SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB
(MARK ONE)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the year ended December 31, 2005
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-18170
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BIOLIFE SOLUTIONS, INC.
( Name of Small Business Issuer in its Charter)
DELAWARE 94-3076866
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(State of Incorporation) (IRS Employer Identification Number)
171 FRONT STREET, OWEGO, NY 13827
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(Address of principal executive offices) (Zip Code)
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Issuer telephone number, including area code: (607) 687-4487
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Securities registered under Section 12(b) of the Exchange Act:
None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
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Title of Class
Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]
NOTE - CHECKING THE BOX ABOVE WILL NOT RELIEVE ANY REGISTRANT REQUIRED
TO FILE REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FROM THEIR OBLIGATIONS UNDER THOSE SECTIONS.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes _X_ No |_|
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12G-2 of the Exchange Act). Yes |_| No _X_
Issuer's revenues for the fiscal year ended December 31, 2005 were
$614,718.
As of March 30, 2006, the aggregate market value of voting stock held
by nonaffiliates was $993,056.
As of March 30, 2006, there were 12,413,209 shares of Common Stock (par
value $.001 per share) outstanding.
Documents Incorporated by Reference
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None
Transitional Small Business Disclosure Format (check one). Yes |_| No _X_
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
BioLife Solutions, Inc. ("BioLife" or the "Company") was incorporated in 1998 in
Delaware as a wholly owned subsidiary of Cryomedical Sciences, Inc.
("Cryomedical"), a company that was engaged in manufacturing and marketing
cryosurgical products. BioLife (a) provides contract-based services for the
development of cryopreservation solutions and processes, and (b), based upon its
patented HypoThermosol(R) platform technology, develops, manufactures and
markets proprietary cryopreservation solutions that markedly improve the
biological processing and preservation of cells and tissues.
In May 2002, Cryomedical implemented a restructuring and recapitalization
program designed to shift its focus away from cryosurgery toward addressing
preservation needs of the biomedical marketplace. On June 25, 2002 the Company
completed the sale of its cryosurgery product line and related intellectual
property assets to Irvine, CA-based Endocare, Inc. (NASDAQ: ENDO). In the
transaction, the Company transferred ownership of all of its cryosurgical
installed base, inventory, and related intellectual property, in exchange for
$2.2 million in cash and 120,022 shares of Endocare restricted common stock. In
conjunction with the sale of Cryomedical's cryosurgical assets, Cryomedical's
Board of Directors also approved merging BioLife into Cryomedical and changing
its name to BioLife Solutions, Inc. In September 2002, Cryomedical changed its
name to BioLife Solutions, Inc. and began to trade under the new ticker symbol,
"BLFS", on the OTCBB.
The Company's principal executive offices are located at 171 Front Street,
Owego, NY 13827 and its telephone number is (607) 687-4487.
TECHNOLOGICAL OVERVIEW
Time management is a crucial aspect of many facets of clinical practice and,
increasingly, cell and gene therapy. Modern therapies must be accomplished under
time constraints if they are to be effective. This problem becomes especially
critical in the field of cell and tissue therapy, where harvested cell culture
and tissue, if maintained at body temperature (98.6(degree)F/37(degree)C), will
lose viability over time. To slow the "metabolic engine" of the harvested cell
and tissue, chilling is required. However, chilling is of mixed benefit.
Although cooling successfully reduces metabolism (i.e., lowers demand for
oxygen), chilling, or hypothermia, is also damaging to cells. To solve this
problem, transplant surgeons, for example, will flush the donor tissue with a
cold solution designed to provide short-term preservation support after removal
of the organ from the donor and during transportation. Clinicians engaged in
cell and gene therapy will also attempt to maintain the original and derived
cellular material in a cold solution before and after application of the
specific cell or gene therapy technique, and during necessary transportation.
Support solutions range from simple "balanced salt" (electrolyte) formulations
to complex mixtures of electrolytes, energy substrates such as sugars, acid
buffers, osmolytes and antibiotics. Clinically, there is not a great deal of
protective difference between these various solutions and few offer long-term
protection. Often, the basis for selection of a "preservation solution" is a
matter of local preference rooted primarily in a hospital's traditional source
of supply.
Because of the cascading destructive cellular effects that begin with the arrest
of metabolism as a result of cooling, and end with cell death through apoptosis,
development of new methods of tissue preservation are important to ensure that
tissue-engineered products survive the trip from the factory to the operating
room in good working order and do not die during transplantation.
1
Based on its understanding of the molecular basis for the cryogenic destruction
of cells through apoptosis, the Company has specifically formulated its
HypoThermosol(R) ("HTS") technology to develop a range of proprietary cell,
tissue and organ specific hypothermic preservative solutions to satisfy
clinicians' need to keep cells and tissue viable longer by:
o minimizing cell and tissue swelling;
o removing free radicals upon formation;
o maintaining appropriate ion balances;
o providing regenerative, high energy substrates to stimulate
recovery upon warming;
o avoiding the creation of an acidic state (acidosis); and
o inhibiting the onset of apoptosis.
A key feature of the Company's products is their fully "defined" nature. These
products are serum-free, protein-free and packaged under sterile conditions
using USP grade or highest quality available synthetic components.
The results of independent testing suggest that BioLife's customized
HypoThermosol(R) solutions significantly prolongs cell, tissue and organ
viability, which may, in turn, improve clinical outcomes for new and existing
cell and tissue therapy applications, as well as for organ transplantation.
BioLife's proprietary HypoThermosol(R) technology is optimized based on
molecular biology principles and genetic analysis, not on conventional
"cookbook" techniques incorporated in other solutions currently on the market.
The Company's line of preservation solutions, based on its patented
HypoThermosol(R) technology, is composed of complex synthetic, aqueous solutions
containing, in part, minerals and other elements found in human blood which are
necessary to maintain fluids and chemical balances throughout the body at near
freezing temperatures.
BIOLIFE PRODUCTS
HYPOTHERMOSOL(R)
HypoThermosol(R) is a family of cell-specific, optimized hypothermic
(4-10(degree)C) preservation media that allows for improved and extended
preservation of biologics. A full line of customized HypoThermosol(R)
preservation solutions are available to researchers and clinicians to preserve
cells and tissue in low temperature environments for extended periods. The
Company's HypoThermosol(R) family of preservation media for the hypothermic
maintenance and cryopreservation of mammalian cell systems include:
HypoThermosol(R) Base
HypoThermosol(R) Base is a uniquely formulated hypothermic preservation solution
designed to address the molecular-biological aspects of cells during the
preservation process thereby directly reducing the level of cell death during
and following the preservation interval. It has been formulated to provide
broad-spectrum chill preservation to most mammalian cell systems. This variant
has proven effective at preserving and maintaining cells, tissues and organs of
the abdominal and thoracic origins, blood vessels, muscular and neural tissues.
HypoThermosol(R) DCC
HypoThermosol(R)-DCC is a uniquely formulated hypothermic preservation solution
designed with the appreciation that the loss of divalent cation homeostasis in
cells either at 37(degree)C or 4(degree)C can lead to activation of enzymes
(phospholipases, proteases and endonucleases) culminating in cell death. HTS-DCC
is especially designed to inhibit these activities.
2
HypoThermosol(R) FRS
This solution has been formulated to decrease the free radical accumulation in
cells undergoing prolonged hypothermic preservation. Numerous investigators have
shown that an increase in free radicals can lead to either pathological cell
death or apoptosis (programmed cell death) in clinical conditions.
HypoThermosol(R)-FRS is very effective at preserving myocardial and kidney
tissues, both of which have high-energy demands that can lead to free radical
accumulation.
HypoThermosol(R) Purge
HypoThermosol(R)-Purge is an acellular flush solution specifically designed for
use during the transition from normothermic to mild hypothermic temperatures
(37(degree)C to 20(degree)C) to rinse culture media and native fluids from
tissue and whole organ systems prior to suspension in one of the various
HypoThermosol(R) preservation solution variants.
CRYOSTOR(TM) CRYOPRESERVATION MEDIA
Based on BioLife's proprietary HypoThermosol(R) technology, CryoStor(TM) is a
family of cell-specific, optimized cryopreservation media designed for frozen
storage (temperature of -196(degree)C) of cells and tissues. Its purpose is to
extend the cryopreservation window for gene and cell therapy and tissue
engineering. CryoStor(TM) is uniquely formulated to address the
molecular-biological aspects of cells during the preservation process thereby
directly reducing the level of Cryopreservation-Induced Delayed-Onset Cell
Death.
CryoStor(TM) CS5
CryoStor(TM) CS5 is BioLife's base cryopreservation solution which is designed
to incorporate the principles which led to the successful development of the
HypoThermosol(R) series with the incorporation of agents to modulate the
physical damaging effects associated with ice formation and cellular freezing
such as dimethyl sulfoxide ("DMSO"). As a result of solution design, utilization
of the CryoStor(TM) platform facilitates substantially improved post-thaw cell
survival and allows for the maintenance of this enhanced recovery with
substantially reduced levels of cryoprotective agents such as DMSO.
CryoStor(TM) CS10
CryoStor(TM) CS10, a member of the CryoStor(TM) Series of solutions, addresses
the molecular-biological properties of systems undergoing preservation
processes. CryoStor(TM) CS-10 contains increased concentrations of
cryoprotective agents (10% DMSO).
CryoStor(TM) DLite
CryoStor(TM) DLite, a member of the CryoStor(TM) Series of solutions, addresses
the molecular-biological properties of systems undergoing preservation
processes. CryoStor(TM) DLite has been further formulated to provide reduced
concentrations of cryoprotective agents (2% DMSO), for use in applications where
a reduction in the levels of DMSO is preferred.
CryoStor(TM) CS AI
CryoStor(TM) CS AI is the next generation of cryopreservation solutions
developed by the Company and is designed around the base CryoStor(TM) platform
with the added inclusion of specific components which directly modulate the
molecular response of the cells to the preservation process. Specifically,
CryoStor(TM) CS AI is designed to modulate the initiation of the induction of
apoptosis through direct inhibition of the progression of the apoptotic process.
CP Rescue
The CP Rescue platform represents a solution technology developed as a
post-cryopreservation cellular salvage medium and is designed to improve cell
recovery following cryopreservation of the cells under sub optimal preservation
regimes where the CryoStor(TM) series of preservation solutions were not
utilized. This solution is designed to modulate the post-preservation activation
and progression of cellular death pathways, such as apoptosis and necrosis,
during the initial cell recovery interval, and thereby reduce the extent of
cryopreservation-induced cell death.
3
GELSTOR SOLID STORAGE SOLUTION
To provide the field of cell therapy and regenerative medicine with the ability
to preserve and maintain consistency of cell and genetic material for extended
periods, BioLife has developed GelStor and GelStor FRS to support the long
distance shipping of biological material in the 40(degree)C to 20(degree)C
range. Based on BioLife's proprietary HypoThermosol(R) technology, GelStor has
been developed specifically to address the need to transport sensitive cell and
tissue material and to serve as a critical adjunct in cell therapy and tissue
engineering medicine.
GelStor
This preservation medium is designed to be liquidous above 30(degree)C to allow
for suspension of cells and when cooled becomes a solid "gel-like" preservation
medium. GelStor is designed for the preservation of sensitive biologics, such as
pancreatic islets, where environmental factors such as shock, sheering, etc.
have a critical effect on cell viability and short term preservation is
necessary for transport.
GelStor-FRS
GelStor-FRS is designed similarly to HypoThermosol(R)-FRS to address the
molecular-biological aspects of cells during preservation by decreasing the free
radical accumulation in cells which are undergoing preservation or transport.
The Company currently markets its HypoThermosol(R) and CryoStor(TM) products
directly to companies and labs engaged in pre-clinical research, and to academic
institutions. At this time, CP Rescue, GelStor, and GelStor-FRS are not being
manufactured or marketed but may be marketed in the future.
SBIR GRANTS
The Company has conducted its internal research through Small Business
Innovative Research ("SBIR") grants. In conjunction with academic investigators,
BioLife has been awarded six National Institute of Health ("NIH") grants and one
National Science Foundation grant, valued at $1.38 million, since 2000. These
grants involve research based around BioLife's core HypoThermosol(R) technology
and includes work on optimizing preservation media for different cellular and
tissue applications and more fundamental research into cellular apoptosis and
cell and tissue preservation.
In 2004, the Company elected to discontinue engaging directly in the SBIR
program. Accordingly, based upon numerous discussions with the Small Business
Administration and a review of applicable SBIR rules and regulations, the
Company entered into a research agreement with Cell Preservation Services, Inc.
("CPSI") to outsource to CPSI all BioLife research currently funded through SBIR
grants. CPSI is owned by Dr. John M. Baust, a recognized expert in cell
preservation, a former employee of BioLife and the son of John G. Baust, the CEO
of BioLife. Robert Van Buskirk, formerly Vice President, Business Development of
BioLife and the person primarily responsible for processing applications for
SBIR grants for BioLife, also has left the employ of BioLife and joined CPSI.
The research agreement, which was negotiated on an arms length basis and
designed to comply with the rules and regulations applicable to the performance
of research with respect to SBIR grants, established a format pursuant to which
CPSI would (a) take over the processing of the then existing applications for
SBIR grants applied for by BioLife ("Current Projects"), (b) apply for
additional SBIR grants for future research projects related to BioLife's core
products ("Future Projects"), (c) perform a substantial portion of the principal
work to be done, in terms of (i) time spent, and (ii) research, in connection
with Current Projects and Future Projects (the "Research"), and (d) utilize
BioLife personnel as consultants with respect to the Research. In conjunction
therewith, BioLife has granted to CPSI a non-exclusive, royalty free license
(with no right to sublicense) to use BioLife's technology solely for the purpose
of conducting the Research in connection with the Current Projects and Future
Projects. Pursuant to the research agreement, (x) BioLife will, among other
things, provide CPSI with (i) suitable facilities in which to conduct the
Research, including basic research equipment and office equipment
("Facilities"), and (ii) management services ("Management Services"), and (y)
CPSI will (i) accept assignment of Current Projects, (ii) be responsible for
conducting the Research with respect to Current Projects and Future Projects,
(iii) as mutually agreed to by the parties and within the confines of the rules
and regulations applicable to the performance of the Research with respect to
SBIR grants, utilize BioLife's personnel as consultants, (iv) provide suitable
experienced personnel, including, without limitation, a principal
investigator/program director, to conduct the Research, (v) comply with all
federal laws, rules and regulations applicable to SBIR grants and file all
necessary forms and reports with the federal agency awarding the SBIR grants,
and (vi) utilize the Facilities and Management Services and pay BioLife fees
with respect thereto. BioLife is to own all right, title and interest in and to
any technology, inventions, designs, ideas, and the like (whether or not
patentable) that emanates from the Current Projects and Future Projects related
to BioLife's core products and technology.
4
BIOLIFE MARKETS
Recent advances in cell therapy and tissue engineering have highlighted the
significant and unmet requirement to maintain the health and viability of
biological material across time and space.
