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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2011
OR
(cid:1)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 001-34632
CRYOPORT, INC.
(Exact name of Registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
88-0313393
(I.R.S. Employer Identification No.)
20382 Barents Sea Circle, Lake Forest, California
(Address of principal executive offices)
92630
(Zip Code)
(949) 470-2300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.001 par value
Name of Each Exchange on Which Registered
OTC Market
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001
Warrants to Purchase Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1) No
(cid:3)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 (cid:3) No (cid:1)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:1) No (cid:1)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein,
and will not 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-K or any amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (check one):
Large accelerated filer (cid:1)
Accelerated filer (cid:1)
Non-accelerated filer (cid:1)
Smaller reporting company (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1) No (cid:3)
The aggregate market value of Common Stock held by non-affiliates as of September 30, 2010 was $9,761,382 (1)
Number of shares of Common Stock outstanding as of June 10, 2011: 27,712,101
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates certain information by reference from the registrant’s proxy statement for the annual meeting of
stockholders, which proxy statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended March 31,
2010.
(1) Excludes 5,881 shares of common stock held by directors and officers, and any stockholder whose ownership exceeds five
percent of the shares outstanding as of September 30, 2010.
CRYOPORT, INC.
Fiscal Year 2011 10-K Annual Report
Table of Contents
PART I
Item 1 Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2 Properties
Item 3 Legal Proceedings
Item 4 [Removed and Reserved]
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities
Item 6 Selected Financial Data
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A Controls and Procedures
Item 9B Other Information
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
PART III
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accountant Fees and Services
Item 15 Exhibits and Consolidated Financial Statement
PART IV
Schedules
Signatures
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
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Exhibit 32.2
NOTE REGARDING REVERSE STOCK SPLIT
On February 5, 2010, we filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of
the State of Nevada to affect a reverse split of our common stock at a ratio of ten for one. All historical share and per share amounts
have been adjusted to reflect the reverse stock split.
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PART I
In this Annual Report, the terms “we”, “us”, “our”, “Company” and “CryoPort” refer to CryoPort, Inc., and our wholly owned
subsidiary, CryoPort Systems, Inc. This Annual Report contains forward-looking statements that involve risks and uncertainties. The
inclusion of forward-looking statements should not be regarded as a representation by us or any other person that the objectives or
plans will be achieved because our actual results may differ materially from any forward-looking statement. The words “may,”
“should,” “plans,” “believe,” “anticipate,” “estimate,” “expect,” their opposites and similar expressions are intended to identify
forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. We
caution readers that such statements are not guarantees of future performance or events and are subject to a number of factors that may
tend to influence the accuracy of the statements, including but not limited to, those risk factors outlined in the section titled “Risk
Factors” as well as those discussed elsewhere in this Annual Report. You should not unduly rely on these forward-looking statements,
which speak only as of the date of this Annual Report. We undertake no obligation to publicly revise any forward-looking statement to
reflect circumstances or events after the date of this Annual Report or to reflect the occurrence of unanticipated events. You should,
however, review the factors and risks we describe in the reports that we file from time to time with the Securities and Exchange
Commission (“SEC”) after the date of this Annual Report.
In addition, we own or have rights to the registered trademark CryoPort ® (both alone and with a design logo) and CryoPort Express ®
(both alone and with a design logo). All other Company names, registered trademarks, trademarks and service marks included in this
Annual Report are trademarks, registered trademarks, service marks or trade names of their respective owners.
Item 1.
BUSINESS
Overview
We are a provider of an innovative cold chain frozen shipping system dedicated to providing superior, affordable cryogenic
shipping solutions that ensure the safety, status and temperature, of high value, temperature sensitive materials. We have developed
cost effective reusable cryogenic transport containers (referred to as “shippers”) capable of transporting biological, environmental and
other temperature sensitive materials at temperatures below minus 150° Celsius. These dry vapor shippers and shipping system are
one of the first significant alternatives to dry ice shipping and achieve 10-plus day holding times compared to one to two day holding
times with dry ice.
Our value proposition comes from both providing safe transportation with an environmentally friendly, long lasting
shipper, and through our value added services that offer a simple hassle-free solution for our customers. These value-added services
include an internet-based web portal that enables the customer to initiate scheduling, shipping and tracking of the progress and status
of a shipment, and provides in-transit temperature and custody transfer monitoring services of the shipper. The CryoPort service also
provides a fully ready charged shipper containing all freight bills, customs documents and regulatory paperwork for the entire journey
of the shipper to our customers at their pickup and delivery locations.
Our principal focus has been the further development and commercial launch of CryoPort Express ® Portal, an innovative
IT solution for shipping and tracking high-value specimens through overnight shipping companies, and our CryoPort Express ®
Shipper, a dry vapor cryogenic shipper for the transport of biological and pharmaceutical materials. A dry vapor cryogenic shipper is a
container that uses liquid nitrogen in dry vapor form, which is suspended inside a vacuum insulated bottle as a refrigerant, to provide
storage temperatures below minus 150° Celsius. The dry vapor shipper is designed using innovative, proprietary, and patented
technology which prevents spillage of liquid nitrogen and pressure build up as the liquid nitrogen evaporates. A proprietary foam
retention system is employed to ensure that liquid nitrogen stays inside the vacuum container, even when placed upside-down or on its
side, as is often the case when in the custody of a shipping company. Biological specimens are stored in a specimen chamber, referred
to as a “well” inside the container and refrigeration is provided by harmless cold nitrogen gas evolving from the liquid nitrogen
entrapped within the foam retention system surrounding the well. Biological specimens transported using our cryogenic shipper can
include clinical samples, diagnostics, live cell pharmaceutical products (such as cancer vaccines, semen and embryos, infectious
substances) and other items that require and/or are protected through continuous exposure to frozen or cryogenic temperatures.
During our early years, our limited revenue was derived from the sale of our reusable product line. Our current business
plan focuses on per-use leasing of the shipping container and added-value services that will be used by us to provide an end-to-end
and cost-optimized shipping solution to life science companies moving pharmaceutical and biological samples in clinical trials and
pharmaceutical distribution.
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The Company entered into its first strategic relationship with a global courier on January 13, 2010 when it signed an
agreement with Federal Express Corporation (“FedEx”) pursuant to which the Company leases to FedEx such number of its cryogenic
shippers that FedEx, from time to time, orders for FedEx’s customers. Under this agreement, FedEx has the right to and shall, on a
non-exclusive basis, promote market and sell transportation of the Company’s shippers and its related value-added goods and services,
such as its data logger, web portal and planned CryoPort Express ® Smart Pak System. On January 24, 2011 we announced that FedEx
had launched its deep frozen shipping solution using our CryoPort Express ® Dry Shipper. On September 2, 2010, the Company
entered into an agreement with DHL Express (USA), Inc. (“DHL”) that gives DHL life science customers direct access to the
Company’s web-based order entry and tracking portal to order the CryoPort Express ® Shipper and receive preferred DHL shipping
rates. The agreement covers DHL shipping discounts that may be used to support the Company’s customers using the CryoPort
Express ® shipping solution. In connection with the agreement, the Company has integrated its proprietary web portal to DHL’s
tracking and billing systems. DHL life science customers now have a seamless way of shipping their critical biological material
worldwide. The IT integration with DHL was completed during the Company’s fourth quarter of fiscal year 2011.
We are a Nevada corporation originally incorporated under the name G.T.5-Limited (“GT5”) on May 25, 1990. In
connection with a Share Exchange Agreement, on March 15, 2005 we changed our name to CryoPort, Inc. and acquired all of the
issued and outstanding shares of common stock of CryoPort Systems, Inc., a California corporation, in exchange for 2,410,811 shares
of our common stock (which represented approximately 81% of the total issued and outstanding shares of common stock following
the close of the transaction). CryoPort Systems, Inc., which was originally formed in 1999 as a California limited liability company,
and subsequently reorganized into a California corporation on December 11, 2000, remains the operating company under CryoPort,
Inc. Our principal executive offices are located at 20382 Barents Sea Circle, Lake Forest, California 92630. The telephone number of
our principal executive offices is (949) 470-2300, and our main corporate website is www.cryoport.com. The information on, or that
can be accessed through, our website is not part of this Annual Report.
Our Products and Pipeline
Our product offering and service offering consists of our CryoPort Express ® Shippers, reusable dry vapor shippers, the web
portal allowing ease of entry and our Smart Pak data logger, a temperature monitoring system (which, together with our CryoPort
Express ® Shippers, comprise our new business model referred to as the CryoPort Express ® System) and a containment bag which is
used in connection with the shipment of infectious or dangerous goods using the CryoPort Express ® Shipper.
The CryoPort Express ® Shippers
Our CryoPort Express ® Shippers are cryogenic dry vapor shippers capable of maintaining cryogenic temperatures of minus
150° Celsius or below for a period of 10 or more days. A dry cryogenic shipper is a device that uses liquid nitrogen contained inside a
vacuum insulated bottle which serves as a refrigerant to provide storage temperatures below minus 150° Celsius. Our CryoPort
Express ® shipper is designed to ensure that there is no pressure build up as the liquid nitrogen evaporates or spillage of liquid
nitrogen. We have developed a proprietary foam retention system to ensure that liquid nitrogen stays inside the vacuum container,
which allows the shipper to be designated as a dry shipper meeting International Air Transport Association (“IATA”) requirements.
Biological or pharmaceutical specimens are stored in a specimen chamber, referred to as a “well”, inside the container and
refrigeration is provided by cold nitrogen gas evolving from the liquid nitrogen entrapped within the foam retention system.
Specimens that may be transported using our cryogenic shipper include live cell pharmaceutical products such as cancer vaccines,
diagnostic materials, semen and embryos, infectious substances and other items that require continuous exposure to frozen or
cryogenic temperatures (e.g., temperatures below minus 150° Celsius).
The technology underlying the CryoPort Express ® Shipper was developed by modifying and advancing technology from
our first generation of reusable cryogenic dry shippers. While our CryoPort Express ® Shippers share many of the characteristics and
basic design details of our earlier shippers, we are manufacturing our CryoPort Express ® Shippers from alternative, lower cost and
lower weight materials, which will reduce overall operating costs. We maintain ongoing development efforts related to our shippers
which are principally focused on material properties, particularly those properties related to the low temperature requirement, the
vacuum retention characteristics, such as the permeability of the materials, and lower cost and lower weight materials in an effort to
meet the market needs for achieving a lower cost frozen and cryogenic shipping solution. Other advances additional to the
development work on the cryogenic container include both an improved liquid nitrogen retention system and a secondary protective,
spill proof packaging system. This secondary system, outer packaging has a low cost that lends itself to disposability, and it is made of
recyclable materials. Further, it adds an additional liquid nitrogen retention capability to further assure compliance with IATA and
ICAO regulations that prohibit egress of liquid nitrogen from the shipping package. IACO stands for the International Civil Aviation
Organization, which is a United Nations organization that develops regulations for the safe transport of dangerous goods by air.
Our CryoPort Express ® Shippers are lightweight, low-cost, re-usable dry vapor liquid nitrogen storage containers that we
believe combine the best features of packaging, cryogenics and high vacuum technology. A CryoPort Express ® Shipper is composed
of an aluminum metallic dewar flask, with a well for holding the biological material in the inner chamber. The dewar flask, or
“thermos bottle,” is an example of a practical device in which the conduction, convection and radiation of heat are reduced as much as
possible. The inner chamber of the shipper is surrounded by a high surface, low-density open cell plastic foam material which retains
the liquid nitrogen in-situ by absorption, adsorption and surface tension. Absorption is defined as the taking up of matter in bulk by
other matter, as in the dissolving of a gas by a liquid, whereas adsorption is the surface retention of solid, liquid or gas molecules,
atoms or ions by a solid or liquid. This material absorbs liquid nitrogen several times faster than currently used materials, while
providing the shipper with a hold time and capacity to transport biological materials safely and conveniently. The annular
space between the inner and outer dewar chambers is evacuated to a very high vacuum (10-6 Torr). The specimen-holding chamber
has a primary cap to enclose the specimens, and a removable and replaceable secondary cap to further enclose the specimen-holding
container and to contain the liquid nitrogen. The entire dewar vessel is then wrapped in a plurality of insulating and cushioning
materials and placed in a disposable outer packaging made of recyclable material.
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We believe the CryoPort solution is the best and most cost effective solution available in the market that satisfies customer
needs and regulatory requirements relating to the shipment of temperature-critical, frozen and refrigerated transport of biological
materials, such as the pharmaceutical clinical trials, gene biotechnology, infectious materials handling, and animal and human
reproduction markets. Due to our proprietary technology and innovative design, our shippers are less prone to losing functional hold
time when not kept in an upright position than the competing products because such proprietary technology and innovative design
prevent the spilling or leakage of the liquid nitrogen when the container is tipped or on its side which would adversely affect the
functional hold time of the container.
An important feature of the CryoPort Express ® Shippers is their compliance with the stringent packaging requirements of
IATA Packing Instructions 602 and 650, respectively. These instructions include the internal pressure (hydraulic) and drop
performance requirements.
The CryoPort Express ® System
The CryoPort Express ® System comprises the CryoPort Express ® Shipper , the CryoPort Express ® Smart Pak data logger,
CryoPort Express ® Portal, which programmatically manages order entry and all aspects of shipping operations, and CryoPort
Express ® Analytics, which monitors shipment performance metrics and evaluates temperature-monitoring data collected by the data
logger during shipment. The CryoPort Express ® System is focused on improving the reliability of frozen shipping while reducing the
customers’ overall operating costs. This is accomplished by providing a complete end-to-end solution for the transport and monitoring
of frozen or cryogenically preserved biological or pharmaceutical materials shipped though overnight shipping companies. Certain of
the intellectual property underlying the CryoPort Express ® System, (other than that related to the CryoPort Express ® Shipper) has
been, and continues to be, developed under a contract with an outside software development company, with the underlying technology
licensed to us for exclusive use in our field of use.
CryoPort Express ® Portal
The CryoPort Express ® Portal is used by CryoPort, our customers and our business partners to automate the entry of
orders, prepare customs documentation and to facilitate status and location monitoring of shipped orders while in transit. It is used by
CryoPort to manage shipping operations and to reduce administrative costs typically provisioned through manual labor relating to
order-entry, order processing, preparation of shipping documents and back-office accounting. It is also used to support the high level
of customer service expected by the industry. Certain features of the CryoPort Express ® Portal reduce operating costs and facilitate
the scaling of CryoPort’s business, but more importantly they offer significant value to the customer in terms of cost avoidance and
risk mitigation. Examples of these features include automation of order entry; development of Key Performance Indicators (“KPI”) to
support our efforts for continuous process improvements in our business, and programmatic exception monitoring to detect and
sometimes anticipate delays in the shipping process, often before the customer or the shipping company becomes aware of them. In
the future we will add rate and mode optimization and in-transit monitoring of temperature, location and state of health (discussed
below), via wireless communications.
The CryoPort Express ® Portal also serves as the communications nerve center for the management, collection and analysis
of Smart Pak data harvested from Smart Pak data loggers in the field. Data is converted into pre-designed reports containing valuable
and often actionable information that becomes the quality control standard or “pedigree” of the shipment. This information can be
utilized by CryoPort to provide valuable feedback to the customer relating to cryogenic shipping.
The CryoPort Express ® Smart Pak
Temperature monitoring is a high value feature from our customers’ perspective as it is an effective and reliable method to
determine that the shipment materials were not damaged or degraded during shipment due to temperature fluctuations. Phase II of our
Smart Pak System which is a self-contained automated data logger capable of recording the internal and external temperatures of
samples shipped in our CryoPort Express ® Shipper was launched in fiscal year 2010.
Phase III of our Smart Pak System is anticipated to launch in fiscal year 2012, and consists of adding a smart chip to each
shipper with wireless connectivity to enable our customers to monitor a shipper’s location, specimen temperature and overall state of
health via our web portal. A key feature of the Phase III product is automatic downloading of data which requires no customer
intervention.
CryoPort Express ® Analytics
Our continued development of the CryoPort Express ® Portal is a strategic element of our business strategy and the
CryoPort Express ® Portal system has been designed to support planned future features with this thought in mind. Analytics is a term
used by IT professionals to refer to performance benchmarks or Key Performance Indicators (KPI’s) that management utilizes to
measure performance against desired standards. Examples include time-based metrics for order processing time and on-time deliveries
by our shipping partners, as well as profiling shipping lanes to determine average transit times and predicting an exception if a
shipment is taking longer than it should based on historical metrics. The analytical results will be utilized by CryoPort to render
consultative customer services.
Biological Material Holders
We have also developed a patented containment bag which is used in connection with the shipment of infectious or
dangerous goods using the CryoPort Express ® Shipper. Up to five vials, watertight primary receptacles are placed onto aluminum
holders and up to fifteen holders (75 vials) are placed into an absorbent pouch which is designed to absorb the entire contents of all the
vials in the event of leakage. This pouch containing up to 75 vials is then placed in a watertight secondary packaging Tyvek bag
capable of withstanding cryogenic temperatures, and then sealed. This bag is then placed into the well of the cryogenic shipper.
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Other Product Candidates and Development Activities
We are continuing our research and development efforts which are expected to lead to the introduction of additional dry
vapor shippers, including larger and smaller size units constructed of lower cost materials and utilizing high volume manufacturing
methods. We are also exploring the use of alternative phase change materials in place of liquid nitrogen in order to seek entry into the
ambient temperature and chilled (2° to 8° Celsius) shipping markets.
Government Regulation
The shipping of diagnostic specimens, infectious substances and dangerous goods, whether via air or ground, falls under the
jurisdiction of many states, federal and international agencies. The quality of the containers, packaging materials and insulation that
protect a specimen determine whether or not it will arrive in a usable condition. Many of the regulations for transporting dangerous
goods in the United States are determined by international rules formulated under the auspices of the United Nations. For example, the
ICAO is the United Nations organization that develops regulations (Technical Instructions) for the safe transport of dangerous goods
by air. If shipment is by air, compliance with the rules established by IATA is required. IATA is a trade association made up of
airlines and air cargo couriers that publishes annual editions of the IATA Dangerous Goods Regulations. These regulations interpret
and add to the ICAO Technical Instructions to reflect industry practices. Additionally, the CDC has regulations (published in the Code
of Federal Regulations) for interstate shipping of specimens, and OSHA also addresses the safe handling of Class 6.2 Substances. Our
CryoPort Express ® Shipper meets Packing Instructions 602 and 650 and is certified for the shipment of Class 6.2 Dangerous Goods
per the requirements of the ICAO Technical Instructions for the Safe Transport of Dangerous Goods by Air and IATA. Our present
and planned future versions of the CryoPort Smart Pak data logger will likely be subject to regulation by FAA, FCC, FDA, IATA and
possibly other agencies which may be difficult to determine on a global basis.
We are also subject to numerous other federal, state and local laws relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances.
We may incur significant costs to comply with such laws and regulations now or in the future.
Manufacturing and Raw Materials
Manufacturing. The component parts for our products are primarily manufactured at third party manufacturing facilities.
We also have a warehouse at our corporate offices in Lake Forest, California, where we are capable of manufacturing certain parts and
fully assemble our products. Most of the components that we use in the manufacture of our products are available from more than one
qualified supplier. For some components, however, there are relatively few alternate sources of supply and the establishment of
additional or replacement suppliers may not be accomplished immediately, however, we have identified alternate qualified suppliers
which we believe could replace existing suppliers. Should this occur, we believe that with our current level of dewars and production
rate we have enough to cover a four to six week gap in maximum disruption of production. There are no specific agreements with any
manufacturer nor are there any long term commitments to any manufacturer. We believe that most of the manufactures currently used
by us could be replaced within a short period of time as none have a proprietary component or a substantial capital investment specific
to our products.
Our production and manufacturing process incorporates innovative technologies developed for aerospace and other
industries which are cost effective, easier to use and more functional than the traditional dry ice devices and other methods currently
used for the shipment of temperature-sensitive materials. Our manufacturing process uses non-hazardous cleaning solutions which are
provided and disposed of by a supplier approved by the Environmental Protection Agency (the “EPA”). EPA compliance costs for us
are therefore negligible.
Raw Materials. Various common raw materials are used in the manufacture of our products and in the development of our
technologies. These raw materials are generally available from several alternate distributors and manufactures. We have not
experienced any significant difficulty in obtaining these raw materials and we do not consider raw material availability to be a
significant factor in our business.
Patents and Proprietary Rights
In order to remain competitive, we must develop and maintain protection on the proprietary aspects of our technologies. We
rely on a combination of patents, copyrights, trademarks, trade secret laws and confidentiality agreements to protect our intellectual
property rights. We currently own four registered United States trademarks and three issued United States patents primarily covering
various aspects of our products. In addition, we have filed a patent application for various aspects of our shipper and web-portal,
which includes, in part, various aspects of our business model referred to as the CryoPort Express ® System, and we intend to file
additional patent applications to strengthen our intellectual property rights. The technology covered by the above indicated issued
patents relates to matters specific to the use of liquid nitrogen dewars in connection with the shipment of biological materials. The
concepts include those of disposability, package configuration details, liquid nitrogen retention systems, systems related to thermal
performance, systems related to packaging integrity, and matters generally relevant to the containment of liquid nitrogen. Similarly,
the trademarks mentioned relate to the cryogenic temperature shipping activity. Issued patents and trademarks currently owned by us
include:
Type:
No.
Issued
Expiration
Patent
Patent
Patent
Trademark
Trademark
Trademark
Trademark
6,467,642 Oct. 22, 2002 Oct. 21, 2022
Sep. 18, 2020
Sep. 19, 2000
6,119,465
Apr. 1, 2003 Mar 31, 2023
6,539,726
7,583,478,7
Oct. 9, 2002
7,586,797,8 Apr. 16, 2002
Feb. 3, 2009
7,748,667,3
7,737,451,1 Mar. 17, 2009
N/A
N/A
N/A
N/A
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Our success depends to a significant degree upon our ability to develop proprietary products and technologies and to obtain
patent coverage for these products and technologies. We intend to file trademark and patent applications covering any newly
developed products, methods and technologies. However, there can be no guarantee that any of our pending or future filed
applications will be issued as patents. There can be no guarantee that the U.S. Patent and Trademark Office or some third party will
not initiate an interference proceeding involving any of our pending applications or issued patents. Finally, there can be no guarantee
that our issued patents or future issued patents, if any, will provide adequate protection from competition.
Patents provide some degree of protection for our proprietary technology. However, the pursuit and assertion of patent
rights involve complex legal and factual determinations and, therefore, are characterized by significant uncertainty. In addition, the
laws governing patent issuance and the scope of patent coverage continue to evolve. Moreover, the patent rights we possess or are
pursuing generally cover our technologies to varying degrees. As a result, we cannot ensure that patents will issue from any of our
patent applications, or that any of its issued patents will offer meaningful protection. In addition, our issued patents may be
successfully challenged, invalidated, circumvented or rendered unenforceable so that our patent rights may not create an effective
barrier to competition. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent, as do
the laws of the United States. There can be no assurance that any patents issued to us will provide a legal basis for establishing an
exclusive market for our products or provide us with any competitive advantages, or that patents of others will not have an adverse
effect on our ability to do business or to continue to use our technologies freely.
We may be subject to third parties filing claims that our technologies or products infringe on their intellectual property. We
cannot predict whether third parties will assert such claims against us or whether those claims will hurt our business. If we are forced
to defend against such claims, regardless of their merit, we may face costly litigation and diversion of management’s attention and
resources. As a result of any such disputes, we may have to develop, at a substantial cost, non-infringing technology or enter into
licensing agreements. These agreements may be unavailable on terms acceptable to it, or at all, which could seriously harm our
business or financial condition.
We also rely on trade secret protection of our intellectual property. We attempt to protect trade secrets by entering into
confidentiality agreements with third parties, employees and consultants, although, in the past, we have not always obtained such
agreements. It is possible that these agreements may be breached, invalidated or rendered unenforceable, and if so, our trade secrets
could be disclosed to our competitors. Despite the measures we have taken to protect our intellectual property, parties to such
agreements may breach confidentiality provisions in our contracts or infringe or misappropriate our patents, copyrights, trademarks,
trade secrets and other proprietary rights. In addition, third parties may independently discover or invent competitive technologies, or
reverse engineer our trade secrets or other technology. Therefore, the measures we are taking to protect our proprietary technology
may not be adequate.
Customers and Distribution
As a result of growing globalization, including with respect to such areas as life science clinical trials and distribution of
pharmaceutical products, the requirement for effective solutions for keeping certain clinical samples and pharmaceutical products at
frozen temperatures takes on added significance due to extended shipping times, custom delays and logistics challenges. Today, such
goods are traditionally shipped in styrofoam cardboard insulated containers packed with dry ice, gel/freezer packs or a combination
thereof. The current dry ice solutions have limitations that severely limit their effective and efficient use for both short and long-
distances (e.g., international). Conventional dry ice shipments often require labor intensive “re-icing” operations resulting in higher
labor and shipping costs.
We believe our patented cryogenic shippers make us well positioned to take advantage of the growing demand for effective
and efficient international transport of temperature sensitive materials resulting from continued globalization. Of particular
significance is the trend within the pharmaceutical and biotechnology industries toward globalization. We believe this presents a new
and unique opportunity for pharmaceutical companies, particularly early or developmental stage companies, to conduct some of their
clinical trials in foreign countries where the cost may be cheaper and/or because the foreign countries significantly larger population
provides a larger pool of potential patients suffering from the indication that the drug candidate is being designed to treat. We also
plan to provide domestic shipping solutions in situations and regions where there is a high priority placed on maintaining the integrity
of materials shipped at cryogenic temperatures and where we can be cost effective.
To date, most of our customers have been in the pharmaceutical or medical industries. As we initially focus our efforts to
increase revenues, we believe that the primary target customers for our CryoPort Express ® System are concentrated in the following
markets, for the following reasons:
•
•
•
•
•
Pharmaceutical clinical trials / contract research organizations;
Gene biotechnology;
Transport of infectious materials and dangerous goods;
Pharmaceutical distribution; and
Fertility clinics/artificial insemination.
Pharmaceutical Clinical Trials. Every pharmaceutical company developing a new drug must be approved by the FDA who
conducts clinical trials to, among other things, test the safety and efficacy of the potential new drug. Presently, a significant amount of
clinical trial activity is managed by a number of large Clinical Research Organizations (“CROs”). Due to the growing downsizing
trend in the pharmaceutical industry, CROs are going to obtain an increasing share of the clinical trial market.
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In connection with the clinical trials, due to globalization the companies may enroll patients from all over the world who
regularly submit a blood or other specimen at the local hospital, doctor’s office or laboratory. These samples are then sent to specified
testing laboratories, which may be local or in another country. The testing laboratories will typically set the requirements for the
storage and shipment of blood specimens. In addition, several of the drugs used by the patients require frozen shipping to the sites of
the clinical trials. While both domestic and international shipping of these specimens is accomplished using dry ice today,
international shipments especially present several problems, as dry ice, under the best of circumstances, can only provide freezing for
one to two days, in the absence of re-icing (which is quite costly). Because shipments of packages internationally can take longer than
one to two days or be delayed due to flight cancellations, incorrect destinations, labor problems, ground logistics, customs delays and
safety reasons, dry ice is not always a reliable and cost effective option. Clinical trial specimens are often irreplaceable because each
one represents clinical data at a prescribed point in time, in a series of specimens on a given patient, who may be participating in a trial
for years. Sample integrity during the shipping process is vital to retaining the maximum number of patients in each trial. Our shippers
are ideally suited for this market, as our longer hold time ensures that specimens can be sent over long distances with minimal concern
that they will arrive in a condition that will cause their exclusion from the trial. There are also many instances in domestic shipments
where the CryoPort Express ® Shipper will provide higher reliability and be cost effective.
Furthermore, the IATA requires that all airborne shipments of laboratory specimens be transmitted in either IATA
Instruction 650 or 602 certified packaging. We have developed and obtained IATA certification of the CryoPort Express ® System,
which is ideally suited for this market, in particular due to the elimination of the cost to return the reusable shipper.
Gene Biotechnology. The gene biotechnology market includes basic and applied research and development in diverse areas
such as stem cells, cloning, gene therapy, DNA tumor vaccines, tissue engineering, genomics, and blood products. Companies
participating in the foregoing fields rely on the frozen transport of specimens in connection with their research and development
efforts, for which our CryoPort Express ® Shippers are ideally suited.
Transport of Infectious Materials and Dangerous Goods. The transport of infectious materials must be classified as such
and must maintain strict adherence to regulations that protect public safety while maintaining the viability of the material being
shipped. Some blood products are considered infective and must be treated as such. Pharmaceutical companies, private research
laboratories and hospitals ship tissue cultures and microbiology specimens, which are also potentially infectious materials, between a
variety of entities, including private and public health reference laboratories. Almost all specimens in this infectious materials
category require either a refrigerated or a frozen environment. We believe our CryoPort Express ® Shipper is ideally suited to meet the
shipping requirements of this market.
Partly in response to the attack on the World Trade Center and the anthrax scare, government officials and health care
professionals are focusing renewed attention on the possibility of attacks involving biological and chemical weapons such as anthrax,
smallpox and sarin gas. Efforts expended on research and development to counteract biowarfare agents requires the frozen transport of
these agents to and from facilities conducting the research and development. Vaccine research, including methods of vaccine delivery,
also requires frozen transport. We believe our CryoPort Express ® Shipper is ideally suited to this type of research and development.
