BioLife Solutions, Inc. — Q2 2011 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2011. BioLife develops and markets biopreservation products and provides related research, development, and consulting services.
Financial performance
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Total revenue | $622,848 | $467,771 | $1,233,647 | $980,680 |
| Gross profit / margin | $333,933 / 54% | $193,618 / 41% | $576,132 / 47% | $432,339 / 44% |
| Operating loss | $(260,012) | $(391,527) | $(714,289) | $(785,342) |
| Net loss | $(436,679) | $(537,144) | $(1,066,801) | $(1,068,921) |
| Net loss per share | $(0.01) | $(0.01) | $(0.02) | $(0.02) |
Product sales were up 34% in the quarter and 26% year to date; licensing revenue was unchanged. Management attributed revenue gains to distributor and direct-customer sales, including higher direct selling prices. Gross margin improved primarily from better manufacturing-capacity utilization, partly offset by first-quarter employee-transition costs.
Q2 operating expenses were $593,945, including R&D of $133,390, sales and marketing of $59,132, and general and administrative costs of $401,423. Six-month interest expense was $325,781, up from $282,065, reflecting higher borrowings. The filing does not report a positive operating profit or net profit.
Cash, liquidity, and debt
- At June 30, cash was $36,145, versus $3,211 at December 31, 2010; working capital was $504,797, versus $474,271.
- For the first six months, operating cash use was $543,795, investing cash use was $43,271, and financing cash provided was $620,000. Cash ended the period at $36,145.
- Related-party promissory notes were $9,653,127, with $1,680,756 of accrued related-party interest. Total liabilities were $11,955,824; stockholders’ deficiency was $10,483,843.
- The company reported an accumulated deficit of approximately $53 million and stated that these conditions raise substantial doubt about its ability to continue as a going concern.
Changes, outlook, and key risks
- Compared with Q2 2010, revenue and gross profit rose, while net loss narrowed. For the six-month period, net loss was nearly unchanged year over year.
- Management said access to shareholder-provided credit facilities plus customer collections was expected to fund operations through year-end, but the MD&A says “December 30” while the financial-statement note says “December 31.” The company may need additional capital to reach sustainable positive cash flow; facility access is not assured, and future financing could dilute shareholders.
- After quarter-end, the company received an additional $250,000 under the facilities. In August, each facility’s borrowing availability was increased by $500,000; the company issued each lender warrants for 1,000,000 shares at $0.08 per share.
- Seven legal matters involving the company or its former CEO and family remained disclosed; there were no significant developments during the first half, and no litigation accrual was recorded. An adverse outcome was identified as a potential financing risk.
- At June 30, 17,283,109 options and 4,218,750 warrants were outstanding; these securities were excluded from diluted loss per share as anti-dilutive. The company had 69,679,854 common shares outstanding.
- No formal revenue or earnings guidance was provided. Management highlighted a fourth consecutive quarter of record revenue, increased contract-manufacturing activity, and continued market penetration. Disclosure controls were assessed as effective, with no material change in internal control reported.
Important facts for investors to verify
- Availability, terms, and remaining capacity of the related-party credit facilities, and the company’s cash runway and additional funding needs.
- The reason for the differing year-end funding dates stated in the filing and the assumptions supporting management’s liquidity outlook.
- Progress toward improved cash generation and whether margin gains from capacity utilization can continue.
- Status and potential financial exposure of the seven legal matters, for which no accrual was recorded.
- Potential dilution from outstanding options and warrants, including warrants issued after quarter-end.