UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-34632

 

 

 

CRYOPORT, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Nevada	88-0313393
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

17305 Daimler St.

Irvine, CA 92614

(Address of principal executive offices)

 

(949) 470-2300

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x
Emerging growth company	¨

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

 

As of July 31, 2017 there were 24,674,432 shares of the registrant’s common stock outstanding.  

 

 

 

TABLE OF CONTENTS

 

	Page
PART I. FINANCIAL INFORMATION	3
ITEM 1. Financial Statements	3
Condensed Consolidated Balance Sheets at June 30, 2017 (Unaudited) and December 31, 2016	3
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016	4
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	24
ITEM 4. Controls and Procedures	24
PART II. OTHER INFORMATION	24
ITEM 1. Legal Proceedings	24
ITEM 1A. Risk Factors	24
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
ITEM 3. Defaults Upon Senior Securities	25
ITEM 4. Mine Safety Disclosures	25
ITEM 5. Other Information	25
ITEM 6. Exhibits	25
SIGNATURES	26

 

 

Cryoport, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

 

		June 30,				December 31,
		2017				2016
		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	12,854,526			$	4,524,529
Accounts receivable, net of allowance for doubtful accounts of $60,000 and $75,000, respectively			1,250,731				1,195,479
Inventories			72,621				89,499
Prepaid expenses and other current assets			308,929				286,919
Total current assets			14,486,807				6,096,426
Property and equipment, net			2,311,680				1,647,104
Intangible assets, net			29,728				5,000
Deposits			363,403				363,403
Total assets		$	17,191,618			$	8,111,933
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other accrued expenses		$	1,369,223			$	1,160,299
Accrued compensation and related expenses			598,325				419,034
Related-party notes payable and accrued interest, net of discount of $0 and $6,100, respectively			—				651,934
Total current liabilities			1,967,548				2,231,267
Deferred rent liability			196,973				200,264
Total liabilities			2,164,521				2,431,531
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $0.001 par value; 2,500,000 shares authorized:
Class A convertible preferred stock — $0.001 par value; 800,000 shares authorized; none issued and outstanding			—				—
Class B convertible preferred stock — $0.001 par value; 585,000 shares authorized; none issued and outstanding			—				—
Common stock, $0.001 par value; 50,000,000 shares authorized; 23,992,510 and 17,604,283 issued and outstanding at June 30, 2017 and December 31, 2016, respectively			23,993				17,604
Additional paid-in capital			142,186,654				129,196,680
Accumulated deficit			(127,183,550	)			(123,533,882	)
Total stockholders’ equity			15,027,097				5,680,402
Total liabilities and stockholders’ equity		$	17,191,618			$	8,111,933

  

See accompanying notes to condensed consolidated financial statements.

 

 

Cryoport, Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2017				2016				2017				2016
Revenues		$	2,917,378			$	1,917,566			$	5,629,612			$	3,473,111
Cost of revenues			1,524,189				1,135,616				2,982,926				2,109,354
Gross margin			1,393,189				781,950				2,646,686				1,363,757
Operating costs and expenses:
General and administrative			1,789,514				1,429,768				3,492,546				3,244,189
Sales and marketing			1,236,833				1,195,638				2,306,768				2,442,664
Engineering and development			230,736				135,799				480,579				280,277
Total operating costs and expenses			3,257,083				2,761,205				6,279,893				5,967,130
Loss from operations			(1,863,894	)			(1,979,255	)			(3,633,207	)			(4,603,373	)
Other income (expense):
Interest expense			(26	)			(21,242	)			(15,693	)			(102,436	)
Warrant repricing expense			—				(1,929,818	)			—				(1,929,818	)
Other income (expense), net			3,463				(1,915	)			3,463				(6,787	)
Loss before provision for income taxes			(1,860,457	)			(3,932,230	)			(3,645,437	)			(6,642,414	)
Provision for income taxes			—				(2,484	)			(4,231	)			(2,484	)
Net loss			(1,860,457	)			(3,934,714	)			(3,649,668	)			(6,644,898	)
Undeclared cumulative preferred dividends			—				—				—				(75,460	)
Net loss attributable to common stockholders		$	(1,860,457	)		$	(3,934,714	)		$	(3,649,668	)		$	(6,720,358	)
Net loss per share attributable to common stockholders – basic and diluted		$	(0.08	)		$	(0.28	)		$	(0.18	)		$	(0.54	)
Weighted average shares outstanding – basic and diluted			23,965,825				14,199,742				20,802,628				12,428,991

 

See accompanying notes to condensed consolidated financial statements.

 

 

Cryoport, Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

		For the Six Months Ended June 30,
		2017				2016
Cash Flows From Operating Activities:
Net loss		$	(3,649,668	)		$	(6,644,898	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			307,905				170,751
Amortization of debt discounts and deferred financing costs			6,130				72,252
Stock-based compensation expense			1,565,001				1,538,139
Warrant repricing expense			—				1,929,818
Loss on disposal of property and equipment			49,840				140,588
Provision for bad debt			1,636				2,503
Changes in operating assets and liabilities:
Accounts receivable			(56,888	)			(400,983	)
Inventories			16,878				(68,940	)
Prepaid expenses and other current assets			(22,010	)			10
Accounts payable and other accrued expenses			205,633				57,300
Accrued compensation and related expenses			179,291				(269	)
Accrued interest			(1,843	)			15,045
Net cash used in operating activities			(1,398,095	)			(3,188,684	)
Cash Flows From Investing Activities:
Purchases of property and equipment			(1,022,321	)			(599,115	)
Trademark costs			(24,728	)			—
Net cash used in investing activities			(1,047,049	)			(599,115	)
Cash Flows From Financing Activities:
Proceeds from the common stock offering, net of offering costs			11,405,924				—
Proceeds from April 2016 tender offer, net of offering costs			—				2,244,247
Proceeds from the rights offering, net of offering costs			—				1,000,678
Proceeds from exercise of stock options and warrants			25,438				—
Repayment of related-party notes payable			(656,221	)			(178,831	)
Net cash provided by financing activities			10,775,141				3,066,094
Net change in cash and cash equivalents			8,329,997				(721,705	)
Cash and cash equivalents — beginning of period			4,524,529				5,247,425
Cash and cash equivalents — end of period		$	12,854,526			$	4,525,720
Supplemental Disclosure of Non-Cash Financing Activities:
Cumulative undeclared preferred dividends recorded upon conversion of Class A convertible preferred stock and Class B convertible preferred stock into common		$	—			$	1,068,055
Reclassification of shipper inventory to fixed assets		$	—			$	38,276
Leasehold improvements paid by tenant allowance included in accounts payable and other accrued expenses		$	—			$	200,000
Issuance of common stock for accrued board of director compensation		$	—			$	26,901

  

See accompanying notes to condensed consolidated financial statements.  

 

 

Cryoport, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For the Three and Six Months Ended June 30, 2017 and 2016

(Unaudited)

 

Note 1. Management’s Representation and Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by Cryoport, Inc. (the “Company”, “our” or “we”) in accordance with accounting principles generally accepted in the United States of America (“U.S. 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 U.S. 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 three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Transition Report on Form 10-K for the period ended December 31, 2016.

 

The Company has evaluated subsequent events through the date of this filing, and determined that no subsequent events have occurred that would require recognition in the unaudited condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes.

 

Note 2. Nature of the Business

 

Cryoport is the premier provider of cryogenic logistics solutions to the life sciences industry through its purpose-built proprietary packaging, information technology and specialized cold chain logistics expertise. The Company provides leading edge logistics solutions for biologic materials, such as immunotherapies, stem cells, CAR-T cells and reproductive cells for clients worldwide. Leading global companies, such as FedEx, UPS and DHL have each separately selected Cryoport as the preferred cryogenic logistics provider for time- and temperature-sensitive biological material. Cryoport actively supports points-of-care, contract research organizations, central laboratories, pharmaceutical and biotechnology companies, contract manufacturers and university researchers.