Pharmaceutical Distribution. The current focus for the CryoPort Express ® System also includes the area of pharmaceutical
distribution. There are a significant number of therapeutic drugs and vaccines currently or soon to be, undergoing clinical trials. After
the FDA approves them for commercial marketing, it will be necessary for the manufacturers to have a reliable and economical
method of distribution to the physician who will administer the product to the patient. Although there are not now a large number of
drugs requiring cryogenic transport, there are a number in the development pipeline. It is likely that the most efficient and reliable
method of distribution will be to ship a single dosage to the administering physician. These drugs are typically identified to individual
patients and therefore will require a complete tracking history from the manufacturer to the patient. The most reliable method of doing
this is to ship a unit dosage specifically for each patient. Because the drugs require maintenance at frozen or cryogenic temperatures,
each such shipment will require a frozen or cryogenic shipping package. CryoPort anticipates being in a position to service that need.
Fertility Clinics. We estimate that artificial insemination procedures in the United States account for at least 50,000 doses
of semen annually. Since relatively few sperm banks provide donor semen, frozen shipping is almost always involved. As with animal
semen, human semen must be stored and shipped at cryogenic temperatures to retain viability, stabilize the cells, and ensure
reproducible results. This can only be accomplished with the use of liquid nitrogen or LN2 dry vapor shippers. CryoPort anticipates
that this market will continue to increase as this practice gains acceptance in new areas of the world.
In addition to the above markets, our longer-term plans include expanding into new markets including, the diagnostics,
food, environmental, semiconductor and petroleum industries.
Sales and Marketing
During the fiscal year ended March 31, 2011, annual net revenues from three customers, B-D Biosciences, CDx Holdings
and Life Technologies accounted for 19%, 38% and 11% of our total revenues, respectively. During the fiscal year ended March 31,
2010, annual net revenue from two customers, B-D Biosciences and CDx Holdings accounted for 32% and 19% of our total revenues,
respectively.
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Our geographical sales for the year ended March 31, 2011 were as follows:
USA and Canada
Europe
Asia and Rest of World
50 %
20 %
30 %
We recently entered into agreements with FedEx and DHL and we plan to further expand our sales and marketing efforts through
the establishment of additional strategic relationships with global couriers and, subject to available financial resources, the hiring of
additional sales and marketing personnel.
During the year ended March 31, 2011, we had one internal sales person who manages our direct sales. In April 2011 the
Company hired a Chief Commercial Officer and added three members to the direct sales force, of whom have backgrounds in the
cold-chain shipping industry.
Industry and Competition
Our products and services are sold into a rapidly growing niche of the packaging industry focused on the temperature
sensitive packaging and shipping of biological materials. Expenditures for “value added” packaging for frozen transport have been
increasing for the past several years and, due in part to continued globalization, are expected to continue to increase even more in the
future as more domestic and international biotechnology firms introduce pharmaceutical products that require continuous refrigeration
at cryogenic temperatures. We believe this will require a greater dependence on passively controlled temperature transport systems
(i.e., systems having no external power source).
We believe that growth in the following markets has resulted in the need for increased efficiencies and greater flexibility in
the temperature sensitive packaging market:
•
•
•
•
•
•
•
•
•
•
Pharmaceutical clinical trials, including transport of tissue culture samples;
Pharmaceutical commercial product distribution;
Transportation of diagnostic specimens;
Transportation of infectious materials;
Intra laboratory diagnostic testing;
Transport of temperature-sensitive specimens by courier;
Analysis of biological samples;
Environmental sampling;
Gene and stem cell biotechnology and vaccine production; and
Food engineering.
Many of the biological products in these above markets require transport in a frozen state as well as the need for shipping
containers which have the ability to maintain a frozen, cryogenic environment (e.g., minus 150° Celsius) for a period ranging from
two to ten days (depending on the distance and mode of shipment). These products include semen, embryo, tissue, tissue cultures,
cultures of viruses and bacteria, enzymes, DNA materials, vaccines and certain pharmaceutical products. In some instances, transport
of these products requires temperatures at, or approaching, minus 196° Celsius.
One problem faced by many companies operating in these specialized markets is the limited number of cryogenic shipping
systems serving their needs, particularly in the areas of pharmaceutical companies conducting clinical trials. The currently adopted
protocol and the most common method for packaging frozen transport in these industries is the use of solid state carbon dioxide (dry
ice). Dry ice is used extensively in shipping to maintain a frozen state for a period of one to four days. Dry ice is used in the transport
of many biological products, such as pharmaceuticals, laboratory specimens and certain infectious materials that do not require true
cryogenic temperatures. The common approach to shipping these items via ground freight is to pack the product in a container, such as
an expanded polystyrene (styrofoam) box or a molded polyurethane box, with a variable quantity of dry ice. The box is taped or
strapped shut and shipped to its destination with freight charges based on its initial shipping weight.
With respect to shipments via specialized courier services, there is no standardized method or device currently in use for the
purpose of transporting temperature-sensitive frozen biological specimens. One common method for courier transport of biological
materials is to place frozen specimens, refrigerated specimens, and ambient specimens into a compartmentalized container, similar in
size to a 55 quart Coleman or Igloo cooler. The freezer compartment in the container is loaded with a quantity of dry ice at minus 78°
Celsius, while the refrigerated compartment at 8° Celsius utilizes ice substitutes.
Two manufacturers of the polystyrene and polyurethane containers frequently used in the shipping and courier transport of
dry ice frozen specimens are Insulated Shipping Containers, Inc. and Tegrant (formerly SCA Thermosafe). When these containers are
used with dry ice, the average sublimation rate (e.g., the rate at which dry ice turns from a solid to a gaseous state) in a container with
a 11/2 inch wall thickness is slightly less than three pounds per 24 hours. Other existing refrigerant systems employ the use of gel
packs and ice substitutes for temperature maintenance. Gels and eutectic solutions (phase changing materials) with a wide range of
phasing temperatures have been developed in recent years to meet the needs of products with varying specific temperature control
requirements.
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The use of dry ice and ice substitutes, however, regardless of external packaging used, are frequently inadequate because
they do not provide low enough storage temperatures and, in the case of dry ice, last for only a few days without re-icing. As a result,
companies run the risk of increased costs due to lost specimens and additional shipping charges due to the need to re-ice.
Some of the other disadvantages to using dry ice for shipping or transporting temperature sensitive products are as follows:
•
•
•
•
•
•
Availability of a dry ice source;
Handling and storage of the dry ice;
Cost of the dry ice;
Compliance with local, state and federal regulations relating to the storage and use of dry ice;
Weight of containers when packed with dry ice;
Securing a shipping container with a high enough R-value (which is a measure of thermal resistance) to hold the dry
ice and product for the required time period;
•
Securing a shipping container that meets the requirements of IATA, the DOT, the CDC, and other regulatory
agencies; and
•
The emission of green house gases into the environment.
Due to the limitations of dry ice, shipment of specimens at true cryogenic temperatures can only be accomplished using
liquid nitrogen dry vapor shippers, or by shipping over actual liquid nitrogen. While such shippers provide solutions to the issues
encountered when shipping with dry ice, they too are experiencing some criticisms by users or potential users. For example, the cost
for these products typically can range from $650 to $3,000 per unit, which can substantially limit their use for the transport of many
common biologics, particularly with respect to small quantities such as, is the case with direct to the physician drug delivery. Because
of the initial cost and limited production of these containers, they are designed to be reusable. However, the cost of returning these
heavy containers can be significant, particularly in international markets, because most applications require only one-way shipping.
We expect to provide a cost effective solution compared to dry ice. We believe we will provide an overall cost savings of 10% to 20%
for international and specialty shipments compared to dry ice, while at the same time providing a higher level of support and related
services.
Another problem with these existing systems relates to the hold time of the unit in a normal, upright position versus the
hold time when the unit is placed on its side or inverted. If a container is laying on its side or is inverted the liquid nitrogen is prone to
leaking out of the container due to a combination of factors, including a shift in the equilibrium height of the liquid nitrogen in the
absorbent material and the relocation of the point of gravity, which affects the hold time and compromises the dependability of the dry
shipper, particularly when used in circumstances requiring lengthy shipping times. Due to the use of our proprietary technology, our
CryoPort Express ® Shippers are not prone to leakage when on their side or inverted, thereby protecting the integrity of our shipper’s
hold time.
Within our intended markets for our CryoPort Express ® Shippers, there is limited known competition. We intend to
become competitive by reason of our improved technology in our products and through the use of our service enabled business model.
The CryoPort Express ® System provides a simple and cost effective solution for the frozen or cryogenic transport of biological or
pharmaceutical materials. This solution uses our innovative dewar and is supported by the CryoPort Express ® Portal, our web-based
order-entry system, which manages the scheduling and shipping of the CryoPort Express ® Shippers. In addition, the traditional dry ice
shippers and suppliers, such as MVE/Chart Industries, Taylor Wharton and Air Liquide, offer various models of dry vapor liquid
nitrogen shippers that are not cost efficient for multi-use and multi-shipment purposes due to their significantly greater unit costs and
unit weight (which may substantially increase the shipping cost). On the other hand, they are more established and have larger
organizations and have greater financial, operational, sales and marketing resources and experience in research and development than
we do. Factors that we believe give us a competitive advantage are attributable to our shipping container which allows our shipper to
retain liquid nitrogen when placed in non-upright positions, the overall “leak-proofness” of the our package which determines
compliance with shipping regulations and the overall weight and volume of the package which determines shipping costs, and our
business model represented by the merged integration of our shipper with CryoPort Express ® Portal and Smart Pak data logger into a
seamless shipping, tracking and monitoring solution. Other companies that offer potentially competitive products include Industrial
Insulation Systems, which offers cryogenic transport units and has partnered with Marathon Products Inc., a manufacturer and global
supplier of wireless temperature data collecting devices used for documenting environmentally sensitive products through the cold
chain and Kodiak Thermal Technologies, Inc. which offers, among other containers, a repeat use active-cool container that uses free
piston stirling cycle technology. While not having their own shipping devices, BioStorage Technologies is potentially a competitive
company through their management services offered for cold-chain logistics and long term biomaterial storage. Cryogena offers a
single use disposable LN2 shipper with better performance than dry-ice, but it does not perform as well and is not as cost-effective as
the CryoPort solution when all costs are considered. In addition, BioMatrica, Inc. is developing and offering technology that stabilizes
biological samples and research materials at room temperature. They presently offer these technologies primarily to research and
academic institutions; however, their technology may eventually enter the broader cold-chain market.
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Research and Development
Our research and development efforts are focused on continually improving the features of the CryoPort Express ® System
including the web based customer service portal and the CryoPort Express ® Shippers. Further these efforts are expected to lead to the
introduction of shippers of varying sizes based on market requirements, constructed of lower cost materials and utilizing high volume
manufacturing methods that will make it practical to provide the cryogenic packages offered by the CryoPort Express ® System. Other
research and development effort has been directed toward improvements to the liquid nitrogen retention system to render it more
reliable in the general shipping environment and to the design of the outer packaging. Alternative phase change materials in place of
liquid nitrogen may be used to increase the potential markets these shippers can serve such as ambient and 2-8°C markets. Our
research and development expenditures during for the fiscal years ended March 31, 2011 and 2010 were $449,129 and $284,847,
respectively.
Corporate Governance
Our Board is committed to legal and ethical conduct in fulfilling its responsibilities. The Board expects all directors, as well
as officers and employees, to act ethically at all times and to adhere to the policies comprising the Company’s Code of Business
Conduct and Ethics. The Board of Directors (the “Board”) of the Company adopted the corporate governance policies and charters.
Copies of the following corporate governance documents are posted on our website, and are available free of charge, at
www.cryoport.com : (1) Code of Business Conduct and Ethics (2) Charter of the Nominating and Governance Committee of the
Board of Directors, (3) Charter of the Audit Committee of the Board of Directors, and (4) Charter of the Compensation Committee of
the Board of Directors. If you would like a printed copy of any of these corporate governance documents, please send your request to
CryoPort, Inc., Attention: Corporate Secretary, 20382 Barents Sea Circle, Lake Forest CA 92630.
Human Resources
As of March 31, 2011, we had 13 full-time employees and 9 consultants; 3 of the consultants work for us on a full-time
basis. Each of our employees has signed a confidentiality agreement and none are covered by a collective bargaining agreement. We
have never experienced employment-related work stoppages and consider our employee relations to be good.
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ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K contains forward-looking information based on our current expectations. Because our
actual results may differ materially from any forward-looking statements made by or on behalf of CryoPort, this section includes a
discussion of important factors that could affect our actual future results, including, but not limited to, our potential product and
service revenues, acceptance of our products and services, expenses, net income(loss) and earnings(loss) per common share.
Risks Related to Our Business
We have incurred significant losses to date and may continue to incur losses.
We have incurred net losses in each fiscal year since we commenced operations. The following table represents net losses
incurred for the years ended March 31, 2011 and 2010:
Fiscal Year Ended March 31, 2011
Fiscal Year Ended March 31, 2010
Net Loss
$ 6,152,278
$ 5,651,561
As of March 31, 2011, we had an accumulated deficit of $52,096,087. While we expect to continue to derive revenues from
our current products and services, in order to achieve and sustain profitable operations, we must successfully commercialize and
launch our CryoPort Express ® System, significantly expand our market presence and increase revenues. We may continue to incur
losses in the future and may never generate revenues sufficient to become profitable or to sustain profitability. Continuing losses may
impair our ability to raise the additional capital required to continue and expand our operations.
If we are unable to obtain additional funding, we may have to reduce or discontinue our business operations.
As of March 31, 2011, we had cash and cash equivalents of $9,278,443. We have expended substantial funds on the
research and development of our products and IT systems. As a result, we have historically experienced negative cash flows from
operations and we expect to continue to experience negative cash flows from operations in the future. Therefore, our ability to
continue and expand our operations is highly dependent on the amount of cash and cash equivalents on hand combined with our
ability to raise additional capital to fund our future operations.
We anticipate, based on currently proposed plans and assumptions relating to our ability to market and sell our products
(but not including any additional strategic relationships with global couriers), that our cash on hand, together with projected cash
flows, will satisfy our operational and capital requirements at least through the fourth quarter of our fiscal year 2012. There are a
number of uncertainties associated with our financial projections that could reduce or delay our future projected revenues and cash-
inflows, including, but not limited to, our ability to complete the commercialization and launch of our CryoPort Express ® System,
launch our relationship with FedEx, increase our customer base and revenues and enter into strategic relationships with additional
global couriers. If our projected revenues and cash-inflows are reduced or delayed, we may not have sufficient capital to operate
through the fourth quarter of our fiscal year 2012 unless we raise more capital. Additionally, if we are unable to realize satisfactory
revenue in the near future, we will be required to seek additional financing to continue our operations beyond that period. We will also
require additional financing to expand into other markets and further develop and market our products. We have no current
arrangements with respect to any additional financing. Consequently, there can be no assurance that any additional financing on
commercially reasonable terms, or at all, will be available when needed. The inability to obtain additional capital may reduce our
ability to continue to conduct business operations. Any additional equity financing may involve substantial dilution to our then
existing stockholders. In addition, raising additional funding may be complicated by certain provisions in the securities purchase
agreements and related transaction documents, as amended, entered into in connection with our prior convertible debenture financings.
If we are not successful in establishing strategic relationships with global couriers, we may not be able to successfully increase
revenues and cash flow which could adversely affect our operations.
We believe that our near term success is best achieved by establishing strategic relationships with global couriers, such as
our recent agreements with FedEx and DHL. Such relationships will enable us to provide a seamless, end-to-end shipping solution to
customers and allow us to leverage the couriers’ established express, ground and freight infrastructures and penetrate new markets
with minimal investment. Further, we expect that the global couriers will utilize their sales forces to promote and sell our frozen
shipping services. If we are not successful in launching our relationship with FedEx or DHL or establishing additional relationships
with global couriers, our sales and marketing efforts will be significantly impacted and anticipated revenue growth will be
substantially delayed which could have an adverse affect on our operations.
Our agreements with FedEx and DHL may not result in a significant increase in our revenues or cash flow.
On January 13, 2010, we entered into an agreement with FedEx pursuant to which we lease to FedEx such number of our
cryogenic shippers that FedEx, from time to time, orders for its customers. FedEx has the right to and shall, on a non-exclusive basis,
promote, market and sell transportation of our shippers and our related value-added goods and services, such as our data logger, web
portal and planned CryoPort Express ® Smart Pak System. Because our agreement with FedEx does not contain any
requirement that FedEx lease a minimum number of shippers from us during the term of the agreement, we may not experience a
significant increase in our revenues or cash flows as a result of this agreement. On September 2, 2010, we entered into an agreement
with DHL that gives DHL life sciences customers direct access to our web-based order entry and tracking portal to order our CryoPort
Express ® Shipper and preferred DHL shipping rates. Although the agreement provides shipping discounts that may be used to support
our customers using our CryoPort Express ® shipping solution, DHL will not be promoting, marketing or selling transportation of our
shippers or services, which may not lead to any increase in our revenues.
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Current economic conditions and capital markets are in a period of disruption and instability which could adversely affect our
ability to access the capital markets, and thus adversely affect our business and liquidity.
The current economic conditions and financial crisis have had, and will continue to have, a negative impact on our ability to
access the capital markets, and thus have a negative impact on our business and liquidity. The shortage of liquidity and credit
combined with substantial losses in worldwide equity markets could lead to an extended worldwide recession. We may face
significant challenges if conditions in the capital markets do not improve and we do not achieve positive cash flow from operations.
Our ability to access the capital markets may be severely restricted at a time when we need to access such markets, which could have a
negative impact on our business plans, including the commercialization and launch of our CryoPort Express ® System and other
research and development activities. Even if we are able to raise capital, it may not be at a price or on terms that are favorable to us.
We cannot predict the occurrence of future financial disruptions or how long the current market conditions may continue.
The sale of substantial shares of our common stock may depress our stock price.
As of March 31, 2011, there were 27,504,583 shares of our common stock issued and outstanding. Substantially all of these
shares of common stock are eligible for trading in the public market. The market price of our common stock may decline if our
stockholders sell a large number of shares of our common stock in the public market, or the market perceives that such sales may
occur.
We could also issue up to 30,332,635 additional shares of our common stock including shares to be issued upon conversion
of the outstanding balance of our convertible debentures and upon the exercise of outstanding warrants and options or reserved for
future issuance under our stock incentive plans, as further described in the following table:
Number of Shares of
Common Stock
Issuable or Reserved
For Issuance
Common stock issuable upon conversion of the outstanding balance of our convertible debentures
Common stock issuable upon exercise of outstanding warrants
Common stock issuable upon exercise of outstanding options or reserved for future incentive awards under our
stock incentive plans
Total
869,065
27,822,669
1,640,901
30,332,635
Of the total options and warrants outstanding as of March 31, 2011, options and warrants exercisable for an aggregate of
23,849,159 shares of common stock would be considered dilutive to the value of our stockholders’ interest in CryoPort because we
would receive upon exercise of such options and warrants an amount per share that is less than the market price of our common stock
on March 31, 2011.
We will have difficulty increasing our revenues if we experience delays, difficulties or unanticipated costs in establishing the sales,
distribution and marketing capabilities necessary to successfully commercialize our products.
We are continuing to develop sales, distribution and marketing capabilities in the Americas, Europe and Asia. It will be
expensive and time-consuming for us to develop a global marketing and sales network. Moreover, we may choose, or find it
necessary, to enter into additional strategic collaborations to sell, market and distribute our products. We may not be able to provide
adequate incentive to our sales force or to establish and maintain favorable distribution and marketing collaborations with other
companies to promote our products. In addition, any third party with whom we have established a marketing and distribution
relationship may not devote sufficient time to the marketing and sales of our products thereby exposing us to potential expenses in
exiting such distribution agreements. We, and any of our third party collaborators, must also market our products in compliance with
federal, state, local and international laws relating to the provision of incentives and inducements. Violation of these laws can result in
substantial penalties. Therefore, if we are unable to successfully motivate and expand our marketing and sales force and further
develop our sales and marketing capabilities, or if our distributors fail to promote our products, we will have difficulty increasing our
revenues.
Our ability to grow and compete in our industry will be hampered if we are unable to retain the continued service of our key
professionals or to identify, hire and retain additional qualified professionals.
A critical factor to our business is our ability to attract and retain qualified professionals including key employees and
consultants. We are continually at risk of losing current professionals or being unable to hire additional professionals as needed. If we
are unable to attract new qualified employees, our ability to grow will be adversely affected. If we are unable to retain current
employees or strategic consultants, our financial condition and ability to maintain operations may be adversely affected.
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We are dependent on new products and services, the lack of which would harm our competitive position.
Our future revenue stream depends to a large degree on our ability to bring new products and services to market on a timely
basis. We must continue to make significant investments in research and development in order to continue to develop new products
and services, enhance existing products and services, and achieve market acceptance of such products and services. We may incur
problems in the future in innovating and introducing new products and services. Our development stage products and services may not
be successfully completed or, if developed, may not achieve significant customer acceptance. If we are unable to successfully define,
develop and introduce new, competitive products and services and enhance existing products and services, our future results of
operations would be adversely affected. Development and manufacturing schedules for technology products and services are difficult
to predict, and we might not achieve timely initial customer shipments of new products or launch of services. The timely availability
of these products and services and their acceptance by customers are important to our future success. A delay in new or enhanced
product or service introductions could have a significant impact on our results of operations.
Because of these risks, our research and development efforts may not result in any commercially viable products or
services. If significant portions of these development efforts are not successfully completed, or any new or enhanced products or
services are not commercially successful, our business, financial condition and results of operations may be materially harmed.
If we successfully develop products and/or services, but those products and/or services do not achieve and maintain market
acceptance, our business will not be profitable.
The degree of acceptance of our CryoPort Express ® Shipper and/or CryoPort Express ® System, or any future product or
services, by our current target markets, and any other markets to which we attempt to sell our products and services, and our
profitability and growth will depend on a number of factors including, among others:
•
•
•
•
•
our shippers’ ability to perform and preserve the integrity of the materials shipped;
relative convenience and ease of use of our shipper and/or web portal;
availability of alternative products;
pricing and cost effectiveness; and
effectiveness of our or our collaborators’ sales and marketing strategy.
If any products or services we may develop do not achieve market acceptance, then we may not generate sufficient revenue
to achieve or maintain profitability.
In addition, even if our products and services achieve market acceptance, we may not be able to maintain that market
acceptance over time if new products or services are introduced that are more favorably received than our products and services, are
more cost effective, or render our products obsolete.
We are dependent on an outside party for the continued development of our CryoPort Express ® Portal
Our proprietary CryoPort Express ® Portal is a software system used by our customers and business partners to automate
the entry of orders, prepare customs documentation and facilitate status and location monitoring of shipped orders while in transit. The
continued development of this system is contracted with an outside software development company. If this developer becomes unable
or unwilling to continue work on scheduled projects, and an alternative developer cannot be secured, we may not be able to implement
needed enhancements to the system. Furthermore, if we terminate our agreement with this developer and cannot reach an agreement or
fail to fulfill an agreement for the termination, we could lose our license to use this software. Failure to proceed with enhancements or
the loss of our license for the system would adversely affect our ability to generate new business and serve existing customers,
resulting in a reduction in revenue.
Our success depends, in part, on our ability to obtain patent protection for our products and business model, preserve our trade
secrets, and operate without infringing the proprietary rights of others.
Our policy is to seek to protect our proprietary position by, among other methods, filing United States patent applications
related to our technology, inventions and improvements that are important to the development of our business. We have three issued
U.S. patents and one recently filed provisional patent application, all relating to various aspects of our products and services. Our
patents or provisional patent application may be challenged, invalidated or circumvented in the future or the rights granted may not
provide a competitive advantage. We intend to vigorously protect and defend our intellectual property. Costly and time-consuming
litigation brought by us may be necessary to enforce our patents and to protect our trade secrets and know-how, or to determine the
enforceability, scope and validity of the proprietary rights of others.
We also rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our
competitive position. In the past our employees, consultants, advisors and suppliers have not always executed confidentiality
agreements and invention assignment and work for hire agreements in connection with their employment, consulting, or advisory
relationships. Consequently, we may not have adequate remedies available to us to protect our intellectual property should one of
these parties attempt to use our trade secrets or refuse to assign any rights he or she may have in any intellectual property he
or she developed for us. Additionally, our competitors may independently develop substantially equivalent proprietary information
and techniques or otherwise gain access to our proprietary technology, or we may not be able to meaningfully protect our rights in
unpatented proprietary technology.
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We cannot assure you that our current and potential competitors and other third parties have not filed (or in the future will
not file) patent applications for (or have not received or in the future will not receive) patents or obtain additional proprietary rights
that will prevent, limit or interfere with our ability to make, use or sell our products either in the United States or internationally. In the
event we are required to license patents issued to third parties, such licenses may not be available or, if available, may not be available
on terms acceptable to us. In addition, we cannot assure you that we would be successful in any attempt to redesign our products or
processes to avoid infringement or that any such redesign could be accomplished in a cost-effective manner. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing
and selling our products or offering our services, which would harm our business.
We are not aware of any third party that is infringing any of our patents or trademarks nor do we believe that we are
infringing on the patents or trademarks of any other person or organization.
Our products may contain errors or defects, which could result in damage to our reputation, lost revenues, diverted development
resources and increased service costs and litigation.
Our products must meet stringent requirements and we must develop our products quickly to keep pace with the rapidly
changing market. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first
introduced or when new models or versions are released. In general, our products may not be free from errors or defects after
commercial shipments have begun, which could result in damage to our reputation, lost revenues, diverted development resources,
increased customer service and support costs, and litigation. The costs incurred in correcting any product errors or defects may be
substantial and could adversely affect our business, results of operations and financial condition.
If we experience manufacturing delays or interruptions in production, then we may experience customer dissatisfaction and our
reputation could suffer.
If we fail to produce enough shippers at our own manufacturing facility or at a third party manufacturing facility, or if we
fail to complete our shipper recycling processes as planned, we may be unable to deliver shippers to our customers on a timely basis,
which could lead to customer dissatisfaction and could harm our reputation and ability to compete. We currently acquire various
component parts for our shippers from various independent manufacturers in the United States. We would likely experience
significant delays or cessation in producing our shippers if a labor strike, natural disaster or other supply disruption were to occur at
any of our main suppliers. If we are unable to procure a component from one of our manufacturers, we may be required to enter into
arrangements with one or more alternative manufacturing companies which may cause delays in producing our shippers. In addition,
because we depend on third party manufacturers, our profit margins may be lower, which will make it more difficult for us to achieve
profitability. To date, we have not experienced any material delay that has adversely impacted our operations. As our business
develops and the quantity of production increases, it becomes more likely that such problems could arise.
Because we rely on a limited number of suppliers, we may experience difficulty in meeting our customers’ demands for our
products in a timely manner or within budget.
We currently purchase key components of our products from a variety of outside sources. Some of these components may
only be available to us through a few sources, however, management has identified alternative materials and suppliers should the need
arise. We generally do not have long-term agreements with any of our suppliers. Consequently, in the event that our suppliers delay or
interrupt the supply of components for any reason, we could potentially experience higher product costs and longer lead times in order
fulfillment.
Our CryoPort Express ® Portal may be subject to intentional disruption that could adversely impact our reputation and future
revenues.
We have implemented our CryoPort Express ® Portal which is used by our customers and business partners to automate the
entry of orders, prepare customs documentation and facilitate status and location monitoring of shipped orders while in transit.
Although we believe we have sufficient controls in place to prevent intentional disruptions, we could be a target of attacks specifically
designed to impede the performance of the CryoPort Express ® Portal. Similarly, experienced computer programmers may attempt to
penetrate our CryoPort Express ® Portal in an effort to search for and misappropriate proprietary or confidential information or cause
interruptions of our services. Because the techniques used by such computer programmers to access or sabotage networks change
frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Our activities
could be adversely affected and our reputation, brand and future sales harmed if these intentionally disruptive efforts are successful.
Our products and services may expose us to liability in excess of our current insurance coverage.
Our products and services involve significant risks of liability, which may substantially exceed the revenues we derive from
them. We cannot predict the magnitude of these potential liabilities.
We currently maintain general liability insurance, with coverage in the amount of $1 million per occurrence, subject to a
$2 million annual limitation, and product liability insurance with a $1 million annual coverage limitation. Claims may be made against
us that exceed these limits.
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Our liability policy is an “occurrence” based policy. Thus, our policy is complete when we purchased it and following
cancellation of the policy it continues to provide coverage for future claims based on conduct that took place during the policy term.
However, our insurance may not protect us against liability because our policies typically have various exceptions to the claims
covered and also require us to assume some costs of the claim even though a portion of the claim may be covered. In addition, if we
expand into new markets, we may not be aware of the need for, or be able to obtain insurance coverage for such activities or, if
insurance is obtained, the dollar amount of any liabilities incurred could exceed our insurance coverage. A partially or completely
uninsured claim, if successful and of significant magnitude, could have a material adverse effect on our business, financial condition
and results of operations.
Complying with certain regulations that apply to shipments using our products can limit our activities and increase our cost of
operations.
Shipments using our products and services are subject to various regulations in the countries in which we operate. For
example, shipments using our products may be required to comply with the shipping requirements promulgated by the Centers for
Disease Control (“CDC”), the Occupational Safety and Health Organization (“OSHA”), the Department of Transportation (“DOT”) as
well as rules established by the International Air Transportation Association (“IATA”) and the International Civil Aviation
Organization (“ICAO”). Additionally, our data logger may be subject to regulation and certification by the Food and Drug
Administration (“FDA”), Federal Communications Commission (“FCC”), and Federal Aviation Administration (“FAA”). We will
need to ensure that our products and services comply with relevant rules and regulations to make our products and services
marketable, and in some cases compliance is difficult to determine. Significant changes in such regulations could require costly
changes to our products and services or prevent use of our shippers for an extended period of time while we seek to comply with
changed regulations. If we are unable to comply with any of these rule or regulations or fail to obtain any required approvals, our
ability to market our products and services may be adversely affected. In addition, even if we are able to comply with these rules and
regulations, compliance can result in increased costs. In either event, our financial results and condition may be adversely affected.