At the leading edge of biomedicine is cell therapy, which involves a method of
growing human cells that may be able to treat cancers and a variety of chronic
disorders. Embryonic stem cells are the earliest precursor of human
differentiated cells. Adult stem cells, as their name suggests, rely on other
sources of stem cells rather than from the blastocysts of embryos. Many
researchers believe that cell therapy may revolutionize the treatment of chronic
disorders by allowing scientists to utilize stem cells to grow cells that
specifically replace and treat diseased tissue. Applications include the
treatment of heart disease, Parkinson's, Alzheimer's, stroke, spinal cord
injuries, burns and other wounds.
Time management in cell therapy becomes especially critical where myoblasts are
extracted from a patient, transported to a culture laboratory, and then
transported back to the patient to be inserted into the target tissue. Because
this entire process can take months and may involve transportation over long
distances, cellular viability is of paramount importance.
Similar to techniques used in whole organ transplantation, clinicians engaged in
cell therapy will attempt to maintain the original and derived cellular material
in a cold solution to extend cell viability before and after application of the
specific cell or gene therapy technique, and during necessary transportation.
Support solutions range from simple balanced salt formulations to complex
mixtures of electrolytes and other components. Until now, there has not been a
great deal of protective difference between these various solutions and few
offer long-term protection.
Tissue engineering has led to the development of several artificial tissue
substitutes for the therapeutic treatment of injury and disease. The process of
preparing engineered tissue involves isolation of cells, manipulation and
purification, expansion to larger quantities - often requiring appropriate media
and support materials, some mechanism to control differentiation and longevity
of the cells, and processes and conditions for maintaining viability during
transportation and storage. The development of effective delivery systems for
engineered tissue has been the subject of enormous investment for the last
several years. The delivery systems serve to protect cells from arduous
conditions during culture and distribution, and these delivery systems are often
vital for protection of cells.
5
Areas such as vaccine and medicine development and toxicological testing, for
application in clinical, military, law enforcement, cosmetic, academic,
environmental and pharmaceutical settings, also rely heavily on the utilization
of biological components. As with the biological components in these areas,
development, banking, distribution and storage of these biologics is a critical
component for successful and ultimately their practical application.
Common to each of these markets is the need for hypothermic preservation media
that yields both extended survival time and superior post-preservation
performance when contrasted with current processes and non-specific solutions
currently in use. For companies in these market segments, the therapeutic
benefit they deliver to clinicians and patients is dependent on establishing a
reasonable shelf-life for the end product. BioLife is addressing this underlying
and unmet need, of providing an enabling technology - a superior preservation or
culture medium - to the entire biomedical industry.
On May 12, 2005, the Company signed an Exclusive Private Labeling and
Distribution Agreement with VWR International, Inc., a global leader in the
distribution of scientific supplies, pursuant to which the Company will
manufacture its HypoThermosol(R) and CryoStor(TM) product lines under the VWR
label for sale to non-clinical customers via the 1,400 person VWR worldwide
sales force. The Company maintains the right to sell its products to
non-clinical customers under its own label.
A large and rapidly growing market already exists for extending the life and
viability of cartilage and skin. Engineered cartilage and skin generated
worldwide sales of $47.5 million in 2001. The market for engineered skin is
expected to grow at a compound annual growth rate ("CAGR") of 44.8% between 2002
and 2010. The market for engineered bone is expected to grow at a CAGR of 31.2%
between 2002 and 2010. The market for engineered cartilage is expected to grow
at a CAGR of 12.5% between 2002 and 2010.
An even larger market is expected to develop over the next several years as cell
therapy and tissue engineering begins to address chronic afflictions such as
Alzheimer's, diabetes and heart disease. These markets will also require the
successful transportation and storage of biologics to ultimately deliver
successful therapy to patients on a large scale. In addition to the growth in
currently commercialized tissue engineered products, the development of tissue
engineering applications to treat chronic diseases has the potential to reach a
market size of more than $1.0 billion by 2010.
The Company is unable to forecast its potential product sales in any of these
markets because each of these markets is in their infancy and not all of the
Company's competitors are known.
MANUFACTURING
BioLife is a FDA registered Class2 Medical Device manufacturer. BioLife's
HypoThermosol(R) line of preservation solutions currently are manufactured
in-house at its new facility in accordance with the Company's patented and
proprietary formulas. In February 2003, the Company entered into a two-year,
non-exclusive manufacturing agreement with a contract manufacturer. BioLife last
ordered solutions from such manufacturer in March 2003. There are multiple
sources available from which the Company can have HypoThermosol(R) manufactured.
GOVERNMENTAL REGULATION
Governmental regulation in the United States and other countries is a
significant factor affecting the research and development, manufacture and
marketing of the Company's products. In the United States, the FDA has broad
authority under the Federal Food, Drug and Cosmetic Act and the Public Health
Service Act to regulate the distribution, manufacture and sale of medical
devices. Foreign sales of medical devices are subject to foreign governmental
regulation and restrictions which vary from country to country.
6
The process of obtaining FDA and other required regulatory clearances or
approvals is lengthy and expensive. There can be no assurance that the Company
will be able to obtain necessary clearances or approvals for clinical testing or
for manufacturing or marketing of those of its products that currently do not
have clearance. Failure to comply with applicable regulatory approvals can,
among other things, result in warning letters, fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution. In
addition, governmental regulations may be established which could prevent,
delay, modify or rescind regulatory clearance or approval of the Company's
products.
Regulatory clearances or approvals, if granted, may include significant
limitations on the indicated uses for which the Company's products may be
marketed. In addition, to obtain such clearances or approvals, the FDA and
foreign regulatory authorities may impose numerous other requirements on the
Company. FDA enforcement policy strictly prohibits the marketing of approved
medical devices for unapproved uses. In addition, product approvals can be
withdrawn for failure to comply with regulatory standards or the occurrence of
unforeseen problems following initial marketing. There can be no assurance that
the Company will be able to obtain regulatory clearances or approvals for
products on a timely basis or at all, and delays in receipt of or failure to
receive such approvals, or the loss of previously obtained approvals, or the
failure to comply with existing or future regulatory requirements, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
As a component of other developed technology, HypoThermosol(R) is not subject to
specific FDA pre-market approval. In particular, the Company is not required to
sponsor formal prospective, controlled clinical-trials in order to establish
safety and efficacy. However, it is highly likely that all potential customers
would require BioLife to comply with Good Manufacturing Procedures ("GMP") as
mandated by FDA.
There can be no assurance that the Company will not be required to obtain
approval from the FDA prior to marketing any of the Company's products in the
future. Although BioLife does not market its products for use in embryo and
gamete preservation or for tissue or organ transplants, the Company expects that
it will need to obtain pre market approval from the FDA before it does so. This
would entail substantial financial and other resources and could take several
years before the products are approved, if at all.
INTELLECTUAL PROPERTY
Obtaining and maintaining a strong intellectual property position is a key
component of the Company's competitive strategy. In addition to keeping
competitors out of our key markets, a broad portfolio of intellectual property
will enable BioLife to negotiate more favorable licensing and distribution
agreements than could otherwise occur. The Company is committed to aggressively
protect BioLife's intellectual property portfolio.
BioLife's core HypoThermosol(R) cell preservation technology is protected by
U.S. Patent No. 6,045,990, "Inclusion of Apoptotic Regulators in Solutions for
Cell Storage at Low Temperature," owned by the Company, which covers the use of
cell-free solution compositions for hypothermic cell storage supplemented with
agents inhibiting apoptotic induced cell death. Additionally, solutions for cell
storage at hypothermic temperatures supplemented with cell death inhibitors for
cryopreservation are disclosed. BioLife's other core patent (No. 5,405,942)
contains claims relating to tissue preservation and bloodless surgery in the
field of organ transplantation.
7
In February 2003, the Company filed a patent application (Serial No. 10/372,379)
entitled "Method and Use of Protein Microarray Technology and Proteomic Analysis
to Determine Efficacy of Human and Xenographic Cell, Tissue and Organ
Transplant" which contains claims related to systems, tools, and methods for
assessing the success of the transplant of a cell, tissue, or organ before and
after transplant. This patent will be jointly assigned to the Research
Foundation of the State of New York.
In October 2003, the Company was awarded U.S. Patent No. 6,632,666 B2 entitled
"Normothermic, Hypothermic and Cryopreservation Maintenance and Storage Cells,
Tissues and Organs in Gel-Based Media." This patent covers gel-based
compositions for normothermic, Hypothermic and cryopreservative transport or
storage of plant tissues or cells and animal organs, tissues or cells, the
gel-based compositions comprising a cell maintenance and preservation medium and
a gelling agent.
The Company also has several additional patents (U.S. Patent Nos. 4,923,442 and
5,130,230), relating to blood substitute products, dating back to 1990. These
patents were originally filed with the purpose of providing surgeons with the
ability to perform bloodless surgery in the event of severe trauma or under
battlefield conditions.
In addition to these U.S. patents, the Company has filed for similar claims for
patent protection in Europe and other major international markets, relating to
each of these patents.
The Company's patents protect HypoThermosol(R) from both literal infringement
and also infringement under the Doctrine of Equivalents. This doctrine does not
allow infringement to be avoided by simply replacing an element or component of
BioLife's invention.
In addition to the Company's corporate logo and name, BioLife has trademarked
the following product names:
o HypoThermosol(R)
o CryoStor(TM)
o GelStor(TM)
o BioPak(TM)
Although the Company intends to continue to develop and file patents relating to
its core technology and to rigorously defend its patent position, there can be
no assurance that any additional patents will be granted. To the extent that any
unique applications of the Company's technologies are developed by the Company's
scientists, such applications or procedures may not be subject to any protection
and there can also be no assurance that the Company will develop additional
patentable processes or products or, if developed, that the Company would be
able to obtain patents with respect thereto, or that others may not assert
claims successfully with respect to such patents or patent applications.
Furthermore, the Company might not be able to afford the expense of any
litigation which might be necessary to enforce its rights under any patents it
may obtain, and there can be no assurance that the Company would be successful
in any such suit. There is also no assurance that the Company's proposed
products will not infringe on patents owned by others.
While the Company believes that the protection of patents and trademarks is
important to its business, the Company also relies on a combination of
copyright, trade secret, nondisclosure and confidentiality agreements, know-how
and continuing technological innovation to maintain its competitive position.
Despite these precautions, it may be possible for unauthorized third parties to
copy certain aspects of the Company's products or to obtain and use information
that the Company regards as proprietary. The laws of some foreign countries in
which the Company may sell its products do not protect the Company's proprietary
rights to the same extent as do the laws of the United States.
8
COMPETITION
The medical products industry is highly competitive. Most of the Company's
potential competitors have considerably greater financial, technical, marketing,
and other resources than the Company.
BioLife faces competition in the markets for its line of HypoThermosol(R)
preservation solutions from several much larger companies, including Organ
Recovery Systems, Inc., which is developing low temperature technologies for the
preservation and transportation of tissue and Barr Laboratories, Inc., which is
selling Viaspan, the organ preservation solution. SangStat Medical Corporation
also has developed a preservation medium, which is indicated for use in the U.S.
only for cardiac transplantation.
BioLife faces competition in the markets for its line of CryoStor(TM)
preservation solutions from several much larger companies, including Invitrogen,
Cambrex, and Sigma, which market alternative cryopreservation media for cell
culture applications.
The Company expects competition to intensify with respect to the areas in which
it is involved as technical advances are made and become more widely known.
EMPLOYEES
The Company's business is highly dependent upon its ability to attract and
retain qualified scientific, technical and management personnel. BioLife had six
full-time employees and four research and development contractors at December
31, 2005. The Company is not a party to any collective bargaining agreements.
REPORTS TO SECURITY HOLDERS
This annual report on Form 10-KSB, including the exhibits and schedules filed as
part of the annual report, may be inspected at the public reference facility
maintained by the Securities and Exchange Commission ("SEC") at its public
reference room at 450 Fifth Street, NW, Washington, DC 20549 and copies of all
or any part thereof may be obtained from that office upon payment of the
prescribed fees. You may call the SEC at 1-800-SEC-0330 for further information
on the operation of the public reference room and you may request copies of the
documents upon payment of a duplicating fee, by writing to the SEC. In addition,
the SEC maintains a website that contains reports, proxy and information
statements and other information regarding registrants, including us, that file
electronically with the SEC which can be accessed at www.sec.gov.
The Company also makes its periodic and current reports available, free of
charge, on its website, www.BioLifeSolutions.com, as soon as reasonably
practicable after such material is electronically filed with the SEC.
Information available on our website is not a part of, and should not be
incorporated into, this annual report on Form 10-KSB.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995; RISK FACTORS
This Annual Report on Form 10-KSB and other reports, releases, and statements
(both written and oral) issued by the Company and its officers from time to time
may contain statements concerning the Company's future results, future
performance, intentions, objectives, plans, and expectations that are deemed to
be "forward-looking statements." Such statements are made in reliance upon safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
Company's actual results, performance, and achievements may differ significantly
from those discussed or implied in the forward-looking statements as a result of
a number of known and unknown risks and uncertainties including, without
limitation, those discussed below and in "Management's Discussion and Analysis
or Plan of Operation." In light of the significant uncertainties inherent in
such forward-looking statements, the inclusion of such statements should not be
regarded as a representation by the Company or any other person that the
Company's objectives and plans will be achieved. Words such as "believes,"
"anticipates," "expects," "intends," "may," and similar expressions are intended
to identify forward-looking statements, but are not the exclusive means of
identifying such statements. The Company undertakes no obligation to revise any
of these forward-looking statements.
9
ITEM 2. DESCRIPTION OF PROPERTY
Rental expense for all of the Company's facilities for the year ended
December 31, 2005 totaled approximately $74,000.
In January 2004, BioLife signed a 3 year lease with Field Afar Properties, LLC
whereby BioLife leases 6,161 square feet of office, laboratory, and
manufacturing space in Owego, NY at a rental rate of $6,200 per month.
Renovation of the new facility was completed in April 2004. The Company's Chief
Executive Officer is a partial owner of Field Afar Properties, LLC.
ITEM 3. LEGAL PROCEEDINGS
BioLife was involved in a lawsuit against Endocare, Inc., arising out of
Endocare's failure to register 120,022 shares of its stock as part of the
transaction by which the Company sold its cryosurgical equipment assets to
Endocare in a transaction that closed on June 24, 2002. In the lawsuit, the
Company claimed damages of $1,648,935, comprising the proceeds that could have
been realized had Endocare properly registered the Stock within the time frame
set forth in the Registration Rights Agreement entered into between the parties.