 

The Company is a Nevada corporation and its common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “CYRX.”

 

Note 3. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The condensed 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. In June 2017, the Company established Cryoport Europe Limited, an English company, as a wholly-owned subsidiary of Cryoport Systems, Inc.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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 allowance for doubtful accounts, recoverability of long-lived assets, allowance for inventory obsolescence, deferred taxes and their accompanying valuations, and valuation of equity instruments and conversion features.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, related-party notes payable, accounts payable and accrued expenses. The carrying value for all such instruments, except for related-party notes payable, approximates fair value at June 30, 2017 and December 31, 2016 due to their short-term nature. The difference between the fair value and recorded values of the related-party notes payable is not significant.

 

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments with original maturities of 90 days or less to be cash equivalents.

  

Customers

 

The Company grants credit to customers within the United States and to a limited number of international customers and does not require collateral. Revenues from international customers are generally secured by advance payments except for established foreign customers. The Company generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability to collect receivables can be affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes is sufficient. Accounts receivable at June 30, 2017 and December 31, 2016 are net of reserves for doubtful accounts of $60,000 and $75,000, respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not exceeded its estimates.

 

The Company’s customers are in the biotechnology, pharmaceutical and life sciences industries. Consequently, there is a concentration of accounts receivable within these industries, which is subject to normal credit risk. There were no customers that accounted for more than 10% of net accounts receivable at June 30, 2017 and December 31, 2016.

 

The Company has revenue from foreign customers primarily in Europe, Japan, Canada, India and Australia. During the six months ended June 30, 2017 and 2016, the Company had revenues from foreign customers of approximately $714,600 and $508,400, respectively, which constituted approximately 12.7% and 14.6%, respectively, of total revenues. For the six months ended June 30, 2016, there was one customer that accounted for 10.9% of total revenues. No other single customer generated over 10% of total revenues during the six months ended June 30, 2017 and 2016.

 

Inventories

 

The Company’s inventories consist of packaging materials and accessories that are used as part of the solutions provided by the Company to its customers or are sold to customers directly. Inventories are stated at the lower of cost and net realizable value. Cost is determined using the standard cost method which approximates the first-in, first-to-expire method. Inventories are reviewed periodically for slow-moving or obsolete status. The Company writes down the carrying value of its inventories to reflect situations in which the cost of inventories is not expected to be recovered. Once established, write-downs of inventories are considered permanent adjustments to the cost basis of the obsolete or excess inventories. Raw materials and finished goods include material costs less reserves for obsolete or excess inventories. The Company evaluates the current level of inventories considering historical trends and other factors, such as selling prices and costs of completion, disposal and transportation, and based on the evaluation, records adjustments to reflect inventories at net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These estimates require us to make assessments about future demand for the Company’s products in order to categorize the status of such inventories items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of the Company’s forecasts of market conditions, industry trends, competition and other factors.

 

Property and Equipment

 

The Company provides shipping containers, the Cryoport Express^® Shippers, to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements are similar to the accounting standard for leases since they convey the right to use the container over a period of time. The Company retains the title to the containers and provides its customers the use of the container for a specific shipping cycle. At the culmination of the customer’s shipping cycle, the container is returned to the Company. As a result, the Company classifies the containers as property and equipment for the per-use container program.

 

Property and equipment are recorded at cost. Cryoport Express^® Shippers and data loggers, used as part of the Company’s SmartPak Condition Monitoring Systems, which comprise 52% and 44% of the Company’s net property and equipment balance at June 30, 2017 and December 31, 2016, respectively, are depreciated using the straight-line method over their estimated useful lives of three years. Equipment and furniture are depreciated using the straight-line method over their estimated useful lives (generally three to seven years) and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful life of the assets or term of the lease, whichever is shorter and included in depreciation and amortization expense.

 

 

Betterments, renewals and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized in the condensed consolidated statements of operations.

 

Intangible Assets

 

Intangible assets are comprised of patents and trademarks and software development costs. The Company capitalizes costs of obtaining patents and trademarks, which are amortized, using the straight-line method over their estimated useful life of five years once the patent or trademark has been issued. The Company capitalizes certain costs related to software developed for internal use. Software development costs incurred during the preliminary or maintenance project stages are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized using the straight-line method over the estimated useful life of the software, which is five years. Capitalized costs include purchased materials and costs of services including the valuation of warrants issued to consultants.

 

Long-lived Assets

 

If indicators of impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing the fair value to the carrying value. We believe the future cash flows to be received from the long-lived assets will exceed the assets’ carrying value, and accordingly, we have not recognized any impairment losses through June 30, 2017.

 

Deferred Financing Costs

 

Deferred financing costs represent costs incurred in connection with the issuance of notes payable and equity financings. Deferred financing costs related to the issuance of debt are reported as a direct deduction from the face amount of the related debt, and are amortized over the term of the financing instrument using the effective interest method. Offering costs from equity financings are netted against the gross proceeds received from the related equity financing.

 

Income Taxes

 

The Company accounts for income taxes under the provision of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, or ASC 740. As of June 30, 2017 and December 31, 2016, there were no unrecognized tax benefits included in the accompanying condensed consolidated balance sheets that would, if recognized, affect the effective tax rates.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Based on the weight of available evidence, the Company’s management has determined that it is more likely than not that the net deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision consists of state minimum taxes.

 

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on its condensed consolidated balance sheets at June 30, 2017 and December 31, 2016 and has not recognized interest and/or penalties in the condensed consolidated statements of operations for the three months ended June 30, 2017 and 2016. The Company is subject to taxation in the U.S. and various state jurisdictions. As of June 30, 2017, the Company is no longer subject to U.S. federal examinations for years before 2012 and for California franchise and income tax examinations for years before 2011. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry forward amount. The Company is not currently under examination by United States federal or state jurisdictions.

  

Revenue Recognition

 

The Company provides shipping containers to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements are similar to the accounting standard for leases since they convey the right to use the containers over a period of time. The Company retains title to the containers and provides its customers the use of the container for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the container is returned to the Company.

 

 

The Company recognizes revenue for the use of the shipper at the time of the delivery of the shipper to the end user of the enclosed materials, and at the time that collectability is reasonably certain. Revenue is based on gross amounts, net of discounts and allowances.

 

The Company also provides logistics support and management to some customers, which may include onsite logistics personnel. Revenue is recognized for these services as services are rendered and at the time that collectability is reasonably certain.

 

Accounting for Shipping and Handling Revenue, Fees and Costs

 

The Company classifies amounts billed for shipping and handling as revenue. Shipping and handling fees and costs are included in cost of revenues in the accompanying condensed consolidated statements of operations.

 

Engineering and Development Expenses

 

Expenditures relating to engineering and development are expensed in the period incurred.

 

Stock-Based Compensation

 

The Company accounts for stock-based payments to employees and directors in accordance with stock-based payment accounting guidance which requires all stock-based payments to employees and directors, including grants of employee stock options and warrants, to be recognized based upon their fair values. The fair value of stock-based awards is estimated at the grant date using the Black-Scholes Option Pricing Model (“Black-Scholes”) and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value using Black-Scholes is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.

 

The Company accounts for forfeitures of unvested awards as they occur. The Company’s stock-based compensation plans are discussed further in Note 7.