We depend on our business partners and unrelated and frequently unknown third party agents in foreign countries to act on our behalf
to complete the importation process and to make delivery of our shippers to the final user. The failure of these third parties to perform
their duties could result in damage to the contents of the shipper resulting in customer dissatisfaction or liability to us, even if we are
not at fault.
If we cannot compete effectively, we will lose business.
Our products, services and solutions are positioned to be competitive in the cold-chain shipping market. While there are
technological and marketing barriers to entry, we cannot guarantee that the barriers we are capable of producing will be sufficient to
defend the market share we wish to gain against current and future competitors. The principal competitive factors in this market
include:
•
•
•
•
•
•
•
•
acceptance of our business model and a per use consolidated fee structure;
ongoing development of enhanced technical features and benefits;
reductions in the manufacturing cost of competitors’ products;
the ability to maintain and expand distribution channels;
brand name;
the ability to deliver our products to our customers when requested;
the timing of introductions of new products and services; and
financial resources.
Current and prospective competitors have substantially greater resources, more customers, longer operating histories,
greater name recognition and more established relationships in the industry. As a result, these competitors may be able to develop and
expand their networks and product offerings more quickly, devote greater resources to the marketing and sale of their products and
adopt more aggressive pricing policies. In addition, these competitors have entered and will likely continue to enter into business
relationships to provide additional products competitive to those we provide or plan to provide.
We may not be able to compete with our competitors in the industry because many of them have greater resources than we do.
We expect to continue to experience significant and increasing levels of competition in the future. In addition, there may be
other companies which are currently developing competitive products and services or which may in the future develop technologies
and products that are comparable, superior or less costly than our own. For example, some cryogenic equipment manufacturers with
greater resources currently have solutions for storing and transporting cryogenic liquid and gasses and may develop storage solutions
that compete with our products. Additionally, some specialty couriers with greater resources currently provide dry ice transportation
and may develop other products in the future, both of which compete with our products. A competitor that has greater resources than
us may be able to bring its product to market faster than we can and offer its product at a lower price than us to establish
market share. We may not be able to successfully compete with a competitor that has greater resources and such competition may
adversely affect our business.
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Risks Relating to Our Current Financing Arrangements
Our outstanding convertible debentures impose certain restrictions on how we conduct our business. In addition, all of our assets,
including our intellectual property, are pledged to secure this indebtedness. If we fail to meet our obligations to the debenture
holders, our payment obligations may be accelerated and the collateral securing the indebtedness may be sold to satisfy these
obligations.
We issued convertible debentures in October 2007 (the “October 2007 Debentures”) and in May 2008 (the “May 2008
Debentures,” and together with the October 2007 Debentures, the “Debentures”). The Debentures were issued to four institutional
investors and have an outstanding principal balance of $2,607,196 as of March 31, 2011. In addition, in October 2007 and May 2008,
we issued to these institutional investors warrants to purchase, as of March 31, 2011, an aggregate of 3,055,097 shares of our common
stock (without regard to beneficial ownership limitations contained in the transaction documents and certain anti-dilution provisions).
As collateral to secure our repayment obligations to the holders of the Debentures we have granted such holders a first priority
security interest in generally all of our assets, including our intellectual property.
The Debentures warrant agreements and related transactional documents (including subsequent amendments) contain
various covenants that presently restrict our operating flexibility. Pursuant to the foregoing documents, we may not, among other
things:
•
other than the reverse stock split we effected on February 5, 2010, which the holder of our Debentures consented to, effect
future reverse stock splits of our outstanding common stock;
•
incur additional indebtedness, except for certain permitted indebtedness. Permitted indebtedness is defined to include lease
obligations and purchase money indebtedness of up to an aggregate of $200,000 and indebtedness that is expressly
subordinated to the Debentures and matures following the maturity date of the Debentures;
•
incur additional liens on any of our assets except for certain permitted liens including but not limited liens for taxes,
assessments and government charges not yet due and liens incurred in connection with permitted indebtedness;
•
•
•
•
pay cash dividends;
redeem any outstanding shares of our common stock or any outstanding options or warrants to purchase shares of our
common stock except in connection with the repurchase of stock from former directors and officers provided such
repurchases do not exceed $100,000 during the term of the Debentures;
enter into transactions with affiliates other than on arms-length terms; and
make any revisions to the terms of existing contractual agreements for the Related Party Notes Payable and the Line of
Credit (as each is referred to in our Form 10-Q for the period ended June 30, 2009).
These provisions could have important consequences for us, including, but not limited to, (i) making it more difficult for us
to obtain additional debt financing, or obtain new debt financing on terms favorable to us, because a new lender will have to be willing
to be subordinate to the Debenture holders, (ii) causing us to use a portion of our available cash for debt repayment and service rather
than other perceived needs, and/or (iii) impacting our ability to take advantage of significant, perceived business opportunities. Our
failure to timely repay our obligations under the Debentures, which require monthly principal payments of $200,000 and quarterly
interest payments that commenced March 1, 2011 and which mature on August 1, 2012, or meet the covenants set forth in the
Debentures and related transaction documents could give rise to a default under the Debentures or such transaction documents. In the
event of an uncured default, all amounts owed to the holders may be declared immediately due and payable and the Debenture holders
will have the right to enforce their security interest in the assets securing the Debentures. In such event, the Debenture holders could
take possession of any or all of our assets in which they hold a security interest, and dispose of those assets to the extent necessary to
pay off our debts, which would materially harm our business.
Certain of our existing stockholders own and have the right to acquire a substantial number of shares of common stock.
As of June 10, 2011, our directors, executive officers and beneficial owners of 5% or more of our outstanding common
stock beneficially owned 11,556,091 shares (without regard to beneficial ownership limitations contained in certain warrants) of
common stock assuming their exercise of all outstanding warrants, options and conversion of all convertible debt; or approximately
30.80% of our outstanding common stock. Of these shares of common stock beneficially owned, 1,921,547 shares, or approximately
6.48% of our outstanding common stock, are beneficially owned by Enable Growth Partners LP (and affiliated funds), 1,877,072
shares, or approximately 6.34% of our outstanding common stock, are beneficially owned by BridgePointe Master Fund, Ltd.,
4,285,710 shares, or approximately 14.02% of our common stock, are beneficially owned by CNH Partners, LLC, and 2,757,895
shares, or approximately 9.14% of our outstanding common stock, are beneficially owned by Emergent Financial Group (each
calculated without regard to the shares of common stock that may be acquired by the other upon the exercise of its warrants and
conversion of debt). As such, the concentration of beneficial ownership of our common stock may have the effect of delaying or
preventing a change in control of CryoPort and may adversely affect the voting or other rights of other holders of our common stock.
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Our stock and warrant price is and will continue to be volatile.
The market price of our common stock has been and, along with the warrants is likely to be, highly volatile and could
fluctuate widely in price in response to various factors, many of which are beyond our control, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
technological innovations or new products and services by us or our competitors;
additions or departures of key personnel;
sales of our common stock;
our ability to integrate operations, technology, products and services;
our ability to execute our business plan;
operating results below expectations;
loss of any strategic relationship;
industry developments;
economic and other external factors; and
period-to-period fluctuations in our financial results.
You may consider any one of these factors to be material. The price of our common stock and warrants may fluctuate
widely as a result of any of the above listed factors. In addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may
also materially and adversely affect the market price of our common stock and warrants.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or
downgrade our common stock and warrants, the price of our common stock and warrants could decline.
The trading market for our common stock and warrants relies in part on the research and reports that equity research
analysts publish about us and our business. We do not control these analysts. The price of our common stock and warrants could
decline if one or more equity analyst downgrades our stock or if analysts issue other unfavorable commentary or cease publishing
reports about us or our business.
We have not paid dividends on our common stock in the past and do not expect to pay dividends in the foreseeable future. Any
return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable
future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and
economic factors affecting us at such time as the Board of Directors may consider the payment of any such dividends. In addition, we
may not pay any dividends without obtaining the prior consent of the holders of our Debentures. If we do not pay dividends, our
common stock may be less valuable because a return on your investment will only occur if the price of our common stock appreciates.
As a result of our recent 10-to-1 reverse stock split, the liquidity of our common stock and market capitalization could be adversely
affected.
On February 5, 2010, we effected a 10-to-1 reverse stock split. A reverse stock split is often viewed negatively by the
market and, consequently, can lead to a decrease in our overall market capitalization. In addition, because the reverse split will
significantly reduce the number of shares of our common stock that are outstanding, the liquidity of our common stock could be
adversely affected and you may find it more difficult to purchase or sell shares of our common stock.
We may need additional capital, and the sale of additional shares of common stock or other equity securities could result in
additional dilution to our stockholders.
We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet
our anticipated cash needs for a period of at least 12 months. We may, however, require additional cash resources due to changed
business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources
are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The
sale of additional equity securities, or debt securities convertible into equity securities, could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and
financing covenants that would restrict our operations.
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Provisions in our bylaws and Nevada law might discourage, delay or prevent a change of control of our company or changes in
our management and, as a result, may depress the trading price of our common stock.
Provisions of our bylaws and Nevada law may discourage, delay or prevent a merger, acquisition or other change in control
that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of
our common stock. The relevant bylaw provisions may also prevent or frustrate attempts by our stockholders to replace or remove our
management. These provisions include advance notice requirements for stockholder proposals and nominations, and the ability of our
Board of Directors to make, alter or repeal our bylaws.
Absent approval of our Board of Directors, our bylaws may only be amended or repealed by the affirmative vote of the
holders of at least a majority of our outstanding shares of capital stock entitled to vote.
In addition, Section 78.438 of the Nevada Revised Statutes prohibits a publicly-held Nevada corporation from engaging in
a business combination with an interested stockholder (generally defined as a person which together with its affiliates owns, or within
the last three years has owned, 10% of our voting stock, for a period of three years after the date of the transaction in which the person
became an interested stockholder) unless the business combination is approved in a prescribed manner.
The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors
might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company,
thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Even though we are not incorporated in California, we may become subject to a number of provisions of the California General
Corporation Law.
Section 2115(b) of the California Corporations Code imposes certain requirements of California corporate law on
corporations organized outside California that, in general, are doing more than 50% of their business in California and have more than
50% of their outstanding voting securities held of record by persons residing in California. While we are not currently subject to
Section 2115(b), we may become subject to it in the future.
The following summarizes some of the principal differences which would apply if we become subject to Section 2115(b).
Under both Nevada and California law, cumulative voting for the election of directors is permitted. However, under Nevada
law cumulative voting must be expressly authorized in the Articles of Incorporation and our Amended and Restated Articles of
Incorporation do not authorize cumulative voting. If we become subject to Section 2115(b), we may be required to permit cumulative
voting if any stockholder properly requests to cumulate his or her votes.
Under Nevada law, directors may be removed by the stockholders only by the vote of two-thirds of the voting power of the
issued and outstanding stock entitled to vote. However, California law permits the removal of directors by the vote of only a majority
of the outstanding shares entitled to vote. If we become subject to Section 2115(b), the removal of a director may be accomplished by
a majority vote, rather than a vote of two-thirds, of the stockholders entitled to vote.
Under California law, the corporation must take certain steps to be allowed to provide for greater indemnification of its
officers and directors than is provided in the California Corporation Code. If we become subject to Section 2115(b), our ability to
indemnify our officers and directors may be limited by California law.
Nevada law permits distributions to stockholders as long as, after the distribution, (i) the corporation would be able to pay
its debts as they become due and (ii) the corporation’s total assets are at least equal to its liabilities and preferential dissolution
obligations. Under California law, distributions may be made to stockholders as long as the corporation would be able to pay its debts
as they mature and either (i) the corporation’s retained earnings equals or exceeds the amount of the proposed distributions, or
(ii) after the distributions, the corporation’s tangible assets are at least 125% of its liabilities and the corporation’s current assets are at
least equal to its current liabilities (or, 125% of its current liabilities if the corporation’s average operating income for the two most
recently completed fiscal years was less than the average of the interest expense of the corporation for those fiscal years). If we
become subject to Section 2115(b), we will have to satisfy more stringent financial requirements to be able to pay dividends to our
stockholders. Additionally, stockholders may be liable to the corporation if we pay dividends in violation of California law.
California law permits a corporation to provide “supermajority vote” provisions in its Articles of Incorporation, which
would require specific actions to obtain greater than a majority of the votes, but not more than 66 2 / 3 percent. Nevada law does not
permit supermajority vote provisions. If we become subject to Section 2115(b), it is possible that our stockholders would vote to
amend our Articles of Incorporation and require a supermajority vote for us to take specific actions.
Under California law, in a disposition of substantially of all the corporation’s assets, if the acquiring party is in control of or
under common control with the disposing corporation, the principal terms of the sale must be approved by 90 percent of the
stockholders. Although Nevada law does contain certain rules governing interested stockholder business combinations, it does not
require similar stockholder approval. If we become subject to Section 2115(b), we may have to obtain the vote of a greater percentage
of the stockholders to approve a sale of our assets to a party that is in control of, or under common control with, us.
California law places certain additional approval rights in connection with a merger if all of the shares of each class or
series of a corporation are not treated equally or if the surviving or parent party to a merger represents more than 50 percent of the
voting power of the other corporation prior to the merger. Nevada law does not require such approval. If we become subject to
Section 2115(b), we may have to obtain a the vote of a greater percentage of the stockholders to approve a merger that treats shares of
a class or series differently or where a surviving or parent party to the merger represents more than 50% of the voting power of the
other corporation prior to the merger.
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California law requires the vote of each class to approve reorganization or a conversion of a corporation into another entity.
Nevada law does not require a separate vote for each class. If we become subject to Section 2115(b), we may have to obtain the
approval of each class if we desire to reorganize or convert into another type of entity.
California law provides greater dissenters’ rights to stockholders than Nevada law. If we become subject to Section 2115
(b), more stockholders may be entitled to dissenters’ rights, which may limit our ability to merge with another entity or reorganize.
Our stock is deemed to be penny stock.
Our stock is currently traded on the OTCQB, operated by the OTC Markets Group, Inc., and is subject to the “penny stock
rules” adopted pursuant to Section 15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The penny stock
rules apply to companies not listed on a national exchange whose common stock trades at less than $5.00 per share or which have
tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). Such rules require,
among other things, that brokers who trade “penny stock” to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the
security, including a risk disclosure document and quote information under certain circumstances. Penny stocks sold in violation of the
applicable rules may entitle the buyer of the stock to rescind the sale and receive a full refund from the broker.
Many brokers have decided not to trade “penny stock” because of the requirements of the penny stock rules and, as a result,
the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the
“penny stock rules” for any significant period, there may develop an adverse impact on the market, if any, for our securities. Because
our securities are subject to the “penny stock rules,” investors will find it more difficult to dispose of our securities. Further, for
companies whose securities are traded in the OTCQB, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for
significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases
about such companies, and (iii) to obtain needed capital.
If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
Our internal controls over financial reporting may have weaknesses and conditions that could require correction or
remediation, the disclosure of which may have an adverse impact on the price of our common stock. We are required to establish and
maintain appropriate internal controls over financial reporting. Failure to establish those controls (or any failure of those controls once
established) could adversely impact our public disclosures regarding our business, financial condition or results of operations. In
addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to
be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or
perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting and disclosure of
management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common
stock.
Standards for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are uncertain, and if we fail to comply in a timely
manner, our business could be harmed and our stock price could decline.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of our
internal controls over financial reporting. The standards that must be met for management to assess the internal controls over financial
reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the
detailed standards. We expect to continue to incur significant expenses and to devote resources to continued Section 404 compliance
on an ongoing basis. It is difficult for us to predict how long it will take or how costly it will be to complete the assessment of the
effectiveness of our internal controls over financial reporting and to remediate any deficiencies in our internal controls. As a result, we
may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or
Chief Financial Officer determine that our internal controls over financial reporting are not effective as defined under Section 404, we
cannot predict how regulators will react or how the market price of our common stock will be affected; however, we believe that there
is a risk that investor confidence and share value may be negatively impacted.
If we fail to remain current in our reporting requirements, our securities could be removed from the OTCQB, which would limit
the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act, and must be current in
their reports under Section 13, in order to maintain price quotation privileges on the OTCQB If we fail to remain current on our
reporting requirements, we could be removed from the OTCQB. As a result, the market liquidity for our securities could be severely
adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in
the secondary market.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 2. PROPERTIES
We do not own real property. We currently lease two facilities, with approximately 12,000 square feet of corporate,
research and development, and warehouse facilities, located at 20382 Barents Sea Circle, Lake Forest, CA 92630 and five
(5) executive offices located at 402 West Broadway, San Diego, CA 92101. The Company currently makes base lease payments of
approximately $7,000 per month, due at the beginning of each month. On August 24, 2009, the Company entered into the second
amendment to the lease for its manufacturing and office space. The amendment extended the lease for twelve months from the end of
the existing lease term with a right to cancel the lease with a minimum of 120 day written notice at anytime as of November 30, 2009.
In June 2010, Company entered into the third amendment to the lease for its manufacturing and office space. The amendment
extended the lease for sixty months commencing July 1, 2010 with a right to cancel the lease with a minimum of 120 day written
notice at anytime as of December 31, 2012. On April 15, 2010, the Company entered into office service agreements with Regus
Management Group, LLC (Lessor) for five (5) executive offices located at 402 West Broadway, San Diego, CA 92101. The office
service agreements are for periods ranging from 3 to 7 months ending October 31, 2011. The office service agreements require base
lease payments of approximately $9,000 per month. We believe that these facilities are adequate, suitable and of sufficient capacity to
support our immediate needs. Additional space may be required, however, as we expand our research and development,
manufacturing and selling and marketing activities.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we are at times subject to various legal proceedings and disputes. We currently are not
aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse effect on
our business, operating results or cash flows.
ITEM 4. [REMOVED AND RESERVED]
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS’ MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information. The Company’s common stock is quoted on the OTCQB under the symbol “CYRX” The
following table shows the high and low sales price of the Company’s common stock for each quarter in the two years ended March 31,
2011:
Fiscal Year 2011
Quarter Ended March 31, 2011
Quarter Ended December 31, 2010
Quarter Ended September 30, 2010
Quarter Ended June 30, 2010
Fiscal Year 2010
Quarter Ended March 31, 2010
Quarter Ended December 31, 2009
Quarter Ended September 30, 2009
Quarter Ended June 30, 2009
Common Stock
Sales Price
High
Low
$
$
$
$
$
$
$
$
1.69
0.95
1.50
2.20
10.50
5.40
7.00
9.00
$
$
$
$
$
$
$
$
0.51
0.43
0.66
1.31
1.65
3.80
3.70
4.10
(b) Holders. As of June 10, 2011, the number of stockholders of record of the Company’s common stock was 218.
(c) Dividends. No dividends on common stock have been declared or paid by the Company. The Company intends to
employ all available funds for the development of its business and, accordingly, does not intend to pay any cash dividends in the
foreseeable future.
(d) Securities Authorized for Issuance Under Equity Compensation. The information included under Item 12 of Part III of
this Annual Report is hereby incorporated by reference into this Item 5 of Part II of this Annual Report.
(e) Recent Sale of Unregistered Securities . The following is a summary of transactions by the Company during the past
quarter involving the issuance and sale of the Company’s securities that were not registered under the Securities Act of 1933, as
amended (the “Securities Act”). All securities sold by the Company were sold to individuals, trusts or others who were accredited
investors as defined under Regulation D under the Securities Act, as amended.
19
Table of Contents
On February 4, 2011, the Company consummated the first closing of a private placement to accredited investors resulting in
the issuance of units consisting of 6,335,318 shares of common stock and warrants to purchase 6,335,318 shares of common stock at
an exercise price of $0.77, for gross cash proceeds of $4,434,722. On February 14, 2011, the Company completed the second closing
of this same private placement resulting in the issuance of units consisting of 7,026,771 shares of common stock and warrants to
purchase 7,026,771 shares of common stock at an exercise price of $0.77, for gross cash proceeds of $4,918,740. In both closings,
each unit consisting of one share, together with one warrant to purchase one share, was priced at $0.70 for aggregate gross proceeds of
$9,353,462. Aggregate net proceeds of $8,041,881 reflect placement agent fees, legal and accounting fees of $1,311,582. In addition,
as part of the compensation to the selling agents, warrants to purchase 2,393,826 shares of common stock were issued to the agents.
The warrants issued to the investors and selling agents are immediately exercisable and have a term of five years. The fair market
value of the warrants issued to the placement agents of $2,153,397 was based on the Black-Scholes pricing model (“Black-Scholes”)
and was recorded to paid-in capital and offset against the proceeds of the financing with no net effect on equity. The Company was
obligated to file a registration statement with the SEC registering the resale of the shares of common stock issued to the investors and
the shares of common stock underlying the warrants issued to the investors within ninety (90) days following the close of the
transaction.
On March 7, 2011 the Company entered into an Advisory Services Agreement with Marc Grossman M.D. to provide strategic
business advice for which he was issued a fully-vested warrant to purchase 200,000 shares of the Company’s common stock at an
exercise price of $0.77 per share. The fair value of this warrant was $302,769 of which the Company recorded $277,538 as another
current asset and recognized $25,231 in selling, general and administrative expense for the year ended March 31, 2011 in the
accompanying consolidated financial statements.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data has been derived from audited consolidated financial statements of the Company for
each of the five years in the period ended March 31, 2011. These selected financial summaries should be read in conjunction with the
financial information contained for each of the two years in the period ended March 31, 2011, included in the consolidated financial
statements and notes thereto, Management’s Discussion and Analysis of Results of Operations and Financial Condition, and other
information provided elsewhere herein.
Consolidated Statement of
Operations Data:
Revenues
Cost of revenues
Gross loss
Selling, general and administrative
Research and development
Total operating expenses
Loss from operations
Other (expense) income:
Interest income
Interest expense
Loss on sale of fixed assets
Loss on extinguishment of debt
Change in fair value of derivative
liabilities
Years Ended March 31,
(in thousands, except per share data)
2011
2010
2009
2008
2007
$
476
1,303
$
118
718
$
35
546
$
84
386
$
(827 )
4,321
449
4,770
(600 )
3,313
284
3,597
(511 )
2,387
297
2,684
(302 )
2,551
166
2,717
67
177
(110 )
1,899
88
1,987
(5,597 )
(4,197 )
(3,195 )
(3.019 )
(2,097 )
16
(619 )
—
—
8
(7,029 )
(9 )
—
32
(2,693 )
(10,847 )
50
5,577
—
50
(1,593 )
—
—
(228 )
—
—
(2,325 )
2
Net loss before income taxes
Income taxes
(6,150 )
2
(5,650 )
2
(16,703 )
2
(4,562 )
2
Net loss
Net loss per common share, basic and
diluted
Weighted average shares used in
computing net loss per common
$
$
(6,152 )
$
(5,652 )
$
(16,705 )
$
(4,564 )
$
(2,327 )
(0.46 )
$
(1.13 )
$
(4.05 )
$
(1.16 )
$
(0.75 )
share, basic and diluted
13,302
5,011
4,124
3,943
3,094
As of March 31,
(in thousands)
2011
2010
2009
2008
2007
Consolidated Balance Sheet Data:
Cash, cash equivalents
Working capital (deficit)
Total assets
Convertible notes, net
Other long-term obligations
Accumulated deficit
Total stockholders’ equity (deficit)
$
$
9,278
6,760
11,031
2,401
1,423
(52,096 )
5,948
$
3,630
1,995
4,777
2,502
1,478
(45,944 )
(915 )
250
(3,693 )
1,573
3,883
1,601
(30,634 )
(4,776 )
$
2,231
981
3,461
902
1,711
(13,929 )
—
$
264
(478 )
484
96
1,857
(9,365 )
(2,288 )
20
Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Annual Report on Form 10-K contains forward-looking statements that have been made pursuant to the provisions of
the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking statements. Discussions containing forward-looking statements
may be found in the material set forth under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and in other sections of this Form 10-K. Words such as “may,” “will,” “should,” “could,” “expect,” “plan,”
“anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar words are intended to identify forward-looking
statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations
reflected in the forward-looking statements are reasonable as of the date of this Annual Report on Form 10-K, we cannot guarantee
future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and
expectations set forth in this Annual Report on Form 10-K. We expressly disclaim any intent or obligation to update any forward-
looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations.
Readers are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of
the risks, uncertainties, and other factors that affect our business, set forth in detail in Item 1A of Part I, under the heading “Risk
Factors.”
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the
related notes to those statements contained elsewhere in this Annual Report on Form 10-K.
Overview
We are a provider of an innovative cold chain frozen shipping system dedicated to providing superior, affordable cryogenic
shipping solutions that ensure the safety, status and temperature, of high value, temperature sensitive materials. We have developed
cost effective reusable cryogenic transport containers (referred to as “shippers”) capable of transporting biological, environmental and
other temperature sensitive materials at temperatures below minus 150° Celsius. These dry vapor shippers are one of the first
significant alternatives to dry ice shipping and achieve 10-plus day holding times compared to one to two day holding times with dry
ice.
Our value proposition comes from providing both safe transportation and an environmentally friendly, long lasting shipper,
and through our value added services that offer a simple, hassle-free solution for our customers. These value-added services include an
internet-based web portal that enables the customer to initiate scheduling, shipping and tracking of the progress and status of a
shipment, and provides in-transit temperature and custody transfer monitoring services of the shipper. The CryoPort service also
provides a fully ready charged shipper containing all freight bills, customs documents and regulatory paperwork for the entire journey
of the shipper to our customers at their pick up location.
Our principal focus has been the further development and commercial launch of CryoPort Express ® Portal, an innovative
IT solution for shipping and tracking high-value specimens through overnight shipping companies, and our CryoPort Express ®
Shipper, a dry vapor cryogenic shipper for the transport of biological and pharmaceutical materials. A dry vapor cryogenic shipper is a
container that uses liquid nitrogen in dry vapor form, which is suspended inside a vacuum insulated bottle as a refrigerant, to provide
storage temperatures below minus 150° Celsius. The dry vapor shipper is designed using innovative, proprietary, and patented
technology which prevents spillage of liquid nitrogen and pressure build up as the liquid nitrogen evaporates. A proprietary foam
retention system is employed to ensure that liquid nitrogen stays inside the vacuum container, even when placed upside-down or on its
side, as is often the case when in the custody of a shipping company. Biological specimens are stored in a specimen chamber, referred
to as a “well,” inside the container and refrigeration is provided by harmless cold nitrogen gas evolving from the liquid nitrogen
entrapped within the foam retention system surrounding the well. Biological specimens transported using our cryogenic shipper can
include clinical samples, diagnostics, live cell pharmaceutical products (such as cancer vaccines, semen and embryos, infectious
substances) and other items that require and/or are protected through continuous exposure to frozen or cryogenic temperatures (below
minus 150° Celsius).
During our early years, our limited revenue was derived from the sale of our reusable product line. Our current business
plan focuses on per-use leasing of the shipping container and added-value services that will be used by us to provide an end-to-end
and cost-optimized shipping solution to life science companies moving pharmaceutical and biological samples in clinical trials and
pharmaceutical distribution.
We have incurred losses since inception and had an accumulated deficit of $52,096,087 through March 31, 2011.
21
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Results of Operations
Years Ended March 31, 2011 and 2010
Revenues . Net revenues were $475,504 in fiscal 2011, as compared to $117,956 in fiscal 2010. The increase of $357,548 or 303%
was the result of our current business plan focusing on per-use leasing of our shipping containers and added-value services that will be
used by us to provide an end-to-end and cost-optimized shipping solution to life science companies moving pharmaceutical and
biological samples in clinical trials and pharmaceutical distribution. The less than anticipated increase in shipper revenues during the
two fiscal years was also the result of delays in the Company securing adequate funding for the manufacturing and full
commercialization of the CryoPort Express ® System.
Gross loss and cost of revenues. Gross loss for 2011 was 174% of revenues, or $827,484 as compared to 508%, or $599,754 for fiscal
2010. The increase in gross loss in absolute dollars and the decrease in gross loss as a percentage of revenues for the year ended
March 31, 2011, as compared to the year ended March 31, 2010, was primarily the result of the increase in revenues from the per-use
leasing of the shipping containers.
The increase in cost of revenues from $717,710 for the year ended March 31, 2010 to $1,302,988 for the year ended March 31, 2011,
was primarily the result of increased revenues. The cost of revenues exceeded revenues due to fixed manufacturing costs and plant
underutilization.
Selling, general and administrative expenses . Selling, general and administrative expenses were $4,320,461 in fiscal 2011, as
compared to $3,312,635 in fiscal 2010. The $1,007,826 increase in expenses over prior year was due to a $900,144 or 218% increase
in sales and marketing expenses from $412,739 for the year ended March 31, 2010, to $1,312,883 for the year ended March 31, 2011.
The increase in sales and marketing expenses reflected our focus on market development and sales ramp up of the CryoPort Express ®
System. An overall increase in the sales effort in 2011 increased expenses in salaries due to new hires, recruiting, travel and outside
services due to additional sales consulting.
Total stock-based compensation costs for the years ended March 31, 2011 and 2010 were $396,696 and $559,561, respectively.
During the year ended March 31, 2011, we granted options to employees and directors to purchase 1,296,832 shares of common stock
at a weighted average exercise price of $0.69 per share. The exercise prices of options and warrants were equal to the fair market
value of our common stock at the time of grant.
Research and development expenses . Research and development expenses were $449,129 in fiscal 2011, as compared to $284,847 in
fiscal 2010. The increase in research and development expenses of $164,282 was due primarily to the costs associated with the
continued development of the internet-based web portal that enables the customer to initiate and monitor the progress of a shipment.
Interest income . Interest income was $15,571 in fiscal year 2011, as compared to $8,164 in fiscal year 2010. Current year interest
income included the impact of increased cash balances related to the funds received in connection with the Company’s February 2011
private placement, August 2010 and October 2010 private placement and the February 25, 2010 public offering. Prior year interest
income included the impact of increased cash balances related to the funds received in connection with the convertible notes payable
issued in March through September 2009.