Endocare filed an answer and counterclaim, seeking damages of over $5,000,000 as
a result of various alleged breaches by the Company of the Asset Purchase
Agreement entered into between the parties. Trial in this matter began on March
31, 2003 and concluded on April 3, 2003. On October 10, 2003, the State of
Delaware issued a Final Order and Judgment in favor of BioLife in the amount of
$1,648,935 plus prejudgment interest. On February 25, 2004, the Company
collected approximately $1.88 million from Endocare for damages, interest, and
legal fees.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
10
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
PRICE RANGE OF COMMON STOCK
The common stock, par value $.001 per share, of the Company ("Common Stock") is
traded on the OTC Bulletin Board under the symbol "BLFS." The following table
sets forth the high and low closing prices for the Common Stock for the periods
indicated.
Price Range
-----------
High Low
---- ---
Quarter Ended:
--------------
March 31, 2004 $0.24 $0.08
June 30, 2004 $0.23 $0.14
September 30, 2004 $0.19 $0.13
December 31, 2004 $0.14 $0.07
March 31, 2005 $0.15 $0.06
June 30, 2005 $0.25 $0.07
September 30, 2005 $0.21 $0.09
December 31, 2005 $0.16 $0.09
HOLDERS
As of December 31, 2005, there were 812 holders of record of the Common Stock.
DIVIDEND HISTORY AND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate that any cash dividends will be paid for the foreseeable future.
PRIVATE PLACEMENTS
In March 2002, the Company borrowed $250,000, represented by a 12-month
promissory note agreement. The principal balance on this promissory note accrued
interest at the rate of 10% per annum. In connection with the promissory note,
the Company issued warrants to purchase one million shares of the Company's
common stock at $0.25 per share. The payment of this note was extended in March
2003 for an additional 12 months and the warrants associated with the note have
been repriced at $0.08 per share. All principal and interest payable on this
note was paid in March 2004.
In March 2003, the Company borrowed $100,000, represented by a 12-month
promissory note agreement. The principal balance on this promissory note accrued
interest at the rate of 10% per annum. In connection with the promissory note,
the Company issued warrants to purchase 500,000 shares of the Company's common
stock at $0.08 per share. All principal and interest payable on this note was
paid in March 2004.
In May 2003, the Company borrowed $300,000, represented by three (3) 12-month
promissory note agreements. The principal balances on these promissory notes
accrued interest at the rate of 10% per annum. In connection with the promissory
notes, the Company issued warrants to purchase 1,500,000 shares of the Company's
common stock at $0.08 per share. All principal and interest payable on these
notes was paid in March 2004.
11
In December 2003, the Company completed a private placement of 55.125 Units,
raising $1,226,533 in cash, net of issuance costs of $23,467, and $128,125 as
payment of accrued salaries to certain employees. Each Unit was priced at
$25,000 and consisted of one share of Series G convertible non-redeemable
preferred stock, convertible into 312,500 share of common stock, and one warrant
to purchase 312,500 shares of common stock a $.08 per share, on or before
October 2013. The Units were placed with investors in the United States and
Europe, and the sales of the Units were exempt from Registration under the
Securities Act pursuant to Rule 506 of Regulation D and Rule 903 of Regulation
S.
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
available for future
Number of securities to be Weighted average exercise issuance under equity
issued upon exercise of price of outstanding compensation plans
outstanding options, options, warrants and (excluding securities
Plan Category warrants and rights rights reflected in column (a)
------------- ------------------- ------ -----------------------
(a) (b) (c)
Equity compensation plan
approved by shareholders 32,832,858 $0.22 4,449,000
See Item 7, Footnote 7 of the financial statements for a description of equity
compensation plans.
12
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto set forth elsewhere herein. The
discussion of the results from operations includes only the Company's continuing
operations.
BioLife has pioneered the next generation of preservation solutions designed to
maintain the viability and health of cellular matter and tissues during
freezing, transportation and storage. Based on the Company's proprietary,
bio-packaging technology and a patented understanding of the mechanism of
cellular damage and death, these products enable the biotechnology and medical
community to address a growing problem that exists today. The expanding practice
of cell and gene therapy has created a need for products that ensure the
biological viability of mammalian cell and tissue material during transportation
and storage. The Company believes that HypoThermosol(R), GelStor and
CryoStor(TM) products are a significant step forward in meeting these needs.
The Company's line of preservation solutions is composed of complex synthetic,
aqueous solutions containing, in part, minerals and other elements found in
human blood, which are necessary to maintain fluids and chemical balances
throughout the body at near freezing temperatures. The solutions preserve cells
and tissue in low temperature environments for extended periods after removal of
the cells through minimally invasive biopsy or surgical extraction, as well as
in shipping the propagated material for the application of cell or gene therapy
or tissue engineering. BioLife has entered into research agreements with several
emerging biotechnology companies engaged in the research and commercialization
of cell and gene therapy technology and has received several government research
grants in partnership with academic institutions to conduct basic research,
which could lead to further commercialization of technology to preserve human
cells, tissues and organs.
The Company currently markets its solutions to companies and labs engaged in
pre-clinical research, and to academic institutions.
LIQUIDITY AND CAPITAL RESOURCES
During 2005, our third full year of solution product sales, we financed our
operations from the proceeds received in 2004 from the settlement with Endocare,
proceeds received in 2005 from the Tioga County LDC loan, as well as from
product sales, and management and facilities fees earned.
At December 31, 2005, the Company had cash and cash equivalents of $185,095,
compared to cash and cash equivalents of $531,684 at December 31, 2004,
primarily as a result of the continuation of negative cash flows from
operations. At December 31, 2005, the Company had a working capital surplus of
$173,704, compared to a working capital surplus $483,955 at December 31, 2004.
During the year ended December 31, 2005, net cash used by operating activities
was $(576,333) as compared to net cash provided by operating activities of
$514,104 for the year ended December 31, 2004. This was due in large part from
receipt in 2004 of the legal settlement of $1,871,945.
Net cash provided by investing activities totaled $3,817 during the year ended
December 31, 2005 which resulted from the sale of old property and equipment and
the purchase of property and equipment to support the new manufacturing facility
in the amount of $15,108. Net cash used by investing activities totaled
$(65,800) during the year ended December 31, 2004 resulting from purchase of
property and equipment during the year.
13
Net cash provided by financing activities totaled $225,927 for the year ended
December 31, 2005 resulting from proceeds from the Tioga County LDC loan
totaling $230,500 and principal payments on the loan totaling $4,573. Net cash
used by financing activities totaled $(705,524) for the year ended December 31,
2004, which resulted from principal payments on notes payable during 2004.
During 2005, the Company experienced a growth in product sales of 41% from 2004.
In addition, the Company experienced continued product sales growth, quarter by
quarter, during 2005, with each quarterly product sales surpassing the previous
year's (2004) quarterly product sales. Although a promising trend, the Company
was not able to support its operating activities through sales of its products
or contracted revenue sources. As a result, operations were funded primarily
with proceeds ($1,877,474) from the settlement of the Endocare lawsuit in
February 2004, as well as proceeds from the Tioga County LDC loan . The Company
maintains no line of credit or bank notes.
On May 12, 2005, the Company signed an Exclusive Private Labeling and
Distribution Agreement with VWR International, Inc., a global leader in the
distribution of scientific supplies, pursuant to which the Company will
manufacture its HypoThermosol(R) and CryoStor(TM) product lines under the VWR
label for sale to non-clinical customers via the 1,400 person VWR worldwide
sales force. The Company maintains the right to sell its products to
non-clinical customers under its own label. To maintain exclusivity, sales to
VWR must equal $375,000 in Year 1, $1,000,000 in Year 2, $1,500,000 in Year 3,
$2,000,000 in Year 4, and $2,500,000 in Year 5.
The Company may need to raise additional funds through additional financings,
including private or public equity and/or debt offerings and collaborative
research and development arrangements with corporate partners if our revenues
are insufficient to meet our operating needs. Our future capital requirements
will depend on many factors, including the ability to market and sell our
product line, research and development programs, the scope and results of
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in obtaining and enforcing patents or any litigation by third
parties regarding intellectual property, the status of competitive products, the
maintenance of our manufacturing facility, the maintenance of sales and
marketing capabilities, and the establishment of collaborative relationships
with other parties.
In March 2006, in order to secure much needed capital, the Board of Directors
approved a plan to raise additional capital from the holders of its outstanding
warrants and stock options in order to a) prevent further dilution by the
issuance of additional securities to outsiders, and (b) to restructure the
capitalization of the Company. Through April 12, 2006, the Company was able to
raise $773,180 through (a) the exercise of warrants to purchase 20,438,783
shares of the Company's Common Stock at $0.04, and (b) the exercise of stock
options to purchase 2,477,000 shares of the Company's Common Stock at $0.04.
Under the terms of the plan, the Company offered to:
1. the holders of the Company's (a) 12,000 shares of Series F Preferred
Stock, convertible into 4,800,000 shares of the Company's Common Stock,
and (b) the 6,000 Series F Warrants to purchase 2,400,000 shares of the
Company's Common Stock at $.375 per share purchased in conjunction with
the Series F Pfd. Stock, the right to exercise the Series F Warrants and
purchase the shares of Common Stock issuable upon exercise thereof at $.04
per share (same number of shares at a lower price), provided that (a)
simultaneously with the exercise of such right, the holder converts his
shares of Series F Pfd. Stock into shares of the Company's Common Stock,
and (b) the conversion of the Series F Pfd. Stock and exercise of the
Series F Warrants take place on or before March 31, 2006 (which date was
extended to April 14, 2006) ;
2. the holders of the Company's 55.125 shares of Series G Pfd. Stock, which
Series G Pfd. Stock is convertible into 17,226,563 shares of the Company's
Common Stock, and (b) the 55.125 Series G Warrants to purchase 17,226,563
of the Company's Common Stock at $.08 per share purchased in conjunction
with the Series G. Pfd. Stock, the right to exercise the Series G Warrants
and purchase the shares of Common Stock issuable upon exercise thereof at
$.04 per share (same number of shares at a lower price), provided that (a)
simultaneously with the exercise of such right, they convert their shares
of Series G Pfd. Stock into shares of the Company's Common Stock, and (b)
the conversion of the Series G Pfd. Stock and exercise of the Series G
Warrants take place on or before March 31, 2006 (which date was extended
to April 14, 2006);
14
3. the holders of all exercisable Stock Options to purchase shares of the
Company's Common Stock (an aggregate of 3,511,000 shares of the Company's
Common Stock) at prices ranging from $.08-$2.50 per share, the right to
exercise such Stock Options and purchase the shares of Common Stock
issuable upon exercise thereof at $.04 per share (the same number of
shares at a lower exercise price), provided that the exercise of such
stock options takes place on or before March 31, 2006 (which date was
extended to April 14, 2006); and
4. the holders of all Warrants to purchase shares of the Company's Common
Stock (an aggregate of 7,640,295 shares of the Company's Common Stock) at
prices ranging from $.08-$41.25 per share, the right to exercise such
warrants and purchase the shares of Common Stock issuable upon exercise
thereof at $.04 per share (the same number of shares at a lower price),
provided the exercise of the warrants takes place on or before March 31,
2006 (which date was extended to April 14, 2006).
The offering was conditioned upon all shares of the Company's Series F Preferred
Stock and Series G Preferred Stock converting into Common Stock of the Company.
As a result, 12,000 shares of the Company's Series F Preferred Stock were
converted to 4,800,000 shares of Common Stock and 55.125 shares of the Company's
Series G Preferred Shares were converted to 17,226,563 shares of Common Stock.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations are based upon its financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses and related disclosures. On an ongoing basis,
the Company evaluates estimates, including those related to bad debts,
inventories, fixed assets, income taxes, contingencies and litigation. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis of the Company's judgments on the carrying value
of assets and liabilities. Actual results may differ from these estimates under
different assumptions or conditions.
The Company believes that the following accounting policies involve more
significant judgments and estimates in the preparation of the financial
statements. The Company maintains an allowance for doubtful accounts for
estimated losses that may result from the inability of its customers to make
payments. If the financial condition of the Company's customers were to
deteriorate, resulting in their inability to make payments, the Company may be
required to make additional allowances. The Company writes down inventory for
estimated obsolete or unmarketable inventory to the lower of cost or market
based on assumptions of future demand. If the actual demand and market
conditions are less favorable than projected, additional write-downs may be
required. Also, the Company uses the intrinsic value method to determine the
fair value of stock options issued. Equity instruments issued to third parties
are valued using the Black Scholes method, which requires assumptions as to
expected volatility, risk-free interest rate and expected lives of the equity
instruments.
15
RESULTS OF OPERATIONS (YEAR ENDED DECEMBER 31, 2005 COMPARED TO THE YEAR ENDED
DECEMBER 31, 2004)
REVENUE
Revenue for the year ended December 31, 2005 decreased $11,991 or 2%, to
$614,718, compared to $626,709 for the year ended December 31, 2004. The Company
had no grant revenue for the year ended December 31, 2005, compared to $38,936
for the year ended December 31, 2004. This decrease was the result of the
transition of grant related activities to CPSI. The Company recorded no
consulting revenue for the year ended December 31, 2005, as compared to $86,000
for the year ended December 31, 2004. This decline was the result of scheduled
completion of contracts as well as the Company's continued focus on product
sales. Although the Company recorded no consulting revenue in 2005, it will
evaluate future consulting opportunities on a case by case basis. In addition,
the Company earned $60,342 and $109,714 for the year ended December 31, 2005 in
management fees and facilities fees, respectively, as a result of a research
agreement with CPSI. In 2004, the Company earned $64,822 and $117,858 in
management and facilities fees, respectively. In 2005, the Company had product
sales revenue of $444,662 as compared to $315,818 in 2004. The shift of the
Company's focus toward product sales resulted in a 41% increase in product sales
over 2004. In addition, the Company experienced continued product sales growth,
quarter by quarter, during 2005, with each quarterly product sales surpassing
the previous year's (2004) quarterly product sales.
COST OF PRODUCT SALES
For the year ended December 31, 2005, the cost of product sales totaled $250,078
as compared to $163,979 for the year ended December 31, 2004. In 2005, the
Company wrote off obsolete inventory (approximately $23,000 in 2005 Q4)
resulting in a reduction in gross margin from 48% in 2004 to 44% in 2005.
RESEARCH AND DEVELOPMENT
Expenses relating to research and development for the year ended December 31,
2005 decreased 4% to $27,855, compared to $29,087 for the year ended
December 31, 2004.
SALES AND MARKETING
For the year ended December 31, 2005, sales and marketing expenses decreased
$174,839, or 69%, to $78,267, compared to $253,106 for the year ended December
31, 2004. The decrease in sales and marketing expense was due primarily to the
elimination of the VP Sales and Marketing position. Sales and marketing
activities were assumed by the current staff. Elimination of that position
resulted in a decrease in sales related salaries of $162,430. In addition, sales
related travel and fringe benefits were also reduced.
GENERAL AND ADMINISTRATIVE EXPENSE
For the year ended December 31, 2005, general and administrative expense
increased $47,090, or 6% to $886,051, compared to $838,961 for the year ended
December 31, 2004. This increase was due primarily to the expenses incurred in
2005 for the annual shareholders meeting.
OPERATING EXPENSES AND NET INCOME
For the year ended December 31, 2005, operating expenses decreased $42,882, or
3% to $1,242,251, compared to $1,285,133 for the year ended December 31, 2004.
