UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2014
(cid:1) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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, CA 92630
(Address of principal executive offices)
(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
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
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 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 (§ 229.405 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 No (cid:1)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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
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 the 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)
Non-accelerated filer (cid:1) (Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting
company
(cid:1)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1) No
The aggregate market value of Common Stock held by non-affiliates of the registrant as of September 30, 2013 was $27,964,500(1) based on the
closing sale price of such common equity on such date.
As of June 13, 2014 there were 59,987,846 shares of the registrant’s common stock outstanding.
(1) Excludes 2,217,562 shares of common stock held by directors and officers, and any stockholders whose ownership exceeds five
percent of the shares outstanding as of September 30, 2013.
DOCUMENTS INCORPORATED BY REFERENCE
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 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 Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
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
PART III
Item 15. Exhibits and Financial Statement Schedules
Signatures
PART IV
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FORWARD-LOOKING STATEMENTS
Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company”, “we,” “us,” “our,” or
“Cryoport” refer to Cryoport, Inc. and our wholly owned subsidiary, Cryoport Systems, Inc. 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.
Cryoport, Inc.’s Annual Report on Form 10-K contains certain forward-looking statements. These forward-looking statements involve a
number of risks and uncertainties. These forward-looking statements can generally be identified as such because the context of the statement will
include certain words, including but not limited to, “believes,” “may,” “will,” “expects,” “intends,” “estimates,” “anticipates,” “plans,”
“seeks,” “continues,” “predicts,” “potential,” “likely,” or “opportunity,” and also contains predictions, estimates and other forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are based on the current beliefs of the Company’s management, as well as assumptions made by and information currently available
to the Company’s management. Readers of this Annual Report on Form 10-K should not put undue reliance on these forward-looking
statements, which speak only as of the time this Annual Report on Form 10-K was filed with the Securities and Exchange Commission (the
“SEC”). Reference is made in particular to forward-looking statements regarding the success of our products, product approvals, product sales,
revenues, development timelines, product acquisitions, liquidity and capital resources and trends. Forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or quantified. Cryoport Inc.’s actual results may differ materially from the
results projected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in
this Annual Report on Form 10-K, including the “Risk Factors” in “Item 1A — Risk Factors”, and in “Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of Operations” included in Part II. In addition, past financial or operating performance is not
necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period
trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what
impact they will have on our results of operations and financial condition. Except as required by law, we do not undertake to update any such
forward-looking statements and expressly disclaim any duty to update the information contained in this Annual Report on Form 10-K.
Item 1. Business
Overview
PART 1
Through a combination of purpose-built proprietary packaging, information technology and specialized cold chain logistics knowhow, we
provide frozen shipping logistics solutions to the life sciences industry. We view our solutions as disruptive to “older technologies” in that our
solutions provide reliable, economic alternatives to existing solutions and services utilized for frozen shipping in life sciences including stem
cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals, infectious substances, and other items
that require continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express ® Solutions include sophisticated cloud-based logistics management software we have branded as the Cryoportal™,
which supports the management of the entire shipment process through a single interface, including initial order input, document preparation,
customs clearance, courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique and incisive
information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains a fully documented “chain-of-
custody” and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy, and stability of shipped
commodities are maintained throughout the process. This recorded and archived information allows our customers to meet exacting requirements
necessary for scientific work and for regulatory purposes.
Our Cryoport Express ® Solutions also include our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express ®
Shippers, which are cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen
(“LN2”) “dry vapor” technology. Cryoport Express ® Shippers are International Air Transport Association (“IATA”) certified and validated to
maintain stable temperatures of minus 150° C and below for a 10-plus day dynamic shipment period. The Company currently features two
Cryoport Express ® Shipper models, the Standard Dry Shipper (holding up to 75-2.0 ml vials) and the High Volume Dry Shipper (holding up to
500-2.0 ml vials).
Amongst our solutions, we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting
Cryoport Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and reseals the shipping
box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up. Cryoport arranges for the pick-up of the parcel by a shipping
service provider for delivery to the customer’s intended recipient. The recipient simply opens the box and shipper and removes the frozen
commodity. The recipient only needs to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for
pre-arranged carrier pick up. The Cryoport Express ® Shipper is returned to us for cleaning, quality assurance testing, recharging and reuse.
2
In late 2012, we shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics
solutions provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution,” we also provide the following value-added solutions that were developed to address our various clients’ needs:
•
•
•
•
•
•
“ Customer Staged Solution ,” under which we supply an inventory of our Cryoport Express® Shippers to our customer, in an
uncharged state, enabling our customert (after training/certification) to charge them with liquid nitrogen and use our Cryoportal™ to
enter orders with shipping and delivery service providers for the transportation of the package. Once the order is released, our customer
services professionals monitor the shipment and the return of the shipper to us for cleaning, quality assurance testing and reuse.
“ Customer Managed Solution ,” a limited customer implemented solution whereby we supply our Cryoport Express® Shippers to
clients in a fully charged state, but leaving it to the client to manage the shipping, including the selection of the shipping and delivery
service provider and the return of the shipper to us. Under this Solution, the customer accepts a significant level of risk for a successful
shipment.
“ Powered by Cryoport SM ,” is made available to providers of shipping and delivery services who seek to offer a “branded” cryogenic
shipping solution as part of their service offerings. By negotiation, this solution can be private labeled as long as “ powered by Cryoport
SM ” appears prominently on the offering software interface and prominently on the packaging, which is provided by the client after
minimum volume requirements are met.
“ Integrated Solution” is our most comprehensive and complex outsourcing solution. It usually involves our management of the entire
cryogenic logistics process for our client, including the location of our employees at the client’s site to manage the client’s cryogenic
logistics in total.
“ Life Science Point-of-Care Repository Solution ” whereby we supply our Cryoport Express ® Shippers to ship and store
cryogenically preserved life science products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care site, with
the Cryoport Express ® Shippers serving as a temporary freezer/repository enabling the efficient distribution of temperature sensitive
allogeneic cell-based therapies without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined process including the shipment’s
return to Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for
reuse.
“ Personalized Medicine and Cell-based Immunotherapy Solution ” whereby our Cryoport Express ® Solutions serves as an enabling
technology for the safe manufacture of the rapidly expanding autologous cellular-based immunotherapy market by providing a
comprehensive logistics solution for the verified chain of custody and condition transport from, (a) the collection of the patient’s cells in
a hospital setting, to (b) a central processing facility where they are manufactured into a personalized medicine, to (c) the safe,
cryogenically preserved return of these irreplaceable cells to a point-of-care treatment facility. The Cryoport Express ® Shippers can
then serve as a temporary freezer/repository to allow the efficient distribution of this personalized medicine to patients when and where
they need it most without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation apparatus. Our
customer services professionals monitor each shipment throughout the predetermined process including the shipment’s return to
Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for reuse.
One of our distribution partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping
logistics services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets and
sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx ® Deep Frozen Shipping Solution on a non-
exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely with FedEx to further align its sales efforts and
accelerate penetration within FedEx’s life sciences customer base through improved processes, sales incentives, joint customer calls and more
frequent communication at the sales and executive level. In addition, FedEx has developed a FedEx branded version of the Cryoportal TM
software platform, which is “ powered by Cryoport ” for use by FedEx and its customers giving them access to the full capabilities of our
logistics management platform.
In January 2013, we entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with
a non-exclusive license and right to use a customized version of our Cryoportal TM for the management of shipments made by FedEx customers.
The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx Agreement, expires on
December 31, 2015.
3
Pursuant to an agreement with DHL Express (USA), Inc. (“DHL”), DHL biotechnology and life science customers have direct access to
our cloud-based order entry and tracking portal to order Cryoport Express ® Shippers and receive preferred DHL shipping rates. The agreement
covers DHL shipping discounts that may be used to support our customers using our Cryoport Express ® Solutions. In connection with the
agreement, we have integrated our proprietary Cryoportal TM to DHL’s tracking and billing systems to provide DHL biotechnology and life
science customers with a seamless way (“ powered by Cryoport ”) of shipping their critical biological material worldwide.
In December 2012, we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.)
pursuant to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the Cryoportal TM , to manage shipments from the Zoetis manufacturing site in
the United States to domestic customers as well as various international distribution centers. As part of our logistics management services,
Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’ logistics, ensuring products arrive at their destinations
in specified conditions, on-time and with the optimum uses of resources. The Company manages Zoetis’ total fleet of dewar flask shippers used
for this purpose, including liquid nitrogen shippers. In July 2013, the agreement was amended to expand Cryoport’s scope to manage all logistics
of Zoetis’ key frozen poultry vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a second poultry
vaccine.
In February 2014, we entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a commercial stage biotechnology
company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using Cryoport Express ®
Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide Cryoport Express ® Solutions to other
biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s proprietary, purpose-built cold chain logistics solutions for
cell-based and advanced biologic tissue forms with Liventa’s distribution capability to orthopedic care providers. The implementation of
Cryoport’s solution will eliminate dry ice shipping and related risks of degradation and also eliminate the need for expensive onsite cryogenic
freezers for storage of cell-based orthopedic therapies. This will enable Liventa to better serve physicians at the point-of-care whether at
hospitals, clinics, pharmacies, family practices, surgery centers or orthopedic offices.
We offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells and cell lines,
diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood, vaccines, tissue, animal
husbandry, and other producers of commodities requiring reliable frozen solutions for logistics. These companies operate within heavily
regulated environments and as such, changing vendors and distribution practices typically require a number of steps; which may include the
audit of our facilities, review of our procedures, qualifying us as a vendor, and performing test shipments. This process can take up to nine
months or longer to complete prior to a potential customer adopting one or more of the Cryoport Express ® Solutions.
Corporate History and Structure
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, CA 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.
The Company became public by a reverse merger with a shell company in May 2005. Over time the Company has transitioned from being
a development company to a fully operational public company, providing cold chain logistics solutions to the biotechnology and life sciences
industries globally.
Since fiscal year 2011 the Company has taken significant steps towards commercialization of the Cryoport Express ® logistics solutions in
validating, perfecting and expanding its features. The Company has now managed shipments of its Cryoport Express ® Shippers through its
Cryoportal TM into and out of approximately 70 countries, handling a vast array of different biological products and specimens.
4
During fiscal year 2012, the Company completed the external validation of its Cryoport Express Standard Shipper to ISTA 7E standards
and introduced the Cryoport Express ® High Volume Shipper in response to customer demand. The Company also set up its European
distribution depot in Holland to better serve its customer base and support sales efforts in Europe.
During fiscal year 2013, the Company elected Jerrell Shelton President and CEO, realigned its sales team and introduced a solutions sales
and operating strategy. In addition, and as part of its global expansion plans, the Company set up its Asian distribution depot in Singapore. The
Company also formed a Commercial Advisory Board (CAB) with Bill Taaffe, a founding member of ICON Clinical Research becoming its first
member.
Since the beginning of fiscal year 2014 the Company’s Board of Directors (“Board”) has added certain members to better align the
experience and competencies of the directors with the Company’s strategic direction. In April 2013, Richard G. Rathmann, a fund manager,
investor and advisor to life science companies over the past 20 years, was appointed to the Board. In September 2013, Mr. Rathmann was
elected Chairman of the Board. Also in September 2013, Mr. Edward Zecchini, an executive with over thirty years of experience in the
healthcare and information technology industries was appointed to the Board. Most recently, in June 2014, the Board appointed Dr. Ramkumar
Mandalam to the Board. Dr. Mandalam has over twenty years of experience in the development of biologics and is currently the President and
Chief Executive Officer of Cellerant Therapeutics, Inc., a clinical-stage biotechnology company. The Company’s five person Board has four
independent Board members.
Cryoport Express ® Solutions
Cryoport Express ® Solutions consist of the Cryoportal TM , a cloud-based logistics management software which programmatically assists
in the management of all aspects of the logistics operations including the Cryoport Express ® Shippers and the Cryoport Express ® Smart Pak
data logger. The Cryoportal TM is capable of producing Cryoport Express ® Analytics which reports shipment performance metrics and evaluates
temperature-monitoring data collected by the data logger during shipment. Cryoport Express ® Solutions are focused on improving the reliability
of frozen shipping while reducing our clients’ 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 primarily though integrators and
specialty couriers. Certain of the intellectual property underlying our Cryoport Express ® Solutions (other than that related to the Cryoport
Express ® Shippers) 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.
Cryoportal TM
The Cryoportal TM 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 assist in managing
logistics 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 Cryoportal TM 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.
The Cryoportal TM also serves as the communications center for the management, collection and analysis of Smart Pak data collected 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
our clients relating to their shipments.
The Cryoportal™ software platform has been developed as a carrier-agnostic system, allowing the customer and the Cryoport Client Care
team to work with multiple integrators, freight forwarders and/or couriers depending on the specific requirements and customer preferences. To
increase operational efficiencies the Cryoportal™ has already been integrated with the tracking systems of FedEx, DHL and UPS and is planning
to integrate with other key logistics providers.
The Cryoportal TM was developed for time- and temperature-sensitive shipments that are required to maintain specific temperatures, such
as ambient (between 20° and 25°C), chilled (between 2° and 8°C) or frozen (minus 10°C or less all the way down to cryogenic temperatures) to
ensure that the shipped specimen is not subject to degradation or out of its designated “safe” range. While our current focus is on frozen
shipments within the biotechnology and life sciences industries using the logistics solutions described herein, the use of the Cryoportal TM can
and may be extended into other temperature ranges.
5
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 dynamic shipping 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 stable storage temperatures below minus 150° Celsius. Our Cryoport Express ®
Shippers are 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 retention system to ensure that liquid nitrogen stays inside the vacuum container, which allows the shipper to be
designated as a dry shipper meeting IATA requirements. Biological or pharmaceutical specimens are stored in a specimen chamber, referred to
as a “well” inside the container, refrigeration is provided by cold nitrogen gas evolving from the liquid nitrogen entrapped within the retention
system. Specimens that may be transported using our cryogenic shipper include live cell scientific or pharmaceutical commodities such as cancer
vaccines, diagnostic materials, semen, eggs and embryos, infectious substances and other items that require continuous exposure to frozen or
cryogenic temperatures (e.g., temperatures below minus 150° Celsius).
An important feature of our Cryoport Express ® Shippers is their compliance with the stringent packaging requirements of IATA Packing
Instructions 602 and 650, respectively. These specifications include meeting internal pressure (hydraulic) and drop performance requirements.
Under IATA guidelines, Cryoport Express ® Shippers are classified as “Non-hazardous” while dry ice and liquid nitrogen are classified as
“Dangerous Goods.” Our shippers are also in compliance with ICAO regulations that prohibit egress of liquid nitrogen residue from the shipping
packages. The International Civil Aviation Organization (“ICAO”) is a United Nations organization that develops regulations for the safe
transport of dangerous goods by air.
We currently offer two sizes of dry vapor shippers, the Cryoport Express ® Standard Shipper with a storage capacity of up to 75 0.2ml
vials and the Cryoport Express ® High Volume Shipper that was introduced in January of 2012 with a capacity of up to 500 0.2ml vials.
Cryoport Express ® Standard Shippers
The Cryoport Express ® Standard 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 ® Standard 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 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. The Cryoport Express ® Standard Shipper has a storage capacity of up to
75 0.2ml vials.
The technology underlying the Cryoport Express ® Standard Shipper has been refined over the past five years. Our current shippers use
aircraft grade aluminum and other lower weight materials, reducing freight cost which is based on dimensional weight. We maintain ongoing
development efforts related to our shippers that are principally focused on material properties, particularly those properties related to our low
temperature requirement, vacuum retention characteristics, such as the permeability of the materials, and lower weight materials in an effort to
meet the life sciences market needs for achieving the lowest cost frozen and cryogenic shipping solution.
Cryoport Express ® High Volume Shippers
The Cryoport Express ® High Volume Shipper also uses a dry vapor liquid nitrogen (LN2) technology to maintain minus 150° C
temperatures with a dynamic shipping endurance of 10 days. The Cryoport Express ® High Volume Shipper is based on the same dry vapor
technology as Cryoport’s original standard dry shipper and utilizes an absorbent material to hold LN2, thus providing the extended endurance
time and IATA validation as a non-hazardous shipping container. The high volume dry shipper is reusable and recyclable, making it a highly
sustainable and cost effective method of transporting life science materials. The Cryoport Express ® High Volume Shipper has a storage capacity
of up to 500 0.2ml vials.
6
We believe Cryoport Express ® Solutions are the best and most cost effective solution available in the biotechnology and life sciences
markets and satisfy customer needs and scientific and regulatory requirements relating to the shipment of time- and temperature-critical, frozen
and refrigerated transport of biological materials, such as stem cells, cell lines, pharmaceutical clinical trial samples, gene biotechnology,
infectious materials handling, 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 our proprietary dry vapor
technology and innovative design prevent the spilling or leakage of the liquid nitrogen when the container is tipped or on its side which would
otherwise adversely affect the functional hold time of the shipper. An important feature of our Cryoport Express ® Shippers is their compliance
with the stringent packaging requirements of IATA Packing Instructions 602 and 650, respectively. These specifications include meeting internal
pressure (hydraulic) and drop performance requirements.
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 did not experience degradation during shipment due to temperature fluctuations. Our Smart Pak
System is a self-contained automated data logger capable of recording cryogenic temperatures of samples shipped in our Cryoport Express ®
Shippers. The data-logging temperature probe is in the vapor plug of the shipper for the most accurate reading. The temperature mapping
includes both the temperature inside the chamber (which is closest to the actual biomaterial) and the external temperature. This reading,
combined with the mapping of every shipment check-in point, provides a holistic view of the complete shipping process. At the client’s election,
shipments can have a full chain-of-custody and chain-of-condition with both data monitoring and analysis available.
Chain-of-Condition
Data monitoring starts with a custom-built data logger. The data logger can be set up to report during the shipment and/or after the
shipment. For those shipments involving biologics or clinical trials or any other material that needs to be verified before receiving, the
information recorded by the data logger can be downloaded to the data station onsite. Alternatively, Cryoport can upload the temperature data
from the data logger for analysis to the Cryoportal TM upon return of the shipper. The Cryoportal TM also acts as the data repository for all
shipment and temperature information, which the customer can access remotely through the internet. Chain of condition service is available at
the client’s election.
Chain-of-Custody
When overlaid with the carrier check-ins, the data monitor and analysis also provides a chain of custody. The report from the data monitor
serves as analysis for temperature monitoring of the entire shipment as well as a tampering warning. If the client has elected to have chain of
condition monitoring, each time the container is opened there is a temperature record. The report identifies outlier temperature excursions such
as opening the shipment in customs or tampering and thus will allow for more conclusive investigations to ensure that specimens were not
adversely impacted during shipment.
Cryoport Express ® Analytics
The Cryoportal TM is an important information technology element of our business strategy and has been designed to support planned
future features to allow for an expansion of our solutions offering. 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 for
analytics tracked through the Cryoportal TM 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 potential shipping exceptions based on historical
metrics. The analytical results are being utilized by Cryoport to render consultative and proactive customer services.
Biological Material Holders
A patented containment bag is used in connection with the shipment of infectious or dangerous goods using the Cryoport Express®
Shippers. Up to 75 cryovials (polypropylene vials with high-density polyethylene closures), set on aluminum canes are placed into an absorbent
pouch, which is designed to contain the entire contents of all the vials in the event of leakage. This pouch is then placed in a watertight Tyvek
bag (secondary packaging) capable of withstanding cryogenic temperatures, and then sealed. This bag is then placed into the well of the
Cryoport Express ® Shipper.
7
Logistics Expertise and Support
Cryoport’s client services professionals provide 24/7/365 live logistics and monitoring services with specialized knowledge in the domestic
and global logistics of life sciences material requiring cryogenic temperatures. The Cryoport logistics professionals have validated shipping lanes
in and out of more than 70 countries to date to ensure shipments maintain cryogenic temperatures and arrive securely and on time.
Other Product Candidates and Development Activities
We are continuing our research and development efforts to further refine our current technology as well as explore opportunities with
partners to offer complementary packaging solutions for frozen temperature (minus 10° Celsius or less), chilled temperature (2° to 8° Celsius)
and ambient temperature (between 20° and 25° Celsius) shipping markets.
We also continue to further expand the functionality of our Cryoportal TM to ensure a high level of effectiveness and efficiency in the cold
chain logistics process and to allow for intelligent and easy data monitoring and analysis.
Government Regulation
The shipping of diagnostic specimens, infectious substances and dangerous goods, whether via air or ground, falls under the jurisdiction of
many state, 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.
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 Centers for Disease Control (“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 ® Shippers meet Packing Instructions 602 and 650 and are 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 Federal Aviation Administration (“FAA”), Federal
Communications Commission (“FCC”), Food and Drug Administration (“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 . Due to our currently adequate levels of dewar inventories, manufacturing is currently suspended. The component parts for
our shippers are primarily manufactured at third party manufacturing facilities. We also have a warehouse at our facility in Lake Forest,
California, where we are capable of manufacturing certain parts and to fully assemble our shippers. Most of the components that we use in the
manufacture of our shippers 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. Should this occur, we believe that with our current level of shippers we have enough inventory to
cover our forecasted demand.
There are no specific agreements with any manufacturer nor are there any long term commitments to any manufacturer. We believe that
most of the manufacturers 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 shippers.
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.
8
Cryoport Express ® High Volume Shippers are purchased from a third party and modified to meet our specifications using our proprietary
technology and know-how.
Our data loggers have been acquired from a single source with the calibration done by an independent third party. We are currently
considering adding alternate data loggers with greater range of functionality.
Raw Materials . Various common raw materials are used in the manufacture of our shippers 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 three registered United States trademarks and three issued United States patents primarily covering various aspects of our
products.
In addition, we have a pending 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. We have also filed a provisional patent application for a smart label
which will communicate electronically with our data logger. 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 shippers 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:
Patent
Patent
Patent
Trademark
Trademark
Issued
No.
6,467,642 Oct. 22, 2002 Oct. 21, 2022
Sep. 19, 2000
6,119,465
Sep. 18, 2020
Apr. 1, 2003 Mar 31, 2023
6,539,726
Expiration
Feb. 2, 2019
7,748,667,3
7,737,454,1 Mar. 17, 2009 Mar. 16, 2019
Feb. 3, 2009
Our success depends in part 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 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 such third parties, or at all, which could seriously harm our business or financial condition.
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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 such areas as biotechnology and life science, clinical trials, distribution of pharmaceutical
products and reproductive medicine, the requirement for effective and reliable solutions for keeping clinical samples, pharmaceutical products
and other specimen at frozen temperatures takes on added significance due to more complex shipping routes, extended shipping times, custom
delays and logistics challenges. Today, such specimens 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 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 Cryoport Express® Shippers, the Cryoportal™ and our logistics expertise 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 life sciences and biotechnology industries toward globalization.
We provide domestic shipping solutions in situations where specimens must be kept at frozen temperatures and in regions where there is a
high priority placed on maintaining the integrity of materials shipped at these temperatures.
Pharmaceutical Clinical Trials . Every United States based pharmaceutical company developing a new drug must seek drug development
protocol approval by the FDA. These clinical trials are to test the safety and efficacy of the potential new drug among other things. A significant
amount of clinical trial activity is managed by a number of large Clinical Research Organizations (“CROs”).
In connection with the clinical trials, due to globalization, companies can be enrolled from all over the world and may need to 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, drugs used by the patients may 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/or 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 Cryoport Express ® Shippers 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 our Cryoport Express ® System, which is ideally suited for this
market, in particular due to the elimination of the cost to return the reusable shipper.
Biotechnology and Diagnostic Companies . The 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.
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Cell Therapy Companies. Rapid advancements are underway in the research and development of cell based therapies, which involves
cellular material being injected into a patient. In allogeniec cell therapy, the donor is a different person to the recipient of the cells. Autologous
cell therapy is a therapeutic intervention that uses an individual’s cells, which are cultured and expanded outside the body, and reintroduced into
the donor. Once cells are processed, in either case, they must be shipped cryogenically for which our Cryoport Express ® Shippers are ideally
suited.
Central Laboratories. With the increase and globalization of clinical studies and trials, logistics has become more complex and ensuring
sample integrity has become more challenging. International courier costs are now consuming a significant portion of global protocol budgets.
We believe laboratories performing the testing of samples collected during the conduct of these global multi-site studies are looking for reliable
state-of-the-art logistics solutions.
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 anticipated 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. 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.
If such drugs require maintenance at frozen or cryogenic temperatures, each such shipment will require a frozen or cryogenic shipping package.
Cryoport can provide the technology to meet this anticipated need.
Distribution of Vaccines and Biologic Therapies. There are a variety of vaccines and other drugs or therapies that require distribution at
frozen or cryogenic temperatures. We anticipate significant growth in this area, in particular therapies based upon stem cells. It is likely that the
most efficient and reliable method of distribution will be to ship a single dosage or a limited supply to the physician for administration to a
patient.
In February 2013, we started providing comprehensive logistics management services for the lead poultry vaccine distribution of Zoetis,
Inc. In October 2013, Zoetis engaged us to manage distribution of an additional vaccine.
One of our strategic alliance partners, Liventa Bioscience, Inc., is, in part, basing its business strategy on using our Cryoport Express ®
Shippers to deliver supplies of cell-based therapies to physicians, which will be able to keep the shippers at the physician’s facility for up to one
week and thus avoid the need to invest in costly cryogenic refrigeration equipment for commodity storage. With the inclusion of our Cryoport
Express ® Smart Pak data logger, Liventa and the physician will have assurance that cryogenic temperatures were maintained within the shipper.
Fertility Clinics and In Vitro Fertilization (“IVF”) . Maintaining cryogenic temperatures during shipping and transfer of in vitro
fertilization specimens like eggs, sperm, or embryos is critical for cell integrity in order to retain viability, stabilize the cells, and ensure
reproducible results and successful IVF treatment. There are approximately 3,300 fertility clinics worldwide. Cryoport anticipates that this
market will continue to grow; in the United States alone, the fertility market has grown to more than $4.0 billion with over 1.3 million women
seeking treatment each year. In the worldwide market, it is reported that there are more than one billion IVF cycles per year and growing.
Sales and Marketing
We currently have two sales directors in the United States, one sales director in Europe, one inside sales representative focused on
Reproductive Medicine/IVF and a part time senior director of marketing promoting the use of our Cryoport Express® Solutions on a direct basis,
in addition to the distribution channels we are establishing. Given the global nature of our business, our sales and marketing initiatives should
more thoroughly cover the Americas, Europe and Asia. For the fiscal year ended March 31, 2014, we had one customer that accounted for 30.8%
of net revenues. No other single customer generated over 10% of our net revenues during 2014 and 2013.
Our geographical revenues for the fiscal year ended March 31, 2014 were as follows:
USA
Europe
Asia
Rest of World
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83.7 %
6.7 %
3.7 %
5.9 %
We renewed our agreement with FedEx and plan to further expand our revenues and marketing efforts through the establishment of
additional strategic partnerships with global integrators and freight forwarders. Subject to available financial resources, we also plan to hiring
additional sales and marketing personnel and implement marketing initiatives intended to increase awareness of the Cryoport Express ®
Solutions.
Cryoport Operations Centers
In addition to the services provided through our facility in Lake Forest, California, we have contracted with third parties to run our
European Operations Center (located in Leiden, Holland) and Asian Operations Center (located in Singapore). The operations centers provide
warehousing, shipping, receiving, refurbishing and recycling services for our shipping containers. This approach is a cost-effective way to
initiate operations outside of the US and allows us to scale up as our business grows globally. In March 2013, we shut down a small third-party
operations center in New Delhi, India without impact on our business or customers.
Industry and Competition
Our products and services are sold into a rapidly growing segment of the logistics 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). In addition,
we expect that industry standards and regulations will be introduced globally, requiring more comprehensive tracking and validation of shipping
temperatures.
We believe that growth in the following markets has resulted in the need for increased reliability, efficiencies and greater flexibility in the
temperature sensitive segment of the logistics market:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
cell-based therapies
gene and stem cell biotechnology
cell lines
vaccine production
commercial drug product distribution
clinical trials, including transport of tissue culture samples
diagnostic specimens
infectious sample materials
inter/intra-laboratory diagnostic testing
temperature-sensitive specimens
biological samples, in general
environmental sampling
IVF
animal husbandry
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 stem cells, semen, embryo, tissue, tissue cultures, cultures of viruses and bacteria,
enzymes, DNA materials, vaccines and certain pharmaceutical products.