Interest expense . Interest expense was $618,765 in fiscal year 2011, as compared to $7,028,684 in fiscal year 2010. The decrease in
interest expense compared to the prior year period was primarily due to the conversion of our convertible notes payable of $1,381,500
and a portion of our convertible debentures of $2,714,430 into common stock in February 2010, and the corresponding reduction in
debt discount amortization and interest expense. Interest expense for fiscal year 2011 included accrued interest on our Related Party
notes payable $57,156, amortization of debt discount $522,041 and interest expense on our convertible debentures $19,233. Interest
expense for fiscal year 2010 included amortization of debt discount of $6,417,346 and amortized financing fees of $159,516, primarily
due to the convertible debentures issued in October 2007, May 2008 and the Private Placement Debentures.
Change in fair value of derivative liabilities. The change in fair value of derivative liabilities was a gain of $49,590 in fiscal year
2011, compared to the gain of $5,576,979 in fiscal year 2010. The gain of $49,590 for the fiscal year 2011 was the result of a decrease
in the fair value of our warrant derivatives due primarily to a decrease in our stock price, and a decrease in the number of equity
instruments treated as derivative liabilities compared to the prior fiscal year. The prior year gain of $5,576,979 was the result of a
decrease in the fair value of our warrant derivatives, due primarily to a decrease in our stock price.
Income taxes . We incurred net operating losses for the years ended March 31, 2011 and March 31, 2010 and consequently did not pay
any federal, state or foreign income taxes. At March 31, 2011, we had federal and state net operating loss carryforwards of
approximately $21,743,000 and $21,706,000, respectively, which we have fully reserved due to the uncertainty of realization. Our
federal tax loss carryforwards will begin to expire in fiscal 2020, unless utilized. Our California tax loss carryforwards will begin to
expire in fiscal 2014, unless utilized. We also have federal and California research tax credit carryforwards of approximately $17,000
and $16,000, respectively. Our federal research tax credits will begin to expire in fiscal 2026, unless utilized. Our California research
tax credit carryforwards do not expire and will carry forward indefinitely until utilized.
Net loss. As a result of the factors described above, net loss for the year ended March 31, 2011 increased by $500,717 to $6,152,278 or
($0.46) per share compared to a net loss of $5,651,561 or ($1.13) per share for the year ended March 31, 2010.
22
Table of Contents
Liquidity and Capital Resources
As of March 31, 2011, the Company had cash and cash equivalents of $9,278,443 and working capital of $6,759,755.
Historically, we have financed our operations primarily through sales of our debt and equity securities. As of March 31, 2010, the
Company had cash and cash equivalents of $3,629,886 and working capital of $1,994,934.
From August 2010 to October 2010, we conducted a private placement financing to institutional and accredited investors
resulting in the issuance of units consisting of 5,532,418 shares of common stock and warrants to purchase 5,532,418 shares of
common stock at an exercise price of $0.77, for gross cash proceeds of $3,872,702 and net cash proceeds of $3,407,679. Each unit
consisting of one share, together with one warrant to purchase one share, was priced at $0.70. Certain investors that had invested in
our public offering that was completed on February 25, 2010 were issued additional warrants with the same terms to purchase 448,333
shares of common stock in connection with this private placement. We paid a 7% fee to the placement agents in the aggregate amount
of $271,090 and issued warrants to purchase an aggregate of 774,542 shares of our common stock, at an exercise price of $0.77, which
are immediately exercisable and have a term of five years.
On February 4, 2011, the Company consummated the first closing of a private placement to accredited investors resulting in
the issuance of units consisting of 6,335,318 shares of common stock and warrants to purchase 6,335,318 shares of common stock at
an exercise price of $0.77, for gross cash proceeds of $4,434,722. On February 14, 2011, the Company completed the second closing
of this same private placement resulting in the issuance of units consisting of 7,026,771 shares of common stock and warrants to
purchase 7,026,771 shares of common stock at an exercise price of $0.77, for gross cash proceeds of $4,918,740. In both closings,
each unit consisting of one share, together with one warrant to purchase one share, was priced at $0.70 for aggregate gross proceeds of
$9,353,462. Aggregate net proceeds which reflect placement agent fees, legal and accounting fees were $8,041,880. In addition, as
part of the compensation to the selling agents, warrants to purchase 2,393,826 shares of common stock were issued to the agents. The
warrants issued to the investors and selling agents are immediately exercisable and have a term of five years.
During fiscal year 2011, we used $4,811,411 of cash for operations primarily as a result of the net loss of $6,152,278 and
non cash expenses of $1,201,300 due primarily to discount amortization related to our convertible debt instruments and share based
compensation. Offsetting the cash impact of our net operating loss (excluding non-cash items) was an increase in accrued
compensation and related expenses of $306,744 due primarily to increased selling, general and administrative expenses. During fiscal
year 2010, we used $2,853,359 of cash for operations primarily as a result of the net loss of $5,651,561 including a non-cash gain of
$5,576,979 due to the change in valuation of our derivative liabilities and non cash expenses of $7,790,062 due primarily to discount
amortization related to our convertible debt instruments. Offsetting the cash impact of our net operating loss (excluding non-cash
items) was an increase in accrued interest payable of $335,830 primarily due to our Private Placement Debentures and an increase in
accounts payable and accrued expenses of $209,907 due primarily to increased general and administrative expenses.
Net cash used in investing activities totaled $465,450 during fiscal year 2011, primarily attributable the purchase of
equipment $341,400 and the purchase of intangible assets of $124,050. Net cash used in investing activities totaled $138,874 during
fiscal year 2010, primarily attributable to the decrease in restricted cash of $10,000, offset by the purchase of equipment $31,926 and
the purchase of intangible assets of $116,948.
Net cash provided by financing activities totaled $10,925,418 in fiscal year 2011, primarily resulting from the receipt of the
proceeds net of cash paid for offering costs from our public offering of common stock of $11,571,286 and gross proceeds from
exercise of options and warrants of $213,203, which were partially offset by payment of deferred financing costs of $275,699 and
repayment of convertible debt of $423,372. Net cash provided by financing activities totaled $6,372,361 in fiscal year 2010, primarily
resulting from the receipt of the proceeds net of cash paid for offering costs from our public offering of common stock of $4,046,863,
the proceeds from the issuance of our Private Placement Debentures of $1,321,500 and gross proceeds from exercise of options and
warrants of $1,437,100, which were partially offset by payment of deferred financing costs of $92,520 and payments on our related
party notes payable and notes payable to officer of $120,000 and $143,950, respectively.
The Company believes it has sufficient cash on hand and projected revenues to sustain operations for at least 12 months.
23
Table of Contents
Contractual Obligations
The following table summarizes our contractual obligations as of March 31, 2011:
Less than
Payments due by period
1-3
years
Total
1 year
3-5
Years
More than
5 years
Operating Lease Obligations
Convertible Debentures (1)
Other Long-term Debt Obligations (2)
483,742
$
2,607,196
1,525,412
156,979
$
2,176,628
102,000
$
195,237
430,568
192,000
$
131,526
—
1,231,412
$
—
—
Total:
$ 4,616,350
$ 2,435,607
$
817,805
$ 1,362,938
$
0
(1) The Company issued convertible debentures in October 2007 (the “October 2007 Debentures”) and in May 2008 (the “May 2008
Debentures,” and together with the October 2007 Debentures, the “Debentures”). The Debentures were issued to four
institutional investors and have an outstanding principal balance of $2,607,196 as of March 31, 2011. As collateral to secure our
repayment obligations to the holders of the Debentures we have granted such holders a first priority security interest in generally
all of our assets, including our intellectual property.
(2) Represents unsecured indebtedness owed to five related parties, including four former members of the board of directors, for
capital advances made to the Company from February 2001 through March 2005. These notes bear interest at the rate of 6% per
annum and provide for aggregate monthly principal payments which began April 1, 2006 of $2,500, and which increased by an
aggregate of $2,500 every nine months to a maximum of $10,000 per month. As of March 31, 2011, the aggregate principal
payments totaled $10,000 per month. Any remaining unpaid principal and accrued interest is due at maturity March 1, 2015.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included
elsewhere in this Annual Report on Form 10-K, are based upon our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. Our significant accounting policies are described in the notes to the
audited consolidated financial statements contained elsewhere in this Annual Report on Form 10-K. Included within these policies are
our “critical accounting policies.” Critical accounting policies are those policies that are most important to the preparation of our
consolidated financial statements and require management’s most subjective and complex judgments due to the need to make
estimates about matters that are inherently uncertain. Although we believe that our estimates and assumptions are reasonable, actual
results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a
material impact on our results of operations and/or financial condition.
We believe that the critical accounting policies that most impact the consolidated financial statements are as described
below.
Revenue Recognition
Per Use Revenues
We recognize revenues from product sales when there is persuasive evidence that an arrangement exists, when title has
passed, the price is fixed or determinable, and we are reasonably assured of collecting the resulting receivable. The Company records
a provision for claims based upon historical experience. Actual claims in any future period may differ from the Company’s estimates.
During its early years, the Company’s limited revenue was derived from the sale of our reusable product line. The Company’s current
business plan focuses on per-use leasing of the shipping container and value-added services that will be used by us to provide an end-
to-end and cost-optimized shipping solution.
The Company provides shipping containers to their customers and charges a fee in exchange for the use of the container.
The Company’ arrangements are similar to the accounting standard for leases since they convey the right to use the containers over a
period of time. The Company retains title to the containers and provides its customers the use of the container for a specified shipping
cycle. At the culmination of the customer’s shipping cycle, the container is returned to the Company. As a result of our new business
plan, during the quarter ended September 30, 2009, the Company reclassified the containers from inventory to fixed assets upon
commencement of the loaned-container program.
Inventory
The Company writes down its inventories for estimated obsolescence or unmarketable inventory equal to the difference
between the cost of inventory and the estimated market value based upon assumptions about future demand, future pricing and market
conditions. Inventory reserve costs are subject to estimates made by the Company based on historical experience, inventory quantities,
age of inventory and any known expectations for product changes. If actual future demands, future pricing or market conditions are
less favorable than those projected by management, additional inventory write-downs may be required and the differences could be
material. Such differences might significantly impact cash flows from operating activities. Once established, write-downs
are considered permanent adjustments to the cost basis of the obsolete or unmarketable inventories.
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Table of Contents
During its early years, the Company’s limited revenue was derived from the sale of our reusable product line. The
Company’s current business plan focuses on per-use leasing of the shipping container and value-added services that will be used by us
to provide an end-to-end and cost-optimized shipping solution. The Company provides shipping containers to its customers and
charges a fee in exchange for the use of the container. The Company’ arrangements are similar to the accounting standard for leases
since they convey the right to use the containers over a period of time. The Company retains title to the containers and provides its
customers the use of the container for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the container is
returned to the Company. As a result of our current business plan, during fiscal year 2010, the Company reclassified the containers
from inventory to fixed assets upon commencement of the loaned-container program. The Company’s current inventory consists of
accessories that are sold and shipped to customers along with loaned containers and not returned to the Company with the containers
at the culmination of the customer’s shipping cycle.
Property and Equipment
Fixed assets are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization of fixed
assets are provided using the straight-line method over the following useful lives:
Cryogenic Shippers
Furniture and fixtures
Machinery and equipment
Leasehold improvements
3 years
7 years
5-7 years
Lesser of lease term or estimated useful life
Betterments, renewals and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets
retired are removed from the accounts, and the gain or loss on disposition is recognized in current operations.
Intangible Assets
Intangible assets are comprised of patents and trademarks and software development costs. The Company capitalizes costs
of obtaining patents and trademarks which are amortized, using the straight-line method over their estimated useful life of five years.
The Company capitalizes certain costs related to software developed for internal use. Software development costs incurred during the
preliminary or maintenance project stages are expensed as incurred, while costs incurred during the application development stage are
capitalized and amortized using the straight-line method over the estimated useful life of the software, which is five years. Capitalized
costs include purchased materials and costs of services including the valuation of warrants issued to consultants.
Long-Lived Assets
The Company assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization
of long-lived assets over their remaining lives can be recovered through projected undiscounted cash flows. The amount of long-lived
asset impairment is measured based on fair value and is charged to operations in the period in which long-lived asset impairment is
determined by management. Manufacturing fixed assets are subject to obsolescence potential as result of changes in customer
demands, manufacturing process changes and changes in materials used. The Company is not currently aware of any such changes
that would cause impairment to the value of its manufacturing fixed assets.
Stock-based Compensation
We recognize compensation costs for all stock-based awards made to employees and directors. The fair value of stock-
based awards is estimated at grant date using the Black-Scholes option pricing model and the portion that is ultimately expected to
vest is recognized as compensation cost over the requisite service period.
We use the Black-Scholes option-pricing model to estimate the fair value of stock-based awards. The determination of fair
value using the Black-Scholes option-pricing model is affected by our stock price as well as assumptions regarding a number of
complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected
employee stock option exercise behaviors. We estimate the expected term based on the contractual term of the awards and employees’
exercise and expected post-vesting termination behavior.
At March 31, 2011, there was $286,821 of total unrecognized compensation cost related to non-vested stock options, which
is expected to be recognized over a remaining weighted average vesting period of 1.83 years.
Issuance of Stock for Non-Cash Consideration
All transactions in which goods or services are the consideration received by non-employees for the issuance of equity
instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the
earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur.
25
Table of Contents
Derivative Liabilities
Our issued and outstanding common stock purchase warrants and embedded conversion features previously treated as
equity pursuant to the derivative treatment exemption were no longer afforded equity treatment, and the fair value of these common
stock purchase warrants and embedded conversion features, some of which have exercise price reset features and some that were
issued with convertible debt, from equity to liability status as if these warrants were treated as a derivative liability since their date of
issue. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash flow, fair value of
any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all
future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised
or expire. These common stock purchase warrants do not trade in an active securities market, and as such, we estimate the fair value of
these warrants using the Black-Scholes option pricing model.
Convertible Debentures
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a
rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is
recorded by the Company as a debt discount. In those circumstances, the convertible debt will be recorded net of the discount related
to the BCF. The Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Deferred Financing Costs
Deferred financing costs represent costs incurred in connection with the issuance of the convertible notes payable and
private equity financing. Deferred financing costs are being amortized over the term of the financing instrument on a straight-line
basis, which approximates the effective interest method, or netted against the gross proceeds from equity financings.
Income Taxes
We account for income taxes under the provision of the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 740, Income Taxes , or ASC 740. As of March 31, 2011 and 2010, there were no unrecognized tax
benefits included in the accompanying balance sheets that would, if recognized, affect the effective tax rates. Based on the weight of
available evidence, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not
be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s
income tax provision consists of state minimum taxes.
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no
accrual for interest or penalties on our consolidated balance sheets at March 31, 2011 and 2010, respectively and have not recognized
interest and/or penalties in the consolidated statement of operations for the year ended March 31, 2011. We are subject to taxation in
the United States and various state jurisdictions. As of March 31, 2011, the Company is no longer subject to U.S. federal examinations
for year before 2007 and for California franchise and income tax examinations before 2006. However, to the extent allowed by law,
the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and
make adjustments up to the amount of the net operating loss carry forward amount. The Company is not currently under examination
by U.S. federal or state jurisdictions.
New Accounting Pronouncements
In August 2010, the FASB issued Accounting Standards Update No. 2010-05, Measuring Liabilities at Fair Value, or ASU
2010-05, which amends ASC 820 to provide clarification of a circumstance in which a quoted price in an active market for an
identical liability is not available. A reporting entity is required to measure fair value using one or more of the following methods: 1) a
valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar
liabilities (or similar liabilities when traded as assets) and/or 2) a valuation technique that is consistent with the principles of ASC 820.
ASU 2010-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include
inputs relating to the existence of transfer restrictions on that liability. The adoption did not have a material impact on our consolidated
financial statements.
In August 2010, the FASB issued an exposure draft on lease accounting that would require entities to recognize assets and
liabilities arising from lease contracts on the balance sheet. The proposed exposure draft states that lessees and lessors should apply a
“right-of-use model” in accounting for all leases. Under the proposed model, lessees would recognize an asset for the right to use the
leased asset, and a liability for the obligation to make rental payments over the lease term. The lease term is defined as the longest
possible term that is “more likely than not” to occur. The accounting by a lessor would reflect its retained exposure to the risks or
benefits of the underlying leased asset. A lessor would recognize an asset representing its right to receive lease payments based on the
expected term of the lease. Comments on this exposure draft were due by December 15, 2010 and the final standard is expected to be
issued in the second quarter of 2011. The Company does not expect the proposed standard, as currently drafted, will have a material
impact on its consolidated financial statements.
26
Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Changes in United States interest rates would affect the interest earned on our cash and cash equivalents and interest
expense on our revolving credit facility.
Based on our overall cash and cash equivalents interest rate exposure at March 31, 2011, a near-term change in interest
rates, based on historical movements, would not have a material adverse effect on our financial position or results of operations.
All outstanding amounts under our Revolving Credit Facility bear interest at a variable rate equal to the lender’s prime rate
plus a margin of 1.50% or 5.0%, whichever is higher. Interest is payable on a monthly basis and may expose us to market risk due to
changes in interest rates. As of March 31, 2011, we had $90,388 outstanding under our Revolving Credit Facility. The interest rate at
March 31, 2011 was 5.00%. A 10% change in interest rates on our Revolving Credit Facility would not have had a material effect on
our net loss for the year ended March 31, 2011.
We have operated primarily in the United States. Accordingly, we have not had any significant exposure to foreign
currency rate fluctuations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the consolidated financial statements included in this Report at pages F-1 through F-31.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures. The term “disclosure controls and procedures” (defined in
Rule 13a-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”) refers to the controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the
Exchange Act is recorded, processed, summarized and reported within the required time periods. Under the supervision and with the
participation of our management, including our chief executive officer and chief financial officer, we have conducted an evaluation of
the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2011. Based on this
evaluation, our president and chief executive officer and our chief financial officer concluded that our disclosure controls and
procedures were effective as of March 31, 2011 to ensure the timely disclosure of required information in our Securities and Exchange
Commission filings.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In
addition, the design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under all future events, no matter how remote. Accordingly,
even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.
(b) Management’s Report on Internal Control Over Financial Reporting. Management’s Report on Internal Control Over
Financial Reporting which appears on the following page is incorporated herein by this reference.
(c) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over
financial reporting during the fourth quarter of the fiscal year ended March 31, 2011 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
27
Table of Contents
CRYOPORT, INC.
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing and maintaining effective internal control over financial
reporting and for the assessment of the effectiveness of internal control over financial reporting. The Company’s internal control over
financial reporting is a process designed, as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for
external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting is supported by written policies and procedures that:
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the Company’s assets;
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of the Company’s management and directors; and
•
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of the Company’s annual consolidated financial statements, management of the
Company has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“the COSO Framework”). Management’s assessment included an evaluation of the design of the Company’s
internal control over financial reporting and testing of the operational effectiveness of the Company’s internal control over financial
reporting.
Based on this assessment, management has concluded that the Company’s internal control over financial reporting was
effective as of March 31, 2011.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation b the Company’s registered public
accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only
management’s report in this Annual Report.
By:
/s/ LARRY G. STAMBAUGH
Larry G. Stambaugh,
President & Chief Executive
Officer, and Director
June 27, 2011
By:
/s/ CATHERINE M. DOLL
Catherine M. Doll
Chief Financial Officer
28
Table of Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item regarding our directors, executive officers and committees of our board of directors is
incorporated by reference to the information set forth under the captions “Election of Directors” and “Executive Compensation and
Related Matters” in our 2011 Definitive Proxy Statement to be filed within 120 days after the end of our fiscal year ended March 31,
2011 (the “2011 Definitive Proxy Statement”).
Information required by this Item regarding Section 16(a) reporting compliance is incorporated by reference to the
information set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2011 Definitive Proxy
Statement.
Information required by this Item regarding our code of ethics is incorporated by reference to the information set forth
under the caption “Corporate Governance” in Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the information set forth under the caption “Executive
Compensation and Related Matters” in our 2011 Definitive Proxy Statement to be filed within 120 days after the end of our fiscal year
ended March 31, 2011.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to the information set forth under the caption “Security
Ownership of Directors and Executive Officers and Certain Beneficial Owners” in our 2011 Definitive Proxy Statement to be filed
within 120 days after the end of our fiscal year ended March 31, 2011.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to the information set forth under the captions “Certain
Relationships and Related Transactions” and “Compensation Committee Interlocks and Insider Participation” in our 2011 Definitive
Proxy Statement to be filed within 120 days after the end of our fiscal year ended March 31, 2011.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated by reference to the information set forth under the caption
“Independent Registered Public Accounting Firm Fees” in our 2011 Definitive Proxy Statement to be filed within 120 days after the
end of our fiscal year ended March 31, 2011.
29
Table of Contents
PART IV
ITEM 15: Exhibits and Financial Statement Schedules.
(a) Financial Statements
(1) Index to Consolidated Financial Statements
The financial statements required by this item are submitted in a separate section beginning on page F-1 of this report.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at March 31, 2011 and 2010
Consolidated Statements of Operations the years ended March 31, 2011 and 2010
Consolidated Statements of Stockholders’ Equity (Deficit) for each years ended March 31, 2011 and 2010
Consolidated Statements of Cash Flows for the years ended March 31, 2011 and 2010
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules
F-2
F-3
F-4
F-5
F-6
F-8
All financial statement schedules are omitted because they were not required or the required information is included in the
Consolidated Financial Statements and the related Notes thereto.
3.
Exhibit Index
See Exhibit Index
30
Table of Contents
CRYOPORT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2011 and 2010
Consolidated Statements of Operations for the years ended March 31, 2011 and 2010
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended March 31, 2011 and 2010
Consolidated Statements of Cash Flows for the years ended March 31, 2011 and 2010
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
CryoPort, Inc.
We have audited the accompanying consolidated balance sheets of CryoPort, Inc. (the “Company”) as of March 31, 2011 and 2010,
and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these consolidated 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 audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of
CryoPort, Inc. at March 31, 2011 and 2010, 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.
/s/ KMJ Corbin & Company LLP
Costa Mesa, California
June 27, 2011
F-2
Table of Contents
CRYOPORT, INC.
CONSOLIDATED BALANCE SHEETS
Current assets:
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $9,100 in 2011 and $1,500 in 2010
Inventories
Other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Deposits and other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses
Accrued compensation and related expenses
Current portion of convertible debentures payable, net of discount of $197,226 in 2011 and $0
in 2010
Line of credit and accrued interest
Current portion of related party notes payable
Derivative liabilities
Total current liabilities
Related party notes payable and accrued interest, net of current portion
Convertible debentures payable, net of current portion and discount of $8,842 in 2011 and
$728,109 in 2010, respectively
Total liabilities
Commitments and contingencies
Stockholders’ equity (deficit):
Common stock, $0.001 par value; 250,000,000 shares authorized; 27,504,583 and 8,136,619
shares issued and outstanding at March 31, 2011 and 2010, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities and stockholders’ equity (deficit)
March 31,
2011
2010
$ 9,278,443
91,169
55,794
44,224
528,045
9,997,675
669,580
354,854
9,358
$ 3,629,886
90,404
81,036
—
104,014
3,905,340
559,241
311,965
—
$ 11,031,467
$ 4,776,546
$
506,887
402,746
$
823,653
312,002
1,979,402
90,388
102,000
156,497
3,237,920
1,423,412
200,000
90,388
150,000
334,363
1,910,406
1,478,256
421,726
5,083,058
2,302,459
5,691,121
27,505
58,016,991
(52,096,087 )
5,948,409
8,137
45,021,097
(45,943,809 )
(914,575 )
$ 11,031,467
$ 4,776,546
See accompanying notes.
F-3
Table of Contents
CRYOPORT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues
Cost of revenues
Gross loss
Operating expenses:
Selling, general and administrative
Research and development
Total operating expenses
Loss from operations
Other (expense) income:
Interest income
Interest expense
Loss on sale of property and equipment
Change in fair value of derivative liabilities
Total other expense, net
Loss before income taxes
Income taxes
Net loss
Net loss per common share, basic and diluted
Years Ended March 31,
2010
2011
117,956
$
475,504
717,710
1,302,988
$
(827,484 )
(599,754 )
4,320,461
449,129
3,312,635
284,847
4,769,590
(5,597,074 )
3,597,482
(4,197,236 )
15,571
(618,765 )
—
49,590
8,164
(7,028,684 )
(9,184 )
5,576,979
(553,604 )
(1,452,725 )
(6,150,678 )
(5,649,961 )
1,600
1,600
$ (6,152,278 )
$ (5,651,561 )
$
(0.46 )
$
(1.13 )
Basic and diluted weighted average common shares outstanding
13,301,769
5,011,057
See accompanying notes.
F-4
Table of Contents
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
CRYOPORT, INC.
Balance at March 31, 2009
Cumulative effect related to adoption of new
accounting principle
Issuance of common stock for conversion of
convertible notes payable including accrued
interest
Issuance of common stock for conversion of
convertible debentures and accrued interest
Reclassification of derivative liability to
additional paid-in capital upon conversion of
convertible notes and debentures
Reclassification of derivative liability to
additional paid-in capital upon effectively
fixing conversion feature and warrant price
Estimated fair value of warrants issued as
commission for debt financing
Issuance of common stock for services
Exercise of warrants for cash, net
Cashless exercise of warrants and stock options
Issuance of units in public offering, net of offering
costs of $1,257,904
Share-based compensation related to stock options
and warrants issued to consultants, employees
and directors
Fractional share adjustment for stock split
Net loss
Balance at March 31, 2010
Issuance of common stock for conversion of
convertible debentures
Reclassification of derivative liability to
additional paid-in capital
Reduction of accrued offering costs in connection
with February 2010 financing
Issuance of common stock for services
Exercise of warrants and options for cash
Cashless exercise of warrants
Issuance of units in private placement offering,
net of offering costs of $1,776,605
Share-based compensation related to stock options
and warrants issued to consultants, employees
and directors
Net loss
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
4,186,194
$
4,186
$
25,854,265
$
(30,634,355 )
$
(4,775,904 )
—
—
(4,217,730 )
(9,657,893 )
(13,875,623 )
519,186
519
1,459,682
1,236,316
1,237
4,267,446
—
—
1,460,201
4,268,683
—
—
—
33,490
479,033
15,753
—
2,728,459
—
2,728,459
—
—
33
479
16
9,009,329
63,396
166,061
1,359,989
(16 )
—
—
—
—
—
—
9,009,329
63,396
166,094
1,360,468
—
3,742,097
1,666,667
1,667
3,740,430
—
(20 )
—
—
—
—
589,786
—
—
—
—
(5,651,561 )
589,786
—
(5,651,561 )
8,136,619
$
8,137
$
45,021,097
$
(45,943,809 )
$
(914,575 )
66,666
—
—
13,636
279,094
114,061
67
—
—
14
279
114
199,933
128,276
29,067
23,985
212,924
(114 )
18,894,507
18,894
11,430,665
—
—
—
—
—
—
—
200,000
128,276
29,067
23,999
213,203
—
11,449,559
—
—
—
—
971,158
—
—
(6,152,278 )
971,158
(6,152,278 )
Balance at March 31, 2011
27,504,583
$
27,505
$
58,016,991
$
(52,096,087 )
$
5,948,409
See accompanying notes.
F-5
Table of Contents
CRYOPORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Amortization of deferred financing costs
Amortization of debt discount
Fair value of stock issued to consultants
Share-based compensation related to stock options and warrants issued to consultants,
employees and directors
Change in fair value of derivative instruments
Loss on sale of assets
Loss on disposal of cryogenic shippers
Interest accrued on restricted cash
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other assets
Accounts payable and accrued expenses
Accrued warranty costs
Accrued compensation and related expenses
Accrued interest
Net cash used in operating activities
INVESTING ACTIVITIES
Decrease in restricted cash
Purchases of intangible assets
Purchases of property and equipment
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of cash paid for issuance costs
Proceeds from borrowings under convertible notes
Repayment of convertible debentures payable
Repayment of deferred financing costs
Repayment of related party notes payable
Repayments of note payable to officer
Payment of fees associated with the exercise of warrants
Proceeds from exercise of options and warrants
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest
Income taxes
F-6
Years Ended March 31,
2010
2011
$ (6,152,278 )
$ (5,651,561 )
245,477
—
522,041
—
150,093
159,516
6,417,346
166,094
477,620
(49,590 )
—
6,517
(765 )
865,895
(5,576,979 )
9,184
21,285
649
25,242
16,004
(155,851 )
(109,728 )
—
306,744
57,156
(4,811,411 )
(78,490 )
81,012
(50,219 )
209,907
(18,743 )
105,822
335,830
(2,853,359 )
—
(124,050 )
(341,400 )
(465,450 )
10,000
(116,948 )
(31,926 )
(138,874 )
11,571,286
—
(423,372 )
(275,699 )
(160,000 )
—
—
213,203
10,925,418
5,648,557
3,629,886
$ 9,278,443
4,046,863
1,321,500
—
(92,520 )
(120,000 )
(143,950 )
(76,632 )
1,437,100
6,372,361
3,380,128
249,758
$ 3,629,886
39,568
1,600
13,875
1,600
Table of Contents
CRYOPORT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Offering costs in connection with equity financing included in accounts payable
Settlement of accounts payable with shares of common stock
Reduction of accrued offering costs in connection with February 2010 financing
Conversion of debt to common stock
Reclassification of embedded conversion feature to equity upon conversion
Cashless exercise of warrants and stock options
Fair value of options issued to employee in lieu of cash bonus
Cumulative effect of accounting change to accumulated deficit for derivative liabilities
Cumulative effect of accounting change to additional paid-in capital for derivative liabilities
Reclassification of inventory to property and equipment
Addition of principal due to debt modifications
Reclassification of derivative liabilities to additional paid-in capital upon fixing conversion
feature and warrant price
Estimated fair value of warrants issued to related party in connection with an advisory services
agreement
Reclassification of property and equipment to inventories
Cumulative effect of accounting change to debt discount for derivative liabilities
Debt discount in connection with convertible debt financing
Years Ended March 31,
2010
2011
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
121,727
23,999
29,067
200,000
—
114
216,000
—
—
—
—
304,766
$
—
$
$
—
$ 5,728,884
$ 2,728,459
16
$
$
—
$ 9,657,893
$ 4,217,730
449,229
$
646,369
$
128,276
$ 9,009,329
302,769
60,228
—
—
$
—
—
$
$ 2,595,095
$ 1,080,201
See accompanying notes.
