BioLife Solutions, Inc. — 2011 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2011; comparisons are to fiscal 2010. This is an annual filing, not a standalone fourth-quarter report.
Business context
BioLife develops, manufactures, and sells biopreservation media for cells, tissues, and organs, including HypoThermosol, CryoStor, and BloodStor, along with custom formulation and contract aseptic manufacturing services. Its customers span regenerative medicine, biobanking, and drug discovery. The company reported more than 400 direct and indirect customers and a new confidential multi-year contract manufacturing agreement.
Financial performance and position
| Metric | 2011 | 2010 | Change |
|---|---|---|---|
| Total revenue | $2.759 million | $2.082 million | Up 33% |
| Gross profit / margin | $1.403 million / 50.9% | $856,388 / 41.1% | Margin up 9.8 percentage points |
| Operating loss | $(1.210) million | $(1.394) million | Loss narrowed |
| Net loss | $(1.957) million | $(1.984) million | Loss narrowed slightly |
| Net loss per share | $(0.03) | $(0.03) | No change |
| Cash used in operations | $(989,917) | $(1.253) million | Cash burn decreased |
- Product sales rose 33%; direct-customer sales increased 19% and distributor sales increased 159%. Distributor revenue was 20% of total revenue.
- Gross margin improved primarily through higher manufacturing-facility utilization. Management expects a slightly lower gross margin percentage in 2012 as contract manufacturing increases.
- Research and development expense rose 62% to $516,454; general and administrative expense increased 22% to $1.829 million; sales and marketing expense fell 38% to $267,080.
- Year-end cash was $16,864, versus $3,211 in 2010; working capital was $581,159. Total assets were $1.662 million and total liabilities were $12.843 million, leaving shareholders’ deficiency of $11.180 million.
- Related-party secured notes payable were $10.128 million, with $2.026 million accrued interest. The notes bear 7% interest and are due in January 2013. The facility was increased to an aggregate $10.5 million; the company received $1.095 million in 2011 financing and a further $175,000 after year-end.
Changes, outlook, and management commentary
Revenue growth, higher facility utilization, and lower operating cash use were favorable year-over-year developments, but the company remained loss-making and dependent on investor financing. No individual customer represented more than 10% of 2011 sales; two customers accounted for approximately 29% of year-end gross receivables.
Management forecast 2012 revenue of approximately $4.1 million, an increase of at least 50%, and expected positive operating cash flow. Drivers included $1 million–$2 million of annual revenue from the new contract manufacturing agreement, with shipments expected to begin in the second quarter, continued direct-customer growth, and expanding international distributor sales. These are forward-looking expectations, not reported results. Management noted that customer therapy approvals and commercialization timing are uncertain.
The company and its auditor disclosed substantial doubt about its ability to continue as a going concern, citing its operating losses, approximately $54.2 million accumulated deficit, and reliance on customer collections and continued investor funding. The auditor issued an unmodified opinion on the financial statements but highlighted the going-concern uncertainty. Management stated that expected collections and access to investor funds were expected to support operations through 2012; there is no assurance of continued funding.
Risks, contingencies, and unusual items
- Several long-running lawsuits remained in discovery, including claims involving former employees and a company lawsuit alleging misuse of its technology and trade secrets. The company reported no litigation accrual at year-end; outcomes and potential financial effects are uncertain.
- A March 2012 lease amendment expanded premises to approximately 21,000 rentable square feet and extended the lease through June 2021. Monthly base rent is to rise to approximately $35,000 beginning July 2012, plus the company’s share of certain costs.
- Other material risks include the need for additional capital, competition from larger companies and in-house formulations, dependence on growth and regulatory progress in customers’ therapies, supplier dependence, intellectual-property protection and litigation, and the ability to retain key employees.
- Products are currently marketed as ancillary reagents or excipients without specific FDA premarket approval, but the company cautioned that future regulatory approval requirements could apply.
Important facts for investors to verify
- Whether 2012 revenue approached management’s approximately $4.1 million forecast and whether the new manufacturing contract began shipments as expected.
- Whether customer collections and operations generated positive cash flow, and whether the related-party investors continued to provide funding.
- The debt balance, accrued interest, maturity and repayment or refinancing terms, given the small cash balance and January 2013 due date.
- Developments and possible exposure from the pending lawsuits, for which no year-end accrual was recorded.
- The financial impact of the expanded long-term lease and the company’s ability to sustain improved gross margins as manufacturing mix changes.