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One of the integral parts of our solutions are our Cryoport Express® Shippers that are based on a liquid nitrogen dry vapor technology.
The following paragraphs compare our shippers with dry ice and liquid nitrogen shipping methods. Our solutions integrate the Cryoport
Express® Shippers with our Cryoportal TM logistics software platform and our cold chain logistics know-how that are comprehensive and
tailored to client requirements.
Cryoport Express Shippers (Liquid Nitrogen Dry Vapor) compared to Dry Ice Shipments
One problem faced by many companies operating in these specialized markets is the limited number of cryogenic shipping systems
serving their needs. 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 and has been 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. 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. All dry ice shipping is considered dangerous goods shipping, requiring
extra packaging steps and adding costs. It gives off carbon dioxide and sublimates unevenly and in short duration.
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 1 1 / 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.
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;
dangerous goods shipping regulations;
• 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 Department of Transportaion (‘DOT”), the CDC, and other
regulatory agencies; and
•
emission of greenhouse gases (primarily carbon dioxide) into the environment.
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Due to the limitations of dry ice, specimens that require frozen shipping are more securely shipped at true cryogenic temperatures using a
service such as liquid nitrogen dry vapor shippers (Cryoport Express Shippers), or liquid nitrogen shippers where the specimen is kept over
actual liquid nitrogen. However, liquid nitrogen is hazardous and has many pitfalls including safety and expense.
Cryoport Express Shippers (Liquid Nitrogen Dry Vapor) compared to Liquid Nitrogen Dewars/Tanks
There are distinct disadvantages when using liquid nitrogen compared to the dry vapor liquid nitrogen used in Cryoport Express ®
Shippers. Liquid nitrogen dewars/tanks are classified as dangerous goods and cannot be shipped as parcel. In addition, the liquid nitrogen has to
be disposed of prior to returning the dewar/tank to its origin. These issues add additional procedural steps and costs to the shipment. In addition,
there is a risk of liquid nitrogen leakage if the dewar/tank tips to the side during transport, which can cause bodily injury and compromise the
specimen being shipped. 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 and being safe for handling.
While both liquid nitrogen dry vapor and liquid nitrogen shippers provide solutions to the issues encountered when shipping with dry ice,
liquid nitrogen shippers have some draw backs. For example, the cost for a liquid nitrogen shipper typically can range from $650 to $4,000 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 containers can be significant, particularly in international markets, because most applications
require only one-way shipping. In addition, the logistics support of cryogenic shippers requires more sophisticated logistics management and
discipline to ensure shippers are returned and recycled, especially for international shipments, which many companies do not have in place.
Cryoport’s solutions are totally comprehensive and integrated for maximum reliability, economy and total effectiveness. Cryoport’s total
logistics solution enables life sciences companies to utilize the superior liquid nitrogen dry vapor technology without having to make capital
investments or developing in-house logistics expertise and systems by offering a complete solution which includes the cloud-based Cryoportal
TM logistics management platform, the temperature monitoring system and the 24/7/365 logistics support. Cryoport allows the customer to
outsource logistics and focus on its core competencies while maintaining visibility of all shipping related information.
Within our intended biotechnology and life sciences markets for Cryoport Express ® Shippers, there is limited known direct competition.
We compete with liquid nitrogen and dry ice solutions by reason of the improved and integrated hardware and software technology in our
products including our comprehensive logistics management software and through the use of our service enabled business model. The Cryoport
Express ® Solution provides a simple and cost effective solution for the frozen or cryogenic transport of biotech and life sciences materials. The
Cryoportal TM assists with the management, scheduling and shipping of the Cryoport Express ® Shippers removing the burdens associated with
other methods.
Traditional dry ice shippers and liquid nitrogen tank suppliers, such as MVE/Chart Industries, Taylor Wharton and Air Liquide, offer
various models of dry vapor liquid nitrogen shippers that are not as 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, have a broader manufactured product
offering of other liquid nitrogen products and more experience in research and development than we do.
Factors that we believe give us a competitive advantage are attributable to our software and shipping container which allows our shipper to
retain liquid nitrogen when placed in non-upright positions, the overall “leak- proofness” of 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 Cryoportal TM 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. Fisher BioServices, part of
Thermo Fisher Scientific, provides cell therapy logistics services, maintaining cold chain from manufacturer to patient bedside.They provide
customized solutions in biospecimen collection kits, biospecimen shipping, lab processing, biobanking and clinical trial support services.
14
Research and Development
Our research and development efforts are focused on continually improving the features of our Cryoport Express ® Solutions including the
cloud-based Cryoportal TM and the Cryoport Express ® Shippers. 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 with the Cryoport Express ® Solutions. 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 for the fiscal years ended March 31, 2014 and 2013 were $409,111 and $425,446, respectively with the largest portion
being spent on software maintenance and development.
Employees
The efforts of our employees are critical to our success. We believe that we have assembled a strong management team with the
experience and expertise needed to execute our business strategy. We anticipate hiring additional personnel as needs dictate to implement our
growth strategy. As of June 13, 2014, we had nineteen full-time employees, three consultants and one temporary employee.
Insurance
We currently maintain general liability insurance, with coverage in the amount of $1 million per occurrence, subject to a $2 million annual
limitation. Claims may be made against us that exceed these limits. In fiscal year 2014, we did not experience any claims against our
professional liability insurance. 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 all 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.
We also maintain product liability insurance with coverage in the amount of $1,000,000 per year. In addition, we currently maintain cargo
insurance for shipments for one customer, with coverage of up to $10,000 per shipment.
ITEM1A. 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 Financial Condition
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
each of our last two fiscal years:
Fiscal Year Ended March 31, 2014
Fiscal Year Ended March 31, 2013
Net Loss
$ 19,565,400
$ 6,382,400
Our fiscal year ended March 31, 2014 loss of $19,565,400 included a one-time non-cash loss of $13,714,000 as a result of an induced debt
conversion expense as described in ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations under the
“Results of Operations for Fiscal 2014 Compared to Fiscal 2013” section. As of March 31, 2014, we had an accumulated deficit of $85.9
million. In order to achieve and sustain such revenue growth in the future, we must significantly expand our market presence and revenues from
existing and new customers. 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.
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Our auditors have expressed doubt about our ability to continue as a going concern.
The Report of Independent Registered Public Accounting Firm to our March 31, 2014 consolidated financial statements includes an
explanatory paragraph stating that the recurring losses and negative cash flows from operations since inception and our cash and cash equivalent
balance at March 31, 2014 raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
If we are unable to obtain additional funding, we may have to reduce or discontinue our business operations.
As of June 13, 2014, we had cash and cash equivalents of $415,200. 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 future operations.
Recently, we funded our operations through a short-term bridge financing and a preferred stock offering. We plan to raise additional funds
through an equity or debt offering to cover general working capital needs and sales and marketing initiatives to expand our customer base and
increase revenues. If we are not able to raise sufficient funds and our projected revenues and cash-inflows are reduced or delayed, we may not
have sufficient capital to operate through the second quarter of our fiscal year 2015 or beyond. We are currently exploring various arrangements
with respect to securing additional funding. However, 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 our business
operations. Any additional equity financing will involve substantial dilution to our then existing stockholders. The uncertainties surrounding our
future cash inflows have raised substantial doubt regarding our ability to continue as a going concern.
Risks Related to Our Business
Our agreements with global providers of shipping services may not result in a significant increase in our revenues or cash flow.
We believe that establishing strategic alliances with global providers of shipping services, such as our agreements with FedEx, DHL and
OCASA can drive growth in our revenues. We are seeking to establish similar arrangements with other providers of international shipping
services. Such alliances may enable us to provide a seamless, end-to-end shipping solution to customers of our alliance partners and allow us to
leverage the established relationships with those customers.
In January 2013, we entered into an agreement with FedEx, renewing FedEx’s right to, on a non-exclusive basis, promote, market and sell
transportation of our shippers and our related value-added goods and services and providing FedEx with a non-exclusive license and right to use
a customized version of our Cryoportal™ software platform for the management of shipments made by FedEx customers. In September 2013,
we entered into a similar agreement with OCASA, Inc. In January 2014, we entered into a letter of intent with DHL confirming our mutual
intentions to negotiate an additional agreement related to our participation in DHL’s efforts to expand its provision of cryogenic shipping
services to the life sciences industry.
Because our agreements with FedEx, OCASA and DHL do not contain any requirement that they use a minimum level of our services (we
do not anticipate the agreement under negotiation with DHL will include such volume commitments by DHL), there can be no assurance of any
significant increase in our revenues or cash flows as a result of these strategic alliances.
Our agreements with providers of vaccines and stem cell-based therapies may not result in a significant increase in our revenues or cash
flow.
We believe that establishing strategic relationships with manufacturers and distributors of treatments for animals and humans, such as our
agreements with Zoetis, Inc. and Liventa Bioscience, Inc. can drive growth in our revenues. We are seeking to establish similar arrangements
with other companies engaged in the life sciences industry, which require logistics solutions for the delivery of biologic material maintained at
cryogenic temperatures.
In December 2012, we entered an agreement with what became Zoetis, Inc. (in January 2013, Pfizer spun off its animal health business
into Zoetis, Inc., a public company) providing for us to manage the cryogenic logistics for the distribution of a poultry vaccine from its
production site in the United States. Recently, Zoetis has expanded our role in providing them assistance in managing their cryogenic
distribution of their vaccines.
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In February 2014, we entered an agreement with Liventa Bioscience, Inc. to act as its exclusive provider of cryogenic logistics of stem
cell based therapies for orthopedic applications. Liventa intends to distribute its own line of therapies and to act as a distributor of other therapies
to orthopedic health care providers that require cryogenic temperatures. However, we do not expect Liventa to begin significant use of our
services prior to the second half of fiscal 2015.
While we anticipate growth in shipments by Zoetis under our management and that Liventa will be successful in its efforts to distribute
cell based biologic materials to the orthopedic market, there can be no assurance of any significant increase in our revenues or cash flows as a
result of these strategic alliances.
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 solutions.
We plan to improve our sales, distribution, and marketing capabilities in the Americas, Europe, and Asia. It will be expensive and time-
consuming for us to develop our global marketing and sales network and thus we intend to rely on our strategic alliances with DHL, FedEx and
OCASA. We further intend to seek to enter into additional strategic alliances with international providers of shipping services to incorporate use
of our solutions in their service offerings. We may not be able to provide adequate incentive to our sales force or to establish and maintain
favorable distribution and marketing collaborations with others to promote our solutions. 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 solutions thereby exposing
us to potential expenses in exiting such distribution agreements. We, and any of our alliance partners, must also market our services 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 alliance partners fail to promote our solutions, 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.
We are dependent on new solutions and services.
Our future revenue stream depends to a large degree on our ability to bring new solutions 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 solutions and services, enhance
existing solutions and services, and achieve market acceptance of such solutions and services. We may incur problems in introducing new
solutions and services.
The adoption cycle of our target customers tends to be very lengthy, which continues to adversely affect our ability to increase revenues
quickly.
We offer our solutions primarily to companies in the life sciences industry. These companies operate within a heavily regulated
environment and as such, changing vendors and distribution practices typically require a number of steps, which may include the audit of our
facilities, review of our procedures, qualifying us as a vendor, and performing test shipments. This process can take several months or longer to
complete, involving multiple levels of approval, prior to a company fully adopting our Cryoport Express ® Solutions. The logistics management
of many companies is decentralized adding to the time need to effect adaptation of our solutions. In addition, any such adoption may be on a
gradual basis such that the customer progressively ramps up use of our Cryoport Express ® Solutions following adoption. The slow adoption
process continues to adversely affect our ability to increase revenues.
We are dependent on an outside party for the continued development and maintenance of our Cryoportal™ software.
Our proprietary Cryoportal™ is a logistics platform software used by our customers, business partners and client care team 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 the Cryoportal™ platform is contracted with an outside software development company. If this developer becomes unable or
unwilling to continue work on scheduled projects, and an alternative software development company cannot be secured, we may not be able to
implement needed enhancements to the system. Furthermore, if we terminate our agreement with our current software developer and cannot
reach an agreement or fail to fulfill an agreement for the termination, it is possible 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.
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Our success depends, in part, on our ability to obtain patent protection for our solutions 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; one pending
patent, and one recently filed provisional patent application, all relating to various aspects of our solutions 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.
While 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, 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 solutions either in the United States or
internationally. Additionally, we may face assertions of claims by holders of patents alleging that we are infringing upon their patent rights
which claims are without merit, but may result in our incurring substantial costs of defense.
Our solutions and services 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 solutions and services must meet stringent requirements and we must develop our services and solutions quickly to keep pace with the
rapidly changing market. Solutions as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when
new equipment or versions of our software are released. If our solutions are not free from errors or defects, we may incur an injury 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, interruptions in production, or delays in procurement of shippers manufactured by third parties,
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 (in part) 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 it becomes more likely that such problems could arise.
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If we experience delays or interruption in shipping due to factors outside of our control, such disruption could lead to customer
dissatisfaction and harm our reputation.
We rely on third party shipment and carrier services to transport our shippers containing biological material. These third party operations
could be subject to natural disasters, adverse weather conditions, other business disruptions, and carrier error, which could cause delays in the
delivery of our shippers, which in turn could cause serious harm to the biological material being shipped. As a result, any prolonged delay in
shipment, whether due to technical difficulties, power failures, break-ins, destruction or damage to carrier facilities as a result of a natural
disaster, fire, or any other reason, could result in damage to the contents of the shipper. If we are unable to cause the delivery of our shippers in a
timely matter and without damage, this could also harm our operating results and our reputation, even if we are not at fault.
Our Cryoportal™ software platform may be subject to intentional disruption that could adversely impact our reputation and future
revenues.
We have implemented our Cryoportal™ software platform 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 cyber attacks specifically designed to impede the
performance of the Cryoportal™ software platform. Similarly, experienced computer programmers may attempt to penetrate our Cryoportal™
software platform 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 could be harmed if such intentionally disruptive efforts were successful.
Our solutions and services may expose us to liability in excess of our current insurance coverage.
Our solutions 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.
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. Our insurance coverage,
however, may not protect us against all 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 solutions can limit our activities and increase our cost of
operations.
Shipments using our solutions and services are subject to various regulations in the various countries in which we operate. For example,
shipments using our solutions may be required to comply with the shipping requirements promulgated by the CDC, the Occupational Safety and
Health Organization (“OSHA”), the DOT as well as rules established by the IATA and the ICAO. Additionally, our data logger may be subject
to regulation and certification by the FDA, FCC, and FAA. We will need to ensure that our solutions and services comply with relevant rules and
regulations to make our solutions and services marketable, and in some cases compliance is difficult to determine. Significant changes in such
regulations could require costly changes to our solutions 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 rules or regulations or fail to obtain any required
approvals, our ability to market our solutions 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 services and solutions are positioned to be competitive in the life sciences cold-chain logistics 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. Our principal competitive considerations in our market include:
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financial resources to allocate to proper marketing and an appropriate sales effort
acceptance of our solutions model
acceptance of our solutions including per use fee structures and other charges for services
keeping up technologically with ongoing development of enhanced features and benefits
reductions in the delivery costs of competitors’ solutions
the ability to develop and maintain and expand strategic alliances
establishing our brand name
our ability to deliver our solutions to our customers when requested
our timing of introductions of new solutions, and services
financial resources to support working capital needs and required capital investments in infrastructure
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 solutions and adopt more aggressive pricing policies. In
addition, these competitors have entered and will likely continue to enter into business relationships to provide additional solutions competitive
to those we provide or plan to provide .
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 ® Solutions or any future products 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:
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our shippers’ ability to perform and preserve the integrity of the materials shipped
relative convenience and ease of use of our shipper and/or Cryoportal TM
availability of alternative products
pricing and cost effectiveness
effectiveness of our or our collaborators’ sales and marketing strategy
the adoption cycles of our targeted customers
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 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
Certain of our existing stockholders own and have the right to acquire a substantial number of shares of common stock.
As of June 13, 2014, our directors, executive officers and beneficial owners of 5% or more of our outstanding common stock beneficially
owned 12,779,856 shares of common stock (without regard to beneficial ownership limitations contained in certain warrants) assuming their
exercise of all outstanding warrants and options that are exercisable within 60 days of June 13, 2014 or approximately 18.2% of our outstanding
common stock. Of these shares of common stock, 3,449,625 shares, or approximately 5.4% of our common stock, will be beneficially owned by
Cranshire Capital Master Fund. 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.
The sale of substantial shares of our common stock may depress our stock price.
As of June 13, 2014, there were 59,987,846 shares of our common stock 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 82,641,062 shares of our common stock including shares to be issued 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:
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
Number of
Shares of
Common Stock
Issuable or
Reserved for
Issuance
63,045,977
19,595,085
82,641,062
Of the total options and warrants outstanding as of March 31, 2014, options and warrants exercisable for an aggregate of 68,170,852
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, 2014.
Our stock price has been and will likely continue to be volatile.
The market price of our common stock has been 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:
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technological innovations or new solutions and services by us or our competitors
additions or departures of key personnel
sales of our common stock
our ability to execute our business plan
our operating results being below expectations
loss of any strategic relationship
industry developments
economic and other external factors
period-to-period fluctuations in our financial results
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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 downgrade our stock or 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. 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.
We need additional capital, and the sale of additional shares of common stock or other equity securities could result in additional
dilution to our stockholders.
Our current cash and cash equivalents and anticipated cash flow from operations are insufficient to meet our cash needs. We require
additional cash resources to fund our operations and may require additional funds in the future due to changed business conditions or other future
developments, including any investments or acquisitions we may decide to pursue. 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.
Our Articles of Incorporation allows our Board of Directors to issue up to 2,500,000 shares of “blank check” preferred stock.
Our Articles of Incorporation allows our Board of Directors to issue up to 2,500,000 shares of “blank check” preferred stock, without
action by our stockholders. Currently, 800,000 shares of the authorized preferred stock have been designated as Class A Preferred Stock
(“Preferred Stock”). We contemplate the Preferred Stock offered will utilize up to 800,000 of such authorized shares resulting in the potential for
1,700,000 shares that could be issued on terms determined by our Board of Directors, and may have rights, privileges and preferences superior to
those of our the Preferred Stock previously offered hereby or the common stock into which it may be converted. Without limiting the foregoing,
(i) such shares of preferred stock could have liquidation rights that are senior to the liquidation preference applicable to our common stock and
Preferred Stock, (ii) such shares of preferred stock could have voting or conversion rights, which could adversely affect the voting power of the
holders of our common stock and Preferred Stock and (iii) the ownership interest of holders of our common stock will be diluted following the
issuance of any such shares of preferred stock. In addition the issuance of such shares of blank check preferred stock could have the effect of
discouraging, delaying or preventing a change of control of our Company.
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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, to the extent permitted in our Articles of Incorporation, Bylaws and under Nevada law, 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 equal or exceed 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.
23
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 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.
California law requires the vote of each class to approve a 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 OTC
Bulletin Board, 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 an effective system of internal control over financial reporting, we may not be able to accurately report our
financial results, and current and potential stockholders may lose confidence in our financial reporting.
We are required by the SEC to establish and maintain adequate internal control over financial reporting that provides reasonable assurance
regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting
principles. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and
material weaknesses in those internal controls.
As described in Item 9A of this Annual Report on Form 10-K for the year ended March 31, 2014, no material weaknesses were identified
and we determined that our internal control over financial reporting was effective as of March 31, 2014.
Any failure to maintain such internal controls in the future could adversely impact our ability to report our financial results on a timely and
accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our
financial statements are not filed on a timely basis as required by the SEC and the OTC Bulletin Board, we could face severe consequences from
those authorities. In either case, there could result a material adverse effect on our business. Inferior internal controls could also cause investors
to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
24
Our publicly-filed SEC reports are reviewed by the SEC from time to time and any significant changes required as a result of any such
review may result in material liability to us and have a material adverse impact on the trading price of our common stock.
The reports of publicly-traded companies are subject to review by the SEC from time to time for the purpose of assisting companies in
complying with applicable disclosure requirements and to enhance the overall effectiveness of companies’ public filings, and reviews of such
reports are now required at least every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time, and we
could be required to modify or reformulate information contained in prior filings as a result of an SEC review. Any modification or
reformulation of information contained in such reports could be significant and could result in material liability to us and have a material adverse
impact on the trading price of our common stock.
ITEM 1B. Unresolved Staff Comments
Not applicable.
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 in Lake Forest, California (“Lake Forest Facility”) and approximately 4,100 square feet of
corporate offices located in San Diego, California (“San Diego Facility”). In June 2010, the Company entered into a third amendment to the
Lake Forest Facility lease and 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 any time after December 31, 2012. On November 28, 2011, the Company entered into a lease agreement for the
corporate offices in San Diego for a thirty six month period ending December 31, 2014.
The Company currently makes base lease payments of approximately $17,000 per month, due at the beginning of each 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, including product liability claims. 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. It is our practice to accrue for open claims based on our historical experience and
available insurance coverage.
ITEM 4. Mine Safety Disclosures
Not applicable
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
As of June 13, 2014 there were 59,987,846 shares of common stock outstanding and 232 stockholders of record. On June 13, 2014, the
closing sale price of our common stock was $0.48 per share.
Market Information
Our common stock is traded on the OTCQB, operated by the OTC Markets Group, Inc. under the symbol “CYRX”. The high and low
closing sale prices of our common stock reported by OTCQB during each quarter ended March 31, 2014 and 2013 were as follows:
Year 2014:
Fourth Quaxrter Ended March 31, 2014
Third Quarter Ended December 31, 2013
Second Quarter Ended September 30, 2013
First Quarter Ended June 30, 2013
Year 2013
Fourth Quarter Ended March 31, 2013
Third Quarter Ended December 31, 2012
Second Quarter Ended September 30, 2012
First Quarter Ended June 30, 2012
High
Low
$
$
$
$
$
$
$
$
0.57 $
0.55 $
0.52 $
0.56 $
0.61 $
0.39 $
0.51 $
0.70 $
0.34
0.30
0.23
0.16
0.33
0.11
0.19
0.37
25
Unregistered Equity Issuances
We did not issue any unregistered securities during the year ended March 31, 2014 that were not otherwise disclosed in a previously filed
Quarterly Report on Form 10-Q or Current Report on Form 8-K.
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.
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.
Recent Sale of Unregistered Securities
The following is a summary of transactions by the Company during period covered by this report 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”) and that have not previously
been included in a Quarterly Report on Form 10-Q. 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.
In the fourth quarter of 2014, the Company issued to certain accredited investors 5% Bridge Notes in the original principal amount of
$1,352,000, including a note in the amount of $50,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer as well as a note in the
amount of $100,000 issued to GBR Investments, LLC, of which Richard Rathmann, a Director of the Company, is the manager. All principal
and interest under the 5% Bridge Notes will be due on June 30, 2014. In connection therewith, the Company also granted such accredited
investors warrants to purchase 676,000 shares of common stock at an exercise price of $0.49 per share. The warrants are exercisable on May 31,
2014 and expire on December 31, 2018.
Emergent Financial Group, Inc. served as the Company’s placement agent in connection with the placement of the 5% Bridge Notes and
earned a commission of 9% of the original principal balance of such notes, excluding the note issued to Jerrell Shelton and GBR Investments, or
$108,180 at the time of the original issuance of such notes.
The issuance of the securities of the Company in the above transaction were deemed to be exempt from registration under the Securities
Act by virtue of Section 4(2) thereof or Regulation D promulgated there under, as a transaction by an issuer not involving a public offering. With
respect to the transaction listed above, no general solicitation was made by either the Company or any person acting on the Company’s behalf;
the securities sold are subject to transfer restrictions; and the certificates for the shares contain an appropriate legend stating that such securities
have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom.
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, 2014. You should read the following financial information together with the information under
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and
related notes included elsewhere in this annual report. The information set forth below is not necessarily indicative of our future financial
condition or results of operations.
26
Statement of Operations Data:
2014
Revenues
Cost of revenues
Gross margin (loss)
$
Selling, general and administrative
Research and development
Loss from operations
Debt conversion expense
Interest income
Interest expense
Loss on sale of fixed assets
Change in fair value of derivative liabilities
Other expense, net
Net loss before provision for income
taxes
Provision for income taxes
Net loss
Net loss per share — basic and diluted
$
$
2,660 $
2,223
437
5,106
409
(5,078 )
(13,714 )
—
(784 )
—
21
(8 )
(19,563 )
2
(19,565 ) $
(0.40 ) $
2013
Years ended March 31,
2012
(In thousands, except per share data)
2011
1,101 $
1,588
(487 )
5,412
425
(6,324 )
—
—
(72 )
—
16
—
(6,380 )
2
(6,382 ) $
(0.17 ) $
556 $
476 $
1,392
(836 )
6,106
492
(7,434 )
—
12
(528 )
—
119
—
1,303
(827 )
4,321
449
(5,597 )
—
16
(619 )
—
50
—
(7,831 )
2
(7,833 ) $
(0.27 ) $
(6,150 )
2
(6,152 ) $
(0.46 ) $
2010
118
718
(600 )
3,313
284
(4,197 )
—
8
(7,029 )
(9 )
5,577
—
(5,650 )
2
(5,652 )
(1.13 )
Balance Sheet Data:
2014
2013
As of March 31,
2012
(In thousands)
2011
2010
Cash, cash equivalents
Working capital (deficit)
Total assets
Convertible notes and accrued interest, net
Long term obligations, less current portion
Total stockholders’ equity (deficit)
$
370 $
563 $
(2,903 )
1,710
1,622
—
(2,304 )
(1,539 )
1,756
1,304
1,322
(2,063 )
4,618 $
4,024
6,214
338
1,375
3,730
9,278 $
6,760
11,031
2,401
1,423
5,948
3,630
1,995
4,777
2,502
1,478
(915 )
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 within the meaning of the federal securities laws. These statements
are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such
forward-looking statements. For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of Part I of this
Form 10-K. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only
as of the date of this Form 10-K. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring
after the date of this Form 10-K.
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 provide leading edge frozen logistics solutions to the life sciences industry. Since 2011, through the completion of the combination
of our purpose-built and patented packaging, purpose-built cold chain logistics software platform information technologies and developed
logistics knowhow known as “total turnkey management” we have provided logistics solutions for frozen shipping to the life sciences industry.
Our solutions are disruptive to “older technologies” as they are more comprehensive and provide reliable, economic alternatives to existing
products and services utilized for frozen shipping in the life sciences industry including stem cells, cell lines, vaccines, diagnostic materials,
semen and embryos for in-vitro fertilization, cord blood, bio-pharmaceuticals, infectious substances and other items that require continuous
exposure to frozen or cryogenic temperatures. In addition, our solutions can contribute significantly to the effectiveness, reliability and efficiency
of clinical trials.
Cryoport Express ® Solutions include a cloud-based logistics management software platform branded as the Cryoportal TM . The
Cryoportal TM software platform supports the management of the entire logistics process through a single interface which includes initial order
input, document preparation, customs clearance, courier management, shipment tracking, issue resolution, and delivery. Cryoport’s total turnkey
logistics solutions offer convenience, reliability and cost effectiveness, while the use of recyclable and reusable components provides “green,”
environmentally friendly solutions. The Cryoportal TM provides an array of unique information dashboards and validation documentation for
every shipment.
27
Integral to our logistics solutions are our Cryoport Liquid Nitrogen Dry Vapor Shippers (Cryoport Express ® Shippers), which provide
packaging that is cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen (LN2)
“dry vapor” technology. Cryoport Express ® Shippers are non-hazardous, IATA (International Air Transport Association) certified, and validated
to maintain stable temperatures of minus 150° Celsius for a 10-plus day dynamic shipment period. The Company currently features two
Cryoport Express ® Shipper models, the Standard Dry Shipper (holding up to approximately 75-2.0 ml vials) and the High Volume Dry Shipper
(holding up to approximately 500-2.0 ml vials).
The Cryoport Express ® Solutions includes document preparation, intervention capability, and recording and retaining a fully documented
“chain-of-custody” and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy, and stability
of shipped commodities shipped. This recorded and archived information allows our customers to meet the exacting requirements necessary for
scientific work and for regulatory purposes. When a customized solution is not required, Cryoport Express ® Solutions can be used by customers
as a “turnkey” solution through direct access to the cloud-based Cryoportal TM or by contacting Cryoport Client Care for order entry tasks.
