In the event that we consummate this offering for minimum gross
proceeds of $10,000,000 and comply with certain other provisions of the 2010
Amendment, then the foregoing limitations and covenants will terminate following
consummation of this offering.
If our common stock and warrants are approved for listing on the
NASDAQ Capital Market, there is no guarantee that we will be able to maintain
such listing for any period of time by perpetually satisfying NASDAQ's continued
listing requirements.
The following table provides information regarding the compensation
earned during fiscal years 2009 and 2008 by our named executive officers:
The following table sets forth certain information regarding equity
awards granted to our named executive officers as of March 31, 2009:
The 2002
Plan, which was approved by CryoPort’s stockholders in October 2002, allows for
the grant of options to purchase up to 500,000 shares (after giving effect
to the anticipated 10-to-1 reverse stock split) of CryoPort’s common stock. The
2002 Plan provides for the granting of options to purchase shares of CryoPort’s
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.
During
fiscal 2009, CryoPort issued 8,269 shares of common stock resulting from
exercises of stock options issued pursuant to the 2002 Plan at an average price
of $0.40 per share for proceeds of $3,307 and issued 15,002 shares of
common stock from the cashless exercises of a total of 15,750 stock options
issued pursuant to the 2002 Plan, after giving effect to the anticipated 10-to-1
reverse stock split.
At our
2009 Annual Meeting of Stockholders held on October 9, 2009, our stockholders
approved the 2009 Plan, which provides for the grant of stock-based
incentives. The 2009 Plan allows for the grant of up to 1,200,000 shares
(after giving effect to the anticipated 10-to-1 reverse stock split) 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 December 31, 2009, a total
of 1,131,000 shares (after giving effect to the anticipated 10-to-1 reverse
stock split) of our common stock remained available for future grants under the
2009 Plan.
Potential
Payments On Termination Or Change In Control
Pursuant
to the Stambaugh Employment Agreement, upon any termination of Mr. Stambaugh’s
employment for any reason, including by CryoPort “for cause” (as defined in the
Stambaugh Employment Agreement), Mr. Stambaugh will receive his salary
through the date of termination and any accrued but unpaid vacation, and he will
retain all of his rights to benefits earned prior to termination under CryoPort
benefit plans in which he participates. If CryoPort terminates Mr. Stambaugh’s
employment other than “for cause” or Mr. Stambaugh terminates his employment due
to a “constructive discharge” (as defined in the Stambaugh Employment
Agreement), subject to Mr. Stambaugh’s signing of a general release, Mr.
Stambaugh will receive a severance payment equal to (i) six months’ base salary,
if such termination occurs during the first twelve months of his employment, or
(ii) twelve months’ base salary if such termination occurs following the first
twelve months of his employment, and, in either instance, health care insurance
coverage for one year.
Pursuant
to the terms of the Bollinger Employment Agreement, in the event that CryoPort
terminates Mr. Bollinger’s employment without “cause” or for change in control
of the leadership of CryoPort as defined by the Bollinger Employment Agreement,
then upon such termination, CryoPort is obligated to pay to Mr. Bollinger as
severance an amount equal to six months of his current base salary.
The 2002
Plan provides that in the event of a “change of control,” all options shares
will become fully vested and may be immediately exercised by the person who
holds the option.
With the
exception of Mr. Stambaugh, CryoPort 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 CryoPort or any
subsidiary.
DIRECTOR
COMPENSATION
Compensation
for the Board of Directors is governed by CryoPort’s Compensation and Governance
Committee. CryoPort began making cash payments to the directors as approved by
the Compensation and Governance Committee in October 2007. Directors who are
also employees do not receive any additional compensation for services performed
as a member of CryoPort’s Board of Directors or any committees
thereof. Prior to August 21, 2009, non-employee directors other than
the Chairman of the Board of Directors receive an annual cash retainer fee of
$12,700, payable in quarterly installments of $3,175 each. Non-employee
directors each receive meeting fees of $1,000 for scheduled quarterly board
meetings, $500 for special board meetings and $1,000 for stockholder meetings,
if any. Committee members receive fees of $1,000 for Audit Committee meetings,
and $900 for Compensation and Governance Committee meetings. Certain Board of
Directors positions receive additional quarterly retainer fees as follows:
Compensation and Governance Committee Chairman $1,250, Board Vice Chairman
$1,275, Chairman of the Audit Committee $1,850 and Board Secretary $1,600. The
Chairman of the Board position received all inclusive monthly fees of $12,000
until he was also elected as President and Chief Executive Officer in February
2009 at which time these fees became executive compensation as discussed below.
From time to time CryoPort has granted stock warrants to the directors with
exercise prices equal to the fair value as of grant date based on external
expert reports and guidance through the Compensation and Governance Committee
recommendations.
Effective
August 21, 2009, the fees payable to non-employee directors were set at a flat
fee of $15,000 per quarter with no additional fees payable for committee
membership or serving as chairman of a committee. In addition, each
year non-employee directors are granted a warrant or stock option to
purchase 5,000 shares (after giving effect to the anticipated 10-to-1
reverse stock split) of CryoPort’s common stock with exercise prices equal to
the closing price of CryoPort’s common stock on the date of grant. The warrants
or options will vest in four equal quarterly installments.
The
following table sets forth the director compensation of the non-employee
directors of CryoPort during the year ended March 31, 2009.
Name
|
|
Fees
Earned
or
Paid in
Cash
($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
|
Warrant
and
Option
Awards
($)
(2)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
Earned or Paid in Cash as shown in this schedule represent payments and
accruals for directors’ services earned for the period of April 1, 2008
through March 31, 2009.
|
|
|
|
Reflects
the dollar amount recognized for financial reporting purposes for the year
ended March 31, 2009, in accordance with SFAS 123(R) of warrant and stock
option awards pursuant to the 2002 Plan, and thus includes amounts from
the vesting of awards granted in and prior to 2009. Assumptions used in
the calculation of these amounts are included in Note 11, Stock Options
and Warrants, of our audited consolidated financial statements. All stock
warrants were granted at or higher than the closing market price of
CryoPort’s stock on the date of grant.
|
|
|
|
Mr.
Cannon was granted 5,920 fully vested warrants (assuming the
consummation of a reverse stock split, at a ratio of 10-to-1) with an
average exercise price of $5.70 during the year ended March 31, 2009 for
his services as a director, Corporate Secretary, and member of the
Compensation and Governance Committee. Mr. Cannon served as General
Counsel for CryoPort pursuant to a retainer arrangement. For the year
ended March 31, 2009 he was paid a total of $108,050 for retainer and out
of pocket fees. Mr. Cannon was also granted additional 3,600 fully
vested warrants (after giving effect to the anticipated 10-to-1 reverse
stock split) with an average exercise price of $8.20 and combined
Black Scholes valuation of $24,206 as of grant dates, for his legal
services during the year ended March 31, 2009 as General Counsel for
CryoPort.
|
|
|
|
Mr.
Fischer was granted 5,920 fully vested warrants (after giving effect
to the anticipated 10-to-1 reverse stock split) with an average exercise
price of $5.70 during the year ended March 31, 2009 for his service as a
director, Lead Director, Chairman of the Compensation and Governance
Committee and member of the Audit
Committee.
|
|
|
|
Mr.
Michelin was granted 4,974 fully vested warrants (after giving effect
to the anticipated 10-to-1 reverse stock split) with an average exercise
price of $5.80 during the year ended March 31, 2009 for his service as a
director and Chairman of the Audit
Committee.
|
|
|
|
Prior
to his resignation from the Board of Directors on November 7, 2008, Mr.
Scott was granted 1,819 fully vested warrants (after giving effect to
the anticipated 10-to-1 reverse stock split) with an average exercise
price of $8.40 during the year ended March 31, 2009 for his service as a
director and member of the Audit
Committee.
|
|
|
|
Mr.
Stambaugh was elected on December 10, 2008 as Chairman of the Board for a
monthly fee of $12,000. Amounts in this Board Compensation table represent
amounts paid to Mr. Stambaugh in his capacity as Chairman of the Board
until February 20, 2009 when he was also elected to serve the positions of
President and Chief Executive Officer. On December 10, 2008 Mr. Stambaugh
was granted incentive awards of 50,000 warrants (after giving effect
to the anticipated 10-to-1 reverse stock split) exercisable at $8.40 per
share which vest in three equal installments on the first, second and
third anniversaries of the grant
date.
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Gary
Cannon served as Secretary of CryoPort from June 2005 to May 2009. None of the
other members of the Compensation and Governance Committee is or has been an
officer or employee of CryoPort.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of CryoPort’s common stock as of December 31, 2009, by each person or group
of affiliated persons known to CryoPort 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 December 31, 2009,
there were 5,001,532 shares (after giving effect to the anticipated 10-to-1
reverse stock split) 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, California
92630.
The
following table and accompanying notes after give effect to the anticipated
10-to-1 reverse stock split, to the 2010 Amendment and to the shares of common
stock issuable within 60 days of December 31, 2009, upon the exercise of
all options, warrants 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 of
common stock beneficially owned:
Beneficial
Owner
|
|
Number
of Shares of Common Stock
Beneficially
Owned
|
|
Percentage
of Shares of Common Stock
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Executive
Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
John
H. Bonde |
|
408 |
(1) |
|
*
|
|
|
|
|
|
|
|
|
All
directors and named executive officers as a group
(6 persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BridgePointe
Master Fund, Ltd.
|
|
|
|
|
|
Enable
Growth Partners LP (and related funds)
|
|
|
|
|
|
|
|
|
|
|
Includes
shares of common stock which individuals shown above have the right to
acquire as of December 31, 2009, or within 60 days thereafter,
pursuant to outstanding stock options and/or warrants as follows: Mr.
Stambaugh – 39,000 shares; Mr. Michelin – 28,255 shares; Mr.
Bollinger – 21,220 shares; Mr. Johnson – 3,278 shares; Ms. Doll - 667
shares; Mr. Bonde - 408 shares; BridgePointe Master Fund, Ltd – 1,592,591
shares and Enable Growth Partners LP – 1,703,787 shares. The foregoing
share amounts for BridgePointe Master Fund, Ltd. and Enable Growth
Partners LP give effect to the 2010
Amendment.
|
|
|
|
Includes
shares of common stock which individuals shown above have the right to
acquire as of December 31, 2009, or within 60 days thereafter,
pursuant to outstanding convertible debentures as follows: BridgePointe
Master Fund, Ltd – 180,962 shares and Enable Growth Partners LP
– 180,962 shares. The foregoing share amounts for BridgePointe Master
Fund, Ltd and Enable Growth Partners LP give effect to the 2010
Amendment.
|
|
|
|
The
number and percentage of shares of common stock beneficially owned is
determined in accordance with Rule 13d-3 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rule, beneficial ownership includes any shares
of common stock as to which the selling stockholder has sole or shared
voting power or investment power and also any shares of common stock,
which the selling stockholder has the right to acquire within 60 days.
Nevertheless, for purposes of this table only for each of the other
stockholders does not give effect to the 4.99% limitation on the number of
shares of common stock that may be held by each other stockholder as
agreed to in the warrant held by each selling stockholder which limitation
is subject to waiver by the holder upon 61 days prior written notice to us
(subject to a further non-waivable limitation at
9.99%).
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
CryoPort
has established policies and other procedures regarding approval of transactions
between CryoPort 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 of Directors. 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.
In August
2006, Peter Berry, CryoPort’s former Chief Executive Officer, agreed to convert
his deferred salaries to a long-term note payable. Under the terms of this note,
CryoPort began to make monthly payments of $3,000 to Mr. Berry in January 2007.
In January 2008, these monthly payments increased to $6,000 and will remain at
that amount until the loan is fully paid in December 2010. Interest of 6% per
annum on the outstanding principal balance of the note began to accrue on
January 1, 2008. As of August 21, 2009, the total amount of deferred salaries
and accrued interest under this arrangement was $160,864. The largest aggregate
amount of principal outstanding during the year ending March 31, 2009 was
$196,121. CryoPort paid $49,427 of principal on the note during the year ending
March 31, 2009. Interest expense related to this note was $10,573 for the year
ended March 31. Accrued interest related to this note payable amounted to
$13,738 at March 31, 2009. In January 2009, Mr. Berry agreed to defer the
monthly payments of the note due from January 31, 2009 through June 30, 2009. As
of March 31, 2009 these unpaid payments totaled $18,000. Mr. Berry resigned his
position as Chief Executive Officer in February 2009; and resigned from the
Board of Directors in July 2009, but continues to work as a consultant to
CryoPort. Effective August 26, 2009, pursuant to a letter agreement (i) we
agreed to pay Berry the sum of $30,000 plus accrued interest representing past
due payments from January to May 2009 previously waived by Berry, (ii) Berry
agreed to waive payments due to him through December 2009, and (iii) we agreed
to pay to Berry the sum of $42,000 plus accrued interest on January 1, 2010,
representing payments due to him from June 2009 thru December
2009. In addition, pursuant to a separate letter agreement regarding
Mr. Berry’s consulting agreement with us pursuant to which he was entitled to
receive $28,890 per month until January 1, 2010, Mr. Berry agreed to accept
$20,000 per month through the remainder of the term of the Consulting Agreement
with the deferred portion payable following expiration of the
term. We are currently in default of our payment obligations to Mr.
Berry under the notes and Consulting Agreement as of the January 1, 2010
payments.
From June
2005 until August 2009, CryoPort retained the legal services of Gary C. Cannon,
Attorney at Law, for a monthly retainer fee. From June 2005 to May 2009, Mr.
Cannon also served as CryoPort’s Secretary and was a member of CryoPort’s Board
of Directors. In December 2007, Mr. Cannon’s monthly retainer for legal
services was increased from $6,500 per month to $9,000 per month. During the
years ended March 31, 2009 and 2008, the total amount expensed by CryoPort for
retainer fees and out of pocket expenses was $108,050 and $88,248, respectively.
From October 2008 through March 31, 2009, Mr. Cannon agreed to defer a portion
of his monthly payments and as of March 31, 2009, a total of $15,000 had been
deferred. In August 2009, we issued 600 warrants (after giving effect to
the anticipated 10-to-1 reverse stock split) in lieu of payment to Gary C.
Cannon, who then served as Corporate Legal Counsel for CryoPort and as a member
of the Advisory Board, to purchase shares of our common stock at an average
exercise price of $5.10 per share. The exercise prices of these
warrants are greater than or equal to the stock price of CryoPort’s shares of
common stock as of the date of grant. In July 2009, Mr. Cannon was
given a 30-day notice of his termination as general legal counsel and
advisor to CryoPort.
As of
September 30, 2009, CryoPort had an aggregate principal balance of
$1,069,500, in unsecured indebtedness owed to five related parties, including
four former members of the Board of Directors, representing working capital
advances made to CryoPort 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 commenced April 1, 2006 of $2,500, and which increased
by an aggregate of $2,500 every six months to the current maximum aggregate
payment of $10,000 per month. Any remaining unpaid principal and accrued
interest is due at maturity. Accrued interest, which is included in related
party notes payable in the accompanying consolidated balance sheets, related to
these notes amounted to $554,260 as of March 31, 2009. As of March 31, 2009,
CryoPort had not made the required payments under the related party notes which
were due on January 1, February 1, and March 1, 2009. However, pursuant to the
note agreements, CryoPort has a 120-day grace period to pay missed payments
before the notes are in default. On April 29, 2009, May 30, 2009, and June 26,
2009, CryoPort paid the January 1, February 1 and March 1 payments respectively,
due on these related party notes. Management expects to continue to pay all
payments due prior to the expiration of the 120-day grace periods.
DESCRIPTION
OF SECURITIES
Our
authorized capital consists of 250,000,000 shares of common stock, $0.001 par
value per share, of which 50,015,318 shares of common stock were issued and
outstanding as of December 31, 2009 (5,001,532 shares of common stock
issued and outstanding after giving effect to the anticipated 10-to-1 reverse
stock split). The following description is a summary and is qualified
in its entirety by our Amended and Restated Articles of Incorporation and Bylaws
as currently in effect.
Common
Stock
Each
holder of common stock is entitled to receive ratable dividends, if any, as may
be declared by the Board of Directors out of funds legally available for the
payment of dividends. As of the date of this prospectus, we have not paid any
dividends on our common stock, and none are contemplated in the foreseeable
future. We anticipate that all earnings that may be generated from our
operations will be used to finance our growth.
Holders
of common stock are entitled to one vote for each share held of record. There
are no cumulative voting rights in the election of directors. Thus the holders
of more than 50% of the outstanding shares of common stock can elect all of our
directors if they choose to do so.
The
holders of our common stock have no preemptive, subscription, conversion or
redemption rights. Upon our liquidation, dissolution or winding-up, the holders
of our common stock are entitled to receive our assets pro rata.
Description
of the Warrants
Each unit
will include a warrant to purchase one share of our common stock. The warrants
will be issued in the form of warrant certificates, which will govern the rights
of a holder of the warrants. The warrants are transferable separately from the
common stock that is part of the unit. The warrant certificate has been filed as
an exhibit to this Registration Statement. Capitalized terms not otherwise
defined in this section have the meaning set forth in the warrant
certificate.
The
exercise price per share of common stock purchasable upon exercise of the
warrant is [$________] (representing 110% of the unit offering price) per
share. The warrants will be exercisable by the holders at any time on or after
[_______, 2010], and through and including [__________,
2015].
The
warrants will, among other things, include provisions for the appropriate
adjustment in exercise price of the warrants and the class and number of the
common stock to be issued upon exercise of the warrants upon the occurrence of
certain events, including any subdivision, consolidation or reclassification of
our common stock, the payment of stock dividends, and certain rights offerings
and other distributions to all holders of our common stock.
In the
event of a capital reorganization or a reclassification of our common stock
(except in certain circumstances), any warrant holder, upon exercise of the
warrants, receives, in substitution for the common stock to which he would have
become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of CryoPort (or cash) that he would have been entitled to receive at
the same aggregate exercise price upon such reorganization or reclassification
if such warrants had been exercised immediately prior to the record date with
respect to such event.
The
common stock underlying the warrants, when issued upon exercise of a warrant,
will be fully paid and non-assessable.
We are
not required to issue fractional shares upon the exercise of a warrant. In lieu
of any fractional share that would otherwise be issuable, we will pay the
warrant holder in cash on the basis of the current market value of any
fractional interest. The holder of a warrant will not possess any rights as our
stockholder until such holder exercises the warrant.
At any
time in which the registration statement of which this prospectus is a part is
effective after [___________, 20__], a warrant may be exercised upon delivery to
us, prior to the expiry date of the warrant, of the exercise form found on the
back of the warrant certificate completed and executed as indicated, accompanied
by payment of the exercise price and any applicable transfer tax in immediately
available funds for the number of common shares with respect to which the
warrant is being exercised. The warrants may be exercised on a
cashless basis in the event that there is not an effective registration
statement covering the resale of the shares of common stock issuable upon the
exercise of such warrants at the time of their exercise.
Transfer
Agent and Registrar
The
Transfer Agent and Registrar for CryoPort’s common stock and warrants
is Continental Stock Transfer & Trust Company, 17 Battery Place, 8th Floor, New
York, New York 10004.
UNDERWRITING
AND PLAN OF DISTRIBUTION
Subject
to the terms and conditions of an underwriting agreement, dated ___________,
2010, we have agreed to sell to the underwriter Rodman & Renshaw, LLC, and
the underwriter has agreed to purchase, on a firm commitment basis the number of
units offered in this offering set forth below, at the public offering price,
less the underwriting discount set forth on the cover page of this
prospectus.
Nature
of Underwriting Commitment
The
underwriting agreement provides that the underwriter is committed to purchase
all units offered in this offering, other than those covered by the
over-allotment option described below, if the underwriters purchase any of these
securities. The underwriting agreement provides that the obligations of the
underwriter to purchase the units offered hereby are conditional and may be
terminated at their discretion based on their assessment of the state of the
financial markets. The obligations of the underwriters may also be terminated
upon the occurrence of other events specified in the underwriting agreement.
Furthermore, pursuant to the underwriting agreement, the underwriters’
obligations are subject to the authorization and the validity of the common
stock and the warrants being accepted for listing on NASDAQ and to various other
customary conditions, representations and warranties contained in the
underwriting agreement, such as receipt by the underwriters of officers’
certificates and legal opinions of our counsel.
State
Blue Sky Information
We intend
to offer and sell the units offered hereby to retail customers and institutional
investors in all 50 states. However, we will not make any offer of these
securities in any jurisdiction where the offer is not permitted.
Pricing
of Securities
The
underwriter has advised us that they propose to offer the units directly to the
public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers that are members of the Financial Industry
Regulatory Authority (“FINRA”), at such price less a concession not in excess of
$[*] per unit. The underwriters may allow, and the selected dealers may reallow,
a concession not in excess of $[*] per unit to certain brokers and dealers.
After this offering, this offering price and concessions and discounts to
brokers and dealers and other selling terms may from time to time be changed by
the underwriters. These prices should not be considered an indication of the
actual value of the units and are subject to change as a result of market
conditions and other factors. No variation in those terms will change the amount
of proceeds to be received by us as set forth on the cover page of this
prospectus.
Our
common stock is currently quoted on the OTC Bulletin Board under the symbol
“CYRX”. We have applied to have our common stock and the warrants listed on
the NASDAQ Capital Market under the symbols “CYPT” and “CYPTW,” respectively,
which we expect to occur prior to the completion of this offering.
On January 22, 2010, the closing market price of our common stock was
$8.00, after giving effect to the anticipated 10-to-1 reverse stock split to be
effected prior to the effectiveness of the registration statement of which this
prospectus forms a part. The public offering price for the shares of common
stock was determined by negotiation between us and the
underwriters.
The
principal factors considered in determining the public offering price of the
units included:
|
●
|
the
information in this prospectus and otherwise available to the
underwriters;
|
|
|
|
|
●
|
the
history and the prospects for the industry in which we will
compete;
|
|
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|
|
●
|
the
current stock price;
|
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|
●
|
our
current financial condition and the prospects for our future cash flows
and earnings;
|
|
|
|
|
●
|
the
general condition of the economy and the securities markets at the time of
this offering;
|
|
|
|
|
●
|
the
recent market prices of, and the demand for, publicly-traded securities of
generally comparable companies; and
|
|
|
|
|
●
|
the
public demand for our securities in this
offering.
|
We cannot
be sure that the public offering price will correspond to the price at which our
shares of common stock will trade in the public market following this offering
or that an active trading market for our shares of common stock will develop and
continue after this offering.
Commissions
and Discounts
The
following table summarizes the compensation to be paid to the underwriters by us
and the proceeds, before expenses, payable to us, assuming a $____ offering
price. The information assumes either no exercise or full exercise by the
underwriters of the over-allotment option.
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Total
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Per
Unit
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Without
Over-Allotment
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With
Over-Allotment
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[___]
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Underwriting
discount (1)
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Non-accountable
expense allowance (2)
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Proceeds,
before offering expenses, to us (3)
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(1)
Underwriting discount is $0.___ per unit (7.5% of the price of the units sold in
this offering).
(2) The
non-accountable expense allowance of 1% is not payable with respect to the units
sold upon exercise of the underwriters’ over-allotment option.
(3) We
estimate that the total expenses of this offering, excluding the underwriters’
discount and the non-accountable expense allowance, will be approximately
$_________.
Over-allotment
Option
We
have granted a 45-day option to the representative of the underwriters to
purchase _________additional units of common stock and warrants solely to cover
over-allotments, if any, at the same price as the initial units. If the
underwriters fully exercise the over-allotment option, the total public offering
price, underwriting fees and expenses and net proceeds (before offering
expenses) to us will be $______________, $____________, and $___________,
respectively.
Lock-ups
All of our
officers, directors and stockholders beneficially owning 3% or more of our
outstanding common stock have agreed that, for a period of 180 days from the
effective date of the registration statement of which this prospectus forms a
part, they will not sell, contract to sell, grant any option for the sale or
otherwise dispose of any of our equity securities, except securities acquired
after the closing of this offering, or any securities convertible into or
exercisable or exchangeable for our equity securities, without the consent of
the representative except for exercise or conversion of currently outstanding
warrants, options and convertible debentures, as applicable; and exercise of
options under an acceptable stock incentive plan. The
restriction is expressly agreed to preclude the holder from engaging in any
hedging or other transaction with respect to their securities during the lock-up
period which is designed to or which reasonably could be expected to lead to or
result in a sale or disposition of their securities, even if such securities
would be disposed of by someone other than the holder. Such prohibited hedging
or other transactions would include without limitation any short sale or any
purchase, sale or grant of any put or call option or other right.
The
underwriter representative may consent to an early release from the lock-up
periods if, in its opinion, the market for the common stock would not be
adversely impacted by sales and in cases of a financial emergency of an officer,
director or other stockholder. We are unaware of any officer or director who
intends to ask for consent to dispose of any of our equity securities during the
relevant lock-up periods.
Underwriter's Warrant
We
have agreed to sell to Rodman & Renshaw, LLC for $100 a warrant to
purchase up to a total of _______ shares of common stock (5% of the shares
of common stock included in the units sold). The shares of common stock issuable
upon exercise of this warrant are identical to those offered by this prospectus.
This warrant is exercisable at $[*] per share (125% of the price of
the units sold in this offering), commencing on a date which is one year
from the effective date of the registration statement and expiring five years
from the effective date of the registration statement. The warrant may also be
exercised on a cashless basis. The warrant and the ________ shares of common
stock underlying the warrant have been deemed compensation by the FINRA and are
therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of the FINRA.
Rodman & Renshaw, LLC (or permitted assignees under the Rule) will not sell,
transfer, assign, pledge, or hypothecate this warrant or the securities
underlying this option, nor will it engage in any hedging, short sale,
derivative, put, or call transaction that would result in the effective economic
disposition of this warrant or the underlying securities for a period of 180
days from the date of this prospectus. Additionally, the warrant may not be sold
transferred, assigned, pledged or hypothecated for a one-year period (including
the foregoing 180 day period) following the effective date of the registration
statement except to any underwriter and selected dealer participating in this
offering and their bona fide officers or partners. The warrant grants
holders “piggy back” registration rights. These rights apply to all of the
securities directly and indirectly issuable upon exercise of the warrant. We
will bear all fees and expenses attendant to registering the securities issuable
on exercise of the warrant, other than underwriting commissions incurred and
payable by the holders. The exercise price and number of shares issuable upon
exercise of the warrant may be adjusted in certain circumstances including in
the event of a stock dividend, extraordinary cash dividend or our
recapitalization, reorganization, merger or consolidation. However, the warrant
exercise price or underlying shares will not be adjusted for issuances of common
stock at a price below the warrant exercise price.
This
warrant will be valued based on the underlying shares of common stock obtainable
and valuation factors appropriate at the time it is issued. We currently
estimate that value to be approximately $______, based on the number of shares
of common stock subject to this warrant, a offering price of the shares of
$______, the resulting exercise prices related to the warrant on the shares of
common stock, the five year term of the warrant, a risk-free interest rate of
[*] % currently commensurate with that term, an expected dividend yield of [*] %
and estimated volatility of [*] %, based on a review of our historical
volatility. The initial value of this warrant will be charged to additional
paid-in capital as part of this offering costs incurred.
Other
Terms
In
connection with this offering, the underwriters or certain of the securities
dealers may distribute prospectuses electronically. No forms of prospectus other
than printed prospectuses and electronically distributed prospectuses that are
printable in Adobe PDF format will be used in connection with this
offering.
The
underwriters have informed us that they do not expect to confirm sales of shares
of common stock units by this prospectus to accounts over which they exercise
discretionary authority without obtaining the specific approval of the account
holder. We have also granted Rodman & Renshaw, LLC a right of first refusal
to conduct future offerings for us during the 12 months following the date of
this prospectus. In addition, pursuant to section 8 (d) of the
Underwriting Agreement, we paid $5,000 per individual for the cost of the
investigative search firm that conducted an investigation of our
principals.
Stabilization
Until
the distribution of the units offered by this prospectus is completed, rules of
the SEC may limit the ability of the underwriters to bid for and to purchase our
securities. As an exception to these rules, the underwriters may engage in
transactions effected in accordance with Regulation M under the Exchange Act
that are intended to stabilize, maintain or otherwise affect the price of our
common stock. The underwriters may engage in over-allotment sales, syndicate
covering transactions, stabilizing transactions and penalty bids in accordance
with Regulation M.
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Stabilizing
transactions permit bids or purchases for the purpose of pegging, fixing
or maintaining the price of the common stock, so long as stabilizing bids
do not exceed a specified maximum.
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Over-allotment
involves sales by the underwriters of shares of common stock in excess of
the number of shares of common stock the underwriters are obligated to
purchase, which creates a short position. The short position may be either
a covered short position or a naked short position. In a covered short
position, the number of shares of common stock over-allotted by the
underwriters is not greater than the number of shares of common stock that
they may purchase in the over-allotment option. In a naked short position,
the number of shares of common stock involved is greater than the number
of shares of common stock in the over-allotment option. The underwriters
may close out any covered short position by either exercising their
over-allotment option or purchasing shares of common stock in the open
market.