F-7
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Summary of Significant Accounting Policies
The Company
CryoPort, Inc. (the “Company” or “we”) is a provider of an innovative cold chain frozen shipping system dedicated to
providing superior, affordable cryogenic shipping solutions that ensure the safety, status and temperature of high value, temperature
sensitive materials. The Company has developed cost-effective reusable cryogenic transport containers (referred to as “shippers”)
capable of transporting biological, environmental and other temperature sensitive materials at temperatures below minus 150° Celsius.
These dry vapor shippers are one of the first significant alternatives to dry ice shipping and achieve 10-plus day holding times
compared to one to two day holding times with dry ice (assuming no re-icing during transit). The Company’s value proposition comes
from both providing safe transportation and an environmentally friendly, long lasting shipper, and through its value-added services
that offer a simple hassle-free solution for its customers. These value-added services include an internet-based web portal that enables
the customer to conveniently initiate scheduling, shipping and tracking of the progress and status of a shipment, and provides in-transit
temperature and custody transfer monitoring services of the shipper. Our service also provides a fully ready charged shipper
containing all freight bills, customs documents and regulatory paperwork for the entire journey of the shipper to its customers at their
pick up location.
The Company’s principal focus has been the further development and commercial launch of CryoPort Express ® Portal, an
innovative IT solution for shipping and tracking high-value specimens through overnight shipping companies, and it’s CryoPort
Express ® Shipper, a dry vapor cryogenic shipper for the transport of biological and pharmaceutical materials. A dry vapor cryogenic
shipper is a container that uses liquid nitrogen in dry vapor form, which is suspended inside a vacuum insulated bottle as a refrigerant,
to provide storage temperatures below minus 150° Celsius. The dry vapor shipper is designed using innovative, proprietary, and
patented technology which prevents spillage of liquid nitrogen and pressure build up as the liquid nitrogen evaporates. A proprietary
foam retention system is employed to ensure that liquid nitrogen stays inside the vacuum container, even when placed upside-down or
on its side as is often the case when in the custody of a shipping company. Biological specimens are stored in a specimen chamber,
referred to as a “well” inside the containers and refrigeration is provided by harmless cold nitrogen gas evolving from the liquid
nitrogen entrapped within the foam retention system surrounding the well. Biological specimens transported using our cryogenic
shipper can include clinical samples, diagnostics, live cell pharmaceutical products (such as cancer vaccines, semen and embryos, and
infectious substances) and other items that require and/or are protected through continuous exposure to frozen or cryogenic
temperatures (less than minus 150° Celsius).
The Company entered into its first strategic relationship with a global courier on January 13, 2010 with Federal Express
Corporation (“FedEx”) pursuant to which the Company leases to FedEx such number of its cryogenic shippers that FedEx, from time
to time, orders for its customers. Under this agreement, FedEx has the right to and shall, on a non-exclusive basis, promote market and
sell transportation of the Company’s shippers and its related value-added goods and services, such as its data logger, web portal and
planned CryoPort Express ® Smart Pak System. On January 24, 2011 we announced that FedEx had launched its deep frozen shipping
solution using our CryoPort Express ® Dry Shipper. On September 2, 2010, the Company entered into an agreement with DHL
Express (USA), Inc. (“DHL”) that gives DHL life science customers direct access to the Company’s web-based order entry and
tracking portal to order the CryoPort Express ® Shipper and receive preferred DHL shipping rates. The agreement covers DHL
shipping discounts that may be used to support the Company’s customers using the CryoPort Express ® shipping solution. In
connection with the agreement, the Company has integrated its proprietary web portal to DHL’s tracking and billing systems to
provide DHL life science customers with a seamless way of shipping their critical biological material worldwide. The IT integration
with DHL was completed during the Company’s fourth quarter of fiscal year 2011.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S”) (“GAAP”).
Reverse Stock Split
On February 5, 2010, we effected a 10-for-1 reverse stock split of all of our issued and outstanding shares of common stock
(the “Reverse Stock Split”) by filing a Certificate of Amendment to Amended and Restated Articles of Incorporation with the
Secretary of State of Nevada. The par value and number of authorized shares of our common stock remained unchanged. The number
of shares and per share amounts included in the consolidated financial statements and the accompanying notes have been adjusted to
reflect the Reverse Stock Split retroactively. Unless otherwise indicated, all references to number of shares, per share amounts and
earnings per share information contained in this report give effect to the Reverse Stock Split.
F-8
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Principles of Consolidation
The consolidated financial statements include the accounts of CryoPort, Inc. and its wholly owned subsidiary, CryoPort
Systems, Inc. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from
estimated amounts. The Company’s significant estimates include allowances for doubtful accounts and sales returns, recoverability of
long-lived assets, allowance for inventory obsolescence, deferred taxes and their accompanying valuations, valuation of derivative
liabilities and valuation of common stock, warrants and stock options issued for products or services.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, related-
party notes payable, a line of credit, convertible notes payable, accounts payable and accrued expenses. The carrying value for all such
instruments approximates fair value at March 31, 2011 and 2010. The difference between the fair value and recorded values of the
related party notes payable is not significant. The Company’s restricted cash is carried at amortized cost which approximates fair value
at March 31, 2011 and 2010.
Cash and Cash Equivalents
The Company considers highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Concentrations of Credit Risk
The Company maintains its cash accounts in financial institutions. Accounts at these institutions are insured by the Federal
Deposit Insurance Corporation (“FDIC”) with basic deposit coverage limits up to $250,000 per owner. In addition to the basic
insurance deposit coverage, the FDIC is providing temporary unlimited coverage for noninterest-bearing transaction accounts from
December 31, 2010 through December 31, 2012. At March 31, 2011 and 2010, the Company had $8,701,410 and $3,490,116 which
exceeded the FDIC insurance limit, respectively, of cash balances, including restricted cash. The Company performs ongoing
evaluations of these institutions to limit its concentration risk exposure.
Restricted cash
The Company has invested cash in a one year restricted certificate of deposit bearing interest at 1% which serves as
collateral for borrowings under a line of credit agreement (see Note 6). At March 31, 2011 and 2010, the balance in the certificate of
deposit was $91,169 and $90,404, respectively.
Customers
The Company grants credit to customers within the U.S. and to a limited number of international customers and does not
require collateral. Revenues from international customers are generally secured by advance payments except for a limited number of
established foreign customers. The Company generally requires advance or credit card payments for initial revenues from new
customers. The Company’s ability to collect receivables is affected by economic fluctuations in the geographic areas and industries
served by the Company. Reserves for uncollectible amounts are provided based on past experience and a specific analysis of the
accounts, which management believes is sufficient. Accounts receivable at March 31, 2011 and 2010 are net of reserves for doubtful
accounts of approximately $9,100 and $1,500, respectively. Although the Company expects to collect amounts due, actual collections
may differ from the estimated amounts.
The Company has foreign revenues primarily in Europe, Canada, India and Australia. During fiscal years 2011 and 2010,
the Company had foreign revenues of approximately $232,000 and $67,000, respectively, which constituted approximately 51% and
56% of total revenues, respectively.
The majority of the Company’s customers are in the biotechnology, pharmaceutical and life science industries.
Consequently, there is a concentration of receivables within these industries, which is subject to normal credit risk. At March 31,
2011, annual revenues from three customers accounted for 68% of our total revenues. At March 31, 2010, annual net revenues from
two customers accounted for 51% of our total revenues. The Company maintains reserves for bad debt and such losses, in the
aggregate, historically have not exceeded our estimates.
Inventories
The Company’s inventories consist of $37,739 in raw material and $6,485 in finished goods, which represents accessories
that are sold and shipped to customers along with pay-per-use containers and not returned to the Company with the containers at the
culmination of the customer’s shipping cycle.
Inventories are stated at the lower of cost or current estimated market value. Cost is determined using the standard cost
method which approximates the first-in, first-to-expire method. Inventories are reviewed periodically for slow-moving or obsolete
status. The Company write downs the carrying value of its inventories to reflect situations in which the cost of inventories is not
expected to be recovered. Once established, write-downs of inventories are considered permanent adjustments to the cost basis of the
obsolete or excess inventories. Raw materials and finished goods include material costs less reserves for obsolete or excess
inventories. The Company evaluates the current level of inventories considering historical trends and other factors, and based on the
evaluation, records adjustments to reflect inventories at its net realizable value. These adjustments are estimates, which could vary
significantly from actual results if future economic conditions, customer demand, competition or other relevant factors differ from
expectations. These estimates require us to make assessments about future demand for the Company’s products in order to categorize
the status of such inventories items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing
accuracy of the Company’s forecasts of market conditions, industry trends, competition and other factors.
In fiscal year 2010, the Company changed its operations and now provides shipping containers to its customers and charges
a fee in exchange for the use of the container. The Company’s arrangements are similar to the accounting standard for leases since
they convey the right to use the containers over a period of time. The Company retains title to the containers and provides its
customers the use of the container for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the container is
returned to the Company. As a result, during the fiscal year 2010, the Company reclassified the containers from inventory to fixed
assets upon commencement of the per-use container program.
F-9
Table of Contents
Property and Equipment
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Property and equipment are recorded at cost. Cryogenic shippers, which comprise of 84% of the Company’s net property
and equipment balance at March 31, 2011, are depreciated using the straight-line method over their estimated useful lives of three
years. Equipment and furniture are depreciated using the straight-line method over their estimated useful lives (generally three to
seven years) and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the
lease term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful life of the assets or
term of the lease, whichever is shorter and included in depreciation expense.
Betterments, renewals and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and
maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets
retired are removed from the accounts, and the gain or loss on disposition is recognized in current operations.
Intangible Assets
Intangible assets are comprised of patents and trademarks and software development costs. The Company capitalizes costs
of obtaining patents and trademarks which are amortized, using the straight-line method over their estimated useful life of five years.
The Company capitalizes certain costs related to software developed for internal use. Software development costs incurred during the
preliminary or maintenance project stages are expensed as incurred, while costs incurred during the application development stage are
capitalized and amortized using the straight-line method over the estimated useful life of the software, which is five years. Capitalized
costs include purchased materials and costs of services including the valuation of warrants issued to consultants.
Long-lived Assets
If indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the
carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we
measure the amount of such impairment by comparing the fair value to the carrying value. We believe the future cash flows to be
received from the long-lived assets will exceed the assets’ carrying value, and accordingly, we have not recognized any impairment
losses through March 31, 2011.
Deferred Financing Costs
Deferred financing costs represent costs incurred in connection with the issuance of the convertible notes payable and
private equity financing. Deferred financing costs related to the issuance of debt are being amortized over the term of the financing
instrument using the effective interest method while deferred financing costs from equity financings are netted against the gross
proceeds received from the equity financings.
During the year ended March 31, 2011, the Company incurred $465,023 of offering costs in connection with the private
placement that closed in August 2010 and October 2010 and $1,311,582 of offering costs from the private placement that closed in
February 2011; both of which were charged to paid-in capital and netted against the proceeds received in the private placements. As of
March 31, 2011, offering costs of $121,727 related to the February 2011 private placement were included in accounts payable and
accrued expenses in the accompanying consolidated balance sheet.
During the year ended March 31, 2010, the Company completed a public offering of units consisting of 1,666,667 shares of
common stock and 1,666,667 warrants to purchase one share of common stock at an exercise price of $3.30, for gross proceeds of
$5,000,001 and net proceeds of approximately $3,742,097 (the “February 2010 Public Offering”). Each unit consisting of one share,
together with one warrant to purchase one share, was priced at $3.00. In connection with this public offering the Company incurred
financing costs of $1,257,904, which consisted primarily of placement agent fees, accounting, legal and filing fees and were netted
against the proceeds of the offering upon completion.
During the year ended March 31, 2010, and in connection with the issuance of convertible notes payable (see Note 8), the
Company paid financing costs, which consisted primarily of placement agent fees, accounting, legal and filing fees, and were
amortized over the life of the debt. Amortization of deferred financing costs using the effective interest method was $0 and $159,516
for the years ended March 31, 2011 and 2010, respectively, and were included in interest expense in the accompanying consolidated
statements of operations. Additionally, during the year ended March 31, 2011, the Company made payments of $275,699 in
connection with the deferred financing fees related to the February 2010 Public Offering, which were included in accounts payable
and accrued expenses in the accompanying consolidated balance sheet at March 31, 2010.
Accrued Warranty Costs
Estimated costs of the Company’s standard warranty were included with products at no additional cost to the customer for a
period up to one year and were recorded as accrued warranty costs at the time of product sale. Costs related to servicing the standard
warranty were charged to the accrual as incurred.
Convertible Debentures
If a conversion feature of conventional convertible debt is not accounted for as a derivative instrument and provides for a
rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is
recorded by the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company
amortizes the discount to interest expense over the life of the debt using the effective interest rate method.
Derivative Liabilities
Effective April 1, 2009, certain of the Company’s issued and outstanding common stock purchase warrants and embedded
conversion features previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity
treatment, and the fair value of these common stock purchase warrants and embedded conversion features, some of which have
exercise price reset features and some that were issued with convertible debt, were reclassified from equity to liability status as if these
warrants were treated as a derivative liability since their date of issue. The common stock purchase warrants were not issued with the
intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The
warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants are recognized
currently in earnings until such time as the warrants are exercised, expire or the related rights have been waived. These common stock
purchase warrants do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants
using the Black-Scholes option pricing model (“Black-Scholes”) (see Note 9).
F-10
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Commitments and Contingencies
The Company is subject to routine claims and litigation incidental to our business. In the opinion of management, the
resolution of such claims is not expected to have a material adverse effect on our operating results or financial position.
Income Taxes
The Company accounts for income taxes under the provision of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 740, Income Taxes , or ASC 740. As of March 31, 2011 and 2010, there were no
unrecognized tax benefits included in the accompanying consolidated balance sheets that would, if recognized, affect the effective tax
rates. Based on the weight of available evidence, the Company’s management has determined that it is more likely than not that the
net deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred
tax assets. The Company’s income tax provision consists of state minimum taxes.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The
Company had no accrual for interest or penalties on its consolidated balance sheets at March 31, 2011 and 2010, respectively and has
not recognized interest and/or penalties in the consolidated statement of operations for the years ended March 31, 2011 and 2010. The
Company is subject to taxation in the U.S. and various state jurisdictions. As of March 31, 2011, the Company is no longer subject to
U.S. federal examinations for years before 2007 per Note 14 and for California franchise and income tax examinations for years
before 2006 per Note 14. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods
where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry
forward amount. The Company is not currently under examination by U.S. federal or state jurisdictions.
Supply Concentration Risks
The component parts for our products are primarily manufactured at third party manufacturing facilities. The Company also
has a warehouse at our corporate offices in Lake Forest, California, where the Company is capable of manufacturing certain parts and
fully assembles its products. Most of the components that the Company uses in the manufacture of its products are available from
more than one qualified supplier. For some components, however, there are relatively few alternate sources of supply and the
establishment of additional or replacement suppliers may not be accomplished immediately, however, the Company has identified
alternate qualified suppliers which the Company believes could replace existing suppliers. Should this occur, the Company believes
that with its current level of shippers and production rate the Company has enough to cover a four to six week gap in maximum
disruption of production.
There are no specific agreements with any manufacturer nor are there any long term commitments to any manufacturer. The
Company believes that any of the manufactures currently used by it could be replaced within a short period of time as none have a
proprietary component or a substantial capital investment specific to its products.
Revenue Recognition
The Company provides shipping containers to their customers and charges a fee in exchange for the use of the container.
The Company’s arrangements are similar to the accounting standard for leases since they convey the right to use the containers over a
period of time. The Company retains title to the containers and provides its customers the use of the container for a specified shipping
cycle. At the culmination of the customer’s shipping cycle, the container is returned to the Company.
The Company recognizes revenue for the use of the shipper at the time of the delivery of the shipper to the end user of the
enclosed materials, and at the time that collectability is reasonably certain. Revenue is based on gross net of discounts and allowances.
Accounting for Shipping and Handling Revenue, Fees and Costs
The Company classifies amounts billed for shipping and handling as revenue. Shipping and handling fees and costs are
included in cost of sales in the accompanying consolidated statements of operations.
Research and Development Expenses
Expenditures relating to research and development are expensed in the period incurred. Research and development
expenses to date have consisted primarily of costs associated with the continually improving the features of the CryoPort Express ®
System including the web based customer service portal and the CryoPort Express ® Shippers. Further, these efforts are expected to
lead to the introduction of shippers of varying sizes based on market requirements, constructed of lower cost materials and utilizing
high volume manufacturing methods that will make it practical to provide the cryogenic packages offered by the CryoPort Express ®
System. Other research and development effort has been directed toward improvements to the liquid nitrogen retention system to
render it more reliable in the general shipping environment and to the design of the outer packaging. Alternative phase change
materials in place of liquid nitrogen may be used to increase the potential markets these shippers can serve such as ambient and 2-8°C
markets.
Stock-based Compensation
The Company recognizes compensation expense for all stock-based awards made to employees and directors. The fair
value of stock-based awards is estimated at grant date using Black-Scholes and the portion that is ultimately expected to vest is
recognized as compensation cost over the requisite service period.
Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, the Company has
applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates will be
revised, if necessary, in future periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation
cost in the period in which the change in estimate occurs. The estimated forfeiture rates at March 31, 2011 and 2010 was zero as the
Company has not had a significant history of forfeitures and does not expect forfeitures in the future.
The Company uses Black-Scholes to estimate the fair value of stock-based awards. The determination of fair value using
Black-Scholes is affected by its stock price as well as assumptions regarding a number of complex and subjective variables, including
expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.
At March 31, 2011, there was $286,821 of total unrecognized compensation cost related to non-vested stock options, which
is expected to be recognized over a remaining weighted average vesting period of approximately 1.83 years.
The Company’s stock-based compensation plans are discussed further in Note 11.
F-11
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Issuance of Stock for Non-Cash Consideration
The Company accounts for equity issuances to non-employees in accordance with accounting guidance for equity
instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods and services. All transactions
in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair
value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The
measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party
performance is complete or the date on which it is probable that performance will occur. See Note 12 for more details.
Basic and Diluted Loss Per Share
Basic loss per common share is computed based on the weighted average number of shares outstanding during the period.
Diluted loss per share is computed by dividing net loss by the weighted average shares outstanding assuming all dilutive potential
common shares were issued. For the years ended March 31, 2011 and 2010, the Company was in a loss position and the basic and
diluted loss per share are the same since the effect of stock options, warrants and convertible notes payable on loss per share was anti-
dilutive and thus not included in the diluted loss per share calculation. The impact under the treasury stock method of dilutive stock
options and warrants and the if-converted method of convertible debt would have resulted in weighted average common shares
outstanding of 16,088,589 and 8,472,977 for the years ended March 31, 2011 and 2010, respectively.
In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back the after-tax
amount of interest, if any, recognized in the period associated with any convertible debt.
Segment Reporting
We currently operate in only one segment.
Subsequent Events
The Company has evaluated subsequent events through the filing date of this Form 10-K and determined that no subsequent
events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto other
than as discussed in the accompanying notes.
F-12
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
New Accounting Pronouncements
In August 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-05, Measuring Liabilities at Fair Value,
or ASU 2010-05, which amends ASC 820 to provide clarification of a circumstance in which a quoted price in an active market for an
identical liability is not available. A reporting entity is required to measure fair value using one or more of the following methods: 1) a
valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar
liabilities (or similar liabilities when traded as assets) and/or 2) a valuation technique that is consistent with the principles of ASC 820.
ASU 2010-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include
inputs relating to the existence of transfer restrictions on that liability. The adoption did not have a material impact on our consolidated
financial statements.
In August 2010, the FASB issued an exposure draft on lease accounting that would require entities to recognize assets and
liabilities arising from lease contracts on the balance sheet. The proposed exposure draft states that lessees and lessors should apply a
“right-of-use model” in accounting for all leases. Under the proposed model, lessees would recognize an asset for the right to use the
leased asset, and a liability for the obligation to make rental payments over the lease term. The lease term is defined as the longest
possible term that is “more likely than not” to occur. The accounting by a lessor would reflect its retained exposure to the risks or
benefits of the underlying leased asset. A lessor would recognize an asset representing its right to receive lease payments based on the
expected term of the lease. Comments on this exposure draft were due by December 15, 2010 and the final standard is expected to be
issued in the second quarter of 2011. The Company does not expect the proposed standard, as currently drafted, will have a material
impact on its consolidated financial statements.
Note 2. Inventories
Inventories consist of the following:
Raw materials
Finished goods
March 31, March 31,
2011
2010
$
$
37,739
6,485
44,224
$
$
—
—
—
The Company’s inventories consists of accessories that are sold and shipped to customers along with pay-per-use
containers and are not returned to the Company along with the containers at the culmination of the customer’s shipping cycle.
Inventories are stated at the lower of standard cost or current estimated market value. Cost is determined using the standard cost
method which approximates the first-in, first-to-expire method.
Note 3. Property and Equipment
Equipment and leasehold improvements and related accumulated depreciation and amortization are as follows:
Cryogenic shippers
Furniture and fixtures
Machinery and equipment
Leasehold improvements
Less accumulated depreciation and amortization
March 31,
$
2011
689,757
3,284
355,303
19,426
1,067,770
(398,190 )
669,580
$
2010
449,734
3,284
340,169
19,426
812,613
(253,372 )
559,241
$
$
During its early years, the Company’s limited revenue was derived from the sale of our reusable product line. The
Company’s current business plan focuses on per-use leasing of shipping containers and added-value services that will be used by us to
provide an end-to-end and cost-optimized shipping solutions.
Total depreciation and amortization expense related to property and equipment amounted to $164,316 and $80,746 for the
years ended March 31, 2011 and 2010, respectively.
F-13
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4. Intangible Assets
Intangible assets are comprised of patents and trademarks and software developed for internal uses. The gross book values
and accumulated amortization as of March 31, 2011 and 2010 were as follows:
Patents and trademarks
Software development costs
Less accumulated amortization
March 31,
2011
2010
$
91,354
479,131
570,485
(215,631 )
$
91,354
355,081
446,435
(134,470 )
$
354,854
$
311,965
Amortization expense for intangible assets for the years ended March 31, 2011 and 2010 was $81,161 and $69,347,
respectively. All of the Company’s intangible assets are subject to amortization.
Years Ending March 31,
2012
2013
2014
2015
2016
Patents and
Trademarks
Software
Total
Intangibles
$
$
8,533
8,533
8,506
7,460
7,047
$
95,804
95,804
77,116
29,253
16,798
104,337
104,337
85,622
36,713
23,845
$
40,079
$
314,775
$
354,854
F-14
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 5. Fair Value Measurements
The Company determines the fair value of its derivative instruments using a three-level hierarchy for fair value
measurements which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market
assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the
following fair-value hierarchy:
Level 1 — Valuations based on unadjusted quoted market prices in active markets for identical securities. Currently the
Company does not have any items classified as Level 1.
Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the
measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and
involve management judgment. The Company uses the Black-Scholes option pricing model to determine the fair value of the
instruments. If the inputs used to measure fair value fall in different levels of the fair value hierarchy, a financial security’s hierarchy
level is based upon the lowest level of input that is significant to the fair value measurement.
The following table presents the Company’s warrants measured at fair value on a recurring basis as of March 31, 2011 and
March 31, 2010 classified using the valuation hierarchy:
Derivative Liabilities
Level 3
Level 3
Carrying Value Carrying Value
March 31, 2011 March 31, 2010
$
156,497 $
334,363
The following table provides a reconciliation of the beginning and ending balances for the Company’s derivative liabilities
measured at fair value using Level 3 inputs:
Balance at April 1
Cumulative effect of change in accounting principle (see Note 9)
Derivative liability added — warrants
Derivative liability added — conversion option
Reclassification of conversion feature to equity upon conversions of notes
Reclassification of conversion feature and warrants to equity upon modification of terms (no
longer derivative instruments)
Change in fair value
Reclassification of warrants to equity upon fixing exercise price
Balance at March 31,
$
2011
334,363
—
—
—
—
2010
$
—
16,470,718
389,781
788,631
(2,728,459 )
—
(49,590 )
(128,276 )
(9,009,329 )
(5,576,979 )
—
$
156,497
$
334,363
F-15
Table of Contents
Note 6. Line of Credit
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On November 5, 2007, the Company secured financing for a $200,000 one-year revolving line of credit (the “Line”)
secured by a $200,000 certificate of deposit with a financial institution. On November 6, 2008, the Company secured a one-year
renewal of the Line for a reduced amount of $100,000 which is secured by a $100,000 certificate of deposit with a financial
institution. During October 2010, the Company secured a one-year renewal of the Line for a reduced amount of $90,000 which is
secured by a $90,000 certificate of deposit with a financial institution. All borrowings under the revolving line of credit bear variable
interest based either the prime rate plus 1.5% per annum (totaling 4.75% as of March 31, 2011) or 5.0%, whichever is higher. The
Company utilizes the funds advanced from the Line for capital equipment purchases to support the commercialization of the
Company’s CryoPort Express ® One-Way Shipper. As of March 31, 2011 and 2010, the outstanding balance of the Line was $90,388,
including accrued interest of $388. No funds were drawn against the Line during the years ended March 31, 2011 or 2010. The
Company recorded interest expense of $4,563 and $4,094 for the years ended March 31, 2011 and 2010, respectively.
Note 7. Related Party Transactions
Related Party Notes Payable
As of March 31, 2011 and 2010, the Company had aggregate principal balances of $849,500 and $1,009,500, respectively,
in outstanding unsecured indebtedness owed to five related parties, including four former members of the board of directors,
representing working capital advances made to the Company from February 2001 through March 2005. These notes bear interest at
the rate of 6% per annum and provide for aggregate monthly principal payments which began April 1, 2006 of $2,500, and which
increased by an aggregate of $2,500 every nine months to a maximum of $10,000 per month. As of March 31, 2011, the aggregate
principal payments totaled $10,000 per month. Any remaining unpaid principal and accrued interest is due at maturity on March 1,
2015.
Related-party interest expense under these notes was $57,156 and $64,496 for the years ended March 31, 2011 and 2010,
respectively. Accrued interest related to these notes, which is included in related party notes payable in the accompanying
consolidated balance sheets, amounted to $675,912 and $618,756 as of March 31, 2011 and 2010, respectively.
Scheduled maturities of related party debt as of March 31, 2011 are as follows:
Years Ending March 31:
2012
2013
2014
2015
Note Payable to Former Officer
$
102,000
96,000
96,000
1,231,412
$ 1,525,412
In August 2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to convert his deferred salaries to a
long-term note payable. Interest of 6% per annum on the outstanding principal balance of the note began to accrue on January 1, 2008.
Under the terms of this note, the Company began to make monthly payments of $3,000 to Mr. Berry in January 2007. The note and a
portion of the accrued interest were paid in March 2010 and the remaining accrued interest of $11,996 was paid in full in
August 2010. Interest expense related to this note was $11,996 and $8,133 for the years ended March 31, 2011 and 2010, respectively.
In February 2009, Mr. Berry resigned his position as Chief Executive Officer and on July 30, 2009. Mr. Berry resigned his position
from the Board.
Consulting Agreement with Former Officer
On March 1, 2009, the Company entered into a Consulting Agreement with Peter Berry, the Company’s former Chief
Executive Officer. Mr. Berry provided the Company with consulting services as an independent contractor, for a ten (10) month
period from March 1, 2009 through December 31, 2009, as an advisor to the Chief Executive Officer and the Board of Directors.
Related-party consulting fees for these services were $0 and $292,010 for the years ended March 31, 2011 and 2010,
respectively.
Advisory Services Agreement with Former Officer
On March 7, 2011 the Company entered into a one-year Advisory Services Agreement with Marc Grossman M.D. to
provide strategic business advisory services including identifying and introducing customers, advising on sales and marketing plans
and providing financial advice. Dr. Grossman is a former officer of the Company and is one of the five related parties to
which CryoPort has an outstanding unsecured debt obligation. For these services, Dr. Grossman was paid a fee of $125,000, which is
to be amortized over the term of the agreement, and issued a warrant to purchase 200,000 shares of the Company’s common stock at
an exercise price of $0.77 per share and vested upon issuance. The fair value of this warrant was $302,769 of which the Company
recorded $277,538 as another current asset and recognized $25,231 in selling, general and administrative expense for the year ended
March 31, 2011 in the accompanying consolidated financial statements.