The Company reported a net loss of $(619,323) for the year ended December 31,
2005, compared to a net loss of $(743,162) for the year ended December 31, 2004.
While total revenue and expenses in 2005 remained fairly consistent with 2004,
the Company was able to reduce its net loss due primarily to a reduction in
interest expense incurred by the Company in 2004. Interest expense totaled
$117,241 for the year ended December 31, 2004 as compared to $1,943 for the year
ended December 31, 2005.
16
CASH AND CASH EQUIVALENTS
At December 31, 2005, the Company had cash and cash equivalents of $185,095,
compared to cash and cash equivalents of $531,684 at December 31, 2004,
primarily as a result of the continuation of negative cash flows from
operations. At December 31, 2005, the Company had a working capital surplus of
$173,704, compared to a working capital surplus $483,955 at December 31, 2004.
CONTRACT OBLIGATIONS
The Company leases equipment as lessee, under an operating lease expiring in
October 2011. The lease requires monthly payments of approximately $337.
In January 2004, BioLife signed a 3 year lease with Field Afar Properties, LLC
whereby BioLife leases 6,161 square feet of office, laboratory, and
manufacturing space in Owego, NY at a rental rate of $6,200 per month.
Renovation of the new facility was completed in April 2004. The Company's Chief
Executive Officer is a partial owner of Field Afar Properties, LLC.
RISK FACTORS
The risks presented below may not be all of the risks the Company may face.
These are the factors that the Company believes could cause actual results to be
different from expected and historical results. Other sections of this report
include additional factors that could have an effect on the Company's business
and financial performance. The industry that the Company competes in is very
competitive and changes rapidly. Sometimes new risks emerge and management may
not be able to predict all of them or how they may cause actual results to be
different from those contained in any forward-looking statements. You should not
rely upon forward-looking statements as a prediction of future results.
THE COMPANY HAS A HISTORY OF LOSSES AND MAY NEVER ACHIEVE OR MAINTAIN
PROFITABILITY.
The Company has incurred annual operating losses since inception, and may
continue to incur operating losses because new products will require substantial
development, clinical, regulatory, manufacturing, marketing and other
expenditures. For the fiscal years ended December 31, 2005 and December 31,
2004, the Company had net losses of $(619,323) and $(743,162), respectively. As
of December 31, 2005, the Company's accumulated deficit was $(40,681,961). The
Company may not be able to successfully commercialize its current or future
products, achieve significant revenues from sales, or achieve or sustain
profitability. Successful completion of the Company's development program and
its transition to attaining profitable operations is dependent upon achieving a
level of revenues adequate to support its cost structure.
THE MARKET FOR THE COMPANY'S COMMON STOCK IS LIMITED AND ITS STOCK PRICE IS
VOLATILE.
The Company's Common Stock, traded on the OTC Bulletin Board, has historically
traded at low average daily volumes, resulting in a limited market for the
purchase and sale of the Company's Common Stock on the OTC Bulletin Board.
The market prices of many publicly traded companies, including emerging
companies in the health care industry, have been, and can be expected to be,
highly volatile. The future market price of the Company's common stock could be
significantly impacted by
o future sales of the Company's common stock,
o announcements of technological innovations for new commercial
products by the Company's present or potential competitors,
o developments concerning proprietary rights,
17
o adverse results in the Company's field or with clinical tests,
o adverse litigation,
o unfavorable legislation or regulatory decisions,
o public concerns regarding the Company's products,
o variations in quarterly operating results,
o general trends in the health care industry, and
o other factors outside of the Company's control.
THERE IS UNCERTAINTY SURROUNDING THE COMPANY'S ABILITY TO SUCCESSFULLY
COMMERCIALIZE ITS PRESERVATIVE SOLUTIONS.
The Company's growth depends, in part, on its continued ability to successfully
develop, commercialize and market the Company's HypoThermosol(R) preservative
solutions. Even in markets that do not require the Company to undergo clinical
trials and obtain regulatory approvals, the Company's line of HypoThermosol(R)
preservative solutions will not be used unless they present an attractive
alternative to competitive products and the benefits and cost savings achieved
through their use outweigh the cost of the solutions. The Company believes that
recommendations and endorsements of physicians will be essential for market
acceptance of the HypoThermosol(R) product line.
THE SUCCESS OF THE COMPANY'S HYPOTHERMOSOL(R) PRESERVATIVE SOLUTIONS IS
DEPENDANT, IN PART, ON THE COMMERCIAL SUCCESS OF NEW CELL AND GENE THERAPY
TECHNOLOGY.
The Company is developing preservative media for, and marketing its
HypoThermosol(R) preservative solutions to, biotechnology companies and research
institutions engaged in research and development of cell, gene and tissue
reengineering therapy. Although the Company, as a component supplier, may not be
subject to the same formal prospective, controlled clinical-trials to establish
safety and efficacy, and to substantial regulatory oversight by the FDA and
other regulatory bodies, with respect to the commercialized end products or
therapies developed by these biotechnology companies and research institutions,
the development of these therapies are years away from commercialization, and
demand, if any, for the HypoThermosol(R) preservative solutions in these
markets, is expected to be limited for several years.
THE COMPANY FACES SIGNIFICANT COMPETITION.
The Company faces competition in the markets for its HypoThermosol(R)
preservation solution from several much larger companies, including Organ
Recovery Systems, Inc., which is developing low temperature technologies for the
preservation and transportation of tissue and Barr Laboratories, Inc., which is
selling Viaspan, the organ preservation solution, under license from DuPont
Pharmaceuticals Company. SangStat Medical Corporation has also developed a
preservation medium for use for cardiac transplantation in the U.S.
Many of the Company's competitors are significantly larger than the Company and
have greater financial, technical, research, marketing, sales, distribution and
other resources than the Company. Additionally, the Company believes there will
be intense price competition with respect to the Company's products. There can
be no assurance that the Company's competitors will not succeed in developing or
marketing technologies and products that are more effective or commercially
attractive than any that are being developed or marketed by the Company, or that
such competitors will not succeed in obtaining regulatory approval, introducing,
or commercializing any such products prior to the Company. Such developments
could have a material adverse effect on the Company's business, financial
condition and results of operations. Further, even if the Company is able to
compete successfully, there can be no assurance that it could do so in a
profitable manner.
18
THE COMPANY'S SUCCESS WILL DEPEND ON ITS ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL.
In order to execute its business plan, the Company must attract, retain and
motivate highly qualified managerial, technical and sales personnel. If the
Company fails to attract and retain skilled scientific and sales personnel, the
Company's research and development and sales efforts will be hindered. The
Company's future success depends to a significant degree upon the continued
services of key management personnel, including John G. Baust, Ph.D., the
Company's President and Chief Executive Officer. Although Dr. Baust is subject
to an employment agreement, he is not covered by a life insurance policy naming
the Company as beneficiary. If the Company does not attract and retain qualified
personnel it will not be able to achieve its growth objectives.
IF THE COMPANY FAILS TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS, THE COMPANY'S
COMPETITORS MAY TAKE ADVANTAGE OF ITS IDEAS AND COMPETE DIRECTLY AGAINST IT.
The Company's success will depend to a significant degree on its ability to
secure and protect intellectual proprietary rights and enforce patent and
trademark protections relating to the Company's technology. While the Company
believes that the protection of patents and trademarks is important to its
business, the Company also relies on a combination of copyright, trade secret,
nondisclosure and confidentiality agreements, know-how and continuing
technological innovation to maintain its competitive position. From time to
time, litigation may be advisable to protect its intellectual property position.
However, these legal means afford only limited protection and may not adequately
protect the Company's rights or permit it to gain or keep any competitive
advantage. Any litigation in this regard could be costly, and it is possible
that the Company will not have sufficient resources to fully pursue litigation
or to protect the Company's intellectual property rights. This could result in
the rejection or invalidation of the Company's existing and future patents. Any
adverse outcome in litigation relating to the validity of its patents, or any
failure to pursue litigation or otherwise to protect its patent position, could
materially harm the Company's business and financial condition. In addition,
confidentiality agreements with the Company's employees, consultants, customers,
and key vendors may not prevent the unauthorized disclosure or use of the
Company's technology. It is possible that these agreements will be breached or
that they will not be enforceable in every instance, and that the Company will
not have adequate remedies for any such breach. Enforcement of these agreements
may be costly and time consuming. Furthermore, the laws of foreign countries may
not protect the Company's intellectual property rights to the same extent as the
laws of the United States.
BECAUSE THE MEDICAL DEVICE INDUSTRY IS LITIGIOUS, THE COMPANY MAY BE SUED FOR
ALLEGEDLY VIOLATING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
The medical technology industry in the past has been characterized by a
substantial amount of litigation and related administrative proceedings
regarding patents and intellectual property rights. In addition, many medical
device companies have used litigation against emerging growth companies as a
means of gaining a competitive advantage.
Should third parties file patent applications or be issued patents claiming
technology claimed by the Company in pending applications, the Company may be
required to participate in interference proceedings in the U.S. Patent and
Trademark Office to determine the relative priorities of its inventions and the
third parties' inventions. The Company could also be required to participate in
interference proceedings involving its issued patents and pending applications
of another entity. An adverse outcome in an interference proceeding could
require the Company to cease using the technology or to license rights from
prevailing third parties. Third parties may claim that the Company is using
their patented inventions and may go to court to stop the Company from engaging
in its normal operations and activities. These lawsuits are expensive to defend
and conduct and would also consume and divert the time and attention of the
Company's management. A court may decide that the Company is infringing on a
third party's patents and may order the Company to cease the infringing
activity. The court could also order the Company to pay damages for the
infringement. These damages could be substantial and could harm the Company's
business, financial condition and operating results. If the Company is unable to
obtain any necessary license following an adverse determination in litigation or
in interference or other administrative proceedings, the Company would have to
redesign its products to avoid infringing a third party's patent and temporarily
or permanently discontinue manufacturing and selling some of its products. If
this were to occur, it would negatively impact future sales.
19
IF THE COMPANY FAILS TO OBTAIN OR MAINTAIN NECESSARY REGULATORY CLEARANCES OR
APPROVALS FOR PRODUCTS, OR IF APPROVALS ARE DELAYED OR WITHDRAWN, THE COMPANY
WILL BE UNABLE TO COMMERCIALLY DISTRIBUTE AND MARKET ITS PRODUCTS OR ANY PRODUCT
MODIFICATIONS.
Government regulation has a significant impact on the Company's business.
Government regulation in the United States and other countries is a significant
factor affecting the research and development, manufacture and marketing of the
Company's products. In the United States, the FDA has broad authority under the
Federal Food, Drug and Cosmetic Act to regulate the distribution, manufacture
and sale of medical devices. Foreign sales of drugs and medical devices are
subject to foreign governmental regulation and restrictions, which vary from
country to country. The process of obtaining FDA and other required regulatory
clearances and approvals is lengthy and expensive. The Company may not be able
to obtain or maintain necessary approvals for clinical testing or for the
manufacturing or marketing of its products. Failure to comply with applicable
regulatory approvals can, among other things, result in fines, suspension or
withdrawal of regulatory approvals, product recalls, operating restrictions, and
criminal prosecution. In addition, governmental regulations may be established
which could prevent, delay, modify or rescind regulatory approval of the
Company's products. Any of these actions by the FDA, or change in FDA
regulations, may adversely impact the Company's business and financial
condition.
Regulatory approvals, if granted, may include significant limitations on the
indicated uses for which the Company's products may be marketed. In addition, to
obtain such approvals, the FDA and foreign regulatory authorities may impose
numerous other requirements on the Company. FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses. Furthermore, product
approvals can be withdrawn for failure to comply with regulatory standards or
unforeseen problems following initial marketing. The Company may not be able to
obtain or maintain regulatory approvals for its products on a timely basis, or
at all, and delays in receipt of or failure to receive such approvals, the loss
of previously obtained approvals, or failure to comply with existing or future
regulatory requirements would have a significant negative effect on the
Company's financial condition.
THE COMPANY IS DEPENDENT ON OUTSIDE SUPPLIERS FOR ALL OF ITS MANUFACTURING
SUPPLIES.
The Company relies on outside suppliers for all of its manufacturing supplies,
parts and components. Although the Company believes it could develop alternative
sources of supply for most of these components within a reasonable period of
time, there can be no assurance that, in the future, its current or alternative
sources will be able to meet all of the Company's demands on a timely basis.
Unavailability of necessary components could require the Company to re-engineer
its products to accommodate available substitutions which would increase costs
to the Company and/or have a material adverse effect on manufacturing schedules,
products performance and market acceptance.
20
ITEM 7. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
BIOLIFE SOLUTIONS, INC.
Owego, New York
We have audited the accompanying Balance Sheets of BIOLIFE SOLUTIONS, INC. as of
December 31, 2005 and 2004, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BIOLIFE SOLUTIONS, INC. as of
December 31, 2005 and 2004, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has been unable to generate sufficient income
from operations to meet its operating needs and may not have sufficient
liquidity to meet its financial obligations in the future. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Aronson & Company
Rockville, Maryland
March 9, 2006, except for Note 11
as to which the date is April 12, 2006
F-1
BIOLIFE SOLUTIONS, INC.