Cryoport provides 24/7/365 logistics services through its Client Care team and also provides complete training and process management services
to support each client’s specific requirements.
Amongst our solutions, we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting
Cryoport Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into inner chamber of the shipper. The customer then closes the shipper and reseals the shipping box
displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up. Cryoport arranges for the pick-up of the parcel by a shipping
service provider for delivery to the customer’s intended recipient. The recipient simply opens the box and shipper and removes the frozen
commodity. The recipient only needs to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set out for
pre-arranged carrier pick up. The Cryoport Express ® Shipper is returned to us for cleaning, quality assurance testing, recharging and reuse of the
Cryoport Express® Shipper.
In late 2012, we shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics
solutions provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution,” we also provide the following value-added solutions that were developed to address our various clients’ needs:
•
•
•
•
•
•
“ Customer Staged Solution ,” under which we supply an inventory of our Cryoport Express® Shippers to our customer, in an
uncharged state, enabling our customer (after training/certification) to charge them with liquid nitrogen and use our Cryoportal™ to
enter orders with shipping and delivery service providers for the transportation of the package. Once the order is released, our customer
services professionals monitor the shipment and the return of the shipper to us for cleaning, quality assurance testing, and reuse.
“ Customer Managed Solution ,” a limited customer implemented solution, whereby we supply our Cryoport Express® Shippers to
clients in a fully charged state, but leaving it to the client to manage the shipping, including the selection of the shipping and delivery
service provider and the return of the shipper to us. Under this Solution, the customer accepts a significant level of the risk for a
successful shipment.
“ Powered by Cryoport SM ” is made available to providers of shipping and delivery services who seek to offer a “branded” cryogenic
shipping solution as part of their service offerings. By negotiation, this solution can be private labeled as long as “ powered by Cryoport
SM ” appears prominently on the offering software interface and prominently on the packaging, which is provided by the client after
minimum volume requirements are met.
“ Integrated Solution ” is our most comprehensive and complex outsourcing solution. It usually involves our management of the entire
cryogenic logistics process for our client, including the location of our employees at the client’s site to manage the client’s cryogenic
logistics, in total.
“ Life Science Point-of-Care Repository Solution ” whereby we supply our Cryoport Express ® Shippers to ship and store
cryogenically preserved life science products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care site, with
the Cryoport Express ® Shippers serving as a temporary freezer/repository enabling the efficient distribution of temperature sensitive
allogeneic cell-based therapies without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined process including the shipment’s
return to Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for
reuse.
“ Personalized Medicine and Cell-based Immunotherapy Solution ” whereby our Cryoport Express ® Solutions serves as an enabling
technology for the safe manufacture of the rapidly expanding autologous cellular-based immunotherapy market by providing a
comprehensive logistics solution for the verified chain of custody and condition transport from, (a) the collection of the patient’s cells in
a hospital setting, to (b) a central processing facility where they are manufactured into a personalized medicine, to (c) the safe,
cryogenically preserved return of these irreplaceable cells to a point-of-care treatment facility. The Cryoport Express ® Shippers can
then serve as a temporary freezer/repository to allow the efficient distribution of this personalized medicine to patients when and where
they need it most without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation apparatus. Our
customer services professionals monitor each shipment throughout the predetermined process including the shipment’s return to
Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for reuse.
28
One of our distribution partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen
shipping logistics services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx
markets and sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx ® Deep Frozen Shipping Solution,
on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely with FedEx to further align its sales
efforts and accelerate penetration within FedEx’s life sciences customer base through improved processes, sales incentives, joint customer calls
and more frequent communication at the sales and executive level. In addition, FedEx has developed a FedEx branded version of the Cryoportal
TM software platform, which is “ powered by Cryoport, ” for use by FedEx and its customers giving them access to the full capabilities of our
logistics management platform.
In January 2013, we entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with
a non-exclusive license and right to use a customized version of our Cryoportal TM for the management of shipments made by FedEx customers.
The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx Agreement, expires on
December 31, 2015.
Pursuant to an agreement with DHL Express (USA), Inc. (“DHL”), DHL biotechnology and life science customers have direct access to
our cloud-based order entry and tracking portal to order Cryoport Express ® Shippers and receive preferred DHL shipping rates. The agreement
covers DHL shipping discounts that may be used to support our customers using our Cryoport Express ® Solutions. In connection with the
agreement, we have integrated our proprietary Cryoportal TM to DHL’s tracking and billing systems to provide DHL biotechnology and life
science customers with a seamless way (“ powered by Cryoport ”) of shipping their critical biological material worldwide.
In December 2012, we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.)
pursuant to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the Cryoportal TM , to manage shipments from the Zoetis manufacturing site in
the United States to domestic customers as well as various international distribution centers. As part of our logistics management services,
Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’ logistics, ensuring products arrive at their destinations
in specified conditions, on-time and with the optimum uses of resources. The Company manages Zoetis’ total fleet of dewar flask shippers used
for this purpose, including liquid nitrogen shippers. In July 2013, the agreement was amended to expand Cryoport’s scope to manage all logistics
of Zoetis’ key frozen poultry vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a second poultry
vaccine.
In February 2014, we entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a commercial stage biotechnology
company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using Cryoport Express ®
Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide Cryoport Express ® Solutions to other
biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s proprietary, purpose-built cold chain logistics solutions for
cell-based and advanced biologic tissue forms with Liventa’s distribution capability to orthopedic care providers. The implementation of
Cryoport’s solution will eliminate the need for expensive onsite cryogenic freezers for storage of cell-based orthopedic therapies. This will
enable Liventa to better serve physicians at the point-of-care, whether at hospitals, clinics, pharmacies, family practices, surgery centers or
orthopedic offices.
We offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells and cell lines,
diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood, vaccines, tissue, animal
husbandry, and other producers of commodities requiring reliable frozen solutions for logistics. These companies operate within heavily
regulated environments and as such, changing vendors and distribution practices typically require a number of steps; which may include the
audit of our facilities, review of our procedures, qualifying us as a vendor, and performing test shipments. This process can take up to nine
months or longer to complete prior to a potential customer adopting one or more of the Cryoport Express ® Solutions.
29
Going Concern
As reported in the Report of Independent Registered Public Accounting Firm to our March 31, 2014 and 2013 consolidated financial
statements, we have incurred recurring losses and negative cash flows from operations since inception. These factors, among others, raise
substantial doubt about our ability to continue as a going concern.
We expect to continue to incur substantial additional operating losses from costs related to the commercialization of our Cryoport Express
® Solutions and do not expect that revenues from operations will be sufficient to satisfy our funding requirements in the near term. We believe
that our cash resources at March 31, 2014, and funds currently being raised through a preferred stock offering together with the revenues
generated from our services will be sufficient to sustain our planned operations into the second quarter of fiscal year 2015; however, we must
obtain additional capital to fund operations thereafter and for the achievement of sustained profitable operations. These factors raise substantial
doubt about our ability to continue as a going concern. We are currently working on funding alternatives in order to secure sufficient operating
capital to allow us to continue to operate as a going concern.
Future capital requirements will depend upon many factors, including the success of our commercialization efforts and the level of
customer adoption of our Cryoport Express ® Solutions as well as our ability to establish additional collaborative arrangements. We cannot make
any assurances that the sales ramp will lead to achievement of sustained profitable operations or that any additional financing will be completed
on a timely basis on acceptable terms or at all. Management’s inability to successfully achieve significant revenue increases or its cost reduction
strategies or to complete any other financing will adversely impact our ability to continue as a going concern. To address this issue, the Company
is seeking additional capitalization to properly fund our efforts to become a self-sustaining financially viable entity.
While we increased revenue year-over-year by 142% to $2.7 million for the fiscal year ended March 31, 2014, our revenue is still
significantly lower than our operating expenses during the year and we have no assurance of the level of future revenues. We incurred a net loss
of $19.6 million and used cash of $4.4 million in our operating activities during the year ended March 31, 2014. We had negative working
capital of $2.9 million, and had cash and cash equivalents of $369,600 at March 31, 2014.
We are currently funding our operations through a preferred stock offering (see Note 15 in the accompanying consolidated financial
statements) and plan to raise additional funds through additional debt or equity offerings to cover general working capital needs and sales and
marketing initiatives to expand our customer base and increase sales. There is no assurance that funds can be secured or if these funds would
allow us to continue our operations until more significant revenues can be generated or more funding can be secured. These matters raise
substantial doubt about our ability to continue as a going concern.
Liquidity and Capital Resources
As of March 31, 2014, the Company had cash and cash equivalents of $369,600 and negative working capital of $2.9 million. As of
March 31, 2013, the Company had cash and cash equivalents of $563,100 and negative working capital of $1.5 million. Historically, we have
financed our operations primarily through sales of our debt and equity securities. From March 2005 through March 2014, we have received net
proceeds of approximately $37.6 million from sales of our common stock and the issuance of promissory notes, warrants and debt.
Net Cash Used In Operating Activities
For the year ended March 31, 2014, we used $4.4 million of cash for operations primarily as a result of the net loss of $19.6 million offset
by non-cash expenses of $15.4 million primarily comprised of debt conversion expense of $13.7 million, amortization of debt discount and
deferred financing costs of $678,900, stock compensation expense of $678,100, depreciation and amortization of $311,600 which was partially
offset by a change in fair value of derivative instruments of $20,800. Net operating losses decreased primarily as a result of increase in net
revenues. Also contributing to the cash impact of our net operating loss (excluding non-cash items) was an increase in accounts receivable of
$323,600.
Net Cash Used In Investing Activities
Net cash used in investing activities totaled $138,900 during the year ended March 31, 2014 and was attributable to the purchase of
property and equipment, primarily the increase in Cryoport Express ® High Volume Shipper to meet expected customer demand.
30
Net Cash Provided By Financing Activities
Net cash provided by financing activities totaled $4.3 million during the year ended March 31, 2014, which resulted from proceeds from
the issuance of convertible debt of $4.6 million and proceeds from the exercise of stock options and warrants of $326,900, partially offset by the
payment of financing costs of $463,200 and the repayment of related party notes payable of $96,000.
As discussed in Note 1 of the accompanying consolidated financial statements, there exists substantial doubt regarding the Company’s
ability to continue as a going concern. The Company issued unsecured convertible promissory notes in principal amount of $1.8 million in the
third and fourth quarters of fiscal 2014. In addition, the Company is currently raising funds through a preferred stock offering as further
described in Note 15 in the accompanying consolidated financial statements. The funds raised are being used for working capital purposes and to
continue our sales efforts to advance the Company’s commercialization of the Cryoport Express ® Solutions. However, the Company’s
management recognizes that the Company will need to obtain additional capital to fund its operations until sustained profitable operations are
achieved. Management is currently working on such funding alternatives in order to secure sufficient operating capital through the end of fiscal
year 2015. In addition, management will continue to review its operations for further cost reductions to extend the time that the Company can
operate with its current cash on hand and additional bridge financing and to utilize third parties for services such as its international recycling
and refurbishment centers to provide for greater flexibility in aligning operational expenses with the changes in sales volumes.
Results of Operations
Results of Operations for Fiscal 2014 Compared to Fiscal 2013
The following table summarizes certain information derived from our consolidated statements of operations:
Year Ended March 31,
2014
2013
$ Change % Change
($ in 000’s)
Revenues
Cost of revenues
$
2,660 $
(2,223 )
1,101 $
(1,588 )
1,559
(635 )
Gross margin (loss)
Selling, general and administrative
Research and development
Debt conversion expense
Interest expense
Change in fair value of derivative liabilities
Other expense
Provision for income taxes
437
(5,106 )
(409 )
(13,714 )
(784 )
21
(8 )
(2 )
(487 )
(5,412 )
(425 )
—
(72 )
16
—
(2 )
924
306
16
(13,714 )
(712 )
5
(8 )
—
141.7 %
40.0 %
189.7 %
(5.6 )%
(3.8 )%
100 %
976.6 %
26.5 %
100 %
—
Net loss
$
(19,565 ) $
(6,382 ) $
(13,183 )
206.6 %
Revenues . We generated revenues from customers in all of our target life sciences markets, such as biotech and diagnostic companies,
pharmaceutical companies, central laboratories, contract research organizations, the reproductive medicine market/in vitro fertilization market,
and research institutions. Net revenues were $2.7 million for the year ended March 31, 2014, as compared to $1.1 million for the year ended
March 31, 2013. This $1.6 million or 142% increase is primarily driven by the ramp up and expansion of logistics services provided to Zoetis, an
increase in revenues in the reproductive medicine/in vitro fertilization market and an overall increase in both, the number of customers utilizing
our services and frequency of shipments compared to the prior year. Our revenues from Zoetis increased to $820,600 for the year ended March
31, 2014 from $62,300 during the prior year. This reflects the successful implementation and expansion of our integrated model with Zoetis,
which commenced in February of 2013, whereby we manage the cryogenic shipments of a certain vaccine, both domestically and globally, and
in October of 2013 expanded our services to include the logistics management for a second vaccine. The increase in revenues in the reproductive
medicine/in vitro fertilization market was particularly strong, with revenues increasing from $238,000 to $614,000, an increase of $376,000 or
158%. This is partially the result of targeted telemarketing activities and email marketing campaigns to broaden the awareness of our solution in
this space.
Gross margin and cost of revenues . Gross margins for the year ended March 31, 2014 was 16.4% of revenues, as compared to a gross
loss of 44.3% of revenues for the prior year. The increase in gross margin is primarily due to the increase in net revenue combined with a
reduction in freight as a percentage of revenues and a decrease of fixed manufacturing costs. Cost of revenues for the year ended March 31, 2014
was 83.6% of revenues, as compared to 144.3% of revenues for the prior year. Our cost of revenues are primarily comprised of freight charges,
payroll and related expenses related to our operations center in California, third-party charges for our European and Asian operations centers in
Holland and Singapore, depreciation expenses of our Cryoport Express® Shippers and supplies and consumables used for our solutions. The
increase in cost of revenues is primarily due to freight charges from the growth in shipments.
31
Selling, general and administrative expenses . Selling, general and administrative expenses decreased $306,000, or 5.6% for the year
ended March 31, 2014 as compared to the prior year. This decrease is primarily related to a severance payment of approximately $180,000 paid
to the former Chief Executive Officer in April 2012 and a decrease in board of director stock-based compensation. Partially offsetting these
decreases is an increase in compensation related to replacement of the Chief Executive Officer and an increase in expenses related to sales and
marketing activities compared to previous year.
Research and development expenses . Research and development expenses decreased $16,000 or 3.8% for the year ended March 31,
2014, as compared to the prior year. Our research and development efforts are focused on continually improving the features of the Cryoport
Express ® Solutions including the Company’s cloud-based logistics management platform, the Cryoportal TM , the Cryoport Express ® Shippers
and development of additional accessories to facilitate the efficient shipment of life science commodities using our solution. We use an outside
software development company and other third parties to provide some of these services. Research and development expenses to date have
consisted primarily of costs associated with the continually improving the features of the Cryoport Express ® Solution 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 ® Solution. 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.
Debt conversion expense. Debt conversion expense for the year ended March 31, 2014 of $13.7 million was related to the induced
conversion of $4,127,200 of aggregate principal and accrued interest from the convertible bridge notes into shares of common stock and
warrants. Debt conversion expense represents the fair value of the securities transferred in excess of the fair value of the securities issuable upon
the original conversion terms of the bridge notes. The Company calculated the fair value of the common stock issued by using the closing price
of the stock on the date of issuance. The fair value of the warrants was calculated using the Black-Scholes option pricing model.
Interest expense . Interest expense increased $712,000 for the year ended March 31, 2014, as compared to the prior year. Interest expense
for the year ended March 31, 2014 included amortization of the debt discount and deferred financing fees of approximately $678,900, interest
expense on our bridge notes of approximately $71,600 and accrued interest on our related party notes payable of approximately $36,500. Interest
expense for the year ended March 31, 2013 included amortization of the debt discount of approximately $17,500, interest expense on our
convertible debentures of approximately $9,900 and accrued interest on our related party notes payable of approximately $42,200.
Change in fair value of derivative liabilities . The gain for the year ended March 31, 2014 was the result of a decrease in the value of our
warrant derivatives, due primarily to a decrease in our stock price.
Other expense, net . The other expense, net for the year ended March 31, 2014 is primarily due to administrative charges and foreign
exchange losses on accounts receivable and payable invoices.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.
Contractual Obligations
The following table summarizes our contractual obligations as of March 31, 2014, and the effects such obligations are expected to have on
liquidity and cash flow in future periods ($ in ‘000’s):
Total
Less than
1 Year
1-3 Years
4-5 Years
After
5 Years
Contractual obligations
Operating lease obligations (1)
Bridge notes (2)
Other long-term obligations (3)
$
220 $
193 $
1,807
1,358
1,807
1,358
27 $
—
—
Total
$
3,385 $
3,358 $
27 $
— $
—
—
—
$
—
—
—
—
32
(1) The operating lease obligations are primarily related to the facility lease for our principal executive office in Lake Forest, California
expiring June 30, 2015; and for our San Diego, California facility expiring December 31, 2014.
(2) Bridge notes represent unsecured convertible promissory notes and accrued interest at 5% per annum which were issued in the third and
fourth quarter of 2014 to certain accredited investors pursuant to the terms of subscription agreements and letters of investment intent. All
principal and accrued interest is due June 30, 2014.
(3) Other long-term obligations represent outstanding unsecured indebtedness and accrued interest owed to four related parties which bear
interest at the rate of 6% per annum. Any unpaid principal and accrued interest is due at maturity on various dates through March 1, 2015.
Impact of Inflation
From time to time, Cryoport experiences price increases from third party manufacturers and these increases cannot always be passed on to
Cryoport’s customers. While these price increases have not had a material impact on Cryoport’s historical operations or profitability in the past,
they could affect revenues in the future.
Critical Accounting Policies and Estimates
Our discussion and analysis of our consolidated financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP. The preparation of
these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities reported in our consolidated financial statements. The
estimation process requires assumptions to be made about future events and conditions, and is consequently inherently subjective and uncertain.
Actual results could differ materially from our estimates.
The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial
condition and results of operations and most demanding of our judgment. We consider the following policies to be critical to an understanding of
our consolidated financial statements and the uncertainties associated with the complex judgments made by us that could impact our results of
operations, financial position and cash flows. See Note 2: “ Summary of Significant Accounting Policies ” of our accompanying consolidated
financial statements for a description of our critical accounting policies and estimates.
New Accounting Pronouncements
See Note 2: “ Recent Accounting Pronouncements ” of our accompanying consolidated financial statements for a description of recent
accounting pronouncements that may have a significant impact on our financial reporting and our expectations of their impact on our results of
operations and financial condition.
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.
Based on our overall cash and cash equivalents interest rate exposure at March 31, 2014, 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.
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
Our annual consolidated financial statements are included in Item 15 of this report.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
33
(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, 2014. Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective
as of March 31, 2014 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
During the quarter ended March 31, 2014, there were no changes in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
34
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
accounting principles generally accepted in the United States of America.
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 accounting principles generally accepted in the United States of America, 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, 2014.
By:
By:
/s/ JERRELL W. SHELTON
Jerrell W. Shelton,
Chief Executive Officer and Director
/s/ ROBERT STEFANOVICH
Robert Stefanovich,
Chief Financial Officer
June 25, 2014
35
Item 10.
PART III
Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated by reference from our definitive proxy statement related to our 2014 Annual
Meeting of Stockholders, or the Proxy Statement, to be filed pursuant to Regulation 14A, on or before July 31, 2014.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
Item 11.
Executive Compensation
Executive Officers of the Company
The Company’s current executive officers are as follows:
Jerrell W. Shelton, age 68, became President and Chief Executive Officer of the Company on November 5, 2012. He served on the
Board of Directors and standing committees of Solera Holdings, Inc. from April 2007 through November 2011. From June 2004 to May
2006, Mr. Shelton was the Chairman and CEO of Wellness, Inc., a provider of advanced, integrated hospital and clinical environments. Prior
to that, he served as CEO of IBM’s WebFountain. From October 1998 to October 1999, Mr. Shelton was Chairman, President and CEO of
NDC Holdings II, Inc. Between October 1996 and July 1998, he was President and CEO of Continental Graphics Holdings, Inc. and from
October 1991 to July 1996, Mr. Shelton served as President and CEO of Thomson Business Information Group. Mr. Shelton has a B.S. in
Business Administration from the University of Tennessee and an M.B.A. from Harvard University. Mr. Shelton currently serves on the
Advisory Board of Directors and the Nominating and Stewardship committee of the Smithsonian Institution Libraries.
Robert S. Stefanovich, age 49, became Chief Financial Officer, Treasurer and Corporate Secretary for the Company on June 27, 2011
following the Company’s filing of its Form 10–K for the fiscal year ended March 31, 2011. From June 15, 2012 to November 4, 2012, Mr.
Stefanovich served as the Principal Executive Officer of the Company. From November 2007 through March 2011, Mr. Stefanovich served
as Chief Financial Officer of Novalar Pharmaceuticals, Inc., a venture-backed specialty pharmaceutical company. Prior to that, he held
several senior positions, including interim Chief Financial Officer of Xcorporeal, Inc., a publicly traded medical device company, Executive
Vice President and Chief Financial Officer of Artemis International Solutions Corporation, a publicly traded software company, Chief
Financial Officer and Secretary of Aethlon Medical Inc., a publicly traded medical device company and Vice President of Administration at
SAIC, a Fortune 500 company. Mr. Stefanovich also served as a member of the Software Advisory Group and an Audit Manager with Price
Waterhouse LLP’s (now PricewaterhouseCoopers) hi-tech practice in San Jose, CA and Frankfurt, Germany. He currently also serves as a
board member of Project InVision International, a provider of business performance improvement solutions. He received his Masters of
Business Administration and Engineering from University of Darmstadt, Germany.
The following table contains information with respect to the compensation for the fiscal years ended March 31, 2014 and 2013 of our
chief executive officer, chief financial officer and former chief executive officer. We refer to the executive officers identified in this table as
our “Named Executive Officers.”
SUMMARY COMPENSATION TABLE
Name and Principal Position
Jerrell W. Shelton
President and Chief Executive Officer
Robert S. Stefanovich
Chief Financial Officer
Larry G. Stambaugh
Former President, Chief Executive
Officer and Chairman
Bonus
($)
Fiscal
Year
2014
2013
2014
2013
2014
2013
Salary (1)
($)
300,000 (4)
122,885 (9)
225,000 (4)
225,000 (4)
—
6,923 (2)
36
Option
Awards (5)
($)
930,358 (3)
295,380 (7)
201,028 (6)
40,652 (6)
—
—
—
—
—
—
—
—
All Other
Compensation
Total
Compensation
($)
—
4,409 (8)
—
—
—
241,115 (10)
($)
1,230,358
422,674
426,028
265,652
—
248,038
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
This column represents salary as of the last payroll period prior to or immediately after March 31 of each fiscal year.
On August 21, 2009, the Compensation Committee approved an employment agreement with Mr. Stambaugh which had an effective
commencement date of August 1, 2009, the details of which are described below. $57,794 and $360,000 were paid to Mr. Stambaugh in
fiscal 2013 and 2012, respectively, per the terms of the employment agreement. Mr. Stambaugh resigned as President, Chief Executive
Officer and Chairman on April 5, 2012.
This amount represents the fair value of all options granted to Mr. Shelton as compensation for services as a director and officer of the
Company during fiscal 2014. Based on the recommendation of the Compensation Committee and approval by the Board, on June 28,
2013, Mr. Shelton was granted an option to purchase 3,902,507 shares of common stock in connection with his engagement as Chief
Executive Officer of the Company.
This amount represents the annual base salary paid.
This column represents the total grant date fair value of all stock options granted in fiscal 2014 and the Company’s fiscal year ended
March 31, 2013. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting
conditions. For information on the valuation assumptions with respect to the grants made in fiscal 2014 and 2013, refer to Note 2 “
Summary of Significant Accounting Policies ” in the accompanying consolidated financial statements.
This amount represents the fair value of all options granted to Mr. Stefanovich as compensation for services during fiscal 2014 and 2013.
Based on the recommendation of the Compensation Committee and approval by the Board, on June 28, 2013 and August 3, 2012 Mr.
Stefanovich was granted an option to purchase 839,016 and 100,000 shares of common stock, respectively. The exercise price of the
options are equal to the fair value of the Company’s stock as of the grant date.
This amount represents the fair value of all options granted to Mr. Shelton as compensation for services as a director and officer of the
Company during fiscal 2013. Based on the recommendation of the Board, on October 22, 2012, Mr. Shelton was granted an option to
purchase 100,000 shares of the Company’s common stock upon joining the Board. Based on the recommendation of the Compensation
Committee and approval by the Board, on November 5, 2012, Mr. Shelton was granted an option to purchase 1,650,000 shares of
common stock in connection with his engagement as Chief Executive Officer of the Company
This amount represents board fees paid to Mr. Shelton as compensation for services as a director of the Company during fiscal 2013 prior
to becoming Chief Executive Officer of the Company.
Reflects a pro-rated salary for Mr. Shelton who began employment with the Company on November 5, 2012.
(9)
(10) Amount represents $180,000 severance payment, $50,871 personal time off payout and $10,244 COBRA reimbursements to Mr.
Stambaugh per the terms of his separation agreement.
Narrative Disclosure to Summary Compensation Table
Employment Contracts
Jerrell W. Shelton
On November 5, 2012, the Company entered into an employment agreement (the “Initial Agreement”) with Mr. Shelton with respect to
his employment as President and Chief Executive Officer. The Initial Agreement provided a term of six months. The Initial Agreement
provided an initial annual base salary of $300,000 during the Term.
In addition, on the date of the Initial Agreement, Mr. Shelton was awarded two options giving him the right to acquire an aggregate of
1,650,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the date
of the Agreement, or $0.20 per share. The aggregate number of shares was determined by dividing $350,000 by the closing price of the
Company’s common stock on the date of the Agreement, or $0.20 per share, and subtracting 100,000 shares, which is the number of shares of
common stock that Mr. Shelton was given the right to purchase pursuant to the option that was issued to him in connection with his
appointment to the Board of Directors on October 22, 2012. The first option issued in connection with the Agreement was issued under the
Company’s 2011 Stock Incentive Plan and provides Mr. Shelton the right to purchase 650,000 shares of the common stock of the Company,
which is the maximum that may be awarded to Mr. Shelton in this fiscal year under such plan. Mr. Shelton subsequently exercised 650,000 of
these shares in May and November 2013. The second option provided Mr. Shelton the right to purchase 1,000,000 shares of common stock of
the Company and was granted outside of the Company’s incentive plans. The options vest in six equal monthly installments during the Term
and expire at the earlier of (a) ten years from the date of the Agreement, and (b) five (5) years from the date of the resignation and/or removal
of the Mr. Shelton as a member of the Board of Directors of the Company.
On June 28, 2013, after the expiration of the Initial Agreement, the Company entered into a new employment agreement (the
“Agreement”) with Mr. Shelton with respect to his employment as President and Chief Executive Officer. The Agreement is effective
through May 14, 2017 (the “Term”).
The Agreement provides an initial annual base salary of $300,000 during the Term. In addition, on the date of the Agreement, Mr.
Shelton was awarded options giving him the right to acquire an aggregate of 3,902,507 shares of the Company’s common stock at an exercise
price equal to the closing price of the Company’s common stock on the date of the Agreement, or $0.27 per share, and such options were
granted outside of the Company’s incentive plans. The option vests immediately with respect to 162,604 shares and the remaining right to
purchase the remaining shares vests in equal monthly installments on the fifth day of each month for forty six months beginning on July 5,
2013 and ending on May 5, 2017. Provided that such vesting will be accelerated on the date that the Company files a Form 10-Q or Form 10-
K indicating an income from operations for the Company in two consecutive fiscal quarters and immediately in the event of a change of
control of the Company.
37
The options expire at the earlier of (a) ten years from the date of the Agreement, and (b) twenty four (24) months from the date of the
resignation and/or removal of the Mr. Shelton as Chief Executive Officer of the Company.