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Covering
transactions involve the purchase of securities in the open market after
the distribution has been completed in order to cover short positions. In
determining the source of securities to close out the short position, the
underwriters will consider, among other things, the price of securities
available for purchase in the open market as compared to the price at
which they may purchase securities through the over-allotment option. If
the underwriters sell more shares of common stock than could be covered by
the over-allotment option, creating a naked short position, the position
can only be closed out by buying securities in the open market. A naked
short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely affect
investors who purchase in this offering.
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Penalty
bids permit the underwriters to reclaim a selling concession from a
selected dealer when the shares of common stock originally sold by the
selected dealer are purchased in a stabilizing or syndicate covering
transaction.
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These
stabilizing transactions, covering transactions and penalty bids may have the
effect of raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our common stock. As a
result, the price of our common stock may be higher than the price that might
otherwise exist in the open market.
Neither
we nor the underwriters make any representation or prediction as to the effect
that the transactions described above may have on the prices of our securities.
These transactions may occur on the NASDAQ Capital Market or on any other
trading market. If any of these transactions are commenced, they may be
discontinued without notice at any time.
Foreign
Regulatory Restrictions on Purchase of the Units
No action
may be taken in any jurisdiction other than the United States that would permit
a public offering of the units or the possession, circulation or distribution of
this prospectus in any jurisdiction where action for that purpose is required.
Accordingly, the units may not be offered or sold, directly or indirectly, and
neither the prospectus nor any other offering material or advertisements in
connection with the units may be distributed or published in or from any country
or jurisdiction except under circumstances that will result in compliance with
any applicable rules and regulations of any such country or
jurisdiction.
In
addition to the public offering of the units in the United States, the
underwriters may, subject to the applicable foreign laws, also offer the units
to certain institutions or accredited persons in the following
countries:
United
Kingdom. No
offer of units has been made or will be made to the public in the United Kingdom
within the meaning of Section 102B of the Financial Services and Markets Act
2000, as amended (“FSMA”), except to legal entities which are authorized or
regulated to operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in securities or
otherwise in circumstances which do not require the publication by us of a
prospectus pursuant to the Prospectus Rules of the Financial Services Authority
(“FSA”). Each underwriter: (i) has only communicated or caused to be
communicated and will only communicate or cause to be communicated an invitation
or inducement to engage in investment activity (within the meaning of Section 21
of FSMA) to persons who have professional experience in matters relating to
investments falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 or in circumstances in which Section
21 of FSMA does not apply to us; and (ii) has complied with, and will comply
with all applicable provisions of FSMA with respect to anything done by it in
relation to the units in, from or otherwise involving the United
Kingdom.
European Economic
Area. In relation
to each member state of the European Economic Area which has implemented the
Prospectus Directive, which we refer to as a Relevant Member State, with effect
from and including the date on which the Prospectus Directive is implemented in
that Relevant Member State, which we refer to as the Relevant Implementation
Date, no offer of units has been made and or will be made to the public in that
Relevant Member State prior to the publication of a prospectus in relation to
the units which has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant Member State
and notified to the competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that, with effect from and
including the Relevant Implementation Date, an offer of units may be made to the
public in that Relevant Member State at any time: (a) to legal entities which
are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in
securities; (b) to any legal entity which has two or more of (i) an average of
at least 250 employees during the last financial year; (ii) a total balance
sheet of more than €43,000,000; and (iii) an annual net turnover of more than
€50,000,000, as shown in its last annual or consolidated accounts; or (c) in any
other circumstances which do not require the publication by us of a prospectus
pursuant to Article 3 of the Prospectus Directive. For the purposes of this
provision, the expression an “offer of ordinary shares to the public” in
relation to any units in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms of the offer
and the units to be offered so as to enable an investor to decide to purchase or
subscribe the units, as the same may be varied in that Relevant Member State by
any measure implementing the Prospectus Directive in that Relevant Member State
and the expression Prospectus Directive means Directive 2003/71/ EC and includes
any relevant implementing measure in each Relevant Member State.
Germany. Any offer or solicitation of
units within Germany must be in full compliance with the German Securities
Prospectus Act (Wertpapierprospektgesetz — WpPG). The offer and solicitation of
securities to the public in Germany requires the approval of the prospectus by
the German Federal Financial Services Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht — BaFin). This prospectus has not been and will
not be submitted for approval to the BaFin. This prospectus does not constitute
a public offer under the German Securities Prospectus Act
(Wertpapierprospektgesetz). This prospectus and any other document relating to
the units, as well as any information contained therein, must therefore not be
supplied to the public in Germany or used in connection with any offer for
subscription of the units to the public in Germany, any public marketing of the
units or any public solicitation for offers to subscribe for or otherwise
acquire the units. The prospectus and other offering materials relating to the
offer of the units are strictly confidential and may not be distributed to any
person or entity other than the designated recipients hereof.
Greece. This prospectus has not been
approved by the Hellenic Capital Markets Commission or another EU equivalent
authority and consequently is not addressed to or intended for use, in any way
whatsoever, by Greek residents. The units have not been offered or sold and will
not be offered, sold or delivered directly or indirectly in Greece, except (i)
to “qualified investors” (as defined in article 2(f) of Greek Law 3401/2005);
and/or (ii) to less than 100 individuals or legal entities, who are not
qualified investors (article 3, paragraph 2(b) of Greek Law 3401/2005), or
otherwise in circumstances which will not result in the offer of the new units
being subject to the Greek Prospectus requirements of preparing a filing a
prospectus (under articles 3 and 4 of Greek Law 3401/2005).
Italy. This offering of the units
has not been cleared by Consob, the Italian Stock Exchanges regulatory agency of
public companies, pursuant to Italian securities legislation and, accordingly,
no units may be offered, sold or delivered, nor may copies of this prospectus or
of any other document relating to the units be distributed in Italy, except (1)
to professional investors (operatori qualificati); or (2) in circumstances which
are exempted from the rules on solicitation of investments pursuant to Decree
No. 58 and Article 33, first paragraph, of Consob Regulation No. 11971 of May
14, 1999, as amended. Any offer, sale or delivery of the units or distribution
of copies of this prospectus or any other document relating to the units in
Italy under (1) or (2) above must be (i) made by an investment firm, bank or
financial intermediary permitted to conduct such activities in Italy in
accordance with the Decree No. 58 and Legislative Decree No. 385 of September 1,
1993, or the Banking Act; (ii) in compliance with Article 129 of the Banking Act
and the implementing guidelines of the Bank of Italy, as amended from time to
time, pursuant to which the issue or the offer of securities in Italy may need
to be preceded and followed by an appropriate notice to be filed with the Bank
of Italy depending, inter alia, on the aggregate value of the securities issued
or offered in Italy and their characteristics; and (iii) in compliance with any
other applicable laws and regulations.
Cyprus. The Underwriter has agreed
that (i) it will not be providing from or within Cyprus any “Investment
Services”, “Investment Activities” and “Non-Core Services” (as such terms are
defined in the Investment Firms Law 144(I) of 2007 (the “IFL”), in relation to
the units, or will be otherwise providing Investment Services, Investment
Activities and Non-Core Services to residents or persons domiciled in Cyprus.
Each underwriter has agreed that it will not be concluding in Cyprus any
transaction relating to such Investment Services, Investment Activities and
Non-Core Services in contravention of the IFL and/or applicable regulations
adopted pursuant thereto or in relation thereto; and (ii) it has not and will
not offer any of the units other than in compliance with the provisions of the
Public Offer and Prospectus Law, Law 114(I)/2005.
Switzerland. This document does not
constitute a prospectus within the meaning of Art. 652a of the Swiss Code of
Obligations. The units may not be sold directly or indirectly in or into
Switzerland except in a manner which will not result in a public offering within
the meaning of the Swiss Code of Obligations. Neither this document nor any
other offering materials relating to the units may be distributed, published or
otherwise made available in Switzerland except in a manner which will not
constitute a public offer of the units of in Switzerland.
Norway. This prospectus has not been
approved or disapproved by, or registered with, the Oslo Stock Exchange, the
Norwegian Financial Supervisory Authority (Kredittilsynet) nor the Norwegian
Registry of Business Enterprises, and the units are marketed and sold in Norway
on a private placement basis and under other applicable exceptions from this
offering prospectus requirements as provided for pursuant to the Norwegian
Securities Trading Act.
Botswana. CryoPort hereby represents
and warrants that it has not offered for sale or sold, and will not offer or
sell, directly or indirectly the units to the public in the Republic of
Botswana, and confirms that this offering will not be subject to any
registration requirements as a prospectus pursuant to the requirements and/or
provisions of the Companies Act, 2003 or the Listing Requirements of the
Botswana Stock Exchange.
Hong
Kong. The units
may not be offered or sold by means of any document other than (i) in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Ordinance (Cap.32, Laws of Hong Kong), (ii) to “professional
investors” within the meaning of the Securities and Futures Ordinance (Cap.571,
Laws of Hong Kong) and any rules made thereunder, or (iii) in other
circumstances which do not result in the document being a “prospectus” within
the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no
advertisement, invitation or document relating to the units may be issued or may
be in the possession of any person for the purpose of issue (in each case
whether in Hong Kong or elsewhere), which is directed at, or the contents of
which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the laws of Hong Kong) other than with respect to units
which are or are intended to be disposed of only to persons outside Hong Kong or
only to “professional investors” within the meaning of the Securities and
Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.
Singapore. This prospectus has not been
registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus and any other document or material in connection
with the offer or sale, or invitation for subscription or purchase, of the units
may not be circulated or distributed, nor may the units be offered or sold, or
be made the subject of an invitation for subscription or purchase, whether
directly or indirectly, to persons in Singapore other than (i) to an
institutional investor under Section 274 of the Securities and Futures Act,
Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any person
pursuant to Section 275(1A), and in accordance with the conditions, specified in
Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA. Where the units
are subscribed or purchased under Section 275 by a relevant person which is: (a)
a corporation (which is not an accredited investor) the sole business of which
is to hold investments and the entire share capital of which is owned by one or
more individuals, each of whom is an accredited investor; or (b) a trust (where
the trustee is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary is an accredited investor, shares, debentures
and units of shares and debentures of that corporation or the beneficiaries’
rights and interest in that trust shall not be transferable for six months after
that corporation or that trust has acquired the units under Section 275 except:
(i) to an institutional investor under Section 274 of the SFA or to a relevant
person, or any person pursuant to Section 275(1A), and in accordance with the
conditions, specified in Section 275 of the SFA; (ii) where no consideration is
given for the transfer; or (iii) by operation of law.
People’s Republic
of China. This
prospectus has not been and will not be circulated or distributed in the PRC,
and units may not be offered or sold, and will not be offered or sold to any
person for re-offering or resale, directly or indirectly, to any resident of the
PRC except pursuant to applicable laws and regulations of the PRC. For the
purpose of this paragraph only, the PRC does not include Taiwan and the special
administrative regions of Hong Kong and Macau.
Israel. This Prospectus does not
constitute an offer to sell the units to the public in Israel or a prospectus
under the Israeli Securities Law, 5728-1968 and the regulations promulgated
thereunder, or the Israeli Securities Law, and has not been filed with or
approved by the Israel Securities Authority. In Israel, pursuant to an exemption
afforded under the Israeli Securities Law, this prospectus may be distributed
only to, and may be directed only at, investors listed in the first addendum to
the Israeli Securities Law, or the Addendum, consisting primarily of certain
mutual trust and provident funds, or management companies thereto, banks, as
defined under the Banking (Licensing) Law, 5741-1981, except for joint service
companies purchasing for their own account or for clients listed in the
Addendum, insurers, as defined under the Supervision of Financial Services Law
(Insurance), 5741-1981, portfolio managers purchasing for their own account or
for clients listed in the Addendum, investment advisers purchasing for their own
account, Tel Aviv Stock Exchange members purchasing for their own account or for
clients listed in the Addendum, underwriters purchasing for their own account,
venture capital funds, certain corporations which primarily engage in the
capital market and fully-owned by investors listed in the Addendum and
corporations whose equity exceeds NIS250 Million, collectively referred to as
institutional investors. Institutional investors may be required to submit
written confirmation that they fall within the scope of the
Addendum.
United Arab
Emirates. This
document has not been reviewed, approved or licensed by the Central Bank of the
United Arab Emirates (the “UAE”), Emirates Securities and Commodities Authority
or any other relevant licensing authority in the UAE including any licensing
authority incorporated under the laws and regulations of any of the free zones
established and operating in the territory of the UAE, in particular the Dubai
International Financial Services Authority (the “DFSA”), a regulatory authority
of the Dubai International Financial Centre (the “DIFC”). The issue of units
does not constitute a public offer of securities in the UAE, DIFC and/or any
other free zone in accordance with the Commercial Companies Law, Federal Law No.
8 of 1984 (as amended), DFSA Offered Securities Rules and the Dubai
International Financial Exchange Listing Rules, accordingly, or otherwise. The
units may not be offered to the public in the UAE and/or any of the free zones
including, in particular, the DIFC. The units may be offered and this document
may be issued, only to a limited number of investors in the UAE or any of its
free zones (including, in particular, the DIFC) who qualify as sophisticated
investors under the relevant laws and regulations of the UAE or the free zone
concerned. Management of CryoPort, and the representatives represent and warrant
that the units will not be offered, sold, transferred or delivered to the public
in the UAE or any of its free zones including, in particular, the
DIFC.
Oman. For the attention of
the residents of Oman:
The
information contained in this memorandum neither constitutes a public offer of
securities in the Sultanate of Oman (“Oman”) as contemplated by the Commercial
Companies Law of Oman (Sultani Decree 4/74) or the Capital Market Law of Oman
(Sultani Decree 80/98), nor does it constitute an offer to sell, or the
solicitation of any offer to buy non-Omani securities in Oman as contemplated by
Article 6 of the Executive Regulations to the Capital Market Law of Oman (issued
vide Ministerial Decision No 4/2001), and nor does it constitute a distribution
of non-Omani securities in Oman as contemplated under the Rules for Distribution
of Non-Omani Securities in Oman issued by the Capital Market Authority of Oman
(“CMA”). Additionally, this memorandum is not intended to lead to the conclusion
of any contract of whatsoever nature within the territory of Oman.
This
memorandum has been sent at the request of the investor in Oman, and by
receiving this memorandum, the person or entity to whom it has been issued and
sent understands, acknowledges and agrees that this memorandum has not been
approved by the CMA or any other regulatory body or authority in Oman, nor has
any authorization, license or approval been received from the CMA or any other
regulatory authority in Oman, to market, offer, sell, or distribute the units
within Oman.
No
marketing, offering, selling or distribution of any financial or investment
products or services has been or will be made from within Oman and no
subscription to any securities, products or financial services may or will be
consummated within Oman. The underwriter is not a company licensed by the CMA to
provide investment advisory, brokerage, or portfolio management services in
Oman, nor banks licensed by the Central Bank of Oman to provide investment
banking services in Oman. The underwriter does not advise persons or entities
resident or based in Oman as to the appropriateness of investing in or
purchasing or selling securities or other financial products.
Nothing
contained in this memorandum is intended to constitute Omani investment, legal,
tax, accounting or other professional advice. This memorandum is for your
information only, and nothing herein is intended to endorse or recommend a
particular course of action. You should consult with an appropriate professional
for specific advice on the basis of your situation.
Any
recipient of this memorandum and any purchaser of the units pursuant to this
memorandum shall not market, distribute, resell, or offer to resell the units
within Oman without complying with the requirements of applicable Omani law, nor
copy or otherwise distribute this memorandum to others.
Canada.
Resale
Restrictions
The
distribution of our securities in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of our securities are made. Any resale of our securities in Canada must
be made under applicable securities laws that will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of our securities.
Representations of
Purchasers
By
purchasing our securities in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:
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·
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the
purchaser is entitled under applicable provincial securities laws to
purchase our securities without the benefit of a prospectus qualified
under those securities laws;
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·
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where
required by law, that the purchaser is purchasing as principal and not as
agent;
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the
purchaser has reviewed the text above under Resale Restrictions;
and
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the
purchaser acknowledges and consents to the provision of specified
information concerning its purchase of our securities to the
regulatory authority that by law is entitled to collect the
information.
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Further
details concerning the legal authority for this information are available on
request.
Rights of Action – Ontario
Purchasers Only
Under
Ontario securities legislation, certain purchasers who purchase a security
offered by this prospectus during the period of distribution will have a
statutory right of action for damages, or while still the owner of our
securities, for rescission against us in the event that this prospectus contains
a misrepresentation without regard to whether the purchaser relied on the
misrepresentation. The right of action for damages is exercisable not later than
the earlier of 180 days from the date the purchaser first had knowledge of the
facts giving rise to the cause of action and three years from the date on which
payment is made for our securities. The right of action for rescission is
exercisable not later than 180 days from the date on which payment is made for
our securities. If a purchaser elects to exercise the right of action for
rescission, the purchaser will have no right of action for damages against us.
In no case will the amount recoverable in any action exceed the price at which
our securities were offered to the purchaser and if the purchaser is shown to
have purchased the securities with knowledge of the misrepresentation, we will
have no liability. In the case of an action for damages, we will not be liable
for all or any portion of the damages that are proven to not represent the
depreciation in value of our securities as a result of the misrepresentation
relied upon. These rights are in addition to, and without derogation from, any
other rights or remedies available at law to an Ontario purchaser. The foregoing
is a summary of the rights available to an Ontario purchaser. Ontario purchasers
should refer to the complete text of the relevant statutory
provisions.
Enforcement of Legal
Rights
All of
our directors and officers as well as the experts named herein may be located
outside of Canada and, as a result, it may not be possible for Canadian
purchasers to effect service of process within Canada upon us or those persons.
All or a substantial portion of our assets and the assets of those persons may
be located outside of Canada and, as a result, it may not be possible to satisfy
a judgment against us or those persons in Canada or to enforce a judgment
obtained in Canadian courts against us or those persons outside of
Canada.
Taxation and Eligibility for
Investment
Canadian
purchasers of our securities should consult their own legal and tax advisors
with respect to the tax consequences of an investment in our securities in their
particular circumstances and about the eligibility of our securities for
investment by the purchaser under relevant Canadian legislation.
Indemnification
The
underwriting agreement provides for indemnification between us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments that
may be required to be made with respect to those liabilities. We have been
advised that, in the opinion of the SEC, indemnification for liabilities under
the Securities Act is against public policy as expressed in the Securities Act,
and is therefore, unenforceable.
LEGAL
MATTERS
The
validity of the units has been passed upon by Snell & Wilmer L.L.P.,
Costa Mesa, California. Sichenzia Ross Friedman Ference LLP in New
York, New York has acted as counsel for the underwriters.
EXPERTS
The
consolidated financial statements of CryoPort, Inc. as of March 31, 2009 and
2008 and for the years then ended, included in this prospectus, have been
audited by KMJ Corbin & Company LLP, an independent registered public
accounting firm, as stated in their report appearing herein, and elsewhere in
the registration statement, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We are
required to comply with the information and periodic reporting requirements of
the Exchange Act, and, in accordance with the requirements of the Exchange Act,
will file periodic reports, proxy statements and other information with the SEC.
These periodic reports, proxy statements and other information will be available
for inspection and copying at the regional offices, public reference facilities
and internet site of the SEC referred to below.
We filed
with the SEC a registration statement on Form S-1 under the Securities Act for
the common stock and warrants to be sold in this offering. This prospectus does
not contain all of the information in the registration statement and the
exhibits and schedules that were filed with the registration statement. For
further information with respect to the common stock, warrants and us, we
refer you to the registration statement and the exhibits and schedules that were
filed with the registration statement. Statements made in this prospectus
regarding the contents of any contract, agreement or other document that is
filed as an exhibit to the registration statement are not necessarily complete,
and we refer you to the full text of the contract or other document filed as an
exhibit to the registration statement.
A copy of
the registration statement and the exhibits and schedules that were filed with
the registration statement may be inspected without charge at the public
reference facilities maintained by the SEC, 100 F Street, Washington, DC 20549.
Copies of all or any part of the registration statement may be obtained from the
SEC upon payment of the prescribed fee. Information regarding the operation of
the public reference rooms may be obtained by calling the SEC at 1-800-SEC-0330.
The SEC maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
You can
find more information about us on our website, which is located at
http://www.cryoport.com.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Under the
Nevada General Corporation Law and our Articles of Incorporation, as amended,
our directors will have no personal liability to us or our stockholders for
monetary damages incurred as the result of the breach or alleged breach by a
director of his “duty of care.” This provision does not apply to the directors’
(i) acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its stockholders or that
involve the absence of good faith on the part of the director, (iii) approval of
any transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director’s duty to the
corporation or its stockholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director’s duties, of a risk of serious injury to the corporation or its
stockholders, (v) acts or omissions that constituted an unexcused pattern of
inattention that amounts to an abdication of the director’s duty to the
corporation or its stockholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
CryoPort,
Inc.
Consolidated
Financial Statements
March 31,
2009 and 2008
Contents
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Page
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Report
of Independent Registered Public Accounting Firm
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Consolidated
Balance Sheets
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Consolidated
Statements of Operations
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Consolidated
Statements of Stockholders’ Deficit
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Consolidated
Statements of Cash Flows
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Notes
to Consolidated Financial Statements
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|
Consolidated
Financial Statements
September
30, 2009 and 2008
(Unaudited)
Contents
|
|
Page
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Consolidated
Balance Sheets at September 30, 2009 (Unaudited) and March 31,
2009
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Unaudited
Consolidated Statements of Operations for the three and six months
ended September 30, 2009 and 2008
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Unaudited
Consolidated Statements of Cash Flows for the six months ended September
30, 2009 and 2008
|
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Notes
to Consolidated Financial Statements (Unaudited)
|
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors of
CryoPort,
Inc.
We have
audited the accompanying consolidated balance sheets of CryoPort, Inc. (the
“Company”) as of March 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders' deficit and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of CryoPort, Inc. at March 31,
2009 and 2008, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company has incurred recurring
losses and negative cash flows from operations since inception and has a working
capital deficit of $3,693,015 and a cash and cash equivalents balance of
$249,758 at March 31, 2009. Management has estimated that cash on
hand, including cash borrowed under convertible debentures issued in the first
quarter of fiscal 2010, will be sufficient to allow the Company to continue its
operations only into the third quarter of fiscal 2010. 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 relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
/s/ KMJ
Corbin & Company LLP
Costa
Mesa, California
June 30,
2009
CRYOPORT,
INC.
|
|
CONSOLIDATED
BALANCE SHEETS
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March
31,
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ASSETS
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2009
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2008
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Cash
and cash equivalents
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Prepaid
expenses and other current assets
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Deferred
financing costs, net
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LIABILITIES
AND STOCKHOLDERS’ DEFICIT
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Accrued
salaries and related
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Convertible
notes payable, net of discount of $13,586 (2009) and $0
(2008)
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Current
portion of convertible debentures payable and accrued interest, net of
discount of $662,583 (2009) and $1,039,844 (2008)
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Line
of credit and accrued interest
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Current
portion of related party notes payable
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Current
portion of note payable to former officer
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Current
portion of note payable
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Total
current liabilities
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Related
party notes and accrued interest payable, net of current
portion
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Convertible
debentures payable, net of current portion of $4,454,424 (2009) and
$1,936,884 (2008) and discount of $2,227,205 (2009) and $2,482,513
(2008)
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Note
payable to former officer and accrued interest, net of current
portion
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Common
stock, $0.001 par value; 125,000,000 shares authorized; 41,861,941 (2009)
and 40,928,225 (2008) shares issued and outstanding
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Additional
paid-in capital
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Total
stockholders’ deficit
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See
Accompanying Notes to Consolidated Financial Statements.
CRYOPORT,
INC.
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
For
the Years Ended March 31, 2009 and 2008
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2009
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2008
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Selling,
general and administrative expenses
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Research
and development expenses
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Loss
on extinguishment of debt
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Net
loss available to common stockholders per common
share:
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Basic
and diluted loss per common share
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Basic
and diluted weighted average common shares
outstanding
|
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See
Accompanying Notes to Consolidated Financial Statements.
CRYOPORT,
INC.
|
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
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Additional
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Total
|
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Common
Stock
|
|
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Paid-in
|
|
|
Accumulated
|
|
|
Stockholders’
|
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Shares
|
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Amount
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Capital
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Deficit
|
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Deficit
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Issuance
of common stock for cash, net of issuance costs of
$89,635
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Issuance
of common stock for conversion of convertible debentures including accrued
interest
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Issuance
of common stock to consultants
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Exercise
of stock options and warrants for cash
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Cashless
exercise of warrants
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Fair
value of stock options and warrants issued to consultants, employees and
directors
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Debt
discount related to convertible debentures
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Fair
value of warrants issued to lessor
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Purchase
of fixed assets with warrants
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Issuance
of common stock for conversion of convertible debentures including accrued
interest
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Cancellation
of common stock issued for debt principal reduction
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Issuance
of common stock for extinguishment of debt
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Change
in fair value of warrants issued in connection with debt
modifications
|
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Issuance
of common stock to consultants
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Exercise
of stock options and warrants for cash
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Cashless
exercise of warrants
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Debt
discount related to convertible debentures
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Fair
value of stock options and warrants issued to consultants, employees and
directors
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See
Accompanying Notes to Consolidated Financial Statements.
CRYOPORT,
INC.
|
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CONSOLIDATED
STATEMENTS OF CASH FLOWS
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For
the Years Ended March 31, 2009 and 2008
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2009
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2008
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Cash
flows from operating activities:
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Depreciation
and amortization
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Amortization
of deferred financing costs
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Amortization
of debt discount
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Stock
issued to consultants
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Fair
value of warrants issued to consultants, employees and
directors
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Loss
on extinguishment of debt
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Interest
accrued on restricted cash
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Changes
in operating assets and liabilities:
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Prepaid
expenses and other assets
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Accrued
salaries and related
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Net
cash used in operating activities
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Cash
flows provided by (used in) investing activities:
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Decrease
(increase) in restricted cash
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Purchases
of fixed assets
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Net
cash provided by (used in) investing activities
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Cash
flows from financing activities:
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Proceeds
from borrowings under convertible notes
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Net
proceeds from borrowings under line of credit
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Repayment
of convertible debt
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Repayment
of line of credit
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Payment
of deferred financing costs
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Repayment
of note payable
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Repayments
of related party notes payable
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Repayments
of note payable to officer
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Proceeds
from insurance of common stock, net
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Proceeds
from exercise of options and warrants
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Net
cash provided by financing activities
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Net
change in cash and cash equivalents
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Cash
and cash equivalents, beginning of year
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Cash
and cash equivalents, end of year
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|
See
Accompanying Notes to Consolidated Financial Statements.
CRYOPORT,
INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For
the Years Ended March 31, 2009 and 2008
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2009
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2008
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Supplemental
disclosure of cash flow information:
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Cash
paid during the year for:
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Supplemental
disclosure of non-cash activities:
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Estimated
for value of warrants issued to lessor
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Purchase
of intangible assets with warrants
|
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Warrants
issued as deferred financing costs in connection with convertible debt
financing
|
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Debt
discount in connection with convertible debt
financing
|
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Conversion
of debt and accrued interest to common stock
|
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Cancellation
of shares issued for debt principal reduction
|
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Change
in fair value of warrants issued in connection with debt
modifications
|
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Fair
value of shares issued in connection with debt
modifications
|
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|
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Cashless
exercise of warrants
|
|
|
|
|
|
|
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|
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|
|
|
|
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|
|
Deferred
financing costs in accrued expenses
|
|
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|
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|
|
|
|
|
|
|
|
|
Addition
of principal due to debt modifications
|
|
|
|
|
|
|
|
|
See
Accompanying Notes to Consolidated Financial Statements.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 1 – ORGANIZATION AND
BUSINESS
Organization
CryoPort,
Inc. (the “Company”) was originally incorporated under the name G.T.5-Limited
(“GT5”) on May 25, 1990 as a Nevada Corporation. On March 15, 2005
CryoPort Systems, Inc., a California corporation founded in 1999 and
incorporated on December 11, 2000, became the primary operating company of GT5
upon completion of a Share Exchange Agreement, whereby GT5 acquired all of the
issued and outstanding shares of CryoPort Systems, Inc. in exchange for
24,108,105 shares of the Company’s common stock representing approximately 81%
of the total issued and outstanding shares of common stock following the close
of the transaction. In connection with this transaction GT5 changed
its name to CryoPort, Inc. CryoPort Systems, Inc. continues today as the
operating company under CryoPort, Inc.