 

Equity Instruments Issued to Non-Employees for Acquiring Goods or Services

 

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

  

Basic and Diluted Net Income (Loss) Per Share

 

We calculate basic and diluted net income (loss) per share attributable to common stockholders using the weighted average number of common shares outstanding during the periods presented, and adjust the amount of net income (loss) used in this calculation for deemed preferred stock dividends and cumulative preferred stock dividends, whether they are earned or not during the period. In periods of a net loss position, basic and diluted weighted average shares are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants and shares associated with the conversion of convertible debt and convertible preferred stock outstanding during the periods. As of June 30, 2017 and December 31, 2016, the Company had no cumulative, undeclared, dividends that have not been accrued related to its preferred stock. During the six months ended June 30, 2017 and 2016, undeclared dividends totaling $0 and $75,460, respectively, were added to the net loss on the condensed consolidated statements of operations in order to calculate net loss per share attributable to common stockholders.

 

 

The following shows the amounts used in computing net loss per share for the six months ended June 30, 2017 and 2016:

 

		Six Months Ended June 30,
		2017				2016
Net loss		$	(3,649,668	)		$	(6,644,898	)
Add:
Undeclared cumulative preferred dividends			—				(75,460	)
Net loss attributable to common stockholders		$	(3,649,668	)		$	(6,720,358	)
Weighted average common shares issued and outstanding - basic and diluted			20,802,628				12,428,991
Basic and diluted net loss per shareattributable to common stockholders		$	(0.18	)		$	(0.54	)

  

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

 

		Six Months Ended June 30,
		2017				2016
Stock options			513,746				58,269
Warrants			875,947				2,495,464
			1,389,693				2,553,733

 

Segment Reporting

 

We currently operate in one reportable segment and our Chief Executive Officer is the chief operating decision maker.

 

Fair Value Measurements

 

We measure fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs.

 

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

 In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.

 

We have no assets or liabilities that are required to be measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016.

 

Foreign Currency Transactions

 

We record foreign currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included in results of operations. Foreign currency transaction gains and losses have not been significant for any of the periods presented.

 

 

Balance Sheet Arrangements

 

We do not currently have any off balance sheet arrangements.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements in FASB Topic 605, “Revenue Recognition”. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. In August 2015, the FASB issued ASU No. 2015-14 which deferred the effective date by one year for public entities and others. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2017 for public business entities, certain not-for-profit entities, and certain employee benefit plans. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Management has not selected a transition method and is currently assessing the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.

 

 In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory”. The amendments in this update apply to inventory that is measured using first-in, first-out (FIFO) or average cost. They do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this update, there are no other substantive changes to the guidance on measurement of inventory. The amendments in this update more closely align the measurement of inventory in International Financial Reporting Standards (IFRS) and are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company has adopted this guidance on January 1, 2017 and the adoption of ASU No. 2015-11 did not have an impact on our consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, “Leases”, which provides for a comprehensive change to lease accounting. The new standard requires that a lessee recognize a lease obligation liability and a right-to-use asset for virtually all leases of property, plant and equipment, subsequently amortized over the lease term. The new standard is effective for fiscal years beginning after December 15, 2018, with a modified retrospective transition. Management is currently evaluating the impact this standard will have on our consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The amendments in this ASU are effective for the reporting periods beginning after December 15, 2016 and early application is permitted. The Company has adopted this guidance on January 1, 2017 and the adoption of ASU No. 2016-09 did not have an impact on our consolidated financial statements.

 

Note 4. Related-Party Transactions

 

As of June 30, 2017 and December 31, 2016, the Company had aggregate principal balances of $0 and $646,700, respectively, in outstanding unsecured indebtedness owed to three related parties, including former members of the Board of Directors, representing working capital advances made to the Company from February 2001 through March 2005.

 

Related-Party Notes Payable

 

On March 1, 2016, we entered into definitive agreements with Patrick Mullens, M.D., Maryl Petreccia and Jeffrey Dell, M.D. to amend and restate the outstanding notes pursuant to certain Second Amended and Restated Promissory Notes dated as of February 29, 2016 (the “Amended and Restated Notes”). As of March 31, 2017, the three note holders had outstanding principal balances of $268,900, $160,000 and $125,400, respectively. The Amended and Restated Notes increased the interest rate to 7% per annum, extended the term to April 1, 2017, and modified the repayment provisions to provide for (i) repayment on March 1, 2016 of the outstanding amount of interest accrued through February 29, 2016, (ii) repayment of 10% of the original principal balance and accrued interest of such notes on a quarterly basis commencing April 1, 2016, and (iii) payment of the remaining outstanding balance on April 1, 2017. In addition, we issued such note holders warrants for the purchase of 11,910, 7,088, and 5,553 shares, respectively, of our common stock at an exercise price of $1.88 per share, immediately exercisable and expiring on April 1, 2019. The Company also agreed to reimburse up to $5,000 of legal fees incurred by the note holders. The relative fair value of the warrants issued in March 2016 of $26,900 was recorded as a debt discount and was amortized to interest expense using the straight-line method which approximated the effective interest method over the term of the related-party notes. During the six months ended June 30, 2017 and 2016, $6,100 and $8,200 of the debt discount was amortized to interest expense. The notes were repaid in full in April 2017.

 

 

Related-party interest expense under these notes was $9,600 and $30,183 for the six months ended June 30, 2017 and 2016, respectively. Accrued interest, which is included in related-party notes payable in the accompanying condensed consolidated balance sheets, amounted to $0 and $11,400 as of June 30, 2017 and December 31, 2016, respectively.

 

Note 5. Commitments and Contingencies

 

Facility and Equipment Leases

 

We lease 27,600 square feet of corporate, engineering and development, and warehouse facilities in Irvine, California under an operating lease expiring February 28, 2023, subject to our option to extend the lease for two additional five-year periods. The initial base rent is approximately $24,700 per month. This lease agreement contains certain scheduled annual rent increases which are accounted for on a straight-line basis. We also lease certain office equipment which expires in March 2018.

 

Employment Agreements

 

We have entered into employment agreements with certain of our officers under which payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon a change in control of our Company, or by the employee for good reason.

 

Consulting and Engineering Services

 

On September 16, 2015, the Company entered into the Purchase and Sale Agreement (the “Purchase and Sale Agreement”), by and between KLATU Networks, LLC (“KLATU”) and the Company. Pursuant to the Purchase and Sale Agreement, the Company purchased from KLATU certain intellectual property and intellectual property rights related to the Company’s Cryoportal^TM logistics management platform (the “Developed Technology”), which KLATU previously developed for and licensed to the Company pursuant to the Master Consulting and Engineering Services Agreement, by and between KLATU and the Company, dated October 9, 2007 (as amended, the “Master Consulting and Engineering Services Agreement”). As full compensation for the sale and assignment of the Developed Technology from KLATU to the Company, the Company paid KLATU an aggregate amount of $400,000 in two equal installments of $200,000.

 

Concurrently with entering into the Purchase and Sale Agreement, on September 16, 2015, the Company and KLATU entered into the Amended and Restated Master Consulting and Engineering Services Agreement (the “Amended and Restated Master Consulting and Engineering Services Agreement”) to amend and restate the Master Consulting and Engineering Services Agreement. The Amended and Restated Master Consulting and Engineering Services Agreement provides a framework for KLATU to perform certain consulting, software and hardware engineering development services as mutually agreed upon and further set forth in one or more Statements of Work (as defined in the Amended and Restated Master Consulting and Engineering Services Agreement). To ensure the availability of KLATU personnel to perform services pursuant to the Amended and Restated Master Consulting and Engineering Services Agreement, the Company agreed to pay KLATU a minimum of $25,000 per month for services fees, which may be carried forward as advance payment for future services under certain conditions. The initial term of the agreement is until December 31, 2017 and will thereafter automatically renew for subsequent one year terms, unless notice of termination is given.

 

Consulting fees for services provided by KLATU were $115,500 and $157,270 for the six months ended June 30, 2017 and 2016, respectively.