Mr. Shelton has agreed during the Term and for a period of one year following the termination of the Agreement, not to solicit, induce,
entice or attempt to solicit, induce, or entice any employee of the Company to leave employment with the Company. Payments due to
Mr. Shelton upon a termination of his employment agreement are described below.
Robert S. Stefanovich
Although the Company does not have a written employment agreement with Mr. Stefanovich, pursuant to the terms of his offer letter,
the Company has agreed to pay Mr. Stefanovich an annual base salary of $225,000 per year. In addition, he is eligible for an incentive bonus
targeted at 25% of his annual base salary. Mr. Stefanovich is eligible to participate in all employee benefits plans or arrangements which may
be offered by the Company during the term of his agreement. The Company shall pay the cost of Mr. Stefanovich’s health insurance coverage
in accordance with the Company’s plans and policies while he is an employee of the Company. Mr. Stefanovich is also eligible for fifteen
(15) paid time off days a year, and is entitled to receive fringe benefits ordinarily and customarily provided by the Company to its senior
officers. Payments due to Mr. Stefanovich upon a termination of his employment agreement with the Company are described below.
Larry G. Stambaugh (former President and Chief Executive Officer)
On August 21, 2009, the Compensation Committee approved an employment agreement with Mr. Stambaugh, the Company’s former
Chief Executive Officer, President and Chairman, which commenced effective as of August 1, 2009 and continued in effect until April 5,
2012 (the “Stambaugh Employment Agreement”), the date of Mr. Stambaugh’s resignation. Pursuant to the terms of the Stambaugh
Employment Agreement, Mr. Stambaugh was paid an annual base salary of $360,000. In connection with Mr. Stambaugh’s resignation as
Chief Executive Officer and Chairman of the Board, the Company paid Mr. Stambaugh a lump sum severance payment of $180,000 and
extended the exercise period of two stock options granted to Mr. Stambaugh on September 10, 2010, with exercise prices of $0.66 per share
until April 5, 2017 with respect to those underlying shares of common stock vested as of April 5, 2012, which amount to 362,232 and
210,000 shares of the Company’s common stock, respectively.
The Company has no other employment agreements with executive officers of the Company as of March 31, 2014.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2014
The following table shows information regarding unexercised stock options held by our Named Executive Officers as of fiscal year ended
March 31, 2014:
Equity
Incentive
Plan Awards
Name
Jerrell W. Shelton
Robert Stefanovich
Larry Stambaugh
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
100,000 (1)
1,000,000 (2)
894,324 (3)
78,125 (4)
—(5)
22,500 (6)
157,316 (7)
362,232 (8)
210,000 (9)
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
—
—
—
—
—
—
—
—
—
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
—
—
$
$
3,008,183 (3) $
46,875 (4) $
40,000 (5) $
37,500 (6) $
681,700 (7) $
—
$
—(9) $
0.19
0.20
0.27
0.86
0.43
0.43
0.27
0.66
0.66
Option
Expiration
Date
10/21/22
11/4/22
6/27/23
6/19/21
8/2/22
8/2/22
6/27/23
4/5/17 (10)
4/5/17 (10)
38
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Shelton was granted an option to
purchase 100,000 shares of common stock exercisable at $0.19 per share on October 22, 2012 upon joining the board of directors.
Options vests in twelve equal monthly installments. The exercise price for shares of common stock pursuant to the options is equal to the
fair value of the Company’s stock as of the grant date.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Shelton was granted an option to
purchase 1,650,000 shares of common stock exercisable at $0.20 per share on November 5, 2012, which vests in six equal monthly
installments. 650,000 of these options were issued under the 2011 stock option plan and exercised in May and November 2013 and
1,000,000 were issued outside of a plan. The exercise price for shares of common stock pursuant to the option is equal to the fair value of
the Company’s stock as of the grant date.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Shelton was granted an option to
purchase 3,902,507 shares of common stock exercisable at $0.27 per share on June 28, 2013. The option vests 2/48 th immediately with
the remainder vesting 1/48 th per month for 46 months. The exercise price for the shares of common stock pursuant to the option is equal
to the fair value of the Company’s stock on the date of grant.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option to
purchase 125,000 shares of common stock exercisable at $0.86 per share on June 20, 2011. The option vests in six month installments
over a four year period. The exercise price for the shares of common stock pursuant to the option is equal to the fair value of the
Company’s stock on the date of grant.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option to
purchase 40,000 shares of common stock exercisable at $0.43 per share on August 3, 2012. The option vests based on certain
performance criteria. The exercise price for the shares of common stock pursuant to the option is equal to the fair value of the Company’s
stock on the date of grant
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option to
purchase 60,000 shares of common stock exercisable at $0.43 per share on August 3, 2012. The option vests in six month installments
over a four year period. The exercise price for the shares of common stock pursuant to the option is equal to the fair value of the
Company’s stock on the date of grant
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option to
purchase 839,016 shares of common stock exercisable at $0.27 per share on June 28, 2013. The options vest in equal monthly
installments over four years. The exercise price for the shares of common stock pursuant to the option is equal to the fair value of the
Company’s stock on the date of grant.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stambaugh was granted an option to
purchase 362,232 shares of common stock exercisable at $0.66 per share on September 15, 2010, in lieu of payment of his fiscal year
2010 cash bonus of $216,000. The option was fully vested at date of grant. The exercise price for shares of common stock pursuant to the
option is equal to the fair value of the Company’s stock as of the grant date.
Based on the recommendation of the Compensation Committee and approval by the Board, Mr. Stambaugh was granted an option to
purchase 420,000 shares of common stock exercisable at $0.66 per share on September 15, 2010. The right to exercise the stock option
vested as to 25% of the underlying shares of common stock upon grant, with the remaining underlying shares vesting in equal
installments on the first, second and third anniversary of the grant date. The exercise price for shares of common stock pursuant to the
option is equal to the fair value of the Company’s stock as of the grant date.
In connection with Mr. Stambaugh’s resignation as Chief Executive Officer and Chairman of the Board, which was effective on April 5,
2012, the Company extended the exercise period of two stock options granted to Mr. Stambaugh on September 10, 2010, with exercise
prices of $0.66 per share until April 5, 2017 with respect to those underlying shares of common stock vested as of April 5, 2012, which
amount to 362,232 and 210,000 shares of the Company’s common stock, respectively.
Potential Payments On Termination Or Change In Control
Pursuant to Mr. Shelton’s employment agreement, if Mr. Shelton terminates the Agreement, dies, or is terminated for “Cause” (as
defined in the agreement), he will be entitled to all compensation and benefits that he earned through the date of termination. If he is
terminated for Cause, the Company may, to the extent allowed by law set off losses, fines or damages that he has caused as a result of his
misconduct. If he is terminated “without cause” (as defined in the agreement), he will be entitled to a continuation of his base salary for three
months following termination and one half of unvested options as of date of termination shall become fully vested. In the event the Company
terminates his employment, except if for “Cause” (as defined in the agreement), within twelve (12) months after a Change in Control (as
defined in the Cryoport, Inc. 2011 Stock Incentive Plan), then, Mr. Shelton will be entitled to: (i) the continuation of his base salary for
twelve (12) months following the date of termination, which shall be paid in accordance with the Company’s ordinary payroll practices in
effect from time to time, and which shall begin on the first payroll period immediately following the date on which the general release and
waiver becomes irrevocable; and (ii) all options previously granted to Mr. Shelton will become fully vested and exercisable as of the date of
termination.
39
Pursuant to Mr. Stefanovich’s employment offer, in the event that Mr. Stefanovich’s employment with the Company is terminated as a
result of a “change of control,” as is defined in the Company’s 2009 Stock Incentive Plan, he will be entitled to receive a severance payment
equal to twelve months of his base salary, continuation of health benefits for a period of twelve months, and the unvested portion of his stock
option grants immediately shall vest in full. Separately, in the event his employment is terminated by the Company for reasons other than
cause, Mr. Stefanovich will be entitled to receive a severance payment equal to six months of his base salary plus continuation of health
benefits for a period of six months.
In connection with Mr. Stambaugh’s resignation as Chief Executive Officer and Chairman of the Board, which was effective on April
5, 2012, the Company paid Mr. Stambaugh a lump sum severance payment of $180,000 and extended the exercise period of two stock
options granted to Mr. Stambaugh on September 10, 2010, with exercise prices of $0.66 per share until April 5, 2017 with respect to those
underlying shares of common stock vested as of April 5, 2012, which amount to 362,232 and 210,000 shares of the Company’s common
stock, respectively.
The 2002 Plan, 2009 Plan and 2011 Plan each provide that in the event of a “change of control,” the applicable option agreement may
provide that such options or shares will become fully vested and may be immediately exercised by the person who holds the option, at the
discretion of the board.
The Company does not provide any additional payments to named executive officers upon their resignation, termination, retirement, or
upon a change of control.
Change in Control Agreements
There are no understandings, arrangements or agreements known by management at this time which would result in a change in control
of the Company or any subsidiary.
DIRECTOR COMPENSATION
Compensation for the Board is governed by the Company’s Compensation Committee. Effective August 21, 2009 through May 2, 2012
the fees payable to non-employee directors were set at a flat fee of $15,000 per quarter with no additional fees payable for committee
membership or serving as chairman of a committee. Effective May 3, 2012, the cash compensation that each non-employee director is paid is
$40,000 annually, except for the non-employee Chairman of the Board who is paid $56,000 annually. In addition, each non-employee
director who serves as Chairman of one or more Board Committees will be paid additional cash compensation of $8,000 annually for all
Committee Chairmanships.
Effective May 3, 2012, each non-employee director is awarded a stock option to purchase 50,000 shares of the Company’s common
stock on the date of the Company’s annual meeting of stockholders, except for the non-employee Chairman of the Board who is awarded a
stock option to purchase 80,000 shares of the Company’s common stock. In addition, each new non-employee director will be granted a stock
option to purchase 100,000 shares of the Company’s common stock upon joining the Board.
On May 3, 2012, Mr. Michelin was granted options to purchase a total of 60,000 shares of the Company’s common stock with an
exercise price of $0.44 per share which vested on September 22, 2012 for his service as a director, Chairman of the Audit Committee, and as
a member of the Compensation Committee and the Nomination and Governance Committee during fiscal 2012 and fiscal 2013 and Lead
Independent Director during fiscal 2012. The options to purchase a total of 35,000 shares were issued in connection with the services he
provided during fiscal 2012.
On May 3, 2012, Mr. Wasserman was granted options to purchase a total of 138,356 shares of the Company’s common stock with an
exercise price of $0.44 per share which vested on March 29, 2013 for his service as a director, Chairman of the Board and member of the
Compensation Committee, Audit Committee and Governance and Nominating Committee during fiscal 2012 and fiscal 2013.
40
On May 3, 2012, Ms. Muller was granted options to purchase a total of 166,438 shares of the Company’s common stock with an
exercise price of $0.44 per share of which 116,438 shares immediately vested and the remaining 50,000 shares vested on September 22, 2012
for her service as a director, Chairman of the Compensation Committee and Nomination and Governance Committee, and a member of the
Audit Committee during fiscal 2012 and fiscal 2013. The options to purchase a total of 127,771 shares were issued in connection with the
services she provided during fiscal 2012.
On July 12, 2012, Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 100,000 shares of the
Company’s common stock with an exercise price of $0.36 per share which were fully vested upon issuance for their service as the Office of
the Chief Executive for the months of April, May, and June 2012.
Annual awards were granted at the shareholders meeting on September 13, 2012. Mr. Michelin, Ms. Muller and Mr. Wasserman were
each granted an option to purchase 50,000, 50,000 and 80,000 shares, respectively, of the Company’s common stock with an exercise price of
$0.30 per share
On October 9, 2012, Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 125,000 shares of the
Company’s common stock with an exercise price of $0.17 per share which were fully vested upon issuance for their service as the Office of
the Chief Executive for the months of July, August and September 2012.
On December 12, 2012, Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 50,000, 100,000 and
100,000 shares, respectively, of the Company’s common stock with an exercise price of $0.18 per share which were fully vested upon
issuance for their service as the Office of the Chief Executive for the month of October and part of November 2012.
Annual awards were granted at the shareholders meeting on September 6, 2013. Mr. Rathmann and Mr. Wasserman were each granted
an option to purchase 80,000 and 50,000 shares, respectively, of the Company’s common stock with an exercise price of $0.38 per share.
On September 13, 2013, Mr. Zecchini was granted an option to purchase 100,000 shares of the Company’s common stock with an
exercise price of $0.40 per share when he joined the board.
The following table sets forth the director compensation of the non-employee directors of the Company during fiscal 2014.
Name
Adam M. Michelin
Karen Muller
Richard Rathmann
Stephen Wasserman
Edward Zecchini
Fees Earned
Or Paid in
Cash
($)(1)
$
24,000 $
24,000
56,445
52,108
26,400
Stock
Awards
($)
Option
Awards
($)(2)
All Other
Compensation
($)
— $
—
—
—
—
—
—
26,300
16,438
34,632
— $
—
—
—
—
Total
($)
24,000
24,000
82,745
68,546
61,032
(1) Fees earned or paid in cash as shown in this schedule represent payments and accruals for directors’ services earned during fiscal 2014.
(2) This column represents the total grant date fair value of all stock options granted in fiscal 2014. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based vesting conditions. For information on the valuation assumptions with
respect to the grants made in fiscal 2014, refer to Note 2 “ Summary of Significant Accounting Policies” in the accompanying consolidated
financial statements.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board has furnished the following report on the Company’s audit procedures and its relationship with its
independent registered public accounting firm for fiscal 2014.
The Audit Committee has reviewed and discussed with the Company’s management the audited consolidated financial statements. The Audit
Committee has also discussed with KMJ Corbin & Company LLP the matters required to be discussed by Auditing Standards No. 61, as
amended (AICPA Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule
3200T which includes, among other items, matters related to the conduct of the audit of the Company’s consolidated financial statements.
41
The Company’s independent registered public accounting firm, KMJ Corbin & Company LLP, also provided to the Audit Committee the
written disclosures and the letter required by the Public Company Accounting Oversight Board (PCAOB) Ethics and Independence Rules and
Standards as adopted by the PCAOB, and the Audit Committee discussed with the independent registered public accounting firm that firm’s
independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated
financial statements be included in the Company’s Annual Report Form 10-K for fiscal 2014 filed with the SEC.
Audit Committee
Stephen E. Wasserman (Chairman)
Richard Rathmann
Edward Zecchini
Pursuant to Instruction 1 to Item 407(d) of Regulation S-K, the information set forth under “Audit Committee Report” shall not be deemed to
be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 407 of Regulation S-K,
or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information be treated as
soliciting material or specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act. Such
information will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we
specifically incorporate it by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information with respect to the beneficial ownership of the Company’s common stock as of June 13, 2014, by
each person or group of affiliated persons known to the Company to beneficially own 5% or more of its common stock, each director, each
named executive officer, and all of its directors and named executive officers as a group. As of June 13, 2014, there were 59,987,846 shares of
common stock outstanding. Unless otherwise indicated, the address of each beneficial owner listed below is c/o Cryoport, Inc., 20382 Barents
Sea Circle, Lake Forest, CA 92630.
The following table gives effect to the shares of common stock issuable within 60 days of June 13, 2014, upon the exercise of all options and
other rights beneficially owned by the indicated stockholders on that date. Unless otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially owned.
Beneficial Owner
Executive Officers and Directors:
Jerrell W. Shelton
Robert S. Stefanovich
Adam M. Michelin
Karen M. Muller
Richard Rathmann
Stephen E. Wasserman
Edward Zecchini
Ramkumar Mandalam Ph.D.
All directors and named executive officers as a group (8 persons)
Other Stockholders:
Cranshire Capital Master Fund(3)
Total for all Directors, Executive Officers and Other Stockholders
42
Number of Shares
of Preferred Stock
Beneficially Owned
Number of Shares
of Common Stock
Beneficially Owned (2)
Percentage of Shares
of Common Stock
Beneficially Owned
11,314
9,376 (4)
3,130,045 (1)
350,984 (1)
536,891 (1)
541,438 (1)
4,090,018 (1)
589,189 (1)
83,333 (1)
8,333 (1)
9,330,231 (1)
3,449,625 (1)
12,779,856
5.0 %
*
*
*
6.6 %
1.0 %
*
*
14.0 %
5.4 %
18.2 %
* Represents less than 1%
(1) Includes shares which individuals shown above have the right to acquire as of June 13, 2014, or within 60 days thereafter, pursuant to
outstanding stock options and/or warrants as follows: Mr. Shelton—2,470,045 shares; Mr. Stefanovich—350,984 shares; Mr. Michelin—
532,755 shares; Ms. Muller—541,438 shares; Mr. Rathmann—2,166,593 of which 683,059 are individually owned by Mr. Rathmann and
1,483,534 are owned by GBR Investments,LLC of which Mr. Rathmann is the manager; Mr. Wasserman—589,189; Mr. Zecchini—83,333;
Dr. Mandalam—8,333 shares; Cranshire Capital—3,449,625 shares.
(2) The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of
1934, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership
includes any shares as to which the selling security holder has sole or shared voting power or investment power and also any shares which
the selling security holder has the right to acquire within 60 days.
(3) Cranshire Capital Master Fund, Ltd. address is 3100 Dundee Road, Suite 703, Northbrook, IL 60062.
(4) GBR Investments, LLC of which Mr. Rathmann is the manager.
Equity Compensation Plan Information
We currently maintain three equity compensation plans, referred to as the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009 Stock
Incentive Plan (the “2009 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). Our Compensation Committee is responsible for making,
reviewing and recommending grants of options and other awards under these plans which are approved by the Board.
The 2002 Plan, which was approved by our stockholders in October 2002, allows for the grant of options to purchase up to 500,000 shares
of the Company’s common stock. The 2002 Plan provides for the granting of options to purchase shares of our common stock at prices not less
than the fair market value of the stock at the date of grant and generally expire 10 years after the date of grant. The stock options are subject to
vesting requirements, generally three or four years. The 2002 Plan also provides for the granting of restricted shares of common stock subject to
vesting requirements. As of June 30, 2013, no shares are available for future issuances as the 2002 Plan has expired.
The 2009 Plan, which was approved by our stockholders at our 2009 Annual Meeting of Stockholders held on October 9, 2009, provides
for the grant of stock-based incentives. The 2009 Plan allows for the grant of up to 1,200,000 shares of our common stock for awards to our
officers, directors, employees and consultants. 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. 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 Code. As of June 13, 2014, a total of 303,768 shares
of our common stock remained available for future grants under the 2009 Plan.
The 2011 Plan, as amended, which was approved by our stockholders at our 2011 Annual Meeting of Stockholders held on September 22,
2011 and, with respect to the amendments, at our 2012 and 2013 Annual Meeting of Stockholders held on September 13, 2012 and September 6,
2013, respectively, provides for the grant of stock-based incentives. The 2011 Plan allows for the grant of up to 12,400,000 shares of our
common stock for awards to our officers, directors, employees and consultants. The 2011 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. The 2011 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 Code. Awards may
be granted under the 2011 Plan until September 21, 2021 or until all shares available for Awards under the 2011 Plan have been purchased or
acquired unless the stockholders of the Company vote to approve an extension of the 2011 Plan prior to such expiration date. As of June 13,
2014, a total of 7,248,069 shares remained available for future grants under the 2011 Plan.
In addition to the stock options issued pursuant to the Company’s three stock incentive plans, the Company has granted warrants to
employees, officers, non-employee directors and consultants. The warrants are generally not subject to vesting requirements and have ten-year
terms.
43
The following table sets forth certain information as of June 13, 2014 concerning the Company’s common stock that may be issued upon
the exercise of options or warrants or pursuant to purchases of stock under the 2002 Plan, the 2009 Plan, the 2011 Plan and other stock based
compensation:
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders(1)
(a)
Number of Securities
to be Issued Upon
the
Exercise of
Outstanding Options
and Warrants
(b)
Weighted-
Average
Exercise Price
of
Outstanding
Options and
Warrants
68,540,648 $
6,548,577 $
75,089,225
(c)
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
7,551,837
N/A
0.79
0.26
7,551,837
(1) During November 5, 2012 through June 13, 2014, a total of 6,548,577 options were granted to employees outside of an option plan. In the
past the Company has issued warrants to purchase 327,415 shares of common stock in exchange for services provided to the Company, of
which warrants to purchase 262,855 shares of common stock are outstanding. The exercise prices ranged from $2.80 to $10.80 and
generally vested upon issuance. 15 consultants and former officers and directors received warrants to purchase 327,415 shares of common
stock in this manner.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Company has established policies and other procedures regarding approval of transactions between the Company and any employee,
officer, director, and certain of their family members and other related persons, including those required to be reported under Item 404 of
Regulation S-K. These policies and procedures are generally not in writing, but are evidenced by long standing principles set forth in our Code
of Conduct or adhered to by our Board. As set forth in the Audit Committee Charter, the Audit Committee reviews and approves all related-party
transactions after reviewing such transaction for potential conflicts of interests and improprieties. Accordingly, all such related-party transactions
are submitted to the Audit Committee for ongoing review and oversight. Generally speaking, we enter into related-party transactions only on
terms that we believe are at least as favorable to our company as those that we could obtain from an unrelated third party.
The following related-party transaction were approved or ratified by at least two independent directors and future material affiliated
transactions will be approved by a majority of the independent directors who do not have an interest in the transaction and who had access, at the
issuer’s expense, to issuer’s or independent legal counsel.
On May 9, 2013, Richard Rathmann, Director, invested $100,000 in the Bridge Notes offered by the Company to certain accredited
investors. For information on terms related to the Bridge Notes, refer to Note 8 “Convertible Debentures Payable” in the Company’s Form 10-K
for the period ended March 31, 2013 filed with the SEC on June 25, 2013. In addition, on July 12, 2013, GBR Investments, LLC, invested
$100,000 in the Bridge Notes offered by the Company to certain accredited investors and also received a warrant to purchase 400,000 shares of
common stock at an exercise price of $0.25 per share, pursuant to the terms of such offering. Richard Rathmann is the Manager of GBR
investments, LLC and is considered an indirect beneficial owner of these securities.
During the year ended March 31, 2014, the Company issued to certain accredited investors various unsecured promissory notes with the
terms as described under Note 7 in the accompanying consolidated financial statements. These unsecured promissory notes included $120,000 of
the 5% Bridge Notes issued to Jerrell Shelton, the Company’s Chief Executive Officer, $100,000 of the Bridge Notes issued to Richard
Rathmann, a member of the Board of Directors of the Company, $200,000 of the Bridge Notes and $100,000 of the 5% Bridge Notes issued to
GBR Investments, LLC, of which Richard Rathmann, is the manager. Subsequent to year end, in May 2014, both note holders elected to convert
all principal and interest into a newly established Class A Convertible Preferred Stock and warrants to purchase common stock of Cryoport as
further described in Note 15 in the accompanying consolidated financial statements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a
registered class of the Company’s equity securities, to file with the SEC reports of beneficial ownership and reports of changes in beneficial
ownership in the Company’s securities. Such directors, executive officers and 10% stockholders are also required to furnish the Company with
copies of all Section 16(a) forms they file.
44
Based solely on a review of the copies of such forms received by it, the Company believes that during fiscal 2014, all Section 16(a) filings
applicable to its directors, officers, and 10% stockholders were filed on a timely basis.
Item 14. Principal Accountant Fees and Services
Independent Registered Public Accounting Firms Fees
The following table shows the fees that were billed to us for the audit and other services provided by KMJ Corbin & Company LLP
(“KMJ”) for the Company’s fiscal 2014 and fiscal 2013.
Audit Fees
Audit-Related Fees
Tax Fees
2014
2013
$
$
69,325 $
—
7,100
76,425 $
66,050
11,960
6,275
84,285
The fees billed to us by KMJ during or related to the fiscal years ended March 31, 2014 and 2013 consist of audit fees, audit-related fees
and tax fees, as follows:
Audit Fees . Represents the aggregate fees billed to us for professional services rendered for the audit of our annual consolidated financial
statements and for the reviews of our consolidated financial statements included in our Form 10-Q filings for each fiscal quarter.
Audit-Related Fees. Represents the aggregate fees billed to us for assurance and related services that are reasonably related to the
performance of the audit and review of our consolidated financial statements that are not already reported in Audit Fees. These services include
accounting consultations and attestation services that are not required by statute such as S-1 and S-8 filings.
Tax Fees. Represents the aggregate fees billed to us for professional services rendered for tax returns, compliance and tax advice.
All Other Fees. We did not incur any other fees to KMJ during the fiscal years ended March 31, 2014 and 2013.
Policy on Audit Committee Pre-Approval of Fees
The Audit Committee must pre-approve all services to be performed for us by our independent auditors. Pre-approval is granted usually
at regularly scheduled meetings of the Audit Committee. If unanticipated items arise between regularly scheduled meetings of the Audit
Committee, the Audit Committee has delegated authority to the chairman of the Audit Committee to pre-approve services, in which case the
chairman communicates such pre-approval to the full Audit Committee at its next meeting. The Audit Committee also may approve the
additional unanticipated services by either convening a special meeting or acting by unanimous written consent. During the fiscal years ended
March 31, 2014 and 2013, all services billed by KMJ were pre-approved by the Audit Committee in accordance with this policy.
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Consolidated Financial Statements:
PART IV
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2014 and 2013
Consolidated Statements of Operations for the years ended March 31, 2014 and 2013
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended March 31, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended March 31, 2014 and 2013
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
(a)(2) Financial Statement Schedules: All financial statement schedules are omitted because they are not applicable or the required
information is included in the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits.
45
Exhibit
No.
Exhibits
Description
3.1
3.2
3.3
Amended and Restated Articles of Incorporation of the Company, as amended. Incorporated by reference to Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2012.
Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-
K dated October 23, 2012.
Cryoport Systems, Inc. 2002 Stock Incentive Plan adopted by the Board of Directors on October 1, 2002. Incorporated by reference to
Exhibit 3.13 to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
3.4
Certificate of Designation. Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 2, 2014.
4.1.1
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.
4.1.2
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.
4.1.3
Amendment to Convertible Debenture dated April 30, 2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated
April 30, 2008 and referred to as Exhibit 10.1.11.
4.1.4
Annex to Amendment to Convertible Debenture dated April 30, 2008. Incorporated by reference to Cryoport’s Current Report on Form
8-K dated April 30, 2008 and referred to as Exhibit 10.1.11.1.
4.1.5
Amendment to Convertible Debenture dated August 29, 2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K
dated August 29, 2008.
4.1.6
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.
4.1.7
4.1.8
4.1.9
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.
4.1.10 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.
4.1.11 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.
4.2
4.3
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.
46
Exhibit
No.
Description
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
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.
Form of Securities Purchase Agreement. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on
February 24, 2012.
Form of Registration Rights Agreement. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on
February 24, 2012.
4.18
Form of Warrant. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on February 24, 2012.
4.19
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.
4.20
4.21
Form of Warrant issued with Convertible Promissory Notes. Incorporated by reference to Exhibit 4.20 of Cryoport’s Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 2013.
Form of Warrant issued upon Conversion of Convertible Promissory Notes. Incorporated by reference to Exhibit 4.21 of Cryoport’s
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013.
47
Exhibit
No.
4.22
4.23
Description
Form of Warrant Issued to Placement Agents. Incorporated by reference to Exhibit 4.22 of Cryoport’s Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2013.
Form of Warrant issued with Convertible Promissory Notes (5% Bridge Notes). Incorporated by reference to Exhibit 4.23 of
Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended December 31, 2013.
4.24+
Form of Warrant issued in connection with the May 2014 private placement.
10.1.1 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.
10.1.2 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.
10.1.3 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.
10.1.4
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.
10.5.2
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.
10.5.3
Third Amendment to Lease: Renewal dated June 8, 2010 between Viking Investors Barents Sea, LLC. Incorporated by reference to
Exhibit 10.5.3 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013.
10.6
10.7
10.9
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.
10.10
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.
10.11
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.
10.12
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.
10.13
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.
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.
10.15.1 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.
48
Exhibit
No.
Description
10.15.2 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/A dated December 17, 2010 and
referred to as Exhibit 10.32.
10.15.3 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/A dated December 17, 2010
and referred to as Exhibit 10.33.