The
principal focus of the Company is to provide the biotechnology and
pharmaceutical industries with a cost effective frozen shipping solution, the
CryoPort Express™ System utilizing the Company’s newly developed product line,
the CryoPort Express™ Shippers, for the frozen or cryogenic transport of
biological materials. These biological materials include live cell
pharmaceutical products; e.g., cancer vaccines, diagnostic materials,
reproductive tissues, infectious substances and other items that require
continuous frozen or cryogenic temperatures (less than -150 °
C). The Company has historically designed, manufactured a line of
reusable cryogenic dry vapor shippers. The reusable cryogenic dry shippers
primarily served as the vehicles for the development of the cryogenic technology
that supported the development of the new CryoPort Express™ Shipper. The
Company’s primary mission is to provide reliable and cost effective solutions
for the frozen transportation of biological materials in the life sciences
industry.
Going
Concern
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The
Company has not generated significant revenues from operations and has no
assurance of any future revenues. The Company generated revenues from
operations of only $35,124, incurred a net loss of $16,705,151 including a
$10,846,573 loss on debt extinguishment and used cash of $2,586,470 in its
operating activities during the year ended March 31,
2009. In addition, the Company has a working capital
deficit of $3,693,015 and has a cash and cash equivalents balance of $249,758 at
March 31, 2009. Currently management has projected that cash on hand,
including cash borrowed under the convertible debentures issued in the first
quarter of fiscal 2010, will be sufficient to allow the Company to continue its
operations only into the third quarter of fiscal 2010 until more
significant.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 1 – ORGANIZATION AND
BUSINESS, continued
funding
can be secured. These matters raise substantial doubt about the
Company’s ability to continue as a going concern
Through
June 22, 2009 the Company had raised net proceeds of $906,630 under the Private
Placement Debentures. (see Note 10 and Note 14). As a result of this
recent financing, the Company had an aggregate cash and cash equivalents and
restricted cash balance of approximately $689,000 as of June 22, 2009 which will
be used to fund the working capital required for minimal operations including
inventory build as well limited sales efforts to advance the Company’s
commercialization of the CryoPort Express™ Shippers until additional capital is
obtained. The Company’s management recognizes that the Company must obtain
additional capital for the achievement of sustained profitable
operations. Management’s plans include obtaining additional capital
through equity and debt funding sources; however, no assurance can be given that
additional capital, if needed, will be available when required or upon terms
acceptable to the Company or that the Company will be successful in its efforts
to negotiate extension of its existing debt. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.
Principles of
Consolidation
The
consolidated financial statements include the accounts of CryoPort, Inc. and its
wholly owned subsidiary, CryoPort Systems, Inc. All intercompany
accounts and transactions have been eliminated.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America 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
the fair value of modified debt, debt discounts, allowances for doubtful
accounts and sales returns, recoverability of long-lived assets, allowances for
inventory obsolescence, accrued warranty costs, valuation of deferred tax
assets, the value of stock options and warrants, and product liability
reserves.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Concentrations of Credit
Risk and Customers
Cash
The
Company maintains its cash accounts in financial
institutions. Accounts at these institutions are insured by the
Federal Deposit Insurance Corporation (“FDIC”). Effective October 3,
2008, the Emergency Economic Stabilization Act of 2008 raised the FDIC deposit
coverage limits to $250,000 per owner from $100,000 per owner. At
March 31, 2009 and 2008, the Company had cash balances of $121,042 and
$2,392,350, respectively, which were in excess of the FDIC insurance
limit. The Company performs ongoing evaluations of these institutions
to limit its concentration risk exposure.
Restricted
cash
The
Company has invested cash in a one year restricted certificate of deposit
bearing interest at 2.32% which serves as collateral for borrowings under a line
of credit agreement (see Note 8). At March 31, 2009 and 2008, the
balance in the certificate of deposit was $101,053 and $203,670,
respectively.
Customers
The
Company grants credit to customers within the United States of America and to a
limited number of international customers, and does not require
collateral. Sales to 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 sales to 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 and estimated sales returns are provided based on past experience and a
specific analysis of the accounts which management believes are
sufficient. Accounts receivable at March 31, 2009 and 2008 are net of
reserves for doubtful accounts and sales returns of approximately $600 and
$4,700, respectively. Although the Company expects to collect amounts due,
actual collections may differ from the estimated amounts.
The
Company has limited foreign sales primarily in Europe, Canada, India and
Australia. Foreign sales are primarily to a small number of
customers. During 2009 and 2008, the Company had foreign sales of
approximately $6,500 and $10,500, respectively, which constituted approximately
19% and 13% of net sales, respectively.
The
majority of the Company’s customers are in the biotechnology, pharmaceutical and
life science industries. Consequently, there is a concentration of
receivables within these industries, which is subject to normal credit
risk.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Cash and Cash
Equivalents
The
Company considers highly liquid investments with original maturities of 90 days
or less to be cash equivalents.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, restricted
cash, accounts receivable, related party notes payable, note payable to officer,
line of credit, convertible notes payable, accounts payable, accrued expenses
and a note payable to a third party. The carrying value for all such
instruments, except the related party notes payable, approximates fair value at
March 31, 2009 and 2008. The difference between the fair value and
recorded values of the related party notes payable is not
significant.
Inventories
Inventories
are stated at the lower of standard cost or current estimated market
value. Cost is determined using the standard cost method which
approximates the first-in, first-out method. The Company periodically
reviews its inventories and records a provision for excess and obsolete
inventories based primarily on the Company’s estimated forecast of product
demand and production requirements. Once established, write-downs of
inventories are considered permanent adjustments to the cost basis of the
obsolete or excess inventories. Raw materials, work in process and
finished goods include material costs less reserves for obsolete or excess
inventories.
Fixed
Assets
Fixed
assets are stated at cost, net of accumulated depreciation and amortization.
Depreciation and amortization of fixed assets are provided using the
straight-line method over the following useful lives:
|
|
|
|
|
Lesser
of lease term or estimated useful
life
|
Betterments,
renewals and extraordinary repairs that extend the lives of the assets are
capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation and
amortization applicable to assets retired are removed from the accounts, and the
gain or loss on disposition is recognized in current operations.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
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 in accordance with AICPA
Statement of Position 98-1, Accounting for Costs of Computer
Software Developed or Obtained 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 using the
Black-Scholes option pricing model.
Long-Lived
Assets
The
Company’s management assesses the recoverability of its long-lived assets upon
the occurrence of a triggering event by determining whether the depreciation and
amortization of long-lived assets over their remaining lives can be recovered
through projected undiscounted future cash flows. The amount of
long-lived asset impairment, if any, is measured based on fair value and is
charged to operations in the period in which long-lived asset impairment is
determined by management. At March 31, 2009 and 2008, the Company’s
management believes there is no impairment of its long-lived
assets. There can be no assurance however, that market conditions
will not change or demand for the Company’s products will continue, which could
result in impairment of its long-lived assets in the future.
Deferred Financing
Costs
Deferred
financing costs represent costs incurred in connection with the issuance of the
convertible notes payable. Deferred financing costs are being
amortized over the term of the financing instrument on a straight-line basis,
which approximates the effective interest method. During the years
ended March 31, 2009 and 2008, the Company capitalized deferred financing costs
of $111,273 and $408,776 respectively, and amortized deferred financing costs of
$42,284 and $87,706 respectively, to interest expense. During the
year ended March 31, 2009, the Company wrote off unamortized deferred financing
costs pursuant to amendments made to convertible notes payable from the
resulting debt modifications (see Note 10).
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Accrued Warranty
Costs
Estimated
costs of the Company’s standard warranty, included with products at no
additional cost to the customer for a period up to one year, are recorded as
accrued warranty costs at the time of product sale. Costs related to
servicing the standard warranty are charged to the accrual as
incurred.
The
following represents the activity in the warranty accrual during the years ended
March 31:
|
|
2009
|
|
|
2008
|
|
Beginning
warranty accrual
|
|
|
|
|
|
|
|
|
Increase
in accrual (charged to cost of sales)
|
|
|
|
|
|
|
|
|
Changes
to accrual (product replacement and warranty
expirations)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
Revenue
Recognition
Revenue
is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101,
Revenue Recognition in
Financial Statements, as revised by SAB 104. The Company
recognizes revenue when products are shipped to a customer and the risks and
rewards of ownership and title have passed based on the terms of the
sale. The Company records a provision for sales returns and claims
based upon historical experience. Actual returns and claims in any
future period may differ from the Company’s estimates.
Accounting for Shipping and
Handling Revenue, Fees and Costs
The
Company classifies amounts billed for shipping and handling as revenue in
accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs . Shipping and handling fees and costs are included in
cost of sales.
Advertising
Costs
The
Company expenses the cost of advertising when incurred as a component of
selling, general and administrative expenses. During 2009 and 2008,
the Company expensed approximately $61,000 and $33,000, respectively, in
advertising costs.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Research and Development
Expenses
The
Company expenses internal research and development costs as
incurred. Third party research and development costs are expensed
when the contracted work has been performed.
Stock-Based
Compensation
The
Company accounts for share-based payments to employees and directors in
accordance with SFAS No. 123(R), Share-Based Payment , (“SFAS
123(R)”). SFAS 123(R) requires all share-based payments to employees and
directors, including grants of employee stock options and warrants, to be
recognized in the consolidated financial statements based upon their fair
values. The Company uses the Black-Scholes option pricing model to estimate the
grant-date fair value of share-based awards under SFAS 123(R). Fair value is
determined at the date of grant. In accordance with SFAS 123(R), the
consolidated financial statement effect of forfeitures is estimated at the time
of grant and revised, if necessary, if the actual effect differs from those
estimates. The estimated average forfeiture rate for the years ended March 31,
2009 and 2008 was zero as the Company has not had a significant history of
forfeitures and does not expect forfeitures in the future.
SFAS
123(R) requires the cash flows resulting from the tax benefits resulting from
tax deductions in excess of the compensation cost recognized for those options
or warrants to be classified as financing cash flows. Due to the Company’s loss
position, there were no such tax benefits during the years ended March 31, 2009
and 2008.
The
Company accounts for equity issuances to non-employees in accordance with
Emerging Issues Task Force ("EITF") Issue No. 96-18, Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods and Services . All transactions in which goods or services
are the consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument
issued is the earlier of the date on which the third party performance is
complete or the date on which it is probable that performance will
occur.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
Plan
Description
The
Company’s stock option plan provides for grants of incentive stock options and
nonqualified options to employees, directors and consultants of the Company to
purchase the Company’s shares at the fair value, as determined by management and
the board of directors, of such shares on the grant date. The options generally
vest over a five-year period beginning on the grant date and have a ten-year
term. As of March 31, 2009, the Company is authorized to issue up to 5,000,000
shares under this plan and has 2,511,387 shares available for future
issuances.
Summary
of Assumptions and Activity
The fair
value of stock-based awards to employees and directors is calculated using the
Black-Scholes option pricing model, even though this model was developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which differ significantly from the Company’s stock
options. The Black-Scholes model also requires subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values. The expected term of options granted is derived
from historical data on employee exercises and post-vesting employment
termination behavior. The risk-free rate selected to value any particular grant
is based on the U.S Treasury rate that corresponds to the pricing term of the
grant effective as of the date of the grant. The expected volatility is based on
the historical volatility of the Company’s stock price. These factors could
change in the future, affecting the determination of stock-based compensation
expense in future periods.
The
following table presents the weighted average assumptions used to estimate the
per share fair values of stock warrants granted to employees and directors
during the years ended March 31, 2009 and 2008:
|
|
March
31,
|
|
March
31,
|
|
|
|
2009
|
|
2008
|
|
Stock
warrants: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
A summary
of employee and director option and warrant activity for the years ended March
31, 2009 and 2008, is presented below:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
(Yrs.)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at April 1, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
|
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|
|
|
|
|
|
|
|
Outstanding,
vested, and expected to vest at March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There
were 917,400 warrants and no stock options granted to employees and directors
during the year ended March 31, 2009 and 887,800 warrants and no stock options
granted to employees and directors during the year ended March 31,
2008. In connection with the warrants granted, the modification of
previous options granted, and the vesting of prior options issued, during the
years ended March 31, 2009 and 2008, the Company recorded total charges of
$289,497 and $742,140, respectively, in accordance with the provisions of SFAS
123(R), which have been included in selling, general and administrative expenses
for the years ended March 31, 2009 and 2008 in the accompanying consolidated
statements of operations. No employee or director warrants or stock
options expired during the years ended March 31, 2009 and 2008. The
Company issues new shares from its authorized shares upon exercise of warrants
or options.
As of
March 31, 2009 and 2008, there was $287,722 and $105,965, respectively, of
unrecognized compensation cost related to employee and director stock option
compensation arrangements.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
The
aggregate intrinsic value for stock options and warrants related to stock based
compensation, which were exercised during the years ended March 31, 2009 and
2008 was $203,102 and $30,284, respectively.
Income
Taxes
The
Company accounts for income taxes in accordance with SFAS No. 109 (“SFAS No.
109”), Accounting for Income
Taxes . Under the asset and liability method of SFAS No. 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. 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. Under SFAS No. 109, 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. The Company is a subchapter "C"
corporation and files a federal income tax return. The Company files separate
state income tax returns for California and Nevada.
Basic and Diluted Loss Per
Share
The
Company has adopted SFAS No. 128, Earnings Per
Share.
Basic
loss per common share is computed by dividing the net loss available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted loss per share is computed by dividing net loss by the weighted
average shares outstanding assuming all dilutive potential common shares were
issued. Basic and diluted loss per share are the same as the effect of stock
options and warrants and convertible debt on loss per share are anti-dilutive
and thus not included in the diluted loss per share calculation. The impact
under the treasury stock method of dilutive stock options and warrants and the
if-converted method of convertible debt would have resulted in weighted average
common shares outstanding of 57,565,246 for the year ended March 31, 2009
and 47,835,303 for the year ended March 31, 2008.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
The
following is a reconciliation of the numerators and denominators of the basic
and diluted loss per share computations for the years ended March
31:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Numerator
for basic and diluted loss per share:
|
|
|
|
|
|
|
Net
loss available to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic and diluted loss per common share:
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share available to common stockholders – basic and
diluted
|
|
|
|
|
|
|
|
|
Convertible
Debentures
If the
conversion feature of conventional convertible debt 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 pursuant to EITF Issue No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingency Adjustable
Conversion Ratio, (“EITF 98-05”) and EITF Issue No. 00-27, Application of EITF Issue No. 98-5
to Certain Convertible Instruments (“EITF 00-27”). In those
circumstances, the convertible debt will be recorded net of the discount related
to the BCF. The Company amortizes the discount to interest expense
over the life of the debt using the effective interest method which approximates
the straight-line amortization method (see Note 10).
Recent Accounting
Pronouncements
In
September 2006, the FASB issued SFAS No. 157 (“SFAS No. 157”), Fair Value Measurements
.. SFAS No. 157 establishes a framework for measuring fair value and
expands disclosure about fair value measurements. Specifically, this
standard establishes that fair value is a market-based measurement, not an
entity specific measurement. As such, the value measurement should be
determined based on assumptions the market participants would use in pricing an
asset or liability. The expanded disclosures include disclosure of
the inputs used to measure fair value and the effect of certain of the
measurements on earnings for the period. SFAS No. 157 was effective
for fiscal years beginning after November 15, 2007. FASB Staff
Position No. FAS 157-2 (“FSP 157-2”), Effective Date of FASB Statement No.
157 was issued in February 2008. FSP 157-2 delays the
effective date of SFAS No. 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value at
least once a year, to fiscal years beginning after November 15, 2008, and for
interim periods within those fiscal years. The adoption of SFAS No. 157 related
to financial assets and liabilities did not have a material effect on the
Company’s consolidated financial statements . The Company is
currently evaluating the impact, if any, that SFAS No. 157 may have on its
future consolidated financial statements related to non-financial assets and
liabilities.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued
In
October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active (“FSP No.
157-3”). FSP No. 157-3 clarifies the application of SFAS No. 157 in a market
that is not active, and provides an illustrative example intended to address
certain key application issues. FSP No. 157-3 is effective immediately, and
applies to the Company’s March 31, 2009 financial statements. The Company has
concluded that the application of FSP No. 157-3 did not have a material impact
on its consolidated financial statements as of and for the year ended March 31,
2009.
In June
2008, the Emerging Issues Task Force of the FASB published EITF Issue No. 07-5,
Determining Whether an
Instrument is Indexed to an Entity’s Own Stock (“EITF No. 07-5”) to
address concerns regarding the meaning of “indexed to an entity’s own stock”
contained in FASB Statement 133, Accounting for Derivative
Instruments and Hedging Activities . This related to the determination of
whether a free-standing equity-linked instrument should be classified as equity
or liability. If an instrument is classified as liability, it is valued at fair
value, and this value is re-measured on an ongoing basis, with changes recorded
in earnings in each reporting period. EITF No. 07-5 is effective for years
beginning after December 15, 2008 and earlier adoption is not permitted.
Although EITF No. 07-5 is effective for fiscal years beginning after December
15, 2008, any outstanding instrument at the date of adoption will require a
retrospective application of the accounting through a cumulative effect
adjustment to retained earnings upon adoption. The Company is currently
evaluating the impact of EITF No. 07-5 on its consolidated financial statements,
but it believes that certain factors of its convertible debentures and warrants
that have been previously classified as equity may require liability
treatment.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “ Business Combinations ”
(“SFAS 141(R)”). SFAS 141(R) replaces SFAS No. 141, “ Business Combinations ”, and
is effective for the Company for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. SFAS 141(R) requires the new acquiring entity to
recognize all assets acquired and liabilities assumed in the transactions,
expense all direct transaction costs and account for the estimated fair value of
contingent consideration. This standard establishes an acquisition-date
fair value for acquired assets and liabilities and fully discloses to investors
the financial effect the acquisition will have. The adoption of this
pronouncement is not expected to have a material effect on the Company’s
consolidated financial statements.
In
November 2007, the Emerging Issues Task Force issued EITF Issue 07-01 (“EITF
07-01”), “Accounting for
Collaborative Arrangements” . EITF 07-01 requires
collaborators to present the results of activities for which they act as the
principal on a gross basis and report any payments received from (made to) other
collaborators based on other applicable generally accepted accounting principles
in the United States (“GAAP”) or, in the absence of other applicable GAAP, based
on analogy to authoritative accounting literature or a reasonable, rational, and
consistently applied accounting policy election. Further, EITF 07-01
clarified that the determination of whether transactions within a collaborative
arrangement are part of a vendor-customer (or analogous) relationship subject to
Issue 01-9, “Accounting for Consideration Given by a Vendor to a Customer”.
EITF 07-01 is effective for fiscal years beginning after December 15,
2008. The Company does not anticipate that the adoption of this standard will
have a material impact on its financial statements.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 3 –
INVENTORIES
Inventories
at March 31, 2009 and 2008 consist of the following:
NOTE 4 – FIXED
ASSETS
Fixed
assets consist of the following at March 31:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expense for fixed assets for the years ended March 31, 2009 and
2008 was $63,129 and $36,602, respectively.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 5 – INTANGIBLE
ASSETS
Intangible
assets are comprised of patents and trademarks and software developed for
internal uses. The gross book values and accumulated amortization as
of March 31, 2009 and 2008 were as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
expense for intangible assets for the years ended March 31, 2009 and 2008 was
$18,855 and $4,696, respectively. All of the Company’s intangible assets are
subject to amortization.
Estimated
future annual amortization expense pursuant to these intangible assets is as
follows:
Years
Ending March 31,
|
|
Patents
and Trademarks
|
|
|
Software
|
|
|
Total
Intangibles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 6 – INCOME
TAXES
The tax
effects of temporary differences that give rise to deferred taxes at
March 31, 2009 and 2008 are as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
|
|
|
|
|
|
|
Accrued
expenses and reserves
|
|
|
|
|
|
|
|
|
Expenses
recognized for granting of options and
warrants
|
|
|
|
|
|
|
|
|
Total
gross deferred tax asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
valuation allowance increased during the years ended March 31, 2009 and 2008 by
approximately $1,123,000 and $1,236,000, respectively. No current
provision for income taxes for the years ended March 31, 2009 and 2008 is
required, except for minimum state taxes, since the Company incurred taxable
losses during such years.
The
provision for income taxes for fiscal 2009 and 2008 was $1,600 and $1,600,
respectively, and differs from the amount computed by applying the U.S. Federal
income tax rate of 34% to loss before income taxes as a result of the
following:
|
|
2009
|
|
|
2008
|
|
Computed
tax benefit at federal statutory rate
|
|
|
|
|
|
|
|
|
State
income tax benefit, net of federal
effect
|
|
|
|
|
|
|
|
|
Non
deductible
extinguishment of debt
|
|
|
|
|
|
|
|
|
Increase
in valuation allowance, net of federal effect
|
|
|
|
|
|
|
|
|
Disallowed
convertible debenture interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 6 – INCOME TAXES,
continued
As of
March 31, 2009, the Company had net operating loss carry forwards of
approximately $12,600,000 and $12,600,000 for federal and state income tax
reporting purposes, respectively, which expire at various dates through
2028.
The
utilization of the net operating loss carry forwards might be limited due to
restrictions imposed under federal and state laws upon a change in ownership.
The amount of the limitation, if any, has not been determined at this time. A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. As a result of
the Company’s continued losses and uncertainties surrounding the realization of
the net operating loss carry forwards, the Company has recorded valuation
allowances equal to the net deferred tax asset amounts as of March 31, 2009 and
2008.
NOTE 7 – COMMITMENTS AND
CONTINGENCIES
Operating
Leases
On July
2, 2007, the Company entered into a new lease agreement for a building with
approximately 11,881 square feet of manufacturing and office space. The lease
agreement is for a period of two years with renewal options for three, one-year
periods, beginning September 1, 2007. The lease requires base lease
payments of approximately $13,000 per month plus operating
expenses. In connection with the lease agreement, the Company issued
10,000 warrants to the lessor at an exercise price of $1.55 per share for a
period of two years, valued at $15,486 as calculated using the Black-Scholes
option pricing model. The assumptions used under the Black-Scholes
pricing model included: a risk free rate of 4.75%; volatility of 293%; an
expected exercise term of 5 years; and no annual dividend rate. The Company has
capitalized and is amortizing the value of the warrants over the life of the
lease and the remaining unamortized value of the warrants has been recorded in
other long-term assets. As of March 31, 2009 and 2008, the unamortized balance
of the value of the warrants issued to the lessor was $2,970 and $10,074,
respectively.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 7 – COMMITMENTS AND
CONTINGENCIES
As of
March 31, 2009, future minimum rental payments required under the existing
facility operating lease are as follows:
Years
Ending
March
31,
|
|
Operating
Lease
|
|
|
|
|
Total
rental expense was approximately $183,000 and $155,000 for the years ended March
31, 2009 and 2008, respectively.
Litigation
The
Company becomes 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 on 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 Company indemnifies its
directors, officers, employees and agents, as permitted under the laws of the
States of California and Nevada. In connection with its facility
lease, the Company has indemnified its lessor for certain claims arising from
the use of the facility. The duration of the guarantees and
indemnities varies, and is generally tied to the life of the agreement. These
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.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 8 – LINE OF
CREDIT
On
November 5, 2007, the Company secured financing for a $200,000 one-year
revolving line of credit (the “Line”) secured by a $200,000 Certificate of
Deposit with Bank of the West. On November 6, 2008, the Company secured a
one-year renewal of the Line for a reduced amount of $100,000 which is secured
by a $100,000 Certificate of Deposit with Bank of the West. All borrowings under
the revolving line of credit bear variable interest based on the prime rate
plus 1% per annum (totaling 4.25% as of March 31, 2009). The Company
utilizes the funds advanced from the Line for capital equipment purchases to
support the launch of the Company’s newly developed product, the CryoPort
Express™ One-Way Shipper. As of March 31, 2009 and 2008, the outstanding balance
of the Line was $90,310 and $115,943, respectively, including accrued interest
of $334 and $443, respectively. During the years ended March 31, 2009
and 2008, the Company made payments against the Line of $25,500 and zero
respectively, and recorded interest expense of $3,099 and $1,493, respectively,
related to the Line. No funds were drawn against the Line during the
year ended March 31, 2009 and $120,000 was drawn against the Line during the
year ended March 31, 2008.
NOTE 9 – NOTES
PAYABLE
The
Company had a non-interest bearing note payable to a third party for $77,304,
which was due in April 2003. The Company made the final payments on
the note of $5,000 in April 2008 and $7,000 in May 2008. As of March
31, 2009 and 2008, the remaining unpaid balance was zero and $12,000,
respectively.
As of
March 31, 2009 and 2008, the Company had aggregate principal balances of
$1,129,500 and $1,249,500, respectively, in outstanding unsecured indebtedness
owed to five related parties, including four former members of the board of
directors, representing working capital advances made to the Company from
February 2001 through March 2005. These notes bear interest at the
rate of 6% per annum and provide for aggregate monthly principal payments which
commenced April 1, 2006 of $2,500, and which increased by an aggregate of $2,500
every six months to the current maximum aggregate payment of $10,000 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 $71,676 and $78,243 for the years ended
March 31, 2009 and 2008, respectively. Accrued interest related
to these notes, which is included in related party notes payable in the
accompanying consolidated balance sheets, amounted to $554,260 and $482,584 as
of March 31, 2009 and 2008, respectively. As of March 31, 2009, the
Company had not made the required payments under the related party notes which
were due on January 1, February 1, and March 1, 2009. However,
pursuant to the note agreements, the Company has a 120-day grace period to pay
missed payments before the notes are in default. On April 29, 2009,
May 30, 2009, and June 26, 2009, the Company paid the January 1, February 1 and
March 1 payments respectively, due on these related party
notes. Management expects to continue to pay all payments due prior
to the expiration of the 120-day grace periods.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 9 – NOTES PAYABLE,
continued
In August
2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008. As of March 31, 2009 and 2008, the
total amount of deferred salaries and accrued interest under this arrangement
was $157,688 and $201,115, respectively, of which $67,688 and $129,115,
respectively is recorded as a long-term liability in the accompanying
consolidated balance sheets. Interest expense related to this note
was $10,573 and $3,165, respectively for the years ended March 31, 2009 and
2008. Accrued interest related to this note payable amounted to
$13,738 and $3,165 at March 31, 2009 and 2008, respectively, and is included in
the note payable to officer in the accompanying consolidated balance sheets. In
January 2009, Mr. Berry agreed to defer the monthly payments of the note due
from January 31, 2009 through June 30, 2009. As of March 31, 2009 these unpaid
payments totaled $18,000 and are included in the current liability portion of
the note payable in the accompanying consolidated balance sheet. Mr.
Berry resigned his position as Chief Executive Officer in February 2009, however
remains a director on the Board and continues to work as a consultant for the
Company.
NOTE 10 – CONVERTIBLE NOTES
PAYABLE
October 2006
Debentures
In
October 2006, the Company entered into an Agency Agreement with a broker to
raise capital in a private placement offering of convertible debentures under
Regulation D. From February 2006 through January 2007, the
Company received a total of $120,000 under this private placement offering of
convertible debenture debt. Related to the issuance of the
convertible debentures, the Company paid commissions to the broker totaling
$15,600 which were capitalized as deferred financing costs. During the years
ended March 31, 2009 and 2008, the Company amortized zero and $4,699,
respectively, of these deferred financing costs to interest
expense.
Per the
terms of the convertible debenture agreements, the notes had a term of 180 days
from issuance, bore interest at 15% per annum and were convertible into shares
of the Company’s common stock at a ratio of 6.67 shares for every dollar of debt
converted. The proceeds of the convertible notes were used in the
ongoing operations of the Company. During the year ended March 31,
2008, the Company converted the full $120,000 of principal balances and $8,857
of accrued interest relating to these convertible debentures into 859,697 shares
of common stock at a conversion price of $0.15 per share. As of March
31, 2009 and 2008, the balance of these convertible notes and accrued interest
was zero. During the years ended March 31, 2009 and 2008, the Company recorded
interest expense of zero and $2,784, respectively, related to these
notes.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued
In
connection with the issuance of the convertible debt, the Company recorded a
debt discount totaling $106,167 related to the beneficial conversion feature of
the notes. The Company amortized the debt discount using the
effective interest method through the maturity dates of the notes. As
of March 31, 2009 and 2008, the remaining balance of the debt discount was
zero. During the years ended March 31, 2009 and 2008, the Company
recorded additional interest expense of zero and $29,638, respectively, related
to the amortization of the debt discount.
October 2007
Debentures
On
October 1, 2007, the Company issued to BridgePointe Master Fund, Ltd. and the
Enable Funds (the “October 2007 Debenture Holders”), Original Issue Discount 8%
Senior Secured Convertible Debentures (the “October 2007 Debentures”) having a
principal face amount of $4,707,705 and generating gross proceeds of $4,001,551.
After accounting for commissions, legal and other fees, the net proceeds
to the Company totaled $3,436,551.
