
required to make additional allowances. The Company writes down inventory for
estimated obsolete or unmarketable inventory to the lower of cost or market
based on assumptions of future demand. If the actual demand and market
conditions are less favorable than projected, additional write-downs may be
required.
CONTRACT OBLIGATIONS
The Company leases equipment as a lessee, under operating leases expiring on
various dates through 2005. The leases require monthly payments of approximately
$2,340.
In January 2004, BioLife signed a 3 year lease with Field Afar Properties, LLC,
whereby BioLife leases 6,161 square feet of office, laboratory, and
manufacturing space in Owego, NY at a rental rate of $6,200 per month.
Renovation of the new facility was completed in April 2004. The Company's Chief
Executive Officer and family members are the members of Field Afar Properties,
LLC.
12
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's periodic
Securities Exchange Act of 1934 ("Exchange Act") reports is recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms, and that such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required financial
disclosure.
At the end of the period covered by this Quarterly Report on Form 10-QSB, 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 Exchange Act Rule 13a-15. Based upon that evaluation,
the CEO/CFO concluded that the Company's disclosure controls and procedures are
not effective in timely alerting him to material information relating to the
Company required to be included in the Company's periodic SEC filings and ensure
that the information required to be disclosed by the Company in the report it
files or submits under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified by the rules and forms.
During the period covered by this report, the Company uncovered a deficiency in
its internal control over financial reporting regarding the counting of physical
inventory which if left uncorrected could result in a material control weakness.
Specifically, the Company discovered that there were finished goods lots that
were not counted during the physical inventory count at the end of the second
quarter of 2005. As a result thereof, the Company adopted new internal control
procedures with respect to physical inventory counts for raw materials, goods in
progress, and finished goods and has amended its form 10-QSB filing for the
second quarter of 2005. To prevent this from happening in the future, the
Company adopted new internal control procedures for obtaining physical inventory
counts for raw materials, goods in progress, and finished goods. Other than as
described herein, there were no significant changes in the Company's internal
control over financial reporting during the quarterly period ended September 30,
2005 that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
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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 of Periodic Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 18
U.S.C. Section 1350
(b) Reports on Form 8-K, filed in the quarter ended June 30, 2005.
Agreement dated May 12, 2005, between May 17, 2005, regarding
a material agreement between the Company and VWR
International, Inc.
* Filed herewith
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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: November 14, 2005 By: /s/ JOHN G. BAUST
-------------------------------------
John G. Baust, PhD
President and Chief Executive Officer
(Principal Accounting Officer )
15