BALANCE SHEETS
December 31, December 31,
2005 2004
------------ ------------
Assets
------
Current assets
Cash and cash equivalents $ 185,095 $ 531,684
Accounts receivable, trade, net of allowance for doubtful
accounts of $13,500 at December 31, 2005 and 2004 76,343 75,337
Inventories 123,413 94,319
Prepaid expenses and other current assets -- 2,925
------------ ------------
Total current assets 384,851 704,265
------------ ------------
Property and equipment
Leasehold improvements 45,783 39,283
Furniture and computer equipment 42,247 39,760
Manufacturing and other equipment 130,575 207,075
------------ ------------
Total 218,605 286,118
Less: Accumulated depreciation and amortization (156,351) (157,114)
------------ ------------
Net property and equipment 62,254 129,004
------------ ------------
Total assets $ 447,105 $ 833,269
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities
Accounts payable $ 56,934 $ 57,010
Accounts payable - related parties 8,729 28,027
Accrued expenses 45,736 12,426
Accrued salaries 71,298 122,847
Notes payable - LDC Loan - current portion 28,450 --
------------ ------------
Total current liabilities 211,147 220,310
Long term liabilities
Notes payable - LDC Loan - long term portion 197,477 --
------------ ------------
Total liabilities 408,624 220,310
------------ ------------
Commitments and contingencies
Stockholders' equity
Series F convertible preferred stock, $.001 par value; 12,000
shares authorized, issued and outstanding, with an aggregate
liquidation value of $2,307,493 and $2,187,808 at
December 31, 2005 and 2004, respectively 12 12
Series G convertible preferred stock, $.001 par value; 80
shares authorized, 55 shares issued and outstanding
liquidation value of $1,595,409 and $1,491,946 at
December 31, 2005 and 2004, respectively -- --
Common stock, $0.001 par value; 100,000,000
shares authorized, 12,413,209 shares issued and outstanding 12,413 12,413
Additional paid-in capital 40,739,041 40,663,172
Deferred compensation (31,024) --
Accumulated deficit (40,681,961) (40,062,638)
------------ ------------
Total stockholders' equity 38,481 612,959
------------ ------------
Total liabilities and stockholders' equity $ 447,105 $ 833,269
============ ============
The accompanying Notes to Financials Statements are an integral part
of these financial statements
F-2
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
Years Ended
December 31,
---------------------------------
2005 2004
------------ ------------
Revenue
Product sales $ 444,662 $ 315,818
Grant revenue -- 38,936
Consulting revenue -- 86,000
Management fees, related party 60,342 64,822
Facilities fees, related party 109,714 117,858
Other -- 3,275
------------ ------------
Total revenue 614,718 626,709
------------ ------------
Operating expenses
Product sales 250,078 163,979
Research and development 27,855 29,087
Sales and marketing 78,267 253,106
General and administrative 886,051 838,961
------------ ------------
Total expenses 1,242,251 1,285,133
------------ ------------
Operating loss (627,533) (658,424)
------------ ------------
Other income (expense)
Interest income 6,998 27,103
Interest expense - related parties -- (117,241)
Interest expense - other (1,943) --
Other income 3,155 5,400
------------ ------------
Total other income (expense) 8,210 (84,738)
------------ ------------
Loss from operations before provision for income taxes (619,323) (743,162)
Provision for income taxes -- --
------------ ------------
Net Loss $ (619,323) $ (743,162)
============ ============
Basic and diluted net loss per common share $ (0.05) $ (0.06)
============ ============
Basic and diluted weighted average common shares used to calculate
net loss per share 12,413,209 12,413,209
============ ============
The accompanying Notes to Financials Statements are an integral part
of these financial statements
F-3
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Convertible Series F
and G Preferred Stock Common Stock Additional Total
------------------------------------------ paid-in Deferred Accumulated stockholders'
Shares Amount Shares Amount capital Compensation deficit equity
-----------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2004 12,055 $12 12,413,209 $12,413 $40,663,172 $ -- $(39,319,476) $1,356,121
Net loss -- -- -- -- -- -- (743,162) (743,162)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 12,055 12 12,413,209 12,413 40,663,172 -- (40,062,638) 612,959
Compensation expense
for stock options
granted -- -- -- -- 75,869 (75,869) -- --
Amortization of deferred
compensation -- -- -- -- -- 44,845 -- 44,845
Net loss -- -- -- -- -- -- (619,323) (619,323)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2005 12,055 $12 12,413,209 $12,413 $40,739,041 $(31,024) $(40,681,961) $ 38,481
===================================================================================================================================
The accompanying Notes to Financials Statements are an integral part
of these financial statements
F-4
BIOLIFE SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
2005 2004
------------ ------------
Cash flow from operating activities
Net Loss $ (619,323) $ (743,162)
Adjustments to reconcile net loss to net cash (used) provided by operating
activities
Depreciation 66,088 59,796
Amortization of loan financing costs -- 106,408
Gain on disposal of fixed assets (3,155) --
Stock-based compensation expense 44,845 --
Change in operating net assets and liabilities
(Increase) Decrease in
Accounts receivable, trade (1,006) (40,487)
Legal settlement receivable -- 1,871,945
Inventories (29,094) (54,514)
Prepaid expenses and other current assets 2,925 (2,925)
Increase (Decrease) in
Accounts payable (76) (438,953)
Accounts payable - related parties (19,298) (39,369)
Accrued expenses 33,310 (70,996)
Accrued salaries (51,549) (132,639)
------------ ------------
Net cash (used) provided by operating activities (576,333) 515,104
------------ ------------
Cash flows from investing activities
Proceeds from sale of property and equipment 18,925 --
Purchase of property and equipment (15,108) (65,800)
------------ ------------
Net cash provided (used) by investing activities 3,817 (65,800)
------------ ------------
Cash flows from financing activities
Proceeds from notes payable 230,500 --
Principal payments on notes payable (4,573) (705,524)
------------ ------------
Net cash provided (used) by financing activities 225,927 (705,524)
------------ ------------
Net (decrease) in cash (346,589) (256,220)
Cash - beginning of year 531,684 787,904
------------ ------------
Cash - end of year $ 185,095 $ 531,684
============ ============
Supplemental cash flow information:
Actual cash payments for:
Interest - related parties $ -- $ 81,598
============ ============
Interest - other $ 1,943 $ --
============ ============
The accompanying Notes to Financials Statements are an integral part
of these financial statements
F-5
BIOLIFE SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Incorporated in 1998 in the State of Delaware as a wholly owned subsidiary of
Cryomedical Sciences, Inc. ("Cryomedical"), BioLife Solutions, Inc. ("BioLife"
or the "Company") develops, manufactures and markets low temperature
technologies for use in preserving and prolonging the viability of cellular and
genetic material for use in cell therapy and tissue engineering. The Company's
patented HypoThermosol(R) platform technology is used to provide customized
preservation solutions designed to significantly prolong cell, tissue and organ
viability. These solutions, in turn, could improve clinical outcomes for new and
existing cell and tissue therapy applications, as well as for organ
transplantation. The Company currently markets its HypoThermosol(R) line of
solutions directly to companies and labs engaged in pre-clinical research, and
to academic institutions.
In May 2002, Cryomedical implemented a restructuring and recapitalization
program designed to shift its focus away from cryosurgery toward addressing
preservation and transportation needs in the biomedical marketplace. On June 25,
2002 the Company completed the sale of its cryosurgery product line and related
intellectual property assets to Irvine, CA-based Endocare Inc., a public
company. In the transaction, the Company transferred ownership of all of its
cryosurgical installed base, inventory, and related intellectual property, in
exchange for $2.2 million in cash and 120,022 shares of Endocare restricted
common stock. In conjunction with the sale of Cryomedical's cryosurgical assets,
Cryomedical's Board of Directors also approved merging BioLife into Cryomedical
and changing its name to BioLife Solutions, Inc. In September 2002, Cryomedical
changed its name to BioLife Solutions, Inc. and began to trade under the new
ticker symbol, "BLFS" on the OTCBB. Subsequent to the merger, the Company ceased
to have any subsidiaries.
In September 2003, the Company was awarded a research grant from the National
Institute of Health for $177,000, titled "Improved Preservation of Suspended
Cells." The remaining portion of the funds from this grant was recognized in
2004, matching research related to this grant carried out in 2004. Total revenue
recognized during the year ended December 31, 2004 totaled $38,936. During the
first quarter of 2004, the Company discontinued applying for grants and now
provides services to a related entity that has become the grant recipient. (See
Note 8)
NET INCOME (LOSS) PER SHARE: Basic net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
calculated using the weighted average number of common shares plus dilutive
common stock equivalents outstanding during the period. Anti-dilutive common
stock equivalents are excluded. Common stock equivalents are stock options,
warrants and convertible preferred stock.
CASH EQUIVALENTS: Cash equivalents consist primarily of interest-bearing money
market accounts. The Company considers all highly liquid debt instruments
purchased with an initial maturity of three months or less to be cash
equivalents. The Company maintains cash balances which may exceed Federally
insured limits. The Company does not believe that this results in any
significant credit risk.
INVENTORIES: Inventories represent preservation solutions and raw materials and
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out ("FIFO") method.
ACCOUNTS RECEIVABLE: The Company has generally had favorable experience in
extending credit to a limited number of customers and the terms are usually
short term. An allowance for uncollectible accounts is established when a
specific account appears uncertain, even though the Company continues its
collection efforts. Accounts considered uncollectible are charged against the
established allowance.
F-6
FIXED ASSETS: Furniture and equipment are stated at cost and are depreciated
using the straight-line method over estimated useful lives of three to five
years. Leasehold improvements are stated at cost and are amortized using the
straight-line method over the lesser of the life of the asset or the remaining
term of the lease.
REVENUE RECOGNITION: Revenue from sales of products is recognized at the time of
shipment. The Company recognizes revenue on cost plus fixed fee basis for grant
funds received from various government agencies in the same period that expenses
relating to the grants are incurred by the Company. Expenses related to grants
are included in research and development expenses. Consulting revenue is
recognized at the completion of milestones and/or according to specific terms
within individual agreements. Management and facilities fees are recognized
during the period in which the services are performed. Customer payments
received in advance of performing the work are recorded as unearned revenue
until the Company obligation is fulfilled with respect to the payment. Upon
fulfillment of the obligation, or when the cash is earned, the revenue is
recognized and unearned revenue is offset.
INCOME TAXES: The Company accounts for income taxes using an asset and liability
method which generally requires recognition of deferred tax assets and
liabilities for the expected future tax effects of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are recognized for the future tax effects of
differences between tax bases of assets and liabilities, and financial reporting
amounts, based upon enacted tax laws and statutory rates applicable to the
periods in which the differences are expected to affect taxable income. The
Company evaluates the likelihood of realization of deferred tax assets and
provides an allowance where, in management's opinion, it is more likely than not
that the asset will not be realized.
ADVERTISING: Advertising costs are expensed as incurred and totaled $2,825 and
$19,769 for the years ended December 31, 2005 and 2004, respectively.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-7
STOCK-BASED COMPENSATION: Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), allows companies to
account for stock-based compensation either under the provision of SFAS 123 or
under the provision of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), as amended by FASB Interpretation No.
44, "Accounting for Certain Transaction Involving Stock Compensation (an
Interpretation of APB Opinion No. 25)," but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of SFAS
123 had been adopted. The Company has elected to account for its stock-based
compensation in accordance with the provisions of APB 25. The following table
illustrates the effect on loss attributable to holders of common stock and loss
per share if the Company had applied the fair value recognition provisions of
SFAS 123:
2005 2004
---------- ----------
Loss attributable to holders of common stock $(619,323) $(743,162)
Add: Stock-based employee compensation costs
included in reported net loss 8,773 --
Less: Stock-based employee compensation costs
under SFAS No. 123 (9,794) (98,568)
------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA LOSS ATTRIBUTABLE TO HOLDERS
OF COMMON STOCK $(620,344) $(841,730)
------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted net loss per share attributable
to holders of common stock as reported $ (0.05) $ (0.06)
------------------------------------------------------------------------------------------------------------------------------------
Pro forma $ (0.05) $ (0.07)
------------------------------------------------------------------------------------------------------------------------------------
Stock options and warrants granted to non-employees are accounted for in
accordance with SFAS 123 and the Emerging Issues Task Force Consensus No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services," which requires
the value of the options to be periodically re-measured as they vest over a
performance period.
The fair value of each option/warrant granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2005: expected volatility of 67%; expected
dividend yield of 0%; risk-free interest rate of 4.4% and expected lives of ten
years. No options or warrants were granted in 2004. No warrants were granted in
2005.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the financial instruments
included in the consolidated financial statements, except as otherwise discussed
in the notes to financial statements, approximates their carrying value.
BUSINESS SEGMENTS: As described above, the Company's activities are directed in
the field of hypothermic solutions. As of December 31, 2005 and 2004 this is the
Company's only business segment.
F-8
RECLASSIFICATIONS: Certain reclassifications have been made in the 2004
financial statements to conform to the 2005 presentation.
RECENT PRONOUNCEMENTS:
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 151, "Inventory Costs." This Statement amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage). In addition, this statement requires that allocation of fixed
production overhead to the costs of conversion be based on the normal capacity
of the production facilities. The provisions of this statement will be effective
for the Company beginning with its fiscal year ending 2006. The adoption of this
standard is not expected to have any material impact on the Company's financial
position, results of operations or cash flows.
In December 2004 the FASB issued SFAS 123-R. SFAS 123-R is a revision of SFAS
No. 123, as amended, Accounting for Stock-Based Compensation ("SFAS 123") and
supersedes Accounting Principles Board Opinion ("APB") No. 25, Accounting for
Stock Issued to Employees. SFAS 123-R eliminates the alternative to use the
intrinsic value method of accounting that was provided in SFAS 123, which
generally resulted in no compensation expense recorded in the financial
statements related to the issuance of equity awards to employees. SFAS 123-R
requires that the cost resulting from all share-based payment transactions be
recognized in the financial statements. SFAS 123-R establishes fair value as the
measurement objective in accounting for share-based payment arrangements and
requires all companies to apply a fair-value-based measurement method in
accounting for generally all share-based payment transactions with employees.
On January 1, 2006, the Company will adopt SFAS 123-R. Under this application,
the Company is required to record compensation expense for all awards granted
after the date of adoption and for the unvested portion of previously granted
awards that remain outstanding at the date of adoption.
Prior to the adoption of SFAS 123-R, the Company applied APB 25 to account for
its stock-based compensation. Beginning with its 2006 fiscal year, with the
adoption of SFAS 123-R, the Company will record stock-based compensation expense
for the cost of stock options. The Company believes that the adoption of this
standard will have a material impact on its future operations and financial
reporting to the extent the Company grants stock options in the future. The
effect of this standard on the Company is not determinable.
On June 1, 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections (SFAS 154), a replacement of APB No. 20, Accounting Changes and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS 154 applies to all voluntary changes in accounting principles and changes
the requirements for accounting for and reporting of a change in accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition provisions, those
provisions should be followed. This statement was issued as part of the
convergence effort with the International Accounting Standards Board (IASB). The
Company does not expect this standard to have a material impact on the Company's
financial position, results of operations, or cash flow.
2. FINANCIAL CONDITION
The Company has been unable to generate sufficient income from operations in
order to meet its operating needs. This raises doubt about the Company's ability
to continue as a going concern.
F-9
The Company has focused on generating product sales in 2004 and 2005 and will
continue to focus on this in the future. However, the Company can make no
assurances that it will be successful in generating adequate product sales to
sustain itself. In April 2006, the Company was able to raise additional capital
through the repricing and exercise of outstanding warrants and options (See Note
11). Other arrangements, if necessary to raise additional funds, may require the
Company to relinquish rights to certain of its technologies, products, marketing
territories or other assets. The failure to generate adequate product sales or
raise additional capital when needed will have a significant negative effect on
the Company's financial condition and may force the Company to curtail or cease
its activities.
These financial statements assume that the Company will continue as a going
concern. If the Company is unable to continue as a going concern, the Company
may be unable to realize its assets and discharge its liabilities in the normal
course of business. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
to amounts and classification of liabilities that may be necessary should the
Company be unable to continue as a going concern.
3. LEGAL SETTLEMENT
On February 25, 2004, the Company collected $1,887,474 from Endocare, Inc. for
damages, interest, and legal fees in connection with a lawsuit that settled on
October 10, 2003. The lawsuit arose after the Company sold its cryosurgery
product line and intellectual property to Endocare in 2002. In the lawsuit, the
Company claimed damages of $1,648,935, comprising the proceeds that could have
been realized had Endocare properly registered the Stock, that was given to the
Company as part of the exchange, within the time frame set forth in the
Registration Rights Agreement entered into between the parties.