Original
Terms, as amended in February 2008:
In
accordance with the Convertible Debenture Agreement as amended on February 19,
2008, the principal amount under the October 2007 Debentures is payable to the
investors in 24 monthly redemption payments which commenced on March 31,
2008. The principal payments have subsequently been adjusted
according to the terms of the January Amendment discussed in further detail
below. The Company may elect to make principal redemptions in shares
of common stock. If the Company elects to make principal
redemptions in common stock, the conversion rate will be the lesser of (a) the
Conversion Price (as defined below), or (b) 85% of the lesser of (i) the average
of the volume weighted average price for the ten consecutive trading days ending
immediately prior to the applicable date a principal redemption is due or (ii)
the average of such price for the ten consecutive trading days ending
immediately prior to the date the applicable shares are issued and delivered if
such delivery is after the principal redemption due date.
At any
time, holders may convert the Debentures into shares of common stock at a fixed
conversion price of $0.84, subject to adjustment in the event the Company issues
common stock (or securities convertible into or exercisable for common stock) at
a price below the conversion price as such price may be in effect at various
times (the “Conversion Price”). During fiscal 2009 the conversion
price was subsequently reset to $0.51 as a result of the January Amendment
discussed in further detail below.
Quarterly
interest payments for these convertible debentures are payable in cash and
commenced on January 1, 2008. The Company may elect to make interest
payments in shares of common stock provided, generally, that it is not in
default under the Debentures and it has met certain equity conditions prior to
the due date of the interest payments. If the Company elects to make
interest payments in common stock, the conversion rate will be the lesser of (a)
the Conversion Price (as defined below), or (b) 85% of the lesser of (i) the
average of the volume weighted average price for the ten consecutive trading
days ending immediately prior to the applicable date an interest payment is due
or (ii) the average of such price for the ten consecutive trading days ending
immediately prior to the date the applicable shares are issued and delivered if
such delivery is after the interest payment date.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued
In
connection with the Debenture financing transaction, the Company issued to the
investors five-year warrants to purchase 5,604,411 shares of common stock at
$0.92 per share and two-year warrants to purchase 1,401,103 shares of common
stock at $0.90 per share and warrants to purchase 1,401,103 shares of common
stock at $1.60 per share (collectively, the “October 2007
Warrants”). The value attributed to these warrants as calculated
using the Black-Scholes option pricing model was $7,838,791 on the date of
issuance. The valuation of the October 2007 Warrants have been affected by the
debt restructurings as the result of subsequent amendments to the October 2007
Debentures as discussed further below.
Under
EITF 00-27, the value of the warrants issued to the investors is calculated
relative to the total amount of the debt offering. The relative fair
value of the warrants issued to the investors was determined to be $2,941,267,
or 62.5% of the total offering. The relative fair value of the
warrants, along with the effective beneficial conversion feature of the debt
($3,557,761) and the face value discount given to the investors ($706,154),
totaled in excess of the face amount of the Debentures. As such, the
Company recorded a debt discount equal to the face value of the Debentures of
$4,707,705. The debt discount is being amortized by the Company
through the maturity dates of the Debentures. The debt discount has
been affected by the debt restructurings as a result of subsequent amendments to
the October 2007 Debentures discussed in further detail below.
Financing
fees of $565,000, including placement agent fees of $440,000 and legal and other
fees of $125,000, were paid in cash from the gross proceeds of the
Debentures. Joseph Stevens and Company (“Joseph Stevens”) acted as
sole placement agent in connection with the Debenture financing
transaction. Also in connection with the Debenture financing
transaction, the Company issued Joseph Stevens three-year warrants to purchase
560,364 shares of the Company’s common stock exercisable at $0.84 per
share. The value of the warrants issued to Joseph Stevens as
calculated using the Black-Scholes option pricing model was
$525,071.
The total
financing fees of $1,090,071 related to the Debenture financing transaction were
allocated to the equity and debt components of the financing. The
Company recorded 62.5% of the financing fees ($681,294) as costs related to the
issuance of the equity instruments, and as such has netted those amounts against
additional paid-in capital as of the date of the financing. The
remaining 37.5% ($408,777) was recorded as deferred financing costs on the
Company’s consolidated balance sheet as of March 31, 2008, and amortized by the
Company through the maturity dates of the Debentures under the effective
interest method. The deferred financing fees were affected by the
debt restructure as a result of the April 2008 Amendment discussed in further
detail below.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued
In
connection with the Debentures, the Company also entered into a registration
rights agreement with the investors that requires the Company to register the
shares issuable upon conversion of the principal amounts of the Debentures and
exercise of the Warrants. Pursuant to the registration rights
agreement, on November 9, 2007 the Company filed a Registration Statement on
Form SB-2. On January 25, 2008, the registration statement, as
amended, became effective with the Securities and Exchange
Commission. Per the terms of the registration rights agreement,
following the effective date of the registration statement, the Company may
force conversion of the Debentures if the market price of the common stock is at
least $2.52 for 30 consecutive days. The Company may also prepay the
Debentures in cash at 120% of the then outstanding principal
balance.
The
Debentures rank senior to all of the Company’s current and future indebtedness
and are secured by substantially all of the Company’s assets.
April
2008 Amendment:
On April
30, 2008, the October 2007 Convertible Debenture Agreement was amended to
reflect changes to the monthly redemption of principal and changes to the
October 2007 Warrants issued with the original October 2007
Debentures. Under the terms of the April 30, 2008 Amendment (the
“April Amendment”), the monthly principal redemptions were suspended until
August 1, 2008 and the remaining principal due on the October 2007 Debentures
were to be paid thereafter on the first date of each month in equal installments
through March 27, 2010, the expiration date. Further, the April Amendment
changed the exercise price of the October 2007 Warrants issued under the terms
of the Securities Purchase Agreement and related Agreements from $0.90, $0.92
and $1.60 to $0.60 each. The number of shares to be purchased under each of the
October 2007 Warrants was also adjusted under the terms of the April Amendment
so that the original dollar amounts to be raised by the Company through the
exercise of each of the October 2007 Warrants remained the same. As a
result, the number of shares to be purchased under the October 2007 Warrants
increased by 6,024,743 from 8,406,617 to 14,431,360.
The April
Amendment to the October 2007 Debentures has been accounted for by the Company
as an extinguishment of debt in accordance with EITF Issue No. 96-19 (“EITF
Issue No. 96-19”), Debtor’s
Accounting for a Modification or Exchange of Debt Instruments , and
EITF Issue No. 06-6 (“EITF Issue No. 06-6”), Debtor's Accounting For a
Modification or Exchange of Convertible Debt Instruments . The
Company determined that the net present value of the cash flows under the terms
of the April Amendment was more than 10 percent different from the present value
of the remaining cash flows under the terms of the original October 2007
Debentures agreement. Due to the substantial difference, the Company
determined an extinguishment of debt had occurred with the April
Amendment. Accordingly, the Company recorded the amended October 2007
Debentures at their fair value of $1,805,668 at the date of
extinguishment. The difference between the fair value of the amended
October 2007 Debentures and the carrying value of the original October 2007
Debentures at the date of debt extinguishment amounting to $732,400 was recorded
as part of the loss on debt extinguishment for the year ended March 31,
2009.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
As a
result of the April Amendment, unamortized deferred financing costs of $312,197
arising from the original issuance of the October 2007 Debentures were written
off and were included in the loss on debt extinguishment for the year ended
March 31, 2009. There were no debt issuance costs incurred in
connection with the April Amendment.
A debt
discount of $2,643,192 was recorded in connection with the debt extinguishment
from April Amendment to the October 2007 Debentures. The debt
discount was amortized monthly based on the maturity dates of the October 2007
Debentures until affected by the August 2008 Amendment discussed in further
detail below.
The
increase in value of the October 2007 Warrants arising from the change in
conversion price and the additional number of warrants issued of $5,858,344 has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.
The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the October 2007 Debentures from the April Amendment discussed above totaled
$6,902,941 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.
August
2008 Amendment:
On August
29, 2008, the Company entered into an “Amendment to Debentures, Agreement and
Waiver” (the “August Amendment”) with October 2007 Debenture Holders, to amend
the October 2007 Convertible Debenture. The August Amendment waived quarterly
interest payments that would otherwise have been due on October 1, 2008 and
January 1, 2009 and defers the monthly redemption dates from July 31, 2008
through November 30, 2008 to commence upon December 31, 2008, and
terminating upon full redemption of the October 2007 Debentures. In
consideration for entering into the August Amendment, the outstanding principal
amount of the October 2007 Debentures was increased to an amount equal to 115%
of the sum of (i) the outstanding principal amount of as of August 29, 2008, the
date of the August Amendment, plus (ii) an amount equal to the additional amount
of interest that would have accrued on the October 2007 Debenture from July 1,
2008 through December 31, 2008. There were no changes to the warrants related to
the October 2007 Debentures as a result of the August
Amendment. Based on the terms of the August Amendment, the principal
balances of the October 2007 Debentures increased by $866,202 to
$5,285,599.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
The
August Amendment to the October 2007 Debentures has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6. The Company determined that the net present
value of the cash flows under the terms of the August Amendment was more than 10
percent different from the present value of the remaining cash flows under the
terms of the October 2007 Debentures agreement as previously amended in April
2008. Due to the substantial difference, the Company determined an
extinguishment of debt had occurred with the August
Amendment. Accordingly, the Company recorded the amended October 2007
Debentures at their fair value of $2,203,086 at the date of
extinguishment. The difference between the fair value of the amended
October 2007 Debentures and the carrying value of the original October 2007
Debentures at the date of debt extinguishment amounting to $91,728 was recorded
as an offset against the loss on debt extinguishment for the year ended
March 31, 2009.
A debt
discount of $3,082,511 was recorded in connection with the debt extinguishment
from August Amendment to the October 2007 Debentures which includes $117,851
related to the interest that would have accrued from September to December
2008. This portion of the debt discount was amortized through
December 2008, while the remaining $2,964,660 of the debt discount is being
amortized monthly based on the maturity dates of the October 2007 Debentures
until affected by the January 2009 Amendment discussed in further detail
below.
January
2009 Amendment:
Effective
January 27, 2009, the October 2007 and May 2008 Convertible Debenture Agreements
(see below) were amended to reflect changes to the monthly redemptions of
principal, the quarterly payments of interest and changes to the October 2007
and May 2008 Warrants related to the original October 2007 and May 2008
Debentures. Under the terms of the January 27, 2009 Amendment (the
“January Amendment”), the “Conversion Price” of the debentures was reset from
$0.84 to $0.51, monthly principal redemptions were deferred until August 1, 2009
and the remaining principal due on each of the debentures will be paid
thereafter on the first date of each month in twelve equal installments through
July 1, 2010, the amended maturity date. During the deferral period
interest payments due from January 1, 2009 through July 1, 2009 may be paid
monthly by the Company in common stock shares at a conversion rate of $0.40
given that it has met certain equity conditions prior to the due date of the
interest payments. If the equity conditions are not met, the Company
may add the monthly interest payment to the principal balance of the
debenture.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
Further,
the January Amendment reset the “Exercise Price” of the October 2007 and May
2008 Warrants issued in connection with the October 2007 and May 2008 Debentures
Agreements and related agreements from the then current exercise prices of
$0.60, $0.92 and $1.35 to $0.60 and extended the expiration dates of the October
2007 warrants to January 1, 2014. The number of shares to be purchased under the
October 2007 and May 2008 warrants were proportionately increased under the
terms of the amendments so that the original dollar amounts to be raised by
registrant though the exercise of each of the warrants and the proportional
number of warrants issued to each Debenture Holder remained the
same. As a result, the number of common stock shares to be
purchased under the October 2007 Warrants increased by 2,851,897 to
17,283,257.
Under the
terms of the January Amendment, in February 2009, the Company issued a total of
320,800 restricted common shares valued at $131,528 to the October 2007
Debenture Holders.
The
January Amendment to the October 2007 Debentures has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6. The Company determined that the net present
value of the cash flows under the terms of the January Amendment was more than
10 percent different from the present value of the remaining cash flows under
the terms of the original October 2007 Debentures agreement. Due to
the substantial difference, the Company determined an extinguishment of debt had
occurred with the January Amendment. Accordingly, the Company
recorded the amended October 2007 Debentures at their fair value of $2,733,557
as of January 27, 2009, the date of extinguishment. The decrease in
the fair value of the amended October 2007 Debentures from the carrying value of
the amended October 2007 Debentures at the date of debt extinguishment amounting
to $367,557 was recorded as an offset to the total loss on debt extinguishment.
A new debt discount of $2,552,042 was recorded in connection with the debt
extinguishment from the January Amendment to the October 2007
Debentures. The debt discount is being amortized through the July 1,
2010 amended maturity dates of the October 2007 Debentures.
The
increase in value of the October 2007 Warrants arising from the change in
conversion price and the additional number of warrants issued of $2,874,314 has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009. In addition the fair value of the 320,800
shares issued to the October 2007 Debenture holders totaled $131,528 and has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.
The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the October 2007 Debentures from the January Amendment discussed above totaled
$2,638,285 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
Principal
and interest:
On
January 31, 2008, $100,000 of the October 2007 Debentures was converted by an
investor. Using the conversion rate of $0.84 per share per the terms
of the Debenture, 119,047 shares of registered common stock were issued to the
investor.
On March
31, 2008, the Company converted principal redemptions totaling $188,308 into
224,176 shares of registered common stock and interest payments of $92,821 into
110,501 shares of common stock using the conversion rate of
$0.84.
In April
2008, the Company rescinded and cancelled 140,143 shares of registered common
stock for principal redemptions of the October 2007 Debentures totaling $117,720
and submitted the cash payments in the same amounts to those
holders. Pursuant to a one-time waiver of certain equity conditions,
the remaining $70,588 of the March 31 principal redemption was adjusted to
reflect a one-time conversion rate of $0.70 and, in April 2008 the Company
issued the holder 16,807 additional registered shares in
consideration. In addition, the March 31, 2008 interest
payments were adjusted to reflect a one-time conversion price of $0.70 and in
April 2008 the Company issued the October 2007 Debenture holders 22,099
additional common stock shares. The additional interest expense for
the October 2007 Debentures of $5,446 related to the one-time conversion rate
adjustments of the March 31, 2008 principal and interest payments from $0.84 to
$0.70 was included in accrued interest for the October 2007 Debentures as of
March 31, 2008.
On March
1, 2009 the Company increased the principal balances of the October 2007
Debentures by $70,474, the amount of the accrued interest due as of that date,
as a result of the equity condition constraints for the conversion of interest
payments pursuant to the January Amendment.
As of
March 31, 2009 and 2008, the principal balance of the October 2007 Debentures
totaled $5,356,073 and $4,419,397, respectively, of which the current portion of
$3,570,720 and $1,936,884 is included in the Company’s current liabilities in
the accompanying consolidated balance sheets as of March 31, 2009 and 2008,
respectively. As of March 31, 2009 and 2008, the Company had $35,707
and $5,446, respectively of accrued interest related to the October 2007
Debentures included in the accompanying consolidated balance sheets and recorded
a total of $253,495 and $192,421, respectively, of interest expense related to
the face rate of interest in the accompanying consolidated statements of
operations for the years ended March 31, 2009 and 2008. During the
years ended March 31, 2009 and 2008, the Company converted accrued interest
payments of $5,446 and $186,975, respectively on the convertible notes into
38,906 and 222,590 shares of common stock, respectively, using a conversion rate
of $0.84 per share.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
Changes
to the principal balances of the October 2007 Debentures during the years ended
March 31, 2009 and 2008 are shown below:
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Payment - Shares
|
|
|
|
|
Balance
at March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2009
|
|
|
|
|
As of
March 31, 2009 and 2008, the unamortized balance of the debt discount related to
the October 2007 Debentures was $2,251,802 and $3,522,356,
respectively. During the years ended March 31, 2009 and 2008 the
Company recorded additional interest expense of $1,804,716 and $1,185,348
respectively, related to the amortization of the debt discount associated with
the October 2007 Debentures.
As of
March 31, 2009 and 2008, the unamortized balance of the deferred financing fees
related to the October 2007 Debentures was zero and $325,769,
respectively. During the years ended March 31, 2009 and 2008 the
Company recorded additional interest expense of $13,572 and $83,007
respectively, related to the amortization of the deferred financing fees
associated with the October 2007 Debentures. In connection with the
April Amendment described above, the unamortized balance of the deferred
financing costs was written off.
Changes
to the exercise prices and number of warrants related to the October 2007
Debentures as a result of the April and January Amendments were made according
to the following schedule:
|
5
Year
Warrants
|
2
Year
Warrants
|
2
Year
Warrants
|
Combined
|
As
Originally Issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Modified April Amendment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Modified January Amendment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
May 2008
Debenture
On June
9, 2008, the Company completed the transactions contemplated under a certain
Securities Purchase Agreement with an accredited investor providing for the
issuance of the Company’s Original Issue Discount 8% Secured Convertible
Debenture (the “May 2008 Debenture”) having a principal face amount of
$1,250,000. The Company realized gross proceeds of $1,062,500 after
giving effect to a 15% discount. After accounting for commissions and
legal and other fees, the net proceeds to the Company totaled
$870,625.
Original
terms:
Under the
original terms, the principal amount under the May 2008 Debenture was payable in
23 monthly payments of $54,348 beginning January 31, 2009. Interest
payments are payable in cash quarterly commencing on January 1, 2009. The
principal and interest payments have been affected by the debt restructures as a
result of the January Amendment discussed in further detail
below. The Company may elect to make principal and interest payments
in shares of common stock provided, generally, that the Company is not in
default under the May 2008 Debenture, it has met certain equity conditions prior
to the due dates and there is then in effect a registration statement with
respect to the shares issuable upon conversion of the May 2008
Debenture. If the Company elects to make principal or interest
payments in common stock, the conversion rate will be the lesser of (a) the
Conversion Price (as defined below), or (b) 85% of the lesser of (i) the average
of the volume weighted average price for the ten consecutive trading days ending
immediately prior to the applicable date an interest payment is due or (ii) the
average of such price for the ten consecutive trading days ending immediately
prior to the date the applicable shares are issued and delivered if such
delivery is after the interest payment date.
At any
time, the holder may convert the May 2008 Debenture into shares of common stock
at a fixed conversion price of $0.84, subject to adjustment in the event the
Company issues common stock (or securities convertible into or exercisable for
common stock) at a price below the conversion price as such price may be in
effect at various times (the “Conversion Price”). During fiscal 2009, the
conversion price was subsequently reset to $0.51 as a result of the January
Amendment discussed in further detail below.
Following
the effective date of the registration statement described below, the Company
may force conversion of the May 2008 Debenture if the market price of the common
stock is at least $2.52 for 30 consecutive days. The Company may also prepay the
May 2008 Debenture in cash at 120% of the then outstanding principal
balance.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
The May
2008 Debenture ranks senior to all current and future indebtedness of the
Company, with the exception of the October 2007 Debentures that were issued by
the Company which rank senior to the May 2008 Debenture. The May 2008
Debenture is secured by substantially all of the assets of the
Company. As part of the transaction, the Company entered into a
waiver and subordination agreement with the holders of the October 2007
Debentures.
In
connection with the financing transaction, the Company issued to the investor
five-year warrants to purchase 1,488,095 shares of the Company’s common stock at
$0.92 per share and five-year warrants to purchase 1,488,095 shares of common
stock at $1.35 per share (collectively, the “May 2008 Warrants”).
Under
EITF Issue No. 00-27, the value of the May 2008 Warrants issued to the investor
was calculated relative to the total amount of the debt offering. The relative
fair value of the May 2008 Warrants issued to the investors was determined to be
$815,471, or 65.2% of the total offering. The relative fair value of the May
2008 Warrants, along with the effective beneficial conversion feature of the
debt ($434,529) and the face value discount given to the investors ($187,500),
totaled in excess of the face amount of the May 2008 Debenture. As such, the
Company recorded a debt discount equal to the face value of the May 2008
Debenture of $1,250,000. The debt discount is being amortized by the Company to
interest expense through the maturity date of the May 2008 Debenture. The debt
discount has been affected by the debt restructures as a result of the January
Amendment discussed in further detail below.
The
Company also entered into a registration rights agreement with the investors
that requires the Company to register the shares issuable upon conversion of the
May 2008 Debenture and exercise of the May 2008 Warrants within 45 days after
the closing date of the transaction. Pursuant to the registration rights
agreement, on July 14, 2008 the Company filed a Registration Statement on Form
S-1, which became effective with the Securities and Exchange Commission on
August 28, 2008. As a result of a timely filing, The Company was not
subject to any liquidated damages as described in the registration rights
agreement.
Financing
fees of $191,875 including placement agent fees of $116,875 and legal and other
fees of $75,000 were paid in cash from the gross proceeds of the May 2008
Debenture. National Securities Corporation (“National Securities”)
acted as sole placement agent in connection with the financing transaction.
Also, in connection with the financing transaction, the Company issued National
Securities five-year warrants to purchase 148,810 shares of the Company’s common
stock exercisable at $0.84 per share. The value of the warrants issued to
National Securities as calculated using the Black-Scholes option pricing model
was $117,530.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
The total
financing fees of $309,405 related to the financing transaction have been
allocated to the equity and debt components of the financing. The Company has
recorded 65.2% of the financing fees ($201,732) as costs related to the issuance
of the equity instruments, and as such has netted those amounts against
additional paid-in capital as of the date of the financing. The remaining 34.8%
($107,673) were recorded as deferred financing fees. The deferred financing fees
have been amortized by the Company through the maturity date of the May 2008
Debenture on a straight-line basis which approximates the effective interest
method. The deferred financing fees have been affected by the debt restructures
as a result of the January Amendment discussed in further detail
below.
All
securities were issued pursuant to an exemption from registration in reliance on
Regulation D promulgated under the Securities Act, and based on the investors’
representations that they are “accredited” as defined in Rule 501 under the
Securities Act.
January
2009 Amendment:
Effective
January 27, 2009 the October 2007 and May 2008 Convertible Debenture Agreements
were amended to reflect changes to the monthly redemptions of principal, the
quarterly payments of interest and changes to the October 2007 and May 2008
Warrants related to the original October 2007 and May 2008
Debentures. Under the terms of the January 27, 2009 Amendment (the
“January Amendment”), the “Conversion Price” of the debentures was reset from
$0.84 to $0.51, monthly principal redemptions were deferred until August 1, 2009
and the remaining principal due on each of the debentures will be paid
thereafter on the first date of each month in twelve equal installments through
July 1, 2010, the amended maturity date. During the deferral period
interest payments due from January 1, 2009 through July 1, 2009 may be paid
monthly by the Company in common stock shares at a conversion rate of $0.40
given that it has met certain equity conditions prior to the due date of the
interest payments. If the equity conditions are not met, the Company
may add the monthly interest payment to the principal balance of the
debenture.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
Further,
the January Amendment reset the “Exercise Price” of the October 2007 and May
2008 Warrants issued in connection with the October 2007 and May 2008 Debentures
Agreements and related agreements from the then current exercise prices of
$0.60, $0.92 and $1.35 to $0.60 and extended the expiration dates of the October
2007 warrants to January 1, 2014. The number of shares to be purchased under the
October 2007 and May 2008 warrants were proportionately increased under the
terms of the amendments so that the original dollar amounts to be raised by
registrant though the exercise of each of the warrants and the proportional
number of warrants issued to each Debenture Holder remained the
same. As a result, the number of Common stock shares to be
purchased under the May 2008 Warrants increased by 2,653,770 to
5,629,960.
Under the
terms of the January Amendment, in February 2009, the Company issued a total of
79,200 restricted common shares valued at $32,472 to the May 2008 Debenture
Holder.
The
January Amendment to the May 2008 Debenture has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6. The Company determined that the net present
value of the cash flows under the terms of the January Amendment was more than
10 percent different from the present value of the remaining cash flows under
the terms of the original May 2008 Debenture agreement. Due to the
substantial difference, the Company determined an extinguishment of debt had
occurred with the January Amendment. Accordingly, the Company
recorded the amended May 2008 Debenture at its fair value of $526,950 as of
January 27, 2009, the date of extinguishment. The increase in the
fair value of the amended May 2008 Debentures from the carrying value of the
original May 2008 Debentures at the date of debt extinguishment amounted to
$193,614 and was recorded as a loss on debt extinguishment for the year ended
March 31, 2009. A new debt discount of $723,050 was recorded in connection with
the debt extinguishment from January Amendment to the May 2008
Debenture. The debt discount is being amortized through the July 1,
2010 amended maturity date of the May 2008 Debenture.
The
increase in value of the May 2008 Warrants arising from the change in conversion
price and the additional number of warrants issued of $1,092,028 has been
accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009. In addition the fair value of the 79,200 shares
issued to the May 2008 Debenture holder totaled $32,472 and has been accounted
for as a payment to the debt holders in connection with the debt extinguishment
and included in the loss on debt extinguishment for the year ended March 31,
2009.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
As a
result of the January Amendment, unamortized deferred financing costs of $78,961
arising from the original issuance of the May 2008 Debentures were written off
and were included in the loss on debt extinguishment for the year ended March
31, 2009. There were no debt issuance costs incurred in connection
with the January Amendment.
The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the May 2008 Debenture from the January Amendment discussed above totaled
$1,397,075 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.
Principal
and interest:
On March
1, 2009 the Company increased the principal balances of the May 2008 Debenture
by $75,556, the amount of the accrued interest due as of that date, as a result
of the equity condition constraints for the conversion of interest payments
pursuant to the January Amendment.
As of
March 31, 2009, the principal balance of the May 2008 Debenture totaled
$1,325,556, of which the current portion of $883,704 is included in the
Company’s current liabilities in the accompanying consolidated balance sheet at
March 31, 2009.
Changes
to the principal balance of the May 2008 Debenture during the year ended March
31, 2009 are shown below:
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2009
|
|
|
|
|
For the
year ended March 31, 2009, the Company recorded interest expense of $84,393
related to the face rate of interest, of which $8,837 is included in
accrued interest in the accompanying consolidated balance sheet at
March 31, 2009.
During
the year ended March 31, 2009, the Company recorded additional interest expense
of $418,400 related to the amortization of the debt discount. As of March 31,
2009, the unamortized balance of the debt discount was $637,986.
During
the year ended March 31, 2009, the Company recorded additional interest expense
of $28,712 related to the amortization of the deferred financing fees on the May
2008 Debenture. In connection with the January Amendment described above,
the unamortized balance of the deferred financing costs was written off. As of
March 31, 2009, the unamortized balance of the deferred financing fees was
zero.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE
NOTES PAYABLE, continued
Changes
to the exercise prices and number of warrants related to the May 2008 Debenture
as a result of the January Amendment were made according to the following
schedule:
|
5
Year
Warrants
|
5
Year
Warrants
|
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Modified January Amendment:
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement
Debentures
In March
2009 the Company entered into an Agency Agreement with a broker to raise capital
in a private placement offering of one-year convertible debentures under
Regulation D (the “Private Placement Debentures”). From March
through June 2009, the Company intends to raise up to a maximum of
$1,500,000 under this private placement offering of convertible debenture
debt. On March 31, 2009, the Company had received initial gross
proceeds of $60,000 under this private placement offering of convertible
debentures. Related to the issuance of the convertible debentures,
the Company accrued for commissions to the broker totaling $3,600 which have
been capitalized as deferred financing costs. The deferred financing costs will
be amortized to interest expense by the Company through the maturity dates of
the debentures on a straight-line basis which approximates the effective
interest method.
The
Company may elect to make principal redemptions on the maturity dates of the
debentures in shares of common stock at a fixed conversion price of $0.51. At
any time, holders may convert the debentures into shares of common stock at the
fixed conversion price of $0.51. The conversion price is subject to adjustment
in the event the Company issues the next equity financing of at least $2,500,000
at a price below $0.51.
Per the
terms of the convertible debenture agreements, the notes have a term of one year
from issuance and are redeemable by the Company with two days
notice. The notes bear interest at 8% per annum and are convertible
into shares of the Company’s common stock at a conversion rate of
$0.51. As of March 31, 2009 the balance of these convertible notes
was $60,000 and accrued interest was zero.
In
connection with the financing transaction, the Company issued to the investors
five-year warrants (the “Private Placement Warrants”) to purchase 23,529 shares
of the Company’s common stock at $0.51 per share. The exercise price of the
warrants is subject to adjustment in the event the Company issues the next
equity financing of at least $2,500,000 at a price below $0.51.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued
Under
EITF Issue No. 00-27, the value of the Private Placement Warrants issued to the
investor was calculated relative to the total amount of the debt offering. The
relative fair value of the Private Placement Warrants issued to the investors
was determined to be $9,146, or 15.2% of the total offering. The relative fair
value of the Private Placement Warrants, along with the effective beneficial
conversion feature of the debt of $4,440 were recorded as a total debt discount
of $13,586 as of March 31, 2009 which is reported in the accompanying
consolidated balance sheet. The Company will amortize the debt discount using
the effective interest method through the maturity dates of the
notes.