 

Litigation

 

The Company may become a party to product litigation in the normal course of business. The Company accrues for open claims based on its historical experience and available insurance coverage. In the opinion of management, there are no legal matters involving the Company that would have a material adverse effect upon the Company’s consolidated financial condition or results of operations.

 

Indemnities and Guarantees

 

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying condensed consolidated balance sheets.

 

 

The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the States of California and Nevada. In connection with its facility lease, the Company has indemnified its lessor for certain claims arising from the use of the facility. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement.

 

Note 6. Stockholders’ Equity

 

Authorized Stock

 

The Company has 50,000,000 authorized shares of common stock with a par value of $0.001 per share which were increased in November 2015 upon approval from our stockholders from 20,833,333 authorized shares. In September 2011, our stockholders approved an amendment to the Amended and Restated Articles of Incorporation to authorize a class of undesignated or “blank check” preferred stock, consisting of 2,500,000 shares at $0.001 par value per share. Shares of preferred stock may be issued in one or more series, with such rights, preferences, privileges and restrictions to be fixed by the Board of Directors. In May 2014, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation which designated 800,000 shares of the Company’s previously authorized preferred stock, par value $0.001, as Class A Convertible Preferred Stock. In February 2015, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation which designated 400,000 shares of the Company’s previously authorized preferred stock, par value $0.001, as Class B Convertible Preferred Stock. In April 2015, the Company filed with the Secretary of State of the State of Nevada an Amendment to the Certificate of Designation to increase the number shares of Class B Convertible Preferred Stock from 400,000 shares to 585,000 shares.

 

Common Stock Issued for Services

 

During the six months ended June 30, 2017, 12,113 shares of common stock with a fair value of $35,000 were issued to two members of the board of directors as compensation for services.

 

Common Stock Reserved for Future Issuance

 

As of June 30, 2017, approximately 12.1 million shares of common stock were issuable upon conversion or exercise of rights granted under prior financing arrangements, stock options and warrants, as follows:

 

Exercise of stock options			5,338,559
Exercise of warrants			6,730,427
Total shares of common stock reserved for future issuances			12,068,986

 

Common Stock Offering

 

On March 31, 2017, we completed an underwritten public offering (the “Offering”) for gross proceeds of $12.7 million for 6,325,000 shares of our common stock (the “Shares”) pursuant to a registration statement on Form S-3 that was previously filed and declared effective by the SEC. The Shares were issued and sold pursuant to an underwriting agreement (the “Underwriting Agreement”), dated March 28, 2017, by and among the Company and Cowen and Company, LLC and Needham & Company, LLC, as Representatives of the underwriters, at a public offering price per share of $2.00. The Shares include 825,000 shares issued and sold pursuant to the Underwriters’ exercise in full of their option to purchase additional shares of common stock pursuant to the Underwriting Agreement. The Company received net proceeds of approximately $11.4 million from the Offering after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. In connection with this offering, the Company incurred $170,300 in offering costs which were offset against the proceeds from this offering.

 

 

Note 7. Stock-Based Compensation

 

Warrant Activity

 

We typically issue warrants to purchase shares of our common stock to investors as part of a financing transaction or in connection with services rendered by placement agents and consultants. Our outstanding warrants expire on varying dates through November 2021. A summary of warrant activity is as follows:

 

		Number of Shares				Weighted- Average Exercise Price/Share				Weighted- Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value (1)
Outstanding — December 31, 2016			7,447,478			$	4.29
Issued			—				—
Exercised			(90,000	)			2.04
Expired			(627,051	)			8.36
Outstanding — June 30, 2017			6,730,427			$	3.94				2.7			$	8,419,800
Vested (exercisable) — June 30, 2017			6,730,427			$	3.94				2.7			$	8,419,800

 

(1)

Aggregate intrinsic value represents the difference between the exercise price of the warrant and the closing market price of our common stock on June 30, 2017, which was $4.92 per share.

 

During the six months ended June 30, 2017, the Company issued 37,989 shares of common stock in connection with the cashless exercise of warrants to purchase 90,000 shares of common stock. The total intrinsic value of warrants exercised during the six months ended June 30, 2017 was $134,100.

  

 Stock Options

 

We have four stock incentive plans: the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009 Stock Incentive Plan (the “2009 Plan”), the 2011 Stock Incentive Plan (the “2011 Plan”) and the 2015 Omnibus Equity Incentive Plan (the “2015 Plan”), (collectively, the “Plans”). The 2002 Plan, the 2009 Plan, and the 2011 Plan (collectively the “Prior Plans”) have been superseded by the 2015 Plan. In October 2015, the stockholders approved the 2015 Plan for 5,000,000 shares. The Prior Plans will remain in effect until all awards granted under such Prior Plans have been exercised, forfeited, cancelled, or have otherwise expired or terminated in accordance with the terms of such awards, but no awards will be made pursuant to the Prior Plans after the effectiveness of the 2015 Plan. As of June 30, 2017, the Company had 1,490,638 shares available for future awards under the 2015 Plan.

 

During the six months ended June 30, 2017, we granted stock options at exercise prices equal to or greater than the quoted market price of our common stock on the grant date. The fair value of each option grant was estimated on the date of grant using Black-Scholes with the following weighted average assumptions:

 

Expected life (years)	5.3 – 6.6
Risk-free interest rate	1.8% - 2.1%
Volatility	112% – 115%
Dividend yield	0%

  

The expected option life assumption is estimated based on the simplified method. Accordingly, the Company has utilized the average of the contractual term of the options and the weighted average vesting period for all options to calculate the expected option term. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. The expected volatility is based on the historical volatility of our stock commensurate with the expected life of the stock-based award. We do not anticipate paying dividends on the common stock in the foreseeable future.

 

We recognize stock-based compensation expense over the vesting period using the straight-line single option method. Stock-based compensation expense is recognized only for those awards that vest. We account for the forfeitures of unvested awards as they occur.

 

 

Total stock-based compensation expense related to all of our share-based payment awards is comprised of the following:

 

		Six Months Ended June 30,				Six Months Ended June 30,
		2017				2016
Cost of revenues		$	18,523			$	9,567
General and administrative			1,217,109				1,209,591
Sales and marketing			321,075				312,558
Engineering and development			8,294				6,423
		$	1,565,001			$	1,538,139

 

A summary of stock option activity is as follows:  

 

		Number of Shares				Weighted- Average Exercise Price/Share				Weighted- Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value (1)
Outstanding — December 31, 2016			4,512,550			$	4.01
Granted (weighted-average fair value of $2.98 per share)			908,500				3.56
Exercised			(13,125	)			1.94
Forfeited			(17,212	)			2.28
Expired			(52,154	)			8.03
Outstanding — June 30, 2017			5,338,559			$	3.90				8.1			$	6,901,200
Vested (exercisable) — June 30, 2017			2,420,322			$	4.10				7.3			$	2,805,900
Expected to vest after June 30, 2017 (unexercisable)			2,918,237			$	3.74				2.4			$	4,095,300

 

(1)

Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of our common stock on June 30, 2017, which was $4.92 per share.

 

The total intrinsic value of options exercised during the six months ended June 30, 2017 was $34,200.

 

As of June 30, 2017, there was unrecognized compensation expense of $7.8 million related to unvested stock options, which we expect to recognize over a weighted average period of 2.4 years.

 

Note 8. Subsequent Event

 

In July 2017, the Company received proceeds of $1.8 million from the exercise of 605,114 supplemental warrants which were issued in connection with the October 2016 tender offer. The warrants were exercisable upon issuance and expired on the earlier of (i) October 28, 2019 and (ii) the thirtieth (30th) day after the date that the closing price of the Company’s common stock equals or exceeds $4.50 for ten consecutive trading days.