4. INVENTORIES
Inventories consist of the following at December 31, 2005 and 2004:
2005 2004
-------------------------
Raw materials $ 23,393 $46,340
Finished goods 100,020 47,979
------------------------------------------------------------------------------
TOTAL $123,413 $94,319
------------------------------------------------------------------------------
F-10
5. NOTES PAYABLE
At December 31, 2005 and 2004, notes payable consisted of the following:
2005 2004
------------------- -- --------------------
NOTES PAYABLE:
Note payable to Tioga County LDC, secured by all assets, payable in monthly
installments of $3,258, including interest of 5%,
final payment due on October 1, 2012. $ 225,927 $ -
-------------------------------------------------------------------------------------------------------------------------------
TOTAL NOTES PAYABLE 225,927 -
Less: current portion 28,450 -
-------------------------------------------------------------------------------------------------------------------------------
Long-term portion $ 197,477 $ -
===============================================================================================================================
The following is a schedule of future principal maturities of long-term debt:
Year Ending
December 31 Amount
-------------------------------------------------
2006 $ 28,450
2007 29,905
2008 31,435
2009 33,043
2010 34,734
Thereafter 68,360
--------------------------------------------------
Total $ 225,927
------------------------- -- ---------------------
F-11
6. INCOME TAXES
Income tax benefit reconciled to tax calculated at statutory rates is as
follows:
2005 2004
-------------------------------------------
Federal tax (benefit) at statutory rate $ (210,570) $ (252,675)
State income tax (benefit), net of federal tax (30,656) (36,787)
Expiration of net operating loss carryforwards 680,379 183,758
Expiration of tax credits 42,000 20,000
Change in valuation allowance (505,943) 83,424
Other 24,790 2,280
------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES, NET $ -- $ --
------------------------------------------------------------------------------------------------------
At December 31, 2005 and 2004, the components of the Company's deferred taxes
are as follows:
2005 2004
--------------------------------------------
Deferred tax assets (liabilities)
Net operating loss carryforwards $ 13,582,867 $ 14,043,789
Tax credits 655,000 697,000
Accrued compensation 27,771 38,879
Depreciation 5,203 (2,884)
Other 5,258 5,258
-------------------------------------------------------------------------------------------------------
TOTAL 14,276,099 14,782,042
Less: Valuation allowance (14,276,099) (14,782,042)
-------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSET $ -- $ --
-------------------------------------------------------------------------------------------------------
The Company provides a valuation allowance for deferred tax assets when, in its
opinion it is more likely than not that they will not be realized.
F-12
The Company has the following net operating loss and research and development
(R&D) tax credit carryforwards available at December 31, 2005:
Net R&D
Operating Tax
Year of Expiration Losses Credits
------------------------------------------------------------------------------------------------------------
2006 $ 2,523,000 $ 88,000
2007 4,505,000 125,000
2008 5,893,000 150,000
2009 1,431,000 114,000
2010 1,562,000 145,000
2011 5,277,000 33,000
2012 1,570,000 --
2013 1,425,000 --
2014 1,234,000 --
2020 2,849,000 --
2021 4,168,000 --
2023 1,217,000 --
2024 646,000 --
2025 573,000 --
------------------------------------------------------------------------------------------------------------
TOTAL $ 34,873,000 $ 655,000
------------------------- ----------------------------------------------------------------------------------
In the event of a significant change in the ownership of the Company, the
utilization of such loss and tax credit carryforwards could be substantially
limited.
7. STOCKHOLDERS' EQUITY
PREFERRED SERIES F STOCK: In October 2001, the Company completed a private
placement of 5,000 Units, raising approximately $1,000,000. Each Unit was priced
at $200.01 and consisted of two shares of Series F convertible preferred stock,
convertible into 800 shares of common stock, and one warrant to purchase 400
shares of common stock at $0.375 per share, on or before October 2006. The
Company retained an advisor to assist the Company in finding qualified investors
to purchase the Units. The Advisor was entitled to a finder's fee equal to 10
percent of the monies received by the Company, payable in Units valued at
$200.01 per Unit. The Advisor was also entitled to a cash fee of 7 percent with
respect to the monies received by the Company upon exercise of the warrants. The
Units were placed with investors in the United States and Europe, and the sales
of the Units were exempt from Registration under the Securities Act pursuant to
Rule 506 of Regulation D and Rule 903 of Regulation S.
In December 2001, the Company received an additional $200,000 after completing a
private placement of an additional 1,000 Units under the same terms as the Units
issued in October 2001.
In connection with the private placement of Units in 2001, the Company issued
warrants to purchase 240,000 shares of the Company's common stock to the
Advisor.
The key rights of the Series F convertible preferred stock, par value $0.001,
issued in the Unit financing include the following:
F-13
Dividends - Series F preferred stockholders are entitled to annual
cumulative dividends at the rate of $10.00 per share payable in the
Company's common stock. The number of common shares to be issued for
dividend purposes is based upon the market value of the common stock on
the date such dividends are declared. No dividends were declared or
paid during 2005 and 2004 on the preferred stock. The Series F
preferred is adjusted for dividends paid to common stockholders so that
each preferred stockholder will receive the same number of shares of
common stock which the stockholder would have owned or been entitled to
receive before the dividend. At December 31, 2005 and 2004 dividends in
arrears on the cumulative preferred stock were $507,808 and $387,808,
respectively.
Conversion Rights - Each Series F preferred share is convertible, at
any time, into 400 shares of common stock. In the event the closing
price for the common stock is $0.75 or greater for 10 consecutive
trading days, the Series F preferred stock shall automatically be
converted into common stock at 400 shares of common stock for each
share of preferred stock.
Voting Rights - The Series F preferred stock has full voting rights on
all matters that holders of common stock are entitled to vote and are
entitled to one vote for each share of common stock into which the
Series F preferred stock held is convertible. In the event of a
proposed dissolution, liquidation or winding up of the Company, or a
sale of all or substantially all of the assets of the Company (other
than in connection with a consolidation or merger), the affirmative
vote of the holders of at least two thirds of the outstanding shares of
Series F preferred stock is required.
Senior Ranking - The Company may not issue a security with rights and
preferences that are senior to those of the holders of Series F
preferred stock. Series F preferred stock and Series G preferred stock
are equal in their seniority.
Liquidation Preference - In the event of any liquidation, dissolution,
or winding up of the Company, the Series F preferred stockholders are
entitled to receive, before any distribution to any other class of
stock ranking junior to the Series F preferred stock, liquidating
distribution in the amount of $150.00 per share and all unpaid
dividends.
PREFERRED SERIES G STOCK: In December 2003, the Company completed a private
placement of 55.125 Units, raising $1,226,533 in cash, net of issuance costs of
$23,467 and $128,125 as payment of accrued salaries to certain employees. Each
Unit was priced at $25,000 and consisted of one share of Series G convertible
non-redeemable preferred stock, convertible into 312,500 shares of common stock,
and one warrant to purchase 312,500 shares of common stock at $0.08 per share,
on or before October 2013. The Units were placed with investors in the United
States and Europe, and the sales of the Units were exempt from Registration
under the Securities Act pursuant to Rule 506 of Regulation D and Rule 903 of
Regulation S.
In connection with the issuance of the Series G preferred stock, the Company
recorded a deemed dividend of $521,000 in accordance with the accounting
requirements for a beneficial conversion feature. The proceeds received in the
Series G offering were first allocated between the convertible instrument and
the Series G warrant on a relative fair value basis. A calculation then was
performed to determine the difference between the effective conversion price and
the fair market value of the common stock at the date of issuance.
The key rights of the Series G convertible preferred stock, par value $0.001,
issued in the Unit financing include the following:
Dividends - Series G preferred stockholders are entitled to annual
cumulative dividends at the rate of $1,875 per share payable at the
option of the Company in cash or shares of common stock. The number of
common shares to be issued for dividend purposes is based upon the
average market value of the common stock for the thirty calendar days
immediately prior to the date such dividends are declared. No dividends
have been declared or paid on the preferred stock. At December 31, 2005
and 2004, dividends in arrears on the cumulative preferred stock were
$217,181 and $113,821 , respectively.
F-14
Conversion Rights - Each Series G preferred share is convertible, at
any time, into 312,500 shares of common stock and the Company will
reserve authorized and unissued shares of common stock in the event of
conversion. The conversion ratio is subject to equitable adjustment for
stock splits, stock dividends, combinations or similar transactions.
Voting Rights - The Series G preferred stock has full voting rights on
all matters that holders of common stock are entitled to vote and are
entitled to one vote for each share of common stock into which the
Series G preferred stock held is convertible. In the event of a
proposed dissolution, liquidation or winding up of the Company, or a
sale of all or substantially all of the assets of the Company (other
than in connection with a consolidation or merger), the affirmative
vote of the holders of at least two thirds of the outstanding shares of
Series G preferred stock is required.
Senior Ranking - The Company may not issue a security with rights and
preferences that are senior to those of the holders of Series G
preferred stock. Series G preferred stock and Series F preferred stock
are equal in their seniority.
Liquidation Preference - In the event of any liquidation, dissolution,
or winding up of the Company, the Series G preferred stockholders are
entitled to receive, before any distribution to any other class of
stock ranking junior to the Series G preferred stock, liquidating
distributions in the amount of $25,000 per share and all unpaid
dividends.
WARRANTS: In August 2003, the Company issued to Breslow & Walker, LLP (Breslow),
the Company's general counsel, and de Greef & Partners, LLC (deGreef), a
consultant for the Company five-year warrants, to purchase 282,910 and 252,500
shares, respectively, of the Company's common stock at $0.08 per share for
professional services rendered.
In connection with the issuance of 12-month promissory notes in March and May
2003, the Company issued four separate five-year warrants to purchase an
aggregate of 2,000,000 shares of the Company's common stock at $0.08 per share.
In August 2003, the Company issued six separate five-year warrants to purchase
an aggregate of 1,022,885 shares of the Company's common stock at $0.08 per
share to employees as a payment of accrued payroll liabilities for services
performed.
F-15
The following table summarizes warrant activity for the years ended December 31,
2005 and 2004:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
-----------------------------------------------------------------------
Wgtd. Avg. Wgtd. Avg.
Exercise Exercise
Shares Price Shares Price
--------------------------------------------------------------------------------------------------------------
Outstanding at beginning
of year 27,266,858 $ 0.20 27,268,858 $ 0.20
Cancelled -- -- (2,000) (2.00)
--------------------------------------------------------------------------------------------------------------
Outstanding at end of year 27,266,858 $ 0.20 27,266,858 $ 0.20
--------------------------------------------------------------------------------------------------------------
Warrants exercisable at
year end 27,266,858 $ 0.20 27,266,858 $ 0.20
--------------------------------------------------------------------------------------------------------------
STOCK COMPENSATION PLANS: The Company's 1988 Stock Option Plan was approved and
adopted by the Board of Directors in July 1988 and had a term of ten years. The
plan expired in 1998. The options are exercisable for up to ten years from the
grant date.
During 1998, the Company adopted the 1998 Stock Option Plan. Under the plan, an
aggregate of 4,000,000 shares of common stock are reserved for issuance upon the
exercise of options granted under the plan. In September 2005, the shareholders
approved an increase in the number of shares available for issuance to
10,000,000 shares. The purchase price of the common stock underlying each option
may not be less than the fair market value at the date the option is granted
(110% of fair market value for optionees that own more than 10% of the voting
power of the Company). The options are exercisable for up to ten years from the
grant date. The plan expires August 30, 2008.
On September 28, 2005, the Company issued options to outside consultants to
purchase 810,000 common shares. The fair value of the options granted was
determined under the Black-Scholes option-pricing model using the assumptions
described in Note 1, "Stock-based compensation". The weighted average grant date
fair value of options issued in 2005 was $0.07 per share.
The following is a summary of stock option activity under the plans for 2005 and
2004, and the status of stock options outstanding and available under the plans
at December 31, 2005 and 2004:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
---------------------------------------------------------------------------
Wgtd. Avg. Wgtd. Avg.
Exercise Exercise
Shares Price Shares Price
--------------------------------------------------------------------------------------------------------------
Outstanding at beginning
of year 4,156,000 $ 0.44 4,176,000 $ 0.49
Granted 2,660,000 0.08 -- --
Cancelled (1,250,000) (0.25) (20,000) (10.63)
--------------------------------------------------------------------------------------------------------------
Outstanding at end of year 5,566,000 $ 0.31 4,156,000 $ 0.44
--------------------------------------------------------------------------------------------------------------
Stock options exercisable at
year end 3,511,000 $ 0.41 2,906,000 $ 0.52
---------------------------------------------------------------------------------------------------------------
F-16
The following table summarizes information about stock options outstanding at
December 31, 2005:
Weighted
Number Average Weighted
Range of Outstanding Remaining Average
Exercise at December Contractual Exercise
Prices 31, 2005 Life Price
---------------------------------------------------------------------------------------
$ 0.08 2,660,000 9.74 $ 0.08
0.25 2,150,000 6.08 $ 0.25
1.25 741,000 2.91 $ 1.25
2.50 15,000 1.11 $ 2.50
-----------------------------------------------
5,566,000 7.39 $ 0.31
-----------------------------------------------
In September 2005, the shareholders approved an increase in the number of
authorized shares of common stock from 25,000,000 shares to 100,000,000 shares.
At December 31, 2005 and 2004, 12,413,209 shares are issued. At December 31,
2005, there are 58,844,226 of common stock that could be issued upon the
conversion/exercise of stock warrants, options and convertible preferred stock.
The following table summarizes the potential shares to be issued upon
conversion/exercise of the above instruments:
Series F preferred stock 4,800,000
Series F preferred stock dividends 4,229,108
Series G preferred stock 17,226,563
Series G preferred stock dividends 1,810,697
Common stock options 3,511,000
Common stock warrants 27,266,858
----------------------------------------------------------------------
Total 58,844,226
----------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS
The Company incurred $59,817 and $80,118 in legal fees during the years ended
December 31, 2005 and 2004, respectively, for services provided by a law firm in
which a director and stockholder of the Company is a partner. In 2005, the
Company granted options to purchase 250,000 shares of common stock to this
director and stockholder with an exercise price of $0.08 which vested
immediately upon grant and have a life of 10 years. At December 31, 2005 and
2004, accounts payable includes $8,729 and $28,027, respectively, due to the
related party for services rendered.
On March 15, 2004, the Company entered into three year Research Agreement with
Cell Preservation Services, Inc. ("CPSI") to outsource to CPSI all of the
Company's research that was funded through SBIR grants. CPSI is owned by a
former employee of BioLife and who is also the son of the Chief Executive
Officer of the Company. The Research Agreement established a format pursuant to
which CPSI (a) took over the processing of existing applications of SBIR grants
applied for by BioLife, (b) applied for additional SBIR grants for future
research projects, (c) performed a substantial portion of the principal work to
be done, in terms of (i) time spent, and (ii) research, in connection with
existing and future projects, and (d) utilized BioLife personnel as consultants
with respect to the research. In conjunction therewith BioLife granted to CPSI a
non-exclusive, royalty free license (with no right to sublicense) to use
BioLife's technology soley for the purpose of conducting the research in
connection with the projects. Pursuant to the Research Agreement BioLife
provides CPSI with (a) facilities in which to conduct the research including
basic research equipment and office equipment, and (b) management services.