As of
June 22, 2009 the Company had received additional gross proceeds of $906,500
under this private placement of convertible debentures. (See Note
14)
Future
Maturities
Future
maturities of all notes payable at March 31, 2009 are as follows:
Years
Ending
March
31,
|
|
|
Oct.
2007
May
2008
Convertible
Debentures
|
|
|
Note
Payable
Officer
|
|
|
Related
Party
Notes
|
|
|
Private
Placement
Conv.
Debt.
|
|
|
Total
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 11 – COMMON
STOCK
In April
2007, the Company issued 375,000 shares of restricted common stock in lieu of
fees paid to a consultant. These shares were issued at a value of
$1.02 per share (based on the underlying stock price on the agreement date after
a fifteen percent deduction as the shares are restricted) for a total cost of
$382,500 which has been included in selling, general and administrative expenses
for the year ended March 31, 2008.
During
fiscal 2008, the Company entered into Agency Agreements with a broker to raise
funds in private placement offerings of common stock under Regulation
D. In connection with these private placement offerings, the Company
sold 3,652,710 shares of common stock at an average price of $0.22 per share
resulting in gross proceeds of $789,501 and incurred offering costs of
$89,635.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 11 – COMMON STOCK,
continued
During
fiscal 2008, the Company issued 117,188 shares of common stock resulting
from exercises of stock options and warrants at an average price of $0.69 per
share for proceeds of $107,500 and issued 386,726 shares of common stock from
the cashless exercises of a total of 465,469 warrants.
In
October 2007, the Company engaged the firm of Carpe DM, Inc. to perform the
services as the Company’s investor relations and public relations representative
for a monthly fee of $7,500 per month. Pursuant to the terms of this
36 month consulting agreement, the Company issued 150,000 S-8 registered shares
at $0.80 per share and a total value of $120,000, and 250,000 fully vested and
non-forfeitable warrants at an exercise price of $1.50 per share for a period of
two and one-half years, valued at $229,834 as calculated using the Black-Scholes
option pricing model. On November 13, 2007, the Company filed the
Form S-8 as required by this agreement with the Securities and Exchange
Commission. The Company recorded the combined value of $349,834 of the shares
and warrants issued as prepaid expense which is being amortized over the life of
the services agreement. As of March 31, 2009 and 2008, the
unamortized balance of the value of the shares and warrants issued to Carpe DM,
Inc. was $174,928 and $291,532, respectively, and $116,604 and $58,302,
respectively has been amortized and included in selling, general and
administrative expenses as outside services expense for the years ended March
31, 2009 and 2008.
On
October 16, 2007, the shareholders approved an increase in the total number of
voting common shares authorized to be issued to 125,000,000 shares.
On
January 31, 2008, $100,000 of the October 2007 Debentures was converted by an
investor. Using the conversion rate of $0.84 per share per the terms
of the Debenture, 119,047 shares of registered common stock were issued to the
investor.
On March
31, 2008, the Company converted principal redemptions totaling $188,308 into
224,176 shares of registered common stock and interest payments of $92,821 into
110,501 shares of common stock using the conversion rate of
$0.84.
In April
2008, the Company rescinded and cancelled 140,143 shares of registered common
stock for principal redemptions of the October 2007 Debentures totaling $117,720
and submitted the cash payments in the same amounts to those
holders. Pursuant to a one-time waiver of certain equity conditions,
the remaining $70,588 of the March 31 principal redemption was adjusted to
reflect a one-time conversion rate of $0.70 and, in April 2008 the Company
issued the holder 16,807 additional registered shares in
consideration. In addition, the March 31, 2008 interest
payments were adjusted to reflect a one-time conversion price of $0.70 and in
April 2008 the Company issued the October 2007 Debenture holders 22,099
additional common stock shares. The additional interest expense for
the October 2007 Debentures of $5,446 related to the one-time conversion rate
adjustments of the March 31, 2008 principal and interest payments from $0.84 to
$0.70 was included in accrued interest for the October 2007 Debentures as of
March 31, 2008 (see Note 10).
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 11 – COMMON STOCK,
continued
During
fiscal 2009, the Company issued 244,722 shares of restricted common stock in
lieu of fees paid to various consultants for services
performed. These shares were issued at an average price of $0.69
(based on the underlying stock prices on the dates of issuances) for a total
cost of $168,769 which has been included in selling, general and administrative
expenses for the year ended March 31, 2009.
During
fiscal 2009, the Company issued 82,693 shares of common stock resulting from
exercises of stock options and warrants at an average price of $0.04 per share
for proceeds of $3,307 and issued 150,022 shares of common stock from the
cashless exercises of a total of 157,000 stock options.
Under the
terms of the January Amendment, in February 2009, the Company issued a total of
400,000 restricted common stock shares to the October 2007 and May 2008
Debenture Holders. The total fair value of the shares issues totaled
$164,000 and has been included in the loss on extinguishment of debt for the
year ended March 31, 2009.
In March
2009, the Company issued 157,516 S-8 registered shares of common stock in lieu
of fees paid for services performed by consultants. On March 28,
2009, the Company filed the Form S-8 with the Securities and Exchange
Commission. These shares were issued at a value of $0.51 per share for a total
cost of $80,333 which has been included in selling, general and administrative
expenses for the year ended March 31, 2009 (see Note 10).
NOTE 12 – STOCK OPTIONS AND
WARRANTS
Effective
October 1, 2002, the Company adopted the 2002 Stock Option Plan (the “2002
Plan”). The stockholders of the Company approved the 2002 Plan on October 1,
2002. Under the 2002 Plan, incentive stock options and nonqualified
options may be granted to officers, employees and consultants of the Company for
the purchase of up to 5,000,000 shares of the Company’s common stock. The
exercise price per share under the incentive stock option plan shall not be less
than 100% of the fair market value per share on the date of grant. The exercise
price per share under the non-qualified stock option plan shall not be less than
85% of the fair market value per share on the date of grant. Expiration dates
for the grants may not exceed 10 years from the date of grant. The 2002
Plan terminates on October 1, 2012.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 12 – STOCK OPTIONS AND
WARRANTS, continued
No
incentive stock options or non-qualified stock options were granted during the
years ended March 31, 2009 and 2008. All options granted have an
exercise price equal to the fair market value at the date of grant, vest upon
grant or agreed upon vesting schedules and expire five years from the date of
grant. Total compensation expense recognized in the years ended March
31, 2009 and 2008 for options issued to consultants in prior years was zero.
During the years ended March 31, 2009 and 2008, 239,693 and 50,000,
respectively, options were exercised. As of March 31, 2009 and
2008, there were 2,198,920 and 2,438,613 options outstanding, respectively, at
an average exercise price of $0.49 and $0.45 per share, respectively, under the
2002 Plan. There were no stock options granted subsequent to
March 31, 2009. The Company had 2,511,387 options available for grant under
the 2002 Plan at March 31, 2009.
From time
to time, the Company issues warrants pursuant to various consulting agreements
and other compensatory arrangements.
During
the year ended March 31, 2008, the Company issued a total of 6,261,375 warrants
to purchase shares of the Company’s common stock at an average price of $0.42
per share to 79 individual investors in connection with funds raised in private
placement offerings. The warrants were issued with exercise periods
of 18 months originating from the related investment dates. The
expiration dates ranged from December 2008 to October 2009.
In July
2007, the Company issued warrants to purchase a total of 699,438 shares of the
Company’s common stock at an average exercise price of $0.29 per share to a
broker in connection with funds raised in previous private placement
offerings. These warrants have 5 year terms beginning from the
dates of the placement offerings and the expiration dates range from March 2011
to March 2012.
On July
2, 2007, in connection with the facility lease agreement, the Company issued
10,000 warrants to the lessor, at an exercise price of $1.55 per share for a
period of two years, valued at $15,486 as calculated using the Black-Scholes
option pricing model. The Company is amortizing the value of the
warrants over the life of the lease and the remaining unamortized value of the
warrants has been recorded in other long term assets. As of March 31, 2009 and
2008, the unamortized balance of the value of the warrants issued to the lessor
was $2,970 and $10,074, respectively and $7,104 and $5,412, respectively, has
been included in selling, general and administrative expenses as additional rent
expense for the years ended March 31, 2009 and 2008.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 12 – STOCK OPTIONS AND
WARRANTS, continued
On July
30, 2007, in connection with the purchase of manufacturing equipment, the
Company issued 79,208 warrants to the seller at an exercise price of $1.01 per
share, with a five year term. The Company has determined the fair
value of the issued warrants, based on the Black-Scholes pricing model, to be
$79,926 as of the date of grant of which $10,000 has been recorded as fixed
assets in the accompanying consolidated balance sheets as of March 31, 2009 and
2008 (which approximates the fair market value of the equipment acquired) and
$69,926 has been recorded as consulting expense and is included in selling,
general and administrative expenses for services performed by the seller for the
year ended March 31, 2008.
On August
21, 2007, in connection with the extension of payment terms of outstanding
amounts owed, the Company issued 20,000 warrants to First Capital Investors,
LLC, at an exercise price of $0.75 per share with a term of two
years. The Company has determined the fair value of the issued
warrants, based on the Black-Scholes pricing model, to be $14,984 as of the date
of grant which has been recorded as consulting and compensation expense and is
included in selling, general and administrative expenses for the year ended
March 31, 2008.
On
October 1, 2007, in connection with the convertible debenture financing
transaction, the Company issued to the investors five-year warrants to purchase
5,604,411 shares of common stock at $0.92 per share and two-year warrants to
purchase 1,401,103 shares of common stock at $0.90 per share and 1,401,103
shares of common stock at $1.60 per share. These warrants were
subsequently increased to a total of 17,283,257, the exercise prices reset to
$0.60 and expiration dates extended to January 1, 2014 as a result of the April
2008 and January 2009 Amendments (see Note 10).
Also in
connection with the convertible debenture financing transaction, in October
2007, the Company issued Joseph Stevens and Company three year warrants to
purchase 560,364 shares of the Company’s common stock at $0.84 per share (see
Note 10).
In
October 2007, the Company engaged the firm of Carpe DM, Inc. to perform the
services as the Company’s investor relations and public relations representative
for a monthly fee of $7,500 per month. Pursuant to the terms of this
36 month consulting agreement, the Company issued 150,000 S-8 registered shares
at $0.80 per share and a total value of $120,000, and 250,000 fully vested and
non forfeitable warrants at an exercise price of $1.50 per share for a period of
two and one-half years, valued at $229,834 as calculated using the Black-Scholes
option pricing model. The Company has recorded the combined value of
$349,834 of the shares and warrants issued as prepaid expense which is being
amortized over the life of the services agreement (see Note 11).
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 12 – STOCK OPTIONS AND
WARRANTS, continued
During
fiscal 2009, the Company issued a total of 1,840,400 warrants to various board
members, advisory board members, employees, and ongoing consultants to purchase
shares of the Company’s common stock. The weighted average exercise price of
these warrants is $0.79. The exercise prices of these warrants are
equal to the fair values of the Company’s shares as of the dates of each
grant. The Company has determined the aggregate fair value of the
issued warrants, based on the Black-Scholes pricing model, to be approximately
$990,480 as of the dates of each grant. The assumptions used under
the Black-Scholes pricing model included: a risk free rate ranging from 1.52% to
3.15%; volatility ranging from 201% to 266%; an expected exercise term of 5
years; and no annual dividend rate. Of total fair market value of
$751,325 for warrants issued and vested during fiscal 2009, $232,964 was
recorded as a portion of the capitalized software development costs and $518,361
has been recorded as consulting and compensation expense and is included in
selling, general and administrative expenses for the year ended March 31,
2009. As of March 31, 2009 and 2008 the Company had $287,722 and
$105,965, respectively, related to unvested warrants which will be recognized as
selling, general and administrative expenses in future periods as the warrants
become vested. In addition, during fiscal 2009 the Company recognized
$57,398 of compensation expense related to the vesting of warrants issued in
prior years which is included in general and administrative expenses for the
year ended March 31, 2009.
During
fiscal 2008, the Company issued a total of 887,800 warrants to various board
members, advisory board members, employees, and ongoing consultants to purchase
shares of the Company’s common stock. The weighted average exercise price of
these warrants is $0.97. The exercise prices of these warrants are
equal to the fair values of the Company’s shares as of the dates of each
grant. The Company has determined the aggregate fair value of the
issued warrants, based on the Black-Scholes pricing model, to be approximately
$858,105 as of the dates of each grant. The assumptions used under
the Black-Scholes pricing model included: a risk free rate ranging from 3.74% to
4.75%; volatility ranging from 229% to 293%; an expected exercise term of 5
years; and no annual dividend rate. Of this total fair market value
of warrants, $742,140 has been recorded as consulting and compensation expense
and is included in selling, general and administrative expenses for the year
ended March 31, 2008 and $105,965 relates to unvested warrants which will be
recognized as the warrants become vested.
On May
27, 2008, in connection with the convertible debenture financing transaction,
the Company issued to the investors five-year warrants to purchase 1,488,095
shares of common stock at $0.92 per share and 1,488,095 shares of common stock
at $1.35 per share. These warrants were subsequently increased to a
total of 5,629,960, the exercise prices reset to $0.60 and expiration dates
extended to January 1, 2014 as a result of the April 2008 and January 2009
Amendments (see Note 10).
Certain
warrants issued in conjunction with compensation and fundraising activities
contain a cashless exercise provision. Under the provision, the
holder of the warrant surrenders those warrants whose fair market value is
sufficient to affect the exercise of the entire warrant quantity. The warrant
holder then is issued shares based on the remaining net warrant and no proceeds
are obtained by the Company. The surrendered warrants are cancelled
by the Company in connection with this transaction.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 12 – STOCK OPTIONS AND
WARRANTS, continued
The
following represents a summary of all stock option and warrant activity for the
years ended March 31, 2009 and 2008:
|
|
2009
|
|
|
2008
|
|
|
|
Options
and
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Options
and
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of warrants issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes information about stock options and warrants
outstanding and exercisable at March 31, 2009:
|
|
|
Warrants
and Options
Outstanding
|
|
|
Warrants
and Options
Exercisable
|
|
Exercise
Price
|
|
|
Number
of
Options
and
Warrants
Outstanding
And
Exercisable
|
|
|
Weighted
Average
Remaining
Contractual
Life
–Years
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 13 – RELATED PARTY
TRANSACTIONS
In August
2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008. As of March 31, 2009 and 2008, the
total amount of deferred salaries and accrued interest under this arrangement
was $157,688 and $201,115, respectively, of which $67,688 and $129,115,
respectively is recorded as a long-term liability in the accompanying
consolidated balance sheets. Interest expense related to this note
was $10,573 and $3,165, respectively for the years ended March 31, 2009 and
2008. Accrued interest related to this note payable amounted to
$13,738 and $3,165 at March 31, 2009 and 2008, respectively, and is included in
the note payable to officer in the accompanying consolidated balance sheets. In
January 2009, Mr. Berry agreed to defer the monthly payments of the note due
from January 31, 2009 through June 30, 2009. As of March 1, 2009 these unpaid
payments totaled $18,000 and are included in the current liability portion of
the note payable in the accompanying consolidated balance sheet. (see Note
9). Mr. Berry resigned his position as Chief Executive Officer in
February 2009, however remains a director on the Board and continues to work as
a consultant for the Company.
Since
June 2005, the Company has retained the legal services of Gary C. Cannon,
Attorney at Law, for a monthly retainer fee. From June 2005 to May
2009, Mr. Cannon also served as the Company’s Secretary and a member of the
Company’s Board of Directors. Mr. Cannon continues to serve as
Corporate Legal Counsel for the Company and serves as a member of the Advisory
Board. In December 2007, Mr. Cannon’s monthly retainer for legal services was
increased from $6,500 per month to $9,000 per month. During the years
ended March 31, 2009 and 2008, the total amount expensed by the Company for
retainer fees and out of pocket expenses was $108,050 and $88,248,
respectively. From October 2008 through March 31, 2009 Mr. Cannon
agreed to defer a portion of his monthly payments and as of March 31, 2009 a
total of $15,000 had been deferred is included in accounts payable in the
accompanying consolidated balance sheet. Additionally, during the
years ended March 31, 2009 and 2008, The Company expensed board fees for Mr.
Cannon totaling $24,000 and $12,650, respectively and at March 31, 2009 $15,000
of deferred board fees was included in accrued expenses. During
fiscal year 2009 Mr. Cannon was granted a total of 95,150 warrants with an
average exercise price of $0.67 per share, and 72,800 warrants with an average
exercise price of $0.93 during fiscal 2008. All warrants granted to Mr. Cannon
were issued with an exercise price of greater than or equal to the fair value of
the Company’s shares on the grant date.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 13 – RELATED PARTY
TRANSACTIONS, continued
As of
March 31, 2009 and 2008, the Company had aggregate principal balances of
$1,129,500 and $1,249,500, respectively, in outstanding unsecured indebtedness
owed to five related parties, including four former members of the board of
directors, representing working capital advances made to the Company from
February 2001 through March 2005. These notes bear interest at the
rate of 6% per annum and provide for aggregate monthly principal payments which
commenced April 1, 2006 of $2,500, and which increased by an aggregate of $2,500
every six months to the current maximum aggregate payment of $10,000 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 $71,646 and $78,243 for the years ended
March 31, 2009 and 2008, respectively. Accrued interest, which is
included in related party notes payable in the accompanying consolidated balance
sheets, related to these notes amounted to $554,260 and $482,584 as of March 31,
2009 and 2008, respectively. As of March 31, 2009, the Company had
not made the required payments under the related party notes which were due on
January 1, February 1, and March 1, 2009. However, pursuant to the
note agreements, the Company has a 120-day grace period to pay missed payments
before the notes are in default. On April 29, 2009, May 30, 2009, and
June 26, 2009, the Company paid the January 1, February 1 and March 1 payments
respectively, due on these related party notes. Management expects to
continue to pay all payments due prior to the expiration of the 120-day grace
periods.
NOTE 14 – SUBSEQUENT
EVENTS
In March
2009 the Company entered into an Agency Agreement with a broker to raise capital
in a private placement offering of one-year convertible debentures under
Regulation D (the “Private Placement Debentures”). From March
through June 2009, the Company intends to raise up to a maximum of
$1,500,000 under this private placement offering of convertible debenture
debt. On March 31, 2009, the Company had received initial gross
proceeds of $60,000 under this private placement offering of convertible
debentures. Through June 22, 2009 the Company had raised an additional $904,500
under the Private Placement Debentures. Related to the issuance of
the convertible debentures, the Company paid additional commissions to the
broker totaling $54,270 which will be capitalized as deferred financing costs.
The deferred financing costs will be amortized to interest expense by the
Company through the maturity dates of the debentures on a straight-line basis
which approximates the effective interest method.
The
Company may elect to make principal redemptions on the maturity dates of the
debentures in shares of common stock at a fixed conversion price of $0.51. At
any time, holders may convert the debentures into shares of common stock at the
fixed conversion price of $0.51. The conversion price is subject to adjustment
in the event the Company issues the next equity financing of at least $2,500,000
at a price below $0.51.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 14 – SUBSEQUENT EVENTS,
continued
Per the
terms of the convertible debenture agreements, the notes have a term of one year
from issuance and are redeemable by the Company with two days
notice. The notes bear interest at 8% per annum and are convertible
into shares of the Company’s common stock at a conversion rate of
$0.51. As of June 22, 2009 the total gross proceeds raised in
connection with these Private Placement Debentures was $964,500.
In
connection with the financing transaction, since March 31, 2009, the Company has
issued to the investors additional five-year warrants (the “Private Placement
Warrants”) to purchase 354,714 shares of the Company’s common stock at $0.51 per
share. The exercise price of the warrants is subject to adjustment in the event
the Company issues the next equity financing of at least $2,500,000 at a price
below $0.51. As of June 22, 2009 the Company had issued a total of
378,243 Private Placement Warrants in connection with these Private Placement
Debentures.
The
Company will calculate the value of the Private Placement Warrants relative to
the total amount of the debt offering which will be recorded as a debt discount
and amortized as interest expense using the effective interest method through
the maturity dates of the notes.
In April
2009, the Company issued 64,000 shares of unrestricted common stock in lieu of
fees paid to a consultant pursuant to the Company’s Form S-8 filed on April 13,
2009. These shares were issued at a value of $0.51 per share for a
total cost of $32,640 which will be reported in selling, general and
administrative expenses for the Company in the quarter ending June 30,
2009.
In June
2009, the Company issued 145,425 shares of unrestricted common stock in lieu of
fees paid to various consultants pursuant to the Company’s Form S-8 filed on
June 11, 2009. These shares were issued at a value of $0.51 per share
for a total cost of $74,167 which will be reported in selling, general and
administrative and research and development expenses for the Company in the
quarter ending June 30, 2009.
On April
1, 2009, the Company issued 111,360 common stock shares to the October 2007 and
May 2008 Debenture holders for total payments of $44,544 interest accrued as of
March 31, 2009 using the conversion rate of $0.40. Through June 22,
2009 an additional 222,720 common stock shares have been issued using the
conversion rate of $0.40 for the payment of $89,088 of accrued interest on the
October 2007 and May 2008 Convertible Debentures.
In May
2009 the October 2007 Convertible Debenture holders redeemed principal balances
totaling $713,000 in exchange for 1,398,039 common stock shares using the
conversion rate of $0.51.
In May
2009, the Company issued 110,345 shares of common stock from exercises of a
total of 119,000 cashless stock options.
CRYOPORT,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For The Years Ended March 31, 2009
and 2008
NOTE 14 – SUBSEQUENT EVENTS,
continued
In April
2009, the Company issued a total of 200,000 warrants in lieu of payment to
consultants to purchase shares of the Company’s common stock at an average
exercise price of $0.51 per share. The exercise prices of these
warrants are greater than or equal to the fair values of the Company’s shares as
of the dates of each grant. The fair market value of the warrants
based on the Black-Scholes pricing model will be recorded as consulting and
compensation expense and included in selling, general and administrative
expenses in the quarter ending June 30, 2009.
During
the period April through June 2009, the Company issued a total of 209,800
warrants to various board members, advisory board members, employees, and
ongoing consultants as part of a previously approved and ongoing compensation
plan to purchase shares of the Company’s common stock at an average exercise
price of $0.56 per share. The exercise prices of these warrants are
greater than or equal to the fair values of the Company’s shares as of the dates
of each grant. The fair market value of the warrants based on the
Black-Scholes pricing model will be recorded as consulting and compensation
expense and included in selling, general and administrative expenses in the
quarter ending June 30, 2009.
CRYOPORT,
INC.
CONSOLIDATED BALANCE
SHEETS
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
ASSETS
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing costs, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
salaries and related
|
|
|
|
|
|
|
|
|
Convertible
notes payable and accrued interest, net of discount of $775,960
(unaudited) at September 30, 2009 and $13,586 at March 31,
2009
|
|
|
|
|
|
|
|
|
Current
portion of convertible notes payable and accrued interest, net of discount
of $2,468,355 (unaudited) at September 30, 2009 and $662,583 at March
31, 2009
|
|
|
|
|
|
|
|
|
Line
of credit and accrued interest
|
|
|
|
|
|
|
|
|
Current
portion of related party notes payable
|
|
|
|
|
|
|
|
|
Current
portion of note payable to former officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
party notes payable and accrued interest, net of current
portion
|
|
|
|
|
|
|
|
|
Note
payable to former officer and accrued interest, net of current
portion
|
|
|
|
|
|
|
|
|
Convertible
notes payable, net of current portion and discount of $6,351,425 at
September 30, 2009 and $6,681,629 at March 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value; 125,000,000 shares authorized; 47,585,635
(unaudited) at September 30, 2009 and 41,861,941 at March 31, 2009
shares issued and outstanding
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited
consolidated financial statements
CRYOPORT,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
The
Three
Months Ended
September
30,
|
|
|
For
The
Six
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on sale of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial statements
CRYOPORT,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
The Six Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
Amortization
of deferred financing costs
|
|
|
|
|
|
|
|
|
Amortization
of debt discount
|
|
|
|
|
|
|
|
|
Stock
issued to consultants
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued to employees and directors
|
|
|
|
|
|
|
|
|
Change
in fair value of derivative instrument
|
|
|
|
|
|
|
|
|
Loss
on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
earned on restricted cash
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses and other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
salaries and related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of intangible assets
|
|
|
|
|
|
|
|
|
Purchases
of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings under convertible notes
|
|
|
|
|
|
|
|
|
Repayment
of convertible notes
|
|
|
|
|
|
|
|
|
Repayment
of borrowings on line of credit, net
|
|
|
|
|
|
|
|
|
Payment
of deferred financing costs
|
|
|
|
|
|
|
|
|
Repayment
of note payable
|
|
|
|
|
|
|
|
|
Repayments
of related party notes payable
|
|
|
|
|
|
|
|
|
Repayments
of note payable to officer
|
|
|
|
|
|
|
|
|
Payment
of fees associated with exercise of warrants
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of options and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
|
|
|
|
|
|
|
See
accompanying notes to unaudited consolidated financial statements
CRYOPORT,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
The Six Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing costs in connection with S-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing costs in connection with convertible debt financing and debt
modifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants to be issued as cost incurred in connection with warrant
exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
discount in connection with convertible debt
financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of debt and accrued interest to common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of embedded conversion feature to equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless
exercise of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of shares issued for debt principal reduction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
interest added to principal amount of debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
fair value of warrants issued in connection of debt
modification
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of accounting change to debt discount for derivative
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of accounting change to accumulated deficit for derivative
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of accounting change to additional paid-in capital for derivative
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of inventory to fixed assets
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 1 - MANAGEMENT’S
REPRESENTATION
The
accompanying unaudited consolidated financial statements have been prepared by
CryoPort, Inc. (the “Company”) in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) for interim
financial information, and pursuant to the instructions to Form 10-Q and Article
8 of Regulation S-X promulgated by the Securities and Exchange Commission
(“SEC”). Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statement presentation. However, the
Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments
(consisting primarily of normal recurring accruals) considered necessary for a
fair presentation have been included.
Operating
results for the six months ended September 30, 2009 are not necessarily
indicative of the results that may be expected for the year ending March 31,
2010. The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included in the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2009.
The
Company has evaluated subsequent events through November 16, 2009, the filing
date of this form 10-Q, and determined that no subsequent events have occurred
that would require recognition in the condensed consolidated financial
statements or disclosure in the notes thereto other than as disclosed in the
accompanying notes.
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The
Company is a provider of an innovative cold chain frozen shipping system
dedicated to providing superior, affordable cryogenic shipping solutions that
ensure the safety, status and temperature, of high value, temperature sensitive
materials. The Company has developed a line of cost-effective
reusable cryogenic transport containers capable of transporting biological,
environmental and other temperature sensitive materials at temperatures below 0°
Celsius. These dry vapor shippers are the first significant
alternative to using dry ice and achieve 10+ day holding times compared to 1–2
day holding times with dry ice. The Company provides safe transportation
and an environmentally friendly, long lasting shipper. These value-added
services include an internet-based web portal that enables the customer to
initiate shipping service and allows the customer to track the progress and
status of a shipment and in-transit temperature monitoring services of the
shipper. CryoPort also provides to its customer at their pick up
location, the fully ready charged shipper containing all freight bills, customs
documents and regulatory paperwork for the entire journey of the
shipper.
The
Company's principal focus has been the further development and commercial launch
of CryoPort Express® Portal – an innovative IT solution for shipping and
tracking high-value specimens through overnight shipping companies –
and its CryoPort Express® Shipper, a line of dry vapor
cryogenic shippers for the transport of biological and pharmaceutical
materials. A dry vapor cryogenic shipper is a container that uses
liquid nitrogen in dry vapor form, which is suspended inside a vacuum insulated
bottle as a refrigerant, to provide storage temperatures below minus 150°
Celsius. The dry vapor shipper is designed using innovative,
proprietary, and patent pending technology such that there can be no pressure
build up as the liquid nitrogen evaporates, nor any spillage of liquid
nitrogen. A proprietary foam retention system is employed to ensure
that liquid nitrogen stays inside the vacuum container even when placed
upside-down or on its side as is often the case when in the custody of a
shipping company. Biological specimens are stored in a specimen
chamber, “well”, inside the container and refrigeration is provided by harmless cold nitrogen gas
evolving from the liquid nitrogen entrapped within the foam retention system
surrounding the well. Biological specimens transported using our
cryogenic shipper can include clinical samples, diagnostics, live cell
pharmaceutical products, such as cancer vaccines, semen and embryos, infectious
substances and other items that require and/or are protected through continuous
exposure to frozen or cryogenic temperatures (less than -150° C).