 

As of June 27, 2017, the closing price of the Company’s common stock was equal to or exceeded $4.50 for ten consecutive trading days. As a result, the supplemental warrants expiration date was accelerated to July 27, 2017 unless exercised prior to that date.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

In this Form 10-Q, the terms “Cryoport”, “Company” and similar terms refer to Cryoport, Inc., and its wholly owned subsidiary, Cryoport Systems, Inc.

 

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS:

 

This Quarterly Report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. In some cases, you can identify these statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar words which are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission (“SEC”), including those contained in our Transition Report on Form 10-K for the nine months ended December 31, 2016, as filed with the SEC on March 13, 2017 and those reports filed after the date of this Quarterly Report. Actual results may differ materially from any forward looking statement.

 

The following management’s discussion and analysis of the Company’s financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated balance sheet as of June 30, 2017 (unaudited) and the consolidated balance sheet as of December 31, 2016 (audited) and the related unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2017 and 2016, and condensed consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 and the related notes thereto (see Item 1. Financial Statements), as well as the audited consolidated financial statements of the Company for the nine month period ended December 31, 2016 and the year ended March 31, 2016 included in the Company’s Transition Report on Form 10-K for the nine months ended December 31, 2016.

 

General Overview

 

Overview

 

We provide cryogenic logistics solutions to the life sciences industry through a combination of proprietary packaging, information technology and specialized cold chain logistics knowhow. We view our solutions as disruptive to the “older technologies” of dry ice and liquid nitrogen, in that our solutions are comprehensive and combine our competencies in configurations that are customized to our client’s requirements. We provide comprehensive, reliable, economic alternatives to all existing logistics solutions and services utilized for frozen shipping in the life sciences industry (e.g., personalized medicine, cell therapies, stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals, infectious substances, and other commodities that require continuous exposure to cryogenic or frozen temperatures). As part of our services we provide the ability to monitor, record and archive crucial information for each shipment that can be used for scientific and regulatory purposes.

 

Our Cryoport Express^® Solutions include a sophisticated cloud-based logistics operating platform, which is branded as the Cryoportal™. The Cryoportal™ supports the management of the entire shipment and logistics process through a single interface, including initial order input, document preparation, customs clearance, courier management, shipment tracking, issue resolution, and delivery. In addition, it provides unique and incisive information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains a fully documented “chain-of-custody” and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process. This recorded and archived information allows our clients to meet exacting requirements necessary for scientific work and for proof of regulatory compliance during the logistics phase.

 

The branded packaging for our Cryoport Express^® Solutions includes our liquid nitrogen dry vapor shippers, the Cryoport Express^® Shippers. The Cryoport Express^® Shippers are engineered shippers that can consist of cost-effective and reusable cryogenic transport shippers, which utilize an innovative application of “dry vapor” liquid nitrogen (“LN2”) technology and SmartPak Condition Monitoring Systems. Cryoport Express^® Shippers are International Air Transport Association (“IATA”) certified and validated to maintain stable temperatures of minus 150° Celsius and below for a 10-day dynamic shipment period. The Company currently features three Cryoport Express^® Shippers: the Standard Dry Shipper (holding up to 75 2.0 ml vials), the High Volume Dry Shipper (holding up to 500 2.0 ml vials) and Cryoport Express^® CXVC1 Shipper (holding up to 1,500 2.0 ml vials). In addition, we assist clients with internal secondary packaging (e.g., vials, canes, straws and plates).

 

 

Our most used solution is the “turnkey” solution, which can be accessed directly through our cloud-based Cryoportal™ or by contacting Cryoport Client Care for order entry. Once an order is placed and cleared, we ship a fully charged Cryoport Express^® Shipper to the client who conveniently loads its frozen commodity into the inner chamber of the Cryoport Express^® Shipper. The customer then closes the shipper package and reseals the shipping box displaying the next recipient’s address (“Flap A”) for pre-arranged carrier pick up. Cryoport arranges for the pick-up of the parcel by a shipping service provider, which is designated by the client or chosen by Cryoport, for delivery to the client’s intended recipient. The recipient simply opens the shipper package and removes the frozen commodity that has been shipped. The recipient then reseals the package, displaying the nearest Cryoport Staging Center address, making it ready for pre-arranged carrier pick-up. When the Cryoport Staging Center receives the Cryoport Express^® Shipper, it is cleaned, put through quality assurance testing, and returned to inventory for reuse.

 

In late 2012, we shifted our focus to become a comprehensive cryogenic logistics solutions provider. Recognizing that clients in the life sciences industry have varying requirements, we unbundled our technologies, established customer facing solutions and took a consultative approach to the market. Today, in addition to our standard turn-key solution, described above, we also provide the following customer facing, value-added solutions to address our various clients’ needs:

 

	·	“Integrated Solution,” which is our total outsource solution. It is our most comprehensive solution and involves our management of the entire cryogenic logistics process for our client, including Cryoport employees at the client’s site to manage the client’s cryogenic logistics function in total.
	·	“Regenerative Medicine Point-of-Care Repository Solution,” designed for allogeneic therapies. In this solution we supply our Cryoport Express® Shipper to ship and store cryogenically preserved life science products for up to six days (or longer periods with supplementary shippers) at a point-of-care site, with the Cryoport Express® Shipper serving as a temporary freezer/repository enabling the efficient and effective distribution of temperature sensitive allogeneic cell-based therapies without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation device.
	·	“Personalized Medicine and Cell-based Immunotherapy Solution,” designed for autologous therapies.  In this solution our Cryoport Express® Shipper serves as an enabling technology for the safe transportation of manufactured autologous cellular-based immunotherapy market by providing a comprehensive logistics solution for the verified chain of custody and condition transport from, (a) the collection of the patient’s cells in a hospital setting, to (b) a central processing facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically preserved return of these irreplaceable cells to a point-of-care treatment facility.  If required, the Cryoport Express® Shipper can then serve as a temporary freezer/repository to allow the efficient distribution of this personalized medicine to the patient when and where the medical provider needs it most without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation device.
	·	“Customer Staged Solution,” designed for clients making 50 or more shipments per month. Under this solution, we supply an inventory of our Cryoport Express® Shippers to our customer, in an uncharged state, enabling our customer (after training/certification) to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with shipping and delivery service providers for the transportation of the package.

 

·

“Customer Managed Solution,” a limited customer implemented solution, whereby we supply our Cryoport Express® Shippers to clients in a fully charged state, but leaving it to the client to manage the shipping, including the selection of the shipping and delivery service provider and the return of the shipper to us.

 

·

“powered by CryoportSM,” available to providers of shipping and delivery services who seek to offer a “branded” cryogenic logistics solution as part of their service offerings, with “powered by CryoportSM” appearing prominently on the offering software interface and packaging. This solution can also be private labeled upon meeting certain requirements, such as minimum required shipping volumes.

 

Cryoport is continuously expanding its solutions offerings in response to its customers’ needs.

 

In April 2016, Cryoport launched its Temperature Controlled Logistics Consulting Division to assist life sciences companies in developing strategies for global cold chain logistics management and contingency options to protect their valuable, and often irreplaceable, biological commodities. The launch of Cryoport’s Temperature Controlled Logistics Consulting Division addresses the demand created by the worldwide advances in cellular based therapies, including immunotherapies, stem cells and CAR T-cells. Cell-based immunotherapies are causing broad shifts and challenges for the life sciences industry, including how to obtain, properly store and transport the growing number of new, individualized, temperature sensitive therapies. Improper temperature maintenance or temperature excursions during any portion of a logistics cycle can adversely affect the viability of these biologically based commodities. Consequently, strategic, global logistics planning for cryogenic cold chain solutions has taken on a strategic importance to the life sciences industry and a rapidly growing demand for consulting expertise.

