BioLife Solutions, Inc. — FY 2012 Form 10-K
Reporting period: Year ended December 31, 2012; filed March 29, 2013. This is an annual filing, not a standalone fourth-quarter report. BioLife develops and sells cell and tissue preservation media and provides contract manufacturing services.
Financial performance
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Total revenue | $5.663 million | $2.759 million |
| Core product sales | $3.019 million | $2.458 million |
| Contract manufacturing revenue | $2.624 million | $0.281 million |
| Gross profit / margin | $2.292 million / 40.5% | $1.403 million / 50.9% |
| Operating loss | $0.942 million | $1.210 million |
| Net loss | $1.660 million | $1.957 million |
| Operating cash flow | $0.855 million provided | $0.990 million used |
Revenue grew 105%, with core product sales up 23% and contract manufacturing rising sharply from a low prior-year base. Gross margin declined as contract manufacturing carried higher costs and production expansion added costs. Sales and marketing expense increased to $619,000; general and administrative expense rose to $2.152 million; research and development expense was $464,000.
Cash and cash equivalents were $196,478 at year-end, versus $16,864 in 2011. Working capital was $262,421, down from $581,159, primarily as accounts payable increased. Investing cash outflow was $1.150 million, mainly for facility improvements and equipment; financing provided $475,000. Operating cash generation included an $862,000 net landlord lease incentive adjustment, a $733,000 increase in accrued related-party interest, and changes in operating liabilities. The company reported positive operating cash flow in Q4 for the first time.
At December 31, 2012, total assets were $3.170 million and total liabilities were $15.656 million, including $10.603 million in related-party notes and $2.759 million in accrued related-party interest. Shareholders’ equity was negative $12.486 million. The notes bear 7% interest, are secured by company assets, and are due January 11, 2016; approximately $900,000 of the facilities remained unused.
Material changes and business developments
- One contract manufacturing customer contributed about 46% of FY 2012 revenue; it represented $1.2 million, or 60% of Q4 revenue. The agreement may be terminated by either party on six months’ notice.
- BioLife expanded its Bothell facility, adding a validated cGMP clean-room suite and increasing manufacturing capacity. Year-end headcount rose to 28 from 12.
- The amended facility lease runs through July 2021. Minimum future lease payments were $5.123 million; monthly base rent was expected to rise to approximately $46,000 after completion of improvements in 2013.
- Accumulated deficit was approximately $55.8 million. The company reported annual operating losses since inception.
Outlook, risks and contingencies
Management forecast 2013 revenue of $6.5–$7.0 million, gross margin of approximately 38%–41%, and operating expenses 10%–20% above 2012. It expected to focus on positive operating income and stated that customer collections should provide sufficient operating funds. Growth depends partly on existing and new regenerative-medicine customers advancing therapies through clinical and regulatory processes.
Key risks include dependence on a small number of customers and sectors, continued losses and limited cash, the substantial secured related-party debt, potential need for additional capital, competition, reliance on outside suppliers, manufacturing and cGMP execution, and uncertain commercialization of customer therapies. Two stockholders collectively held about 48% of shares and provided the debt facilities. Several New York legal disputes involving former employees and related parties remained in discovery; the company said potential losses could not be reasonably estimated and recorded no accrual.
The independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal controls.
Investor verification priorities
- Verify the major customer’s ongoing orders, termination rights, receivables exposure and contribution to gross profit.
- Assess whether operating cash generation is sustainable without lease incentives, growing payables or increased accrued interest.
- Review debt covenants, accrued interest, repayment capacity and the availability and terms of the remaining credit facility.
- Track whether 2013 revenue, margin and expense guidance was achieved, especially given the expected contract-manufacturing mix.
- Review the outstanding litigation and note an apparent inconsistency in the shareholders’ equity roll-forward: its 2012 net-loss line shows $1,656,586, while the audited statement of operations reports a net loss of $1,659,586.