10.16
Stock Option Agreement ISO under the 2002 Stock Incentive Plan of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.14
to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
10.17
Stock Option Agreement NSO under the 2002 Stock Incentive Plan of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.15
to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
10.18
2009 Stock Incentive Plan of the Company. Incorporated by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K
dated October 15, 2009 and referred to as Exhibit 10.21.
10.19
Form Incentive Stock Option Award Agreement under the 2009 Stock Incentive Plan of the Company. Incorporated by reference to
Exhibit 10.22 of the Company’s Current Report on Form 8-K dated October 9, 2009.
10.20
Form of Non-Qualified Stock Option Award Agreement under the 2009 Stock Incentive Plan of the Company. Incorporated by
reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-8 dated April 27, 2010.
10.21
2011 Stock Incentive Plan (as amended and restated). Incorporated by reference to Exhibit B of the Company’s Definitive Proxy
Statement on Schedule 14A filed with the SEC on July 30, 2012.
10.22
Form of Stock Option Award Agreement. Incorporated by reference to Exhibit 10.37 to Cryoport’s Current Report on Form 8-K filed
with the SEC on September 27, 2011.
10.23
Form of Non-Qualified Stock Option Award Agreement. Incorporated by reference to Exhibit 10.38 to Cryoport’s Current Report on
Form 8-K filed with the SEC on September 27, 2011.
10.24
Form of Convertible Promissory Note. Incorporated by reference to Exhibit 10.24 to Cryoport’s Annual Report on Form 10-K filed
with the SEC on June 25, 2013.
10.25
Form of Amendment to Convertible Promissory Note. Incorporated by reference to Exhibit 10.25 to Cryoport’s Annual Report on Form
10-K filed with the SEC on June 25, 2013.
10.26
Form of Convertible Promissory Note. Incorporated by reference to Exhibit 10.26 to Cryoport’s Annual Report on Form 10-K filed
with the SEC on June 25, 2013.
10.27* Employment Agreement between the Company and Jerrell Shelton. Incorporated by reference to the Company’s Current Report on
Form 8-K filed on November 6, 2012 and referred to as Exhibit 10.45.
10.28
Stock Option Agreement dated November 5, 2012 between the Company and Jerrell Shelton. Incorporated by reference to Exhibit
10.28 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013.
10.29# Master Agreement between the Company and Federal Express Corporation dated January 1, 2013. Incorporated by reference to the
Company’s Current Report on Form 8-K filed on January 8, 2013 and referred to as Exhibit 10.1.
10.30* Employment Agreement dated June 28, 2013 with Jerrell Shelton. Incorporated by reference to Exhibit 10.30 to Cryoport’s Current
Report on Form 8-K filed with the SEC on July 3, 2013.
10.31
Form of Convertible Promissory Notes issued with Warrants. Incorporated by reference to Exhibit 10.31 to Cryoport’s Quarterly
Report on Form 10-Q for the Quarter Ended September 30, 2013.
49
Exhibit
No.
10.32
10.33
Description
Form of Letter of Tender and Exchange. Incorporated by reference to Exhibit 10.32 to Cryoport’s Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2013.
Form of Convertible Promissory Note (5% Bridge Note) issued with Warrants. Incorporated by reference to Exhibit 10.33 to
Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended December 31, 2013.
10.34+
Form of Subscription Agreement in connection with the May 2014 private placement.
10.35+
Form of Election to Convert in connection with the May 2014 private placement.
21+
Subsidiaries of Registrant.
23.1+
Consent of Independent Registered Public Accounting Firm—KMJ Corbin & Company LLP.
31.1+
Certification of Principal Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 .
31.2+
Certification of Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 .
32.1+
32.2+
Certification of Principal Executive Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.
Certification of Principal Financial Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.
101.INS† XBRL Instance Document.
101.SCH† XBRL Taxonomy Extension Schema Document.
101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF† XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB† XBRL Taxonomy Extension Label Linkbase Document.
101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document.
*
#
+
†
Indicates a management contract or compensatory plan or arrangement.
Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated
under the Securities Exchange Act of 1934, as amended.
Filed herewith.
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus
for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections or otherwise incorporated by reference.
50
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Cryoport, Inc.
By: /s/ JERRELL W. SHELTON
Jerrell W. Shelton
Chief Executive Officer and Director
Date: June 25, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
/s/ JERRELL W. SHELTON
Jerrell W. Shelton
/s/ ROBERT S. STEFANOVICH
Robert S. Stefanovich
/s/ RICHARD G. RATHMANN
Richard G. Rathmann
/s/ STEPHEN E. WASSERMAN
Stephen W. Wasserman
/s/ EDWARD ZECCHINI
Edward Zecchini
/s/ RAMKUMAR MANDALAM, PH.D.
Ramkumar Mandalam Ph.D.
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
51
Date
June 25, 2014
June 25, 2014
June 25, 2014
June 25, 2014
June 25, 2014
June 25, 2014
Cryoport, Inc. and Subsidiary
Consolidated Financial Statements
As of March 31, 2014 and 2013
For Each of the Two Years Ended March 31, 2014
52
Cryoport, Inc. and Subsidiary
Consolidated Financial Statements
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of March 31, 2014 and 2013
Consolidated Statements of Operations for the years ended March 31, 2014 and 2013
Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended March 31, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended March 31, 2014 and 2013
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F- 1
The Board of Directors and
Stockholders of Cryoport, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of CryoPort, Inc. (the “Company”) as of March 31, 2014 and 2013, and the
related consolidated statements of operations, stockholders’ (deficit) equity and cash flows for each of the years in the two-year period ended
March 31, 2014. 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 consolidated 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 consolidated financial
position of CryoPort, Inc. at March 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the two-year
period ended March 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As
described in Note 1 to the consolidated financial statements, the Company has incurred recurring operating losses and has had negative cash
flows from operations since inception. Although the Company has cash and cash equivalents of $369,581 at March 31, 2014, management has
estimated that cash on hand, which include proceeds from convertible bridge notes received in the fourth quarter of fiscal 2014, will only be
sufficient to allow the Company to continue its operations into the second quarter of fiscal 2015. These matters raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KMJ Corbin & Company LLP
Costa Mesa, California
June 25, 2014
F- 2
Cryoport, Inc. and Subsidiary
Consolidated Balance Sheets
Current Assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $24,600 and $8,700, respectively
Inventories
Other current assets
$
Total current assets
Property and equipment, net
Intangible assets, net
Deposits and other assets
Total assets
Current Liabilities:
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and other accrued expenses
Accrued compensation and related expenses
Convertible debentures payable and accrued interest, net of discount of $184,750 in 2014
Current portion of related party notes payable
Derivative liabilities
Total current liabilities
Related party notes payable and accrued interest, net of current portion
Total liabilities
Commitments and contingencies
Stockholders’ (Deficit) Equity:
$
$
March 31,
2014
2013
369,581 $
515,825
29,703
196,505
1,111,614
408,892
180,086
9,358
1,709,950 $
579,678 $
454,288
1,622,359
1,358,120
—
4,014,445
—
4,014,445
563,104
217,097
39,212
138,892
958,305
505,485
272,263
19,744
1,755,797
858,709
217,432
1,304,419
96,000
20,848
2,497,408
1,321,664
3,819,072
Preferred stock, $0.001 par value; 2,500,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 250,000,000 shares authorized; 59,979,954 and 37,760,628
—
—
issued and outstanding at March 31, 2014 and 2013, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ deficit
Total liabilities and stockholders’ deficit
59,980
83,512,399
(85,876,874 )
(2,304,495 )
1,709,950 $
37,761
64,210,412
(66,311,448 )
(2,063,275 )
1,755,797
$
See accompanying notes to consolidated financial statements.
F- 3
Cryoport, Inc. and Subsidiary
Consolidated Statements of Operations
Revenues
Cost of revenues
Gross margin (loss)
Operating costs and expenses:
Selling, general and administrative
Research and development
Total operating costs and expenses
Loss from operations
Other (expense) income:
Debt conversion expense
Interest expense
Other expense, net
Change in fair value of derivatives
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per common share – basic and diluted
Weighted average shares outstanding – basic and diluted
$
Years Ended March 31,
2014
2,659,943 $
2,222,988
436,955
2013
1,100,539
1,587,823
(487,284 )
5,106,219
409,111
5,515,330
(5,078,375 )
(13,713,767 )
(784,454 )
(8,078 )
20,848
(19,563,826 )
(1,600 )
(19,565,426 ) $
(0.40 ) $
48,850,513
5,411,728
425,446
5,837,174
(6,324,458 )
—
(72,861 )
—
16,486
(6,380,833 )
(1,600 )
(6,382,433 )
(0.17 )
37,760,628
$
$
See accompanying notes to consolidated financial statements.
F- 4
Cryoport, Inc. and Subsidiary
Consolidated Statements of Stockholders’ (Deficit) Equity
Preferred Stock
Common Stock
Shares
Amount
Amount
Shares
— 37,760,628 $
—
—
Additional Accumulated Stockholders’
Total
Paid-
In Capital
Deficit
37,761 $ 63,620,774 $ (59,929,015 ) $
(6,382,433 )
—
—
(Deficit)
Equity
3,729,520
(6,382,433 )
Balance at March 31, 2012
Net loss
Offering costs in connection with the
February 2012 private placement offering
Stock-based compensation expense
Balance at March 31, 2013
Net loss
Stock-based compensation expense
Estimated relative fair value of warrants issued in connection
with convertible bridge notes payable
Issuance of common stock upon exercise of options and
warrants
Issuance of common stock units upon conversion of
convertible bridge notes and accrued interest
Induced debt conversion expense
Balance at March 31, 2014
— $
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
(103,542 )
693,180
—
—
(103,542 )
693,180
— 37,760,628
—
—
—
—
37,761 64,210,412 (66,311,448 )
(2,063,275 )
— (19,565,426 ) (19,565,426 )
678,119
—
678,119
—
—
—
—
—
478,229
—
478,229
— 1,583,315
1,583
325,307
—
326,890
— 20,636,011
—
—
— 59,979,954 $
20,636 4,106,565
— 13,713,767
59,980 $ 83,512,399 $ (85,876,874 ) $
—
4,127,201
— 13,713,767
(2,304,495 )
See accompanying notes to consolidated financial statements.
F- 5
Cryoport, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Cash Flows From Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Amortization of debt discount and deferred financing costs
Stock-based compensation expense
Change in fair value of derivative instruments
Loss on write-off of intangible assets
Loss on disposal of cryogenic shippers
Reserve for bad debt
Debt conversion expense
Changes in operating assets and liabilities:
Accounts receivable, net
Inventories
Other assets
Accounts payable and other accrued expenses
Accrued compensation and related expenses
Accrued interest
Net cash used in operating activities
Cash Flows From Investing Activities:
Purchases of intangible assets
Purchases of property and equipment
Net cash used in investing activities
Cash Flows From Financing Activities:
Proceeds from exercise of stock options and warrants
Proceeds from issuance of convertible debt
Repayment of convertible debt
Repayment of offering and deferred financing costs
Repayment of related party notes payable
Net cash provided by financing activities
Net decrease 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 for interest
Cash paid for income taxes
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Offering costs in connection with equity financing included in accounts payable
Deferred financing costs in connection with convertible debt payable included in accounts
payable
Release of restricted cash for repayment of convertible debentures
Estimated relative fair value of warrants issued in connection with convertible bridge notes
payable
Conversion of bridge notes payable and accrued interest into common stock units
$
$
$
$
$
See accompanying notes to consolidated financial statements.
F- 6
Years Ended March 31,
2013
2014
$
(19,565,426 ) $
(6,382,433 )
311,590
678,915
678,119
(20,848 )
—
16,066
24,876
13,713,767
(323,604 )
9,509
(26,588 )
(221,929 )
236,856
108,038
(4,380,659 )
393,959
17,514
693,180
(16,486 )
17,046
51,033
—
—
(70,973 )
12,542
34,912
443,568
(18,564 )
39,558
(4,785,144 )
—
(138,886 )
(138,886 )
(22,482 )
(156,200 )
(178,682 )
326,890
4,558,301
—
(463,169 )
(96,000 )
4,326,022
(193,523 )
563,104
369,581 $
—
1,294,500
(82,800 )
(206,305 )
(96,000 )
909,395
(4,054,431 )
4,617,535
563,104
— $
1,600 $
15,676
1,600
— $
53,747
30,120 $
— $
38,475
251,368
478,229 $
4,127,201 $
—
—
$
$
$
Note 1. Nature of the Business
Cryoport, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Cryoport Inc. (the “Company”, “Cryoport” or “we”) is 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. We
became “publicly held” by the reverse merger with GT5 described above. Over time we have transitioned from being a development company to
a fully operational public company, providing cold chain logistics solutions to the biotechnology and life sciences industries, globally.
Through a combination of purpose-built proprietary packaging, information technologies and specialized logistics knowhow, we provide
frozen shipping logistics solutions to the life sciences industry. We view our solutions as disruptive to “older technologies” in that our solutions
provide reliable, economic alternatives to existing solutions and services utilized for frozen shipping in life sciences including stem cells, cell
lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals, infectious substances and other items that require
continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express ® Solutions includes sophisticated cloud-based logistics management software we have branded as the Cryoportal™
which supports the management of the entire shipment process through a single interface, including initial order input, document preparation,
customs clearance, courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique and incisive
information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains a fully documented “chain-of-
custody” and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy, and stability of shipped
commodities are maintained throughout the process. This recorded and archived information allows our customers to meet exacting requirements
necessary for scientific work and for regulatory purposes.
Our Cryoport Express ® Solutions also includes our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express ®
Shippers, which are cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen
(“LN2”) “dry vapor” technology. Cryoport Express ® Shippers are International Air Transport Association (“IATA”) certified, and validated to
maintain stable temperatures of minus 150° C and below for a 10-plus day dynamic shipment period. The Company currently features two
Cryoport Express ® Shipper models, the Standard Dry Shipper (holding up to 75-2.0 ml vials) and the High Volume Dry Shipper (holding up to
500-2.0 ml vials).
Amongst our solutions, we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting
Cryoport Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and reseals the shipping
box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up. Cryoport arranges for the pick-up of the parcel by a shipping
service provider for delivery to the customer’s intended recipient. The recipient simply opens the box and shipper and removes the frozen
commodity. The recipient only needs to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for
pre-arranged carrier pick up. The Cryoport Express ® Shipper is returned to us for cleaning, quality assurance testing, recharging and reuse.
In late 2012, we shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics
solutions provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution”, we also provide the following value-added solutions that were developed to address our various clients’ needs:
•
•
“ Customer Staged Solution ,” under which we supply an inventory of our Cryoport Express® Shippers to our customer, in an
uncharged state, enabling our customer (after training/certification) to charge them with liquid nitrogen and use our Cryoportal™ to
enter orders with shipping and delivery service providers for the transportation of the package. Once the order is released, our customer
services professionals monitor the shipment and the return of the shipper to us for cleaning, quality assurance testing and reuse.
“ Customer Managed Solution ,” a limited customer implemented, solution, whereby we supply our Cryoport Express® Shippers to
clients in a fully charged state, but leaving it to the client to manage the shipping, including the selection of the shipping and delivery
service provider and the return of the shipper to us. Under this solution, the customer accepts a significant level of the risk for a
successful shipment.
F- 7
•
•
•
•
“ Powered by Cryoport SM ” is made available to providers of shipping and delivery services who seek to offer a “branded” cryogenic
shipping solution as part of their service offerings. By negotiation, this solution can be private labeled as long as “ powered by Cryoport
SM ” appears prominently on the offering software interface and prominently on the packaging, which is provided by the client after
minimum volume requirements are met.
“ Integrated Solution ” is our most comprehensive and complex outsourcing solution. It usually involves our management of the entire
cryogenic logistics process for our client, including the location of our employees at the client’s site to manage the client’s cryogenic
logistics, in total.
“ Life Science Point-of-Care Repository Solution ” whereby we supply our Cryoport Express ® Shippers to ship and store
cryogenically preserved life science products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care site, with
the Cryoport Express ® Shippers serving as a temporary freezer/repository enabling the efficient distribution of temperature sensitive
allogeneic cell-based therapies without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined process including the shipment’s
return to Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for
reuse.
“ Personalized Medicine and Cell-based Immunotherapy Solution ” whereby our Cryoport Express ® Solutions serves as an enabling
technology for the safe manufacture of the rapidly expanding autologous cellular-based immunotherapy market by providing a
comprehensive logistics solution for the verified chain of custody and condition transport from, (a) the collection of the patient’s cells in
a hospital setting, to (b) a central processing facility where they are manufactured into a personalized medicine, to (c) the safe,
cryogenically preserved return of these irreplaceable cells to a point-of-care treatment facility. The Cryoport Express ® Shippers can
then serve as a temporary freezer/repository to allow the efficient distribution of this personalized medicine to patients when and where
they need it most without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation apparatus. Our
customer services professionals monitor each shipment throughout the predetermined process including the shipment’s return to
Cryoport where the Cryoport Express ® Shipper is cleaned, tested for quality assurance and then returned to inventory for reuse.
One of our distribution partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping
logistics services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets and
sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx ® Deep Frozen Shipping Solution on a non-
exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely with FedEx to further align its sales efforts and
accelerate penetration within FedEx’s life sciences customer base through improved processes, sales incentives, joint customer calls and more
frequent communication at the sales and executive level. In addition, FedEx has developed a FedEx branded version of the Cryoportal TM
software platform, which is “ powered by Cryoport ” for use by FedEx and its customers giving them access to the full capabilities of our
logistics management platform.
In January 2013, we entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with
a non-exclusive license and right to use a customized version of our Cryoportal TM for the management of shipments made by FedEx customers.
The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx Agreement, expires on
December 31, 2015.
Pursuant to an agreement with DHL Express (USA), Inc. (“DHL”), DHL biotechnology and life science customers have direct access to
our cloud-based order entry and tracking portal to order Cryoport Express ® Shippers and receive preferred DHL shipping rates. The agreement
covers DHL shipping discounts that may be used to support our customers using our Cryoport Express ® Solutions. In connection with the
agreement, we have integrated our proprietary Cryoportal TM to DHL’s tracking and billing systems to provide DHL biotechnology and life
science customers with a seamless way (“ powered by Cryoport ”) of shipping their critical biological material worldwide.
In December 2012, we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.)
pursuant to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the Cryoportal TM , to manage shipments from the Zoetis manufacturing site in
the United States to domestic customers as well as various international distribution centers. As part of our logistics management services,
Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’ logistics, ensuring products arrive at their destinations
in specified conditions, on-time and with the optimum uses of resources. The Company manages Zoetis’ total fleet of dewar flask shippers used
for this purpose, including liquid nitrogen shippers. In July 2013 the agreement was amended to expand Cryoport’s scope to manage all logistics
of Zoetis’ key frozen poultry vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a second poultry
vaccine.
F- 8
In February 2014, we entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage
biotechnology company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using
Cryoport Express ® Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide Cryoport Express ®
Solutions to other biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s proprietary, purpose-built cold chain
logistics solutions for cell-based and advanced biologic tissue forms with Liventa’s distribution capability to orthopedic care providers. The
implementation of Cryoport’s solution will eliminate dry ice shipping and related risks of degradation and also eliminate the need for expensive
onsite cryogenic freezers for storage of cell-based orthopedic therapies. This will enable Liventa to better serve small or mobile clinics,
pharmacies, family practice, and orthopedic specialty care providers. Surgical centers and hospitals will also benefit from better logistics and the
elimination of issues surrounding dry ice transport and storage. The agreement has an initial three-year term and may be renewed for consecutive
three-year terms. Liventa also agreed to certain performance criteria and the issuance of 150,000 shares of its common stock to Cryoport in
exchange for the exclusive right to offer, market and promote Cryoport Express ® Solutions for cellular-based therapies requiring cryogenic
temperatures for use
in orthopedic indications in the United States.
We offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells and cell lines,
diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood, vaccines, tissue, animal
husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems. These companies operate within
heavily regulated environments and as such, changing vendors and distribution practices typically require a number of steps which may include
the audit of our facilities, review of our procedures, qualifying us as a vendor, and performing test shipments. This process can take up to nine
months or longer to complete prior to a potential customer adopting one or more of the Cryoport Express ® Solutions.
Going Concern
The consolidated financial statements have been prepared using the accrual method of accounting in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) and have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities in the normal course of business. We have sustained operating losses since our inception and
have used substantial amounts of working capital in our operations. Further, at March 31, 2014, we had an accumulated deficit of $85.9 million.
During the year ended March 31, 2014, we used cash in operations of $4.4 million and had a net loss of $19.6 million, which included a one-
time, non-cash debt conversion expense of $13.7 million.
We expect to continue to incur substantial additional operating losses from costs related to the commercialization of our Cryoport Express
® Solutions and do not expect that revenues from operations will be sufficient to satisfy our funding requirements in the near term. We believe
that our cash resources at March 31, 2014, additional funds raised subsequent to March 31, 2014 through the current preferred stock offering (see
Note 15), together with the revenues generated from our services will be sufficient to sustain our planned operations into the second quarter of
fiscal year 2015; however, we must obtain additional capital to fund operations thereafter and for the achievement of sustained profitable
operations. These factors raise substantial doubt about our ability to continue as a going concern. We are currently working on funding
alternatives in order to secure sufficient operating capital to allow us to continue to operate as a going concern.
Future capital requirements will depend upon many factors, including the success of our commercialization efforts and the level of
customer adoption of our Cryoport Express ® Solutions as well as our ability to establish additional collaborative arrangements. We cannot make
any assurances that the sales ramp will lead to achievement of sustained profitable operations or that any additional financing will be completed
on a timely basis and on acceptable terms or at all. Management’s inability to successfully achieve significant revenue increases or implement
cost reduction strategies or to complete any other financing will adversely impact our ability to continue as a going concern. To address this
issue, the Company is seeking additional capitalization to properly fund our efforts to become a self-sustaining financially viable entity.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP.
F- 9
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 financial statements in conformity with U.S. 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, 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, accounts receivable, related-party notes payable, convertible
notes payable, accounts payable and accrued expenses. The carrying value for all such instruments approximates fair value at March 31, 2014
and 2013 due to their short-term nature. The difference between the fair value and recorded values of the related party notes payable is not
significant.
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 insurance coverage limits up to $250,000 per owner. At March 31, 2014 and 2013, the
Company had cash balances of approximately $159,000 and $214,000, respectively, which exceeded the FDIC insurance limit. The Company
performs ongoing evaluations of these institutions to limit its concentration risk exposure.
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, 2014 and 2013 are net of reserves for doubtful accounts of $24,600 and $8,700, respectively. Although the Company
expects to collect amounts due, actual collections may differ from the estimated amounts.
The majority of the Company’s customers are in the biotechnology, pharmaceutical and life science industries. Consequently, there is a
concentration of accounts receivable within these industries, which is subject to normal credit risk. At March 31, 2014, there was one customer
that accounted for 30.6% of net accounts receivable. No other single customer owed us more than 10% of net accounts receivable at March 31,
2014 and 2013. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not exceeded our estimates.
The Company has revenue from foreign customers primarily in Europe, Japan, Canada, India and Australia. During fiscal years 2014 and
2013, the Company had revenues from foreign customers of approximately $434,000 and $161,000, respectively, which constituted
approximately 16.3% and 14.6% of total revenues, respectively. For the fiscal year ended March 31, 2014, there was one customer that
accounted for 30.8% of net revenues. No other single customer generated over 10% of net revenues during 2014 and 2013.
Inventories
The Company’s inventories consist of accessories that are sold and shipped to customers along with pay-per-use containers that are 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 writes down 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.
F- 10
Property and Equipment
The Company 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 container over a period of time. The
Company retains the title to the containers and provides its customers the use of the container for a specific shipping cycle. At the culmination of
the customer’s shipping cycle, the container is returned to the Company. As a result, the Company classifies the containers as fixed assets for the
per-use container program.
Property and equipment are recorded at cost. Cryogenic shippers, which comprise of 89% and 87% of the Company’s net property and
equipment balance at March 31, 2014 and 2013, respectively, 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, 2014.
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.
In connection with the 5% Bridge Notes, during the third and fourth quarter of fiscal 2014, the Company incurred financing costs that have
been capitalized and are being amortized over the term of the convertible bridge notes payable using the straight-line method which
approximates the effective interest method (see Note 8).
F- 11
During the year ended March 31, 2013, the Company incurred $103,542 of offering costs in connection with the private placement that
closed in February and March 2012, which were charged to additional paid-in capital and netted against the proceeds received in the private
placements. As of March 31, 2013, offering costs of $53,747 related to the private placement were included in accounts payable and accrued
expenses in the accompanying consolidated balance sheet.
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
Certain of the Company’s issued and outstanding common stock purchase warrants which have exercise price reset features are treated as
derivatives for accounting purposes. 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).
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, 2014 and 2013, there were no unrecognized tax benefits
included in the accompanying consolidated balance sheets that would, if recognized, affect the effective tax rates.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future operations. 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, 2014 and 2013, respectively and has not recognized interest
and/or penalties in the consolidated statement of operations for the years ended March 31, 2014 and 2013. The Company is subject to taxation in
the U.S. and various state jurisdictions. As of March 31, 2014, the Company is no longer subject to U.S. federal examinations for years before
2010 and for California franchise and income tax examinations for years before 2009. 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.
Revenue Recognition
The Company 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.
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.
The Company also provides logistics support and management to some customers, which may include onsite logistics personnel. Revenue
is recognized for these services as services are rendered and at the time that collectability is reasonably certain.
F- 12
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
revenues in the accompanying consolidated statements of operations.
Research and Development Expenses
Expenditures relating to research and development are expensed in the period incurred.
Stock-based Compensation
The Company accounts for stock-based payments to employees and directors in accordance with stock-based payment accounting
guidance which requires all stock-based payments to employees and directors, including grants of employee stock options and warrants, to be
recognized based upon their fair values. 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, 2014 and 2013 was zero as the Company has not had a significant history
of forfeitures and does not expect significant forfeitures in the future.
Cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options or warrants
are classified as financing cash flows. Due to the Company’s loss position, there were no such tax benefits during years ended March 31, 2014
and 2013.
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 the Company’s 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.
The Company’s stock-based compensation plans are discussed further in 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.
Basic and Diluted Net Income (Loss) Per Share
We calculate basic and diluted net income (loss) per share using the weighted average number of common shares outstanding during the
periods presented, and adjust the amount of net income (loss) used in this calculation for preferred stock dividends (if any) declared during the
period. In periods of a net loss position, basic and diluted weighted average shares are the same. For the diluted earnings per share calculation,
we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants and other common stock
equivalents outstanding during the periods.
The following shows the amounts used in computing net loss per share for each of the two years in the period ended March 31, 2014:
Net loss
Less:
Preferred dividends paid in cash or stock
Loss attributable to Cryoport stockholders
Weighted average shares issued and outstanding
Basic and diluted net loss per share
F- 13
Years Ended March 31,
2013
2014
(6,382,433 )
(19,565,426 ) $
—
(19,565,426 ) $
48,850,513
(0.40 ) $
—
(6,382,433 )
37,760,628
(0.17 )
$
$
$
The following table sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would
have been anti-dilutive:
Stock options
Warrants
Segment Reporting
Years Ended March 31,
2014
2013
3,458,313
3,221,728
6,680,041
411,762
—
411,762
We currently operate in one reportable segment.
Fair Value Measurements
We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used
to measure fair value. These tiers include the following:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include
quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities. Currently we do not have any items classified as
Level 2.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.
We did not elect the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair
value. Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and payable, are
reported at their historical carrying values.
The carrying values of our assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2014 and
2013 are classified in the table below in one of the three categories of the fair value hierarchy described below:
March 31, 2013
Liabilities:
Derivative liabilities
Fair Value Measurements
Level 1 Level 2 Level 3 Total
$
— $
— $ 20,848 $ 20,848
F- 14
The following summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended March 31, 2014 and 2013:
Balance at March 31, 2012
Transfers in / (out) of Level 3
Adjustments resulting from a change in fair value of derivative liabilities
Balance at March 31, 2013
Transfers in / (out) of Level 3
Adjustments resulting from a change in fair value of derivative liabilities
Balance at March 31, 2014
Fair Value Measurements
of Unobservable Inputs
(Level 3)
$
$
37,334
—
(16,486 )
20,848
—
(20,848 )
—
The fair value of derivative liabilities were measured on their respective origination dates and at the end of each reporting period using
Level 3 inputs. The significant assumptions we use in the calculations under Black-Scholes as of March 31, 2014 and 2013 included an expected
term based on the remaining contractual life of the warrants, a risk-free interest rate based upon observed interest rates appropriate for the
expected term of the instruments, volatility based on the historical volatility of our common stock, and a zero dividend rate based on our past,
current and expected practices of granting dividends on common stock.