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Going
Concern
The
accompanying unaudited consolidated financial statements have been prepared in
conformity with GAAP, which contemplates continuation of the Company as a going
concern. The Company has not generated significant revenues from
operations and has no assurance of any future revenues. The Company
generated revenues from operations of $35,124, incurred a net loss of
$16,705,151 and used cash of $2,586,470 in its operating activities during the
year ended March 31, 2009. The Company generated revenues from
operations of $22,181, had net loss of $7,536,045, and used cash of $1,145,497
in its operating activities during the six months ended September 30,
2009. In addition, the Company had a working capital deficit of
$22,902,096, and has cash and cash equivalents of $1,120,758 at September 30,
2009. The Company’s working capital deficit at September 30, 2009
included $18,404,578 of derivative liabilities, the balance of which represented
the fair value of warrants and embedded conversion features related to the
Company’s convertible debentures which were reclassified from equity during
the six months ended September 30, 2009 (see Note 9). Currently
management has projected that cash on hand, including cash borrowed under the
convertible debentures issued in the first second, and third quarter
of fiscal 2010, will be sufficient to allow the Company to continue its
operations only into the fourth quarter of fiscal 2010 until more significant
funding can be secured. These matters raise substantial doubt about
the Company’s ability to continue as a going concern.
Through
November 10, 2009, the Company had raised proceeds of $1,381,500 under the
Private Placement Debentures (see Note 8) and proceeds of $1,437,100 (see
Note 11 and 13) from the exercise of warrants. As a result of these
recent financings, the Company had an aggregate cash and cash equivalents and
restricted cash balance of approximately $1,260,453 as of November 10, 2009
which will be used to fund the working capital required for minimal operations
including limited inventory build as well as limited sales efforts to advance
the Company’s commercialization of the CryoPort Express® Shippers until
additional capital is obtained. The Company’s management recognizes that the
Company must obtain additional capital for the achievement of sustained
profitable operations. Management’s plans include obtaining
additional capital through equity and debt funding sources; however, no
assurance can be given that additional capital, if needed, will be available
when required or upon terms acceptable to the Company or that the Company will
be successful in its efforts to negotiate extension of its existing
debt. In this regard on October 6, 2009 the Company filed with the
Securities and Exchange Commission a Registration Statement on Form S-1 (File
No. 333-162350) for a possible underwritten public offering of units, each unit
to consist of one share of common and one warrant to purchase one share of
common stock. Management cannot assure you that this contemplated
offering will be consummated, or if consummated, whether the proceeds from such
offering will be sufficient to fund the Company’s planned operations. The
accompanying unaudited consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Basis of
Presentation
The
accompanying unaudited consolidated financial statements have been prepared in
accordance with GAAP.
Principles of
Consolidation
The
unaudited 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.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of
Estimates
The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from estimated amounts. The Company’s significant estimates include allowances
for doubtful accounts and sales returns, recoverability of long-lived assets,
realizability of inventories, accrued warranty costs, deferred tax assets and
their accompanying valuations, product liability reserves, valuation of
derivative liabilities and the valuations of common stock, warrants and stock
options issued for products or services.
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
Cash
and cash equivalents
The
Company maintains its cash accounts in financial
institutions. Accounts at these institutions are insured by the
Federal Deposit Insurance Corporation (“FDIC”). Effective October 3,
2008, the Emergency Economic Stabilization Act of 2008 raised the FDIC deposit
coverage limits to $250,000 per owner from $100,000 per owner. At
September 30, 2009 and March 31, 2009, the Company had $1,058,485 and $121,042,
respectively, of cash balances, including restricted cash, which were in excess
of the FDIC insurance limit. The Company performs ongoing evaluations of these
institutions to limit its concentration risk exposure.
Restricted
cash
The
Company has invested cash in a one year restricted certificate of deposit
bearing interest at 2.32% which serves as collateral for borrowings under a line
of credit agreement (see Note 6). At September 30, 2009 and March 31,
2009, the balance in the certificate of deposit was $102,115 and $101,053,
respectively.
Customers
The
Company grants credit to customers within the United States of America and to a
limited number of international customers and does not require collateral. Sales
to 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 sales to 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 and estimated sales
returns are provided based on past experience and a specific analysis of the
accounts which management believes are sufficient. Accounts
receivable at September 30, 2009 and March 31, 2009 are net of reserves for
doubtful accounts and sales returns of approximately of zero and $600,
respectively. Although the Company expects to collect amounts due, actual
collections may differ from the estimated amounts.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
Company has foreign sales primarily in Europe, Canada, India and
Australia. Foreign sales were approximately $2,200 and $10,700 which
constituted approximately 26% and 48%, of net sales for the three and six months
ended September 30, 2009, respectively, and $300 and $6,500 which
constituted approximately 5% and 33%, of net sales for the three and six months
ended September 30, 2008, respectively.
The
majority of the Company’s customers are in the biotechnology, pharmaceutical and
life science industries. Consequently, there is a concentration of receivables
within these industries, which is subject to normal credit risk.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, restricted
cash, accounts receivable, related-party notes payable, note payable to officer,
a line of credit, convertible notes payable, accounts payable and accrued
expenses. The carrying value for all such instruments, except the related party
notes payable, approximates fair value at September 30, 2009 and March 31, 2009.
The difference between the fair value and recorded values of the related party
notes payable is not material.
Inventories
Inventories
were stated at the lower of standard cost or current estimated market
value. Cost was determined using the standard cost method which
approximates the first-in, first-out method. The Company periodically
reviewed its inventories and recorded a provision for excess and obsolete
inventories based primarily on the Company’s estimated forecast of product
demand and production requirements. Once established, write-downs of
inventories were considered permanent adjustments to the cost basis of the
obsolete or excess inventories. Raw materials, work in process and
finished goods included material costs less reserves for obsolete or excess
inventories.
The
Company provides shipping containers to their customers and charges a fee in
exchange for the use of the container. The Company’s arrangements are
similar to the accounting standard for leases since they convey the right to use
the containers over a period of time. The Company retains title to the
containers and provides its customers the use of the container for a specified
shipping cycle. At the culmination of the customer’s shipping cycle, the
container is returned to the Company. As a result, during the quarter
ended September 30, 2009, the Company reclassified the containers from inventory
to fixed assets upon commencement of the loaned-container program (see Note
3).
Fixed
Assets
Depreciation
and amortization of fixed assets are provided using the straight-line method
over the following useful lives:
Cryogenic
shippers
|
|
3
Years
|
Furniture
and fixtures
|
|
7
years
|
Machinery
and equipment
|
|
5-7
years
|
Leasehold
improvements
|
|
Lesser
of lease term or estimated useful
life
|
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
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 applicable to assets retired are
removed from the accounts, and the gain or loss on disposition is recognized in
current operations.
The
Company provides shipping containers to their customers and charges a fee in
exchange for the use of the container. The Company’s arrangements are
similar to the accounting standard for leases since they convey the right to use
the containers over a period of time. The Company retains title to the
containers and provides its customers the use of the container for a specified
shipping cycle. At the culmination of the customer’s shipping cycle, the
container is returned to the Company. As a result, during the quarter
ended September 30, 2009, the Company reclassified the containers from inventory
to fixed assets upon commencement of the loaned-container program (see Note
3).
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 using the
Black-Scholes option pricing model.
Long-Lived
Assets
The
Company’s management assesses the recoverability of its long-lived assets upon
the occurrence of a triggering event by determining whether the depreciation and
amortization of long-lived assets over their remaining lives can be recovered
through projected undiscounted future cash flows. The amount of long-lived asset
impairment, if any, is measured based on fair value and is charged to operations
in the period in which long-lived asset impairment is determined by management.
At September 30, 2009 and March 31, 2009, the Company’s management believes
there is no impairment of its long-lived assets. There can be no assurance
however, that market conditions will not change or demand for the Company’s
products will continue, which could result in impairment of its long-lived
assets in the future.
Deferred Financing
Costs
Deferred
financing costs represent costs incurred in connection with the Company’s
planned public offering of units and issuance of the convertible notes
payable. Deferred financing costs are being amortized over the term
of the financing instrument on a straight-line basis, which approximates the
effective interest method. During the six month periods ended September 30,
2009, the Company capitalized deferred financing costs of $215,752, of which
$124,518 related to the Company’s planned public offering and will be
reclassified to paid-in capital and netted against the proceeds of the offering
upon completion. Amortization of deferred financing costs was $17,675
and $25,579 for the three and six months ended September 30, 2009,
respectively, and $10,767 and $27,929 for the three and six months ended
September 30, 2008, respectively.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
following represents the activity in the warranty accrual account during the six
month period ended September 30, 2009 and the year ended March 31,
2009:
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
|
|
|
|
|
|
|
Beginning
warranty accrual
|
|
|
|
|
|
|
|
|
Increase
in accrual (charged to cost of sales)
|
|
|
|
|
|
|
|
|
Charges
to accrual (product replacements)
|
|
|
|
|
|
|
|
|
Reversal
of remaining accrual due to expected future claims
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities
Effective
April 1, 2009, certain of the Company's issued and outstanding common
stock purchase warrants and embedded conversion features previously treated as
equity pursuant to the derivative treatment exemption were no longer afforded
equity treatment, and the fair value of these common stock purchase warrants and
embedded conversion features, some of which have exercise price reset features
and some that were issued with convertible debt, were reclassified from equity
to liability status as if these warrants were treated as a derivative liability
since their date of issue. The common stock purchase warrants were
not issued with the intent of effectively hedging any future cash flow, fair
value of any asset, liability or any net investment in a foreign operation. The
warrants do not qualify for hedge accounting, and as such, all future changes in
the fair value of these warrants will be 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 (see “Change in
Accounting Principle” section below and Note 9).
Convertible
Debentures
If the
conversion features of conventional convertible debt provide 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 pursuant. In those circumstances, the convertible
debt will be recorded net of the discount related to the BCF. The
Company amortizes the discount to interest expense over the life of the debt
using the effective interest rate method (see Note 8).
Revenue
Recognition
Four
conditions must be met before revenue can be recognized: (i) there is persuasive
evidence that an arrangement exists; (ii) delivery has occurred or service has
been rendered; (iii) the price is fixed or determinable; and (iv) collection is
reasonably assured. The Company records a provision for sales returns and claims
based upon historical experience. Actual returns and claims in any future period
may differ from the Company’s estimates. During its early years, the
Company's limited revenue was derived from the sale of our reusable product
line. The Company's current business plan focuses on per-use leasing of the
shipping container and added-value services that will be used by us to provide
an end-to-end and cost-optimized shipping solution.
The
Company provides shipping containers to their customers and charges a fee in
exchange for the use of the container. The Company’ arrangements are
similar to the accounting standard for leases since they convey the right to use
the containers over a period of time. The Company retains title to the
containers and provides its customers the use of the container for a specified
shipping cycle. At the culmination of the customer’s shipping cycle, the
container is returned to the Company.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Accounting for Shipping and
Handling Revenue, Fees and Costs
The
Company classifies amounts billed for shipping and handling as revenue. Shipping
and handling fees and costs are included in cost of sales.
Advertising
Costs
The
Company expenses the cost of advertising when incurred as a component of
selling, general and administrative expenses. During the six month periods ended
September 30, 2009 and 2008, the Company expensed approximately $9,000 and
$51,000, respectively, in advertising costs.
Research and Development
Expenses
The
Company expenses internal research and development costs as incurred. Third
party research and development costs are expensed when the contracted work has
been performed.
Stock-Based
Compensation
All
share-based payments to employees and directors, including grants of employee
stock options and warrants, are recognized in the consolidated financial
statements based upon their fair values. The Company uses the Black-Scholes
option pricing model to estimate the grant-date fair value of share-based
awards. Fair value is determined at the date of grant. The
consolidated financial statement effect of forfeitures is estimated at the time
of grant and revised, if necessary, if the actual effect differs from those
estimates. The estimated average forfeiture rate for the six month periods ended
September 30, 2009 and 2008 was zero as the Company has not had a significant
history of forfeitures and does not expect forfeitures in the
future.
Stock
Option Plans
The
Company maintains two stock option plans, the 2002 Plan and the 2009 Plan. The
2002 Plan provides for grants of incentive stock options and nonqualified
options to employees, directors and consultants of the Company to purchase the
Company’s shares at the fair value, as determined by management and the board of
directors, of such shares on the grant date. The options generally vest over a
five-year period beginning on the grant date and have a ten-year term. As of
September 30, 2009, the Company is authorized to issue up to 5,000,000 shares
under this plan and has 2,210,042 shares available for future
issuances.
On
October 9, 2009, the Company’s stockholders approved and adopted the 2009 Plan,
which had previously been approved by the Company’s Board of Directors on August
31, 2009. The 2009 Plan provides for the grant of incentive stock
options, nonqualified stock options, restricted stock rights, restricted stock,
performance share units, performance shares, performance cash awards, stock
appreciation rights, and stock grant awards (collectively, “Awards”) to
employees, officers, non-employee directors, consultants and independent
contractors of the Company. A total of 12,000,000 shares of the Company’s common
stock is authorized for the granting of awards under the 2009 Plan. The number
of shares available for awards, as well as the terms of outstanding awards, are
subject to adjustment as provided in the 2009 Plan for stock splits, stock
dividends, recapitalizations and other similar events. Awards may be
granted under the 2009 Plan until October 9, 2019 or until all shares available
for awards under the 2009 Plan have been purchased or acquired. As of
September 30, 2009, no options had been granted under the 2009
Plan.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Summary
of Assumptions and Activity
The fair
value of stock-based awards to employees and directors is calculated using the
Black-Scholes option pricing model, even though this model was developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which differ significantly from the Company’s stock
options. The Black-Scholes model also requires subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values. The expected term of options granted is derived
from historical data on employee exercises and post-vesting employment
termination behavior. The risk-free rate selected to value any particular grant
is based on the U.S. Treasury rate that corresponds to the pricing term of the
grant effective as of the date of the grant. The expected volatility is based on
the historical volatility of the Company’s stock price. These factors could
change in the future, affecting the determination of stock-based compensation
expense in future periods.
The
following table presents the weighted average assumptions used to estimate the
per share fair values of stock warrants granted to employees and directors
during the six months ended September 30, 2009 and 2008:
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2009
|
|
2008
|
|
Stock
options and warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary
of employee and director options and warrant activity for the six month period
ended September 30, 2009 is presented below:
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average Remaining Contractual Term (Yrs.)
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and
expected to vest at September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
There
were 210,000 warrants and 100,000 stock options with a weighted average fair
value of $0.53 per share granted to employees and directors during the six
months ended September 30, 2009 and 88,600 warrants and no stock options with a
weighted average fair value of $0.92 per share granted to employees and
directors during the six months ended September 30, 2008. In
connection with the warrants and options granted and the vesting of prior
warrants issued, during the six months ended September 30, 2009 and 2008, the
Company recorded total charges of $190,462 and $337,356, respectively, which
have been included in selling, general and administrative expenses in the
accompanying unaudited consolidated statements of operations. No
employee or director warrants or stock options expired during the six months
ended September 30, 2009 and 2008. The Company issues new shares from
its authorized shares upon exercise of warrants or options.
As of
September 30, 2009, there was $251,257 of unrecognized compensation cost related
to employee and director stock based compensation arrangements, which is
expected to be recognized over the next two years.
The
aggregate intrinsic value of stock options and warrants exercised during
the six month periods ended September 30, 2009 and 2008 was $60,690 and
$203,012, respectively.
Issuance of Stock for
Non-Cash Consideration
All
issuances of the Company's stock for non-cash consideration have been assigned a
per share amount equaling either the market value of the shares issued or the
value of consideration received, whichever is more readily determinable. The
majority of the non-cash consideration received pertains to services rendered by
consultants and others and has been valued at the market value of the shares on
the dates issued. In certain instances, the Company has discounted the values
assigned to the issued shares for illiquidity and/or restrictions on
resale.
The
measurement date for the fair value of the equity instruments issued is
determined at the earlier of (i) the date at which a commitment for performance
by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor's performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement. The Company records the fair value of the fully
vested non-forfeitable common stock issued for future consulting services as
prepaid expenses in its consolidated balance sheets.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Income
Taxes
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. The Company is a subchapter "C"
corporation and files a federal income tax return. The Company files separate
state income tax returns for California and Nevada.
Basic and Diluted Loss Per
Share
Basic
loss per common share is computed based on the weighted average number of shares
outstanding during the period. Diluted loss per share is computed by
dividing net loss by the weighted average shares outstanding assuming all
dilutive potential common shares were issued. For the six months
ended September 30, 2009 and 2008, the Company was in a loss position and the
basic and diluted loss per share are the same since the effect of stock options
and warrants on loss per share was anti-dilutive and thus not included in the
diluted loss per share calculation. The impact under the treasury stock method
of dilutive stock options and warrants and the if-converted method of
convertible debt would have resulted in weighted average common shares
outstanding of 66,572,876 and 67,039,579 for the three and six month periods
ended September 30, 2009 and 58,965,164 and 58,459,328 for the three
and six month periods ended September 30, 2008,
respectively.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
Recent Accounting
Pronouncements
In
May 2009, the Financial Accounting Standards Board (the “FASB”) issued
Accounting Standards Codification (“ASC”) 855-10, Subsequent Events, or ASC
855-10, which establishes general standards for accounting and disclosure of
events that occur after the balance sheet date but before the financial
statements are issued or are available to be issued. The pronouncement requires
the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that date, whether that date represents the date the
financial statements were issued or were available to be issued. The Company
adopted ASC 855-10 and evaluated subsequent events through the issuance date of
the financial statements. ASC 855-10 did not have a material impact on its
consolidated financial statements.
In
June 2009, the FASB issued ASC 105-10, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, or
ASC 105-10. ASC 105-10 became the source of authoritative U.S. GAAP recognized
by the FASB to be applied by nongovernment entities. It also modified the GAAP
hierarchy to include only two levels of GAAP; authoritative and
non-authoritative. The Company adopted ASC 105-10 for the reporting in its 2009
second quarter. The adoption did not have a significant impact on its
consolidated balance sheets, consolidated statements of operations or
consolidated statements of cash flows.
Change in Accounting
Principle
Equity-linked
instruments (or embedded features) that otherwise meet the definition of a
derivative are not accounted for as derivatives if certain criteria are met, one
of which is that the instrument (or embedded feature) must be indexed to the
entity’s own stock. The warrant and convertible debt agreements contain
adjustment (or ratchet) provisions and accordingly, we determined that
these instruments are not indexed to the Company’s common stock. As a
result, the Company is required to account for these instruments as derivatives
or liabilities. The Company applied these provisions to outstanding instruments
as of April 1, 2009. The cumulative effect at April 1, 2009 to record, at
fair value, a liability for the warrants and embedded conversion features,
including the effects on the discounts on the convertible notes of
$2,595,095, resulted in an aggregate reduction to equity
of $13,875,623 consisting of a reduction to additional paid-in capital
of $4,217,730 and an increase in the accumulated deficit of $9,657,893 to
reflect the change in the accounting. The warrants and embedded
conversion features will be carried at fair value and adjusted quarterly through
earnings.
The
following table summarizes the effect of the change in accounting principle on
the unaudited consolidated balance sheet as of April 1, 2009:
|
|
As
Previously Reported
|
|
|
As
Adjusted
|
|
|
Cumulative
Adjustment
|
|
Liabilities
and Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
Fair Value
Measurements
The
Company determines the fair value of its derivative instruments using a
three-level hierarchy for fair value measurements which these assets and
liabilities must be grouped, based on significant levels of observable or
unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company’s market
assumptions. This hierarchy requires the use of observable market data when
available. These two types of inputs have created the following fair-value
hierarchy:
Level 1 —
Valuations based on unadjusted quoted market prices in active markets for
identical securities. Currently the Company does not have any items classified
as Level 1.
Level 2 —
Valuations based on observable inputs (other than Level 1 prices), such as
quoted prices for similar assets at the measurement date; quoted prices in
markets that are not active; or other inputs that are observable, either
directly or indirectly. Currently the Company does not have any items classified
as Level 2.
Level 3 —
Valuations based on inputs that are unobservable and significant to the overall
fair value measurement, and involve management judgment. The Company used the
Black-Scholes option pricing model to determine the fair value of the
instruments.
If the
inputs used to measure fair value fall in different levels of the fair value
hierarchy, a financial security’s hierarchy level is based upon the lowest level
of input that is significant to the fair value measurement.
The
following table presents the Company’s warrants and embedded conversion features
measured at fair value on a recurring basis as of September 30, 2009 and
April 1, 2009 (the Company’s adoption date of derivative liability
accounting) classified using the valuation hierarchy:
|
|
Level
3
|
|
|
Level
3
|
|
|
|
Carrying
Value
|
|
|
Carrying
Value
|
|
|
|
September
30, 2009
|
|
|
April
1, 2009
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Embedded
Conversion Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in fair value included in other expense
|
|
|
|
|
|
|
|
|
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 2 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
The
following table provides a reconciliation of the beginning and ending balances
for the Company’s derivative liabilities measured at fair value using Level 3
inputs:
|
|
|
|
|
Balance
at March 31, 2009
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of change in accounting principle
|
|
|
|
|
Derivative
liability added - warrants
|
|
|
|
|
Derivative
liability added – conversion option
|
|
|
|
|
Reclassification
of conversion feature to equity upon conversions of
notes
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2009
|
|
|
|
|
NOTE 3 -
INVENTORIES
Inventories
at September 30, 2009 and March 31, 2009 consist of the following:
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2009
|
|
|
2009
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
its early years, the Company's limited revenue was derived from the sale of our
reusable product line. The Company's current business plan focuses on per-use
leasing of the shipping container and added-value services that will be used by
us to provide an end-to-end and cost-optimized shipping solution.
The
Company provides shipping containers to their customers and charges a fee in
exchange for the use of the container. The Company’s arrangements are
similar to the accounting standard for leases since they convey the right to use
the containers over a period of time. The Company retains title to the
containers and provides its customers the use of the container for a specified
shipping cycle. At the culmination of the customer’s shipping cycle, the
container is returned to the Company. As a result, during the quarter
ended September 30, 2009, the Company reclassified the containers from inventory
to fixed assets upon commencement of the loaned-container program.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 4 – FIXED
ASSETS
Fixed
assets consist of the following at September 30, 2009 and March 31,
2009:
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
its early years, the Company's limited revenue was derived from the sale of our
reusable product line. The Company's current business plan focuses on
per-use leasing of the shipping container and added-value services that will be
used by us to provide an end-to-end and cost-optimized shipping
solution.
The
Company provides shipping containers to their customers and charges a fee in
exchange for the use of the container. The Company’ arrangements are
similar to the accounting standard for leases since they convey the right to use
the containers over a period of time. The Company retains title to the
containers and provides its customers the use of the container for a specified
shipping cycle. At the culmination of the customer’s shipping cycle, the
container is returned to the Company. As a result, during the quarter
ended September 30, 2009, the Company reclassified the containers from inventory
to fixed assets upon commencement of the loaned-container program.
Depreciation and amortization expenses for fixed assets were $16,397 and $33,745
for the three and six months ended September 30, 2009, respectively, and
$15,923 and $30,554 for the three and six months ended September 30, 2008,
respectively.
NOTE 5 – INTANGIBLE
ASSETS
Intangible
assets are comprised of patents and trademarks and software developed for
internal uses. The gross book values and accumulated amortization as
of September 30, 2009 and March 31, 2009 were as follows:
|
|
September
30,
2009
|
|
|
March
31,
2009
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less
accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
expense for intangible assets was $14,966 and $29,120 for the three and six
months ended September 30, 2009, respectively, and $0 for both the three
and six months ended September 30, 2008, respectively. All of
the Company’s intangible assets are subject to amortization.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 6 – LINE OF
CREDIT
On
November 5, 2007, the Company secured financing for a $200,000 one-year
revolving line of credit (the “Line”) secured by a $200,000 Certificate of
Deposit with Bank of the West. On November 6, 2008, the Company secured a
one-year renewal of the Line for a reduced amount of $100,000 which is secured
by a $100,000 Certificate of Deposit with Bank of the West. All borrowings under
the revolving line of credit bear variable interest based on the prime rate
plus 1% per annum (totaling 4.25% as of September 30, 2009). The Company
utilizes the funds advanced from the Line for capital equipment purchases to
support the commercialization of the Company’s CryoPort Express® One-Way
Shipper. As of both September 30, 2009 and March 31, 2009, the outstanding
balance of the Line was $90,310, including accrued interest of $310. During the
six months ended September 30, 2009 and 2008, the Company made principal
payments against the Line of $0 and $22,500, respectively, and recorded interest
expense of $1,840 and $2,118, respectively, related to the Line. No
funds were drawn against the Line during the six months ended September 30, 2009
and 2008.
NOTE 7 – NOTES
PAYABLE
Related Party Notes
Payable
As of
September 30, 2009 and March 31, 2009, the Company had aggregate principal
balances of $1,069,500 and $1,129,500, respectively, in outstanding unsecured
indebtedness owed to five related parties, including four former members of the
board of directors, representing working capital advances made to the Company
from February 2001 through March 2005. These notes bear interest at the rate of
6% per annum and provide for aggregate monthly principal payments which began
April 1, 2006 of $2,500, and which increased by an aggregate of $2,500 every six
months to a maximum of $10,000 per month. As of September 30, 2009,
the aggregate principal payments totaled $10,000 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 $16,344 and $33,138 for the three and six
months ended September 30, 2009, respectively, and $18,144 and $36,738 for
the three and six months ended September 30, 2008, respectively. Accrued
interest, which is included in related party notes payable in the accompanying
unaudited consolidated balance sheets, related to these notes amounted to
$587,398 and $554,260 as of September 30, 2009 and March 31, 2009, respectively.
As of September 30, 2009, the Company had not made the required payments under
the related-party notes which were due on July 1, August 1, and September 1,
2009. However, pursuant to the note agreements, the Company has a 120-day grace
period to pay missed payments before the notes are in default. On October 31,
2009, the Company paid the July 1 note payments due on these related party
notes. Management expects to continue to pay all payments due prior to the
expiration of the 120-day grace periods.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
Note Payable to Former
Officer
In August
2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008. As of September 30, 2009 and March 31,
2009, the total amount of deferred salaries and accrued interest under this
arrangement was $132,476 and $157,688, respectively, of which, $36,476 and
$67,688, respectively, is recorded as a long-term liability in the accompanying
unaudited consolidated balance sheets. Interest expense related to
this note was $2,412 and $4,788 for the three and six months ended
September 30, 2009, respectively, and $2,714 and $5,657 for the three and
six months ended September 30, 2008, respectively. Accrued interest related
to this note payable amounted to $18,526 and $13,738 at September 30, 2009 and
March 31, 2009, respectively, and is included in the note payable to officer in
the accompanying unaudited consolidated balance sheets. In January 2009, Mr.
Berry agreed to defer the monthly payments of the note due from January 31, 2009
through June 30, 2009. Effective August 26, 2009, pursuant to a letter agreement
(i) the Company agreed to pay Mr. Berry the sum of $30,000 plus accrued interest
representing past due payments from January to May 2009 previously waived by Mr.
Berry, (ii) Mr. Berry agreed to waive payments due to him through December 2009,
and (iii) the Company agreed to pay to Mr. Berry the sum of $42,000 plus accrued
interest on January 1, 2010, representing payments due to him from June 2009
thru December 2009. As of September 30, 2009 and March 31, 2009 these unpaid
payments totaled $24,000 and $18,000, respectively, and are included in the
current liability portion of the note payable in the accompanying unaudited
consolidated balance sheets. In February 2009, Mr. Berry resigned his
position as Chief Executive Officer and on July 16, 2009. Mr. Berry
resigned his position from the Board on July 30, 2009.
NOTE 8 – CONVERTIBLE NOTES
PAYABLE
The
Company’s convertible debenture balances are shown below:
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September
30,
2009
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March
31,
2009
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(unaudited)
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Private
Placement Debentures
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Accrued
interest on Private Placement Debentures
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Total
convertible debentures, net
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Convertible
notes payable and accrued interest, net
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Current
portion of convertible notes payable, net
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Convertible
notes payable, net
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|
During
the three and six months ended September 30, 2009, the Company recognized an
aggregate of $1,468,879 and $3,737,569 in interest expense, respectively, due to
amortization of debt discount related to the warrants and embedded conversion
features associated with the Company’s outstanding convertible notes
payable. During the three and six months ended September 30, 2008,
the Company recognized an aggregate of $540,311 and $958,586 in interest
expense, respectively, due to amortization of debt discount related to the
warrants and embedded conversion features associated with the Company’s
outstanding convertible notes payable.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
October 2007 and May 2008
Debentures
In May
2009, approximately $713,000 of the October 2007 Debentures was converted
by a note holder. Using the conversion rate of $0.51 per share
per the terms of the Debenture, 1,398,039 shares of common stock were issued to
the investor. In addition, the fair value of $593,303 related to the conversion
feature was reclassed from the liability for derivative instruments to
additional paid-in capital (see Note 9) and accelerated the recognition of
$508,886 of unamortized debt discount as interest expense.