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CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Related Party Legal Services
Since June 2005, the Company had retained the legal services of Gary C. Cannon, Attorney at Law, for a monthly retainer
fee. From June 2005 to May 2009, Mr. Cannon also served as the Company’s Secretary and a member of the Company’s Board of
Directors. Mr. Cannon continued to serve as Corporate Legal Counsel for the Company and served as a member of the Advisory
Board. In December 2007, Mr. Cannon’s monthly retainer for legal services was increased from $6,500 per month to $9,000 per
month. The total amount paid to Mr. Cannon for retainer fees and out-of-pocket expenses for the year ended March 31, 2011 and 2010
was $0 and $34,350, respectively. Board fees expensed for Mr. Cannon were $0 and $5,388 for the years ended March 31, 2011 and
2010, respectively. At March 31, 2011 and 2010, $0 and $7,788, respectively, of deferred board fees was included in accrued
compensation and related expenses. During the year ended March 31, 2010, Mr. Cannon was granted a total of 2,557 warrants with an
average exercise price of $5.90 per share. All warrants granted to Mr. Cannon were issued with an exercise price of greater than or
equal to the stock price of the Company’s shares on the grant date. On May 4, 2009, Mr. Cannon resigned from the Company’s Board
of Directors and in July 2009 Mr. Cannon was given 30 days notice that he was terminated as the general legal counsel and advisor to
the Company.
Consulting Agreement with Officer
On July 29, 2009, the Board of Directors of the Company appointed Ms. Catherine M. Doll, a consultant, to the offices of
Chief Financial Officer, Treasurer and Assistant Corporate Secretary, which became effective on August 20, 2009.
Ms. Doll is the owner and chief executive officer of The Gilson Group, LLC. The Gilson Group, LLC provided the
Company financial and accounting consulting services including, SEC and financial reporting including the filing of the S-1,
budgeting and forecasting and finance and accounting systems implementations and conversions.
Related-party consulting fees for these services were $437,796 and $234,650 for the years ended March 31, 2011 and 2010,
respectively. On October 9, 2009, the Compensation and Governance Committee granted Ms. Doll an option to purchase 2,000 shares
of common stock at an exercise price of $4.50 per share (the closing price of the Company’s stock on the date of grant) valued at
$8,480 as calculated using Black-Scholes and is included in selling, general and administrative expense in the accompanying
consolidated statements of operations. The assumptions used under Black-Scholes included: a risk free rate of 2.36%; volatility of
182%; an expected exercise term of 4.25 years; and no annual dividend rate. The right to exercise the stock options vested as to 33
1/3% of the underlying shares of common stock upon grant, with the remaining underlying shares vesting in equal installments on the
first and second anniversary of the grant date.
Note 8. Convertible Debentures Payable
The Company’s convertible debenture balances are shown below:
October 2007 Debentures
May 2008 Debentures
Debt discount
Total convertible debentures, net of discount
March 31, March 31,
2011
$ 2,607,196
—
2,607,196
(206,068 )
$ 2,401,128
2010
$ 3,150,975
79,593
3,230,568
(728,109 )
$ 2,502,459
Short-term:
Current portion of convertible debentures payable, net of discount of $197,226 in 2011 and $0 in
2010, respectively
Long-term:
Convertible debentures payable, net of current portion and discount of $8,842 in 2011 and
$728,109 in 2010, respectively
Total convertible debentures, net of discount
1,979,402
200,000
421,726
$ 2,401,128
2,302,459
$ 2,502,459
During the years ended March 31, 2011 and 2010, the Company recognized an aggregate of $522,041 and $6,417,346 in
interest expense, respectively, due to amortization of debt discount related to the warrants and embedded conversion features
associated with the Company’s outstanding convertible debentures.
October 2007 and May 2008 Debentures
The Company issued convertible debentures in October 2007 (the “October 2007 Debentures”) and in May 2008 (the
“May 2008 Debentures,” and together with the October 2007 Debentures, the “Debentures”). The Debentures were issued to four
institutional investors and had an outstanding principal balance of $2,607,196 and $3,230,568 as of March 31, 2011 and
2010, respectively. In addition, in October 2007 and May 2008, the Company issued to these institutional investors warrants to
purchase, as of March 31, 2011, an aggregate of 3,055,097 shares of the Company’s common stock (the “Debenture Warrants”). As
collateral to secure our repayment obligations to the holders of the Debentures we have granted such holders a first priority security
interest in generally all of our assets, including our intellectual property.
F-17
Table of Contents
Fiscal Year 2010 Activity
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During the year ended March 31, 2010, the Company converted interest payments due on the Debentures totaling $171,253
into 42,814 shares of common stock using the conversion rate of $4.00.
In May 2009, approximately $713,000 of the October 2007 Debentures was converted by a note holder. Using the
conversion rate of $5.10 per share per the terms of the debenture, 139,804 shares of common stock were issued to the investor. In
addition, the fair value of $593,303 related to the conversion feature was reclassified from the liability for derivative instruments to
additional paid-in capital (see Note 10) and accelerated the recognition of $508,886 of unamortized debt discount as interest expense.
On July 30, 2009, the Company entered into a Consent, Waiver and Agreement with the holders of the Debentures (the
“July Agreement”). Pursuant to the terms of the July Agreement, the Holders (i) consented to the Company’s issuance of convertible
notes and warrants in connection with a bridge financing of up to $1,500,000 which commenced in March 2009 (the “Bridge
Financing”), and (ii) waived, as it relates to the Bridge Financing, a covenant contained in the Debentures not to incur any further
indebtedness, except as otherwise permitted by the Debentures. This Bridge Financing is more particularly described below under the
caption “Private Placement Debentures.” In addition, in connection with the July Agreement, the Company and Holders confirmed
that (i) the exercise price of the Debenture Warrants had been reduced, pursuant to the terms of the Debenture Warrants, to $5.10 as a
result of the Bridge Financing, and (ii) as a result of the foregoing decrease in the exercise price, pursuant to the terms of the
Debenture Warrants, the number of shares underlying the Debenture Warrants held by Holders of the Debentures had been
proportionally increased by 404,350 pursuant to the terms of the warrant agreements. As a result of the foregoing adjustments, the
Company recognized a loss in other expense due to the change in fair value of derivative liabilities of $1,608,540 and a corresponding
increase to the liability for derivative instruments.
On September 17, 2009, the Company entered into an Amendment to Debentures and Warrants, Agreement and Waiver
(the “September Amendment”) with the holders of the Company’s outstanding Debentures and associated Debenture Warrants to
purchase common stock, as such Debentures and Debenture Warrants have been amended. The effective date of the September
Amendment was September 1, 2009. The purpose of the September Amendment was to restructure the Company’s obligations under
the outstanding Debentures in order to reduce the amount of the required monthly principal payment and temporarily defer the
commencement of monthly principal payments (which was scheduled to commence September 1, 2009) and ceased the continuing
interest payments for a period time. The following is a summary of the material terms of the September Amendment:
1. The Company was required to obtain stockholder approval of an amendment to its Amended and Restated Articles of
Incorporation to increase the number of authorized shares of its common stock to 250,000,000. Such approval was obtained
at the shareholders’ meeting on October 9, 2009, and an amendment was filed with the Nevada Secretary of State on
November 2, 2009.
2. As of September 1, 2009, the principal amount of the Debentures was increased by $482,792, which was added to the
outstanding principal balances and $403,214 was recorded as a debt discount and is being amortized over the remaining life
of the Debentures. The increase reflected all accrued and unpaid interest as of such date, plus all interest that would have
accrued on the principal amount (as increased as of September 1, 2009, to reflect the then accrued but unpaid interest) from
September 1, 2009, to July 1, 2010 (the maturity date of the Debentures). The Company had no obligation under the
Debentures to make further payments of interest, and interest ceased to accrue, during the period September 1, 2009 to
July 1, 2010.
3. The conversion price of the Debentures was decreased from $5.10 per share to $4.50 per share, which resulted in an
increase in the number shares of common stock which the Debentures may be converted into, an increase in the liability for
derivative instruments of $802,200 and a corresponding loss was recorded in other expense, net due to the change in fair
value of derivatives.
4. The commencement of the Company’s obligation to make monthly payments of principal was deferred from
September 1, 2009, to January 1, 2010, at which time the Company was to make monthly pro rata payments to the Holders
in the aggregate amount of $200,000 with a balloon payment due on the maturity date of July 1, 2010. Prior to the
Amendment, the Company was obligated to repay the entire outstanding principal amount of the debentures in twelve equal
monthly payments commencing on August 1, 2009. On January 12, 2010, the Company entered into an Amendment to
Debentures and Warrants, Agreement and Waiver with the Holders of the Company Debentures, which was subsequently
amended in February 2010 as discussed below.
5. The Holders’ existing right to maintain a fully diluted ownership equal to 31.5% has been increased by the Amendment
to a fully diluted ownership of 34.5%.
F-18
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. The exercise price of the outstanding Debenture Warrants was decreased from $5.10 per share to $4.50 per share, which
also resulted in a corresponding pro rata increase in the number of shares that would be purchased upon exercise of the
Debenture Warrants to an aggregate of 3,055,095 shares. The reduction in exercise price of the Debenture Warrants to
$4.50 per share and the 359,423 share increase in the number of Debenture Warrants resulted in an increase in the liability
for derivative instruments of $1,679,990 and a corresponding loss was recorded in other expense, net due to the change in
fair value of derivative liabilities.
7. The following additional covenants were added to the Debentures (replacing similar covenants which had terminated as
of June 30, 2009) and remained in full force so long as any of the Debentures remain outstanding (the “Covenant Period”):
a. The Company was to maintain a total cash balance of no less than $100,000 at all times during the Covenant
Period;
b. The Company was to have an average monthly operating cash burn of no more than $500,000 during the Covenant
Period. Operating cash burn was defined by taking net income (or loss), added back all non-cash items, and excluded
changes in assets, liabilities and financing activities;
c. The Company was to have a minimum current ratio of 0.5 to 1 at all times during the Covenant Period. This
calculation was to be made by excluding the current portion of the convertible notes payable and accrued interest, and
liability from derivative instruments from current liability for the current ratio;
d. Accounts payable was not to exceed $750,000 at any time during the Covenant Period;
e. Accrued salaries was not to exceed $350,000 at any time during the Covenant Period; and
f. The Company was not make any revisions to the terms of the existing contractual agreements for the Notes Payable
to Former Officer, Related Party Notes Payable and the Line of Credit (as each is referred to in the Company’s Form
10-Q for the period ended June 30, 2009); other than the previous amendment to the payment terms of a note payable
to the Company’s former CEO.
8. The Company was not to deliver a redemption notice with respect to the outstanding Debentures until such time as the
closing price of the Company’s common stock shall have exceeded $7.00 (as adjusted for stock splits or similar
transactions) for ten consecutive trading days prior to the delivery of the redemption notice.
On September 22, 2009, the holders of the October 2007 Debentures converted $100,000 of principal into 22,222 shares of
the Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $52,799 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $41,277
of unamortized debt discount as interest expense.
On October 9, 2009, the holders of the October 2007 Debentures converted $90,000 principal into 20,000 shares of the
Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $37,001 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $33,708
of unamortized debt discount as interest expense.
On November 17, 2009, the holders of the October 2007 Debentures converted $180,000 principal into 40,000 shares of the
Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $80,368 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $59,262
of unamortized debt discount as interest expense.
On November 24, 2009, the holders of the October 2007 Debentures converted $100,000 principal into 22,222 shares of the
Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $38,224 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $32,034
of unamortized debt discount as interest expense.
On January 11, 2010, the holders of the October 2007 Debentures converted $100,000 principal into 22,222 shares of the
Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $88,001 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $25,989
of unamortized debt discount as interest expense.
On January 15, 2010, the holders of the October 2007 Debentures converted $100,000 principal into 22,222 shares of the
Company’s common stock at a conversion price of $4.50. As a result of the conversion, the Company reclassified $114,693 of the
derivative liability related to the embedded conversion feature to additional paid-in capital and accelerated the recognition of $25,451
of unamortized debt discount as interest expense.
On February 19, 2010, the Company entered into an Amended and Restated Amendment Agreements with the holders of
the Company’s Debentures (as hereinafter defined), which was amended on February 23, 2010 (collectively, the “2010 Amendment”),
pursuant to which the Company amended and restated the amendment agreements entered into on January 12, 2010 and February 1,
2010 with the holders. Pursuant to the 2010 Amendment, the debenture holders confirmed their prior agreement to defer until
March 1, 2010 the Company’s obligation to make the January 1, 2010 and February 1, 2010 debenture amortization payments (each in
the aggregate amount of $200,000) and their consent to the Company’s recent 10-to-1 reverse stock split. The following is a summary
of the material terms of the 2010 Amendment:
•
•
each holder converted $1,357,215 in principal amount of the outstanding principal balance of such holder’s debenture in
exchange for a number of shares of common stock determined by dividing such principal amount by the unit offering price
in the Company’s equity financing on February 25, 2010 (see Note 10). Based on the public offering price of $3.00 per
unit, each holder received a total of 452,405 shares of common stock upon conversion. As a result of the conversion of an
aggregate of $2,714,430 outstanding principal, the Company reclassified a portion of the derivative liability related to the
conversion feature of the Debentures of $1,450,605 to additional paid-in capital and accelerated the recognition of $554,720
of debt discount as interest expense;
with respect to the remaining outstanding balance of the debentures after the foregoing conversions, the Company is not
obligated to make any principal or interest payments until March 1, 2011, at which time the Company will be obligated to
start making monthly principal payments of $200,000 for a period of seventeen (17) months with a final balloon payment
due on August 1, 2012. In addition, the future interest of $163,573 (in the aggregate) that would accrue on the outstanding
principal balance from July 1, 2010 (the date to which accrued interest was previously added to principal) to March 1, 2011
was added to the current principal balance of the debentures with a corresponding increase to the debt discount to be
amortized over the remaining life of the debt. Interest payments over the remaining term are to accrue and become due
quarterly;
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CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
•
the conversion price of the remaining outstanding balance of each debenture was reset to $3.00 based on the public offering
price;
•
•
•
•
the exercise price of the warrants currently held by the debenture holders was reset to $3.30 per share which is equal to the
exercise price of the warrants included as part of the units sold in the public offering (110% of the unit offering price) and
the exercise period was extended to January 1, 2015;
the termination of certain anti-dilution provisions contained in the debentures and warrants held by the debenture holders
and their right to maintain a fully-diluted ownership of our common stock equal to 34.5%, which, along with the reset of
the conversion price to $3.00 per share and warrant exercise price to $3.30 per share, resulted in the reclassification of
$9,009,329 of derivative liability related to the embedded conversion features and warrants to additional paid-in capital
since the modification to the terms of the warrants no longer required derivative accounting;
the termination of certain financial covenants as described above; and
each executed a lock-up agreement covering a period of 180 days following the effective date of the registration statement;
provided, however, that in the event that on any trading day during the lock-up period the trading price of the Company’s
common stock exceeds 200% of the offering price of the units, then each holder may sell at sales prices equal to or greater
than 200% of such unit offering price a number of shares of common stock on that trading day (such day referred to as an
“Open Trading Day”) equal to up to 10% of the aggregate trading volume of the Company’s common stock on the primary
market on which it is trading on such Open Trading Day, and (ii) in the event on any trading day during the lock-up period
the trading price of the Company’s common stock exceeds 300% of the unit offering price (also referred to as an Open
Trading Day), each holder may sell at sales prices equal to or greater than 300% of such unit offering price an unlimited
number of shares of common stock on such Open Trading Day. Sales under the foregoing clause (ii) on any particular Open
Trading Day shall not be aggregated with sales under the foregoing clause (i) on the same Open Trading Day for purposes
of calculating the 10% limitation under clause (i).
Fiscal Year 2011 Activity
During January 2011, the holders of the October 2007 Debentures converted $200,000 principal into 66,666 shares of the
Company’s common stock at a conversion price of $3.00 per share per the terms of the Debentures. For the year ending March 31,
2011 aggregate principal payments were $343,779.
As of March 31, 2011, the May 2008 Debentures were paid in full. For the year ending March 31, 2011 aggregate principal
payments were $79,593.
Private Placement Debentures
Fiscal Year 2010 Activity
In March 2009, the Company entered into an Agency Agreement with a broker to raise capital in a private placement
offering of one-year convertible debentures pursuant to Regulation D of the Securities Act of 1933 and the Rules promulgated there
under (the “Private Placement Debentures”). As of March 31, 2010, the Company had received total gross proceeds of $1,381,500
under this private placement offering of convertible debentures which included gross proceeds of $1,321,500 raised during the year
ended March 31, 2010. The Company had the option to make principal redemptions on the maturity dates of the debentures in shares
of common stock at a conversion price of $5.10 per share. At any time, holders were able to convert the debentures into shares of
common stock at the conversion price of $5.10. The conversion price was subject to adjustment in the event the Company issued its
next equity financing of at least $2,500,000 at a price below $5.10 per share. Per the terms of the convertible debenture agreements,
the notes had a term of one year from issuance and were redeemable by the Company with two days notice. The notes bore interest at
8% per annum and were convertible into shares of the Company’s common stock at a conversion rate of $5.10 per share. In
connection with the Private Placement Debentures, the Company issued to investors an aggregate of 54,177 five-year warrants to
purchase shares of the Company’s common stock at $5.10 per share (the “Private Placement Warrants”), which included 51,824
warrants issued to investors during the year ended March 31, 2010, and were accounted for as derivative liabilities (see Note 9). The
Company had determined the aggregate fair value of the issued warrants as of the dates of each grant, based on Black-Scholes, to be
approximately $291,570 for the year ended March 31, 2010. The exercise price of the warrants was subject to adjustment in the event
the Company issued its next equity financing of at least $2,500,000 at a price below $5.10 per share. In connection with the issuance
of the Private Placement Debentures, the Company recognized a debt discount and derivative liability at the dates of issuance in the
aggregate amount of $1,125,772 related to the fair value of the warrants and embedded conversion features, which included
$1,080,201 of debt discount recorded during the year ended March 31, 2010 comprised of $788,631 related to the fair value of the
embedded conversion features and $291,570 related to the fair value of the warrants. Prior to conversion (see below), the debt
discount was amortized to interest expense over the life of the debentures and the derivative liability was revalued each reporting
period with changes in fair value recognized in earnings.
On February 25, 2010, immediately prior to the Company’s public offering, the holders of the Private Placement
Debentures converted the principal balance of $1,381,500 and accrued interest of $78,701 into 519,187 shares of the Company’s
common stock at a conversion price of $2.81 in prepayment of all amounts due. As a result of the conversion, the Company
reclassified the derivative liability related to the conversion feature of the Private Placement Debentures of $273,465 to additional
paid-in capital and recognized the remaining debt discount of approximately $331,002 as interest expense. In addition, pursuant to the
anti-dilution provisions contained in the Private Placement Warrant agreements, the exercise price of the Private Placement Warrants
was reset from $5.10 per share to $2.81 per share and the Company recorded a loss of $2,756 in other expense, net and a
corresponding increase in derivative liabilities. The derivative liabilities balance of $128,276 related to the Company’s Private
Placement Warrants was reclassified to additional paid-in capital in 2011 (see Note 9). During the year ended March 31, 2010, the
Company issued 16,253 warrants with an exercise price of $5.10 per share for commissions due in connection with the Company’s
Private Placement Debentures. The Company determined the aggregate fair value of the issued warrants, based on the Black-Scholes
pricing model, to be $63,396, or $3.90 per share as of the effective date of grant, and was recorded in equity with a corresponding
charge to deferred financing fees to be amortized to interest expense over the remaining life of the debt. The remaining balance of
$21,132 was charged to interest expense upon conversion of the Private Placement Debentures in February 2010.
During the year ended March 31, 2010, the Company recognized an aggregate of $1,125,772 in interest expense due to
amortization of debt discount related to the warrants and embedded conversion features associated with the Company’s outstanding
Private Placement Debentures.
F-20
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Convertible debentures mature in fiscal years ending after March 31, 2011 as follows:
Years Ending March 31,
2012
2013
Note 9. Derivative Liabilities
Amount
$ 2,176,628
430,568
$ 2,607,196
The Company’s derivative liabilities balance as of March 31, 2011 and 2010 was $156,497 and $334,363, respectively.
During 2010, the Company adopted a new accounting guidance which requires certain instruments to be accounted for as
derivative liabilities. In accordance with this guidance, the Company’s outstanding warrants to purchase shares of common stock and
embedded conversion features in convertible notes payable previously treated as equity were no longer afforded equity treatment
because these instruments have reset or ratchet provisions that are triggered in the event the Company raises additional capital at a
lower price, among other adjustments. As such, effective April 1, 2009 the Company reclassified the fair value of these common stock
purchase warrants and embedded conversion features, from equity to liability status as if these warrants and conversion features were
treated as derivative liabilities since their dates of issuance or modification. Any change in fair value subsequent to April 1, 2009 is
recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives was higher at the
subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower
at the subsequent balance sheet date, the Company recorded non-operating, non-cash income. The cumulative effect at April 1, 2009
to record, at fair value, a liability for the warrants and embedded conversion features, and related adjustments to discounts on
convertible notes of $2,595,095, resulted in an aggregate reduction to equity of $13,875,623 consisting of a reduction to additional
paid-in capital of $4,217,730 and an increase in the accumulated deficit of $9,657,893 to reflect the adoption of new accounting
guidance.
Fiscal Year 2010 Activity
In July 2009, as a result of the July Agreement, the exercise price of the Debenture Warrants was decreased from $6.00 per
share to $5.10 per share, which resulted in an increase in the liability for derivative instruments of $1,608,540 and a corresponding
loss was recorded in other expense, net due to the change in fair value of derivative liabilities (see Note 8).
In September 2009, as a result of the September Amendment, the conversion price of the Debentures and the exercise price
of the Debenture Warrants was decreased from $5.10 per share to $4.50 per share, pursuant to the terms of the Debentures, which
resulted in an aggregate increase in the liability for derivative instruments of $1,679,990 and a corresponding loss was recorded in
other expense, net due to the change in fair value of derivative liabilities. In addition, the conversion price of the Debentures was
decreased from $5.10 per share to $4.50 per share, which resulted in an increase in the number shares of common stock which the
Debentures may be converted into, an increase in the liability for derivative instruments of $802,200 and a corresponding loss was
recorded in other expense, net and included in the change in fair value of derivative liabilities (see Note 8).
In February 2010, as a result of the conversion of all outstanding amounts due under the Private Placement Debentures, the
Company reclassified the derivative liability for the embedded conversion feature of $273,465 to additional paid-in capital. In
addition, pursuant to the anti-dilution provisions contained in the Private Placement Warrant agreements, the exercise price of the
Private Placement Warrants was reset from $5.10 per share to $2.81 per share. The Company recorded an increase in the liability for
derivative instrument of $2,756 and a corresponding loss was recorded in other expense, net and included in the change in fair value of
derivative liabilities. The Company determined the aggregate fair value of the warrants, based on Black-Scholes, to be $98,786 as of
March 31, 2010. See Note 8 for a discussion of the fair value of the warrants and embedded conversion features as of the dates of
issuance.
In February 2010, as a result of the 2010 Amendment, the exercise price of the Debenture Warrants was decreased from
$4.50 per share to $3.30 per share, pursuant to the terms of the Debentures, which resulted in an increase in the liability for derivative
instruments of $231,093 and a corresponding loss was recorded in other expense, net due to the change in fair value of derivative
liabilities. In addition, the conversion price of the Debentures was decreased from $4.50 per share to $3.00 per share which resulted in
an increase in the number of shares of common stock which the Debentures may be converted into, an increase in the liability for
derivative instrument of $1,376,043 and a corresponding loss was recorded in other expense, net and included in the change in fair
value of derivative liabilities (see Note 8).
F-21
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In February 2010, as a result of the 2010 Amendment and partial conversion of the Debentures, the Company reclassified a
portion of the derivative liability related to the conversion feature of the Debentures of $1,653,299 to additional paid in capital. In
addition, due to the modification of the terms of the Debentures, the remaining derivative liabilities for the embedded conversion
features and warrants of $9,009,329 was reclassified to additional paid-in capital as they no longer require derivative treatment (see
Note 8).
During the year ended March 31, 2010, the Company issued to various placement agents in lieu of cash fees an aggregate of
20,000 warrants to purchase shares of the Company’s common stock with a fair value of $87,448. The exercise prices of these
warrants are equal to $3.30, as reset from $5.10 on February 25, 2010 pursuant to the anti-dilution provisions contained in the warrant
agreements and an additional 10,909 warrant shares were issued for an aggregate total of 30,909 warrants. The Company determined
the aggregate fair value of the issued warrants, based on Black-Scholes, to be $55,961 as of March 31, 2010. Since the exercise price
of the warrants is subject to adjustment in the event the Company issues the next equity financing, the warrants are accounted for as a
derivative liability.
During the year ended March 31, 2010, the Company modified the terms of an aggregate of 54,676 warrants to purchase
shares of the Company’s common stock which were previously issued to various placement agents in lieu of cash fees. On April 5,
2009, in connection with the termination of a consulting agreement, the Company modified the terms of 54,676 warrants issued in
October 2007 and May 2008. The exercise price of the warrants was reduced from $8.40 per share to $6.00 per share and the
expiration date was extended to 5 years from the date of modification. As a result of the modification, the Company recognized
expense of $10,763 in other expense, net based on the change in the Black-Scholes fair value before and after modification. On
February 25, 2010, the exercise price of the warrants was reduced from $6.00 per share to $3.30 per share pursuant to the anti-dilution
provisions contained in the warrant agreements and an additional 44,735 warrant shares were issued, for an aggregate total of 99,411
warrant shares. The Company recorded an increase in the liability for derivative instrument of $5,225 and a corresponding loss was
recorded in other expense, net and included in the change in fair value of derivative liabilities. The Company determined the aggregate
fair value of the issued warrants, based on Black-Scholes, to be $179,616 as of March 31, 2010. Since the exercise price of the
warrants is subject to adjustment in the event the Company issues the next equity financing, the warrants are accounted for as a
derivative liability.
Fiscal Year 2011 Activity
During the year ended March 31, 2011, it was determined that the anti-dilution provisions contained in the Private
Placement Warrants issued in connection with the Private Placement Debentures were no longer afforded treatment as a derivative
liability due to the equity financing in February 2010, thus the Company reclassified the derivative liability of $128,276 to additional
paid-in capital.
During the year ended March 31, 2011, the Company issued an aggregate of 36,371 warrants to purchase shares of the
Company’s common stock pursuant to the anti-dilution provisions contained in the warrant agreements which were previously issued
to various placement agents in lieu of cash fees. On August 20, 2010, in connection with the August 2010 private placement closing,
the exercise price of the warrants was reduced from $3.30 per share to $3.20 per share and the Company issued an additional 4,073
warrants. On February 4, 2011, in connection with the February 2011 private placement, the exercise price of the warrants was
reduced from $3.20 per share to $2.81 per share and the Company issued an additional 18,657 warrants. On February 14, 2011, in
connection with the February 2011 private placement, the exercise price of the warrants was reduced from $2.81 per share to $2.58 per
share and the Company issued an additional 13,641 warrants. Since the exercise price of the warrants is subject to additional
adjustment in the event the Company issues dilutive equity securities, as described in the original warrant agreements, the warrants are
accounted for as a derivative liability.
F-22
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During the years ended March 31, 2011 and 2010, the Company recognized aggregate gains of $49,590 and $5,576,979,
respectively, due to the change in fair value of its derivative instruments. See Note 5 for the components of changes in derivative
liabilities. The Company’s common stock purchase warrants do not trade in an active securities market, and as such, the Company
estimated the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:
Expected dividends
Expected term (in years)
Risk-free interest rate
Expected volatility
March 31,
March 31,
2011
—
3.01 – 4.22
2010
—
3.50 – 5.00
0.64% – 1.79% 1.42% – 2.69%
178% – 204%
128% – 189%
Historical volatility was computed using daily pricing observations for recent periods that correspond to the remaining term
of the warrants, which had an original term of five years from the date of issuance. The expected life is based on the remaining term of
the warrants. The risk-free interest rate is based on U.S. Treasury securities with a maturity corresponding to the remaining term of the
warrants.
The Company estimated the fair value of the embedded conversion features related to its convertible debentures using
Black-Scholes using the following assumptions:
Expected dividends
Expected term (in years)
Risk-free interest rate
Expected volatility
March 31,
2010
—
0.09 – 2.43
0.06% – 1.65%
81% – 150%
Historical volatility was computed using daily pricing observations for recent periods that correspond to the remaining life
of the related debentures. The expected life is based on the remaining term of the related debentures. The risk-free interest rate is
based on U.S. Treasury securities with a maturity corresponding to the remaining term of the related debentures.
Note 10. Stockholders’ Equity
Common Stock
The Company’s authorized capital consists of 250,000,000 shares of common stock, $0.001 par value per share. On
February 5, 2010, the Company filed a Certificate of Amendment to Amended and Restated Articles of Incorporation with the
Secretary of State of the State of Nevada to effect a 10-to-1 reverse stock split of the Company’s issued and outstanding shares of
common stock. As of March 31, 2011 and 2010, 27,504,583 and 8,136,619 shares of common stock were issued and outstanding,
respectively.
F-23
Table of Contents
Fiscal Year 2010 Activity
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In May 2009, $713,000 of the October 2007 Debentures was converted by the note holders. Using the conversion rate of
$5.10 per share per the terms of the Debenture, 139,804 shares of registered common stock were issued to the investors.
On September 28, 2009, the Company issued 2,353 shares of common stock, in lieu of $12,000 in fees paid for services
performed by Carpe DM, Inc., which were issued at a value of $5.10 per share.
In July 2009, the Company engaged an agent to solicit the holders of certain warrants to exercise their rights to purchase
shares of the Company’s common stock. Pursuant to the terms of the engagement, the Company agreed to pay the agent compensation
of 5% of the gross proceeds totaling $76,632, which is included equity and netted against the gross proceeds in the accompanying
consolidated balance sheet at March 31, 2010. In addition, the Company issued to the agent a warrant to purchase a number of shares
of the Company’s common stock equal to 5% of the number of shares issued in the exercise of the warrants, or a total of 23,952
warrants with a fair value of $98,256 or $4.10 per share. The warrant has an exercise price of $5.10 and will permit the agent or its
designees to purchase shares of common stock on or prior to October 1, 2014. The fair value of warrants has been recorded as an
offset to additional paid-in capital on the accompanying consolidated balance sheets. During the year ended March 31, 2010, the
Company issued 479,033 shares of its common stock for gross cash proceeds of $1,437,100 from the exercise of warrants which
resulted from the solicitation.