 

 

In June 2016, Cryoport further broadened its capabilities and solutions offerings beyond cryogenic logistics and transportation services to include temperature-controlled storage solutions that include cGMP compliant biorepositories at controlled temperatures and climatized systems. Cryoport Biostorage services feature extensive management and monitoring, including controlled access to commodities, periodic temperature and activity reports, as well as 21 CFR, Part II compliant monitoring with 24/7/365 alarm response.

 

Also in June 2016, Cryoport announced a new Laboratory Relocation Service, for transport of complete laboratories. The Laboratory Relocation Service manages the safe, secure and proper transportation of materials that are stored in labs as well as lab equipment and instruments. Relocation projects can range in size from the relocation of a fully equipped lab to the move of a single freezer.

 

Strategic Logistics Alliances

 

We have established strategic alliances to market our solutions to the life sciences industry. We have focused our efforts on leading companies in the logistics services industry as well as participants in the life sciences industry. In connection with our alliances with providers of shipping services, we refer to their offerings as “powered by Cryoport^SM” to reflect our solutions being integrated into our alliance partner’s services.

 

Cryoport now serves and supports the three largest integrators in the world, responsible for over 85% of worldwide airfreight, with its advanced cryogenic logistics solutions for life sciences. We operate with each independently and confidentially in support of their respective market and sales strategies. In addition, we plan to establish additional strategic partnerships with integrators and freight forwarders.

 

FedEx. In January 2013, we entered into a master agreement with Federal Express Corporation (“FedEx”) (the “FedEx Agreement”) renewing these services and providing FedEx with a non-exclusive license and right to use a customized version of our Cryoportal^TM for the management of shipments made by FedEx customers. The FedEx Agreement became effective on January 1, 2013 and was amended in December 2015 to extend the initial term for an additional three years, expiring on December 31, 2018. FedEx has the right to terminate this agreement at any time for convenience upon 180 days’ notice.

 

Under our FedEx Agreement, we provide frozen shipping logistics services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets and sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx^® Deep Frozen Shipping Solution on a non-exclusive basis and at its sole expense. As part of the solution, Cryoport has developed a FedEx branded version of the Cryoportal^TM software platform, which is “powered by Cryoport^SM” for use by FedEx and its customers, giving them access to the full capabilities of our cloud-based logistics management software platform.

 

DHL. In June 2014, we entered into a master agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”). DHL has enhanced its cold chain logistics offerings to its life sciences and healthcare customers with Cryoport’s validated cryogenic solutions. DHL offers Cryoport’s cryogenic solutions through its worldwide Thermonet network of Certified Life Sciences Stations under the DHL brands as “powered by Cryoport^SM”. In addition, DHL’s customers have direct access to our cloud-based order entry and tracking portal to order Cryoport Express^® Solutions and receive preferred DHL shipping rates and discounts. Our proprietary logistics management operating platform, the Cryoportal^TM, is integrated with DHL’s tracking and billing systems to provide DHL life sciences and healthcare customers with a seamless way of accessing critical information regarding shipments of biological material worldwide.

 

UPS. In October 2014, we added United Parcel Services, Inc. (“UPS”) as our third major distributor by entering into an agreement with UPS Oasis Supply Corporation, a part of UPS, whereby UPS offers our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global basis. Over the course of rolling out our new relationship with UPS, UPS customers will have direct access to our cloud-based order entry and tracking portal to order Cryoport Express^® Solutions and gain access to UPS’s broad array of domestic and international shipping and logistics solutions at competitive prices. Our proprietary logistics management operating platform, the Cryoportal^TM, is integrated with UPS’s tracking and billing systems to provide UPS life sciences and healthcare customers with a seamless way of accessing critical information regarding shipments of biological material worldwide.

 

 

Cryoport has and continues to build strategic relationships with leaders supporting the life sciences industry, in areas of cGMP compliant climate- and temperature controlled biorepositories as well as in the design and manufacture of biostorage and logistics equipment. This enables us to further advance and expand our cold chain solutions to meet the growing and varied demands in the life sciences market. This provides us with additional opportunities to increases our revenues as well as enables us to rapidly scale our capabilities in support our client’s commercialization activities.

 

 Cryoport’s Positioning in the Life Sciences Industry

 

Life sciences technologies are expected to have a significant impact on global society over the next 25 years. In the United States alone, the life sciences industry is made up of 6,000 identifiable establishments. However, the industry is growing globally in a way where research and manufacturing pipelines span across the globe, which increases the need to mitigate logistics risk.

 

The total cold chain logistics market has historically grown 70% faster per annum than the total logistics market. For 2011, global cold chain logistics transportation costs were reported to be $7.2 billion; about $1.5 billion within the cryogenic range of requirements. By 2017, transportation cost alone, for global life sciences cold chain logistics, is forecasted to grow to $9.3 billion, a 41% increase, and twice the growth of the overall market.

 

In addition, with the recent advancements in the development of biologics and cell-based therapies, scientists, intermediaries, and manufacturers require the means for cryogenically transporting their work. Temperatures must be maintained below the “glass point” (generally, minus 136ºC) while shipping these therapies to ensure that the shipped specimens are not subject to degradation that could impact the characteristics and efficacy of those specimens.

 

While we estimate that our solutions currently offer comprehensive and technology-based monitoring and tracking for a potential of six to seven million deep frozen shipments globally on an annual basis, we also believe that with investment in our services, adaptations of our solutions can be applied to a large portion of an additional fifty-five to sixty million annual shipments requiring ambient (between 20° and 25°C), chilled (between 2° and 8°C) or frozen (minus 10°C or less) temperatures.

 

Cryoport’s clients include companies and institutions that require reliable cryogenic logistics solutions such as therapy developers for personalized medicine, bio-pharmaceuticals, research, contract research organizations, diagnostic laboratories, contract manufacturers, cord blood repositories, vaccine manufacturers, animal husbandry related companies, and in-vitro fertilization clinics.

 

Life Sciences Agreements

 

Zoetis. In December 2012, we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, Cryoport provides on-site logistics personnel and its logistics management operating platform, the Cryoportal^TM to manage shipments from the Zoetis manufacturing site in the United States to domestic customers as well as various international distribution centers. As part of our logistics management services, Cryoport is constantly analyzing logistics data and processes to further introduce economies and reliability throughout the network, ensuring products arrive at their destinations in specified conditions, on-time and with the optimum utilization of resources. The Company manages Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers. In July 2013 the agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry vaccine to all Zoetis’ international distribution centers as well as all domestic shipments. In October 2013, the agreement was further amended to further expand Cryoport’s role to include the logistics management for a second poultry vaccine. In September 2015, the agreement was further amended and extended through September 2018, subject to certain termination and extension provisions.

 

In summary, we serve the life sciences industry with cryogenic logistics solutions that are advanced, comprehensive, reliable, validated, and efficient. Our clients include those companies and institutions that have logistics requirements for personalized medicine, immunotherapies, stem cells, cell lines, tissue, vaccines, in-vitro fertilization, cord blood and other temperature sensitive commodities of life sciences.

 

Recent Developments

 

Common Stock Offering

 

On March 31, 2017, we completed an underwritten public offering (the “Offering”) for gross proceeds of $12.7 million for 6,325,000 shares of our common stock (the “Shares”) pursuant to a registration statement on Form S-3 that was previously filed and declared effective by the SEC. The Shares were issued and sold pursuant to an underwriting agreement (the “Underwriting Agreement”), dated March 28, 2017, by and among the Company and Cowen and Company, LLC and Needham & Company, LLC, as Representatives of the underwriters, at a public offering price per share of $2.00. The Shares include 825,000 shares issued and sold pursuant to the Underwriters’ exercise in full of their option to purchase additional shares of common stock pursuant to the Underwriting Agreement. The Company received net proceeds of approximately $11.4 million from the Offering after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. In connection with this offering, the Company incurred $170,300 in offering costs which were offset against the proceeds from this offering.

