-----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, K2oRiz5IZ5/6bios1V9tZamwUMWvo+2oxwUmqe7WlqZavZ2tzPBJeEEgxRKm5rfj Nayn93RC59jGRc33sZT+xQ== 0001005150-03-001780.txt : 20031114 0001005150-03-001780.hdr.sgml : 20031114 20031114144758 ACCESSION NUMBER: 0001005150-03-001780 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 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: 031003471 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 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 ------------------ 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 -------------- 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. --- 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 ------------ TOTAL CURRENT ASSETS 216,816 ------------ PROPERTY AND EQUIPMENT Furniture and computer equipment 31,266 Manufacturing and other equipment 177,831 ------------ TOTAL 209,097 Less: Accumulated depreciation and amortization (85,890) ------------ NET PROPERTY AND EQUIPMENT 123,207 ------------ 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 -- ------------ TOTAL CURRENT LIABILITIES 1,955,373 ------------ 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) ------------ 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 ----------- ----------- 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) -- ----------- ----------- 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 ----------- ----------- 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 ------------------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------------------
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 EX-31.1 3 ex31-1.txt 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: Novermber 14, 2003 /s/ John G. Baust, PhD. ----------------------------- John G. Baust, PhD Chief Executive Officer and Chief Financial Officer 17 EX-32.1 4 ex32-1.txt 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 September 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: November 14, 2003 /s/ John G. Baust, PhD ------------------------------- 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. 18 -----END PRIVACY-ENHANCED MESSAGE-----