During
the six months ended September 30, 2009, the Company converted interest payments
due on the October 2007 and May 2008 convertible debentures (the "Debentures")
totaling $126,710 into 428,134 shares of common stock using the
conversion rate of $0.40.
On July
30, 2009, the Company entered into a Consent, Waiver and Agreement with the
holders of the Debentures (the “July Agreement”). Pursuant to the
terms of the July Agreement, the Holders (i) consented to the Company’s issuance
of convertible notes and warrants in connection with a bridge financing of up to
$1,500,000 which commenced in March 2009 (the “Bridge Financing”), and (ii)
waived, as it relates to the Bridge Financing, a covenant contained in the
Debentures not to incur any further indebtedness, except as otherwise permitted
by the Debentures. This Bridge Financing is more particularly
described below under the caption “Private Placement Debentures.” In
addition, in connection with the July Agreement, the Company and Holders
confirmed that (i) the exercise price of the warrants issued to the Holders in
connection with their purchase of the Debentures had been reduced, pursuant to
the terms of the warrants, to $0.51 as a result of the Bridge Financing, and
(ii) as a result of the foregoing decrease in the exercise price, pursuant to
the terms of the warrants (the “Warrants”), the number of shares underlying the
Warrants held by Holders of the Debentures had been proportionally increased by
4,043,507 pursuant to the terms of the warrant agreements. As a
result of the foregoing adjustments, the Company recognized a loss in other
expense due to the change in fair value of derivative liabilities of $1,608,540
and a corresponding increase to the liability for derivative
instruments.
On
September 17, 2009, the Company entered into an Amendment to Debentures and
Warrants, Agreement and Waiver (the “Amendment”) with the Holders the Company’s
outstanding Debentures and associated Warrants to purchase common stock, as such
Debentures and Warrants have been amended. The effective date
of the Amendment was September 1, 2009. The purpose of the Amendment
was to restructure the Company’s obligations under the outstanding Debentures in
order to reduce the amount of the required monthly principal payment and
temporarily defer the commencement of monthly principal payments (which was
scheduled to commence September 1, 2009) and ceased the continuing interest
payments for a period time.
The
following is a summary of the material terms of the Amendment:
1. The
Company must obtain stockholder approval of an amendment to its Amended and
Restated Articles of Incorporation to increase the number of authorized shares
of its common stock to 250,000,000, and file such amendment with the Nevada
Secretary of State, by December 31, 2009.
2. As
of September 1, 2009, the principal amount of the Debentures was increased by
$482,796, which was added to the outstanding principal balances and $403,214 was
recorded as a debt discount and will be amortized over the remaining life of the
Debentures of nine months. The increase reflected all accrued and
unpaid interest as of such date, plus all interest that would have accrued on
the principal amount (as increased as of September 1, 2009, to reflect the then
accrued but unpaid interest) from September 1, 2009, to July 1, 2010 (the
maturity date of the Debentures). The Company shall have no
obligation under the Debentures to make further payments of interest, and
interest shall cease to accrue, during the period September 1, 2009 to July 1,
2010.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
3. The
conversion price of the Debentures was decreased from $0.51 per share to $0.45
per share, which resulted in an increase in the number shares of common stock
which the Debentures may be converted into, an increase in the liability for
derivative instruments of $802,200 and a corresponding loss was recorded in
other expense due to the change in fair value of derivatives.
4. The
commencement of the Company’s obligation to make monthly payments of principal
was deferred from September 1, 2009, to January 1, 2010, at which time the
Company will make monthly pro rata payments to the Holders in the aggregate
amount of $200,000 with a balloon payment due on the maturity date of July 1,
2010. Prior to the Amendment, the Company was obligated to repay the
entire outstanding principal amount of the debentures in twelve equal monthly
payments commencing on August 1, 2009.
5. The
Holders’ existing right to maintain a fully diluted ownership equal to 31.5% has
been increased by the Amendment to a fully diluted ownership of
34.5%.
6. The
exercise price of the outstanding Warrants was decreased from $0.51 per share to
$0.45 per share, which also resulted in a corresponding pro rata increase in the
number of shares that may be purchased upon exercise of the Warrants to an
aggregate of 30,550,955 shares. The reduction in exercise price of
the Warrants to $0.45 per share and the 3,594,230 share increase in the number
of Warrants resulted in an increase in the liability for derivative instruments
of $1,679,990 and a corresponding loss was recorded in other expense due to the
change in fair value of derivative liabilities.
7. The
following additional covenants were added to the Debentures (replacing similar
covenants which had terminated as of June 30, 2009) and shall remain in full
force so long as any of the Debentures remain outstanding (the “Covenant
Period”):
a. The
Company shall maintain a total cash balance of no less than $100,000 at all
times during the Covenant Period;
b. The
Company shall have an average monthly operating cash burn of no more than
$500,000 during the Covenant Period. Operating cash burn is defined by taking
net income (or loss) and adding back all non-cash items, and excludes changes in
assets, liabilities and financing activities;
c. The
Company shall have a minimum current ratio of 0.5 to 1 at all times during the
Covenant Period. This calculation is to be made by excluding the current portion
of the convertible notes payable and accrued interest, and liability from
derivative instruments from current liability for the current
ratio;
d. Accounts
payable shall not exceed $750,000 at any time during the Covenant
Period;
e. Accrued
salaries shall not exceed $350,000 at any time during the Covenant Period;
and
f. The
Company shall not make any revisions to the terms of the existing contractual
agreements for the Notes Payable to Former Officer, Related Party Notes Payable
and the Line of Credit (as each is referred to in the Company’s Form 10-Q for
the period ended June 30, 2009); other than the previous amendment to the
payment terms of a note payable to the Company’s former CEO.
8. The
Company may not deliver a redemption notice with respect to the outstanding
Debentures until such time as the closing price of the Company’s common stock
shall have exceeded $0.70 (as adjusted for stock splits or similar transactions)
for ten consecutive trading days prior to the delivery of the redemption
notice.
On
September 22, 2009, the holders of the May 2008 Debentures converted $100,000
principal into 222,222 shares of the Company’s common stock at a conversion
price of $0.45. As a result of the conversion, the Company
reclassified $52,799 of the derivative liability related to the embedded
conversion feature to additional paid in capital and accelerated the recognition
of $41,277 of unamortized debt discount as interest expense.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 8 – CONVERTIBLE NOTES
PAYABLE, continued
During
the three and six months ended September 30, 2009, the Company recognized an
aggregate of $1,233,360 and $3,387,756 in interest expense, respectively, due to
amortization of debt discount related to the warrants and embedded conversion
features associated with the Company’s outstanding Debentures. During
the three and six months ended September 30, 2008, the Company recognized an
aggregate of $540,311 and $958,586 in interest expense, respectively, due to
amortization of debt discount related to the warrants and embedded conversion
features associated with the Company’s outstanding Debentures.
Private Placement
Debentures
In March
2009, the Company entered into an Agency Agreement with a broker to raise
capital in a private placement offering of one-year convertible debentures
pursuant to Regulation D of the Securities Act and the Rules promulgated
thereunder (the “Private Placement Debentures”). As of
September 30, 2009, the Company had received gross proceeds of $1,381,500
under this private placement offering of convertible debentures which includes
$395,000 and $1,321,500 raised during the three and six months ended September
30, 2009, respectively (also see Note 13 - Subsequent Events).
The
Company may elect to make principal redemptions on the maturity dates of the
debentures in shares of common stock at a fixed conversion price of $0.51 per
share. At any time, holders may convert the debentures into shares of common
stock at the fixed conversion price of $0.51. The conversion price is subject to
adjustment in the event the Company issues its next equity financing of at least
$2,500,000 at a price below $0.51 per share.
Per the
terms of the convertible debenture agreements, the notes have a term of one year
from issuance and are redeemable by the Company with two days
notice. The notes bear interest at 8% per annum and are convertible
into shares of the Company’s common stock at a conversion rate of $0.51 per
share. In connection with the Private Placement Debentures, the
Company issued to investors an aggregate of 541,772 five-year warrants to
purchase shares of the Company’s common stock at $0.51 per share (the “Private
Placement Warrants”), which includes 154,902 warrants and 518,242 warrants
issued to investors during the three and six months ended September 30, 2009,
respectively. The Company has determined the aggregate fair value of the issued
warrants as of the dates of each grant, based on the Black-Scholes pricing
model, to be approximately $72,642 and $291,571 for the three and six months
ended September 30, 2009. The exercise price of the warrants is subject to
adjustment in the event the Company issues its next equity financing of at least
$2,500,000 at a price below $0.51 per share. At September 30, 2009,
the aggregate fair value of the Private Placement Warrants was $252,971 and is
accounted for as a derivative liability (see Note 9).
In
connection with the issuance of the Private Placement Debentures, the Company
recognized a debt discount and derivative liability at the dates of issuance in
the aggregate amount of $1,125,773 related to the fair value of the warrants and
embedded conversion features, which included $256,992 and $1,080,201 of debt
discount recorded for the three and six month periods ended September 30, 2009,
respectively. The debt discount will be amortized to interest expense over the
life of the debentures and the derivative liability will be revalued each
reporting period with changes in fair value recognized in earnings.
During
the three and six months ending September 30, 2009, the Company recognized an
aggregate of $235,519 and $349,813 in interest expense, respectively, due to
amortization of debt discount related to the warrants and embedded conversion
features associated with the Company’s outstanding Private Placement
Debentures. There were no corresponding amounts recognized during the
three and six months ended September 30, 2008 related to the Private Placement
Debentures.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 9 — DERIVATIVE
LIABILITIES
In
accordance with current accounting guidance (see Note 2), outstanding warrants
to purchase shares of common stock and embedded conversion features in
convertible notes payable previously treated as equity were no longer afforded
equity treatment because these instruments have reset or ratchet provisions in
the event the Company raises additional capital at a lower price, among other
adjustments. As such, effective April 1, 2009 the
Company reclassified the fair value of these common stock purchase warrants
and embedded conversion features, from equity to liability status as if these
warrants and conversion features were treated as derivative
liabilities since their dates of issuance or modification. The
cumulative effect at April 1, 2009 to record, at fair value, a liability
for the warrants and embedded conversion features, and related adjustments to
discounts on convertible notes of $2,595,095, resulted in an aggregate reduction
to equity of $13,875,623 consisting of a reduction to additional paid-in
capital of $4,217,730 and an increase in the accumulated deficit of $9,657,893
to reflect the change in the accounting.
Any
change in fair value subsequent to April 1, 2009 is recorded as non-operating,
non-cash income or expense at each reporting date. If the fair value of the
derivatives 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.
In July
2009, as a result of the July Agreement, the exercise price of the Warrants was
decreased from $0.60 per share to $0.51 per share, which resulted in an increase
in the liability for derivative instruments of $1,608,540 and a corresponding
loss was recorded in other expense due to the change in fair value of derivative
liabilities (see Note 8).
In
September 2009, as a result of the September Amendment, the conversion price of
the Debentures and the exercise price of the Warrants was decreased from $0.51
per share to $0.45 per share, pursuant to the terms of the Debentures, which
resulted in an aggregate increase in the liability for derivative instruments of
$1,679,990 and a corresponding loss was recorded in other expense due to the
change in fair value of derivative liabilities. In addition, the
conversion price of the Debentures was decreased from $0.51 per share to $0.45
per share, which resulted in an increase in the number shares of common stock
which the Debentures may be converted into, an increase in the liability for
derivative instruments of $802,200 and a corresponding loss was recorded in
other expense due to the change in fair value of derivatives (see Note
8).
During
the six months ended September 30, 2009, the Company issued a total of 200,000
warrants to various consultants in lieu of fees paid for services performed by
consultants to purchase shares of the Company’s common stock at an average
exercise price of $0.51 per share. The exercise prices of these
warrants are equal to the stock price of the Company’s shares as of the dates of
each grant. The Company determined the aggregate fair value of the
issued warrants, based on the Black-Scholes pricing model, to be approximately
$87,448 as of the dates of each grant. Since the exercise price of the
warrants is subject to adjustment in the event the Company issues the next
equity financing, the warrants are accounted for as a derivative
liability.
During
the six months ended September 30, 2009, in connection with the termination of a
consulting agreement, the Company modified the terms of 546,761 warrants issued
in October 2007 and May 2008. The exercise price of the warrants was reduced
from $0.84 per share to $0.60 per share and the expiration date was extended to
5 years from the date of modification. As a result of the modification, the
Company recognized expense of $10,763 in other expense based on
the change in the Black-Scholes fair value before and after
modification.
During
the three and six months ended September 30, 2009, the Company recognized
aggregate losses of $4,535,848 and $1,401,550, respectively, due to the change
in fair value of its derivative instruments. See Note 2 – Organization and Summary of
Significant Accounting Policies – Fair Value Measures, for the components
of changes in derivative liabilities. During the three and six months
ended September 30, 2008, there were no derivative liabilities and therefore no
recognized changes in fair value.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
The
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 using the following assumptions:
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September
30,
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April
1,
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2009
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2009
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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
Operating
Leases
On July
2, 2007, the Company entered into a lease agreement with Viking Investors -
Barents Sea, LLC (Lessor) for a building with approximately 11,881 square feet
of manufacturing and office space located at 20382 Barents Sea Circle, Lake
Forest, CA, 92630. The lease agreement is for a period of two years with renewal
options for three, one-year periods, beginning September 1, 2007. The lease
requires base lease payments of approximately $13,000 per month plus operating
expenses. In connection with the lease agreement, the Company issued 10,000
warrants to the lessor at an exercise price of $1.55 per share for a period of
two years, valued at $15,486 as calculated using the Black Scholes option
pricing model. The assumptions used under the Black-Scholes pricing model
included: a risk free rate of 4.75%; volatility of 293%; an expected exercise
term of 5 years; and no annual dividend rate. The Company has capitalized and is
amortizing the value of the warrants over the life of the lease and the
remaining unamortized value of the warrants has been recorded in other long-term
assets. The Company capitalized and amortized the value of the
warrants over the life of the lease and recorded the unamortized value of the
warrants in other long-term assets. For the three and six months
ended September 30, 2009, the Company amortized $1,776 and $2,970,
respectively. As of September 30, 2009, the fair value of the
warrants has been fully amortized. On August 24, 2009, the Company entered
into the second amendment to the lease for its manufacturing and office space.
The amendment extended the lease for twelve months from the end of the existing
lease term with a right to cancel the lease with a minimum of 120 day written
notice at anytime as of November 30, 2009. In the event the Company
does exercise its option to cancel the lease, the Company shall reimburse the
Lessor for the unearned leasing commissions. Total rental expense was
approximately $42,000 and $85,000 for the three and six months ended
September 30, 2009, respectively, and approximately $44,000 and $90,000 for
the three and six months ended September 30, 2008,
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 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 Company indemnifies its directors,
officers, employees and agents, as permitted under the laws of the States of
California and Nevada. In connection with its facility lease, the Company has
indemnified its lessor for certain claims arising from the use of the facility.
The duration of the guarantees and indemnities varies, and is generally tied to
the life of the agreement. These 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 unaudited
consolidated balance sheets.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 11 -
EQUITY
Common
Stock and Warrants
In
October 2007, the Company engaged the firm of Carpe DM, Inc. to perform the
services as the Company’s investor relations and public relations representative
for a monthly fee of $7,500 per month. Pursuant to the terms of this
36 month consulting agreement, the Company issued 150,000 shares of common stock
at a price of $0.80 per share and a total value of $120,000, the resale of which
is registered on a Form S-8 registration statement and 250,000 fully vested and
non-forfeitable warrants at an exercise price of $1.50 per share for a period of
two and one-half years, valued at $229,834 as calculated using the Black-Scholes
option pricing model. On November 13, 2007, the Company filed the
Form S-8 as required by this agreement with the Securities and Exchange
Commission. The Company recorded the combined value of $349,834 of the shares
and warrants issued as prepaid expense which is being amortized over the life of
the services agreement. As of September 30, 2009 and March 31, 2009,
the unamortized balance of the value of the shares and warrants issued to Carpe
DM, Inc. was $116,626 and $174,928, respectively. Amortization
expense related to the value of the shares and warrants was $29,151 and $58,302
for the three and six months ended September 30, 2009,
respectively, and is included in selling, general and administrative
expenses.
In May
2009, $713,000 of the October 2007 Debentures was converted by the note
holder. Using the conversion rate of $0.51 per share per the terms of
the Debenture, 1,398,039 shares of registered common stock were issued to the
investor.
In July
2009, the Company engaged an agent to solicit the holders of certain warrants to
exercise their rights to purchase shares of the Company’s common
stock. Pursuant to the terms of the engagement, the Company agreed to
pay the agent compensation of 5% of the gross proceeds totaling
$51,174, which is included equity and netted again the gross proceeds in the
accompanying unaudited consolidated balance sheet at September 30,
2009. In addition, the Company will issue to the agent a warrant to
purchase a number of shares of the Company’s common stock equal to 5% of the
number of shares issued in the exercise of the warrants, or a total of 166,600
warrants as of September 30, 2009. The warrant has an exercise price
of $0.51. As of September 30, 2009, the estimated fair value of
warrants owed to the agent was approximately $82,000 and has been recorded as an
accrued liability with the offset to additional paid in capital on the
accompanying unaudited consolidated balance sheet, and will permit the agent or
its designees to purchase shares of common stock on or prior to October 1,
2014. During the three months ended September 30, 2009, the Company
issued 3,332,000 shares of its common stock for gross cash proceeds of $999,600
from the exercise of warrants which resulted from the solicitation.
During
July 2009, the Company entered into the July Agreement with the holders of the
Company’s Debentures (see Note 8). Pursuant to the terms of the July Agreement,
the Holders (i) consented to the Company’s issuance of convertible notes and
warrants in connection with the Bridge Financing of up to $1,500,000 which
commenced in March 2009, and (ii) waived, as it relates to the Bridge Financing,
a covenant contained in the Debentures not to incur any further indebtedness,
except as otherwise permitted by the Debentures. This Bridge Financing is more
particularly described in Note 8 above under the caption “Private Placement
Debentures.” In addition, in connection with the July Agreement, the Company and
Holders confirmed that (i) the exercise price of the warrants issued to the
Holders in connection with their purchase of the Debentures had been reduced,
pursuant to the terms of the warrants, to $0.51 as a result of the Bridge
Financing, and (ii) as a result of the foregoing decrease in the exercise price,
pursuant to the terms of the warrants, the number of shares underlying the
warrants held by Holders of the Debentures had been proportionally increased by
4,043,507 pursuant to the terms of the warrant agreements (see Note
8).
In August
2009, the Company issued 6,000 warrants in lieu of payment to Gary C. Cannon,
who then served as Corporate Legal Counsel for the Company and as a member of
the Advisory Board, to purchase shares of the Company’s common stock at an
exercise price of $0.51 per share with a five year term. The exercise prices of
these warrants are greater than or equal to the stock price of the Company’s
shares as of the date of grant. The fair market value of the warrants based on
the Black-Scholes pricing model of $2,799 was recorded as consulting and
compensation expense and included in selling, general and administrative
expenses in the quarter ending September 30, 2009. In July 2009, Mr. Cannon was
given a 30 day notice of his termination as general legal counsel and advisor to
the Company.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
On August
21, 2009, the Compensation and Governance Committee granted Adam Michelin an
option to purchase 50,000 shares of common stock at an exercise price of $0.48
per share (the closing price of the Company’s stock on the date of grant) in
consideration for his services as an independent director and Chairman of the
Audit Committee. The option vests in four equal quarterly
increments.
On August
21, 2009 the Compensation and Governance Committee granted Carlton Johnson an
option to purchase 50,000 shares of common stock at an exercise price of $0.48
per share (the closing price of the Company’s stock on the date of grant) in
consideration for his service as an independent director and Chairman of the
Compensation and Governance Committee. The option vests in four equal quarterly
increments.
Effective
September 1, 2009, in connection with the Amendment (as defined) with the
holders of the October 2007 and May 2008 Convertible Debentures, the exercise
price of certain outstanding warrants held by such holders was reduced to $0.45
per share which resulted in a proportionate increase the number of shares that
may be purchased upon the exercise of such warrants of 3,594,230 shares (see
Note 8).
In
September 2009, $100,000 of the May 2008 Debentures was converted by the note
holder. Using the conversion rate of $0.45 per share per the terms of
the Debenture, 222,222 share of registered common stock were issued to the
investor.
During
the six months ended September 30, 2009 the Company issued convertible
debentures with an aggregate principal amount of $1,321,500. The
Company paid $79,290 in commissions to the broker. In addition, the Company
issued to the purchasers of the convertible debentures warrants to purchase an
aggregate of 518,242 shares of common stock at an initial exercise price of
$0.51.
During
the six months ended September 30, 2009, the Company converted interest payments
due on the Debentures totaling $171,254 into 428,134 shares of common stock
using the conversion rate of $0.40 per share.
During
the six months ended September 30, 2009, the Company issued 110,345 shares of
common stock upon the cashless exercises of a total of 119,000 warrants at an
average exercise price of $0.04 per share.
During
the six months ended September 30, 2009, the Company issued 232,954 shares of
common stock the resale of which is registered pursuant to Form S-8 in lieu of
fees paid for services performed by consultants. On April 13, 2009
and June 11, 2009, the Company filed the related Forms S-8 with the SEC. These
shares were issued at a value of $0.51 per share for a total cost of $118,807
which has been included in selling, general and administrative expenses for the
six months ended September 30, 2009.
During
the six months ended September 30, 2009, the Company issued 210,000
warrants and 100,000 options with a fair value of $107,507 to employees and
directors and 200,000 warrants with a fair value of $87,448 in lieu of fees
paid for services performed to various consultants for purchase of the Company’s
common stock (see Notes 2 and 9, respectively).
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 12 - RELATED PARTY
TRANSACTIONS
In August
2006, Peter Berry the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008. As of September 30, 2009 and March 31,
2009, the total amount of deferred salaries and accrued interest under this
arrangement was $132,476 and $157,688, respectively, of which $36,476 and
$67,688, respectively was recorded as a long-term liability in the accompanying
unaudited consolidated balance sheets. Interest expense related to
this note was $2,412 and $4,788 for the three and six months ended
September 30, 2009, respectively, and $2,714 and $5,657 for the three and
six months ended September 30, 2008, respectively. Accrued interest related
to this note payable amounted to $18,526 and $13,738 at September 30, 2009 and
March 31, 2009, respectively, and is included in the note payable to officer in
the accompanying unaudited consolidated balance sheets. In January 2009, Mr.
Berry agreed to defer the monthly payments of the note due from January 31, 2009
through June 30, 2009. Effective August 26, 2009, pursuant to a letter agreement
(i) we agreed to pay Mr. Berry the sum of $30,000 plus accrued interest
representing past due payments from January to May 2009 previously waived by Mr.
Berry, (ii) Mr. Berry agreed to waive payments due to him through December 2009,
and (iii) we agreed to pay to Mr. Berry the sum of $42,000 plus accrued interest
on January 1, 2010, representing payments due to him from June 2009 thru
December 2009. As of September 30, 2009 and March 31, 2009 these unpaid payments
totaled $24,000 and $18,000, respectively and are included in the current
liability portion of the note payable in the accompanying unaudited consolidated
balance sheets (see Note 7). Mr. Berry resigned his position as Chief
Executive Officer in February 2009. Mr. Berry resigned his position from
the Board on July 30, 2009.
In May
2009, the Company issued 110,345 shares of common stock to Peter Berry,
resulting from the cashless exercise of 119,000 warrants at an exercise price of
$0.04 per share (see Note 11).
Since
June 2005, the Company had retained the legal services of Gary C. Cannon,
Attorney at Law, for a monthly retainer fee. From June 2005 to May
2009, Mr. Cannon also served as the Company’s Secretary and a member of the
Company’s Board of Directors. Mr. Cannon continued to serve as
Corporate Legal Counsel for the Company and served as a member of the Advisory
Board. In December 2007, Mr. Cannon’s monthly retainer for legal
services was increased from $6,500 per month to $9,000 per month. The
total amount paid to Mr. Cannon for retainer fees and out-of-pocket expenses for
the six months ended September 30, 2009 and 2008 was $34,000 and $54,000,
respectively. From October 2008 through March 31, 2009 Mr. Cannon
agreed to defer a portion of his monthly payments. As of September
30, 2009 and March 31, 2009 a total of $26,000 and $15,000, respectively, had
been deferred and was included in accounts payable in the accompanying unaudited
consolidated balance sheets Board fees expensed for Mr. Cannon were $0 and
$5,388 for the three and six months ended September 30, 2009, respectively,
and $6,675 and $12,450 for the three and six months ended September 30,
2008, respectively. At September 30, 2009 and March 31, 2009, $19,788 and
$15,000, respectively, of deferred board fees was included in accrued
expenses. During the six months ended September 30, 2009, Mr. Cannon was
granted a total of 25,575 warrants with an average exercise price of $0.59 per
share. For the six months ended September 30, 2008, Mr. Cannon was granted
a total of 18,000 warrants with an average exercise price of $.95 per share. All
warrants granted to Mr. Cannon were issued with an exercise price of greater
than or equal to the stock price of the Company’s shares on the grant date. On
May 4, 2009, Gary Cannon resigned from the Company’s Board of Directors and in
July 2009 Mr. Cannon was given 30 days notice that he was terminated as the
general legal counsel and advisor to the Company (see Note 13 for subsequent
events).
As of
September 30, 2009 and March 31, 2009, the Company had aggregate principal
balances of $1,069,500 and $1,129,500, respectively, in outstanding unsecured
indebtedness owed to five related parties, including four former members of the
board of directors, representing working capital advances made to the Company
from February 2001 through March 2005. These notes bear interest at
the rate of 6% per annum and provide for aggregate monthly principal payments
which commenced April 1, 2006 of $2,500, and which increased by an aggregate of
$2,500 every six months to the current maximum aggregate payment of $10,000 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 $16,344 and $33,138 for the three and six months ended
September 30, 2009, respectively, and $18,144 and $36,738 for the three and
six months ended September 30, 2008, respectively. Accrued
interest, which is included in related party notes payable in the accompanying
unaudited consolidated balance sheets, related to these notes amounted to
$587,398 and $554,260 as of September 30, 2009 and March 31, 2009,
respectively. The Company had not made the required payments under
the related party notes which were due on April 1, 2009, May 1, 2009 and June 1,
2009. However, pursuant to the note agreements, the Company has a
120-day grace period to pay missed payments before the notes are in
default. On July 29, 2009, August 25, 2009, and September 30, 2009,
the Company paid the April 1, 2009, May 1, 2009 and June 1,2009 payments
respectively, due on these related party notes. Management expects to
continue to pay all payments due prior to the expiration of the 120-day grace
periods.
CRYOPORT,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the
Three and Six Months Ended September 30, 2009 and 2008
NOTE 12 - RELATED PARTY
TRANSACTIONS, continued
On July
20, 2009, Dee Kelly informed the Company’s Board of her intent to terminate the
consulting agreement between Dee Kelly Financial Services and the Company and
resign as the Company’s Chief Financial Officer and Vice President of Finance
effective August 20, 2009, the expiration date of the thirty (30) day notice
period provided for in the consulting agreement. The Company also
entered into a Settlement and Mutual General Release of Claims (the “Release
Agreement”) with Ms. Kelly on July 24, 2009, that governs the terms of her
departure and that provides, in exchange for a general release by Ms. Kelly, for
the following: (i) the Company will pay to Ms. Kelly on July 31, 2009, the sum
of $14,000 representing the amount of deferred compensation owed to Ms. Kelly as
of July 24, 2009, which the Company and Ms. Kelly had previously agreed to
defer; and (ii) a general release of claims by the Company in favor of Ms.
Kelly. The Release Agreement also contains other customary
provisions.
In August
2009, the Company issued 6,000 warrants in lieu of payment to Gary C. Cannon,
who then served as Corporate Legal Counsel for the Company and as a member of
the Advisory Board, to purchase shares of the Company’s common stock at an
exercise price of $0.51 per share and 5 year term. The exercise prices of these
warrants are greater than or equal to the stock price of the Company’s shares as
of the date of grant. The fair market value of the warrants of $2,799 based on
the Black-Scholes pricing model was recorded as consulting and compensation
expense and included in selling, general and administrative expenses in the
quarter ending September 30, 2009.
NOTE 13 - SUBSEQUENT
EVENTS
During
the period October 1, 2009 through November 10, 2009, 1,458,333 warrants were
exercised at an average price of $0.30 per share for aggregate proceeds of
$437,500.
On
October 15, 2009, the Company issued 22,616 shares of common stock upon the
cashless exercises of a total of 51,400 warrants at an average exercise price of
$0.28 per share.