During July 2009, the Company entered into the July Agreement with the holders of the Company’s Debentures (see Note
8). Pursuant to the terms of the July Agreement, the Holders (i) consented to the Company’s issuance of convertible notes and
warrants in connection with the Bridge Financing of up to $1,500,000 which commenced in March 2009, and (ii) waived, as it relates
to the Bridge Financing, a covenant contained in the Debentures not to incur any further indebtedness, except as otherwise permitted
by the Debentures. This Bridge Financing is more particularly described in Note 8 above under the caption “Private Placement
Debentures.” In addition, in connection with the July Agreement, the Company and Holders confirmed that (i) the exercise price of the
warrants issued to the Holders in connection with their purchase of the Debentures had been reduced, pursuant to the terms of the
warrants, to $5.10 as a result of the Bridge Financing, and (ii) as a result of the foregoing decrease in the exercise price, pursuant to
the terms of the warrants, the number of shares underlying the warrants held by Holders of the Debentures had been proportionally
increased by 404,350 pursuant to the terms of the warrant agreements (see Note 8).
In August 2009, the Company issued warrants to purchase 600 shares of common stock in lieu of payment to Gary C.
Cannon, who then served as Corporate Legal Counsel for the Company and as a member of the Advisory Board, to purchase shares of
the Company’s common stock at an exercise price of $5.10 per share with a five year term. The exercise prices of these warrants are
greater than or equal to the stock price of the Company’s shares as of the date of grant. The fair market value of the warrants based on
Black-Scholes of $2,799 was recorded as consulting and compensation expense and included in selling, general and administrative
expenses during the year ended March 31, 2010. In July 2009, Mr. Cannon was given a 30 day notice of his termination as general
legal counsel and advisor to the Company. During November 2009, the Company issued 4,314 shares of common stock to Mr. Cannon
in lieu of payment for services for a total expense of $22,000 which has been included in selling, general and administrative expenses.
Effective September 1, 2009, in connection with the September Amendment with the holders of the Debentures, the
exercise price of the Debenture Warrants was reduced to $4.50 per share which resulted in a proportionate increase in the number of
shares that may be purchased upon the exercise of such warrants of 359,423 shares (see Note 8).
In September 2009, $100,000 of the October 2007 Debentures was converted by the note holder. Using the conversion rate
of $4.50 per share per the terms of the Debentures, 22,222 share of registered common stock were issued to the investor.
On October 30, 2009, the Company issued 5,881 shares of common stock, in lieu of fees paid for services performed by the
Board of Directors. These shares were issued at a value of $4.30 per share, for a total value of $25,288.
During October and November 2009, the holders of the October 2007 Debentures converted $370,000 principal into 82,222
shares of the Company’s common stock at a conversion price of $4.50 per share per the terms of the Debentures (See Note 8).
During January, 2010, the holders of the October 2007 Debentures converted $200,000 principal into 44,444 shares of the
Company’s common stock at a conversion price of $4.50 per share per the terms of the Debentures (see Note 8).
On February 19, 2010, we entered into the 2010 Amendment with the holders of our Debentures (see Note 8). Pursuant to
the 2010 Amendment, the holders each converted $1,357,215 in principal amount of the outstanding principal balance of such holder’s
debenture in exchange for a number of shares of common stock determined by dividing such principal amount by the unit offering
price. Based on the public offering price of $3.00 per unit, each holder received a total of 452,405 shares of common stock upon
conversion. The conversion price of the remaining outstanding balance of each debenture was reset to $3.00 based on the Company’s
public offering price. As a result of the conversion of an aggregate of $2,714,430 outstanding principal, the Company reclassified a
portion of the derivative liability related to the conversion feature of the Debentures of $1,450,605 to additional paid-in capital. In
addition, pursuant to the 2010 Amendment, certain anti-dilution provisions contained in the debentures and warrants held
by the debenture holders were terminated along with the right to maintain a fully-diluted ownership of our common stock equal to
34.5%, which resulted in the reclassification of $9,009,329 of derivative liability related to the embedded conversion features and
warrants to additional paid-in capital. Pursuant to the terms of the 2010 Amendment, the exercise price of the warrants currently held
by the debenture holders was reset to equal the exercise price of the warrants included as part of the units sold in the Company’s
public offering (110% of the unit offering price or $3.30 per share) and the exercise period was extended to January 1, 2015.
On February 25, 2010 the Company completed a public offering of units consisting of 1,666,667 shares of the Company’s
common stock and 1,666,667 warrants to purchase one share of the Company’s common stock for gross proceeds of $5,000,001 and
net cash proceeds of approximately $3,742,097. Each unit consisting of one share, together with one warrant to purchase one share,
was priced at $3.00. The warrants issued as part of the offering have an exercise price of $3.30 and a term of 5 years. In addition, the
Company issued a warrant to purchase 83,333 shares of the Company’s common stock to the underwriter’s representative at an
exercise price of $3.75 with a 5 year term and have a fair value of $199,043 based on Black-Scholes. Pursuant to the offering, the
Company issued to an investment banker warrants to purchase 17,500 shares of the Company’s common stock with a fair value of
$41,939, which represented 7% of the warrants issued to the holders of the Company’s Debentures participating in the public offering,
at an exercise price of $3.30 per share and a 5 year term.
F-24
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During the year ended March 31, 2010, the Company issued to the purchasers of the Private Placement Debentures
warrants to purchase an aggregate of 51,824 shares of common stock at an initial exercise price of $5.10. In February 2010,
immediately prior to the Company’s public offering, the holders of the Private Placement Debentures converted the aggregate
principal balance of $1,381,500 and accrued interest of $78,701 into 519,186 shares of the Company’s common stock at a conversion
price of $2.81 in prepayment of all amounts due. As a result of the conversion of all outstanding amounts, the Company reclassified
the derivative liability for the embedded conversion feature of $273,465 to additional paid-in capital. In addition, pursuant to the anti-
dilution provisions contained in the Private Placement Warrant agreements, the exercise price of the Private Placement Warrants was
reset from $5.10 per share to $2.81 per share (see Notes 8 and 9).
On March 23, 2010, the Company issued warrants to purchase 15,000 shares of the Company’s common stock with a fair
value of $27,426 to an agent for continued shareholder support at an exercise price of $1.91 per share. The warrants were recorded in
equity with a corresponding charge to general and administrative expense.
During the year ended March 31, 2010, the Company issued 20,000 warrants to purchase shares of the Company’s common
stock to various placement agents. The warrants were issued in April 2009 with a fair value of $87,448 and an exercise price of $5.10
and were classified as derivative liabilities. The exercise price of these warrants was reset to $3.30 per share from $5.10 per share on
February 25, 2010 pursuant to the anti-dilution provisions contained in the warrant agreements, and an additional 10,909 warrant
shares were issued for an aggregate total of 30,909 warrants (see Note 9).
During the year ended March 31, 2010, the Company modified the terms of 54,676 warrants to purchase shares of the
Company’s common stock which were previously issued to various placement agents and currently classified as derivative liabilities.
In April 2009, the exercise price of the warrants was reduced from $8.40 per share to $6.00 per share and the expiration date was
extended to 5 years from the date of modification. On February 25, 2010, the exercise price of the warrants was reduced from $6.00
per share to $3.30 per share pursuant to the anti-dilution provisions contained in the warrant agreements and an additional 44,735
warrant shares were issued, for an aggregate total of 99,411 warrant shares. See Note 9 for a discussion of the accounting impact.
During the year ended March 31, 2010, the Company issued 4,719 shares of common stock upon the cashless exercise of a
total of 11,640 warrants at an average exercise price of $2.80 per share and 11,034 shares of common stock upon the cashless exercise
of a total of 11,900 options at an average exercise price of $0.40 per share.
During the year ended March 31, 2010, the Company issued 20,942 shares of common stock the resale of which was
registered pursuant to Form S-8 in lieu of fees paid for services performed by consultants. On April 13, 2009 and June 11, 2009, the
Company filed the related Forms S-8 with the SEC. These shares were issued at a value of $5.10 per share with a total value of
$106,806 which has been included in selling, general and administrative expenses for the year ended March 31, 2010.
During the year ended March 31, 2010, the Company converted interest payments due on the Debentures totaling $171,253
into 42,814 shares of common stock using the conversion rate of $4.00 per share.
During the year ended March 31, 2010, a total of 21,000 warrants and 190,553 stock options with a weighted average fair
value of $3.53 per share were granted to employees and directors (see Note 11).
During the year ended March 31, 2010, the Company issued 16,253 warrants with a fair value of $63,396 or $3.90 per share
for commissions due in connection with the Company’s Private Placement Debentures (see Note 8).
Fiscal Year 2011 Activity
In April 2010, the Company issued 13,636 shares of unrestricted common stock in lieu of fees paid to various consultants
for services incurred in fiscal year 2010 pursuant to the Company’s Form S-8 filed on April 27, 2010. These shares were issued at a
value of $1.76 per share for a total cost of $23,999 which is included in accounts payable and accrued expenses and selling, general
and administrative expense as of and for the year ended March 31, 2010 in the accompanying consolidated financial statements.
In May 2010, the Company granted 40,000 warrants to a consultant to purchase shares of the Company’s common stock
with an exercise price of $1.89. Of the 40,000 warrants, 20,000 warrants with a fair value of $36,030 vested upon issuance and is
included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The remaining
20,000 shares vest upon completion of certain key milestones (see Note 12).
F-25
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During August 2010, the Company closed its first round of a private placement financing to institutional and accredited
investors resulting in the issuance of units consisting of 4,699,550 shares of common stock and warrants to purchase 4,699,550 shares
of common stock at an exercise price of $0.77 per share, for gross cash proceeds of $3,289,701 and net cash proceeds of $2,990,953.
Each unit consisting of one share of common stock, together with one warrant to purchase one share of common stock, was priced at
$0.70. Certain investors that had invested in the Company’s public offering that was completed on February 25, 2010 were issued
additional warrants with the same terms to purchase an aggregate of 448,333 shares of common stock in connection with this private
placement. The fair market value of the warrants issued to prior investors of $307,794 was based on Black-Scholes and recorded to
additional paid-in capital and offset against the proceeds of the financing with no net effect on equity. In connection with the closing
of this first round of financing, the Company paid a 7% fee to the placement agents of $230,279 and issued warrants to purchase
657,940 shares of the Company’s common stock, at an exercise price of $0.77, which are immediately exercisable and have a term of
five years. The fair market value of the warrants issued to the placement agents of $449,938 was based on Black-Scholes and was
recorded to additional paid-in capital and offset against the proceeds of the financing with no net effect on equity. The Company
incurred additional legal and accounting fees of $36,207 in connection with the first round of financing.
During September 2010, the Company received a $29,067 credit for financing fees which were reclassed to additional paid-
in capital during the year ended March 31, 2010, and offset against the proceeds related to the February 2010 public offering.
On October 14, 2010, the Company closed on its second round of a private placement financing of its securities to certain
institutional and accredited investors that commenced in August 2010. In connection with the second closing of the private placement
financing, the Company received aggregate gross proceeds of $583,001 and net cash proceeds of $416,726. The investors purchased
an aggregate of 832,868 units priced at $0.70 per unit, with each unit consisting of one share of common stock and one warrant to
purchase one share of common stock at an exercise price of $0.77 per share. The warrants are immediately exercisable and have a
term of five years. In connection with this second round of financing, the Company paid a 7% fee to the placement agents of $40,811
and issued a warrant to purchase 116,602 shares of Common Stock at an exercise price of $0.77 per share, which are immediately
exercisable and have a term of five years. The fair market value of the warrants issued to the placement agents of $85,719 was based
on Black-Scholes and was recorded to additional paid-in capital and offset against the proceeds of the financing with no net effect on
equity. The Company incurred additional legal and accounting fees of $122,964 in connection with the second round of financing.
Pursuant to the Registration Rights Agreement, on October 19, 2010, the Company filed a registration statement on Form
S-1 with the Securities and Exchange Commission (“SEC”) registering the resale of the 12,287,711 shares of common stock issued to
the investors that participated in both the first closing of the private placement during August 2010 and the second closing of the
private placement during October 2010, and the shares of common stock underlying the warrants issued to the investors and placement
agents in both closings. The registration statement was declared effective by the SEC on December 29, 2010.
During January 2011, the holders of the October 2007 Debentures converted $200,000 principal into 66,666 shares of the
Company’s common stock at a conversion price of $3.00 per share per the terms of the Debentures (see Note 8).
On February 4, 2011, the Company consummated the first closing of a private placement to accredited investors resulting in
the issuance of units consisting of 6,335,318 shares of common stock and warrants to purchase 6,335,318 shares of common stock at
an exercise price of $0.77, for gross cash proceeds of $4,434,722. On February 14, 2011, the Company completed the second closing
of this same private placement resulting in the issuance of units consisting of 7,026,771 shares of common stock and warrants to
purchase 7,026,771 shares of common stock at an exercise price of $0.77, for gross cash proceeds of $4,918,740. In both closings,
each unit consisting of one share, together with one warrant to purchase one share, was priced at $0.70 for aggregate gross proceeds of
$9,353,462. Aggregate net proceeds which reflect placement agent fees, legal and accounting fees were $8,041,880. In addition, as
part of the compensation to the selling agents, warrants to purchase 2,393,826 shares of common stock were issued to the agents. The
warrants issued to the investors and selling agents are immediately exercisable and have a term of five years. The fair market value of
the warrants issued to the placement agents of $2,153,397 was based on Black-Scholes and was recorded to additional paid-in capital
and offset against the proceeds of the financing with no net effect on equity. The Company was obligated to file a registration
statement with the SEC registering the resale of the shares of common stock issued to the investors and the shares of common stock
underlying the warrants issued to the investors within ninety (90) days following the close of the transaction.
On March 4, 2011, the Company granted a warrant to a related party (see Note 7) to purchase 200,000 shares of common
stock with an exercise price of $0.77 valued at $302,769 as calculated using Black Scholes. The assumptions used under Black-
Scholes included: a risk free rate of 2.17%; volatility of 179%; a term of 5.01 years; and no annual dividend rate. The warrant was
issued pursuant to a one year consulting agreement and vested upon issuance. The Company recorded $277,538 as an other current
asset and recognized $25,231 in selling, general and administrative expense for the year ended March 31, 2011 in the accompanying
consolidated financial statements.
Pursuant to the Registration Rights Agreement, on April 22, 2011, the Company filed a registration statement on Form S-1
with the SEC registering the resale of 40,943,178 shares of common stock issued to the investors that participated in the
February 2011 private placement, the private placement which occurred during August 2010 and October 2010, the shares of common
stock underlying the warrants issued to the investors and placement agents in both private placements and the underlying shares of
common stock which will be issued upon exercise of the publicly traded warrants that were issued as part of the public
offering of units the occurred in February 2010.
F-26
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During the year ended March 31, 2011, the Company issued 36,371 warrants to purchase shares of the Company’s common
stock to various placement agents pursuant to the anti-dilution provisions contained in their original warrant agreements (see Note 9).
The anti-dilution provisions were triggered as a result of the Company’s private placements which occurred in August 2010 and
February 2011. An aggregate of 166,691 placement agent warrants were classified as derivative liabilities at March 31, 2011, and had
a fair value of $156,497 and an exercise price of $2.58 (reduced from an exercise price of $3.30 at March 31, 2010).
During the year ended March 31, 2011, the Company reclassified $128,276 of derivative liability related to the Private
Placement Warrants to additional paid-in capital (see Note 9).
During the year ended March 31, 2011, the Company issued 274,500 shares of common stock upon the exercise of warrants
at an exercise price of $0.77 per share and 4,594 shares of common stock upon the exercise of options at an exercise price of $0.40 per
share.
During the year ended March 31, 2011, the Company issued 114,061 shares of common stock upon the cashless exercise of
a total of 209,525 warrants at an exercise price of $0.77 per share.
During the year ended March 31, 2011, stock options to purchase a total of 1,296,832 shares of the Company’s common
stock with a weighted average value of $0.69 per share were granted to employees and directors. Included in this amount were stock
options to purchase 362,232 shares of the Company’s common stock issued to the Company’s Chief Executive Officer in lieu of a
cash bonus for fiscal year 2010. As of and for the year ended March 31, 2010, this bonus was included in accrued compensation and
related expenses and selling, general and administrative expenses in the accompanying consolidated financial statements (see Note
11).
Warrants Outstanding:
A summary of the Company’s warrant activity (other than those warrants issued to the Company’s employees, officers,
directors and related consultants presented in the Stock Compensation Plan Section below) and related information during the 2011
fiscal year follows:
Outstanding at April 1, 2010
Granted
Exercised
Forfeited
Expired
Outstanding at March 31, 2011
Exercisable
Number of Shares
5,227,677
22,787,582
(388,561 )
(95,464 )
(21,420 )
Weighted-
Average
Exercise Price
3.43
$
0.78
$
0.77
$
0.77
$
6.99
$
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic Value
$
279,953
27,509,814
$
27,489,814
$
1.27
1.27
4.55
$
14,003,125
4.54
$
14,003,125
At March 31, 2010 the number of unvested warrants was 20,000. The following summary information reflects outstanding
warrants to purchase shares of the Company’s common stock as of March 31, 2011 and other related details:
Year of Grant
(as of March 31)
2008
2009
2010
2011
Warrants Outstanding
Remaining
Contractual
Exercise Price Number Outstanding Life (Years)
$1.50 – $15.00
$2.81 – $8.50
$1.91 – $5.10
$0.77 – $2.74
1,777,153
659,881
2,769,223
22,303,557
27,509,814
3.69
3.60
3.81
4.73
F-27
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 11. Stock Compensation Plan
The Company accounts for share-based payments to employees and directors in accordance with share-based payment
accounting literature which requires all share-based payments to employees and directors, including grants of employee stock options
and warrants, to be recognized in the consolidated financial statements based upon their fair values. The Company uses Black-Scholes
to estimate the grant-date fair value of share-based awards. Fair value is determined at the date of grant. The consolidated financial
statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those
estimates. The estimated average forfeiture rate for the years ended March 31, 2011 and 2010 was zero, as the Company has not had a
significant history of forfeitures and does not expect forfeitures in the future.
Cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for
those options or warrants to be classified as financing cash flows. Due to the Company’s loss position, there were no such tax benefits
during the years ended March 31, 2011 and 2010.
Plan Descriptions
The Company maintains two stock option plans, the 2002 Stock Incentive Plan (the “2002 Plan”) and the 2009 Stock
Incentive Plan (the “2009 Plan”). The 2002 Plan provides for grants of incentive stock options and nonqualified options to employees,
directors and consultants of the Company to purchase the Company’s shares at the fair value, as determined by management and the
board of directors, of such shares on the grant date. The options are subject to various vesting conditions and generally vest over a
three-year period beginning on the grant date and have seven to ten-year term. The 2002 Plan also provides for the granting of
restricted shares of common stock subject to vesting requirements. The Company is authorized to issue up to 500,000 shares under this
plan and has 318,136 shares available for future issuances as of March 31, 2011.
On October 9, 2009, the Company’s stockholders approved and adopted the 2009 Plan, which had previously been
approved by the Company’s Board of Directors on August 31, 2009. The 2009 Plan provides for the grant of incentive stock options,
nonqualified stock options, restricted stock rights, restricted stock, performance share units, performance shares, performance cash
awards, stock appreciation rights, and stock grant awards (collectively, “Awards”) to employees, officers, non-employee directors,
consultants and independent contractors of the Company. The 2009 Plan also permits the grant of awards that qualify for the
“performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed by Section 162
(m) of the Internal Revenue Code. A total of 1,200,000 shares of the Company’s common stock are authorized for the granting of
Awards under the 2009 Plan. The number of shares available for future awards, as well as the terms of outstanding awards, is subject
to adjustment as provided in the 2009 Plan for stock splits, stock dividends, recapitalizations and other similar events. Awards may be
granted under the 2009 Plan until October 9, 2019 or until all shares available for awards under the 2009 Plan have been purchased or
acquired. The Company is authorized to issue up to 1,200,000 shares under this plan and has 209,724 shares available for future
issuances as of March 31, 2011.
In addition to the stock options issued pursuant to the Company’s two stock option plans, the Company has granted
warrants to employees, officers, non-employee directors, consultants and independent contractors. The warrants are generally not
subject to vesting requirements and have ten-year terms.
As of March 31, 2011, a total of 136,401 and 976,640 shares of common stock were reserved for issuance under the 2002
and 2009 Stock Plans, respectively, and a total of 312,855 shares of common stock were reserved for issuance upon exercise of
outstanding warrants. A summary of the Company’s employee and director stock option and warrant activity and related information
during the 2011 fiscal year follows:
Number of Weighted- Average
Remaining
Aggregate
Shares
Exercise Price
Contractual Life Intrinsic Value
Outstanding at April 1, 2010
Granted
Exercised
Canceled
555,203 $
1,296,832 $
(4,594 ) $
(421,545 ) $
Outstanding and expected to vest at March 31, 2011
Exercisable at March 31, 2011
1,425,896 $
993,396 $
6.22
0.72
0.40
1.11
2.75
3.55
$
4,594
7.75 $
7.15 $
709,703
418,573
F-28
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following summary information reflects stock options and warrants outstanding, vesting and related details as of
March 31, 2011:
Year of Grant
(as of March 31)
2003
2004
2005
2007
2008
2009
2010
2011
Stock Options and Warrants Outstanding
Remaining
Contractual
Number
Exercise Price Outstanding Life (Years)
2.59
3.26
2.30
5.45
6.77
7.71
6.07
8.53
$10.00
6.00
0.40 – 6.00
2.80 – 10.00
7.50 – 10.80
5.10 – 10.50
4.30 – 8.30
0.66-2.00
5,000
20,000
22,201
111,335
88,780
91,740
107,008
979,832
1,425,896
Vested and
Exercisable
5,000
20,000
22,201
111,335
88,780
91,740
84,008
570,332
993,396
The Company uses Black-Scholes to recognize the value of stock-based compensation expense for all share-based payment
awards. Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires
considerable judgment, including estimating stock price volatility, expected option life and forfeiture rates. The Company develops
estimates based on historical data and market information, which can change significantly over time. Black-Scholes requires the
Company to make several key judgments including:
•
•
•
•
•
The expected option term reflects the application of the simplified method set out in SAB No. 107 Share-Based Payment
(SAB 107), which was issued in March 2005. In December 2007, the SEC released Staff Accounting Bulletin No. 110
(SAB 110), which extends the use of the “simplified” method, under certain circumstances, in developing an estimate of
expected term of “plain vanilla” share options. Accordingly, the Company has utilized the average of the contractual term
of the options and the weighted average vesting period for all options and warrants to calculate the expected option term.
Estimated volatility also reflects the historical volatility pattern of the Company’s share price.
The dividend yield is based on the Company’s historical pattern of dividends as well as expected dividend patterns.
The risk-free rate is based on the implied yield of U.S. Treasury notes as of the grant date with a remaining term
approximately equal to the expected term.
Estimated forfeiture rate of 0% per year is based on the Company’s historical forfeiture activity of unvested stock options.
The Company used the following assumptions for stock options and warrants granted during the years ended March 31,
2011 and 2010:
Risk-free interest rate
Expected volatility
Expected life (in years)
Expected dividend yield
Years Ended March 31,
2010
2011
0.77% – 3.32% 1.38% – 3.04%
179% – 197%
3.50 – 6.02
N/A
142% – 179%
3.50 – 6.48
N/A
F-29
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the years ended March 31, 2011 and 2010, the weighted-average fair value of the Company’s stock option and warrant
grants are as follows:
Grant Year
March 31, 2011
March 31, 2010
Weighted
Average
Fair Value of
Options and
Warrants
Granted
1,296,832
211,553
$
$
0.69
3.53
There were no warrants and 1,296,832 stock options granted to employees and directors during the year ended March 31,
2011, and 21,000 warrants and 190,553 stock options for an aggregate of 211,553 shares granted to employees and directors during
the year ended March 31, 2010. In connection with the warrants and options granted and the vesting of prior warrants issued, during
the years ended March 31, 2011 and 2010, the Company recorded total charges of $396,696 and $559,561, respectively, which have
been included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The
Company issues new shares from its authorized shares upon exercise of warrants or options.
As of March 31, 2011, there was $286,821 of total unrecognized compensation cost, related to non-vested stock options and
warrants, which is expected to be recognized over a remaining weighted average vesting period of 1.83 years.
The aggregate intrinsic value of stock options and warrants exercised during the years ended March 31, 2011 and 2010 was
$4,594 and $79,964, respectively.
Note 12. Equity Instruments Issued to Non-Employees for Acquiring Goods or Services
Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement
date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (I) the date at which a
commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty
considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is
complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the
measurement date, for purposes of recognition of costs during those periods the equity instrument is measured at the then-current fair
values at each of those interim financial reporting dates.
On May 11, 2010, the Company granted an aggregate of 40,000 warrants to purchase shares of the Company’s common
stock at an exercise price of $1.89 to a consultant for services to be rendered through March 31, 2011 or until the related deliverables
are met. Of the total warrants, 20,000 warrants vested upon issuance with a fair value of $36,090; the assumptions used under Black-
Scholes included: a risk free rate of 2.26%, volatility of 177%, an expected exercise term of 5.0 years and no annual dividend rate. The
remaining 20,000 warrants will vest based upon attainment of certain deliverables and are valued accordingly at each interim reporting
date until the deliverables are completed. The Company recognized an aggregate of $55,693 in selling, general and administrative
expense related to these warrants for the year ended March 31, 2011 in the accompanying consolidated statements of operations.
On March 4, 2011, the Company granted a warrant to a related party to purchase 200,000 shares of common stock with an
exercise price of $0.77 valued at $302,769 as calculated using the Black Scholes option pricing model. The warrant was issued
pursuant to a one year consulting agreement and vested upon issuance. The assumptions used under Black-Scholes included: a risk
free rate of 2.17%, volatility of 179%, a term of 5.01 years and no annual dividend rate. The Company recorded $277,538 as an other
current asset and recognized $25,231 in selling, general and administrative expense for the year ended March 31, 2011 in the
accompanying consolidated financial statements.
F-30
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 13. Commitments and Contingencies
Lease Commitments
On July 2, 2007, the Company entered into a lease agreement with Viking Investors — Barents Sea, LLC (Lessor) for a
building with approximately 11,881 square feet of manufacturing and office space located at 20382 Barents Sea Circle, Lake Forest,
CA, 92630. The lease agreement is for a period of two years with renewal options for three, one-year periods, beginning September 1,
2007. The lease required base lease payments of approximately $10,000 per month plus operating expenses. In connection with the
lease agreement, the Company issued to the lessor a warrant to purchase 1,000 shares of common stock at an exercise price of $15.50
per share for a period of two years, valued at $15,486 as calculated using the Black Scholes option pricing model. The assumptions
used under Black-Scholes included: a risk free rate of 4.75%; volatility of 293%; an expected exercise term of 5 years; and no annual
dividend rate. The Company capitalized and amortized the value of the warrant over the life of the lease and recorded the unamortized
value of the warrant in other assets. For the years ended March 31, 2011 and 2010, the Company recognized warrant amortization of
$0 and $2,970, respectively. As of March 31, 2010 the fair value of the warrant was fully amortized. On August 24, 2009, the
Company entered into the second amendment to the lease for its manufacturing and office space. The amendment extended the lease
for twelve months from the end of the existing lease term with a right to cancel the lease with a minimum of 120 day written notice at
anytime as of November 30, 2009. In June 2010, Company entered into the third amendment to the lease for its manufacturing and
office space. The amendment extended the lease for sixty months commencing July 1, 2010, with a right to cancel the lease with a
minimum of 120 day written notice at anytime as of December 31, 2012, and adjusted the base lease payments to a range over the life
of the agreement of $7,010 per month to $8,911 per month plus operating expenses.
On April 11, 2011, the Company entered into an office service agreement with Regis Management Group, LLC (Lessor)
for six (6) executive offices located at 402 West Broadway, San Diego, CA 92101. The office service agreement is for a six-month
period ending October 31, 2011 and is subject to automatic renewal unless terminated with 90 days prior notice. The office service
agreements require aggregate base lease payments of approximately $9,250 per month.
Total rental expense was $170,358 and $144,728 for the years ended March 31, 2011 and 2010, respectively.
Future annual minimum payments under operating leases are as follows:
Years Ending March 31:
2012
2013
2014
2015
2016
Consulting and Engineering Services
$
156,979
96,153
99,084
104,793
26,733
$
483,742
Effective November 1, 2010, the Company entered into a Second Amendment to Master Consulting and Engineering
Services Agreement (the “Second Amendment”) with KLATU Networks, LLC (“KLATU”), which amended the Master Consulting
and Engineering Services Agreement between the parties dated as of October 9, 2007 (the “Agreement”), as amended by the First
Amendment to Master Consulting and Engineering Services Agreement between the parties dated as of April 23, 2009. The parties
entered into the Second Amendment to clarify their mutual intent and understanding that all license rights granted to the Company
under the Agreement, as amended, shall survive any termination or expiration of the Agreement. In addition, in recognition that the
Company has paid KLATU less than the market rate for comparable services, the Second Amendment provides that if the Company
terminates the Agreement without cause, which the Company has no intention of doing, or liquidates, KLATU shall be entitled to
receive additional consideration for its services provided from the commencement of the Agreement through such date of termination,
which additional compensation shall not be less than $2 million plus two times the “cost of work” (as defined in the Agreement). Any
such additional compensation would be payable in three equal installments within 12 months following the date the amount of such
additional compensation is determined.