 

 

Results of Operations

 

Three months ended June 30, 2017 compared to three months ended June 30, 2016:

 

The following table summarizes certain information derived from our condensed consolidated statements of operations:

 

		Three Months Ended June 30,
		2017				2016				$ Change				% Change
						($ in 000’s)
Revenues		$	2,917			$	1,918			$	999				52.1	%
Cost of revenues			(1,524	)			(1,136	)			(388	)			34.2	%
Gross margin			1,393				782				611				78.2	%
General and administrative			(1,789	)			(1,430	)			(359	)			25.2	%
Sales and marketing			(1,237	)			(1,196	)			(41	)			3.4	%
Engineering and development			(231	)			(136	)			(95	)			69.99	%
Interest expense			—				(21	)			21				(100	)%
Warrant repricing expense			—				(1,930	)			1,930				(100	)%
Other income (expense), net			4				(2	)			6				(280.8	)%
Provision for income taxes			—				(2	)			2				(100	)%
Net loss		$	(1,860	)		$	(3,935	)		$	(2,075	)			(52.7	)%

 

Total revenues

 

		Three Months Ended June 30,
		2017				2016				$ Change				% Change
		($ in 000’s)
Biopharmaceutical		$	2,229			$	1,319			$	910				69.0	%
Reproductive medicine			426				370				56				15.2	%
Animal health			262				229				33				14.6	%
Total revenues		$	2,917			$	1,918			$	999				52.1	%

 

Revenues. We generated revenues from customers in all of our target life sciences markets, such as biopharma, animal health and reproductive medicine. Revenues increased $1.0 million or 52.1% to $2.9 million for the three months ended June 30, 2017, as compared to $1.9 million for the three months ended June 30, 2016. This increase was primarily driven by the continuing increase in the number of biopharmaceutical customers utilizing our services and frequency of shipments compared to the prior year. Biopharmaceutical revenue increased $910,300 or 69.0%, to $2.2 million for the quarter compared to $1.3 million in the same quarter last year. During the three months ended June 30, 2017, we added approximately 19 new biopharma clients and supported 172 clinical trials, of which 17 trials were in Phase III. This increased activity in the clinical trial space is expected to drive future revenue growth as these clinical trials advance and resulting therapies are commercialized. Revenues in the reproductive medicine market increased by 15.2% for the three months ended June 30, 2017, as compared to the same period in 2016. This increase was driven by a 57.0% increase in revenues in the U.S. market through continued success of our targeted marketing campaigns and was partially offset by a 33.0% decrease in revenues in the international markets as a result of regulatory uncertainties. Our revenues from animal health increased 14.6% for the three months ended June 30, 2017, as compared to the same period in 2016 driven by the onboarding of several new clients in this market.

 

Gross margin and cost of revenues. Gross margin for the three months ended June 30, 2017 was 47.8% of revenues, as compared to 40.8% of revenues for the three months ended June 30, 2016. The increase in gross margin by almost seven percentage points is primarily due to the increased business volume and pricing adjustments combined with a reduction in freight as a percentage of revenues and a decrease of fixed manufacturing costs. Our cost of revenues are primarily comprised of freight charges, payroll and related expenses related to our operations center in California, third-party charges for our European and Asian staging centers in Holland and Singapore, depreciation expenses of our Cryoport Express^® Shippers and supplies and consumables used for our solutions. Cost of revenues increased $388,600, or 34.2%, to $1.5 million for the three months ended June 30, 2017, as compared to $1.1 million in the same period in 2016. The increase in cost of revenues was primarily due to freight charges from the increased volume of shipments.

 

 

General and administrative expenses. General and administrative expenses increased $359,700 for the three months ended June 30, 2017 or 25.2% as compared to the three months ended June 30, 2016. This increase is primarily due to an increase of $125,800 for legal settlements, an increase in salaries and associated employee costs of $82,200, public company related expenses in the amount of $57,500, including legal fees, patent legal fees of $32,100, implementation costs for a new ERP system of $21,800, an increase of $15,200 for insurance premiums and an increase in stock-based compensation expense of $13,900.

 

Sales and marketing. Sales and marketing expenses increased $41,200 or 3.4% for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. This increase is primarily due to recruiting fees and related relocation costs of $84,900 incurred to expand our sales force, an increase in stock based compensation expense of $22,000 and an increase in marketing trade shows of $9,700. These increases were partially offset by a reduction in outsourced marketing consulting of $117,100 as a result of bringing this function in-house.

 

Engineering and development expenses. Engineering and development expenses increased $94,900 or 69.9% for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016. The increase was primarily due to $49,700 in salary adjustments, recruiting and associated employee costs to add a software development product manager, $52,700 in testing expenses, facility expenses of $21,400 and an increase of $3,100 in stock-based compensation expense. These increases were partially offset by a reduction of $36,200 in web portal development expenses. We continually strive to improve and expand the features of our Cryoport Express^® Solutions. Our developments are directed towards facilitating the safe, reliable and efficient shipment of life science commodities through innovative and technology-based solutions. We also incurred costs to design and validate additional new primary and secondary packaging solutions and accessories in response to requests from our customers. We supplement our internal engineering and development resources with subject matter experts and consultants.

 

Interest expense. Interest expense decreased $21,200 for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016. There was no interest expense during the three months ended June 30, 2017 as the related party notes were paid in full April 1, 2017. Interest expense for the three months ended June 30, 2016 included amortization of the debt discount on the related-party notes of $6,200 and the stated interest expense of $15,000.

 

Warrant repricing expense. Warrant repricing expense for the three months ended June 30, 2016 was due to the repricing of certain warrants for the tender offer that was completed April 7, 2016.

 

Other income (expense), net. The other expense, net for the three months ended June 30, 2017 increased $5,400 as compared to the three months ended June 30, 2016 primarily due to an increase in interest income on larger cash balances and foreign exchange gains on accounts receivable and payable invoices partially offset by bank administrative charges.

 

 

Six months ended June 30, 2017 compared to six months ended June 30, 2016:

 

The following table summarizes certain information derived from our condensed consolidated statements of operations:

 

		Six Months Ended June 30,
		2017				2016				$ Change				% Change
						($ in 000’s)
Revenues		$	5,630			$	3,473			$	2,157				62.1	%
Cost of revenues			(2,983	)			(2,109	)			(874	)			41.4	%
Gross margin			2,647				1,364				1,283				94.1	%
General and administrative			(3,493	)			(3,244	)			(249	)			7.7	%
Sales and marketing			(2,307	)			(2,443	)			136				(5.6	)%
Engineering and development			(481	)			(280	)			(201	)			71.5	%
Interest expense			(16	)			(103	)			87				(84.7	)%
Warrant repricing expense			—				(1,930	)			1,930				(100	)%
Other income (expense), net			4				(7	)			11				(151	)%
Provision for income taxes			(4	)			(2	)			(2	)			70.3	%
Net loss		$	(3,650	)		$	(6,645	)		$	2,995				(45.1	)%

 

Total revenues

 

		Six Months Ended June 30,
		2017				2016				$ Change				% Change
		($ in 000’s)
Biopharmaceutical		$	4,252			$	2,332			$	1,920				82.3	%
Reproductive medicine			844				701				143				20.5	%
Animal health			534				440				94				21.2	%
Total revenues		$	5,630			$	3,473			$	2,157				62.1	%

 

Revenues. We generated revenues from customers in all of our target life sciences markets, such as biopharma, animal health and reproductive medicine. Revenues increased $2.2 million or 62.1% to $5.6 million for the six months ended June 30, 2017, as compared to $3.5 million for the six months ended June 30, 2016. This increase was primarily driven by the continuing increase in the number of biopharmaceutical customers utilizing our services and frequency of shipments compared to the prior year. Biopharmaceutical revenue increased $1.9 million or 82.3%, to $4.3 million for the six months ended June 30, 2017 as compared to $2.3 million in the same period last year. During the six months ended June 30, 2017, we added approximately 46 new biopharma clients and supported 172 clinical trials, of which 17 trials were in Phase III. This increased activity in the clinical trial space is expected to drive future revenue growth as these clinical trials advance and resulting therapies are commercialized. Revenues in the reproductive medicine market increased by 20.5% for the six months ended June 30, 2017, as compared to the same period in 2016. This increase was driven by a 54.2% increase in revenues in the U.S. market through continued success of our targeted marketing campaigns and was partially offset by a 24.0% decrease in revenues in the international markets as a result of regulatory uncertainties. Our revenues from animal health increased 21.2% for the six months ended June 30, 2017, as compared to the same period in 2016 driven by the onboarding of several new clients in this market.

