-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T7Ul7bQKzvHSMimNUQCcFyB4dgIXcaRUQN/MPMd5oK/v2MotYh7wJ9RdFc9hxpCN TZ3Cf08P4MOLFG5g0qCaAA== 0001005150-03-001351.txt : 20030814 0001005150-03-001351.hdr.sgml : 20030814 20030814160128 ACCESSION NUMBER: 0001005150-03-001351 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOLIFE SOLUTIONS INC CENTRAL INDEX KEY: 0000834365 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 943076866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18170 FILM NUMBER: 03847689 BUSINESS ADDRESS: STREET 1: SUNY PARK SCIENCE III STREET 2: SUITE 144 CITY: BINGHAMTON STATE: NY ZIP: 13902-6000 BUSINESS PHONE: 6077772775 MAIL ADDRESS: STREET 1: SUNYPARK SCIENCE III STREET 2: STE 144 CITY: BINGHAMTON STATE: NY ZIP: 13902-6000 FORMER COMPANY: FORMER CONFORMED NAME: BIOLIFE SOLUTION INC DATE OF NAME CHANGE: 20030113 FORMER COMPANY: FORMER CONFORMED NAME: CRYOMEDICAL SCIENCES INC DATE OF NAME CHANGE: 19920703 10QSB 1 form10qsb.txt FORM 10QSB 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 ------------- ------- BIOLIFE SOLUTIONS, INC. ----------------------- (Exact name of small business issuer as specified in its charter) Delaware 94-3076866 -------- ---------- (State of Incorporation) (IRS Employer I.D. Number) Suite 144 - Science III. SUNY Park Binghamton, NY 13902 -------------------- (Address of principal executive offices) Issuer's telephone number, including area code: (607) 777-4415 -------------- 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 --- --- 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 ------------ 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 ------------ TOTAL CURRENT ASSETS 293,569 ------------ PROPERTY AND EQUIPMENT Furniture and computer equipment 31,266 Manufacturing and other equipment 177,831 ------------ TOTAL 209,097 Less: Accumulated depreciation and amortization (74,474) ------------ NET PROPERTY AND EQUIPMENT 134,623 ------------ TOTAL ASSETS $ 428,192 ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES Accounts payable $ 442,904 Accrued expenses 113,422 Accrued salaries 330,834 Notes payable 725,824 ------------ TOTAL CURRENT LIABILITIES 1,612,984 ------------ 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) ------------ TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (1,184,792) ------------ 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 ------------ ------------ ------------ ------------ TOTAL REVENUE 99,125 112,768 378,312 341,048 ------------ ------------ ------------ ------------ 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 ------------ ------------ ------------ ------------ 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 ---------- ---------- ---------- ---------- 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 -- ---------- ---------- ---------- ---------- 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 ----------- ----------- 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 ----------- ----------- CASH PROVIDED (USED) BY CONTINUING OPERATIONS 450,888 (431,831) CASH USED IN DISCONTINUED OPERATIONS (1,225,173) -- ----------- ----------- NET CASH USED BY OPERATING ACTIVITIES (774,285) (431,831) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of cryosurgical assets 2,200,000 -- Purchase of property and equipment (89,405) -- ----------- ----------- NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES 2,110,595 -- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable 410,000 400,000 Principal payments on notes payable (60,000) (20,000) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 350,000 380,000 ----------- ----------- NET INCREASE (DECREASE) IN CASH 1,686,310 (51,831) CASH - BEGINNING OF YEAR 286,105 67,118 ----------- ----------- CASH - END OF YEAR $ 1,972,415 $ 15,287 =========== =========== NON CASH 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 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. 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: August 14, 2003 By: /s/ John G. Baust ------------------------------------- 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 17 EX-31 3 ex31_1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION I, John G. Baust, Chief Executive Officer and Chief Financial Officer of BioLife Solutions, Inc. (the "Registrant"), certify that: (1) I have reviewed this quarterly report on Form 10-QSB of the Registrant; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 14, 2003 /s/ John G. Baust ----------------------------- John G. Baust, PhD Chief Executive Officer and Chief Financial Officer EX-32.1 4 ex32_1.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION OF PERIODIC REPORT I, John G. Baust, Chief Executive Officer and Chief Financial Officer of Biolife Solutions, Inc. (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. the Quarterly Report on Form 10-QSB of the Company for the quarterly period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 14, 2003 /s/ John G. Baust ------------------------------- John G. Baust, PhD Chief Executive Officer and Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----