Foreign Currency Translation
We record foreign currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being
included in results of operations. Foreign currency transaction gains and losses have not been significant for any of the periods presented.
Recent Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement
presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The
guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option
for early adoption. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. The adoption of ASU 2011-11
did not have a material impact on the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue
recognition requirements in FASB Topic 605, "Revenue Recognition". The ASU implements a five-step process for customer contract revenue
recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures
regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include
the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing
estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are
effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either
retrospectively or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the impact the adoption of
ASU 2014-09 will have on our consolidated financial statements.
Note 3. Inventories
Inventories consist of the following:
Raw materials
Finished goods
March 31,
2014
2013
$
$
18,283 $
11,420
29,703 $
28,533
10,679
39,212
F- 15
Note 4. Property and Equipment
Property and equipment consist of the following:
Cryogenic shippers
Furniture and fixtures
Machinery and equipment
Leasehold improvements
Less accumulated depreciation and amortization
March 31,
2014
1,037,286 $
30,746
386,731
30,913
1,485,676
(1,076,784 )
408,892 $
2013
962,565
30,746
380,526
30,913
1,404,750
(899,265 )
505,485
$
$
Total depreciation and amortization expense related to property and equipment amounted to $219,400 and $281,700 for the years ended
March 31, 2014 and 2013, respectively.
Note 5. Intangible Assets
Intangible assets consist of the following:
Patents and trademarks
Software development costs for internal use
Total intangible assets
March 31, 2014
Gross Amount
$
154,214 $
547,127
701,341 $
$
Accumulated
Amortization Net Amount
(55,712 ) $
(465,543 )
(521,255 ) $
98,502
81,584
180,086
Weighted
Average
Amortization
Period (years)
4.9
1.6
Patents and trademarks
Software development costs for internal use
Total intangible assets
$
$
154,214 $
547,127
701,341 $
(54,251 ) $
(374,827 )
(429,078 ) $
99,963
172,300
272,263
March 31, 2013
Gross
Amount
Accumulated
Amortization
Net
Amount
Weighted
Average
Amortization
Period (years)
5.9
2.6
Amortization expense for intangible assets for the years ended March 31, 2014 and 2013 was $92,200 and $112,300, respectively.
Future amortization of intangible assets is as follows:
Years Ending March 31,
2015
2016
2017
2018
2019
Note 6. Accrued Compensation and Related Expenses
Accrued compensation and related expenses consist of the following:
Accrued salary and wages
Accrued paid time off
Accrued board of director fees
Other accrued obligations
$
62,884
49,770
28,199
19,617
19,616
$ 180,086
March 31,
2014
2013
$
$
80,328 $
155,166
214,553
4,241
454,288 $
85,554
92,376
38,000
1,502
217,432
F- 16
Note 7. Related Party Transactions
Related Party Notes Payable
As of March 31, 2014 and 2013, the Company had aggregate principal balances of $555,500 and $651,500, respectively, in outstanding
unsecured indebtedness owed to four related parties, including former members of the Company’s 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, 2014, the aggregate principal payments totaled $8,000 per month. Any
remaining unpaid principal and accrued interest is due at maturity on various dates through March 1, 2015.
Related-party interest expense under these notes was $36,500 and $42,200 for the years ended March 31, 2014 and 2013, respectively.
Accrued interest, which is included in related party notes payable in the accompanying consolidated balance sheets, amounted to $802,600 and
$766,200 as of March 31, 2014 and 2013, respectively.
Convertible Bridge Notes
During the year ended March 31, 2014, the Company issued to certain accredited investors various unsecured promissory notes with the
terms as described under Note 8. These unsecured promissory notes included $120,000 of the 5% Bridge Notes (as defined below) issued to
Jerrell Shelton, the Company’s Chief Executive Officer, $100,000 of the Bridge Notes (as defined below) issued to Richard Rathmann, a
member of the Board of Directors of the Company, $200,000 of the Bridge Notes and $100,000 of the 5% Bridge Notes issued to GBR
Investments, LLC, of which Richard Rathmann is the manager.
Note 8. Convertible Notes Payable
2013 and 2014 Bridge Notes
In the fourth quarter of fiscal 2013 and first nine months of fiscal 2014, the Company issued to certain accredited investors unsecured
convertible promissory notes (the “Bridge Notes”) in the original principal amount of $1,294,500 and $2,765,301, respectively, for total
principal of $4,059,801, pursuant to the terms of subscription agreements and letters of investment intent.
The Bridge Notes accrued interest at a rate of 15% per annum from date of issuance until January 31, 2013 and at a rate of 5% per annum
from February 1, 2013 through the date of payment, in each case on a non-compounding basis. All principal and interest under the Bridge Notes
were due on December 31, 2013. Accrued interest related to these notes amounted to $0 and $9,900, as of March 31, 2014 and 2013,
respectively.
In connection with the issuance of the Bridge Notes to three accredited investors totaling $400,000 in June, July and August 2013, the
Company granted these investors warrants to purchase 1,797,457 shares of common stock at an exercise prices ranging from $0.19 to $0.29 per
share. The relative fair value of the warrants of $199,200 was recorded as a debt discount and was amortized to interest expense using the
straight-line method which approximated the effective interest method over the term of the Bridge Notes. These Bridge Notes accrued interest at
8% per annum from the date of issuance through date of payment, on a non-compounding basis. All other terms of these Bridge Notes are
consistent with the rest of the Bridge Notes. Upon conversion of the Bridge Notes in September and October 2013, the remaining unamortized
debt discount was amortized to interest expense.
In September and October 2013, the Bridge Note holders accepted an offer by the Company and converted an aggregate of $4,127,202 of
outstanding principal and accrued interest under the Bridge Notes into 20,636,011 units (the “Units”) at a price of $0.20 per Unit, with each Unit
consisting of (i) one share of common stock of the Company (“Common Stock”) and (ii) one warrant to purchase one share of Common Stock at
an exercise price of $0.37 per share. The warrants are exercisable beginning on March 31, 2014 and have a term of five years from date of
issuance. As the transaction was considered an induced conversion under the applicable accounting guidance, the Company recognized
$13,713,767 in debt conversion expense representing the fair value of the securities transferred in excess of the fair value of the securities
issuable upon the original conversion terms of the Bridge Notes. The Company calculated the fair value of the common stock issued by using the
closing price of the stock on the date of issuance. The fair value of the warrants was calculated using Black-Scholes.
F- 17
Upon conversion of the Bridge Notes, the remaining unamortized debt discount was amortized to interest expense. During the years ended
March 31, 2014 and 2013, the Company amortized $199,200 and $0, respectively, to interest expense.
5% Bridge Notes
From December 2013 to March 2014, the Company issued to certain accredited investors unsecured convertible promissory notes (the
“5% Bridge Notes”) in the original principal amount of $1,793,000, pursuant to the terms of subscription agreements and letters of investment
intent. This includes two notes in the aggregate amount of $120,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer, on
December 11, 2013 and January 10, 2014 as well as a note in the amount of $100,000 issued to GBR Investments, LLC on February 3, 2014, of
which Richard Rathmann, a Director of the Company, is the manager.
The 5% Bridge Notes accrue interest at a rate of 5% per annum from the date of issuance through date of payment, on a non-compounding
basis. All principal and interest under the 5% Bridge Notes becomes due on June 30, 2014. Accrued interest related to these notes of $14,100 is
included in convertible debentures payable and accrued interest, net of discount in the accompanying consolidated balance sheet at March 31,
2014.
In connection with the issuance of the 5% Bridge Notes, the Company granted these investors warrants to purchase 896,500 shares of
common stock at an exercise price of $0.49 per share. The warrants are exercisable on May 31, 2014 and expire on December 31, 2018. The
relative fair value of the warrants of $279,100 was recorded as a debt discount and is amortized to interest expense using the straight-line method
which approximates the effective interest method over the term of the 5% Bridge Notes. During the year ended March 31, 2014, the Company
amortized $94,300 of the debt discount to interest expense for these notes.
In the event the Company designates and issues one or more types of equity securities while the 5% Bridge Notes are outstanding
(“Subsequent Offering”), the Company must provide written notice to the holders of the notes and such holders will have a right to convert up to
all of the principal and accrued unpaid interest on the notes into shares of such equity securities on the same terms as the Subsequent Offering
during the ten days following the provision of such notice. The conversion price for these equity securities will be 90% of the offering price for
the equity securities. The Company was unable to value the conversion feature of these 5% Bridge Notes given the absence of a conversion rate
and the convertibility of the 5% Bridge Notes being contingent upon the completion of a Subsequent Offering. In May 2014, note holders with
the principal amount of $1,743,000 converted their notes (see Note 15).
Emergent Financial Group, Inc. (“Emergent”) served as the Company’s placement agent in connection with the original placement of the
Bridge Notes and 5% Bridge Notes and earned a commission of 9% of the original principal balance of such notes. Debt financing costs of
$375,900 and $116,500 in 2014 and 2013, respectively, comprised primarily of the commission earned by Emergent, of which $98,400 and
$107,800 is recorded in other current assets in the accompanying consolidated balance sheets as of March 31, 2014 and 2013, respectively, and
are being amortized to interest expense using the straight-line method which approximates the effective interest method over the term of the
notes.
In connection with the conversion of the Bridge Notes in September and October 2013, Emergent received warrants to purchase 1,911,259
shares of common stock at an exercise price of $0.20 per share. The warrants were exercisable beginning March 31, 2014 and have an expiration
date of June 30, 2018. Emergent did not receive any compensation with respect to the 5% Bridge Note in the principal amount of $120,000
issued to Jerrell Shelton, the Chief Executive Officer of the Company and $100,000 issued to GBR Investments, LLC , of which Richard
Rathmann, a Director of the Company, is the manager. During the years ended March 31, 2014 and 2013, the Company amortized $385,400 and
$8,700, respectively, to interest expense.
Note 9. Derivative Liabilities
In accordance with applicable accounting guidance, certain of the Company’s outstanding warrants to purchase shares of common stock
were treated as derivatives because these instruments had reset or ratchet provisions in the event the Company raises additional capital at a lower
price, among other adjustments. As such, the fair value of these common stock purchase warrants were treated as derivative liabilities since their
date of issuance or modification. Changes in fair value were recorded as non-operating, non-cash income or expense at each reporting date. If the
fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair
value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income. As of March 31,
2014 and 2013, the Company had derivative warrant liabilities with fair values of $0 and $20,848, respectively. The derivative warrants expire in
April 2014.
F- 18
During the year ended March 31, 2014 and 2013, the Company recognized aggregate gains of $20,848 and $16,486, respectively, due to
the change in fair value of its derivative instruments.
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 Black-Scholes using the following assumptions:
Expected life (years)
Risk-free interest rate
Volatility
Dividend yield
March 31,
2014
2013
0.01 to 0.81 1.01 to 1.81
0.03% -
0.15%
70% - 144%
—
0.14%-
0.33%
129% -
158%
—
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.
Note 10. Commitments and Contingencies
Facility and Equipment Leases
We lease 11,900 square feet of corporate, research and development, and warehouse facilities in Lake Forest, California under an
operating lease expiring June 30, 2015 which includes the right to cancel the lease with a minimum of 120 day written notice at any time after
December 31, 2012. We also lease corporate facilities in San Diego, California under a non-cancelable operating lease expiring December 31,
2014. Each lease agreement contains certain scheduled rent increases which are accounted for on a straight-line basis.
Future minimum lease payments are as follows:
Years ending March 31,
2015
2016
Operating Leases
192,800
$
26,700
219,500
$
Rent expense for the years ended March 31, 2014 and 2013 was approximately $178,000 and $204,000, respectively.
Employment Agreements
We have entered into employment agreements with certain of our officers under which payment and benefits would become payable in the
event of termination by us for any reason other than cause, or upon a change in control of our Company, or by the employee for good reason.
Consulting and Engineering Services
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. If KLATU terminates that agreement, no such payments are payable.
F- 19
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. Consulting fees for services provided by KLATU were $395,300 and $401,100 for the years ended March 31, 2014 and
2013, respectively.
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 consolidated 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 leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities.
The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement.
Note 11. Stockholders’ Equity
Authorized Stock
The Company has 250,000,000 authorized shares of common stock with a par value of $0.001 per share. In September 2011, our
stockholders approved an amendment to the Amended and Restated Articles of Incorporation to authorize a class of undesignated or "blank
check" preferred stock, consisting of 2,500,000 shares at $0.001 par value per share. Shares of preferred stock may be issued in one or more
series, with such rights, preferences, privileges and restrictions to be fixed by the Company's board of directors. In May 2014, our stockholders
approved a Certificate of Designation, which designated 800,000 shares of preferred stock as Class A Preferred Stock (See Note 15).
Common Stock Reserved for Future Issuance
As of March 31, 2014, approximately 73.1 million shares of common stock were issuable upon conversion or exercise of rights granted
under prior financing arrangements, stock options and warrants, as follows:
Exercise of stock options
Exercise of warrants
Total shares of common stock reserved for future issuances
Note 12. Stock-Based Compensation
Warrant Activity
11,894,205
61,194,343
73,088,548
We typically issue warrants to purchase shares of our common stock to investors as part of a financing transaction or in connection with
services rendered by placement agents and consultants. Included in outstanding warrants are 262,856 and 312,856 warrants at March 31, 2014
and 2013, respectively issued to employees or directors. Our outstanding warrants expire on varying dates through July 2019. A summary of
warrant activity is as follows:
F- 20
Outstanding — March 31, 2012
Issued
Exercised
Forfeited
Expired
Outstanding — March 31, 2013
Issued
Exercised
Forfeited
Expired
Outstanding — March 31, 2014
Vested (exercisable) — March 31, 2014
Weighted-
Average
Exercise
Number of
Shares
37,144,504 $
30,000
—
(123,376 )
(23,929 )
37,027,199
25,241,227
(926,315 )
(39,728 )
(108,040 )
61,194,343 $
60,297,010 $
Price/Share
1.18
0.50
—
0.77
8.89
1.18
0.35
0.22
8.49
7.96
0.84
0.84
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (1)
2.9 $
2.9 $
3,987,500
3,960,600
(1) Aggregate intrinsic value represents the difference between the exercise price of the warrant and the closing market price of the common
stock on March 31, 2014, which was $0.52 per share.
The following table summarizes information with respect to warrants outstanding and exercisable at March 31, 2014:
Exercise Price
$0.19 – 0.20
$0.21 – 0.37
$0.38 – 0.69
$0.70 – 0.92
$0.93 – 10.80
Number
Outstanding
2,437,574
20,980,838
10,932,429
21,431,557
5,411,945
61,194,343
Stock Options
Weighted-
Average
Remaining
Contractual
Life (Years)
4.3 $
4.5 $
3.0 $
1.7 $
0.9 $
Weighted-
Average
Exercise Price
0.20
0.37
0.67
0.77
3.53
Weighted-
Average
Exercise Price
0.20
0.37
0.69
0.77
3.53
Number
Exercisable
2,437,574 $
20,980,838 $
10,035,929 $
21,431,557 $
5,411,112 $
60,297,010
We have three stock incentive plans: the 2002 Stock Incentive Plan, or the 2002 Plan, the 2009 Stock Incentive Plan, or the 2009 Plan and
the 2011 Stock Incentive Plan, or the 2011 Plan (collectively, the “Plans”). The 2002 Plan authorizes the grant of incentive awards, including
stock options, for the purchase of up to a total of 500,000 shares and has no shares available for future issuances as the 2002 Plan has expired.
Subsequent to the adoption of the 2011 Plan, no new options have been granted pursuant the 2009 Plan or 2002 Plan. In September 2009, the
stockholders approved the issuance of up to 1,200,000 shares of common stock available for issuance under the 2009 Plan and as of March 31,
2014, the Company has 299,741 shares available for future awards under the 2009 Plan. In September 2011, the stockholders authorized the
issuance of up to 2,300,000 shares of the Company's common stock. On September 13, 2012, the stockholders approved an increase to the
number of shares of the Company’s common stock available for issuance by 3,000,000 shares. On September 6, 2013 the stockholders approved
an increase to the number of shares of the Company’s common stock available for issuance by 7,100,000 shares. As of March 31, 2014, there
were 7,405,004 incentive awards available for grant under the 2011 Plan.
During each of the two years in the period ended March 31, 2014, we granted stock options at exercise prices equal to or greater than the
quoted market price of our common stock on the grant date. The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average assumptions:
Expected life (years)
Risk-free interest rate
Volatility
Dividend yield
March 31,
2014
1.6 – 6.02
0.19% -
1.84%
127% - 140%
0 %
2013
2.6 -10.0
0.63%-2.22%
124% - 166%
0 %
The expected option life assumption is estimated based on the simplified method. Accordingly, the Company has utilized the average of
the contractual term of the options and the weighted average vesting period for all options to calculate the expected option term. The risk-free
interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. The expected
volatility is based on the historical volatility of our stock commensurate with the expected life of the stock-based award. We do not anticipate
paying dividends on the common stock in the foreseeable future.
We recognize stock-based compensation cost over the vesting period using the straight-line single option method. Stock-based
compensation expense is recognized only for those awards that are ultimately expected to vest. An estimated forfeiture rate has been applied to
unvested awards for the purpose of calculating compensation cost. The estimated forfeiture rate of 0% per year is based on the historical
forfeiture activity of unvested stock options. These estimates are revised, if necessary, in future periods if actual forfeitures differ from the
estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.
A summary of stock option activity is as follows:
Outstanding — March 31, 2012
Granted (weighted-average fair value of $0.26 per share)
Exercised
Forfeited
Expired
Outstanding — March 31, 2013
Granted (weighted-average fair value of $0.24 per share)
Exercised
Forfeited
Expired
Outstanding — March 31, 2014
Vested (exercisable) — March 31, 2014
Unvested (unexercisable) — March 31, 2014
Number of
Shares
1,355,132 $
4,063,109
—
(322,500 )
—
5,095,741 $
7,673,272
(657,000 )
(197,808 )
(20,000 )
11,894,205 $
5,543,002 $
6,351,203 $
Weighted-
Average
Exercise
Price/Share
1.14
0.29
—
0.98
—
0.47
0.28
0.20
0.32
6.00
0.35
0.42
0.30
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (1)
8.6 $
8.0 $
3.0 $
2,578,900
1,110,600
1,468,300
(1) Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of the common
stock on March 31, 2014, which was $0.52 per share.
The following table summarizes information with respect to stock options outstanding and exercisable at March 31, 2014:
Exercise Price
$0.17 – 0.48
$0.52 – 0.98
$1.05 – 2.20
$4.30 – 8.31
Weighted-
Average
Remaining
Contractual
Life (Years)
Weighted-
Average
Exercise
Price
Number
Outstanding
10,523,036
1,234,469
48,600
88,100
11,894,205
8.9 $
6.3 $
6.4 $
2.3 $
0.27
0.66
1.64
4.74
Number
Exercisable
Weighted-
Average
Exercise
Price
4,428,083 $
987,594 $
39,225 $
88,100 $
5,543,002
0.27
0.66
1.69
4.74
As of March 31, 2014, there was unrecognized compensation expense of $1.6 million related to unvested stock options, which we expect
to recognize over a weighted average period of 3.0 years.
F- 21
Note 13. Income Taxes
Significant components of the Company’s deferred tax assets as of March 31, 2014 and 2013 are shown below:
Deferred tax assets:
Net operating loss carryforward
Research credits
Expenses recognized for granting of options and warrants
Accrued expenses and reserves
Valuation allowance
March 31,
2014
2013
$
$
(000’s)
15,379 $
60
1,651
135
(17,225 )
— $
13,505
51
1,319
32
(14,907 )
—
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
Induced conversion costs
Interest expense
Permanent items and other
Valuation allowance
March 31,
2014
2013
(327,000 )
(7,000 )
4,663,000
—
4,600
$ (6,650,000 ) $ (2,169,000 )
(359,000 )
(6,000 )
—
1,000
215,600
2,318,000 2,319,000
1,600
1,600 $
$
At March 31, 2014, the Company has federal and state net operating loss carryforwards of approximately $39,086,000 and $35,759,000
which will begin to expire in 2020, unless previously utilized, and as of 2012 have already begun to for state carryforwards. At March 31, 2014,
the Company has federal and California research and development tax credits of approximately $18,000 and $64,000, 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.
On September 13, 2013, the U.S. Treasury Department released final income tax regulations on the deduction and capitalization of
expenditures related to tangible property. These final regulations apply to tax years beginning on or after January 1, 2014, and may be adopted in
earlier years. The Company does not intend to early adopt the tax treatment of expenditures to improve tangible property and the capitalization
of inherently facilitative costs to acquire tangible property as of January 1, 2013. The tangible property regulations will require the Company to
make additional tax accounting method changes as of January 1, 2014; however, management does not anticipate the impact of these changes to
be material to the Company’s consolidated financial position, its results of operations and its footnote disclosures.
F- 22
Note 14. Quarterly Financial Data (Unaudited)
A summary of quarterly financial data is as follows ($ in ‘000’s):
Year ended March 31, 2014
Total revenues
Gross margin
Operating loss
Net loss
Net loss per share, basic and diluted
Year ended March 31, 2013
Total revenues
Gross loss
Operating loss
Net loss
Net loss per share, basic and diluted
June 30
September 30
December
31
March 31
Quarter Ended
$
$
$
$
$
$
$
$
$
$
488 $
55 $
(1,260 ) $
(1,324 ) $
(0.03 ) $
191 $
(163 ) $
(1,541 ) $
(1,546 ) $
(0.04 ) $
580 $
72 $
(1,287 ) $
(14,960 ) $
(0.38 ) $
234 $
(111 ) $
(1,554 ) $
(1,551 ) $
(0.04 ) $
757 $
167 $
(1,257 ) $
(1,840 ) $
(0.03 ) $
307 $
(62 ) $
(1,549 ) $
(1,567 ) $
(0.04 ) $
835
143
(1,274 )
(1,441 )
(0.02 )
368
(153 )
(1,681 )
(1,717 )
(0.05 )
Earnings per basic and diluted shares are computed independently for each of the quarters presented based on basic and diluted shares
outstanding per quarter and, therefore, may not sum to the totals for the year.
Note 15. Subsequent Events
Designation of Class A Preferred Stock
On May 2, 2014, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation which designated
800,000 shares of the Company’s previously authorized preferred stock, par value $0.001, as Class A Preferred Stock (“Preferred Stock”).
The rights, preferences, and privileges of the Preferred Stock are summarized as follows:
• Dividends shall accrue on shares of Preferred Stock at the rate of $0.96 per annum. Such dividends shall accrue day-to-day, shall be
cumulative, and shall be payable on when, as, and if declared by the Board of Directors of the Company.
•
In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Registrant, holders of Preferred Stock then
outstanding shall be entitled to receive a preference payment equal to $12.00 per share (subject to appropriate adjustment in the event of
a stock dividend, split, combination, or other similar recapitalization) plus any accrued dividends, but unpaid thereon, whether or not
declared, together with any other dividends declared but unpaid thereon.
• Shares of Preferred Stock shall vote together with the common stock on an as-converted basis.
• At any time after September 1, 2014, shares of Preferred Stock shall be convertible into thirty shares of Common Stock. In addition,
accrued but unpaid dividends on the Preferred Stock will also be convertible into common stock after September 1, 2014 at the rate of
one share for each $0.40 of dividend. Such conversion is subject to adjustment in the event of any stock split or combination, certain
dividends and distributions, and any reorganization, recapitalization, reclassification, consolidation, or merger involving the Company.
• Shares of the Preferred Stock shall be subject to redemption by the Company at any time on or after January 15, 2017, upon payment of
$12.00 per share (subject to appropriate adjustment in the event of a stock dividend, split, combination, or other similar recapitalization)
plus all accrued but unpaid dividends thereon.
• The Preferred Stock is subject to a liquidation preference over common stock equal to $12 per share and the unpaid accrued
dividend. Holders of the Preferred Stock will vote with holders of the Company’s common stock, but will have thirty votes per share of
Preferred Stock held compared to one vote for each share of common stock.
F- 23
Issuance of Class A Preferred Stock
In May 2014, the Company entered into definitive agreements for a private placement of its securities to certain institutional and
accredited investors (the “Investors”) pursuant to certain Subscription Agreements and Elections to Convert between the Company and the
Investors. Through June 13, 2014, aggregate gross cash proceeds of $839,600 (approximately $628,700 after estimated cash offering expenses)
were collected in exchange for the issuance of 69,964 shares of our Class A Preferred Stock, and warrants, exercisable for five years, to purchase
up to a total of 559,712 shares of our common stock at an exercise price of $0.50 per share. The Company intends to use the net proceeds for
working capital purposes.
Pursuant to the Subscription Agreements, the Company issued shares of a newly established Class A Preferred Stock and warrants to
purchase common stock of Cryoport. The shares and warrants were issued as a unit (a “Unit”) consisting of (i) one share of Class A Convertible
Preferred Stock and (ii) one warrant to purchase eight (8) shares of Common Stock at an exercise price of $0.50 per share, which are
immediately exercisable and may be exercised at any time on or before March 31, 2019.
Pursuant to the terms of the 5% Bridge Notes issued by the Company between December 6, 2013 and March 13, 2014 with a total
original principal amount of $1,793,000 (the “5% Bridge Notes”), the issuance of the Units to Investors at $12.00 per Unit entitled the holders of
the 5% Bridge Notes to convert up to the entire principal amount and accrued interest under the 5% Bridge Notes into Units at a rate of $10.80
per Unit. Through June 13, 2014, 5% Bridge Note holders totaling $1,743,000 in original principal sum elected to convert their 5% Bridge
Notes, including accrued interest, for Units in exchange for the issuance of 163,608 shares of our Class A Preferred Stock and warrants to
purchase up to 1,308,864 shares of our commons stock at an exercise price of $0.50 per share. Two of the 5% Bridge Note holders that executed
Subscription Agreements to convert 5% Bridge Notes in the aggregate principal amount of $220,000, are affiliates of the Company – Jerrell W.
Shelton, the Company’s Chief Executive Officer, and GBR Investments, LLC, which is managed by Richard Rathmann, a Director and
Chairman of the Board of Directors of the Company (collectively, the “Affiliates”).
Emergent Financial Group, Inc. served as the Company’s placement agent in this transaction and received, with respect to the gross
proceeds received from Investors who converted their 5% Bridge Notes into Units (not including those conversions by the Affiliates), a
commission of 3% and a non-accountable finance fee of 1% of such proceeds, and with respect to gross proceeds received from all other
Investors, a commission of 10% and a non-accountable finance fee of 3% of the aggregate gross proceeds received from such Investors, plus
reimbursement of legal expenses of up to $40,000. Emergent Financial Group, Inc. will also be issued a warrant to purchase three shares of
Common Stock at an exercise price of $0.50 per share for each Unit issued in this transaction. The Company and Emergent Financial Group, Inc.
have agreed that the offering of Units to new Investors will conclude on July 14, 2014.
As of June 13, 2014, 233,572 shares of Preferred Stock and 1,868,576 of the related warrants were outstanding for Investors and 638,646
warrants were outstanding for Emergent in connection with the Preferred Stock offering and the 5% Bridge Notes conversion.
F- 24
Exhibit
No.
Index to Exhibits
Description
3.1
3.2
3.3
Amended and Restated Articles of Incorporation of the Company, as amended. Incorporated by reference to Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2012.
Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-
K dated October 23, 2012.
Cryoport Systems, Inc. 2002 Stock Incentive Plan adopted by the Board of Directors on October 1, 2002. Incorporated by reference to
Exhibit 3.13 to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
3.4
Certificate of Designation. Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 2, 2014.
4.1.1
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.
4.1.2
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.
4.1.3
Amendment to Convertible Debenture dated April 30, 2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated
April 30, 2008 and referred to as Exhibit 10.1.11.