 

Gross margin and cost of revenues. Gross margin for the six months ended June 30, 2017 was 47.0% of revenues, as compared to 39.3% of revenues for the six months ended June 30, 2016. The increase in gross margin by almost eight percentage points is primarily due to the increased business volume and pricing adjustments combined with a reduction in freight as a percentage of revenues and a decrease of fixed manufacturing costs. Our cost of revenues are primarily comprised of freight charges, payroll and related expenses related to our operations center in California, third-party charges for our European and Asian staging centers in Holland and Singapore, and depreciation expenses of our Cryoport Express^® Shippers and supplies and consumables used for our solutions. Cost of revenues increased $873,600, or 41.4%, to $3.0 million for the six months ended June 30, 2017, as compared to $2.1 million in the same period in 2016. The increase in cost of revenues was primarily due to freight charges from the increased volume of shipments.

 

 

General and administrative expenses. General and administrative expenses increased $248,400 for the six months ended June 30, 2017 or 7.7% as compared to the six months ended June 30, 2016. This increase is primarily due to an increase of $125,800 for legal settlements, an increase in salaries and associated employee costs of $43,000, patent legal fees of $28,200, implementation costs for a new ERP system of $63,200, an increase of $66,800 for insurance premiums, facility expenses of $41,500 and an increase in stock-based compensation expense of $35,400. These increases were partially offset by a decrease in public company related expenses in the amount of $17,500, including legal fees, a decrease in moving expenses incurred in 2016 of $10,000 and the 2016 disposal of components used to manufacture our shippers in the amount of $121,700 due to our decision to co-develop and outsource the manufacturing of our shippers that was not incurred in 2017.

 

Sales and marketing. Sales and marketing expenses decreased $135,900 or 5.6% for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. This decrease is primarily due to a reduction in outsourced marketing consulting of $241,900 as a result of bringing this function in-house and a decrease in salaries and associated employee costs of $29,100. These decreases were partially offset by an increase in facility expenses of $29,000, an increase in marketing trade shows of $30,300, an increase in travel and lodging expense of $18,400, implementation costs for a new ERP system of $33,300 and an increase in stock-based compensation expense of $9,200.

 

Engineering and development expenses. Engineering and development expenses increased $200,300 or 71.5% for the six months ended June 30, 2017, as compared to the six months ended June 30, 2016. We continually strive to improve and expand the features of our Cryoport Express^® Solutions. Our developments are directed towards facilitating the safe, reliable and efficient shipment of life science commodities through innovative and technology-based solutions. During the six months ended June 30, 2017, we tested and upgraded the firmware and software of our SmartPak II™ Condition Monitoring System that tracks the key aspects of each shipment that could affect the quality and/or timing of delivery of the commodities shipped to its intended destination. We also incurred costs to design, qualify, and test additional new primary and secondary packaging solutions and accessories in response to requests from our customers. We incurred a total of $177,300 for these testing and qualification activities for the six months ended June 30, 2017 as compared to $4,300 for the same period in the prior year. We supplement our internal engineering and development resources with subject matter experts and consultants.

 

Interest expense. Interest expense decreased $86,700 for the six months ended June 30, 2017, as compared to the six months ended June 30, 2016. Interest expense for the six months ended June 30, 2017 included amortization of the debt discount on the related-party notes of $6,100 and the stated interest expense of $9,600. Interest expense for the six months ended June 30, 2016 included amortization of the debt discount on the related-party notes of $72,300 and the stated interest expense of $30,200.

 

Warrant repricing expense. Warrant repricing expense for the six months ended June 30, 2016 was due to the repricing of certain warrants for the tender offer that was completed April 7, 2016.

 

Other income (expense), net. The other expense, net for the six months ended June 30, 2017 increased $10,200, as compared to the six months ended June 30, 2016 primarily due to an increase in interest income on larger cash balances and foreign exchange gains on accounts receivable and payable invoices partially offset by bank administrative charges.

 

Liquidity and Capital Resources

 

As of June 30, 2017, the Company had cash and cash equivalents of $12.9 million and working capital of $12.5 million. Historically, we have financed our operations primarily through sales of our debt and equity securities.

 

For the six months ended June 30, 2017, we used $1.4 million of cash for operations primarily as a result of the net loss of $3.6 million offset by non-cash expenses of $1.9 million primarily comprised of depreciation and amortization, stock-based compensation expense, and loss on disposal of fixed assets. Also contributing to the cash impact of our net operating loss (excluding non-cash items) was an increase in accounts receivable of $56,900 as a result of an increase in sales offset by an increase in accounts payable and other accrued expenses and accrued compensation of $383,000.  

 

Net cash used in investing activities of $1.0 million during the six months ended June 30, 2017 was primarily due to the purchase of Cryoport Express^® CXVC1 Shippers, Smart Pak II^TM Condition Monitoring Systems and computer equipment as well as legal expenses incurred for trademark applications.

 

Net cash provided by financing activities totaled $10.8 million during the six months ended June 30, 2017, and resulted from net proceeds of $11.4 million from the March 2017 common stock offering, proceeds from the exercise of stock options and warrants of $25,400, which were partially offset by the repayment of related party notes payable of $656,200. 

 

The Company’s management believes that, based on its current plans and assumptions, the current cash on hand, together with projected cash flows, will satisfy our operational and capital for at least the next twelve months. The Company’s management recognizes that the Company may need to obtain additional capital to fund its operations until sustained profitable operations are achieved. Additional funding plans may include obtaining additional capital through equity and/or debt funding sources. No assurance can be given that additional capital, if needed, will be available when required or upon terms acceptable to the Company.

 

 

Off-Balance Sheet Arrangements

 

We do not currently have any off balance sheet arrangements.

     

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Securities and Exchange Commission Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2017 at the reasonable assurance level.

 

Changes in internal control over financial reporting.

 

There were no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None

 

ITEM 1A. RISK FACTORS

 

The risks described in Part I, Item 1A, Risk Factors, in our Transition Report on Form 10-K for the nine months ended December 31, 2016, could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all of the risks that we face. Our business, financial condition and results of operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial. There have been no material changes to the “Risk Factors” section included in our Transition Report on Form 10-K for the nine months ended December 31, 2016.

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit
Index
31.1+		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+		XBRL Instance Document.
101.SCH+		XBRL Taxonomy Extension Schema Document.
101.CAL+		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF+		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+		XBRL Taxonomy Extension Presentation Linkbase Document.

 

+ Filed herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Cryoport, Inc.
Dated: August 9, 2017
	By:	/s/ Jerrell W. Shelton
		Jerrell W. Shelton
		Chief Executive Officer
Dated: August 9, 2017
	By:	/s/ Robert S. Stefanovich
		Robert S. Stefanovich
		Chief Financial Officer