On
October 30, 2009, $90,000 of the October 2007 Debentures was converted by the
note holder. Using the conversion rate of $0.45 per share per the
terms of the Debenture, 200,000 shares of registered common stock were issued to
the investor.
On
November 4, 2009, the Company issued 58,808 shares of common stock the resale of
which is registered pursuant to Form S-8 in lieu of fees paid for services
performed by the Board of Directors. On June 11, 2009 and April 13,
2009, the Company filed the related Forms S-8 with the SEC. These shares were
issued at a value of $0.43 per share.
On
November 7, 2009, the Company issued 24,566 shares of common stock upon the
cashless exercises of a total of 65,000 warrants at an average exercise price of
$0.28 per share.
On
October 6, 2009 the Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 (File No. 333-162350) for a possible
underwritten public offering of units, each unit to consist of one share of
common and warrant to purchase one share of common stock. Management
cannot assure you that this contemplated offering will be consummated, or if
consummated, whether the proceeds from such offering will be sufficient to fund
the Company’s planned operations.
Units
CRYOPORT,
INC.
PROSPECTUS
Rodman
& Renshaw, LLC
The date
of this prospectus is ______________, 2010.
Until
______________, 2010 (25 days after the commencement of this offering), all
dealers that buy, sell or trade shares of our common stock or warrants,whether
or not participating in this offering, may be required to deliver a
prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
You
should rely only on the information contained or incorporated by reference to
this prospectus in deciding whether to purchase our common stock or warrants. We
have not authorized anyone to provide you with information different from that
contained or incorporated by reference to this prospectus. Under no
circumstances should the delivery to you of this prospectus or any sale made
pursuant to this prospectus create any implication that the information
contained in this prospectus is correct as of any time after the date of this
prospectus. To the extent that any facts or events arising after the date of
this prospectus, individually or in the aggregate, represent a fundamental
change in the information presented in this prospectus, this prospectus will be
updated to the extent required by law.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM
24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the
Nevada General Corporation Law and our Amended and Restated Articles of
Incorporation, as amended, our directors will have no personal liability to us
or our stockholders for monetary damages incurred as the result of the breach or
alleged breach by a director of his “duty of care.” This provision does not
apply to the directors’ (i) acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) acts or omissions
that a director believes to be contrary to the best interests of the corporation
or its stockholders or that involve the absence of good faith on the part of the
director, (iii) approval of any transaction from which a director derives an
improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director’s duty to the corporation or its stockholders in circumstances
in which the director was aware, or should have been aware, in the ordinary
course of performing a director’s duties, of a risk of serious injury to the
corporation or its stockholders, (v) acts or omissions that constituted an
unexcused pattern of inattention that amounts to an abdication of the director’s
duty to the corporation or its stockholders, or (vi) approval of an unlawful
dividend, distribution, stock repurchase or redemption. This provision would
generally absolve directors of personal liability for negligence in the
performance of duties, including gross negligence.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth an estimate of the costs and expenses payable by us
in connection with the offering described in this registration statement. All of
the amounts shown are estimates except the SEC registration fee:
|
|
$ |
2,582.85 |
|
|
|
|
Accounting
Fees and Expenses
|
|
$ |
35,000 |
|
|
|
* |
|
NASDAQ
Capital Market Listing Fee
|
|
$ |
7,500 |
|
|
|
* |
|
Printing
and Engraving Expenses
|
|
$ |
20,000 |
|
|
|
* |
|
|
|
$ |
125,000 |
|
|
|
* |
|
|
|
$ |
9,917.15 |
|
|
|
* |
|
|
|
$ |
200,000 |
|
|
|
|
|
*
Estimated
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES
The
following is a summary of transactions by CryoPort during the past three years
involving the issuance and sale of CryoPort’s securities that were not
registered under the Securities Act. Unless otherwise indicated, the
issuance of the securities in the transactions below were deemed to be exempt
from registration under the Securities Act by virtue of the exemption under
Section 4(2) of the Securities Act as a transaction by an issuer not involving a
public offering, or by virtue of the exemption under Rule 506 of the Securities
Act and Regulation D promulgated thereunder. The following give effect to the
anticipated 10-to-1 reverse stock split.
On
October 9, 2009, the Compensation and Governance Committee granted Larry
Stambaugh an option to purchase 67,000 shares of common stock at an
exercise price of $4.50 per share (the closing price of CryoPort’s stock on the
date of grant). The right to exercise the stock options will vest as to 33⅓% of
the underlying shares of common stock upon grant, with the remaining underlying
shares vesting in equal installments on the first and second anniversary of the
grant date.
On
October 9, 2009, the Compensation and Governance Committee granted Catherine
Doll an option to purchase 2,000 shares of common stock at an exercise
price of $4.50 per share (the closing price of CryoPort’s stock on the date of
grant). The right to exercise the stock options will vest as to 33⅓% of the
underlying shares of common stock upon grant, with the remaining underlying
shares vesting in equal installments on the first and second anniversary of the
grant date.
On
October 15, 2009, CryoPort issued 2,262 shares of common stock upon the
cashless exercises of a total of 5,140 warrants at an average exercise
price of $2.80 per share.
On
October 30, 2009, $90,000 of the May 2008 Debentures was converted by the note
holder. Using the conversion rate of $4.50 per share per the terms of
the Debenture, 20,000 shares of registered common stock were issued to the
investor.
On November 4, 2009, CryoPort
issued 5,882 shares of common stock the resale of which is registered
pursuant to Form S-8 in lieu of fees paid for services performed by the Board of
Directors. On June 11, 2009 and April 13, 2009, CryoPort filed the
related Forms S-8 with the SEC. These shares of common stock were issued at a
value of $4.30 per share.
On
November 7, 2009, CryoPort issued 2,456 shares of common stock upon the
cashless exercises of a total of 6,500 warrants at an average exercise
price of $2.80 per share.
On
November 17, 2009, CryoPort issued 4,314 shares of common stock the resale
of which is registered pursuant to Form S-8 in lieu of fees paid for legal
services performed by Gary Cannon. On June 11, 2009 and April 13,
2009, CryoPort filed the related Forms S-8 with the SEC. These shares
of common stock were issued at a value of $5.10 per share.
On
November 19, 2009, $180,000 of the May 2008 Debentures was converted by the note
holder. Using the conversion rate of $4.50 per share per the terms of
the Debenture, 40,000 shares of registered common stock were issued to the
investor.
On November 25, 2009, $100,000 of the
October 2007 Debentures was converted by the note holder. Using the
conversion rate of $4.50 per share per the terms of the Debenture, 22,223
shares of registered common stock were issued to the
investor.
During the six months ended September
30, 2009, CryoPort issued convertible debentures with an aggregate principal
amount of $1,321,500. CryoPort paid $79,290 in commissions to the
broker. In addition, CryoPort issued to the purchasers of the
convertible debentures warrants to purchase an aggregate of 51,728 shares
of common stock at an initial exercise price of $5.10.
On July 1, 2009, CryoPort paid accrued
interest due on the Debentures in the amount of $37,620 by issuing to the
debenture holders a total of 9,405 shares of common stock, based on
the contractual exchange rate of $4.00 per share.
During
the period July 1, 2009 through December 31, 2009, CryoPort issued an
aggregate of 479,033 shares of common stock upon the exercise of
outstanding warrants. The average exercise price of the warrants was
$3.00 per share and CryoPort received aggregate proceeds of
$1,437,100.
On July
30, 2009, in connection with CryoPort’s execution of a Consent, Waiver and
Agreement with the holders of the Debentures, the exercise price of certain
outstanding warrants held by such holders was reduced to $5.10 per share which
resulted in a proportionate increase the number of shares of common stock that
may be purchased upon the exercise of such warrants of 404,351 shares of
common stock.
In August
2009, CryoPort issued a fully vested warrant to purchase 600 shares of
common stock to Gary C. Cannon, who then served as CryoPort’s Corporate Legal
Counsel and as a member of the Advisory Board. The exercise price of the
warrant was $5.10 per share.
On August
21, 2009, the Compensation and Governance Committee granted Adam Michelin an
option to purchase 5,000 shares of common stock at an exercise price of
$4.80 per share (the closing price of CryoPort’s stock on the date of grant) in
consideration for his services as an independent director and Chairman of the
Audit Committee. The option vests in four equal quarterly
increments.
On August
21, 2009 the Compensation and Governance Committee granted Carlton Johnson an
option to purchase 5,000 shares of common stock at an exercise price of
$4.80 per share (the closing price of CryoPort’s stock on the date of grant) in
consideration for his service as an independent director and Chairman of the
Compensation and Governance Committee. The option vests in four equal quarterly
increments.
On
September 22, 2009, $100,000 of the October 2007 Debentures was converted by the
note holder. Using the conversion rate of $4.50 per share per the
terms of the Debenture, 22,223 shares of registered common stock were
issued to the investor.
Effective
September 1, 2009, in connection with CryoPort’s execution of a Consent, Waiver
and Agreement with the holders of the Debentures, the exercise price of
certain outstanding warrants held by such holders was reduced to $4.50 per share
which resulted in a proportionate increase the number of shares of common stock
that may be purchased upon the exercise of such warrants of 359,423 shares of
common stock.
During
the three months ended June 30, 2009, CryoPort issued 11,035 shares of
common stock resulting from the cashless exercises of warrants for 11,900
shares of common stock.
During
the three months ended June 30, 2009, CryoPort issued fully vested warrants to
purchase a total of 20,000 shares of common stock to various consultants in
lieu of fees paid for services performed by consultants to purchase shares of
CryoPort’s common stock.
During
the three months ended June 30, 2009 CryoPort issued fully vested warrants to
purchase 9,680 shares of common stock to members of the Board of Directors
to purchase shares of CryoPort’s common stock.
During
fiscal 2009, CryoPort issued 8,269 shares of common stock resulting from
the cashless exercise of warrants at an average exercise price of $0.40 per
share resulting in proceeds of $3,307.
During
fiscal 2009, CryoPort issued 15,002 shares of common stock resulting from
the cashless exercises of options for 15,700 shares of common stock at an
average market price of approximately $0.40 per share resulting in options
for 698 shares of common stock used for the cashless
conversion.
During
fiscal 2009, CryoPort issued 40,224 shares of common stock in lieu of fees
paid to a consultant. These shares of common stock were issued at an
average value of $6.10 per share for a total cost of $249,102 which has been
included in selling general and administrative expenses for the year ended March
31, 2009.
During
fiscal 2009, CryoPort issued 40,000 shares of common stock for
extinguishment of debt. These shares of common stock were issued at a
value of $4.10 per share (based on the stock price on the agreement date) for a
total cost of $164,000 which has been included in the loss on extinguishment of
debt.
During
fiscal 2009, CryoPort issued to an accredited investor Original Issue Discount
8% Senior Secured Convertible Debentures having a principal face amount of
$1,250,000 and generating gross proceeds to us of $1,062,500 after giving effect
to a 15% discount. After accounting for commissions and legal and
other fees, the net proceeds to us totaled $870,625. In connection
with the financing transaction, CryoPort issued to the investor 5-year fully
vested warrants to purchase 148,810 shares of common stock at $9.20 per
share and 5-year fully vested warrants to purchase 148,810 shares of
common stock at $13.50 per share. CryoPort paid to the placement
agent cash in the amount of $116,875 and issued fully vested warrants to
purchase 14,882 shares of CryoPort’s common stock at $8.40 per
share.
During
fiscal 2008, 365,272 shares of CryoPort’s common stock were sold to
investors at an average price of $2.16 per share resulting in gross proceeds of
$789,501.
During
fiscal 2008, CryoPort issued 15,625 shares of common stock resulting from
the cashless exercises of warrants at an average exercise price of $6.90 per
share resulting in proceeds of $107,500.
During
fiscal 2008, CryoPort issued 38,673 shares of common stock resulting from
the cashless exercise of warrants for 46,547 shares of common stock
converted using an average market price of approximately $11.90 per share
resulting in 7,874 warrants used for the cashless
conversion.
During
fiscal 2008, CryoPort issued 37,500 shares
of common stock in lieu of fees paid to a consultant. These shares of
common stock were issued at a value of $10.20 per share (based on the stock
price on the agreement dates after a 15% deduction as the shares of common stock
are restricted) for a total cost of $382,500 which has been included in selling
general and administrative expenses for the year ended March 31,
2008.
During
fiscal 2008, CryoPort issued 15,000 S-8 registered shares of common stock
in lieu of fees paid to a consultant for a 36 month consulting
agreement. These shares of common stock were issued at a value of
$8.00 per share (based on the stock price on the agreement date) for a total
cost of $120,000, which is being amortized over the life of the service
agreement.
During
fiscal 2008, CryoPort issued to a number of accredited investors Original Issue
Discount 8% Senior Secured Convertible Debentures having a principal face amount
of $4,707,705 and generating gross proceeds to us of
$4,001,551. After accounting for commissions and legal and other
fees, the net proceeds to us totaled $3,436,551.25. In connection with the
financing transaction, CryoPort also issued to the investors 5-year fully vested
warrants to purchase 560,411 shares of our common stock at $9.20 per share,
two-year fully vested warrants to purchase 140,110 shares of common stock
at $9.00 per share and 140,110 shares of common stock at $16.00 per share.
In connection with this offering, CryoPort paid to a placement agent cash in the
amount of $440,000 and issued fully vested warrants to purchase 56,036
shares of CryoPort’s common stock at $8.40 per share.
During
fiscal 2007, 469,200 shares of CryoPort’s common stock were sold to
investors at an average price of $2.20 per share resulting in net proceeds of
$902,028 to CryoPort.
During
fiscal 2007, CryoPort issued 833 shares of common stock resulting from
exercises of warrants at an average exercise price of $3.00 per share resulting
in proceeds of $2,500.
The
following table lists the sales of shares of common
stock net of offering costs (excluding exercises of options and warrants) and
issuances of options and warrants during the 2009, 2008, and 2007 fiscal
years.
|
Fiscal
2009
|
|
Common
Stock
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
Shares
|
|
Avg.
Price
|
|
Issued
|
|
Ex.
Price
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2008
|
|
Common
Stock
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
Shares
|
|
Avg.
Price
|
|
Issued
|
|
Ex.
Price
|
|
|
|
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Fiscal
2007
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Common
Stock
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Warrants
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$
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Shares
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Avg.
Price
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Issued
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Ex.
Price
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The
issuances of the securities of CryoPort in the above transactions were deemed to
be exempt from registration under the Securities Act by virtue of Section 4(2)
thereof or Regulation D promulgated thereunder, as a transaction by an issuer
not involving a public offering. With respect to each transaction
listed above, no general solicitation was made by either CryoPort or any person
acting on CryoPort’s behalf; and the certificates for the shares of common stock
contained an appropriate legend stating 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
27. EXHIBITS
Exhibit
No.
|
|
Description
|
|
|
|
1.1
|
|
Form
of Underwriting Agreement **
|
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3.1
|
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Corporate
Charter for G.T.5-Limited issued by the State of Nevada on March 15,
2005. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
|
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3.2
|
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Articles
of Incorporation for G.T.5-Limited filed with the State of Nevada in May
25, 1990. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
|
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3.3
|
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Amendment
to Articles of Incorporation of G.T.5-Limited increasing the authorized
shares of common stock from 5,000,000 to 100,000,000 shares of common
stock filed with the State of Nevada on October 12, 2004. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006.
|
|
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3.4
|
|
Amendment
to Articles of Incorporation changing the name of the corporation from
G.T.5-Limited to CryoPort, Inc. filed with the State of Nevada on March
16, 2005. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
|
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3.4.1
|
|
Amended
and Restated Articles of Incorporation dated October 19, 2008.
Incorporated by reference to CryoPort’s Current Report on Form 8-K filed
October 19, 2007.
|
|
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3.4.2 |
|
Certificate
of Amendment to Articles of Incorporation filed with the State of Nevada
on November 2, 2009. *** |
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3.5
|
|
Amended
and Restated By-Laws of CryoPort, Inc. adopted by the Board of Directors
on June 22, 2005 and amended by the Certificate of Amendment of Amended
and Restated Bylaws of CryoPort, Inc. adopted by the Board of Directors on
October 9, 2009. ***
|
|
|
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3.6
|
|
Articles
of Incorporation of CryoPort Systems, Inc. filed with the State of
California on December 11, 2000, including Corporate Charter for CryoPort
Systems, Inc. issued by the State of California on December 13,
2000. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
|
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3.7
|
|
By-Laws
of CryoPort Systems, Inc. adopted by the Board of Directors on December
11, 2000. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
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3.8
|
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CryoPort,
Inc. Stock Certificate Specimen. Incorporated by reference to
CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23,
2006.
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3.9
|
|
Code
of Conduct for CryoPort, Inc. Incorporated by reference to
CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23,
2006.
|
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3.10
|
|
Code
of Ethics for Senior Officers of CryoPort, Inc. and
subsidiaries. Incorporated by reference to CryoPort’s
Registration Statement on Form 10-SB/A4 dated February 23,
2006.
|
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3.11
|
|
Statement
of Policy on Insider Trading. Incorporated by reference to
CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23,
2006.
|
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3.12
|
|
CryoPort,
Inc. Audit Committee Charter, under which the Audit Committee will
operate, adopted by the Board of Directors on August 19,
2005. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23,
2006.
|
3.13
|
|
CryoPort
Systems, Inc. 2002 Stock Incentive Plan adopted by the Board of Directors
on October 1, 2002. Incorporated by reference to CryoPort’s
Registration Statement on Form 10-SB/A4 dated February 23,
2006.
|
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3.14
|
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Stock
Option Agreement ISO - Specimen adopted by the Board of Directors on
October 1, 2002. Incorporated by reference to CryoPort’s
Registration Statement on Form 10-SB/A4 dated February 23,
2006.
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3.15
|
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Stock
Option Agreement NSO – Specimen adopted by Board of Directors on October
1, 2002. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
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3.16
|
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Warrant
Agreement – Specimen adopted by the Board of Directors on October 1,
2002. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
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3.17
|
|
Patents
and Trademarks
|
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3.17.1
|
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CryoPort
Systems, Inc. Patent #6,467,642 information sheet and Assignment to
CryoPort Systems, Inc. document. On File with
CryoPort.
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3.17.2
|
|
CryoPort
Systems, Inc. Patent #6,119,465 information sheet and Assignment to
CryoPort Systems, Inc. document. On File with
CryoPort.
|
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3.17.3
|
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CryoPort
Systems, Inc. Patent #6,539,726 information sheet and Assignment to
CryoPort Systems, Inc. document. On File with
CryoPort.
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3.17.4
|
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CryoPort
Systems, Inc. Trademark #7,583,478,7 information sheet and Assignment to
CryoPort Systems, Inc. document. On File with
CryoPort.
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3.17.5
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CryoPort
Systems, Inc. Trademark #7,586,797,8 information sheet and Assignment to
CryoPort Systems, Inc. document. On File with
CryoPort.
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3.17.6
|
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CryoPort
Systems, Inc. Trademark #7,748,667,3 information sheet and Assignment
to CryoPort Systems, Inc. document. On File with
CryoPort.
|
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3.17.7
|
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CryoPort
Systems, Inc. Trademark #7,737,454,1 information sheet and Assignment
to CryoPort Systems, Inc. document. On File with
CryoPort.
|
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4.1
|
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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.
|
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4.1.1
|
|
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.
|
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4.1.2
|
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Amendment
to Convertible Debenture dated April 30, 2008. CryoPort’s
Current Report on Form 8-K dated April 30, 2008 and referred to as Exhibit
10.1.11.
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4.1.2.1
|
|
Annex
to Amendment to Convertible Debenture dated April 30,
2008. CryoPort’s Current Report on Form 8-K dated April 30,
2008 and referred to as Exhibit 10.1.11.1.
|
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4.1.3
|
|
Amendment
to Convertible Debenture dated August 29, 2008. Incorporated by
reference to CryoPort’s Current Report on Form 8-K dated August 29,
2008.
|
|
|
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4.1.4
|
|
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.
|
|
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4.1.5
|
|
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.
|
|
|
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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.
|
|
|
|
4.3
|
|
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.
|
|
|
|
4.4
|
|
Common
Stock Purchase Warrant dated May 30, 2008. Incorporated by
reference to CryoPort’s Current Report on Form 8-K dated June 9,
2008
|
4.5
|
Common
Stock Purchase Warrant dated May 30, 2008. Incorporated by
reference to CryoPort’s Current Report on Form 8-K dated June 9,
2008
|
|
|
4.6
|
Form
of Warrant and Warrant Certificate***
|
|
|
5.1
|
Legal
Opinion of Snell & Wilmer L.L.P. ***
|
|
|
10.1.1
|
Stock
Exchange Agreement associated with the merger of G.T.5-Limited and
CryoPort Systems, Inc. signed on March 15, 2005. Incorporated
by reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006.
|
|
|
10.1.2
|
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.
|
|
|
10.1.3
|
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.
|
|
|
10.1.4
|
Commercial
Promissory Note between CryoPort, Inc. and M. Grossman executed on August
25, 2005. Incorporated by reference to CryoPort’s Registration
Statement on Form 10-SB/A4 dated February 23, 2006.
|
|
|
10.1.5
|
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.
|
|
|
10.1.6
|
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.
|
|
|
10.1.7
|
Exclusive
and Representation Agreement between CryoPort Systems, Inc. and CryoPort
Systems, Ltda. executed on August 9, 2001. Incorporated by
reference to CryoPort’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006 and referred to as Exhibit 10.1.8.
|
|
|
10.1.8
|
Secured
Promissory Note and Loan Agreement between Ventana Group, LLC and
CryoPort, Inc. dated May 12, 2006. Incorporated by reference to
CryoPort’s Registration Statement on Form 10-SB/A4 dated February 23, 2006
and referred to as Exhibit 10.1.9.
|
|
|
10.2
|
Business
Alliance Agreement dated April 27, 2007, by CryoPort, Inc. and American
Biologistics Company LLC. Incorporated by reference to
CryoPort’s Current Report on Form 8-K dated April 27, 2007 and referred to
as Exhibit 10.3.
|
|
|
10.2.1
|
Corrected
Business Alliance Agreement dated April 27, 2007, by CryoPort, Inc. and
American Biologistics Company LLC. Incorporated by reference to
CryoPort’s Current Report on Form 8-K/A dated May 2, 2007 and referred to
as Exhibit 10.3.1.
|
|
|
10.3
|
Consultant
Agreement dated April 18, 2007 between CryoPort, Inc. and Malone and
Associates, LLC. Incorporated by reference to CryoPort’s
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2007 and
referred to as Exhibit 10.4.
|
|
|
10.4
|
Lease
Agreement dated June 26, 2007 between CryoPort, Inc. and Viking Investors
– Barents Sea LLC. Incorporated by reference to CryoPort’s
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2007 and
referred to as Exhibit 10.5.
|
|
|
10.4.1
|
Second
Amendment To Lease: Renewal dated August 24, 2009, between
CryoPort, Inc. and Viking Inventors-Barents Sea LLC. ***
|
|
|
10.5
|
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.
|
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.
|
|
|
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.
|
|
|
10.8
|
Sitelet
Agreement between FedEx Corporate Services, Inc. and CryoPort Systems,
Inc. dated January 23, 2008. Incorporated by reference to CryoPort’s
Current Report on Form 8-K dated February 1, 2008 and referred to as
Exhibit 10.9.
|
|
|
10.9
|
Securities
Purchase Agreement dated May 30, 2008. Incorporated by
reference to CryoPort’s Current Report on Form 8-K dated June 9, 2008 and
referred to as Exhibit 10.10.
|
|
|
10.10
|
Registration
Rights Agreement dated May 30, 2008. Incorporated by reference
to CryoPort’s Current Report on Form 8-K dated June 9, 2008 and referred
to as Exhibit 10.11.
|
|
|
10.11
|
Waiver
dated May 30, 2008. Incorporated by reference to CryoPort’s
Current Report on Form 8-K dated June 9, 2008 and referred to as Exhibit
10.12.
|
|
|
10.12
|
Security
Agreement dated May 30, 2008. Incorporated by reference to
CryoPort’s Current Report on Form 8-K dated June 9, 2008 and referred to
as Exhibit 10.13.
|
|
|
10.13
|
Board
of Directors Agreement between Larry G. Stambaugh and CryoPort, Inc. dated
December 10, 2008. Incorporated by reference to CryoPort’s
Current Report on Form 8-K dated December 5, 2008 and referred to as
Exhibit 10.15.
|
|
|
10.14
|
Rental Agreement
with FedEx Corporate Services and CryoPort, Inc. dated May 15, 2009
(CryoPort has filed a Confidential Treatment Request under Rule 24b-5 of
the Exchange Act, for parts of this document). Incorporated by
reference to CryoPort’s Annual Report on Form 10-K for the year ended
March 31, 2009 and referred to as Exhibit 10.16.
|
|
|
10.15
|
Settlement
Agreement and Mutual Release with Dee Kelly and CryoPort, Inc. dated July
24, 2009. Incorporated by reference to CryoPort’s Current
Report on Form 8-K dated July 20, 2009 and referred to as Exhibit
10.14.
|
|
|
10.16
|
Consent,
Waiver and Agreement with Enable Growth Partners LP, Enable Opportunity
Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena,
BridgePointe Master Fund Ltd. and CryoPort Inc. and its subsidiary dated
July 30, 2009. Incorporated by reference to CryoPort’s Current
Report on Form 8-K dated July 29, 2009 and referred to as Exhibit
10.15.
|
|
|
10.17
|
Employment
Agreement with Larry G. Stambaugh and CryoPort, Inc. dated August 1,
2009. Incorporated by reference to CryoPort’s Current Report
dated August 21, 2009 and referred to as Exhibit 10.19.
|
|
|
10.18
|
Letter
Accepting Consulting Agreement dated October 1, 2007 with Carpe DM, Inc.
and CryoPort, Inc. Incorporated by reference to CryoPort,
Inc.’s Registration Statement on Form S-8 dated March 25, 2009 and
referred to as Exhibit 10.1.
|
10.19
|
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
|
|
|
10.20
|
Investment
Banker Termination Agreement dated April 6, 2009 with Bradley Woods &
Co. Ltd., SEPA Capital Corp., Edward Fine, and CryoPort,
Inc. Incorporated by reference to CryoPort, Inc.’s Registration
Statement on Form S-8 dated April 13, 2009 and referred to as Exhibit
10.1.
|
|
|
10.21
|
Attorney-Client
Retainer Agreement with Gary Curtis Cannon and CryoPort, Inc. dated
December 1, 2007. Incorporated by reference to CryoPort, Inc.’s
Registration Statement on Form S-8 dated June 11, 2009 and referred to as
Exhibit 10.3.
|
|
|
10.22
|
CryoPort,
Inc., 2009 Stock Incentive Plan. Incorporated by reference to
CryoPort’s Current Report on Form 8-K dated October 9, 2009 and referred
to as Exhibit 10.21.
|
|
|
10.23
|
CryoPort,
Inc., Form Incentive Stock Option Award Agreement under the CryoPort,
Inc., 2009 Stock Incentive Plan. Incorporated by reference to
CryoPort’s Current Report on Form 8-K dated October 9, 2009 and referred
to as Exhibit 10.22.
|
|
|
10.24
|
Form
of Warrant to be entered into between the Registrant and Rodman &
Renshaw, LLC. **
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - KMJ Corbin &
Company LLP.*
|
|
|
23.2
|
Consent
by Snell & Wilmer L.L.P. (included in Exhibit 5.1) ***
|
|
|
24
|
Power
of Attorney***
|
|
|
___________________
*
|
Filed
herewith
|
|
**
|
To
be filed by amendment
|
|
***
|
Previously
filed |
|
ITEM
28. UNDERTAKINGS
*(a) (1)
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to
include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and this offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of this
offering.
(6) That,
for the purpose of determining liability of the registrant under the Securities
Act to any purchaser in the initial distribution of the securities: The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
this offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to this offering prepared by or on behalf of
the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to this offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv) Any
other communication that is an offer in this offering made by the undersigned
registrant to the purchaser.
*(f) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
*(i) The
undersigned registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
this offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
*Paragraph
references correspond to those of Regulation S-K, Item 512.
SIGNATURES
Pursuant
to the requirements of the Securities Act, as amended, the registrant has duly
caused this amendment to the registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Lake Forest, California, on
this February
2, 2010 .
|
CRYOPORT,
INC.
|
|
|
|
|
By:
|
/s/
Larry G.
Stambaugh
|
|
Larry
G. Stambaugh
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Act, this amendment to the registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Larry G. Stambaugh
|
|
Director
and Chief Executive Officer
|
|
February
2, 2010
|
Larry
G. Stambaugh
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
Catherine Doll
|
|
Chief
Financial Officer
|
|
|
Catherine
Doll
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
|
Carlton
M. Johnson, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
|
Adam
M. Michelin
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By: /s/ Larry
G.
Stambaugh
Larry G. Stambaugh
Attorney-in-fact