BioLife Solutions, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; filed May 14, 2012. BioLife develops, manufactures and markets hypothermic storage and cryopreservation solutions, including HypoThermosol and CryoStor.
Financial performance
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Total revenue | $835,880 | $610,799 |
| Gross profit / margin | $489,751 / 58.6% | $242,199 / 39.7% |
| Operating loss | $(179,264) | $(454,277) |
| Net loss | $(296,877) | $(630,122) |
| Cash used in operating activities | $(74,823) | $(304,639) |
| Cash used in investing activities | $(46,517) | $(13,475) |
| Cash provided by financing activities | $175,000 | $350,000 |
Product sales rose 37%. Direct product revenue increased 84% to $738,167; indirect revenue declined 27% to $92,713, and contract manufacturing revenue was nil versus $76,686. Gross-margin improvement primarily reflected better manufacturing-facility utilization and lower overhead costs per unit. Operating expenses fell about 4% to $669,015: lower R&D and sales and marketing costs partly offset a 5% increase in general and administrative expenses. Interest expense was $178,777, and financing-cost amortization was $27,045.
Liquidity, debt and balance sheet
At March 31, cash and equivalents were $70,524, up from $16,864 at year-end; working capital was $686,793, versus $581,159. Total liabilities were $13.30 million, including $10.30 million of related-party notes payable and $2.20 million of accrued related-party interest. Shareholders’ equity was a deficit of $11.43 million, and accumulated deficit was approximately $54.4 million. Financing cash flow included $175,000 borrowed from two investors who were company-related parties. Subsequent to quarter-end, the company received another $300,000 under amended notes; investors also extended the notes’ maturity by at least 12 months.
Outlook, material developments and risks
- Management forecast approximately $4.1 million in 2012 revenue, citing expected growth in contract manufacturing and shipments to direct customers. It expected slightly lower gross margin for the year, reflecting increased contract manufacturing, and forecast positive operating cash flow.
- The company reported seven consecutive quarters of record revenue. Management said revenue from direct customers was up 15% from Q4 2011 and 84% from Q1 2011.
- The company disclosed substantial doubt about its ability to continue as a going concern, given its operating losses and accumulated deficit. Management believed customer collections and continued investor funding would provide sufficient funds through December 31, 2012; no assurance was given that additional financing would be available or on non-dilutive terms.
- Q1 other income included $87,215 from inventory received in a noncash transaction, recorded at fair value. This item materially contributed to reported other income.
- A March lease amendment expanded the facility to approximately 21,000 square feet and extended the lease for nine years beginning July 1, 2012. Monthly base rent was to increase to approximately $35,000; disclosed future minimum lease payments totaled $4,194,016.
- New York litigation involving the company and its former CEO had no significant developments during the quarter. The company recorded no accrual for potential litigation outcomes and identified an adverse outcome as a financing risk.
- Disclosure controls were assessed as effective as of March 31, 2012; the company reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether revenue growth, particularly expected contract-manufacturing deliveries, supports the $4.1 million full-year outlook and positive operating cash-flow forecast.
- The company’s ability to fund operations and meet obligations given the going-concern warning, low cash balance, reliance on investor financing, and related-party debt.
- The timing and cash-flow impact of the expanded facility lease, including rent and other occupancy costs.
- Potential dilution: 18,766,977 stock options and 6,218,750 warrants were outstanding at quarter-end; both were excluded from diluted loss per share as anti-dilutive.
- Potential exposure from the pending litigation, for which no loss accrual was recorded.