During the year ended December 31, 2005, the Company recognized $109,714 and
$60,342 for facilities and management services, respectively. During the year
ended December 31, 2004, the Company recognized $117,858 and $64,822 for
facilities and management services, respectively. At December 31, 2005 and 2004,
the Company was due $1,321 and $2,290 from CPSI, respectively.
F-17
Effective January 8, 2004, the Company entered into a non-cancelable operating
lease for its corporate and manufacturing facilities in Owego, New York that
expires in February 2007. The lease requires payments of $6,200 per month. The
building is partially owned by the Company's CEO. For the years ended December
31, 2005 and December 31, 2004, the Company paid $74,400 and $62,000,
respectively.
9. COMMITMENTS
LEASES: The Company leases equipment as lessee, under an operating lease
expiring in October 2010.
The following is a schedule of future minimum lease payments required under the
operating leases:
Year Ending Office
December 31 Equipment (Note 8) Total
--------------------------------------------------------------------------------
2006 $ 4,044 $ 74,400 $ 78,444
2007 4,044 12,400 16,444
2008 4,044 -- 4,044
2009 4,044 -- 4,044
2010 3,370 -- 3,370
--------------------------------------------------------------------------------
Total $ 19,546 $ 86,800 $ 106,346
--------------------------------------------------------------------------------
Rental expense for facilities and equipment operating leases for the years ended
December 31, 2005 and 2004, totaled $100,999 and $86,647, respectively.
EMPLOYMENT AGREEMENT: The Company has an employment agreement with the CEO of
the Company expiring June 30, 2006. The agreement provides for certain minimum
compensation per month and incentive bonuses at the discretion of the Board of
Directors. Under certain conditions, the Company may be required to continue to
pay the base salary for a period of one year.
10. CONCENTRATION OF RISK
SIGNIFICANT CUSTOMERS: Sales to individual customers representing more than 10%
of total revenues totaled approximately $362,000 and $396,000 in 2005 and 2004,
respectively. These amounts represent sales to two customers in 2005 and three
customers in 2004. Of the $362,000 in 2005, approximately $178,000 was derived
from management fees, facilities fees, and product sales to CPSI, a related
party (See Note 8). Of the $396,000 in 2004, approximately $197,000 was derived
from management fees, facilities fees, and product sales to CPSI. Pursuant to
the Research Agreement BioLife provides CPSI with (a) facilities in which to
conduct the research including basic research equipment and office equipment,
and (b) management services. During the year ended December 31, 2005, the
Company recognized $109,714 and $60,342 for facilities and management services,
respectively as compared to $117,858 and $64,822 for facilities and management
services, respectively in 2004.
At December 31, 2005, two customers accounted for approximately 72% of total
accounts receivable, and at December 31, 2004, three customers accounted for
approximately 85% of total accounts receivable.
F-18
11. SUBSEQUENT EVENT
In March 2006, in order to secure much needed capital, the Board of Directors
approved a plan to raise additional capital from the holders of its outstanding
warrants and stock options in order to a) prevent further dilution by the
issuance of additional securities to outsiders, and (b) to restructure the
capitalization of the Company. Through April 12, 2006, the Company was able to
raise $773,180 through (a) the exercise of warrants to purchase 20,438,783
shares of the Company's Common Stock at $0.04, and (b) the exercise of stock
options to purchase 2,477,000 shares of the Company's Common Stock at $0.04.
The offering was conditioned upon all shares of the Company's Series F Preferred
Stock and Series G Preferred Stock converting into Common Stock of the Company.
As a result, 12,000 shares of the Company's Series F Preferred Stock were
converted to 4,800,000 shares of Common Stock and 55.125 shares of the Company's
Series G Preferred Shares were converted to 17,226,563 shares of Common Stock.
F-19
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 8A. CONTROLS AND PROCEDURES
As of the end of the period covered by this Annual Report on Form 10-KSB, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the CEO/CFO, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's CEO/CFO concluded that the Company's disclosure controls and
procedures are effective in timely alerting him to material information relating
to the Company required to be included in the Company's periodic SEC filings.
Subsequent to the end of the 2nd quarter of 2005, the Company uncovered a
deficiency in its internal control over financial reporting regarding the
counting of physical inventory. Specifically, the Company discovered that there
were finished good lots that were not counted during the physical inventory
count at the end of the 2nd quarter of 2005. This had the affect of understating
inventory and overstating the loss for the period covered by the quarterly
report of Form 10QSB. As a result thereof, the Company adopted new internal
control procedures with respect to physical inventory counts for raw materials,
goods in progress and finished goods and remitted an amended 10-QSB for the 2nd
quarter of 2005 to correct the error.
There were no significant changes in the Company's internal control over
financial reporting during the quarterly period ended December 31, 2005 that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
21
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and text set forth the names and ages of all directors and
executive officers of the Company as of March 31, 2006. The Board of Directors
is comprised of only one class. All of the directors will serve until the next
annual meeting of shareholders, which is anticipated to be held in 2006, and
until their successors are elected and qualified, or until their earlier death,
retirement, resignation or removal. There are no family relationships among
directors and executive officers. Also provided herein are brief descriptions of
the business experience of each director and executive officer during the past
five years (based on information supplied by them) and an indication of
directorships held by each director in other companies subject to the reporting
requirements under the Federal securities laws.
Position and Offices
Name Age With the Company
---- --- --------------------
John G. Baust, Ph.D. 63 Chief Executive Officer,
President, and Director
Richard O'Hara 36 Controller
Howard S. Breslow 66 Director, Secretary
Roderick de Greef 45 Director
Thomas Girschweiler 48 Director
John G. Baust, Ph.D., has been President and Chief Executive Officer of the
Company since June 2002. Previously he was Senior Vice President of the Company
since January 1995, Chief Scientific Officer since August 1993, served as Vice
President, Research and Development, of the Company from July 1990 to January
1995, and served as a consultant to the Company from April 1990 to July 1990.
Dr. Baust became a director of the Company on October 13, 2000. Since 1987, Dr.
Baust has also been a Professor and the Director of the Center for
Cryobiological Research at State University of New York at Binghamton, and since
July 1994, Dr. Baust has also been Adjunct Professor of Surgery, Medical College
of Pennsylvania. From 1984 to 1987, he was a Professor and the Director of the
Institute of Low Temperature Biology at the University of Houston.
Richard O'Hara served as an accounting consultant with the Company since
December 2003 and was hired as Controller in January 2004. Prior to joining
BioLife, he served as the Senior Vice President of Operations of E-Base
Interactive, Inc., a software development company in upstate New York from
January 2001 to November 2003 and Project Manager from January 2000 to December
2000. From January 1998 to December 1999, Mr. O'Hara served as the Director of
Operations of Dine-A-Mate, Inc. Prior to his position as the Director of
Operations of Dine-A-Mate, he served as Head Project Manager where he managed
multi-million dollar accounts. Mr. O'Hara earned his MBA from the State
University of New York at Albany in 1993 and his Bachelor's Degree in
Economics-Management from Ithaca College in 1991.
Howard S. Breslow has served as a director of the Company since July 1988. He
has been a practicing attorney in New York City for more than 35 years and is a
member of the law firm of Breslow & Walker, LLP, New York, New York, which firm
serves as general counsel to the Company. Mr. Breslow currently serves as a
director of Excel Technology, Inc., a publicly-held company engaged in the
development and sale of laser products.
22
Roderick de Greef has served as a director of the Company since June 19, 2000.
From March 2001 to September 2005, Mr. de Greef has served as Executive Vice
President, Chief Financial Officer and Secretary of Cardiac Sciences, Inc., a
public company traded on NASDAQ, under the ticker "DFIB". In October 2005, Mr.
de Greef became the Chief Financial Officer of Cambridge Heart, Inc., a medical
device manufacturer located in Bedford, MA. Since 1995 Mr. de Greef has provided
corporate finance advisory services to a number of early-stage companies,
including the Company, where he was instrumental in securing the Company's
equity capital beginning in June 2000, and advising on merger and acquisition
activity. From 1989 to 1995, Mr. de Greef was Vice President and Chief Financial
Officer of BioAnalogics, Inc. and International BioAnalogics, Inc., publicly
held, development stage medical technology companies located in Portland,
Oregon. From 1986 to 1989, Mr. de Greef was Controller and then Chief Financial
Officer of Brentwood Instruments, Inc., a publicly held cardiology products
distribution company based in Torrance, California. Mr. de Greef has a B.A. in
Economics and International Relations from California State University at San
Francisco and an M.BA. from the University of Oregon.
Thomas Girschweiler joined the Board in 2003. Mr. Girschweiler has been engaged
in corporate financing activities on his own behalf since 1996. From 1981 to
1996 he was an investment banker with Union Bank of Switzerland. Thomas
Girschweiler was graduated at the Swiss Banking School.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers, directors, and beneficial owners of more than
10% of any class of its equity securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 (collectively, the "Reporting Persons") are
required to file reports of ownership and changes in beneficial ownership of the
Company's equity securities with the Securities Exchange Commission. Copies of
those reports also must be furnished to the Company. Based solely on a review of
copies of the reports furnished to the Company, the Company believes that during
the fiscal year ended December 31, 2005 all of these filing requirements have
been satisfied.
CODE OF ETHICS
The Company has always encouraged its employees, including officers and
directors to conduct business in an honest and ethical manner. Additionally, it
has always been our policy to comply with all applicable laws and provide
accurate and timely disclosure. Although we did not have a formal written code
of ethics for the 2005 fiscal year, due to the abundance of tasks associated
with marketing our products, the Board has adopted formal written codes of
ethics for both our executive officers and for our directors.
Our codes of ethics are designed to deter wrongdoing and promote honest and
ethical conduct and compliance with applicable laws and regulations. These codes
also incorporate our expectations of our executives that enable us to provide
accurate and timely disclosure in our filings with the Securities and Exchange
Commission and other public communications. Our codes of ethics is posted on our
website, www.BioLifeSolutions.com. Any future changes or amendments to our code
of ethics, and any waiver of our codes of ethics will also be posted on our
website when applicable.
NO AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT:
The Company does not have an audit committee or an audit committee financial
expert. The Company does not believe, based upon its present operations, that
the failure to have such a committee or expert is material to the financial
controls of the Company.
23
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
paid by the Company to its Chief Executive Officer and to each of its executive
officers (other than the Chief Executive Officer) who received salary and bonus
payments in excess of $100,000 during the fiscal year ended December 31, 2005
(collectively the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------- ----------------------------------------------------
Awards Payouts
------------------------ ------------------------
Restricted
Name and Principal Fiscal Salary Bonus Other Annual Stock Options/ LTIP All Other
Positions Year ($) ($) Compensation ($) Award(s) SARs (#) Payouts Compensation
------------------------ -------- --------- --------- ---------------- ---------- ----------- -------- ------------
John G. Baust, Ph.D 2005 220,000(2) -- -- -- 1,000,000 -- --
President, Chief 2004 240,000 -- -- -- -- -- --
Executive Officer and 2003 240,000 -- 7,490 (1) -- -- -- --
Director 2002 202,369 50,000 3,600 (1) -- 1,000,000 -- --
2001 180,000 -- 7,846 (1) -- 1,000,000 -- --
(1) Represents auto allowance
(2) Includes voluntary salary reduction in 2005 of $20,000 to support cash flow
24
OPTION/SAR GRANTS IN YEAR-ENDED DECEMBER 31, 2005
In 2005, the Company issued 1,000,000 options to purchase shares of Common Stock
to its executive officers. This grant is a ten-year non-incentive stock option
to purchase 1,000,000 shares of the Company's common stock, at $0.08 per share,
which vests to the extent of 250,000 shares on the first day of the month
following the first anniversary and 20,833 shares on the first day of each of
the next 36 months.
AGGREGATED OPTION/SAR EXERCISES DURING THE 2005 FISCAL YEAR AND THE 2005 FISCAL
YEAR OPTION/SAR VALUES
The following table provides information related to options exercised by each of
the Named Executive Officers during the 2005 fiscal year and the number and
value of options held at December 31, 2005. The Company does not have any
outstanding stock appreciation rights.
Number of Securities Value of Unexercised
Underlying Unexercised in the money
Options/SAR Options/SAR
At Fiscal Year End 12/31/05 At Fiscal Year End 12/31/05
--------------------------- ---------------------------
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
John G. Baust, Ph.D. -- -- 1,942,000 1,600,000 -- $40,000
----------------------------------------
(1) The closing price for the Common Stock as reported on the OTC Bulletin Board
on December 31, 2005 was $0.12. Value is calculated on the basis of the
difference between the option exercise price and $0.12 multiplied by the
number of shares of Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with its President and Chief Executive
Officer which expired on June 30, 2005 and automatically renewed for an
additional year expiring on June 30, 2006. The agreement provides for a salary
of $20,000 per month and an incentive bonus based on certain milestones, as
agreed by the discretion of the Board of Directors. The officer also received a
$50,000 signing bonus and ten-year incentive stock options to purchase 1,000,000
shares of common stock, which vest 200,000 on each anniversary of the grant. The
agreement also provides an automobile allowance of $600 per month.
The Company also had an employment agreement with its Vice President, Sales and
Marketing. The agreement, which expired October 31, 2004, provided for a salary
of $12,500 per month and an incentive bonus based on certain milestones, as
agreed by the discretion of the Board of Directors, and ten-year incentive stock
options to purchase 400,000 shares of common stock. The Vice President
terminated employment in 2005 and his options were cancelled.
Each officer has executed a Proprietary Information and Inventions Agreement
pursuant to which each agreed, among other things, to keep the Company's
information confidential and assigned all inventions to the Company, except for
certain personal inventions not related to the Company's work, whether existing
or later developed.
25
CONSULTANTS
At December 31, 2005, various consultants to the Company held exercisable
warrants to purchase an aggregate of 2,537,410 shares of Common Stock.
Consultants to the Company have either received warrants to purchase Common
Stock or are entitled to cash compensation. No consultant has agreed to devote
any specified amount of time to Company activities.
Consultants to the Company may be employed by or have consulting agreements with
entities other than the Company, some of which may conflict or compete with the
Company, and the advisors and consultants are expected to devote only a small
portion of their time to the Company. Most are not expected to actively
participate in the Company's development. Certain of the institutions with which
the advisors and consultants are affiliated may have regulations and policies
which are unclear with respect to the ability of such personnel to act as
part-time consultants or in other capacities for a commercial enterprise.
Regulations or policies now in effect or adopted in the future might limit the
ability of the advisors and consultants to consult with the Company. The loss of
the services of certain of the advisors and consultants could adversely affect
the Company.