4.1.4
Annex to Amendment to Convertible Debenture dated April 30, 2008. Incorporated by reference to Cryoport’s Current Report on Form
8-K dated April 30, 2008 and referred to as Exhibit 10.1.11.1.
4.1.5
Amendment to Convertible Debenture dated August 29, 2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K
dated August 29, 2008.
4.1.6
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.
4.1.7
4.1.8
4.1.9
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.
4.1.10 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.
4.1.11 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.
4.2
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.
Exhibit
No.
Description
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
4.16
4.17
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.
Form of Securities Purchase Agreement. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on
February 24, 2012.
Form of Registration Rights Agreement. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on
February 24, 2012.
4.18
Form of Warrant. Incorporated by reference to Cryoport’s Current Report on Form 8-K filed with the SEC on February 24, 2012.
4.19
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.
4.20
4.21
Form of Warrant issued with Convertible Promissory Notes. Incorporated by reference to Exhibit 4.20 of Cryoport’s Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 2013.
Form of Warrant issued upon Conversion of Convertible Promissory Notes. Incorporated by reference to Exhibit 4.21 of Cryoport’s
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013.
Exhibit
No.
4.22
4.23
Description
Form of Warrant Issued to Placement Agents. Incorporated by reference to Exhibit 4.22 of Cryoport’s Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2013.
Form of Warrant issued with Convertible Promissory Notes (5% Bridge Notes). Incorporated by reference to Exhibit 4.23 of Cryoport’s
Quarterly Report on Form 10-Q for the Quarter Ended December 31, 2013.
4.24+
Form of Warrant issued in connection with the May 2014 private placement.
10.1.1 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.
10.1.2 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.
10.1.3 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.
10.1.4
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.
10.5.2
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.
10.5.3
Third Amendment to Lease: Renewal dated June 8, 2010 between Viking Investors Barents Sea, LLC. Incorporated by reference to
Exhibit 10.5.3 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013.
10.6
10.7
10.9
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.
10.10
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.
10.11
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.
10.12
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.
10.13
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.
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.
10.15.1 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.
Exhibit
No.
Description
10.15.2 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/A dated December 17, 2010 and
referred to as Exhibit 10.32.
10.15.3 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/A dated December 17, 2010
and referred to as Exhibit 10.33.
10.16
Stock Option Agreement ISO under the 2002 Stock Incentive Plan of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.14
to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
10.17
Stock Option Agreement NSO under the 2002 Stock Incentive Plan of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.15
to the Company’s Registration Statement on Form 10-SB/A2 dated January 26, 2006.
10.18
2009 Stock Incentive Plan of the Company. Incorporated by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K
dated October 15, 2009 and referred to as Exhibit 10.21.
10.19
Form Incentive Stock Option Award Agreement under the 2009 Stock Incentive Plan of the Company. Incorporated by reference to
Exhibit 10.22 of the Company’s Current Report on Form 8-K dated October 9, 2009.
10.20
Form of Non-Qualified Stock Option Award Agreement under the 2009 Stock Incentive Plan of the Company. Incorporated by
reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-8 dated April 27, 2010.
10.21
2011 Stock Incentive Plan (as amended and restated). Incorporated by reference to Exhibit B of the Company’s Definitive Proxy
Statement on Schedule 14A filed with the SEC on July 30, 2012.
10.22
Form of Stock Option Award Agreement. Incorporated by reference to Exhibit 10.37 to Cryoport’s Current Report on Form 8-K filed
with the SEC on September 27, 2011.
10.23
Form of Non-Qualified Stock Option Award Agreement. Incorporated by reference to Exhibit 10.38 to Cryoport’s Current Report on
Form 8-K filed with the SEC on September 27, 2011.
10.24
Form of Convertible Promissory Note. Incorporated by reference to Exhibit 10.24 to Cryoport’s Annual Report on Form 10-K filed with
the SEC on June 25, 2013.
10.25
Form of Amendment to Convertible Promissory Note. Incorporated by reference to Exhibit 10.25 to Cryoport’s Annual Report on Form
10-K filed with the SEC on June 25, 2013.
10.26
Form of Convertible Promissory Note. Incorporated by reference to Exhibit 10.26 to Cryoport’s Annual Report on Form 10-K filed with
the SEC on June 25, 2013.
10.27* Employment Agreement between the Company and Jerrell Shelton. Incorporated by reference to the Company’s Current Report on
Form 8-K filed on November 6, 2012 and referred to as Exhibit 10.45.
10.28
Stock Option Agreement dated November 5, 2012 between the Company and Jerrell Shelton. Incorporated by reference to Exhibit 10.28
to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013.
10.29# Master Agreement between the Company and Federal Express Corporation dated January 1, 2013. Incorporated by reference to the
Company’s Current Report on Form 8-K filed on January 8, 2013 and referred to as Exhibit 10.1.
10.30* Employment Agreement dated June 28, 2013 with Jerrell Shelton. Incorporated by reference to Exhibit 10.30 to Cryoport’s Current
Report on Form 8-K filed with the SEC on July 3, 2013.
10.31
Form of Convertible Promissory Notes issued with Warrants. Incorporated by reference to Exhibit 10.31 to Cryoport’s Quarterly
Report on Form 10-Q for the Quarter Ended September 30, 2013.
Exhibit
No.
10.32
10.33
Description
Form of Letter of Tender and Exchange. Incorporated by reference to Exhibit 10.32 to Cryoport’s Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 2013.
Form of Convertible Promissory Note (5% Bridge Note) issued with Warrants. Incorporated by reference to Exhibit 10.33 to
Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended December 31, 2013.
10.34 +
Form of Subscription Agreement in connection with the May 2014 private placement.
10.35+
Form of Election to Convert in connection with the May 2014 private placement.
21+
Subsidiaries of Registrant.
23.1+
Consent of Independent Registered Public Accounting Firm—KMJ Corbin & Company LLP.
31.1+
Certification of Principal Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 .
31.2+
Certification of Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 .
32.1+
32.2+
Certification of Principal Executive Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.
Certification of Principal Financial Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.
101.INS† XBRL Instance Document.
101.SCH† XBRL Taxonomy Extension Schema Document.
101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF† XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB† XBRL Taxonomy Extension Label Linkbase Document.
101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document.
*
#
+
†
Indicates a management contract or compensatory plan or arrangement.
Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated
under the Securities Exchange Act of 1934, as amended.
Filed herewith.
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus
for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections or otherwise incorporated by reference.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (I) A
REGISTRATION STATEMENT REGISTERING SUCH SECURITIES UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE, OR (II) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION
WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST RELY ON THEIR OWN
ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.
Warrant to Purchase
_________________ shares
Warrant Number 2014 - _________
Exhibit 4.24
Warrant to Purchase Common Stock
of
CRYOPORT, INC.
THIS CERTIFIES that ____________________ or any subsequent holder hereof (“Holder”) has the right to purchase from Cryoport, Inc., a
Nevada corporation, (the “Company”), _____________ (___________) fully paid and nonassessable shares of the Company’s common stock,
$0.001 par value per share (“Common Stock”), subject to adjustment as provided herein, at a price equal to the Exercise Price as defined in
Section 3 below at any time during the Exercise Period (as defined below).
Holder agrees with the Company that this Warrant to Purchase Common Stock of the Company (this “Warrant” or this “Agreement”) is issued
and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein.
1. Term and Restriction on Exercise .
The term of this Warrant begins on ___________, 2014 and the rights under this Warrant expire at 5:00 p.m., Pacific Time, on March 31, 2019
(such period of exercise is referred to herein as the “Term”).
Notwithstanding anything herein to the contrary, the Company shall not issue to the Holder, and the Holder may not acquire, a number of shares
of Common Stock upon exercise of this Warrant to the extent that, upon such exercise, the number of shares of Common Stock then beneficially
owned by the Holder and its Affiliates and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with
the Holder’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including shares held by
any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to
acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) would exceed 9.98%
of the total number of shares of Common Stock then issued and outstanding (the “9.98% Cap”), provided that the 9.98% Cap shall only apply to
the extent that the Common Stock is deemed to constitute an “equity security” pursuant to Rule 13d-1(i) promulgated under the Exchange Act.
For purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Securities and
Exchange Commission (the “SEC”), and the percentage held by the Holder shall be determined in a manner consistent with the provisions of
Section 13(d) of the Exchange Act. Upon the written request of the Holder, the Company shall, within two (2) Trading Days, confirm orally and
in writing to the Holder the number of shares of Common Stock then outstanding.
“Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under
common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”). With respect to a Holder of Warrants, any investment fund or managed account that is managed on a discretionary basis
by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
2. Exercise .
(a) Manner of Exercise . During the Term (the “Exercise Period”), this Warrant may be Exercised as to all or any lesser number of whole shares
of Common Stock covered hereby (the “Warrant Shares” or the “Shares”) upon surrender of this Warrant, with the Exercise Form attached
hereto as Exhibit A (the “Exercise Form”) duly completed and executed, together with the full Exercise Price for each share of Common Stock
as to which this Warrant is Exercised, at the office of the Company, Cryoport, Inc., 20382 Barrents Sea Circle, Lake Forest, California 92630;
Fax: (949) 470-2306, with an electronic copy (for
to:
stockadministrator@cryoport.com, or at such other office or agency as the Company may designate in writing, by overnight mail, with an
advance copy of the Exercise Form sent to the Company by facsimile (such surrender and payment of the Exercise Price hereinafter called the
“Exercise” of this Warrant).
informational purposes only, and not constituting delivery hereunder)
(b) Date of Exercise . The “Date of Exercise” of the Warrant shall be defined as the later of (A) the date that the Exercise Form attached hereto
as Exhibit A , completed and executed, is sent by facsimile or email to the Company, provided that the original Warrant and Exercise Form are
received by the Company, each as soon as practicable thereafter (or, the date the original Exercise Form is received by the Company, if Holder
has not sent advance notice by facsimile) and (B) the date that the Exercise Price is received by the Company.
(c) Delivery of Common Stock Upon Exercise . Within three (3) business days after any Date of Exercise, the Company shall issue and deliver
(or cause its Transfer Agent to issue and deliver) in accordance with the terms hereof to or upon the order of the Holder that number of shares of
Common Stock (“Exercise Shares”) for the portion of this Warrant exercised as shall be determined in accordance herewith. Upon the Exercise
of this Warrant or any part hereof, the Company shall, at its own cost and expense, take all necessary action, including obtaining and delivering
an opinion of counsel, to assure that the Transfer Agent shall issue stock certificates in the name of Holder (or its nominee) or such other persons
as designated by Holder and in such denominations to be specified at Exercise representing the number of shares of Common Stock issuable
upon such Exercise.
(d) Delivery Failure . In addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason
to effect delivery of the Exercise Shares by the end of the Delivery Period (a “Delivery Failure”), the Holder will be entitled to revoke all or part
of the relevant Exercise Form by delivery of a notice to such effect to the Company via facsimile or email not later than three (3) Trading Days
after the end of the Delivery Period, whereupon the Company and the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that the liquidated damages described herein shall be payable through the date notice of revocation or
rescission is given to the Company.
(e) Restrictive Legend . The Holder understands that the Exercise Shares will be issued pursuant to a claimed exemption from registration under
the Securities Act and thus the certificate for the Exercise Shares will bear a restrictive legend in substantially the following form (and a stop-
transfer order will be placed against transfer of the certificates for such securities):
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A
UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL SEC
INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”
(f) Cancellation of Warrant . This Warrant shall be canceled upon the full Exercise of this Warrant and if this Warrant is not Exercised in full,
Holder shall be entitled to receive a new Warrant (containing terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(g) Holder of Record . Each person in whose name any Warrant for shares of Common Stock is issued shall, for all purposes, be deemed to be
the Holder of record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery of the Common Stock purchased
upon the Exercise of this Warrant.
3. Payment of Warrant Exercise Price .
(a) Exercise Price . The Exercise Price (“Exercise Price”) shall initially equal $0.50 per share, subject to adjustment pursuant to the terms hereof,
including but not limited to Section 5 below. Payment of the Exercise Price may be made in cash, bank or cashier’s check or wire transfer.
(b) Dispute Resolution . In the case of a dispute as to the determination of the closing price or the Volume Weighted Average Price of the
Company’s Common Stock or the arithmetic calculation of the Exercise Price, Market Price or any Major Transaction Warrant Early
Termination Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) business days of
receipt, or deemed receipt, of the Exercise Notice or Major Transaction Early Termination Notice, or other event giving rise to such dispute, as
the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within two (2)
business days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2)
business days submit via facsimile (i) the disputed determination of the closing price or the Volume Weighted Average Price of the Company’s
Common Stock to an independent, reputable investment bank selected by the Company and approved by the Holder, which approval shall not be
unreasonably withheld or (ii) the disputed arithmetic calculation of the Exercise Price, Market Price or any Major Transaction Warrant Early
Termination Price to the Company’s independent, outside accountant. The Company shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) business
days from the time such investment bank or accountant, as the case may be, receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
4. Transfer Rights . Subject to the provisions of Section 8 of this Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon
such surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be entitled to receive a new Warrant or
Warrants as to the portion of this Warrant transferred, and Holder shall be entitled to receive a new Warrant as to the portion hereof retained.
5. Adjustments Upon Certain Events .
(a) Participation . The Holder, as the holder of this Warrant, shall be entitled to receive such dividends paid and distributions of any kind made
to the holders of Common Stock of the Company to the same extent as if the Holder had Exercised this Warrant into Common Stock (without
regard to any limitations on exercise herein or elsewhere and without regard to whether or not a sufficient number of shares are authorized and
reserved to effect any such exercise and issuance) and had held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common
Stock.
(b) Recapitalization or Reclassification . If the Company shall at any time effect a stock split, payment of stock dividend, recapitalization,
reclassification or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for
a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which Holder shall be entitled
to purchase upon Exercise of this Warrant shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in
the number of shares of Common Stock by reason of such stock split, payment of stock dividend, recapitalization, reclassification or similar
transaction, and the Exercise Price shall be, in the case of an increase in the number of shares, proportionally decreased and, in the case of
decrease in the number of shares, proportionally increased. The Company shall give Holder the same notice it provides to holders of Common
Stock of any transaction described in this Section 5(b).
(c) Rights Upon Major Transaction .
(i) Major Transaction . In the event that a Major Transaction (as defined below) occurs, then (1) in the case of a Cash-Out Major Transaction and
in the case of a Mixed Major Transaction to the extent of the percentage of the cash consideration in the Mixed Major Transaction (determined
in accordance with the definition of a Mixed Major Transaction below), the Holder, at its option, may require the Company to redeem the
Holder’s outstanding Warrants in accordance with Section 5(c)(iii) below, and (2) in the case of a transaction with a Publicly Traded Successor
Entity covered by the provisions of Section 5(c)(i)(A) below in which the Company is not the surviving entity (a “Successor Redemption
Transaction”) and in the case of a Mixed Major Transaction that is a Successor Redemption Transaction, to the extent of the percentage of the
consideration represented by securities of a Publicly Traded Successor Entity, the Holder may require this Warrant to be treated as a Successor
Redemption in accordance with Section 5(c)(iii) below. In the event the Holder shall not have exercised any of its rights under clauses (1) or (2)
above within the applicable time periods set forth herein, then the Major Transaction shall be treated as an Assumption (as defined below) in
accordance with Section 5(c)(ii) below unless the Holder waives its rights under this Section 5(c) with respect to such Major Transaction. Each
of the following events shall constitute a “Major Transaction”:
(A) a consolidation, merger, exchange of shares, recapitalization, reorganization, business combination or other similar event, (1) following
which the holders of Common Stock immediately preceding such consolidation, merger, exchange, recapitalization, reorganization, combination
or event either (a) no longer hold a majority of the shares of Common Stock or (b) no longer have the ability to elect a majority of the board of
directors of the Company or (2) as a result of which shares of Common Stock shall be changed into (or the shares of Common Stock become
entitled to receive) the same or a different number of shares of the same or another class or classes of stock or securities of another entity
(collectively, a “Change of Control Transaction”);
(B) the sale or transfer, in one transaction or in a series of related transactions, of significant assets of the Company which, without limitation,
shall include, but not be limited to, a sale or transfer, in one transaction or in a series of related transactions, of more than 50% of the Company’s
assets as reflected on its then latest publicly filed balance sheet (including proprietary rights), provided, however, that except for a sale of all or
substantially all of the Company’s assets, a collaborative arrangement, licensing agreement, joint venture or partnership or similar business
arrangement providing for the development or commercial exploitation or, or right to develop or commercially exploit, the technology,
intellectual property or products of the Company (including arrangements that involve the assignment or licensing of any existing or newly
developed intellectual property under such arrangements) whereby income or profits are to be shared (including by lump sum royalty or running
royalty) with any other entity shall not constitute a Major Transaction;
(C) a purchase, tender or exchange offer made to the holders of outstanding shares of Common Stock, such that following such purchase, tender
or exchange offer a Change of Control Transaction shall have occurred;
(D) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the occurrence of any analogous proceeding) affecting the Company;
or
(E) the shares of Common Stock cease to be listed, traded or publicly quoted on the OTCBB, and are not promptly re-listed or requoted on either
the New York Stock Exchange, the NYSE Alternext U.S., the NASDAQ Global Select Market, the NASDAQ Capital Market or listed in the
over the counter market by the Financial Industry Regulatory Authority, Inc. or in the “pink sheets” by the Pink OTC Market, Inc.
(ii) Assumption. The Company shall not enter into or be party to a Major Transaction that is to be treated as an Assumption pursuant to Section 5
(c)(i), unless (i) any Person purchasing the Company’s assets or Common Stock, or any successor entity resulting from such Major Transaction
(in each case, a “Successor Entity”), assumes in writing all of the obligations of the Company under this Warrant, and (ii) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Major Transaction, including agreements
to deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Warrants, including, without limitation, an instrument representing the appropriate number of
shares of the Successor Entity, having similar exercise rights as the Warrants (including but not limited to a similar Exercise Price and similar
Exercise Price adjustment provisions based on the price per share or conversion ratio to be received by the holders of Common Stock in the
Major Transaction), satisfactory to the Holder. Upon the occurrence of any Major Transaction, any Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Major Transaction, the provisions of this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company
under this Warrant with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the Major
Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise or redemption of this Warrant
at any time after the consummation of the Major Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other
property) issuable upon the exercise of the Warrants prior to such Major Transaction, such shares of common stock (or their equivalent) of the
Successor Entity, as adjusted in accordance with the provisions of this Warrant. The provisions of this Section shall apply similarly and equally
to successive Major Transactions and shall be applied without regard to any limitations on the exercise of this Warrant other than any applicable
beneficial ownership limitations. Any assumption of Company obligations under this paragraph shall be referred to herein as an “Assumption.”
(iii) Notice; Major Transaction Early Termination Right. At least thirty (30) days prior to the consummation of any Major Transaction, but, in
any event, on the first to occur of (x) the date of the public announcement of such Major Transaction if such announcement is made before 4:00
p.m., New York City time, or (y) the day following the public announcement of such Major Transaction if such announcement is made on and
after 4:00 p.m., New York City time, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a
“Major Transaction Notice”). At any time during the period beginning after the Holder’s receipt of a Major Transaction Notice and ending five
(5) Trading Days prior to the consummation of such Major Transaction (the “Early Termination Period”), the Holder may require the Company
to redeem (an “Early Termination Upon Major Transaction”) all or any portion of this Warrant (without taking into consideration the 9.98%
Cap) by delivering written notice thereof (“Major Transaction Early Termination Notice”) to the Company, which Major Transaction Early
Termination Notice shall indicate the portion of the principal amount (the “Early Termination Principal Amount”) of the Warrant that the Holder
is electing to have redeemed. The portion of this Warrant subject to early termination pursuant to this Section 5(c)(iii) (the “Redeemable
Shares”), shall be redeemed by the Company at a price (the “Major Transaction Warrant Early Termination Price”) payable in cash equal to the
Black Scholes Value of the Redeemable Shares determined by use of the Black Scholes Option Pricing Model using the criteria set forth in
Schedule 1 hereto (the “Black Scholes Value”).
At any time during the Early Termination Period, the Holder may require the Company to treat all or any portion of this Warrant eligible to be
treated as a Successor Redemption (without taking into consideration the 9.98% Cap) as a Successor Redemption by delivering written notice
thereof (a “Successor Redemption Notice”) to the Company, which Successor Redemption Notice shall indicate the portion of the principal
amount of the Warrant that the Holder is electing to have treated as a Successor Redemption. The portion of this Warrant subject to Successor
redemption pursuant to this Section 5(c)(iii) (the “Successor Redemption Shares”), shall be converted upon consummation of such Major
Transaction into the number of securities of the Successor Entity (the “Successor Redemption Shares”) that would be issuable under the terms of
such Major Transaction in respect of a number of shares of Common Stock equal to the Black Scholes Share Amount.
(iv) Escrow; Payment of Major Transaction Warrant Early Termination Price . Following the receipt of a Major Transaction Early Termination
Notice from the Holder, the Company shall not effect a Major Transaction that is being treated as an early termination unless (a) the definitive
documentation governing such Major Transaction provides that it shall be a condition precedent to the consummation of such Major Transaction
that the Holder be issued or paid, as the case may be, an amount in shares of Common Stock or cash, as applicable, equal to the Major
Transaction Warrant Early Termination Price and/or applicable Exercise Shares or (b) it shall first place into an escrow account with an
independent escrow agent, at least three (3) business days prior to the closing date of the Major Transaction (the “Major Transaction Escrow
Deadline”), an amount in shares of Common Stock (or irrevocable instructions to the Transfer Agent to issue such shares) or cash, as applicable,
equal to the Major Transaction Warrant Early Termination Price and/or applicable Exercise Shares. Concurrently upon closing of such Major
Transaction, the Company shall pay or shall instruct the escrow agent to pay the Major Transaction Warrant Early Termination Price and/or to
deliver the applicable Exercise Shares to the Holder. For purposes of determining the amount required to be placed in escrow pursuant to the
provisions of this subsection (iv) and without affecting the amount of the actual Major Transaction Warrant Early Termination Price and/or
applicable Exercise Shares, the calculation of the price referred to in clause (1) of the first column of Schedule 1 hereto with respect to Stock
Price shall be determined based on the Closing Market Price (as defined on Schedule I) of the Common Stock on the Trading Day immediately
preceding the date that the funds and/or applicable Exercise Shares, as applicable, are deposited with the escrow agent.
Following the receipt of a Successor Redemption Notice, the Company shall not effect the applicable Major Transaction unless the definitive
documentation governing such Major Transaction includes an obligation by the Successor Entity to issue the Successor Redemption Shares to
the Holder upon consummation of the Major Transaction and designates the Holder as an express third party beneficiary of such obligation.
(v) Injunction . Following the receipt of a Major Transaction Early Termination Notice from the Holder, in the event that the Company attempts
to consummate a Major Transaction without either placing the Major Transaction Warrant Early Termination Price or applicable Exercise
Shares, as applicable, in escrow in accordance with subsection (iv) above or without payment of the Major Transaction Warrant Early
Termination Price or issuance of the applicable Exercise Shares, as applicable, to the Holder prior to consummation of such Major Transaction,
or without providing for the issuance of Successor Redemption Shares in accordance with Section 5(c) above, as applicable, the Holder shall
have the right to apply for an injunction in any state or federal courts sitting in the City of New York, borough of Manhattan to prevent the
closing of such Major Transaction until the Major Transaction Warrant Early Termination Price is paid to the Holder, in full, the applicable
Exercise Shares are delivered or the issuance of the Successor Redemption Shares is provided for, as applicable.
An early termination required by this Section 5(c) shall be made in accordance with the provisions of Section 12 and shall have priority to
payments to holders of Common Stock in connection with a Major Transaction to the extent an early termination required by this Section 5(c)
(iii) are deemed or determined by a court of competent jurisdiction to be prepayments of the Warrant by the Company, such early termination
shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5, until the Major Transaction Warrant
Early Termination Price is paid in full or the Successor Redemption Shares are fully issued, as applicable, this Warrant may be exercised, in
whole or in part, by the Holder into shares of Common Stock, or in the event the Exercise Date is after the consummation of the Major
Transaction or in the event of a Successor Redemption, shares of publicly traded common stock (or their equivalent) of the Successor Entity
pursuant to Section 5(c). The parties hereto agree that in the event of the Company’s early termination of any portion of the Warrant under this
Section 5(c), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates
and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any premium due under this
Section 5(c) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty.
For purposes hereof:
“Cash-Out Major Transaction” means a Major Transaction in which the consideration payable to holders of Common Stock in connection with
the Major Transaction consists solely of cash.
“Eligible Market” means the OTCBB, the New York Stock Exchange, Inc., the NYSE Arca, the NASDAQ Capital Market, the NASDAQ
Global Market, the NASDAQ Global Select Market or the NYSE Alternext U.S.
“Mixed Major Transaction” means a Major Transaction in which the consideration payable to the shareholders of the Company consists partially
of cash and partially of securities of a Successor Entity. If the Successor Entity is a Publicly Traded Successor Entity, the percentage of
consideration represented by securities of such Successor Entity shall be equal to the percentage that the value of the aggregate anticipated
number of shares of the Publicly Traded Successor Entity to be issued to holders of Common Stock of the Company represents in comparison to
the aggregate value of all consideration, including cash consideration, in such Mixed Major Transaction, as such values are set forth in any
definitive agreement for the Mixed Major Transaction that has been executed at the time of the first public announcement of the Major
Transaction or, if no such value is determinable from such definitive agreement, based on the closing market price for shares of the Publicly
Traded Successor Entity on its principal securities exchange on the Trading Day preceding the first public announcement of the Mixed Major
Transaction. If the Successor Entity is a Private Successor Entity, the percentage of consideration represented by securities of such Successor
Entity shall be determined in good-faith by the Company's Board of Directors
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of a Major Transaction.
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.
“Private Successor Entity” means a Successor Entity that is not a Publicly Traded Successor Entity.
“Publicly Traded Successor Entity” means a Successor Entity that is a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market (as defined above).
“Successor Entity” means any Person purchasing the Company’s assets or Common Stock, or any successor entity resulting from such Major
Transaction, or if the Warrant is to be exercisable for shares of capital stock of its Parent Entity (as defined above), its Parent Entity.
(d) Exercise Price Adjusted . As used in this Warrant, the term “Exercise Price” shall mean the purchase price per share specified in Section 3(a)
of this Warrant, until the occurrence of an event stated in this Section 5 or otherwise set forth in this Warrant, and thereafter shall mean said
price as adjusted from time to time in accordance with the provisions of said subsection. No adjustment made pursuant to any provision of this
Section 5 shall have the net effect of increasing the aggregate Exercise Price in relation to the split adjusted and distribution adjusted price of the
Common Stock.
(e) Adjustments: Additional Shares, Securities or Assets . In the event that at any time, as a result of an adjustment made pursuant to this
Section 5 or otherwise, Holder shall, upon Exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares
and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from
time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5.
(f) Notice of Adjustments . Whenever the Exercise Price is adjusted pursuant to the terms of this Warrant, the Company shall promptly mail to
the Holder a notice (an “Exercise Price Adjustment Notice”) setting forth the Exercise Price after such adjustment and setting forth a statement
of the facts requiring such adjustment. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like
Warrant setting forth (i) such adjustment or readjustment, (ii) the Exercise Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time would be received upon Exercise of the Warrant. For purposes of
clarification, whether or not the Company provides an Exercise Price Adjustment Notice pursuant to this Section 5(f), upon the occurrence of
any event that leads to an adjustment of the Exercise Price, the Holder would be entitled to receive a number of Exercise Shares based upon the
new Exercise Price, as adjusted, for exercises occurring on or after the date of such adjustment, regardless of whether the Holder accurately
refers to the adjusted Exercise Price in the Exercise Form.
6. Fractional Interests .
No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
Holder may purchase only a whole number of shares of Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon Exercise shall be the next higher whole number of shares.
7. Reservation of Shares .
From and after the date hereof, the Company shall at all times reserve for issuance such number of authorized and unissued shares of Common
Stock (or other securities substituted therefor as herein above provided) as shall be sufficient for the Exercise of this Warrant and payment of the
Exercise Price. If at any time the number of shares of Common Stock authorized and reserved for issuance is below the number of shares
sufficient for the Exercise of this Warrant (a “Share Authorization Failure”) (based on the Exercise Price in effect from time to time), the
Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation,
calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations under this Section 7, in the case of an
insufficient number of authorized shares, and using its best efforts to obtain stockholder approval of an increase in such authorized number of
shares. The Company covenants and agrees that upon the Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise
shall be duly and validly issued, fully paid and nonassessable and not subject to preemptive rights, rights of first refusal or similar rights of any
Person.
