BioLife Solutions, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. BioLife develops and sells cell- and tissue-preservation media and, through its majority-owned biologistex joint venture, cold-chain shipping products and services.
Financial results
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $1.99 million | $1.50 million | $3.84 million | $3.00 million |
| Gross profit / margin | $1.12 million / 56% | $0.82 million / 55% | $2.20 million / 57% | $1.70 million / 57% |
| Operating expenses | $2.71 million | $1.97 million | $5.28 million | $4.02 million |
| Operating loss | $1.59 million | $1.16 million | $3.09 million | $2.32 million |
| Consolidated net loss | $1.72 million | $1.15 million | $3.21 million | $2.30 million |
| Net loss attributable to BioLife | $1.36 million; $0.11/share | $0.99 million; $0.08/share | $2.58 million; $0.21/share | $2.03 million; $0.17/share |
- Core product revenue rose 39% in Q2 and 32% in the first half, driven by higher sales to regenerative-medicine customers and distributors, as well as product mix and pricing. Contract manufacturing revenue was zero in 2016, versus $63,000 in Q2 2015.
- Operating expenses grew 37% in Q2 and 32% in the first half. Management cites increased research and development, personnel and biologistex development and marketing costs; first-quarter costs also included severance and higher stock compensation.
- Six-month operating cash use was $2.78 million, compared with $2.53 million a year earlier. Investing activities provided $0.86 million and financing activities provided $1.06 million. Cash and equivalents ended June at $1.32 million, down from $2.17 million at year-end; short-term investments fell from $1.65 million to zero.
- At June 30, total assets were $10.55 million, current assets $4.92 million, current liabilities $2.26 million and total liabilities $3.00 million. Shareholders’ equity was $7.55 million. The filing reports no off-balance-sheet arrangements.
Outlook, liquidity and notable items
- Management forecast 20%–30% full-year 2016 growth in core product revenue and 55%–65% gross margin on core products. It expected nominal biologistex revenue in the second half and positive operating cash flow “next year.” These are management expectations, not guarantees.
- On May 12, BioLife entered a $4 million credit facility with its largest shareholder, WAVI Holding AG, at 10% annual interest. The four $1 million advances are scheduled through March 2017; the first was received June 1. The unsecured note matures June 1, 2017 and ranks senior to existing debt. BioLife issued WAVI warrants for 550,000 shares at $1.75.
- Management said the remaining $3 million of advances, together with operating cash, should fund the company to expected positive operating cash flow, but warned that cash generation may not cover repayment at maturity. Additional financing or renegotiation may be needed; neither is assured, and equity financing could dilute shareholders. WAVI may withhold advances upon a defined default.
- Q2 and first-half other expenses included $31,199 of debt-discount amortization and an $86,736 write-off of deferred financing costs associated with a Form S-3 filing. The facility also generated $8,333 of related-party interest expense for the first half.
- Commitments include approximately $2.0 million remaining under a purchase commitment for evo Smart Containers. The Bothell facility lease runs through July 2021; monthly base rent was approximately $59,700, plus the company’s share of certain costs. Management reported no currently material litigation.
- Risks include reliance on a limited customer base and market sectors, customer ordering variability tied to clinical-trial progress, and financing and debt-maturity uncertainty. One customer generated 12% of product revenue in Q2 and the first half; three customers represented 41% of gross receivables at June 30.
Most important facts for investors to verify
- Whether WAVI makes the remaining advances and whether BioLife can meet the note’s terms and June 2017 maturity.
- Whether core-product growth and the projected 55%–65% gross margin persist as operating expenses rise.
- Progress toward positive operating cash flow and the company’s need for additional financing.
- Biologistex revenue, development spending and the remaining Smart Container purchase commitment.
- Customer concentration and the effect of clinical-trial enrollment and market conditions on orders.