Furthermore, inventions or processes discovered by the advisors and consultants
will not, unless otherwise agreed, become the property of the Company but will
remain the property of such persons or of such persons' full-time employers. In
addition, the institutions with which the advisors and consultants are
affiliated may make available the research services of their scientific and
other skilled personnel, including the advisors and consultants, to entities
other than the Company. In rendering such services, such institutions may be
obligated to assign or license to a competitor of the Company patents and other
proprietary information which may result from such services, including research
performed by an advisor or consultant for a competitor of the Company.
COMPENSATION OF DIRECTORS
Directors are not compensated for attending board meetings or for telephonic
board meetings.
Howard S. Breslow, a director of the Company, is a member of Breslow & Walker,
LLP, general counsel to the Company. Mr. Breslow currently owns 53,600 shares of
Common Stock of the Company and holds options to purchase an aggregate of
2,477,910 additional shares pursuant to stock options and warrants issued to him
and/or affiliates. During the period ended December 2005, Breslow & Walker, LLP
billed the Company approximately $60,000 for legal fees.
26
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 30, 2006, certain information
regarding the beneficial ownership of Common Stock and Series F Preferred Stock
and Series G Preferred Stock by (i) each stockholder known by the Company to be
the beneficial owner of more than 5% of the outstanding shares thereof; (ii)
each director of the Company; (iii) each Named Executive Officer of the Company;
and (iv) all of the Company's current directors and executive officers as a
group.
Name and Address Common Stock Series F Preferred Series G Preferred
of Beneficial Owner (% of class)(1) (% of class) (% of class)
-------------------------------------------------------------------------------------------------------------------------------
John G. Baust (Director, Executive Officer)
c/o BioLife Solutions, Inc.
171 Front Street 3,668,270 (22.8%)(2) -- 2.125 (3.9%)
Owego, NY 13827
Howard S. Breslow, Esq. (Director)
c/o Breslow & Walker, LLP
767 Third Avenue 2,531,510 (17.0%)(3) -- --
New York, NY 10017
Roderick de Greef (Director)
c/o BioLife Solutions, Inc.
171 Front Street 4,630,119 (27.9%)(4) 1,000 (8.3%) 4.0 (7.3%)
Owego, NY 13827
Walter Villiger
Paradiesstrasse 25
CH-8645 17,760,474 (59.7%)(5) 5,000 (41.7%) 18.0 (32.7%)
Jona Switzerland
Thomas Girschweiler (Director)
Wissmannstrasse 15 13,291,912 (52.8%)(6) 3,450 (28.8%) 10.0 (18.1%)
8057 Zurich, Switzerland
Karl-Heinz Illenseer
Wissmannstrasse 15 2,072,003 (14.3%)(7) -- 6.0 (10.9%)
8057 Zurich, Switzerland
Clariden Bank
Claridenstrasse 26
Postfach 5080 2,703,653 (18.9%)(8) 2,000 (16.7%) --
CH-8022 Zurich, Switzerland
Richard Molinsky
c/o BioLife Solutions, Inc.
171 Front Street 2,632,021 (17.5%)(9) -- 4.0 (7.3%)
Owego, NY 13827
Beskivest Chart LTD
Goodmans Bay Center 7,136,986 (36.5%)(10) -- 8.0 (14.5%)
West Bay Street & Sea View Drive
Nassau, Bahamas
Robert Van Buskirk 1,108,992 (8.2%)(11) -- 1 (1.8%)
c/o CPSI, 2 Court Street
Owego, New York 13827
Eddy Kauffmann 727,397 (5.5%)(12) 500 (4.2%) --
5 Chester Close
London SW1 7BE UK
John M. Baust 1,098,397(8.1%)(13) -- 1 (1.8%)
c/o CPSI, 2 Court Street
Owego, New York 13827
All officers and directors as a group 24,121,811 (33.9%) 4,450 (37.1%) 16.125 (29.3%)
(four persons)
27
-------------------------------------------------------------
(1) Shares of Common Stock subject to options and warrants currently
exercisable or exercisable within 60 days of December 31, 2005 are
deemed outstanding for computing the number of shares and the
percentage of the outstanding shares held by a person holding such
options or warrants, but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the Company
believes that the persons named in the table have sole voting and
investment power with respect to all shares shown as beneficially owned
by them.
(2) Includes 1,942,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 664,063 shares of Common Stock issuable upon the
conversion of Series G Preferred Stock, 990,618 shares of Common Stock
issuable upon the exercise of outstanding warrants, and 71,589 shares
of Common Stock, 67,589 of which were earned as dividend on Preferred
Stock.
(3) Includes 399,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 2,078,910 shares of Common Stock issuable upon the
exercise of outstanding warrants owned of record by Breslow & Walker,
LLP (1,358,910) and B & W Investments (720,000), both of which are
entities in which Mr. Breslow is a partner, and 53,600 common shares.
(4) Includes 250,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 400,000 shares of Common Stock issuable upon the
conversion of Series F Preferred Stock, 1,250,000 shares of Common
Stock issuable upon the conversion of Series G Preferred Stock,
1,814,000 shares of Common Stock issuable upon the exercise of
outstanding warrants, and 916,119 shares of Common Stock, 482,819 of
which were earned as dividend on Preferred Stock.
(5) Includes 2,000,000 shares of Common Stock issuable upon the conversion
of Series F Preferred Stock, 5,625,000 shares of Common Stock issuable
upon the conversion of Series G Preferred Stock, 7,375,000 shares of
Common Stock issuable upon the exercise of outstanding warrants, and
2,760,474 shares of Common Stock, 2,360,474 of which were earned as
dividend on Preferred Stock.
(6) Includes 250,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 1,380,000 shares of Common Stock issuable upon the
conversion of Series F Preferred Stock, 3,125,000 shares of Common
Stock issuable upon the conversion of Series G Preferred Stock,
6,455,000 shares of Common Stock issuable upon the exercise of
outstanding warrants, and 2,081,912 shares of Common Stock, 1,543,852
of which were earned as dividend on Preferred Stock.
(7) Includes 1,875,000 shares of Common Stock issuable upon the conversion of
Series G Preferred Stock and 197,003 shares of Common Stock earned as
dividend on Preferred Stock.
(8) Includes 800,000 shares of Common Stock, 800,000 shares of Common Stock
issuable upon the conversion of Series F Preferred Stock, 400,000
shares of Common Stock issuable upon the exercise of outstanding
warrants, and 703,653 shares of Common Stock earned as dividend on
Preferred Stock.
(9) Includes 1,250,000 shares of Common Stock issuable upon the conversion
of Series G Preferred Stock, 1,250,000 shares of Common Stock issuable
upon the exercise of outstanding warrants, and 132,021 shares of Common
Stock earned as dividend on Preferred Stock.
(10) Includes 2,500,000 shares of Common Stock issuable upon the conversion
of Series G Preferred Stock, 4,375,000 shares of Common Stock issuable
upon the exercise of outstanding warrants, and 261,986 shares of Common
Stock earned as dividend on Preferred Stock.
(11) Includes 275,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 312,500 shares of Common Stock issuable upon the
conversion of Series G Preferred Stock, 489,685 shares of Common Stock
issuable upon the exercise of outstanding warrants, and 31,807 shares
of Common Stock earned as dividend on Preferred Stock.
(12) Includes 200,000 shares of Common Stock issuable upon the conversion of
Series F Preferred Stock, 350,000 shares of Common Stock issuable upon
the exercise of outstanding warrants, and 177,397 shares of Common
Stock earned as dividend on Preferred Stock.
(13) Includes 250,000 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Company's 1988 and 1998 Stock
Option Plans, 312,500 shares of Common Stock issuable upon the
conversion of Series G Preferred Stock, 504,090 shares of Common Stock
issuable upon the exercise of outstanding warrants, and 31,807 shares
of Common Stock earned as dividend on Preferred Stock.
28
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
Number of securities to be Number of securities
issued upon exercise of remaining available
outstanding options Weighted average exercise for future issuance
Plan category (in thousands) price of outstanding options (in thousands)
------------- -------------- ---------------------------- -------------
Equity compensation plans approved
by security holders 5,566 $.30 0
Equity compensation plans not
approved by security holders 0 0 0
Total 5,566 $.30 0
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2004, the Company elected to discontinue engaging directly in the SBIR
program. Accordingly, based upon numerous discussions with the Small Business
Administration and a review of applicable SBIR rules and regulations, the
Company entered into a research agreement with Cell Preservation Services, Inc.
("CPSI") to outsource to CPSI all BioLife research currently funded through SBIR
grants. CPSI is owned by Dr. John M. Baust, a recognized expert in cell
preservation, a former employee of BioLife and the son of John G. Baust, the CEO
of BioLife. Robert Van Buskirk, formerly Vice President, Business Development of
BioLife and the person primarily responsible for processing applications for
SBIR grants for BioLife, also has left the employ of BioLife and joined CPSI.
The research agreement, which was negotiated on an arms length basis and
designed to comply with the rules and regulations applicable to the performance
of research with respect to SBIR grants, establishes a format pursuant to which
CPSI will (a) take over the processing of existing applications for SBIR grants
applied for by BioLife ("Current Projects"), (b) apply for additional SBIR
grants for future research projects ("Future Projects"), (c) perform a
substantial portion of the principal work to be done, in terms of (i) time
spent, and (ii) research, in connection with Current Projects and Future
Projects (the "Research"), and (d) utilize BioLife personnel as consultants with
respect to the Research. In conjunction therewith, BioLife has granted to CPSI a
non-exclusive, royalty free license (with no right to sublicense) to use
BioLife's technology solely for the purpose of conducting the Research in
connection with the Current Projects and Future Projects. Pursuant to the
research agreement, (x) BioLife will, among other things, provide CPSI with (i)
suitable facilities in which to conduct the Research, including basic research
equipment and office equipment ("Facilities"), and (ii) management services
("Management Services"), and (y) CPSI will (i) accept assignment of Current
Projects, (ii) be responsible for conducting the Research with respect to
Current Projects and Future Projects, (iii) as mutually agreed to by the parties
and within the confines of the rules and regulations applicable to the
performance of the Research with respect to SBIR grants, utilize BioLife's
personnel as consultants, (iv) provide suitable experienced personnel,
including, without limitation, a principal investigator/program director, to
conduct the Research, (v) comply with all federal laws, rules and regulations
applicable to SBIR grants and file all necessary forms and reports with the
federal agency awarding the SBIR grants, and (vi) utilize the Facilities and
Management Services and pay BioLife fees with respect thereto. BioLife is to own
all right, title and interest in and to any technology, inventions, designs,
ideas, and the like (whether or not patentable) that emanates from the Current
Projects and Future Projects.
29
Howard S. Breslow, a director of the Company, is a member of Breslow & Walker,
LLP, general counsel to the Company. Mr. Breslow currently owns 53,600 shares of
Common Stock of the Company and holds options to purchase an aggregate of
2,477,910 additional shares pursuant to stock options and warrants issued to him
and/or affiliates. The Company incurred approximately $60,000 and $80,000 in
legal fees during the years ended December 31, 2005 and 2004, respectively, for
services provided by Breslow & Walker, LLP. At December 31, 2005 and 2004
accounts payable includes $8,729 and $28,027, respectively, due to Breslow &
Walker, LLP.
In January 2004, BioLife signed a 3 year lease with Field Afar Properties, LLC
whereby BioLife leases 6,161 square feet of office, laboratory, and
manufacturing space in Owego, NY at a rental rate of $6,200 per month.
Renovation of the new facility was completed in April 2004. The Company's Chief
Executive Officer is a partial owner of Field Afar Properties, LLC.
30
PART V
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
The financial statements filed as part of this report
begin on page F-1.
(2) Exhibits
Exhibit
Number Document
------ --------
3.1 Certificate of Incorporation, as amended. (1)
3.2 By-Laws, and amendment, dated March 19, 1990, thereto. (1)
4.1 Specimen of Common Stock Certificate. (1)
10.1 Stock Option Plan, dated July 7, 1988, and amendment, dated
July 19, 1989. (1)
10.2 1998 Stock Option Plan (2)
10.3 Employment Agreement dated July 1, 2002 between the Company
and Robert Van Buskirk (3)
10.4 Employment Agreement dated July 1, 2002 between the Company
and John G. Baust (3)
10.5 Employment Agreement dated November 1, 2002 between the
Company and Alan F. Rich (6)
10.6 Incubator License Agreement, dated the first day of March
1999, between BioLife Technologies, Inc. (name subsequently
changed to BioLife Solutions, Inc.) and The Research
Foundation of the State University of New York, and
extensions thereto, dated February 23, 2000 and February 7,
2001 relating to the incubator space at the State
University of New York at Binghamton. (4)
10.7 Asset Purchase Agreement dated May 26, 2002 (5)
10.8 Research Agreement dated March 15, 2004 between the
Company and CPSI (7)
31* Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32* Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(1) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2000.
(2) Incorporated by reference to the Company's Definitive Proxy
Statement for the special meeting of stockholders held on December 16,
1998.
(3) Incorporated by reference to the Company's annual report on Form
10-K for the year ended December 31, 2000.
31
(4) Incorporated by reference to the Company's quarterly report on Form
10-QSB for the quarter ended September 30, 2002.
(5) Incorporated by reference to the Company's quarterly report on Form
8-k filed July 10, 2002.
(6) Incorporated by reference to the Company's annual report on From
10-KSB for the year ended December 31, 2002.
(7) Incorporated by reference to the Company's annual report on Form
10-KSB for the year ended December 31, 2003.
*Filed herewith
(b) Reports on Form 8-K - There were no reports on Form 8-k filed
during the last quarter of the period covered by this report
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During 2005, Aronson & Company acted as the independent auditors for the
Company. The following table sets forth the aggregate fees billed by Aronson &
Company for audit and review services rendered in connection with the financial
statements and reports for the years ending December 31, 2005 and December 31,
2004 and for other services rendered during the years ending December 31, 2005
and December 31, 2004 on behalf of the Company:
December 31,
2005 2004
---- ----
Audit Fees $ 78,315 $49,275
Tax fees 7,616 6,775
All other fees 1,350 475
--------- -------
Total $ 87,281 $56,525
The Board of Directors pre-approves all audit and non-audit services to be
performed by the Company's independent auditors.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BIOLIFE SOLUTIONS, INC.
Date: April 14, 2006 /s/ John G. Baust, Ph.D.
--------------------------------
John G. Baust, Ph.D.
Chief Executive
Officer and Chief
Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: April 14, 2006 /s/ John G. Baust, Ph.D.
-------------------------------
John G. Baust, Ph.D.
Director
Date: April 14, 2006 /s/ Roderick de Greef
-------------------------------
Roderick de Greef
Director
Date: April 14, 2006 /s/ Howard S. Breslow
-------------------------------
Howard S. Breslow
Director
Date: April 14, 2006 /s/ Thomas Girschweiler
-------------------------------
Thomas Girschweiler
Director
33