8. Restrictions on Transfer .
(a) Registration or Exemption Required . This Warrant has been issued in a transaction exempt from the registration requirements of the
Securities Act by virtue of Regulation D and exempt from state registration or qualification under applicable state laws. None of the Warrant or
the Exercise Shares may be pledged, transferred, sold, assigned, hypothecated or otherwise disposed of except pursuant to an effective
registration statement or an exemption to the registration requirements of the Securities Act and applicable state laws including, without
limitation, a so-called “4(1) and a half” transaction.
(b) Assignment . Should the Holder desire to sell, transfer, assign, pledge, hypothecate or otherwise dispose of this Warrant, in whole or in part;
the Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B , indicating the
Person or Persons to whom the Warrant is requested to be assigned and the respective number of Warrant Shares to be assigned to each assignee.
The Company may permit the assignment upon such reasonable conditions as the Company may require, including the delivery to the Company
of an acceptable opinion of counsel as to the assignment’s qualification for an exemption from registration. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Holder.
(c) Representations of the Holder. The right to acquire Common Stock or the Common Stock issuable upon exercise of the Holder’s rights
contained herein will be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Holder has no present
intention of selling, transferring, assigning, pledging, hypothecating or otherwise disposing of this Warrant in any public distribution of the same
except pursuant to a registration or exemption. Holder is an “accredited investor” within the meaning of the Securities and Exchange
Commission’s Rule 501 of Regulation D, as presently in effect. The Holder understands (i) that the Common Stock issuable upon exercise of the
Holder’s rights contained herein is not registered under the Securities Act or qualified under applicable state securities laws on the ground that
the issuance contemplated by this Warrant will be exempt from the registration and qualifications requirements thereof and (ii) that the
Company’s reliance on such exemption is predicated on the representations set forth in this Section 8(c). The Holder has such knowledge and
experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the
economic risks of its investment.
9. Noncircumvention .
The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
10. Benefits of this Warrant .
Nothing in this Warrant shall be construed to confer upon any person other than the Company and Holder any legal or equitable right, remedy or
claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and Holder.
11. Governing Law .
All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in Los Angeles, California. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in such city for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
12. Loss of Warrant .
Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver a new Warrant of like tenor and date.
13. Notice or Demands .
Notices or demands pursuant to this Warrant to be given or made by Holder to or on the Company shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and addressed, until another address is designated in writing by the
Company, to the address set forth in Section 2(a) above. Notices or demands pursuant to this Warrant to be given or made by the Company to or
on Holder shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company’s records, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the _____ day of ______, 2013.
CRYOPORT, INC .
By:
Title:
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: [ ]
(cid:1) Exercise
The undersigned hereby irrevocably exercises the attached warrant (the “Warrant”) with respect to shares of Common Stock (the “Common
Stock”) of Cryoport, Inc., a Nevada corporation (the “Company”).
The undersigned hereby encloses $____ as payment of the Exercise Price.
1. The undersigned requests that any stock certificates for such shares be issued and, if applicable, a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at the address set forth below.
2. Capitalized terms used but not otherwise defined in this Exercise Form shall have the meaning ascribed thereto in the Warrant.
Dated: _______________
Signature
Print Name
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the “Warrant”) hereby sells, assigns and transfers unto the person or
persons below named the right to purchase __________ shares of the Common Stock of Cryoport, Inc., a Nevada corporation, evidenced by the
attached Warrant and does hereby irrevocably constitute and appoint __________ attorney to transfer the said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: _______________
Fill in for new registration of Warrant:
Signature
Name
Address
Please print name and address of assignee
(including zip code number)
NOTICE
The signature to the foregoing Assignment must correspond to the name as written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
Remaining Term
Interest Rate
Volatility
Schedule 1
Black-Scholes Value
Calculation Under Section 5(c)(iii)
Number of calendar days from date of public announcement of the Major Transaction after
commencement of the Exercise Period until the last date on which the Warrant may be exercised.
A risk-free interest rate corresponding to the US$ LIBOR/Swap rate for a period equal to the Remaining
Term.
If the first public announcement of the Major
Transaction is made at or prior to 4:00 p.m., New
York City time, the arithmetic mean of the historical
volatility for the 10, 30 and 50 Trading Day periods
ending on the date of such first public
announcement, obtained from the HVT or similar
function on Bloomberg.
If the first public announcement of the Major
Transaction is made after 4:00 p.m., New York City
time, the arithmetic mean of the historical volatility for the
10, 30 and 50 Trading Day periods ending on the
next succeeding Trading Day following the date of
such first public announcement, obtained from the
HVT or similar function on Bloomberg.
Stock Price
The greater of (1) the closing price of the Common Stock on the OTCBB, or, if that is not the principal
trading market for the Common Stock, such principal market on which the Common Stock is traded or
listed (the “Closing Market Price”) on the trading day immediately preceding the date on which a Major
Transaction is consummated, (2) the first Closing Market Price following the first public announcement
of a Major Transaction, or (3) the Closing Market Price as of the date immediately preceding the first
public announcement of the Major Transaction.
Dividends
Strike Price
Zero.
Exercise Price as defined in section 3(a).
12
Exhibit 10.34
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN
SUBSCRIPTION AGREEMENT AND LETTER OF INVESTMENT INTENT
The undersigned hereby tenders this subscription and applies for the purchase of Units, consisting of a share of Class A Convertible
Preferred Stock and a Warrant for the purchase of Common Stock (“the Securities ”) of Cryoport, Inc. (the “ Company ”), in the amount
indicated on the signature page hereof, upon the terms and conditions set forth below.
Subscription payment is by:
_____
_____
A check in the amount of the subscription payable to “Cryoport Escrow”
A wire transfer in the amount of the subscription sent to:
Receiving Bank:
Address:
United Bankers Bank
1650 W 82 nd Street
Bloomington, MN 55431
United Bankers Bank Routing/ABA # 091001322
To Credit:
Address:
Signature Bank
9800 Bren Road E Suite 200
Minnetonka, MN 55343
Account Number:
2503167
Final Credit:
Account name:
Account #
Cryoport Escrow
10062378
The undersigned understands that the Company has the right to reject any subscription for the Securities for any reason and that the
Company will cause to be returned the funds delivered herewith if this subscription is rejected. By execution below, the undersigned
acknowledges that the Company is relying upon the accuracy and completeness of the representations contained herein in complying with its
obligations under applicable securities laws.
1. Subscription .
(a)
Subject to the terms and conditions of this subscription agreement and letter of investment intent (the “ Subscription
Agreement ”), the undersigned hereby irrevocably subscribes for the Securities for the aggregate purchase price set forth on the
signature page hereto, which is payable as indicated above. The purchase price for one share of Class A Convertible Preferred
Stock and a warrant to purchase eight shares of Common Stock at an exercise price of $0.50 per share (the “ Warrant ”) shall
equal $12.00 (the “ Per Unit Purchase Price ”). No fractional shares will be issued. If the subscription amount yields a
fractional share of 0.5 or more, the number of shares will be rounded up and all other fractional shares will be rounded down.
(b)
(c)
(d)
The Class A Convertible Preferred Stock will be issued pursuant to the terms and conditions set forth in the certificate of
designation (“ Certificate of Designation ”) that will be filed with the Secretary of State of Nevada on or before the first
closing in connection with the offering of the Securities. The Warrant will be issued pursuant to the terms and conditions
contained in the Warrant Agreement (the “ Warrant Agreement ”).
If the Company accepts this subscription, closing shall take place at such date, time, and location as determined by the
Company. In the discretion of the Company, there may be more than one closing in connection with the offering of the
Securities. The Securities sold in a subsequent closing, if any, shall be sold at the same Per Unit Purchase Price as the
Securities sold in the initial closing.
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE OR ANY OTHER JURISDICTION. THERE ARE FURTHER RESTRICTIONS ON THE
TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN. THE PURCHASE OF THE SECURITIES
INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN BEAR
THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT.
2. Subscribers Representations . The undersigned acknowledges and represents as follows:
(a)
(b)
(c)
The undersigned has received, and is familiar with the Company’s Private Placement Memorandum dated March 5, 2014, the
Certificate of Designation, the Warrant Agreement, and the publicly available filings by the Company with the Securities Exchange
Commission (collectively the “ Disclosure Documents ”).
The undersigned is in a financial position to hold the Securities for an indefinite period of time and is able to bear the economic risk and
withstand a complete loss of its investment in the Securities.
The undersigned believes it, either alone or with the assistance of its professional advisor, has such knowledge and experience in
financial and business matters that it is capable of reading and interpreting the Disclosure Documents and evaluating the merits and
risks of the prospective investment in the Securities and has the net worth to undertake such risks.
2
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
The undersigned has obtained, to the extent it deems necessary, professional advice with respect to the risks inherent in the investment
in the Securities, and the suitability of the investment in the Securities in light of its financial condition and investment needs.
The undersigned believes that the investment in the Securities is suitable for it based upon its investment objectives and financial needs,
and the undersigned has adequate means for providing for its current financial needs and contingencies and has no need for liquidity of
investment with respect to the Securities.
The undersigned understands that no public market for the Securities exists, or is likely to develop, and that it may not be possible to
liquidate this investment readily, if at all, in the case of an emergency or for any other reason.
The undersigned recognizes that an investment in the Securities involves a high degree of risk.
The undersigned realizes that (1) the purchase of the Securities and the shares into which they may be exchanged is a long-term
investment, (2) the purchaser of the Securities must bear the economic risk of investment for an indefinite period of time because the
Securities and any such shares that may be issued upon exercise of the Warrant will not have been registered under the Securities Act of
1933 and, therefore, cannot be sold unless they are subsequently registered under said Act or an exemption from such registration is
available and (3) the transferability of the Securities and such shares is restricted pending effectiveness of such a registration of
qualification for an exemption.
The undersigned has been advised that the offering and issuance of Securities and any exchange of the Securities will not be registered
under the Securities Act of 1933 or the relevant state securities laws but are being offered and issued pursuant to exemptions from such
laws and that the Company’s reliance upon such exemptions is predicated in part on the undersigned’s representations as contained
herein. The undersigned represents and warrants that the Securities are being purchased for the undersigned’s own account and for
investment and without the intention of reselling or redistributing the same, that it has made no agreement with others regarding any of
such Securities and that its financial condition is such that it is not likely that it will be necessary to dispose of any of the Securities in
the foreseeable future.
The undersigned represents and warrants that it is a bona fide resident of, and is domiciled in the state indicated on the signature page
below under “Address”, and that the Securities are being purchased by it in its name solely for its own beneficial interest and not as
nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any other person, trust or organization.
The undersigned understands that the representations contained below are made for the purpose of qualifying it is an “accredited
investor” as that term is defined in Regulation D of the General Rules and Regulations under the Securities Act of 1933 and for the
purpose of inducing a sale of securities to it. The undersigned hereby represents that the statement or statements initialled below are true
and correct in all respects. The undersigned understands that a false representation may constitute a violation of law, and that any
person who suffers damage as a result of a false representation may have a claim against the undersigned for damages.
3
(l)
The undersigned understands that certificates evidencing the Securities may bear the following or any similar legend (in addition to any
other legends that may be required):
(i) “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(ii) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by
such state authority.
(m)
(n)
(o)
The undersigned represents and warrants that it did not learn of the investment in the Securities as a result of any general solicitation or
general advertising.
Since the date on which undersigned first learned about the investment opportunity, the undersigned has not disclosed any information
regarding such opportunity to any third parties (other than its affiliates and legal, accounting and other advisors who are bound by
agreements or duties of confidentiality) and has not engaged in any purchases or sales involving the securities of the Company
(including, without limitation, any short sales involving the Company’s securities). The undersigned agrees that it will not engage in
any purchases or sales involving the securities of the Company (including short sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed. The undersigned agrees that it will not use any of the Securities acquired
pursuant to this Subscription Agreement to cover any short position in the Common Stock if doing so would be in violation of
applicable securities laws. For purposes hereof, “short sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the 1934 Act, whether or not against the box, and all types of direct and indirect stock
pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under
the 1934 Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers.
The undersigned acknowledges that prior to acquiring the Securities, the undersigned has been provided with financial and other written
information about the Company and the terms and conditions of the offering. The undersigned has been given the opportunity by the
Company to obtain such information and ask such questions concerning the Company, the Securities and the undersigned’s investment
as the undersigned felt necessary, and to the extent the undersigned took such opportunity, the Purchaser received satisfactory
information and answers. If the undersigned requested any additional information which the Company possessed or could acquire
without unreasonable effort or expense which was necessary to verify the accuracy of the financial and other written information
furnished to the undersigned by the Company, such additional information was provided to the undersigned and was satisfactory.
4
3. Accredited Investor Status . The undersigned is an “accredited investor” within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended (the “ Act ”). The specific category or categories of “accredited investor” applicable to the undersigned are as follows:
(a)
Accredited individual investors must initial either or both of the following two statements:
_____ (1)
_____ (2)
I certify that I am an accredited investor because I had individual income (exclusive of any income attributable to my spouse) of
more than $200,000 in each of the most recent two years or joint income with my spouse of more than $300,000 in each of such
years and I reasonably expect to have an individual income in excess of such amounts for the current year.
I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a combined individual
net worth, in excess of $1,000,000. For purposes of this questionnaire, “net worth” excludes the equity in my or our primary
residence.
(b)
Accredited partnerships, corporations or other entities must initial one or more of the following statements, and must initial the last
statement:
_____ (1)
The undersigned hereby certifies that all of the beneficial equity owners of the undersigned qualify as accredited individual
investors under items (a)(1) or (a)(2) above. (Subscribers attempting to qualify under this item may be required to provide
additional information beyond the equity owner of the Subscriber)
_____ (2)
The undersigned is a bank or savings and loan association as defined in Sections 3(a)(2) and 3(a)(5)(A), respectively, of the Act
acting either in its individual or fiduciary capacity.
_____ (3)
The undersigned is an insurance company as defined in Section 2(a)(13) of the Act.
_____ (4)
The undersigned is an investment company registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act.
_____ (5)
This Agreement has been duly authorized by all necessary action on the part of the undersigned, has been duly executed by an
authorized officer or representative of the undersigned, and is a legal, valid and binding obligation of the undersigned enforceable
in accordance with its terms.
5
Subscription Amount : $ ______________
Number of Units : ______________
Manner in which title to the Class A Convertible Preferred Stock and Warrants are to be held (please initial one):
_____ Individual
_____ Community Property
_____ Corporation
_____ IRA
_____ SEP/SIMPLE
_____ Partnership
_____ Joint tenants with Right of Survivorship
_____ Tenants-in-Common
_____ Trust
_____ Qualified Retirement Plans
_____ LLC
_____ Other
IN WITNESS WHEREOF, the undersigned has executed
this Subscription Agreement this ________ ___, 2014
______________________________
______________________________
Name : ______________________________
Name : ______________________________
* * * * * * * *
6
PLEASE PRINT BELOW THE REGISTRATION
INFORMATION OF EACH SUBSCRIBER
SUBSCRIBER (INDIVIDUAL and JOINT)
(Please type or print name[s] exactly as it should appear on the
Certificate)
ENTITY
(Please type or print name[s] exactly as it should appear on the
Certificate)
Name(s) Typed or Printed
Name Typed or Printed
Daytime Phone
Email Address
Business Phone
Email Address
Address to Which Correspondence Should be Directed:
Address to Which Correspondence Should be Directed:
Social Security Number
Rep #
Name Person to Contact
Entity’s Taxpayer Identification Number
(for use by Selling Agent)
Subscription Approved by Principal
__________________________ on ____/____/2014
7
Exhibit 10.35
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN
ELECTION TO CONVERT AND LETTER OF INVESTMENT INTENT
The undersigned hereby tenders this Election to Convert and applies for the conversion of that portion (the “ Conversion Amount ”) of
the principal and accrued interest outstanding under the Convertible Promissory Note(s) indicated on the signature page hereof (the “ Note ”)
into Units, consisting of a share of Class A Convertible Preferred Stock and a Warrant for the purchase of Common Stock (“the Securities ”) of
Cryoport, Inc. (the “ Company ”), pursuant to the terms of the Note and upon the terms and conditions set forth below.
In connection with the conversion of the Note, the undersigned hereby assigns, transfers, conveys, surrenders, and releases to the
Company the Conversion Amount of the Note. Concurrently with delivery of this Election to Convert, the undersigned shall deliver to the
Company the original Note for cancellation, which Note will be cancelled upon Company’s acceptance of this Election to Convert. If the
undersigned elects to convert less than the entire principal and accrued interest outstanding under the Note, then the Company will issue a
replacement Note for the remaining amount; provided, that such replacement Note will not have the right to convert into the Securities in
connection with this this offering.
The undersigned understands that this election will not become effective unless and until the first closing of the offering of the
Securities and that the Company will cause to be returned the Note delivered herewith if such closing does not occur. By execution below, the
undersigned acknowledges that the Company is relying upon the accuracy and completeness of the representations contained herein in
complying with its obligations under applicable securities laws.
1. Conversion .
(a)
(b)
Subject to the terms and conditions of this Election to Convert, the undersigned hereby irrevocably elects to convert the
Conversion Amount of the Note for the Securities. The conversion price for one share of Class A Convertible Preferred Stock
and a warrant to purchase eight shares of Common Stock at an exercise price of $0.50 per share (the “ Warrant ”) shall equal
$10.80 (the “ Conversion Price ”). No fractional shares will be issued. If the conversion amount yields a fractional share of 0.5
or more, the number of shares will be rounded up and all other fractional shares will be rounded down.
The Class A Convertible Preferred Stock will be issued pursuant to the terms and conditions set forth in the certificate of
designation (“ Certificate of Designation ”) that will be filed with the Secretary of State of Nevada on or before the first
closing in connection with the offering of the Securities.
1
(c)
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE OR ANY OTHER JURISDICTION. THERE ARE FURTHER RESTRICTIONS ON THE
TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN. THE ACQUISITION OF THE SECURITIES
INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN BEAR
THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT.
2. Representations . The undersigned acknowledges and represents as follows:
(a)
(b)
(c)
(d)
(e)
(f)
The undersigned has received, and is familiar with the Company’s Private Placement Memorandum dated March 5, 2014, the
Certificate of Designation, the Warrant Agreement and the publicly available filings by the Company with the Securities Exchange
Commission (collectively the “ Disclosure Documents ”).
The undersigned is in a financial position to hold the Securities for an indefinite period of time and is able to bear the economic risk and
withstand a complete loss of its investment in the Securities.
The undersigned believes it, either alone or with the assistance of its professional advisor, has such knowledge and experience in
financial and business matters that it is capable of reading and interpreting the Disclosure Documents and evaluating the merits and
risks of the prospective investment in the Securities and has the net worth to undertake such risks.
The undersigned has obtained, to the extent it deems necessary, professional advice with respect to the risks inherent in the investment
in the Securities, and the suitability of the investment in the Securities in light of its financial condition and investment needs.
The undersigned believes that the investment in the Securities is suitable for it based upon its investment objectives and financial needs,
and the undersigned has adequate means for providing for its current financial needs and contingencies and has no need for liquidity of
investment with respect to the Securities.
The undersigned understands that no public market for the Securities exists, or is likely to develop, and that it may not be possible to
liquidate this investment readily, if at all, in the case of an emergency or for any other reason.
(g)
The undersigned recognizes that an investment in the Securities involves a high degree of risk.
(h)
The undersigned realizes that (1) the conversion of the Note for the Securities and the shares into which they may be exchanged is a
long-term investment, (2) the undersigned must bear the economic risk of investment for an indefinite period of time because the
Securities and any such shares that may be issued upon exercise of the Warrant will not have been registered under the Securities Act of
1933 and, therefore, cannot be sold unless they are subsequently registered under said Act or an exemption from such registration is
available and (3) the transferability of the Securities and such shares is restricted pending effectiveness of such a registration of
qualification for an exemption.
(i)
(j)
(k)
The undersigned has been advised that the offering and issuance of Securities and any exchange of the Securities will not be registered
under the Securities Act of 1933 or the relevant state securities laws but are being offered and issued pursuant to exemptions from such
laws and that the Company’s reliance upon such exemptions is predicated in part on the undersigned’s representations as contained
herein. The undersigned represents and warrants that the Securities are being acquired for the undersigned’s own account and for
investment and without the intention of reselling or redistributing the same, that it has made no agreement with others regarding any of
such Securities and that its financial condition is such that it is not likely that it will be necessary to dispose of any of the Securities in
the foreseeable future.
The undersigned represents and warrants that it is a bona fide resident of, and is domiciled in the state indicated on the signature page
below under “Address”, and that the Securities are being acquired by it in its name solely for its own beneficial interest and not as
nominee for, or on behalf of, or for the beneficial interest of, or with the intention to transfer to, any other person, trust or organization.
The undersigned understands that the representations contained below are made for the purpose of qualifying it is an “accredited
investor” as that term is defined in Regulation D of the General Rules and Regulations under the Securities Act of 1933 and for the
purpose of inducing a sale of securities to it. The undersigned hereby represents that the statement or statements initialled below are true
and correct in all respects. The undersigned understands that a false representation may constitute a violation of law, and that any
person who suffers damage as a result of a false representation may have a claim against the undersigned for damages.
(l)
The undersigned understands that certificates evidencing the Securities may bear the following or any similar legend (in addition to any
other legends that may be required):
(i) “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(ii) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by
such state authority.
(m)
The undersigned represents and warrants that it did not learn of the investment in the Securities as a result of any general solicitation or
general advertising.
(n)
(o)
Since the date on which undersigned first learned about the investment opportunity, the undersigned has not disclosed any information
regarding such opportunity to any third parties (other than its affiliates and legal, accounting and other advisors who are bound by
agreements or duties of confidentiality) and has not engaged in any purchases or sales involving the securities of the Company
(including, without limitation, any short sales involving the Company’s securities). The undersigned agrees that it will not engage in
any purchases or sales involving the securities of the Company (including short sales) prior to the time that the transactions
contemplated by this Election to Convert are publicly disclosed. The undersigned agrees that it will not use any of the Securities
acquired pursuant to this Election to Convert to cover any short position in the Common Stock if doing so would be in violation of
applicable securities laws. For purposes hereof, “short sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the 1934 Act, whether or not against the box, and all types of direct and indirect stock
pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under
the 1934 Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers.
The undersigned acknowledges that prior to acquiring the Securities, the undersigned has been provided with financial and other written
information about the Company and the terms and conditions of the offering. The undersigned has been given the opportunity by the
Company to obtain such information and ask such questions concerning the Company, the Securities and the undersigned’s investment
as the undersigned felt necessary, and to the extent the undersigned took such opportunity, the undersigned received satisfactory
information and answers. If the undersigned requested any additional information which the Company possessed or could acquire
without unreasonable effort or expense which was necessary to verify the accuracy of the financial and other written information
furnished to the undersigned by the Company, such additional information was provided to the undersigned and was satisfactory.
3. Accredited Investor Status . The undersigned is an “accredited investor” within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended (the “ Act ”). The specific category or categories of “accredited investor” applicable to the undersigned are as follows:
(a)
Accredited individual investors must initial either or both of the following two statements:
_____ (1)
_____ (2)
I certify that I am an accredited investor because I had individual income (exclusive of any income attributable to my spouse) of
more than $200,000 in each of the most recent two years or joint income with my spouse of more than $300,000 in each of such
years and I reasonably expect to have an individual income in excess of such amounts for the current year.
I certify that I am an accredited investor because I have an individual net worth, or my spouse and I have a combined individual
net worth, in excess of $1,000,000. For purposes of this questionnaire, “net worth” excludes the equity in my or our primary
residence.
(b)
Accredited partnerships, corporations or other entities must initial one or more of the following statements, and must initial the last
statement:
_____ (1)
The undersigned hereby certifies that all of the beneficial equity owners of the undersigned qualify as accredited individual
investors under items (a)(1) or (a)(2) above. (Those attempting to qualify under this item may be required to provide additional
information beyond the equity owner of the entity)
_____ (2)
The undersigned is a bank or savings and loan association as defined in Sections 3(a)(2) and 3(a)(5)(A), respectively, of the Act
acting either in its individual or fiduciary capacity.
_____ (3)
The undersigned is an insurance company as defined in Section 2(a)(13) of the Act.
_____ (4)
The undersigned is an investment company registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act.
_____ (5)
The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities,
and the undersigned is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Act.
_____ (6)
The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of
1940.
_____ (7)
This Election to Convert has been duly authorized by all necessary action on the part of the undersigned, has been duly executed
by an authorized officer or representative of the undersigned, and is a legal, valid and binding obligation of the undersigned
enforceable in accordance with its terms.
Conversion Amount with respect to the following Convertible Promissory Note(s)
Convertible Promissory Note dated as of _______________, 20__, with an original principal amount of $______________.
Check one:
_____ Elect to convert all principal and accrued interest currently outstanding
_____ Elect to convert ___% of the principal and ___% of the accrued interest currently outstanding
Convertible Promissory Note dated as of _______________, 20__, with an original principal amount of $______________.
Check one:
_____ Elect to convert all principal and accrued interest currently outstanding
_____ Elect to convert ___% of the principal and ___% of the accrued interest currently outstanding
Convertible Promissory Note dated as of _______________, 20__, with an original principal amount of $______________.
Check one:
_____ Elect to convert all principal and accrued interest currently outstanding
_____ Elect to convert ___% of the principal and ___% of the accrued interest currently outstanding
Manner in which title to the Class A Convertible Preferred Stock and Warrants are to be held (please initial one):
_____ Individual
_____ Community Property
_____ Corporation
_____ IRA
_____ SEP/SIMPLE
_____ Partnership
_____ Joint tenants with Right of Survivorship
_____ Tenants-in-Common
_____ Trust
_____ Qualified Retirement Plans
_____ LLC
_____ Other
IN WITNESS WHEREOF, the undersigned has executed
this Subscription Agreement this ________ ___, 2014
______________________________
______________________________
Name : ______________________________
Name : ______________________________
* * * * * * * *
6
PLEASE PRINT BELOW THE REGISTRATION
INFORMATION OF EACH INDIVIDUAL OR ENTITY ELECTING TO CONVERT
INDIVIDUAL and JOINT
(Please type or print name[s] exactly as it should appear on the
Certificate)
ENTITY
(Please type or print name[s] exactly as it should appear on the
Certificate)
Name(s) Typed or Printed
Name Typed or Printed
Daytime Phone
Email Address
Business Phone
Email Address
Address to Which Correspondence Should be Directed:
Address to Which Correspondence Should be Directed:
Social Security Number
Rep #
Name Person to Contact
Entity’s Taxpayer Identification Number
(for use by Selling Agent)
Conversion Approved by Principal
__________________________ on ____/____/2014
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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 25, 2014
(which includes an explanatory paragraph regarding Cryoport, Inc.’s ability to continue as a going concern), 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, 2014 and
2013.
Exhibit 23.1
/s/ KMJ Corbin & Company LLP
Costa Mesa, California
June 25, 2014
EXHIBIT 31.1
I, Jerrell W. Shelton, certify that:
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
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.
Date: June 25, 2014
/s/ JERRELL W. SHELTON
JERRELL W. SHELTON
Chief Executive Officer and Director
(Principal Executive Officer)
I, Robert S. Stefanovich, certify that:
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
1.
I have reviewed this Annual Report on Form 10-K of Cryoport, Inc.;
EXHIBIT 31.2
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.
Date: June 25, 2014
/s/ ROBERT S. STEFANOVICH
Robert S. Stefanovich
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
EXHIBIT 32.1
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cryoport,
Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended March 31, 2014 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: June 25, 2014
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended.
/s/ JERRELL W. SHELTON
Jerrell W. Shelton
Chief Executive Officer and Director
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
EXHIBIT 32.2
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cryoport,
Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended March 31, 2014 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: June 25, 2014
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended.
/s/ ROBERT S. STEFANOVICH
Robert S. Stefanovich
Chief Financial Officer