The Master Consulting and Engineering Services Agreement dated October 9, 2007, as amended on April 23, 2009 and
November 1, 2010, between CryoPort, Inc. and KLATU Networks, LLC provides a framework for KLATU to provide services to
CryoPort. The agreement provides for one year terms ending on December 31 of each year, but it automatically renews for one year
periods unless otherwise terminated. CryoPort can terminate the agreement upon 30 days notice. If CryoPort terminates the agreement,
it has to pay KLATU a termination fee that will not be less than $2,000,000 plus two times the cost of work (as defined in the
agreement) performed by KLATU under the agreement.
Litigation
The Company may become a party to product litigation in the normal course of business. The Company accrues for open
claims based on its historical experience and available insurance coverage. In the opinion of management, there are no legal matters
involving the Company that would have a material adverse effect upon the Company’s financial condition or results of operations.
Indemnities and Guarantees
The Company has made certain indemnities and guarantees, under which it may be required to make payments to a
guaranteed or indemnified party, in relation to certain actions or transactions. The guarantees and indemnities do not provide for any
limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not
been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities
and guarantees in the accompanying consolidated balance sheets.
The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the States of
California and Nevada. In connection with its facility lease, the Company has indemnified its lessor for certain claims arising from the
use of the facility. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement.
In connection with the Company’s agreement with FedEx pursuant to which the Company leases to FedEx its cryogenic
shippers, the Company has agreed to indemnify and hold harmless FedEx, its directors, officers, employees and agents from and
against any and all claims, demands, causes of action, losses, damages, judgments, injuries and liabilities, including payment of
attorney’s fees. In addition, the Company has agreed to indemnify, defend and hold harmless FedEx, its Affiliates (including the
corporate patent company), directors, officers, employees and agents from and against any and all Claims by third parties based on an
allegation that the use of the Company’s shippers infringes on any United States or foreign intellectual property right of such third
parties, including any potential royalty payments and other costs and damages, reasonable attorneys’ fees and out-of-pocket expenses
reasonably incurred by FedEx. The duration of these indemnities survive the termination or expiration of the agreement.
F-31
Table of Contents
Note 14. Income Taxes
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Significant components of the Company’s deferred tax assets as of March 31, 2011 and 2010 are shown below:
Deferred tax asset:
Net operating loss carryforward
Research credits
Expenses recognized for granting of options and warrants
Accrued expenses and reserves
Valuation allowance
2011
2010
$ 8,661,000
28,000
927,000
41,000
(9,657,000 )
—
$
$ 10,938,000
24,000
800,000
104,000
(11,866,000 )
—
$
Based on the weight of available evidence, the Company’s management has determined that it is more likely than not that
the net deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net
deferred tax assets. The Company’s income tax provision consists of state minimum taxes.
The income tax provision differs from that computed using the federal statutory rate applied to income before taxes as
follows:
Computed tax benefit at federal statutory rate
State tax, net of federal benefit
Warrant MTM Adjustment
Permanent items and other
Valuation allowance
2011
$ (2,091,000 )
(307,000 )
(17,000 )
4,625,600
(2,209,000 )
1,600
$
2010
$ (1,920,000 )
(645,000 )
—
(3,226,400 )
5,793,000
1,600
$
At March 31, 2011, the Company has federal and state net operating loss carryforwards of approximately $21,743,000 and
$21,706,000 which will begin to expire in 2020 and 2014, respectively, unless previously utilized. At March 31, 2011, the Company
has federal and California research and development tax credits of approximately $17,000 and $16,000, respectively. The federal
research tax credit begins to expire in 2026 unless previously utilized and the California research tax credit has no expiration date.
Utilization of the net operating loss and research and development carryforwards might be subject to a substantial annual
limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of
the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state and foreign provisions. These ownership
changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and
tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of
transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a
company by certain stockholders or public groups. Since the Company’s formation, the Company has raised capital through the
issuance of capital stock on several occasions which, combined with the purchasing stockholders’ subsequent disposition of those
shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent
disposition.
The Company has not completed a study to assess whether an ownership change has occurred. If the Company has
experienced an ownership change, utilization of the NOL or R&D credit carryforwards would be subject to an annual limitation under
Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership
change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation
may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization. Further, until a study is completed
and any limitation is known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit.
Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its
effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred
tax assets with a corresponding reduction of the valuation allowance.
FASB ASC Topic 740, Income Taxes , which clarifies the accounting for uncertainty in income taxes recognized in the
financial statements, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that
the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the
technical merits. Income tax positions must meet a more likely than not recognition threshold. The Company did not record any
unrecognized tax benefits upon adoption of Accounting for Uncertainty in Income Taxes. The Company’s policy is to recognize
interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income
tax expense.
F-32
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company does not have any unrecognized tax benefits that will significantly decrease or increase within 12 months of
March 31, 2011. The Company is subject taxation in the US and the state of California.
As of March 31, 2011, the Company is no longer subject to U.S. federal examinations for years before 2007 and for
California franchise and income tax examinations before 2006. However, to the extent allowed by law, the taxing authorities may have
the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the
amount of the net operating loss carry forward amount. The Company is not currently under examination by U.S. federal or state
jurisdictions.
Note 15. Quarterly Results of Operations (unaudited)
The following table sets forth a summary of our unaudited quarterly operating results for each of the last eight quarters in
the period ended March 31, 2011. This data has been derived from our unaudited consolidated interim financial statements which, in
our opinion, have been prepared on substantially the same basis as the audited financial statements contained elsewhere in this report
and include all normal recurring adjustments necessary for a fair presentation of the financial information for the periods presented.
These unaudited quarterly results should be read in conjunction with our financial statements and notes thereto included elsewhere in
this report. The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period
(in thousands except earnings per share).
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2011
2010
2010
2010
2010
(Unaudited)
2009
2009
2009
Quarter Ended
Revenues:
$
100 $
100 $
124 $
152 $
75 $
21 $
8 $
14
Cost of revenues
274
257
378
395
259
133
177
149
Gross loss
(174 )
(157 )
(254 )
(243 )
(184 )
(112 )
(169 )
(135 )
Research and
development
Selling, general and
administrative
107
105
115
122
15
89
93
1,182
1,081
1,114
943
1,114
690
779
Total operating expenses
1,289
1,186
1,229
1,065
1,129
779
872
88
729
817
Loss from operations
Other income (expense),
net
Income (loss) before
income taxes
(1,463 )
(1,343 )
(1,483 )
(1,308 )
(1,313 )
(891 )
(1,041 )
(952 )
(394 )
(114 )
(27 )
(19 )
747
3,342
(6,144 )
602
(1,857 )
(1,457 )
(1,510 )
(1,327 )
(566 )
2,451
(7,185 )
(350 )
Income taxes
—
—
—
2
—
—
2
—
Net income (loss)
$ (1,857 ) $ (1,457 ) $ (1,510 ) $ (1,329 ) $
(566 ) $ 2,451 $ (7,187 ) $
(350 )
Net income (loss) per
common share:
Basic
Weighted average
common shares
outstanding:
Basic
Diluted
(0.09 )
(0.11 )
(0.15 )
(0.16 )
(0.09 )
0.50
(1.56 )
(0.08 )
21,346
13,565
10,269
8,146
6,242
4,912
4,615
4,294
21,346
13,565
10,269
8,146
6,242
6,577
4,615
4,294
F-33
Table of Contents
CRYOPORT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 16. Subsequent Events
On April 4, 2011, CryoPort, Inc. (the “Company”) named Mark Englehart, 53, as the Company’s Chief Commercial
Officer. Mr. Englehart has more than 30 years of marketing, sales and product commercialization experience in the pharmaceutical,
biotechnology and contract research organization industries.
On May 25, 2011, the Board of Directors of CryoPort, Inc. (the “Company”), elected Karen M. Muller to the Board of
Directors to fill the vacancy created by the recent passing of Mr. Hank Bonde. Ms. Muller was expected to be appointed to the Audit
Committee, Compensation Committee and Governance and Nominating Committee of the Board of Directors on June 23, 2011.
In April 2011, the Company issued 171,428 shares of common stock upon the exercise of warrants at an average exercise
price of $0.77 per share for total gross proceeds of $132,000.
In April 2011, the Company issued 36,090 shares of common stock upon the cashless exercise of a total of 85,714 warrants
at an average exercise price of $0.77 per share.
F-34
Table of Contents
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.
SIGNATURES
Dated: June 27, 2011
CRYOPORT, INC.
By:
/s/ LARRY G. STAMBAUGH
Larry G. Stambaugh,
President & Chief Executive Officer, and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Larry G.
Stambaugh, President and Chief Executive Officer, and Catherine M. Doll, Chief Financial Officer, and each of them, his true and
lawful attorneys-in-fact and agents, with the full power of substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power
and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorney-in-fact and agent,
or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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:
Signature
/s/ Larry G. Stambaugh
Larry G. Stambaugh
/s/ Catherine M. Doll
Catherine M. Doll
/s/ Carlton M. Johnson
Carlton M. Johnson
/s/ Adam Michelin
Adam Michelin
/s/ Karen M. Muller
Karen M. Muller
Capacity
President & Chief Executive Officer (Principal Executive
Officer), and Director
Date
June 27, 2011
Chief Financial Officer (Principal Financial and Principal
Accounting Officer)
June 27, 2011
Director
Director
Director
31
June 27, 2011
June 27, 2011
June 27, 2011
Table of Contents
Exhibit
No.
Description
EXHIBIT INDEX
3.1
3.2
3.3
3.4
3.4.1
3.4.2
3.4.3
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
Corporate Charter for G.T.5-Limited issued by the State of Nevada on March 15, 2005. Incorporated by reference
to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Articles of Incorporation for G.T.5-Limited filed with the State of Nevada in May 25, 1990. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Amendment to Articles of Incorporation of G.T.5-Limited increasing the authorized shares of common stock from
5,000,000 to 100,000,000 shares of common stock filed with the State of Nevada on October 12, 2004.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Amendment to Articles of Incorporation changing the name of the corporation from G.T.5-Limited to CryoPort,
Inc. filed with the State of Nevada on March 16, 2005. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
Amended and Restated Articles of Incorporation dated October 19, 2008. Incorporated by reference to CryoPort’s
Current Report on Form 8-K filed October 19, 2007.
Certificate of Amendment to Articles of Incorporation filed with the State of Nevada on November 2, 2009.
Incorporated by reference to CryoPort’s Amendment No. 1 to Form S-1/A Registration Statement dated
January 12, 2010.
Certificate of Amendment to Amended and Restated Articles of Incorporation filed with the State of Nevada on
February 3, 2010. Incorporated by reference to CryoPort’s Current Report on Form 8-K filed on February 5, 2010.
Amended and Restated By-Laws of CryoPort, Inc. adopted by the Board of Directors on June 22, 2005 and
amended by the Certificate of Amendment of Amended and Restated Bylaws of CryoPort, Inc. adopted by the
Board of Directors on October 9, 2009. Incorporated by reference to CryoPort’s Amendment No. 1 to Form S-1/A
Registration Statement dated January 12, 2010.
Articles of Incorporation of CryoPort Systems, Inc. filed with the State of California on December 11, 2000,
including Corporate Charter for CryoPort Systems, Inc. issued by the State of California on December 13, 2000.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
By-Laws of CryoPort Systems, Inc. adopted by the Board of Directors on December 11, 2000. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
CryoPort, Inc. Stock Certificate Specimen. Incorporated by reference to CryoPort’s Registration Statement on
Form 10-SB/A4 dated February 23, 2006.
Code of Conduct for CryoPort, Inc. Incorporated by reference to CryoPort’s Registration Statement on Form 10-
SB/A4 dated February 23, 2006.
Code of Ethics for Senior Officers of CryoPort, Inc. and subsidiaries. Incorporated by reference to CryoPort’s
Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Statement of Policy on Insider Trading. Incorporated by reference to CryoPort’s Registration Statement on
Form 10-SB/A4 dated February 23, 2006.
CryoPort, Inc. Audit Committee Charter, under which the Audit Committee will operate, adopted by the Board of
Directors on August 19, 2005. Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4
dated February 23, 2006.
CryoPort Systems, Inc. 2002 Stock Incentive Plan adopted by the Board of Directors on October 1, 2002.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Stock Option Agreement ISO — Specimen adopted by the Board of Directors on October 1, 2002. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
32
Table of Contents
Exhibit
No.
3.15
3.16
Description
Stock Option Agreement NSO — Specimen adopted by Board of Directors on October 1, 2002. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Warrant Agreement — Specimen adopted by the Board of Directors on October 1, 2002. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
3.17
Patents and Trademarks
3.17.1
3.17.2
3.17.3
3.17.4
3.17.5
3.17.6
3.17.7
4.1
4.1.1
4.1.2
CryoPort Systems, Inc. Patent #6,467,642 information sheet and Assignment to CryoPort Systems, Inc. document.
On File with CryoPort.
CryoPort Systems, Inc. Patent #6,119,465 information sheet and Assignment to CryoPort Systems, Inc. document.
On File with CryoPort.
CryoPort Systems, Inc. Patent #6,539,726 information sheet and Assignment to CryoPort Systems, Inc. document.
On File with CryoPort.
CryoPort Systems, Inc. Trademark #7, 583, 478,7 information sheet and Assignment to CryoPort Systems, Inc.
document. On File with CryoPort.
CryoPort Systems, Inc. Trademark #7, 586, 797, 8 information sheet and Assignment to CryoPort Systems, Inc.
document. On File with CryoPort.
CryoPort Systems, Inc. Trademark #7,748,667,3 information sheet and Assignment to CryoPort Systems, Inc.
document. On File with CryoPort.
CryoPort Systems, Inc. Trademark #7,737,454,1 information sheet and Assignment to CryoPort Systems, Inc.
document. On File with CryoPort.
Form of Debenture — Original Issue Discount 8% Secured Convertible Debenture dated September 28, 2007.
Incorporated by reference to CryoPort’s Registration Statement on Form SB-2 dated November 9, 2007.
Amendment to Convertible Debenture dated February 19, 2008. Incorporated by reference to CryoPort’s Current
Report on Form 8- K dated March 7, 2008 and referred to as Exhibit 10.1.10.
Amendment to Convertible Debenture dated April 30, 2008. CryoPort’s Current Report on Form 8-K dated
April 30, 2008 and referred to as Exhibit 10.1.11.
4.1.2.1
Annex to Amendment to Convertible Debenture dated April 30, 2008. CryoPort’s Current Report on Form 8-K
dated April 30, 2008 and referred to as Exhibit 10.1.11.1.
4.1.3
4.1.4
4.1.5
4.1.6
4.1.7
Amendment to Convertible Debenture dated August 29, 2008. Incorporated by reference to CryoPort’s Current
Report on Form 8-K dated August 29, 2008.
Amendment to Convertible Debenture effective January 27, 2009 and dated February 20, 2009. Incorporated by
reference to CryoPort’s Current Report on Form 8-K dated February 19, 2009.
Amendment to Debentures and Warrants with Enable Growth Partners LP, Enable Opportunity Partners LP,
Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and CryoPort Inc. dated
September 1, 2009. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated September 17,
2009.
Amendment to Debentures and Warrants, Agreement and Waiver with Enable Growth Partners LP, Enable
Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and
CryoPort Inc. dated January 12, 2010. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated
January 15, 2010.
Amendment Agreement with Enable Growth Partners LP, Enable Opportunity Partners LP, Pierce Diversified
Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and CryoPort Inc. dated February 1, 2010.
Incorporated by reference to CryoPort’s Current Report on Form 8-K dated February 3, 2010.
4.1.8
Amended and Restated Amendment Agreements with Enable Growth Partners LP, Enable Opportunity Partners
LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and CryoPort Inc. dated
February 19, 2010. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated February 26, 2010.
33
Table of Contents
Exhibit
No.
4.1.9
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
10.1.1
10.1.2
10.1.3
10.1.4
Description
First Amendment to Amended and Restated Amendment Agreements with Enable Growth Partners LP, Enable
Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and
CryoPort Inc. dated February 23, 2010. Incorporated by reference to CryoPort’s Current Report on Form 8-K
dated February 26, 2010.
Form of Common Stock Purchase Warrant dated September 28, 2007. Incorporated by reference to CryoPort’s
Registration Statement on Form SB-2 dated November 9, 2007.
Original Issue Discount 8% Secured Convertible Debenture dated May 30, 2008. Incorporated by reference to
CryoPort’s Current Report on Form 8-K dated June 9, 2008.
Common Stock Purchase Warrant dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on
Form 8-K dated June 9, 2008
Common Stock Purchase Warrant dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on
Form 8-K dated June 9, 2008
Form of Warrant and Warrant Certificate in connection with the February 25, 2010 public offering. Incorporated
by reference to CryoPort’s Amendment No. 5 to Form S-1/A Registration Statement dated February 9, 2010.
Form of Securities Purchase Agreement in connection with the August to October 2010 private placement.
Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Form of First Amendment to Security Purchase Agreement in connection with the August to October 2010 private
placement. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Form of Securities Purchase Agreement (Continuation of the Placement) in connection with the August to
October 2010 private placement. Incorporated by reference to CryoPort’s Registration Statement on Form S-1
dated October 19, 2010.
Registration Rights Agreement in connection with the August to October 2010 private placement. Incorporated by
reference to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Form of Joinder to Registration Rights Agreement in connection with the August to October 2010 private
placement. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Form of Securities Purchase Agreement in connection with the February 2011 private placement. Incorporated by
reference to CryoPort’s Registration Statement on Form S-1 dated April 1, 2011.
Form of Registration Rights Agreement in connection with the February 2011 private placement. Incorporated by
reference to CryoPort’s Registration Statement on Form S-1 dated April 1, 2011.
Form of Warrant in connection with the August to October 2010 private placement. Incorporated by reference to
CryoPort’s Registration Statement on Form S-1/A dated April 22, 2011.
Form of Warrant in connection with the February 2011 private placement. Incorporated by reference to CryoPort’s
Registration Statement on Form S-1/A dated April 22, 2011.
Stock Exchange Agreement associated with the merger of G.T.5-Limited and CryoPort Systems, Inc. signed on
March 15, 2005. Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006.
Commercial Promissory Note between CryoPort, Inc. and D. Petreccia executed on August 26, 2005. Incorporated
by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Commercial Promissory Note between CryoPort, Inc. and J. Dell executed on September 1, 2005. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Commercial Promissory Note between CryoPort, Inc. and M. Grossman executed on August 25, 2005.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
10.1.5
10.1.6
10.1.7
10.1.8
Commercial Promissory Note between CryoPort, Inc. and P. Mullens executed on September 2, 2005.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Commercial Promissory Note between CryoPort, Inc. and R. Takahashi executed on August 25, 2005.
Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006.
Exclusive and Representation Agreement between CryoPort Systems, Inc. and CryoPort Systems, Ltda. executed
on August 9, 2001. Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006 and referred to as Exhibit 10.1.8.
Secured Promissory Note and Loan Agreement between Ventana Group, LLC and CryoPort, Inc. dated May 12,
2006. Incorporated by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006
and referred to as Exhibit 10.1.9.
34
Table of Contents
Exhibit
No.
10.2
10.2.1
10.3
10.4
10.4.1
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Description
Business Alliance Agreement dated April 27, 2007, by CryoPort, Inc. and American Biologistics Company LLC.
Incorporated by reference to CryoPort’s Current Report on Form 8-K dated April 27, 2007 and referred to as
Exhibit 10.3.
Corrected Business Alliance Agreement dated April 27, 2007, by CryoPort, Inc. and American Biologistics
Company LLC. Incorporated by reference to CryoPort’s Current Report on Form 8-K/A dated May 2, 2007 and
referred to as Exhibit 10.3.1.
Consultant Agreement dated April 18, 2007 between CryoPort, Inc. and Malone and Associates, LLC.
Incorporated by reference to CryoPort’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2007
and referred to as Exhibit 10.4.
Lease Agreement dated June 26, 2007 between CryoPort, Inc. and Viking Investors — Barents Sea LLC.
Incorporated by reference to CryoPort’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2007
and referred to as Exhibit 10.5.
Second Amendment To Lease: Renewal dated August 24, 2009, between CryoPort, Inc. and Viking Inventors-
Barents Sea LLC. Incorporated by reference to CryoPort’s Amendment No. 1 to Form S-1/A Registration
Statement dated January 12, 2010.
Securities Purchase Agreement dated September 27, 2007. Incorporated by reference to CryoPort’s Registration
Statement on Form SB-2 dated November 9, 2007 and referred to as Exhibit 10.6.
Registration Rights Agreement dated September 27, 2007. Incorporated by reference to CryoPort’s Registration
Statement on Form SB-2 dated November 9, 2007 and referred to as Exhibit 10.7.
Security Agreement dated September 27, 2007. Incorporated by reference to CryoPort’s Registration Statement on
Form SB-2 dated November 9, 2007 and referred to as Exhibit 10.8.
Sitelet Agreement between FedEx Corporate Services, Inc. and CryoPort Systems, Inc. dated January 23, 2008.
Incorporated by reference to CryoPort’s Current Report on Form 8-K dated February 1, 2008 and referred to as
Exhibit 10.9.
Securities Purchase Agreement dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on
Form 8-K dated June 9, 2008 and referred to as Exhibit 10.10.
Registration Rights Agreement dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on
Form 8-K dated June 9, 2008 and referred to as Exhibit 10.11.
Waiver dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated June 9,
2008 and referred to as Exhibit 10.12.
Security Agreement dated May 30, 2008. Incorporated by reference to CryoPort’s Current Report on Form 8-K
dated June 9, 2008 and referred to as Exhibit 10.13.
Board of Directors Agreement between Larry G. Stambaugh and CryoPort, Inc. dated December 10, 2008.
Incorporated by reference to CryoPort’s Current Report on Form 8-K dated December 5, 2008 and referred to as
Exhibit 10.15.
Rental Agreement with FedEx Corporate Services and CryoPort, Inc. dated May 15, 2009 (CryoPort has filed a
Confidential Treatment Request under Rule 24b-5 of the Exchange Act, for parts of this document). Incorporated
by reference to CryoPort’s Annual Report on Form 10-K for the year ended March 31, 2009 and referred to as
Exhibit 10.16.
Settlement Agreement and Mutual Release with Dee Kelly and CryoPort, Inc. dated July 24, 2009. Incorporated
by reference to CryoPort’s Current Report on Form 8-K dated July 20, 2009 and referred to as Exhibit 10.14.
Consent, Waiver and Agreement with Enable Growth Partners LP, Enable Opportunity Partners LP, Pierce
Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and CryoPort Inc. and its subsidiary
dated July 30, 2009. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated July 29, 2009 and
referred to as Exhibit 10.15.
10.17
Employment Agreement with Larry G. Stambaugh and CryoPort, Inc. dated August 1, 2009. Incorporated by
reference to CryoPort’s Current Report dated August 21, 2009 and referred to as Exhibit 10.19.
35
Table of Contents
Exhibit
No.
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Description
Letter Accepting Consulting Agreement dated October 1, 2007 with Carpe DM, Inc. and CryoPort, Inc.
Incorporated by reference to CryoPort, Inc.’s Registration Statement on Form S-8 dated March 25, 2009 and
referred to as Exhibit 10.1.
Master Consulting and Engineering Services Agreement dated October 9, 2007 with KLATU Networks, LLC and
CryoPort, Inc. Incorporated by reference to CryoPort, Inc.’s Registration Statement on Form S-8 dated March 25,
2009 and referred to as Exhibit 10.2.
Investment Banker Termination Agreement dated April 6, 2009 with Bradley Woods & Co. Ltd., SEPA Capital
Corp., Edward Fine, and CryoPort, Inc. Incorporated by reference to CryoPort, Inc.’s Registration Statement on
Form S-8 dated April 13, 2009 and referred to as Exhibit 10.1.
Attorney-Client Retainer Agreement with Gary Curtis Cannon and CryoPort, Inc. dated December 1, 2007.
Incorporated by reference to CryoPort, Inc.’s Registration Statement on Form S-8 dated June 11, 2009 and
referred to as Exhibit 10.3.
CryoPort, Inc., 2009 Stock Incentive Plan. Incorporated by reference to CryoPort’s Current Report on Form 8-K
dated October 9, 2009 and referred to as Exhibit 10.21.
CryoPort, Inc., Form Incentive Stock Option Award Agreement under the CryoPort, Inc., 2009 Stock Incentive
Plan. Incorporated by reference to CryoPort’s Current Report on Form 8-K dated October 9, 2009 and referred to
as Exhibit 10.22.
Warrant issued to Rodman & Renshaw, LLC in connection with the February 25, 2010 public offering.
Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Form of Non-Qualified Stock Option Award Agreement under the CryoPort, Inc. 2009 Stock Incentive Plan.
Incorporated by reference to CryoPort’s Registration Statement on Form S-8 dated April 27, 2010.
Underwriting Agreement with Rodman & Renshaw, LLC and CryoPort in connection with the February 25, 2010
public offering. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated October 19,
2010.
Letter of Engagement with Maxim Group, LLC and CryoPort dated as of June 16, 2010. Incorporated by reference
to CryoPort’s Registration Statement on Form S-1 dated October 19, 2010.
Second Amendment to Engagement Agreement with Maxim Group, LLC. Incorporated by reference to CryoPort’s
Registration Statement on Form S-1 dated October 19, 2010.
Selling Agency Agreement for CryoPort, Inc. Stock and Warrants with Emergent Financial Group, Inc. and
CryoPort dated as of July 27, 2010. Incorporated by reference to CryoPort’s Registration Statement on Form S-1
dated October 19, 2010.
Addendum to Selling Agency Agreement for CryoPort, Inc. Stock and Warrants with Emergent Financial Group,
Inc. and CryoPort dated as of August 31, 2010. Incorporated by reference to CryoPort’s Registration Statement on
Form S-1 dated October 19, 2010.
Agreement dated as of January 13, 2010, between CryoPort, Inc. and Federal Express Corporation. Incorporated
by reference to CryoPort’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.**
First Amendment to Master Consulting and Engineering Services Agreement dated as of April 23, 2009, between
CryoPort, Inc. and KLATU Networks, LLC. Incorporated by reference to CryoPort’s Registration Statement on
Form S-1 dated October 19, 2010.
Second Amendment to Master Consulting and Engineering Services Agreement dated as of November 1, 2010,
between CryoPort, Inc. and KLATU Networks, LLC. Incorporated by reference to CryoPort’s Registration
Statement on Form S-1 dated October 19, 2010.
10.34
Selling Agency Agreement between CryoPort, Inc. and Emergent Financial Group, Inc. dated as of February 4,
2011. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated April 1, 2011.
10.35
Consent to Appointment of Co-Agent Agreement between CryoPort, Inc. and Emergent Financial Group, Inc.
dated as of February 10, 2011. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated
April 1, 2011.
36
Table of Contents
Exhibit
No.
10.36
Description
Letter Agreement between CryoPort, Inc. and Maxim Group LLC dated February 11, 2011. Incorporated by
reference to CryoPort’s Registration Statement on Form S-1 dated April 1, 2011.
13.1
Consolidated Financial Statements and related Notes thereto.*
21
Subsidiaries of Registrant*
23.1
Consent of Independent Registered Public Accounting Firm — KMJ Corbin & Company LLP.*
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.*
32.1
Certification Pursuant to U.S.C. §1350 of Chief Executive Officer.*
32.2
Certification Pursuant to U.S.C. §1350 of Chief Financial Officer.*
Filed herewith.
*
** Portions omitted pursuant to a request for confidential treatment filed separately with the Commission.
37
CryoPort Systems, Inc.
CRYOPORT, INC.
Subsidiaries of Registrant
EXHIBIT 21
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement No. 333-166327 on Form S-8 of our report dated June 27,
2011, with respect to the consolidated financial statements of CryoPort, Inc. included in this Annual Report on Form 10-K of
CryoPort, Inc. for the years ended March 31, 2011 and 2010.
EXHIBIT 23.1
/s/ KMJ Corbin & Company, LLP
Costa Mesa, California
June 27, 2011
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
I, Larry G. Stambaugh, certify that:
1. I have reviewed this annual report on Form 10-K of CryoPort, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: June 27, 2011
Signed:
/s/ LARRY G. STAMBAUGH
Larry G. Stambaugh
President & Chief Executive Officer, and Director
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.2
I, Catherine M. Doll, certify that:
1. I have reviewed this annual report on Form 10-K of CryoPort, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: June 27, 2011
Signed:
/s/ CATHERINE M. DOLL
Catherine M. Doll
Chief Financial Officer
Certification Pursuant to U.S.C. §1350 of Chief Executive Officer
I, Larry G. Stambaugh., President and Chief Executive Officer of CryoPort, Inc. (the “Company”), certify, pursuant to Rule 13
(a)-14(b) or Rule 15(d)-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the fiscal year ended March 31, 2011 (the “Report”) fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
EXHIBIT 32.1
Dated: June 27, 2011
/s/ Larry G. Stambaugh
Larry G. Stambaugh, Chairman,
Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to CryoPort, Inc. and will be retained
by CryoPort, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification is being furnished pursuant to Rule 15(d) and shall not be deemed “filed” for purposes of Section 18 of
the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. This Certification shall not be deemed
incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference.
Certification Pursuant to U.S.C. §1350 of Chief Financial Officer
I, Catherine M. Doll Chief Financial Officer of CryoPort, Inc. (the “Company”), certify, pursuant to Rule 13(a)-14(b) or Rule 15
(d)-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the fiscal year ended March 31, 2011 (the “Report”) fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
EXHIBIT 32.2
Dated: June 27, 2011
/s/ Catherine M. Doll
Catherine M. Doll,
Chief Financial Officer, Chief Accounting Officer
A signed original of this written statement required by Section 906 has been provided to CryoPort, Inc. and will be retained
by CryoPort, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
This Certification is being furnished pursuant to Rule 15(d) and shall not be deemed “filed” for purposes of Section 18 of
the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. This Certification shall not be deemed
incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference.