As filed with the Securities and
Exchange Commission on September 5, 2014
Registration Number 333-180326
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 2 to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CRYOPORT, INC.
(Exact Name of Registrant as Specified
in its Charter)
| Nevada |
3086 |
88-0313393 |
(State or Other Jurisdiction
of
Incorporation or Organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification No.) |
20382 Barents Sea Circle,
Lake Forest, CA 92630
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Principal Executive Offices)
Robert Stefanovich
Chief Financial Officer
20382 Barents Sea Circle,
Lake Forest, CA 92630
(619) 481-6800
(Name, Address, Including Zip Code,
and Telephone Number, Including Area Code, of Agent For Service
Copies to:
Anthony Ippolito, Esq.
Snell & Wilmer L.L.P.
600 Anton Boulevard., Suite 1400
Costa Mesa, California 92626
Tel: (714) 427-7000
Fax: (714) 427-7799
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered
on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended,
check the following box. x
If this form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ¨
If this form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number
of the earlier effective registration statement for the same offering. ¨
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 |
Pursuant to
Rule 429 under the Securities Act, the prospectus contained in this Post-Effective Amendment No. 2 to this Registration Statement
will be used as a combined prospectus in connection with this Registration Statement, the Registration Statement on Form S-1 (File
No. 333-170027), which was initially filed on October 19, 2010 and became effective on December, 29, 2010 (the “First Prior
Registration Statement”), and the Registration Statement on Form S-1 (File No. 333-173263), which was initially filed on
April 1, 2011 and became effective April 28, 2011 (the “Second Prior Registration Statement”). This Post-Effective
Amendment No. 2 to this Registration Statement constitutes Post-Effective Amendment No. 4 to the First Prior Registration Statement
and Post-Effective Amendment No. 3 to the Second Prior Registration Statement. Such post-effective amendments shall hereafter
become effective concurrently with the effectiveness of this Registration Statement in accordance with Section 8(c) of the Securities
Act.
The registrant
hereby amends this registration statement on such date or date(s) as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(c) of the Securities Act, or until the registration statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(c), may determine.
EXPLANATORY NOTE
This Post-Effective Amendment No. 2
to the Registration Statement on Form S-1 (File No. 333-180326) (the “Registration Statement”) of Cryoport, Inc.
(“Cryoport”) is being filed pursuant to the undertakings in Item 17 of the Registration Statement to update and supplement
the information contained in the Registration Statement, as originally declared effective by the Securities and Exchange Commission
on June 21, 2012, in connection with the results of Cryoport’s 2014 Annual Meeting of Stockholders.
The information included in this filing
updates and supplements this Registration Statement and the Prospectus contained therein. This Registration Statement also constitutes
Post-Effective Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-170027), which was initially filed on October
19, 2010 and became effective on December, 29, 2010, and Post-Effective Amendment No. 3 to the Registration Statement on Form
S-1 (File No. 333-173263), which was initially filed on April 1, 2011 and became effective April 28, 2011.
No additional securities are being registered
under this Post-Effective Amendment No. 2 to the Registration Statement. All applicable registration fees were paid at the time
of the original filing of the Registration Statement.
CRYOPORT, INC.
51,379,154 shares of Common Stock
This prospectus relates to the offering
by certain existing holders of our common stock named in this prospectus of 51,379,154 shares of our common stock, par value
$0.001 per share, including 31,405,018 shares of our common stock issuable upon exercise of the warrants held by such selling
security holders. These existing holders of our common stock are referred to as selling security holders throughout this prospectus.
It is anticipated that the selling security
holders will sell these shares of common stock from time to time in one or more transactions, in negotiated transactions or otherwise,
at prevailing market prices or at prices otherwise negotiated. We will not receive any proceeds from the sales of shares of common
stock by the selling security holders. We have agreed to pay all fees and expenses incurred by us incident to the registration
of our common stock, including SEC filing fees. Each selling security holder will be responsible for all costs and expenses in
connection with the sale of their shares of common stock, including brokerage commissions or dealer discounts.
Our common stock
is currently traded on the OTCQB, operated by the OTC Markets Group, Inc. (“OTCQB”), under the symbol “CYRX”.
As of July 31, 2014, the closing sale price of our common stock was $0.46 per share.
Investing in our common stock involves
a high degree of risk. Please read “Risk Factors” beginning on page 9.
Neither the Securities and Exchange
Commission (the “SEC”) nor any state securities commission has approved or disapproved these securities or determined
whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is September
5, 2014.
TABLE OF CONTENTS
You may only rely on the information contained
in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This
prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common
stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale
made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in
our affairs since the date of this prospectus or that the information incorporated by reference to this prospectus is correct
as of any time after its date.
PROSPECTUS SUMMARY
This summary
highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider
before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our
common stock and warrants discussed under “Risk Factors” beginning on page 9, and the consolidated financial statements
and notes to those consolidated financial statements, before making an investment decision. Cryoport, Inc. is referred to throughout
this prospectus as “Cryoport,” “we” or “us.”
Overview
Through a combination
of purpose-built proprietary packaging, information technology and specialized cold chain logistics knowhow, we provide frozen
shipping logistics solutions to the life sciences industry. We view our solutions as disruptive to “older technologies”
in that our solutions provide reliable, economic alternatives to existing solutions and services utilized for frozen shipping
in life sciences including stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals,
infectious substances, and other items that require continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express®
Solutions include sophisticated cloud-based logistics management software we have branded as the Cryoportal™, which
supports the management of the entire shipment process through a single interface, including initial order input, document preparation,
customs clearance, courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique
and incisive information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains
a fully documented “chain-of-custody” and, at the client’s option, “chain-of-condition” for every
shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process.
This recorded and archived information allows our customers to meet exacting requirements necessary for scientific work and for
regulatory purposes.
Our Cryoport Express®
Solutions also include our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express® Shippers,
which are cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen
(“LN2”) “dry vapor” technology. Cryoport Express® Shippers are International Air Transport
Association (“IATA”) certified and validated to maintain stable temperatures of minus 150° C and below for a 10-plus
day dynamic shipment period. The Company currently features two Cryoport Express® Shipper models, the Standard
Dry Shipper (holding up to 75-2.0 ml vials) and the High Volume Dry Shipper (holding up to 500-2.0 ml vials).
Amongst our solutions,
we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting Cryoport
Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and
reseals the shipping box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up.
Cryoport arranges for the pick-up of the parcel by a shipping service provider for delivery to the customer’s intended
recipient. The recipient simply opens the box and shipper and removes the frozen commodity. The recipient only needs
to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for pre-arranged
carrier pick up. The Cryoport Express® Shipper is returned to us for cleaning, quality assurance testing, recharging
and reuse.
In late 2012, we
shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics solutions
provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution,” we also provide the following value-added solutions that were developed to address our various clients’
needs:
| · | “Customer
Staged Solution,” under which we supply an inventory of our Cryoport Express®
Shippers to our customer, in an uncharged state, enabling our customer (after training/certification)
to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with
shipping and delivery service providers for the transportation of the package. Once the
order is released, our customer services professionals monitor the shipment and the return
of the shipper to us for cleaning, quality assurance testing and reuse. |
| · | “Customer
Managed Solution,” a limited customer implemented solution whereby we supply
our Cryoport Express® Shippers to clients in a fully charged state, but
leaving it to the client to manage the shipping, including the selection of the shipping
and delivery service provider and the return of the shipper to us. Under this solution,
the customer accepts a significant level of risk for a successful shipment. |
| · | “Powered
by CryoportSM,” is made available to providers of shipping and
delivery services who seek to offer a “branded” cryogenic shipping solution
as part of their service offerings. This solution can be private labeled as long as “powered
by CryoportSM” appears prominently on the offering software interface
and prominently on the packaging. |
| · | “Integrated
Solution”
is our most comprehensive and complex outsourcing solution.
It usually involves our management of the entire cryogenic logistics process for our
client, including the location of our employees at the client’s site to manage
the client’s cryogenic logistics in total. |
| · | “Life
Science Point-of-Care Repository Solution” whereby we supply our Cryoport
Express® Shippers to ship and store cryogenically preserved life science
products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care
site, with the Cryoport Express® Shippers serving as a temporary freezer/repository
enabling the efficient distribution of temperature sensitive allogeneic cell-based therapies
without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined
process including the shipment’s return to Cryoport where the Cryoport Express®
Shipper is cleaned, tested for quality assurance and then returned to inventory
for reuse. |
| · | “Personalized
Medicine and Cell-based Immunotherapy Solution” whereby our Cryoport Express®
Solutions serves as an enabling technology for the safe manufacture of the rapidly
expanding autologous cellular-based immunotherapy market by providing a comprehensive
logistics solution for the verified chain of custody and condition transport from, (a)
the collection of the patient’s cells in a hospital setting, to (b) a central processing
facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically
preserved return of these irreplaceable cells to a point-of-care treatment facility.
The Cryoport Express® Shippers can then serve as a temporary freezer/repository
to allow the efficient distribution of this personalized medicine to patients when and
where they need it most without the expense, inconvenience, and potential costly failure
of an on-sight, cryopreservation apparatus. Our customer services professionals monitor
each shipment throughout the predetermined process including the shipment’s return
to Cryoport where the Cryoport Express® Shipper is cleaned, tested for
quality assurance and then returned to inventory for reuse. |
One of our distribution
partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping logistics
services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets
and sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx® Deep
Frozen Shipping Solution on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely
with FedEx to further align its sales efforts and accelerate penetration within FedEx’s life sciences customer base through
improved processes, sales incentives, joint customer calls and more frequent communication at the sales and executive level. In
addition, FedEx has developed a FedEx branded version of the CryoportalTM software platform, which is “powered
by CryoportSM” for use by FedEx and its customers giving them access to the full capabilities of our logistics
management platform.
In January 2013, we
entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with a
non-exclusive license and right to use a customized version of our CryoportalTM for the management of shipments made
by FedEx customers. The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx
Agreement, expires on December 31, 2015. FedEx has the right to terminate this agreement at any time for convenience upon 180
days’ notice.
In June 2014, we added
DHL as our second major distribution partner by entering into an agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”),
whereby DHL can offer our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global
basis. This relationship with DHL is a further implementation of the Company’s expansion of distribution partnerships under
the “powered by CryoportSM” model described above, allowing us to expand our sales and marketing
reach through our partners and build awareness of the benefits our validated cryogenic solution offerings. DHL has announced that
it will add 15 more certified Life Sciences stations in the second quarter of 2014 to its existing Thermonet network of 45 stations
already in operation. This expanded network will now be able to offer Cryoport’s cryogenic solutions under the DHL brands.
In addition, DHL’s customer will continue to be able to 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 platform, the CryoportalTM, is integrated to DHL’s tracking and billing systems to provide
DHL life sciences and healthcare customers with a seamless way of shipping their critical biological material worldwide.
In December 2012,
we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant
to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the CryoportalTM, to manage shipments from the Zoetis
manufacturing site in the United States to domestic customers as well as various international distribution centers. As part of
our logistics management services, Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’
logistics, ensuring products arrive at their destinations in specified conditions, on-time and with the optimum uses of resources.
The Company manages Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers.
In July 2013 the agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry
vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a
second poultry vaccine.
In February 2014,
we entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage
biotechnology company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will
be using Cryoport Express® Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures
and also provide Cryoport Express® Solutions to other biologics suppliers within the orthopedic arena. The agreement
combines Cryoport’s proprietary, purpose-built cold chain logistics solutions for cell-based and advanced biologic tissue
forms with Liventa’s distribution capability to orthopedic care providers. The implementation of Cryoport’s solution
will eliminate dry ice shipping and related risks of degradation and also eliminate the need for expensive onsite cryogenic freezers
for storage of cell-based orthopedic therapies. This will enable Liventa to better serve small or mobile clinics, pharmacies,
family practice, and orthopedic specialty care providers. Surgical centers and hospitals will also benefit from better logistics
and the elimination of issues surrounding dry ice transport and storage. The agreement has an initial three-year term and may
be renewed for consecutive three-year terms, unless earlier terminated by either party. Liventa also agreed to certain performance
criteria and the issuance of 150,000 shares of its common stock to Cryoport in exchange for the exclusive right to offer, market
and promote Cryoport Express® Solutions for cellular-based therapies requiring cryogenic temperatures for use in
orthopedic indications in the United States.
We
offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells
and cell lines, diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood,
vaccines, tissue, animal husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems.
These companies operate within heavily regulated environments and as such, changing vendors and distribution practices typically
require a number of steps which may include the audit of our facilities, review of our procedures, qualifying us as a vendor,
and performing test shipments. This process can take up to nine months or longer to complete prior to a potential customer adopting
one or more of our Cryoport Express® Solutions.
Equity Offerings Relating to this Registration Statement
In February and March
2012, we conducted a private placement (the “2012 Private Placement”) of units at a purchase price of $0.55 per unit.
Each unit consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of
$0.69 per share. Each warrant was exercisable beginning on the six month anniversary of date of issuance and exercisable for a
period of five years. Craig-Hallum Capital Group LLC acted as our lead placement agent and Emergent Financial Group, Inc. and
Maxim Group LLC served as co-placement agents for the 2012 Private Placement. In connection with the 2012 Private Placement, we
issued an aggregate of 9,477,554 shares of common stock and warrants to purchase an aggregate of 10,005,929 (inclusive of the
warrants issued to our placement agents as compensation and warrants issued to certain holders of outstanding convertible debentures
in consideration for the waiver of certain potential defaults). All units were purchased by accredited or institutional investors.
No investor in the 2012 Private Placement received additional warrants by virtue of the fact that they had invested in the Public
Offering (as defined below) or otherwise.
In February 2011,
we conducted a private placement (the “2011 Private Placement”) of units at a purchase price of $0.70 per unit. Each
unit consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $0.77
per share. Each warrant was immediately exercisable and exercisable for a period of five years. Emergent Financial Group, Inc.
and Maxim Group LLC served as our placement agents in connection with the 2011 Private Placement. In connection with the 2011,
Private Placement, we issued an aggregate of 13,362,089 shares of common stock and warrants to purchase an aggregate of 15,755,915
(inclusive of the warrants issued to our placement agents as compensation). All units were purchased by accredited or institutional
investors. No investor in the 2011 Private Placement received additional warrants by virtue of the fact that they had invested
in the Public Offering or otherwise.
From August 2010
to October 2010, we conducted a private placement (the “2010 Private Placement”) of units at a purchase price of $0.70
per unit. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock at an exercise
price of $0.77 per share. Each warrant was immediately exercisable and exercisable for a period of five years. In connection with
the 2010 Private Placement we also issued to certain investors who were also investors in our underwritten public offering registered
on Form S-1 (File No. 333-162350), which was declared effective by the Securities and Exchange Commission on February 25,
2010 (the “Public Offering”), warrants to purchase in the aggregate 445,001 shares of common stock with terms identical
to those contained in the warrants issued as part of the units. Maxim Group LLC and Emergent Financial Group, Inc. served as our
placement agents in connection with the 2010 Private Placement. In connection with the 2010 Private Placement, we issued an aggregate
of 5,532,418 shares of common stock and warrants to purchase an aggregate of 6,755,293 (inclusive of the warrants issued to our
placement agents as compensation and the additional warrants to purchase 445,001 shares of common stock issued to investors who
also invested in our Public Offering). All units were purchased by accredited or institutional investors.
The sale and issuance
of the units, the common stock, and the warrants in connection with each of the 2012 Private Placement, 2011 Private Placement
and the 2010 Private Placement were completed in accordance with the exemptions provided by Rule 506 of Regulation D of the Securities
Act of 1933, as amended (the “Securities Act”), and/or Section 4(2) of the Securities Act.
Corporate History and Structure
We are a Nevada corporation
originally incorporated under the name G.T.5-Limited (“GT5”) on May 25, 1990. In connection with a Share Exchange
Agreement, on March 15, 2005 we changed our name to Cryoport, Inc. and acquired all of the issued and outstanding shares
of common stock of Cryoport Systems, Inc., a California corporation, in exchange for 2,410,811 shares of our common stock (which
represented approximately 81% of the total issued and outstanding shares of common stock following the close of the transaction).
Cryoport Systems, Inc., which was originally formed in 1999 as a California limited liability company, and subsequently reorganized
into a California corporation on December 11, 2000, remains the operating company under Cryoport, Inc. Our principal executive
offices are located at 20382 Barents Sea Circle, Lake Forest, CA 92630. The telephone number of our principal executive offices
is (949) 470-2300, and our main corporate website is www.Cryoport.com. The information on, or that can be accessed through our
website is not part of this Annual Report.
The Company became
public by a reverse merger with a shell company in May 2005. Over time the Company has transitioned from being a development company
to a fully operational public company, providing cold chain logistics solutions to the biotechnology and life sciences industries
globally.
Since fiscal year
2011 the Company has taken significant steps towards commercialization of the Cryoport Express® logistics solutions
in validating, perfecting and expanding its features. The Company has now managed shipments of its Cryoport Express®
Shippers through its CryoportalTM into and out of over 70 countries, handling a vast array of different biological
products and specimens.
During fiscal year
2012, the Company completed the external validation of its Cryoport Express Standard Shipper to ISTA 7E standards and introduced
the Cryoport Express® High Volume Shipper in response to customer demand. The Company also set up its European
distribution depot in Holland to better serve its customer base and support sales efforts in Europe.
During fiscal year
2013, the Company elected Jerrell Shelton President and CEO, realigned its sales team and introduced a solutions sales and operating
strategy. In addition, and as part of its global expansion plans, the Company set up its Asian distribution depot in Singapore.
The Company also formed a Commercial Advisory Board (CAB) with Bill Taaffe, a founding member of ICON Clinical Research becoming
its first member.
Since the beginning
of fiscal year 2014 the Company’s Board of Directors (“Board”) has added certain members to better align the
experience and competencies of the directors with the Company’s strategic direction. In March 2013, Richard G. Rathmann,
a fund manager, investor and advisor to life science companies over the past 20 years, was appointed to the Board. In September
2013, Mr. Rathmann was elected Chairman of the Board. Also in September 2013, Mr. Edward Zecchini, an executive with over thirty
years of experience in the healthcare and information technology industries was appointed to the Board. Most recently, in June
2014, the Board appointed Dr. Ramkumar Mandalam to the Board. Dr. Mandalam has over twenty years of experience in the development
of biologics and is currently the President and Chief Executive Officer of Cellerant Therapeutics, Inc., a clinical-stage biotechnology
company. The Company’s two remaining Board members, Stephen Wasserman and Jerrell Shelton, who is the President and Chief
Executive Officer of Cryoport, joined the Board in 2012. The Company’s five person Board has four independent Board members,
as determined by NASDAQ Rule 5605(a)(2) and the related rules of the Securities and Exchange Commission.
Cryoport Express®
Solutions
Cryoport Express®
Solutions consist of the CryoportalTM, a cloud-based logistics management software which programmatically assists
in the management of all aspects of the logistics operations including the Cryoport Express® Shippers and the Cryoport
Express® Smart Pak data logger. The CryoportalTM is capable of producing Cryoport Express®
Analytics which reports shipment performance metrics and evaluates temperature-monitoring data collected by the data logger
during shipment. Cryoport Express® Solutions are focused on improving the reliability of frozen shipping while
reducing our clients’ overall operating costs. This is accomplished by providing a complete end-to-end solution for the
transport and monitoring of frozen or cryogenically preserved biological or pharmaceutical materials shipped primarily though
integrators and specialty couriers. Certain of the intellectual property underlying our Cryoport Express ® Solutions
(other than that related to the Cryoport Express® Shippers) has been, and continues to be, developed under a contract
with an outside software development company, with the underlying technology licensed to us for exclusive use in our field of
use.
CryoportalTM
The CryoportalTM
is used by Cryoport, our customers and our business partners to automate the entry of orders, prepare customs documentation
and to facilitate status and location monitoring of shipped orders while in transit. It is used by Cryoport to assist in managing
logistics operations and to reduce administrative costs typically provisioned through manual labor relating to order-entry, order
processing, preparation of shipping documents and back-office accounting. It is also used to support the high level of customer
service expected by the industry. Certain features of the CryoportalTM reduce operating costs and facilitate the scaling
of Cryoport’s business, but more importantly they offer significant value to the customer in terms of cost avoidance and
risk mitigation. Examples of these features include automation of order entry, development of Key Performance Indicators (“KPI”)
to support our efforts for continuous process improvements in our business, and programmatic exception monitoring to detect and
sometimes anticipate delays in the shipping process, often before the customer or the shipping company becomes aware of them.
The CryoportalTM
also serves as the communications center for the management, collection and analysis of Smart Pak data collected from Smart
Pak data loggers in the field. Data is converted into pre-designed reports containing valuable and often actionable information
that becomes the quality control standard or “pedigree” of the shipment. This information can be utilized by Cryoport
to provide valuable feedback to our clients relating to their shipments.
The Cryoportal™
software platform has been developed as a carrier-agnostic system, allowing the customer and the Cryoport Client Care team to
work with multiple integrators, freight forwarders and/or couriers depending on the specific requirements and customer preferences.
To increase operational efficiencies the Cryoportal™ has already been integrated with the tracking systems of FedEx, DHL
and UPS and is planning to integrate with other key logistics providers.
The CryoportalTM
was developed for time- and temperature-sensitive shipments that are required to maintain specific temperatures, such as
ambient (between 20° and 25°C), chilled (between 2° and 8°C) or frozen (minus 10°C or less all the way down
to cryogenic temperatures) to ensure that the shipped specimen is not subject to degradation or out of its designated “safe”
range. While our current focus is on frozen shipments within the biotechnology and life sciences industries using the logistics
solutions described herein, the use of the CryoportalTM can and may be extended into other temperature ranges.
The Cryoport Express®
Shippers
Our Cryoport Express®
Shippers are cryogenic dry vapor shippers capable of maintaining cryogenic temperatures of minus 150° Celsius or below
for a dynamic shipping period of 10 or more days. A dry cryogenic shipper is a device that uses liquid nitrogen contained inside
a vacuum insulated bottle which serves as a refrigerant to provide stable storage temperatures below minus 150° Celsius. Our
Cryoport Express® Shippers are designed to ensure that there is no pressure build up as the liquid nitrogen evaporates
or spillage of liquid nitrogen. We have developed a proprietary retention system to ensure that liquid nitrogen stays inside the
vacuum container, which allows the shipper to be designated as a dry shipper meeting IATA requirements. Biological or pharmaceutical
specimens are stored in a specimen chamber, referred to as a “well” inside the container, refrigeration is provided
by cold nitrogen gas evolving from the liquid nitrogen entrapped within the retention system. Specimens that may be transported
using our cryogenic shipper include live cell scientific or pharmaceutical commodities such as cancer vaccines, diagnostic materials,
semen, eggs and embryos, infectious substances and other items that require continuous exposure to frozen or cryogenic temperatures
(e.g., temperatures below minus 150° Celsius).
An important feature
of our Cryoport Express® Shippers is their compliance with the stringent packaging requirements of IATA Packing
Instructions 602 and 650, respectively. These specifications include meeting internal pressure (hydraulic) and drop performance
requirements. Under IATA guidelines, Cryoport Express® Shippers are classified as “Non-hazardous” while
dry ice and liquid nitrogen are classified as “Dangerous Goods.” Our shippers are also in compliance with International
Civil Aviation Organization (“ICAO”) regulations that prohibit egress of liquid nitrogen residue from the shipping
packages. The ICAO is a United Nations organization that develops regulations for the safe transport of dangerous goods by air.
We currently offer
two sizes of dry vapor shippers, the Cryoport Express ® Standard Shipper with a storage capacity of up to 75 0.2ml
vials and the Cryoport Express® High Volume Shipper that was introduced in January of 2012 with a capacity of up
to 500 0.2ml vials.
Cryoport Express ®
Standard Shippers
The Cryoport Express®
Standard Shippers are lightweight, low-cost, re-usable dry vapor liquid nitrogen storage containers that we believe combine
the best features of packaging, cryogenics and high vacuum technology. A Cryoport Express ® Standard Shipper is
composed of an aluminum metallic dewar flask, with a well for holding the biological material in the inner chamber. The dewar
flask, or “thermos bottle,” is an example of a practical device in which the conduction, convection and radiation
of heat are reduced as much as possible. The inner chamber of the shipper is surrounded by a high surface, low-density material
which retains the liquid nitrogen in-situ by absorption, adsorption and surface tension. Absorption is defined as the taking up
of matter in bulk by other matter, as in the dissolving of a gas by a liquid, whereas adsorption is the surface retention of solid,
liquid or gas molecules, atoms or ions by a solid or liquid. This material absorbs liquid nitrogen several times faster than currently
used materials, while providing the shipper with a hold time and capacity to transport biological materials safely and conveniently.
The annular space between the inner and outer dewar chambers is evacuated to a very high vacuum (10-6 Torr). The specimen-holding
chamber has a primary cap to enclose the specimens, and a removable and replaceable secondary cap to further enclose the specimen-holding
container and to contain the liquid nitrogen. The entire dewar vessel is then wrapped in a plurality of insulating and cushioning
materials and placed in a disposable outer packaging made of recyclable material. The Cryoport Express ® Standard
Shipper has a storage capacity of up to 75 0.2ml vials.
The technology underlying
the Cryoport Express® Standard Shipper has been refined over the past five years. Our current shippers use aircraft
grade aluminum and other lower weight materials, reducing freight cost which is based on dimensional weight. We maintain ongoing
development efforts related to our shippers that are principally focused on material properties, particularly those properties
related to our low temperature requirement, vacuum retention characteristics, such as the permeability of the materials, and lower
weight materials in an effort to meet the life sciences market needs for achieving the lowest cost frozen and cryogenic shipping
solution.
Cryoport Express®
High Volume Shippers
The Cryoport Express®
High Volume Shipper also uses a dry vapor liquid nitrogen (LN2) technology to maintain minus 150° C temperatures with
a dynamic shipping endurance of 10 days. The Cryoport Express ® High Volume Shipper is based on the same dry vapor
technology as Cryoport’s original standard dry shipper and utilizes an absorbent material to hold LN2, thus providing
the extended endurance time and IATA validation as a non-hazardous shipping container. The high volume dry shipper is reusable
and recyclable, making it a highly sustainable and cost effective method of transporting life science materials. The Cryoport
Express ® High Volume Shipper has a storage capacity of up to 500 0.2ml vials.
We believe Cryoport
Express® Solutions are the best and most cost effective solution available in the biotechnology and life sciences
markets and satisfy customer needs and scientific and regulatory requirements relating to the shipment of time- and temperature-critical,
frozen and refrigerated transport of biological materials, such as stem cells, cell lines, pharmaceutical clinical trial samples,
gene biotechnology, infectious materials handling, animal and human reproduction markets. Due to our proprietary technology and
innovative design, our shippers are less prone to losing functional hold time when not kept in an upright position than the competing
products because our proprietary dry vapor technology and innovative design prevent the spilling or leakage of the liquid nitrogen
when the container is tipped or on its side which would otherwise adversely affect the functional hold time of the shipper.
An important feature
of our Cryoport Express® Shippers is their compliance with the stringent packaging requirements of IATA Packing
Instructions 602 and 650, respectively. These specifications include meeting internal pressure (hydraulic) and drop performance
requirements.
The Cryoport Express®
Smart Pak
Temperature monitoring
is a high value feature from our customers’ perspective as it is an effective and reliable method to determine that the
shipment materials were not damaged or did not experience degradation during shipment due to temperature fluctuations. Our Smart
Pak System is a self-contained automated data logger capable of recording cryogenic temperatures of samples shipped in our Cryoport
Express® Shippers. The data-logging temperature probe is in the vapor plug of the shipper for the most accurate
reading. The temperature mapping includes both the temperature inside the chamber (which is closest to the actual biomaterial)
and the external temperature. This reading, combined with the mapping of every shipment check-in point, provides a holistic view
of the complete shipping process. At the client’s election, shipments can have a full chain-of-custody and chain-of-condition with
both data monitoring and analysis available.
Chain-of-Condition
Data monitoring starts
with a custom-built data logger. The data logger can be set up to report during the shipment and/or after the shipment. For those
shipments involving biologics or clinical trials or any other material that needs to be verified before receiving, the information
recorded by the data logger can be downloaded to the data station onsite. Alternatively, Cryoport can upload the temperature data
from the data logger for analysis to the CryoportalTM upon return of the shipper. The CryoportalTM also
acts as the data repository for all shipment and temperature information, which the customer can access remotely through the internet.
Chain of condition service is available at the client’s election.
Chain-of-Custody
When overlaid with
the carrier check-ins, the data monitor and analysis also provides a chain of custody. The report from the data monitor serves
as analysis for temperature monitoring of the entire shipment as well as a tampering warning. If the client has elected to have
chain of condition monitoring, each time the container is opened there is a temperature record. The report identifies outlier
temperature excursions such as opening the shipment in customs or tampering and thus will allow for more conclusive investigations
to ensure that specimens were not adversely impacted during shipment.
Cryoport Express®
Analytics
The CryoportalTM
is an important information technology element of our business strategy and has been designed to support planned future
features to allow for an expansion of our solutions offering. Analytics is a term used by IT professionals to refer to performance
benchmarks or Key Performance Indicators (KPI’s) that management utilizes to measure performance against desired standards.
Examples for analytics tracked through the CryoportalTM include time-based metrics for order processing time and on-time
deliveries by our shipping partners, as well as profiling shipping lanes to determine average transit times and predicting potential
shipping exceptions based on historical metrics. The analytical results are being utilized by Cryoport to render consultative
and proactive customer services.
Biological Material Holders
A patented containment
bag is used in connection with the shipment of infectious or dangerous goods using the Cryoport Express® Shippers. Up to 75
cryovials (polypropylene vials with high-density polyethylene closures), set on aluminum canes are placed into an absorbent pouch,
which is designed to contain the entire contents of all the vials in the event of leakage. This pouch is then placed in a watertight
Tyvek bag (secondary packaging) capable of withstanding cryogenic temperatures, and then sealed. This bag is then placed into
the well of the Cryoport Express® Shipper.
Logistics Expertise and
Support
Cryoport’s
client services professionals provide 24/7/365 live logistics and monitoring services with specialized knowledge in the domestic
and global logistics of life sciences material requiring cryogenic temperatures. The Cryoport logistics professionals have validated
shipping lanes in and out of more than 70 countries to date to ensure shipments maintain cryogenic temperatures and arrive securely
and on time.
Our Corporate Information
Our principal executive
offices are located on 20382 Barents Sea Circle, Lake Forest, California 92630. The telephone number of our principal executive
offices is (619) 481-6800, and our main corporate website is www.cryoport.com. The information on, or that can be accessed
through, our website is not part of this prospectus.
We own, have rights
to, or have applied for the service marks and trade names that we use in conjunction with our business, including Cryoport (both
alone and with a design logo) and Cryoport Express® (both alone and with a design logo). All other trademarks and
trade names appearing in this prospectus are the property of their respective holders.
SUMMARY FINANCIAL
INFORMATION
In the table below
we provide you with historical consolidated financial data for the three months ended June 30, 2014 and 2013 and the fiscal years
ended March 31, 2014 and 2013, derived from our audited and unaudited consolidated financial statements included elsewhere in
this prospectus. Historical results are not necessarily indicative of the results that may be expected for any future period.
When you read this historical selected financial data, it is important that you read along with it the appropriate historical
consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included elsewhere in this prospectus.
| | |
Three Months Ended | | |
Year Ended | |
| | |
June 30 | | |
March 31, | |
| Statement of Operations Data: | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| | |
(In thousands, except per share data) | |
| Revenues | |
$ | 937 | | |
$ | 488 | | |
$ | 2,660 | | |
$ | 1,101 | |
| Cost of revenues | |
| 597 | | |
| 433 | | |
| 2,223 | | |
| 1,588 | |
| Gross margin (loss) | |
| 340 | | |
| 55 | | |
| 437 | | |
| (487 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Selling, general and administrative | |
| 1,428 | | |
| 1,222 | | |
| 5,106 | | |
| 5,412 | |
| Research and development | |
| 79 | | |
| 93 | | |
| 409 | | |
| 425 | |
| Loss from operations | |
| (1,167 | ) | |
| (1,260 | ) | |
| (5,078 | ) | |
| (6,324 | ) |
| Debt conversion expense | |
| — | | |
| — | | |
| (13,714 | ) | |
| — | |
| Interest expense | |
| (1,129 | ) | |
| (82 | ) | |
| (784 | ) | |
| (72 | ) |
| Change in fair value of derivative liabilities | |
| — | | |
| 18 | | |
| 21 | | |
| 16 | |
| Other income (expense), net | |
| 1 | | |
| — | | |
| (8 | ) | |
| — | |
| Net loss before provision for income taxes | |
| (2,295 | ) | |
| (1,324 | ) | |
| (19,563 | ) | |
| (6,380 | ) |
| Provision for income taxes | |
| (2 | ) | |
| — | | |
| (2 | ) | |
| (2 | ) |
| Net loss | |
| (2,297 | ) | |
| (1,324 | ) | |
| (19,565 | ) | |
| (6,382 | ) |
| Preferred stock beneficial conversion charge | |
| (742 | ) | |
| — | | |
| — | | |
| — | |
| Undeclared cumulative preferred
dividends | |
| (28 | ) | |
| — | | |
| — | | |
| — | |
| Net loss attributable to common
stockholders | |
$ | (3,067 | ) | |
$ | (1,324 | ) | |
| (19,565 | ) | |
| (6,382 | ) |
| Net loss per share attributable
to common stockholders — basic and diluted | |
$ | (0.05 | ) | |
$ | (0.03 | ) | |
$ | (0.40 | ) | |
$ | (0.17 | ) |
| | |
June 30, | | |
March 31, | |
| Balance Sheet Data: | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| | |
(In thousands) | |
| Cash, cash equivalents | |
$ | 171 | | |
$ | 228 | | |
$ | 370 | | |
$ | 563 | |
| Working capital (deficit) | |
| (1,600 | ) | |
| (2,555 | ) | |
| (2,903 | ) | |
| (1,539 | ) |
| Total assets | |
| 1,325 | | |
| 1,662 | | |
| 1,710 | | |
| 1,756 | |
| Convertible notes and accrued interest, net | |
| — | | |
| 2,176 | | |
| 1,622 | | |
| 1,304 | |
| Long term obligations, less current portion | |
| — | | |
| 1,307 | | |
| — | | |
| 1,322 | |
| Total stockholders’ equity (deficit) | |
| (1,058 | ) | |
| (3,023 | ) | |
| (2,304 | ) | |
| (2,063 | ) |
THE OFFERING
| Common stock being offered
by the selling security holders |
|
Up to 51,379,154 of our common stock, including 31,405,018 shares of
our common stock issuable upon exercise of the warrants held by the selling security holders (1). |
| |
|
|
| Common stock outstanding prior to the offering |
|
60,037,846 shares of common stock (2) |
| |
|
|
| Common stock to be outstanding after the
offering |
|
91,442,864 shares of common stock (3) |
| |
|
|
| Use of proceeds |
|
We will not receive any proceeds from the sales of shares of common stock by the selling
security holders. However, we will receive up to $23,414,400 in the aggregate from selling security holders if they
exercise in full, on a cash basis, all of their unexercised warrants to purchase 31,405,018 shares of common stock issued
to the selling security holders in connection with the 2012 Private Placement, 2011 Private Placement, 2010 Private Placement
and warrants issued to a consultant in March 2011 . We will use such proceeds from the warrant exercises for working capital
and other corporate purposes. |
| OTCQB symbol |
|
Our common stock is currently traded on the OTCQB under the symbol “CYRX.” |
| |
|
|
| Risk factors |
|
Investing in our securities involves a high degree of risk. You should carefully read and
consider the information set forth under the heading “Risk Factors” beginning on page 9 of this prospectus and
all other information in this prospectus before investing in our securities. |
| (1) | In connection with the 2012 Private
Placement, 2011 Private Placement, and the 2010 Private Placement, we agreed to file
a registration statement with the Securities and Exchange Commission no later than 30,
90 and 60 days, respectively, after closing of such private placements and use our best
efforts to cause them to become effective (within 60 days after filing or 90 days after
the filing in case of a full review of the Registration Statement for the 2012 Private
Placement) and remain effective until all securities covered by the registration statement
either have been sold, under the registration statement or pursuant to Rule 144 under
the Securities Act of 1933, as amended, or may be sold without volume or manner-of-sale
restrictions pursuant to Rule 144, and without the requirement for the Company to be
in compliance with the current public information requirement under Rule 144. In addition,
in March 2011, we issued to a consultant a warrant to purchase 200,000 shares of common
stock. The warrant granted the consultant piggyback registration rights. |
| (2) | Based upon the total number of
issued and outstanding shares as of July 31, 2014. |
| (3) | Based upon the total number of
issued and outstanding shares as of July 31, 2014, including shares of our common stock
issuable upon exercise of the warrants held by the selling security holders but excluding: |
| • | 12,323,275 shares issuable
upon the exercise of stock options outstanding at a weighted average exercise price of
$0.36 as of July 31, 2014; |
| • | 31,095,353 shares issuable
upon exercise of outstanding warrants to purchase common stock (excluding the warrants
held by the selling security holders) at a weighted average exercise price of $0.75 as
of July 31, 2014. |
| • | 1,666,667 shares issuable
upon exercise of outstanding publicly traded warrants that were issued as part of a public
offering at an exercise price of $3.30 per share. |
| • | 9,052,170 shares issuable
upon conversion of preferred stock. |
RISK
FACTORS
An investment
in our shares of common stock involves a high degree of risk. Before making an investment decision, you should carefully consider
all of the risks described in this prospectus. If any of the risks discussed in this prospectus actually occur, our business,
financial condition, and results of operations could be materially and adversely affected. If this were to happen, the price of
our shares of common stock and warrants could decline significantly and you may lose all or a part of your investment. Our forward-looking
statements in this prospectus are subject to the following risks and uncertainties. Our actual results could differ materially
from those anticipated by our forward-looking statements as a result of the risk factors below. See “Forward-Looking Statements.”
Risks Related to Our Financial Condition
We have incurred significant
losses to date and may continue to incur losses.
We have incurred
net losses in each fiscal year since we commenced operations. The following table represents net losses incurred for each of our
last two fiscal years:
| | |
Net Loss | |
| Fiscal Year Ended March 31, 2014 | |
$ | 19,565,400 | |
| Fiscal Year Ended March 31, 2013 | |
$ | 6,382,400 | |
Our fiscal year ended
March 31, 2014 loss of $19,565,400 included a one-time non-cash loss of $13,714,000 as a result of an induced debt conversion
expense as described in Management's Discussion and Analysis of Financial Condition and Results of Operations under the “Results
of Operations for Fiscal 2014 Compared to Fiscal 2013” section. As of March 31, 2014, we had an accumulated deficit of $85.9
million. In order to achieve and sustain such revenue growth in the future, we must significantly expand our market presence and
revenues from existing and new customers. We may continue to incur losses in the future and may never generate revenues sufficient
to become profitable or to sustain profitability. Continuing losses may impair our ability to raise the additional capital required
to continue and expand our operations.
Our auditors have expressed
doubt about our ability to continue as a going concern.
The Report of Independent
Registered Public Accounting Firm to our March 31, 2014 consolidated financial statements includes an explanatory paragraph
stating that the recurring losses and negative cash flows from operations since inception and our cash and cash equivalents balance
at March 31, 2014 raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
If we are unable to obtain
additional funding, we may have to reduce or discontinue our business operations.
As of July 31, 2014,
we had cash and cash equivalents of $386,100. Therefore, our ability to continue and expand our operations is highly dependent
on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to fund future operations.
Recently, we funded
our operations through a short-term bridge financing and a preferred stock offering. We plan to raise additional funds through
an equity or debt offering to cover general working capital needs and sales and marketing initiatives to expand our customer base
and increase revenues. If we are not able to raise sufficient funds and our projected revenues and cash-inflows are reduced or
delayed, we may not have sufficient capital to operate through the second quarter of our fiscal year 2015 or beyond. We are currently
exploring various arrangements with respect to securing additional funding. However, there can be no assurance that any additional
financing on commercially reasonable terms, or at all, will be available when needed. The inability to obtain additional capital
may reduce our ability to continue to conduct our business operations. Any additional equity financing will involve substantial
dilution to our then existing stockholders. The uncertainties surrounding our future cash inflows have raised substantial doubt
regarding our ability to continue as a going concern.
Risks Related to Our Business
Our agreements with global
providers of shipping services may not result in a significant increase in our revenues or cash flow.
We believe that establishing
strategic alliances with global providers of shipping services, such as our agreements with FedEx and DHL can drive growth in
our revenues. We are seeking to establish similar arrangements with other providers of international shipping services. Such alliances
may enable us to provide a seamless, end-to-end shipping solution to customers of our alliance partners and allow us to leverage
the established relationships with those customers.
In January 2013,
we entered into an agreement with FedEx, renewing FedEx’s right to, on a non-exclusive basis, promote, market and sell transportation
of our shippers and our related value-added goods and services and providing FedEx with a non-exclusive license and right to use
a customized version of our Cryoportal™ software platform for the management of shipments made by FedEx customers. In January
2014, we entered into a letter of intent with DHL confirming our mutual intentions to negotiate an additional agreement related
to our participation in DHL’s efforts to expand its provision of cryogenic shipping services to the life sciences industry.
Because our agreements
with FedEx and DHL do not contain any requirement that they use a minimum level of our services, there can be no assurance of
any significant increase in our revenues or cash flows as a result of these strategic alliances.
Our agreements with providers
of vaccines and stem cell-based therapies may not result in a significant increase in our revenues or cash flow.
We believe that establishing
strategic relationships with manufacturers and distributors of treatments for animals and humans, such as our agreements with
Zoetis, Inc. and Liventa Bioscience, Inc. can drive growth in our revenues. We are seeking to establish similar arrangements with
other companies engaged in the life sciences industry, which require logistics solutions for the delivery of biologic material
maintained at cryogenic temperatures.
In December 2012, we
entered an agreement with what became Zoetis, Inc. (in January 2013, Pfizer spun off its animal health business into Zoetis, Inc.,
a public company) providing for us to manage the cryogenic logistics for the distribution of a poultry vaccine from its production
site in the United States. Recently, Zoetis has expanded our role in providing them assistance in managing their cryogenic distribution
of their vaccines.
In February 2014, we
entered an agreement with Liventa Bioscience, Inc. to act as its exclusive provider of cryogenic logistics of stem cell based
therapies for orthopedic applications. Liventa intends to distribute its own line of therapies and to act as a distributor of
other therapies to orthopedic health care providers that require cryogenic temperatures. However, we do not expect Liventa to
begin significant use of our services prior to the second half of fiscal 2015.
While we anticipate
growth in shipments by Zoetis under our management and that Liventa will be successful in its efforts to distribute cell based
biologic materials to the orthopedic market, there can be no assurance of any significant increase in our revenues or cash flows
as a result of these strategic alliances.
We will have difficulty
increasing our revenues if we experience delays, difficulties or unanticipated costs in establishing the sales, distribution and
marketing capabilities necessary to successfully commercialize our solutions.
We plan to improve
our sales, distribution, and marketing capabilities in the Americas, Europe, and Asia. It will be expensive and time-consuming
for us to develop our global marketing and sales network and thus we intend to rely on our strategic alliances with FedEx and
DHL. We further intend to seek to enter into additional strategic alliances with international providers of shipping services
to incorporate use of our solutions in their service offerings. We may not be able to provide adequate incentive to our sales
force or to establish and maintain favorable distribution and marketing collaborations with others to promote our solutions. In
addition, any third party with whom we have established a marketing and distribution relationship may not devote sufficient time
to the marketing and sales of our solutions thereby exposing us to potential expenses in exiting such distribution agreements.
We, and any of our alliance partners, must also market our services in compliance with federal, state, local and international
laws relating to the provision of incentives and inducements. Violation of these laws can result in substantial penalties. Therefore,
if we are unable to successfully motivate and expand our marketing and sales force and further develop our sales and marketing
capabilities, or if our alliance partners fail to promote our solutions, we will have difficulty increasing our revenues.
Our ability to grow and
compete in our industry will be hampered if we are unable to retain the continued service of our key professionals or to identify,
hire and retain additional qualified professionals.
A critical factor
to our business is our ability to attract and retain qualified professionals including key employees and consultants. We are continually
at risk of losing current professionals or being unable to hire additional professionals as needed. If we are unable to attract
new qualified employees, our ability to grow will be adversely affected. If we are unable to retain current employees or strategic
consultants, our financial condition and ability to maintain operations may be adversely affected.
We are dependent on
new solutions and services.
Our future revenue
stream depends to a large degree on our ability to bring new solutions and services to market on a timely basis. We must continue
to make significant investments in research and development in order to continue to develop new solutions and services, enhance
existing solutions and services, and achieve market acceptance of such solutions and services. We may incur problems in introducing
new solutions and services.
The adoption cycle of
our target customers tends to be very lengthy, which continues to adversely affect our ability to increase revenues quickly.
We offer our solutions
primarily to companies in the life sciences industry. These companies operate within a heavily regulated environment and as such,
changing vendors and distribution practices typically require a number of steps, which may include the audit of our facilities,
review of our procedures, qualifying us as a vendor, and performing test shipments. This process can take several months or longer
to complete, involving multiple levels of approval, prior to a company fully adopting our Cryoport Express® Solutions.
The logistics management of many companies is decentralized adding to the time need to effect adaptation of our solutions. In
addition, any such adoption may be on a gradual basis such that the customer progressively ramps up use of our Cryoport Express®
Solutions following adoption. The slow adoption process continues to adversely affect our ability to increase revenues.
We are dependent on an
outside party for the continued development and maintenance of our Cryoportal™ software.
Our proprietary Cryoportal™
is a logistics platform software used by our customers, business partners and client care team to automate the entry of orders,
prepare customs documentation and facilitate status and location monitoring of shipped orders while in transit. The continued
development of the Cryoportal™ platform is contracted with an outside software development company. If this developer becomes
unable or unwilling to continue work on scheduled projects, and an alternative software development company cannot be secured,
we may not be able to implement needed enhancements to the system. Furthermore, if we terminate our agreement with our current
software developer and cannot reach an agreement or fail to fulfill an agreement for the termination, it is possible we could
lose our license to use this software. Failure to proceed with enhancements or the loss of our license for the system would adversely
affect our ability to generate new business and serve existing customers, resulting in a reduction in revenue.
Our success depends,
in part, on our ability to obtain patent protection for our solutions and business model, preserve our trade secrets, and operate
without infringing the proprietary rights of others.
Our policy is to
seek to protect our proprietary position by, among other methods, filing United States patent applications related to our technology,
inventions and improvements that are important to the development of our business. We have three issued U.S. patents; one pending
U.S. patent application, and one recently filed U.S. provisional patent application, all relating to various aspects of our solutions
and services. Our patents or patent application may be challenged, invalidated or circumvented in the future or the rights granted
may not provide a competitive advantage. We intend to vigorously protect and defend our intellectual property. Costly and time-consuming
litigation brought by us may be necessary to enforce our patents and to protect our trade secrets and know-how, or to determine
the enforceability, scope and validity of the proprietary rights of others.
We also rely upon
trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive position. In
the past our employees, consultants, advisors and suppliers have not always executed confidentiality agreements and invention
assignment and work for hire agreements in connection with their employment, consulting, or advisory relationships. Consequently,
we may not have adequate remedies available to us to protect our intellectual property should one of these parties attempt to
use our trade secrets or refuse to assign any rights he or she may have in any intellectual property he or she developed for us.
Additionally, our competitors may independently develop substantially equivalent proprietary information and techniques or otherwise
gain access to our proprietary technology, or we may not be able to meaningfully protect our rights in unpatented proprietary
technology.
While we are not
aware of any third party that is infringing any of our patents or trademarks nor do we believe that we are infringing on the patents
or trademarks of any other person or organization, we cannot assure you that our current and potential competitors and other third
parties have not filed (or in the future will not file) patent applications for (or have not received or in the future will not
receive) patents or obtain additional proprietary rights that will prevent, limit or interfere with our ability to make, use or
sell our solutions either in the United States or internationally. Additionally, we may face assertions of claims by holders of
patents alleging that we are infringing upon their patent rights which claims are without merit, but may result in our incurring
substantial costs of defense.
Our solutions and services
may contain errors or defects, which could result in damage to our reputation, lost revenues, diverted development resources and
increased service costs and litigation.
Our solutions and
services must meet stringent requirements and we must develop our services and solutions quickly to keep pace with the rapidly
changing market. Solutions as sophisticated as ours could contain undetected errors or defects, especially when first introduced
or when new equipment or versions of our software are released. If our solutions are not free from errors or defects, we may incur
an injury to our reputation, lost revenues, diverted development resources, increased customer service and support costs, and
litigation. The costs incurred in correcting any product errors or defects may be substantial and could adversely affect our business,
results of operations and financial condition.
If we experience manufacturing
delays, interruptions in production, or delays in procurement of shippers manufactured by third parties, then we may experience
customer dissatisfaction and our reputation could suffer.
If we fail to produce
enough shippers at our own manufacturing facility or at a third party manufacturing facility, or if we fail to complete our shipper
recycling processes as planned, we may be unable to deliver shippers to our customers on a timely basis, which could lead to customer
dissatisfaction and could harm our reputation and ability to compete. We currently acquire various component parts for our shippers
from various independent manufacturers in the United States. We would likely experience significant delays or cessation in producing
our shippers if a labor strike, natural disaster or other supply disruption were to occur at any of our main suppliers. If we
are unable to procure a component from one of our manufacturers, we may be required to enter into arrangements with one or more
alternative manufacturing companies, which may cause delays in producing our shippers. In addition, because we depend (in part)
on third party manufacturers, our profit margins may be lower, which will make it more difficult for us to achieve profitability.
To date, we have not experienced any material delay that has adversely impacted our operations. As our business develops it becomes
more likely that such problems could arise.
If we experience delays
or interruption in shipping due to factors outside of our control, such disruption could lead to customer dissatisfaction and
harm our reputation.
We rely on third
party shipment and carrier services to transport our shippers containing biological material. These third party operations could
be subject to natural disasters, adverse weather conditions, other business disruptions, and carrier error, which could cause
delays in the delivery of our shippers, which in turn could cause serious harm to the biological material being shipped. As a
result, any prolonged delay in shipment, whether due to technical difficulties, power failures, break-ins, destruction or damage
to carrier facilities as a result of a natural disaster, fire, or any other reason, could result in damage to the contents of
the shipper. If we are unable to cause the delivery of our shippers in a timely matter and without damage, this could also harm
our operating results and our reputation, even if we are not at fault.
Our Cryoportal™
software platform may be subject to intentional disruption that could adversely impact our reputation and future revenues.
We have implemented
our Cryoportal™ software platform which is used by our customers and business partners to automate the entry of orders,
prepare customs documentation and facilitate status and location monitoring of shipped orders while in transit. Although we believe
we have sufficient controls in place to prevent intentional disruptions, we could be a target of cyber attacks specifically designed
to impede the performance of the Cryoportal™ software platform. Similarly, experienced computer programmers may
attempt to penetrate our Cryoportal™ software platform in an effort to search for and misappropriate proprietary or confidential
information or cause interruptions of our services. Because the techniques used by such computer programmers to access or sabotage
networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques.
Our activities could be adversely affected and our reputation, brand and future sales could be harmed if such intentionally disruptive
efforts were successful.
Our solutions and services
may expose us to liability in excess of our current insurance coverage.
Our solutions and
services involve significant risks of liability, which may substantially exceed the revenues we derive from them. We cannot predict
the magnitude of these potential liabilities. We currently maintain general liability insurance, with coverage in the amount of
$1 million per occurrence, subject to a $2 million annual limitation, and product liability insurance with a $1 million annual
coverage limitation. Claims may be made against us that exceed these limits.
Our liability policy
is an “occurrence” based policy. Thus, our policy is complete when we purchased it and following cancellation of the
policy it continues to provide coverage for future claims based on conduct that took place during the policy term. Our insurance
coverage, however, may not protect us against all liability because our policies typically have various exceptions to the claims
covered and also require us to assume some costs of the claim even though a portion of the claim may be covered. In addition,
if we expand into new markets, we may not be aware of the need for, or be able to obtain insurance coverage for such activities
or, if insurance is obtained, the dollar amount of any liabilities incurred could exceed our insurance coverage. A partially or
completely uninsured claim, if successful and of significant magnitude, could have a material adverse effect on our business,
financial condition and results of operations.
Complying with certain
regulations that apply to shipments using our solutions can limit our activities and increase our cost of operations.
Shipments using our
solutions and services are subject to various regulations in the various countries in which we operate. For example, shipments
using our solutions may be required to comply with the shipping requirements promulgated by the CDC, the Occupational Safety and
Health Organization (“OSHA”), the Department of Transportaion (“DOT”) as well as rules established by
the IATA and the ICAO. Additionally, our data logger may be subject to regulation and certification by the Food and Drug Administration
(“FDA”), Federal Communications Commission (“FCC”), and the Federal Aviation Administration (“FAA”).
We will need to ensure that our solutions and services comply with relevant rules and regulations to make our solutions and services
marketable, and in some cases compliance is difficult to determine. Significant changes in such regulations could require costly
changes to our solutions and services or prevent use of our shippers for an extended period of time while we seek to comply with
changed regulations. If we are unable to comply with any of these rules or regulations or fail to obtain any required approvals,
our ability to market our solutions and services may be adversely affected. In addition, even if we are able to comply with these
rules and regulations, compliance can result in increased costs. In either event, our financial results and condition may be adversely
affected. We depend on our business partners and unrelated and frequently unknown third party agents in foreign countries to act
on our behalf to complete the importation process and to make delivery of our shippers to the final user. The failure of these
third parties to perform their duties could result in damage to the contents of the shipper resulting in customer dissatisfaction
or liability to us, even if we are not at fault.
If we cannot compete
effectively, we will lose business.
Our services and
solutions are positioned to be competitive in the life sciences cold-chain logistics market. While there are technological and
marketing barriers to entry, we cannot guarantee that the barriers we are capable of producing will be sufficient to defend the
market share we wish to gain against current and future competitors. Our principal competitive considerations in our market include:
| · | financial resources
to allocate to proper marketing and an appropriate sales effort |
| · | acceptance of
our solutions model |
| · | acceptance of
our solutions including per use fee structures and other charges for services |
| · | keeping up technologically
with ongoing development of enhanced features and benefits |
| · | reductions in
the delivery costs of competitors’ solutions |
| · | the ability
to develop and maintain and expand strategic alliances |
| · | establishing
our brand name |
| · | our ability
to deliver our solutions to our customers when requested |
| · | our timing of
introductions of new solutions, and services |
| · | financial resources
to support working capital needs and required capital investments in infrastructure |
Current
and prospective competitors have substantially greater resources, more customers, longer operating histories, greater name recognition
and more established relationships in the industry. As a result, these competitors may be able to develop and expand their networks
and product offerings more quickly, devote greater resources to the marketing and sale of their solutions and adopt more aggressive
pricing policies. In addition, these competitors have entered and will likely continue to enter into business relationships to
provide additional solutions competitive to those we provide or plan to provide.
If we
successfully develop products and/or services, but those products and/or services do not achieve and maintain market acceptance,
our business will not be profitable.
The degree of acceptance
of our Cryoport Express ® Solutions or any future products or services by our current target markets, and any other
markets to which we attempt to sell our products and services, and our profitability and growth will depend on a number of factors
including, among others:
| · | our
shippers’ ability to perform and preserve the integrity of the materials shipped |
| · | relative
convenience and ease of use of our shipper and/or CryoportalTM |
| · | availability
of alternative products |
| · | pricing
and cost effectiveness |
| · | effectiveness
of our or our collaborators’ sales and marketing strategy |
| · | the
adoption cycles of our targeted customers |
If any products or
services we may develop do not achieve market acceptance, then we may not generate sufficient revenue to achieve or maintain profitability.
In addition, even
if our products and services achieve market acceptance, we may not be able to maintain that market acceptance over time if new
products or services are introduced that are more favorably received than our products and services, are more cost effective,
or render our products obsolete.
We may not be able to
compete with our competitors in the industry because many of them have greater resources than we do.
We expect to continue
to experience significant and increasing levels of competition in the future. In addition, there may be other companies which
are currently developing competitive products and services or which may in the future develop technologies and products that are
comparable, superior or less costly than our own. For example, some cryogenic equipment manufacturers with greater resources currently
have solutions for storing and transporting cryogenic liquid and gasses and may develop storage solutions that compete with our
products. Additionally, some specialty couriers with greater resources currently provide dry ice transportation and may develop
other products in the future, both of which compete with our products. A competitor that has greater resources than us may be
able to bring its product to market faster than we can and offer its product at a lower price than us to establish market share.
We may not be able to successfully compete with a competitor that has greater resources and such competition may adversely affect
our business.
Risks Relating to Our Current Financing
Arrangements
Certain of our existing
stockholders own and have the right to acquire a substantial number of shares of common stock.
As of July 31, 2014,
our directors, executive officers and beneficial owners of 5% or more of our outstanding common stock beneficially owned 13,642,288
shares of common stock (without regard to beneficial ownership limitations contained in certain warrants) assuming their exercise
of all outstanding preferred stock, warrants and options that are exercisable within 60 days of July 31, 2014 or approximately
19.2% of our outstanding common stock. Of these shares of common stock, 3,449,625 shares, or approximately 5.4% of our common
stock, will be beneficially owned by Cranshire Capital Master Fund. As such, the concentration of beneficial ownership of our
common stock may have the effect of delaying or preventing a change in control of Cryoport and may adversely affect the voting
or other rights of other holders of our common stock.
The sale of substantial
shares of our common stock may depress our stock price.
As of July 31, 2014,
there were 60,037,846 shares of our common stock outstanding. Substantially all of these shares of common stock are eligible for
trading in the public market. The market price of our common stock may decline if our stockholders sell a large number of shares
of our common stock in the public market, or the market perceives that such sales may occur.
We could also issue
up to 94,314,293 shares of our common stock including shares to be issued upon the conversion of outstanding preferred stock,
exercise of outstanding warrants and options or reserved for future issuance under our stock incentive plans, as further described
in the following table:
| | |
Number of
Shares of
Common Stock
Issuable or
Reserved for
Issuance | |
| | |
| |
| Common stock issuable upon conversion
of outstanding preferred stock | |
| 9,052,170 | |
| Common stock issuable upon exercise of outstanding
warrants | |
| 64,167,038 | |
| Common stock issuable upon exercise
of outstanding options or reserved for future incentive awards under our stock incentive plans | |
| 21,095,085 | |
| | |
| | |
| Total | |
| 94,314,293 | |
Of the total options
and warrants outstanding as of March 31, 2014, options and warrants exercisable for an aggregate of 68,170,852 shares of common
stock would be considered dilutive to the value of our stockholders’ interest in Cryoport because we would receive upon
exercise of such options and warrants an amount per share that is less than the market price of our common stock on March 31,
2014.
Our stock price has been
and will likely continue to be volatile.
The market price
of our common stock has been highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control, including, but not limited to:
| · | technological
innovations or new solutions and services by us or our competitors |
| · | additions or
departures of key personnel |
| · | sales of our
common stock |
| · | our ability
to execute our business plan |
| · | our operating
results being below expectations |
| · | loss of any
strategic relationship |
| · | economic and
other external factors |
| · | period-to-period
fluctuations in our financial results |
In addition, the
securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our
common stock and warrants.
If equity research analysts
do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock and
warrants, the price of our common stock and warrants could decline.
The trading market
for our common stock and warrants relies in part on the research and reports that equity research analysts publish about us and
our business. We do not control these analysts. The price of our common stock and warrants could decline if one or more equity
analyst downgrades our stock or if analysts downgrade our stock or issue other unfavorable commentary or cease publishing reports
about us or our business.
We have not paid dividends
on our common stock in the past and do not expect to pay dividends in the foreseeable future. Any return on investment may be
limited to the value of our common stock.
We have never paid
cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends
on our common stock will depend on our earnings, financial condition and other business and economic factors affecting us at such
time as the Board of Directors may consider the payment of any such dividends. If we do not pay dividends, our common stock may
be less valuable because a return on your investment will only occur if the price of our common stock appreciates.
We need additional capital,
and the sale of additional shares of common stock or other equity securities could result in additional dilution to our stockholders.
Our current cash
and cash equivalents and anticipated cash flow from operations are insufficient to meet our cash needs. We require additional
cash resources to fund our operations and may require additional funds in the future due to changed business conditions or other
future developments, including any investments or acquisitions we may decide to pursue. The sale of additional equity securities,
or debt securities convertible into equity securities, could result in additional dilution to our stockholders. The incurrence
of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that
would restrict our operations.
Our Articles of Incorporation
allows our Board of Directors to issue up to 2,500,000 shares of “blank check” preferred stock.
Our Articles of Incorporation
allows our Board of Directors to issue up to 2,500,000 shares of “blank check” preferred stock, without action by
our stockholders. Currently, 800,000 shares of the authorized preferred stock have been designated as Class A Convertible Preferred
Stock (“Preferred Stock”). We contemplate the Preferred Stock offered will utilize up to 800,000 of such authorized
shares resulting in the potential for 1,700,000 shares that could be issued on terms determined by our Board of Directors, and
may have rights, privileges and preferences superior to those of our the Preferred Stock previously offered hereby or the common
stock into which it may be converted. Without limiting the foregoing, (i) such shares of preferred stock could have liquidation
rights that are senior to the liquidation preference applicable to our common stock and Preferred Stock, (ii) such shares of preferred
stock could have voting or conversion rights, which could adversely affect the voting power of the holders of our common stock
and Preferred Stock and (iii) the ownership interest of holders of our common stock will be diluted following the issuance of
any such shares of preferred stock. In addition the issuance of such shares of blank check preferred stock could have the effect
of discouraging, delaying or preventing a change of control of our Company.
Provisions in our bylaws
and Nevada law might discourage, delay or prevent a change of control of our Company or changes in our management and, as a result,
may depress the trading price of our common stock.
Provisions of our
bylaws and Nevada law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may
consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock.
The relevant bylaw provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
These provisions include advance notice requirements for stockholder proposals and nominations, and the ability of our Board of
Directors to make, alter or repeal our bylaws.
Absent approval of
our Board of Directors, our bylaws may only be amended or repealed by the affirmative vote of the holders of at least a majority
of our outstanding shares of capital stock entitled to vote.
In addition, Section 78.438
of the Nevada Revised Statutes prohibits a publicly-held Nevada corporation from engaging in a business combination with an interested
stockholder (generally defined as a person which together with its affiliates owns, or within the last three years has owned,
10% of our voting stock, for a period of two years after the date of the transaction in which the person became an interested
stockholder) unless the business combination is approved in a prescribed manner.
The existence of
the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay
in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood
that you could receive a premium for your common stock in an acquisition.
Even though we are not
incorporated in California, we may become subject to a number of provisions of the California General Corporation Law.
Section 2115(b)
of the California Corporations Code imposes certain requirements of California corporate law on corporations organized outside
California that, in general, are doing more than 50% of their business in California and have more than 50% of their outstanding
voting securities held of record by persons residing in California. While we are not currently subject to Section 2115(b),
we may become subject to it in the future.
The following summarizes
some of the principal differences which would apply if we become subject to Section 2115(b).
Under both Nevada
and California law, cumulative voting for the election of directors is permitted. However, under Nevada law cumulative voting
must be expressly authorized in the Articles of Incorporation and our Amended and Restated Articles of Incorporation do not authorize
cumulative voting. If we become subject to Section 2115(b), we may be required to permit cumulative voting if any stockholder
properly requests to cumulate his or her votes.
Under Nevada law,
directors may be removed by the stockholders only by the vote of two-thirds of the voting power of the issued and outstanding
stock entitled to vote. However, California law permits the removal of directors by the vote of only a majority of the outstanding
shares entitled to vote. If we become subject to Section 2115(b), the removal of a director may be accomplished by a majority
vote, rather than a vote of two-thirds, of the stockholders entitled to vote.
Under California
law, the corporation must take certain steps to be allowed to provide for greater indemnification of its officers and directors
than is provided in the California Corporation Code. If we become subject to Section 2115(b), our ability to indemnify our
officers and directors, to the extent permitted in our Articles of Incorporation, Bylaws and under Nevada law, may be limited
by California law.
Nevada law permits
distributions to stockholders as long as, after the distribution, (i) the corporation would be able to pay its debts as they
become due and (ii) the corporation’s total assets are at least equal to its liabilities and preferential dissolution
obligations. Under California law, distributions may be made to stockholders as long as the corporation would be able to pay its
debts as they mature and either (i) the corporation’s retained earnings equal or exceed the amount of the proposed
distributions, or (ii) after the distributions, the corporation’s tangible assets are at least 125% of its liabilities
and the corporation’s current assets are at least equal to its current liabilities (or, 125% of its current liabilities
if the corporation’s average operating income for the two most recently completed fiscal years was less than the average
of the interest expense of the corporation for those fiscal years). If we become subject to Section 2115(b), we will have
to satisfy more stringent financial requirements to be able to pay dividends to our stockholders. Additionally, stockholders may
be liable to the corporation if we pay dividends in violation of California law.
California law permits
a corporation to provide “supermajority vote” provisions in its Articles of Incorporation, which would require specific
actions to obtain greater than a majority of the votes, but not more than 66 2 / 3 percent. Nevada law does
not permit supermajority vote provisions. If we become subject to Section 2115(b), it is possible that our stockholders would
vote to amend our Articles of Incorporation and require a supermajority vote for us to take specific actions.
Under California
law, in a disposition of substantially of all the corporation’s assets, if the acquiring party is in control of or under
common control with the disposing corporation, the principal terms of the sale must be approved by 90 percent of the stockholders.
Although Nevada law does contain certain rules governing interested stockholder business combinations, it does not require similar
stockholder approval. If we become subject to Section 2115(b), we may have to obtain the vote of a greater percentage of
the stockholders to approve a sale of our assets to a party that is in control of, or under common control with, us.
California law places
certain additional approval rights in connection with a merger if all of the shares of each class or series of a corporation are
not treated equally or if the surviving or parent party to a merger represents more than 50 percent of the voting power of the
other corporation prior to the merger. Nevada law does not require such approval. If we become subject to Section 2115(b),
we may have to obtain the vote of a greater percentage of the stockholders to approve a merger that treats shares of a class or
series differently or where a surviving or parent party to the merger represents more than 50% of the voting power of the other
corporation prior to the merger.
California law requires
the vote of each class to approve a reorganization or a conversion of a corporation into another entity. Nevada law does not require
a separate vote for each class. If we become subject to Section 2115(b), we may have to obtain the approval of each class
if we desire to reorganize or convert into another type of entity.
California law provides
greater dissenters’ rights to stockholders than Nevada law. If we become subject to Section 2115(b), more stockholders
may be entitled to dissenters’ rights, which may limit our ability to merge with another entity or reorganize.
Our stock is deemed to
be penny stock.
Our stock is currently
traded on the OTCQB, operated by the OTC Markets Group, Inc., and is subject to the “penny stock rules” adopted pursuant
to Section 15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The penny stock rules apply
to companies not listed on a national exchange whose common stock trades at less than $5.00 per share or which have tangible net
worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). Such rules require, among
other things, that brokers who trade “penny stock” to persons other than “established customers” complete
certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading
in the security, including a risk disclosure document and quote information under certain circumstances. Penny stocks sold in
violation of the applicable rules may entitle the buyer of the stock to rescind the sale and receive a full refund from the broker.
Many brokers have
decided not to trade “penny stock” because of the requirements of the penny stock rules and, as a result, the number
of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the “penny
stock rules” for any significant period, there may develop an adverse impact on the market, if any, for our securities.
Because our securities are subject to the “penny stock rules,” investors will find it more difficult to dispose of
our securities. Further, for companies whose securities are traded in the OTC Bulletin Board, it is more difficult: (i) to obtain
accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News
Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.
If we
fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our
financial results, and current and potential stockholders may lose confidence in our financial reporting.
We are required by
the SEC to establish and maintain adequate internal control over financial reporting that provides reasonable assurance regarding
the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting
principles. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose
any changes and material weaknesses in those internal controls.
Any failure to maintain
such internal controls in the future could adversely impact our ability to report our financial results on a timely and accurate
basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise,
if our financial statements are not filed on a timely basis as required by the SEC and the OTC Bulletin Board, we could face severe
consequences from those authorities. In either case, there could result a material adverse effect on our business. Inferior internal
controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect
on the trading price of our stock.
Our publicly-filed SEC
reports are reviewed by the SEC from time to time and any significant changes required as a result of any such review may result
in material liability to us and have a material adverse impact on the trading price of our common stock.
The reports of publicly-traded
companies are subject to review by the SEC from time to time for the purpose of assisting companies in complying with applicable
disclosure requirements and to enhance the overall effectiveness of companies’ public filings, and reviews of such reports
are now required at least every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time, and
we could be required to modify or reformulate information contained in prior filings as a result of an SEC review. Any modification
or reformulation of information contained in such reports could be significant and could result in material liability to us and
have a material adverse impact on the trading price of our common stock.
FORWARD LOOKING
STATEMENTS
This prospectus contains
forward-looking statements. All statements other than statements of historical fact contained in this prospectus, including statements
regarding our future results of operations and financial position, business strategy and plans and objectives of management for
future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements.
In some cases, you
can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,”
“plans,” “anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential,”
“continue,” or the negative of these terms or other similar words. These statements are only predictions. We have
based these forward-looking statements largely on our current expectations and projections about future events and financial trends
that we believe may affect our business, financial condition and results of operations. We discuss many of the risks in greater
detail under the heading “Risk Factors.” Also, these forward-looking statements represent our estimates and assumptions
only as of the date of this prospectus. Forward-looking statements in this prospectus include, but are not necessarily limited
to, those relating to:
| · | our
intention to introduce new products or services, |
| · | our
expectations about the markets for our products or services, |
| · | our
expectations about securing strategic relationships with global couriers or large clinical
research organization, |
| · | our
future capital needs, |
| · | results
of our research and development efforts, and |
| · | success
of our patent applications. |
Forward-looking statements
are subject to risks and uncertainties, certain of which are beyond our control. Actual results could differ materially from those
anticipated as a result of the factors described in “Risk Factors” in this prospectus and detailed in our other SEC
filings, including among others:
| · | the
effect of regulation by United States and foreign governmental agencies, |
| · | research
and development efforts, including delays in developing, or the failure to develop, our
products, |
| · | the
development of competing or more effective products by other parties, |
| · | uncertainty
of market acceptance of our products, |
| · | errors
in business planning attributable to insufficient market size or segmentation data, |
| · | problems
that we may face in manufacturing, marketing, and distributing our products, |
| · | problems
that we may encounter in further development of Cryoport Express® Solutions,
which includes the cloud-based logistics management software branded as Cryoportal™, |
| · | our
inability to raise additional capital when needed, |
| · | delays
in the issuance of, or the failure to obtain, patents for certain of our products and
technologies, |
| · | problems
with important suppliers and strategic business partners, and |
| · | difficulties
or delays in establishing marketing relationships with international couriers. |
Because of these
risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus might not transpire. Except
for our ongoing obligations to disclose material information as required by the federal securities laws, we undertake no obligation
to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. All of the above factors are difficult to predict, contain uncertainties that
may materially affect our actual results and may be beyond our control. New factors emerge from time to time, and it is not possible
for our management to predict all of such factors or to assess the effect of each factor on our business.
This prospectus also
contains estimates and other industry and statistical data developed by independent parties and by us relating to market size,
growth, and segmentation of markets. This data involves a number of assumptions and limitations, and you are cautioned not to
give undue weight to such estimates. We have not independently verified these estimates generated by independent parties and contained
in this prospectus and, accordingly, we cannot guarantee their accuracy or completeness. In addition, projections, assumptions,
and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject
to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this
prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the
independent parties and by us.
USE OF PROCEEDS
Each of the selling
security holders will receive all of the net proceeds from the sale of shares by that holder. We will not receive any of the net
proceeds from the sale of the shares. The selling security holders will pay any underwriting discounts and commissions and expenses
incurred by the selling security holders for brokerage, accounting, tax or legal services, or any other expenses incurred by the
selling security holders in offering or selling their shares. We will bear all other costs, fees, and expenses incurred in effecting
the registration of the shares covered by this prospectus, including, without limitation, blue sky registration and filing fees,
and fees and expenses of our counsel and accountants.
A portion of the
shares covered by this prospectus are, prior to their sale under this prospectus, issuable upon exercise of warrants. If all of
the warrants are exercised for cash at their then current exercise prices per share, we will receive an aggregate of $23,414,400
from such exercises. We will use such proceeds from any warrant exercises for working capital and other corporate purposes.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is
traded on the OTCQB, operated by the OTC Markets Group, Inc. under the symbol “CYRX”. The high and low closing sale
prices of our common stock reported by OTCQB during the periods indicated were as follows:
| | |
High | | |
Low | |
| Year 2015: | |
| | | |
| | |
| First Quarter Ended June 30, 2014 | |
$ | 0.53 | | |
$ | 0.35 | |
| | |
| | | |
| | |
| Year 2014: | |
| | | |
| | |
| Fourth Quarter Ended March 31, 2014 | |
$ | 0.57 | | |
$ | 0.34 | |
| Third Quarter Ended December 31, 2013 | |
$ | 0.55 | | |
$ | 0.30 | |
| Second Quarter Ended September 30, 2013 | |
$ | 0.52 | | |
$ | 0.23 | |
| First Quarter Ended June 30, 2013 | |
$ | 0.56 | | |
$ | 0.16 | |
| | |
| | | |
| | |
| Year 2013 | |
| | | |
| | |
| Fourth Quarter Ended March 31, 2013 | |
$ | 0.61 | | |
$ | 0.33 | |
| Third Quarter Ended December 31, 2012 | |
$ | 0.39 | | |
$ | 0.11 | |
| Second Quarter Ended September 30, 2012 | |
$ | 0.51 | | |
$ | 0.19 | |
| First Quarter Ended June 30, 2012 | |
$ | 0.70 | | |
$ | 0.37 | |
Number of Stockholders
As of July 31, 2014, there were 233 record
holders of our common stock.
Dividend Policy
No dividends on
common stock have been declared or paid by the Company. As of June 30, 2014 and March 31, 2014, the Company had cumulative,
undeclared, dividends that have not been accrued related to its outstanding preferred stock of $27,700 and $0, respectively.
The Company intends to employ all available funds for the development of its business and, accordingly, does not intend to
pay any cash dividends in the foreseeable future.
Securities Authorized For Issuance Under Equity Compensation
Plans
We currently maintain
three equity compensation plans, referred to as the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009 Stock Incentive
Plan (the “2009 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). Our Compensation Committee
is responsible for making, reviewing and recommending grants of options and other awards under these plans which are approved
by the Board.
The 2002 Plan, which
was approved by our stockholders in October 2002, allows for the grant of options to purchase up to 500,000 shares of the Company’s
common stock. The 2002 Plan provides for the granting of options to purchase shares of our common stock at prices not less than
the fair market value of the stock at the date of grant and generally expire 10 years after the date of grant. The stock options
are subject to vesting requirements, generally three or four years. The 2002 Plan also provides for the granting of restricted
shares of common stock subject to vesting requirements. As of July 31, 2014, no shares are available for future issuances as the
2002 Plan has expired.
The 2009 Plan, which
was approved by our stockholders at our 2009 Annual Meeting of Stockholders held on October 9, 2009, provides for the grant
of stock-based incentives. The 2009 Plan allows for the grant of up to 1,200,000 shares of our common stock for awards to our
officers, directors, employees and consultants. The 2009 Plan provides for the grant of incentive stock options, nonqualified
stock options, restricted stock rights, restricted stock, performance share units, performance shares, performance cash awards,
stock appreciation rights, and stock grant awards. The 2009 Plan also permits the grant of awards that qualify for the “performance-based
compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed by Section 162(m) of
the Code. As of July 31, 2014, a total of 303,768 shares of our common stock remained available for future grants under the 2009
Plan.
The 2011
Plan, as amended, which was approved by our stockholders at our 2011 Annual Meeting of Stockholders held on
September 22, 2011 and, with respect to the amendments, at our 2012, 2013 and 2014 Annual Meeting of Stockholders held
on September 13, 2012, September 6, 2013 and August 29, 2014, respectively, provides for the grant of stock-based incentives.
The 2011 Plan allows for the grant of up to 13,900,000 shares of our common stock for awards to our officers, directors,
employees and consultants. The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options,
restricted stock rights, restricted stock, performance share units, performance shares, performance cash awards, stock
appreciation rights, and stock grant awards. The 2011 Plan also permits the grant of awards that qualify for the
“performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed
by Section 162(m) of the Code. Awards may be granted under the 2011 Plan until September 21, 2021 or until all
shares available for Awards under the 2011 Plan have been purchased or acquired unless the stockholders of the Company vote
to approve an extension of the 2011 Plan prior to such expiration date. As of July 31, 2014, a total of 8,468,042 shares
remained available for future grants under the 2011 Plan.
In addition to the
stock options issued pursuant to the Company’s three stock incentive plans, the Company has granted warrants to employees,
officers, non-employee directors and consultants. The warrants are generally not subject to vesting requirements and have ten-year
terms.
The following table
sets forth certain information as of July 31, 2014 concerning the Company’s common stock that may be issued upon the exercise
of options or warrants or pursuant to purchases of stock under the 2002 Plan, the 2009 Plan, the 2011 Plan and other stock based
compensation:
| Plan Category | |
(a)
Number of Securities
to be Issued Upon the
Exercise of
Outstanding Options
and Warrants | | |
(b)
Weighted-Average
Exercise Price of
Outstanding
Options and
Warrants | | |
(c)
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a)) | |
| Equity compensation plans approved by
stockholders | |
| 5,774,698 | | |
$ | 0.47 | | |
| 8,771,810 | |
| Equity compensation plans
not approved by stockholders(1) | |
| 6,811,432 | | |
$ | 0.57 | | |
| N/A | |
| | |
| | | |
| | | |
| | |
| | |
| 12,586,130 | | |
| | | |
| 8,771,810 | |
| (1) | During
November 5, 2012 through July 31, 2014, a total of 6,548,577 options were granted to
employees outside of an option plan. In the past the Company has issued warrants to purchase
327,415 shares of common stock in exchange for services provided to the Company, of which
warrants to purchase 262,855 shares of common stock are outstanding. The exercise prices
ranged from $2.80 to $10.80 and generally vested upon issuance. Fifteen consultants and
former officers and directors received warrants to purchase 327,415 shares of common
stock in this manner. |
DETERMINATION OF THE OFFERING PRICE
The securities may
be sold in one or more transactions at prevailing market prices at the time of the sale on the over-the counter bulletin board
or at privately negotiated prices determined at the time of sale.
DILUTION
We are not selling
any of the shares of common stock in this offering. All of the shares sold in this offering will be held by the Selling Security
Holders at the time of the sale, so that no dilution will result from the sale of the shares.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with our consolidated financial statements
and related notes that appear elsewhere in this prospectus. In addition to historical consolidated financial information, the
following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences
include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.” We caution the reader
not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date
of this prospectus. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring
after the date of this prospectus.
General Overview
We provide leading
edge frozen logistics solutions to the life sciences industry. Since 2011, through the completion of the combination of our
purpose-built and patented packaging, purpose-built cold chain logistics software platform information technologies
and developed logistics knowhow known as “total turnkey management” we have provided logistics solutions for frozen
shipping to the life sciences industry. Our solutions are disruptive to “older technologies” as they are more comprehensive
and provide reliable, economic alternatives to existing products and services utilized for frozen shipping in the life sciences
industry including stem cells, cell lines, vaccines, diagnostic materials, semen and embryos for in-vitro fertilization, cord
blood, bio-pharmaceuticals, infectious substances and other items that require continuous exposure to frozen or cryogenic temperatures.
In addition, our solutions can contribute significantly to the effectiveness, reliability and efficiency of clinical trials.
Cryoport Express®
Solutions include a cloud-based logistics management software platform branded as the CryoportalTM. The
CryoportalTM software platform supports the management of the entire logistics process through a single interface
which includes initial order input, document preparation, customs clearance, courier management, shipment tracking, issue resolution,
and delivery. Cryoport’s total turnkey logistics solutions offer convenience, reliability and cost effectiveness,
while the use of recyclable and reusable components provides “green,” environmentally friendly solutions. The CryoportalTM
provides an array of unique information dashboards and validation documentation for every shipment.
Integral
to our logistics solutions are our Cryoport Liquid Nitrogen Dry Vapor Shippers (Cryoport Express® Shippers),
which provide packaging that is cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing
innovative liquid nitrogen (LN2) “dry vapor” technology. Cryoport Express® Shippers
are non-hazardous, IATA certified, and validated to maintain stable temperatures of minus 150° Celsius for a 10-plus day dynamic
shipment period. The Company currently features two Cryoport Express® Shipper
models, the Standard Dry Shipper (holding up to approximately 75-2.0 ml vials) and the High Volume Dry Shipper (holding up to
approximately 500-2.0 ml vials).
The Cryoport Express®
Solutions includes document preparation, intervention capability, and recording and retaining a fully documented “chain-of-custody”
and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy,
and stability of shipped commodities shipped. This recorded and archived information allows our customers to meet the exacting
requirements necessary for scientific work and for regulatory purposes. When a customized solution is not required, Cryoport Express®
Solutions can be used by customers as a “turnkey” solution through direct access to the cloud-based CryoportalTM
or by contacting Cryoport Client Care for order entry tasks. Cryoport provides 24/7/365 logistics services through its Client
Care team and also provides complete training and process management services to support each client’s specific requirements.
Amongst our solutions,
we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting Cryoport
Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into inner chamber of the shipper. The customer then closes the shipper and reseals
the shipping box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up.
Cryoport arranges for the pick-up of the parcel by a shipping service provider for delivery to the customer’s intended recipient.
The recipient simply opens the box and shipper and removes the frozen commodity. The recipient only needs to reseal the
box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set out for pre-arranged carrier pick
up. The Cryoport Express® Shipper is returned to us for cleaning, quality assurance testing, recharging and reuse
of the Cryoport Express® Shipper.
In late 2012, we
shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics solutions
provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution,” we also provide the following value-added solutions that were developed to address our various clients’
needs:
| · | “Customer
Staged Solution,” under which we supply an inventory of our Cryoport Express®
Shippers to our customer, in an uncharged state, enabling our customer (after training/certification)
to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with
shipping and delivery service providers for the transportation of the package. Once the
order is released, our customer services professionals monitor the shipment and the return
of the shipper to us for cleaning, quality assurance testing, and reuse. |
| · | “Customer
Managed Solution,” a limited customer implemented solution, whereby we
supply our Cryoport Express® Shippers to clients in a fully charged state, but leaving
it to the client to manage the shipping, including the selection of the shipping and
delivery service provider and the return of the shipper to us. Under this Solution, the
customer accepts a significant level of the risk for a successful shipment. |
| · | “Powered
by CryoportSM” is made available to providers of shipping and
delivery services who seek to offer a “branded” cryogenic shipping solution
as part of their service offerings. By negotiation, this solution can be private labeled
as long as “powered by CryoportSM” appears prominently
on the offering software interface and prominently on the packaging. |
| · | “Integrated
Solution” is our most comprehensive and complex
outsourcing solution. It usually involves our management of the entire cryogenic logistics
process for our client, including the location of our employees at the client’s
site to manage the client’s cryogenic logistics, in total. |
| · | “Life
Science Point-of-Care Repository Solution” whereby we supply our Cryoport
Express® Shippers to ship and store cryogenically preserved life science
products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care
site, with the Cryoport Express® Shippers serving as a temporary freezer/repository
enabling the efficient distribution of temperature sensitive allogeneic cell-based therapies
without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined
process including the shipment’s return to Cryoport where the Cryoport Express®
Shipper is cleaned, tested for quality assurance and then returned to inventory
for reuse. |
| · | “Personalized
Medicine and Cell-based Immunotherapy Solution” whereby our Cryoport Express®
Solutions serves as an enabling technology for the safe manufacture of the rapidly
expanding autologous cellular-based immunotherapy market by providing a comprehensive
logistics solution for the verified chain of custody and condition transport from, (a)
the collection of the patient’s cells in a hospital setting, to (b) a central processing
facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically
preserved return of these irreplaceable cells to a point-of-care treatment facility.
The Cryoport Express® Shippers can then serve as a temporary freezer/repository
to allow the efficient distribution of this personalized medicine to patients when and
where they need it most without the expense, inconvenience, and potential costly failure
of an on-sight, cryopreservation apparatus. Our customer services professionals monitor
each shipment throughout the predetermined process including the shipment’s return
to Cryoport where the Cryoport Express® Shipper is cleaned, tested for
quality assurance and then returned to inventory for reuse. |
One of our
distribution partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen
shipping logistics services through the combination of our purpose-built proprietary technologies and turnkey management processes.
FedEx markets and sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx®
Deep Frozen Shipping Solution on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked
closely with FedEx to further align its sales efforts and accelerate penetration within FedEx’s life sciences customer base
through improved processes, sales incentives, joint customer calls and more frequent communication at the sales and executive
level. In addition, FedEx has developed a FedEx branded version of the CryoportalTM software platform, which is “powered
by Cryoport” for use by FedEx and its customers giving them access to the full capabilities of our logistics management
platform.
In January 2013, we
entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with a
non-exclusive license and right to use a customized version of our CryoportalTM for the management of shipments made
by FedEx customers. The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx
Agreement, expires on December 31, 2015. FedEx has the right to terminate this agreement at any time for convenience upon 180
days’ notice.
In June 2014, we
added DHL as our second distribution partner by entering into an agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”),
whereby DHL can offer our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global
basis. This relationship with DHL is a further implementation of the Company’s expansion of distribution partnerships under
the “powered by CryoportSM” model described above, allowing us to expand our sales and marketing
reach through our partners and build awareness of the benefits our validated cryogenic solution offerings. DHL has announced that
it will add 15 more certified Life Sciences stations in the second quarter of 2014 to its existing Thermonet network of 45 stations
already in operation. This expanded network will now be able to offer Cryoport’s cryogenic solutions under the DHL brands.
In addition, DHL’s customer will continue to be able to 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 platform, the CryoportalTM, is integrated to DHL’s tracking and billing systems to provide
DHL life sciences and healthcare customers with a seamless way of shipping their critical biological material worldwide.
In December 2012,
we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant
to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the CryoportalTM, to manage shipments from the Zoetis
manufacturing site in the United States to domestic customers as well as various international distribution centers. As part of
our logistics management services, Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’
logistics, ensuring products arrive at their destinations in specified conditions, on-time and with the optimum uses of resources.
The Company manages Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers.
In July 2013 the agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry
vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a
second poultry vaccine.
In February 2014, we
entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage biotechnology
company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using Cryoport
Express® Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide
Cryoport Express® Solutions to other biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s
proprietary, purpose-built cold chain logistics solutions for cell-based and advanced biologic tissue forms with Liventa’s
distribution capability to orthopedic care providers. The implementation of Cryoport’s solution will eliminate dry ice shipping
and related risks of degradation and also eliminate the need for expensive onsite cryogenic freezers for storage of cell-based
orthopedic therapies. This will enable Liventa to better serve small or mobile clinics, pharmacies, family practice, and orthopedic
specialty care providers. Surgical centers and hospitals will also benefit from better logistics and the elimination of issues
surrounding dry ice transport and storage. The agreement has an initial three-year term and may be renewed for consecutive three-year
terms, unless earlier terminated by either party. Liventa also agreed to certain performance criteria and the issuance of 150,000
shares of its common stock to Cryoport in exchange for the exclusive right to offer, market and promote Cryoport Express®
Solutions for cellular-based therapies requiring cryogenic temperatures for use in orthopedic indications in the United
States.
We
offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells
and cell lines, diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood,
vaccines, tissue, animal husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems.
These companies operate within heavily regulated environments and as such, changing vendors and distribution practices typically
require a number of steps which may include the audit of our facilities, review of our procedures, qualifying us as a vendor,
and performing test shipments. This process can take up to nine months or longer to complete prior to a potential customer adopting
one or more of our Cryoport Express® Solutions.
Going Concern
As reported in the
Report of Independent Registered Public Accounting Firm to our March 31, 2014 and 2013 consolidated financial statements,
we have incurred recurring losses and negative cash flows from operations since inception. These factors, among others, raise
substantial doubt about our ability to continue as a going concern.
We
expect to continue to incur substantial additional operating losses from costs related to the commercialization of our Cryoport
Express® Solutions and do not expect that revenues from operations will be
sufficient to satisfy our funding requirements in the near term. We believe that our cash resources at March 31, 2014, and funds
currently being raised through a preferred stock offering together with the revenues generated from our services will be sufficient
to sustain our planned operations into the second quarter of fiscal year 2015; however, we must obtain additional capital to fund
operations thereafter and for the achievement of sustained profitable operations. These factors raise substantial doubt about
our ability to continue as a going concern. We are currently working on funding alternatives in order to secure sufficient operating
capital to allow us to continue to operate as a going concern.
Future
capital requirements will depend upon many factors, including the success of our commercialization efforts and the level of customer
adoption of our Cryoport Express® Solutions as well as our ability to establish
additional collaborative arrangements. We cannot make any assurances that the sales ramp will lead to achievement of sustained
profitable operations or that any additional financing will be completed on a timely basis on acceptable terms or at all. Management’s
inability to successfully achieve significant revenue increases or its cost reduction strategies or to complete any other financing
will adversely impact our ability to continue as a going concern. To address this issue, the Company is seeking additional capitalization
to properly fund our efforts to become a self-sustaining financially viable entity.
At June 30, 2014,
we had an accumulated deficit of $88.9 million. During the quarter ended June 30, 2014, we used cash in operations of $917,000
and had a net loss of $2.3 million.
While we increased
revenue year-over-year by 142% to $2.7 million for the fiscal year ended March 31, 2014, our revenue is still significantly lower
than our operating expenses during the year and we have no assurance of the level of future revenues. We incurred a net loss of
$19.6 million and used cash of $4.4 million in our operating activities during the year ended March 31, 2014. We had negative
working capital of $2.9 million, and had cash and cash equivalents of $369,600 at March 31, 2014.
We are currently
funding our operations through a preferred stock offering (see Note 15 in the accompanying March 31, 2014 consolidated financial
statements) and plan to raise additional funds through additional debt or equity offerings to cover general working capital needs
and sales and marketing initiatives to expand our customer base and increase sales. There is no assurance that funds can be secured
or if these funds would allow us to continue our operations until more significant revenues can be generated or more funding can
be secured. These matters raise substantial doubt about our ability to continue as a going concern.
Results of Operations
Three months ended June 30, 2014 compared to three months
ended June 30, 2013:
The following table summarizes certain
information derived from our condensed consolidated statements of operations:
| | |
Three Months Ended June
30, | | |
| | |
| |
| | |
2014 | | |
2013 | | |
$ Change | | |
% Change | |
| | |
($ in 000’s) | | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 937 | | |
$ | 488 | | |
$ | 449 | | |
| 91.9 | % |
| Cost of revenues | |
| (597 | ) | |
| (433 | ) | |
| (164 | ) | |
| 37.8 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Gross margin | |
| 340 | | |
| 55 | | |
| 285 | | |
| 521.1 | % |
| Selling, general and administrative | |
| (1,428 | ) | |
| (1,222 | ) | |
| (206 | ) | |
| 16.8 | % |
| Research and development | |
| (79 | ) | |
| (93 | ) | |
| 14 | | |
| (14.5 | )% |
| Interest expense | |
| (1,129 | ) | |
| (82 | ) | |
| (1,047 | ) | |
| 1,273.0 | % |
| Change in fair value of derivative liabilities | |
| — | | |
| 18 | | |
| (18 | ) | |
| (100.0 | )% |
| Other income | |
| 1 | | |
| — | | |
| 1 | | |
| 100.0 | % |
| Provision for income taxes | |
| (2 | ) | |
| — | | |
| (2 | ) | |
| 100.0 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
$ | (2,297 | ) | |
$ | (1,324 | ) | |
$ | (973 | ) | |
| 73.6 | % |
Revenues.
We generated revenues from customers in all of our target life sciences markets, such as biotech and diagnostic companies,
pharmaceutical companies, central laboratories, contract research organizations, the reproductive medicine market/in vitro fertilization
market, and research institutions. Revenues increased $449,000 or 91.9% for the three months ended June 30, 2014, as compared
to the three months ended June 30, 2013. This increase is primarily driven by the ramp up and expansion of logistics services
provided to Zoetis, an increase in revenues in the reproductive medicine/in vitro fertilization market and an overall increase
in both, the number of customers utilizing our services and frequency of shipments compared to the prior year. Our revenues from
Zoetis increased to $284,700 for the quarter ended June 30, 2014, representing a 92.7% increase over the prior year quarter. This
is reflective of the expansion of our services, both domestically and globally, provided to Zoetis for a primary poultry vaccine,
and the addition of logistics management for a second vaccine that was introduced to the market during the fourth calendar quarter
of 2013. The increase in revenues in the reproductive medicine/in vitro fertilization market was strong compared to the prior
year quarter, with revenues increasing by 129% to $212,900. This market has proven very responsive to telemarketing activities
and email marketing campaigns.
Gross
margin and cost of revenues. Gross margin for the three months ended June 30, 2014
was 36.2% of revenues, as compared to 11.2% of revenues for the three months ended June 30, 2013. The increase in gross margin
is primarily due to the increase in revenues combined with a reduction in freight as a percentage of revenues and a decrease of
fixed manufacturing costs. Cost of revenues for the three months ended June 30, 2014 was
63.8% of revenues, as compared to 88.8% of revenues for the three months ended June 30, 2013. Our cost of revenues are primarily
comprised of freight charges, payroll and related expenses related to our operations center in California, third-party charges
for our European and Asian operations centers in Holland and Singapore, depreciation expenses of our Cryoport Express® Shippers
and supplies and consumables used for our solutions. The increase in cost of revenues is primarily due to freight charges from
the growth in shipments.
Selling, general
and administrative expenses. Selling, general and administrative expenses increased $206,000 for the three months ended
June 30, 2014 or 16.8% as compared to the three months ended June 30, 2013. The increase is primarily due to recruiting fees,
the engagement of an investor relations firm and related activities, legal fees and banking charges as a result of the higher
business volume.
Research
and development expenses. Research and development expenses decreased $14,000 or 14.5% for the three months ended June
30, 2014, as compared to the three months ended June 30, 2013. Our research and development efforts are focused on continually
improving the features of the Cryoport Express® Solutions including the Company’s
cloud-based logistics management platform, the CryoportalTM, the Cryoport Express® Shippers and
development of new packaging solutions and additional accessories to facilitate the efficient shipment of life science commodities
using our solution. We use an outside software development company and other third parties to provide some of these services.
Research and development expenses to date have consisted primarily of costs associated with continually improving the features
of the Cryoport Express® Solution including the web based customer service portal and the Cryoport Express®
Shippers. Further, these efforts are expected to lead to the introduction of shippers of varying sizes based on market requirements,
constructed of lower cost materials and utilizing high volume manufacturing methods that will make it practical to provide the
cryogenic packages offered by the Cryoport Express® Solution. Other research and development effort has been directed
toward improvements to the liquid nitrogen retention system to render it more reliable in the general shipping environment and
to the design of the outer packaging. Alternative phase change materials in place of liquid nitrogen may be used to increase the
potential markets these shippers can serve such as ambient and 2°-8°C markets.
Interest expense.
Interest expense increased $1.0 million for the three months ended June 30, 2014, as compared to the three months ended June
30, 2013. Interest expense for the three months ended June 30, 2014 included amortization of the debt discount and deferred financing
fees of approximately $1.1 million, of which $826,900 related to the fair value of the beneficial conversion feature of the 5%
Bridge Notes that was triggered by the convertible preferred stock offering, interest expense on our 5% Bridge Notes of approximately
$10,600 and accrued interest on our related party notes payable of approximately $8,200. Interest expense for the three months
ended June 30, 2013 included amortization of the deferred financing fees of approximately $51,000, interest expense on our bridge
notes of approximately $20,000 and accrued interest on our related-party notes payable of approximately $10,000.
Change in fair
value of derivative liabilities. The derivative liabilities expired in April 2014. The gain on the change in fair value
of derivative liabilities was $18,000 for the three months ended June 30, 2013 as a result of a decrease in the value of our warrant
derivatives, due primarily to a decrease in our stock price.
Results of Operations for Fiscal
2014 Compared to Fiscal 2013
The following table
summarizes certain information derived from our consolidated statements of operations:
| | |
Year Ended March 31, | | |
| | |
| |
| | |
2014 | | |
2013 | | |
$ Change | | |
% Change | |
| | |
($ in 000’s) | | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| Revenues | |
$ | 2,660 | | |
$ | 1,101 | | |
$ | 1,559 | | |
| 141.7 | % |
| Cost of revenues | |
| (2,223 | ) | |
| (1,588 | ) | |
| (635 | ) | |
| 40.0 | % |
| | |
| | | |
| | | |
| | | |
| | |
| Gross margin (loss) | |
| 437 | | |
| (487 | ) | |
| 924 | | |
| 189.7 | % |
| Selling, general and administrative | |
| (5,106 | ) | |
| (5,412 | ) | |
| 306 | | |
| (5.6 | )% |
| Research and development | |
| (409 | ) | |
| (425 | ) | |
| 16 | | |
| (3.8 | )% |
| Debt conversion expense | |
| (13,714 | ) | |
| — | | |
| (13,714 | ) | |
| 100.0 | % |
| Interest expense | |
| (784 | ) | |
| (72 | ) | |
| (712 | ) | |
| 976.6 | % |
| Change in fair value of derivative liabilities | |
| 21 | | |
| 16 | | |
| 5 | | |
| 26.5 | % |
| Other expense | |
| (8 | ) | |
| — | | |
| (8 | ) | |
| 100.0 | % |
| Provision for income taxes | |
| (2 | ) | |
| (2 | ) | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | |
| Net loss | |
$ | (19,565 | ) | |
$ | (6,382 | ) | |
$ | (13,183 | ) | |
| 206.6 | % |
Revenues.
We generated revenues from customers in all of our target life sciences markets, such as biotech and diagnostic companies,
pharmaceutical companies, central laboratories, contract research organizations, the reproductive medicine market/in vitro fertilization
market, and research institutions. Net revenues were $2.7 million for the year ended March 31, 2014, as compared to $1.1 million
for the year ended March 31, 2013. This $1.6 million or 142% increase is primarily driven by the ramp up and expansion of logistics
services provided to Zoetis, an increase in revenues in the reproductive medicine/in vitro fertilization market and an overall
increase in both, the number of customers utilizing our services and frequency of shipments compared to the prior year. Our revenues
from Zoetis increased to $820,600 for the year ended March 31, 2014 from $62,300 during the prior year. This reflects the successful
implementation and expansion of our integrated model with Zoetis, which commenced in February of 2013, whereby we manage the cryogenic
shipments of a certain vaccine, both domestically and globally, and in October of 2013 expanded our services to include the logistics
management for a second vaccine. The increase in revenues in the reproductive medicine/in vitro fertilization market was particularly
strong, with revenues increasing from $238,000 to $614,000, an increase of $376,000 or 158%. This is partially the result of targeted
telemarketing activities and email marketing campaigns to broaden the awareness of our solution in this space.
Gross
margin and cost of revenues. Gross margin for the year ended March 31, 2014 was 16.4% of revenues, as compared to
a gross loss of 44.3% of revenues for the prior year. The increase in gross margin is primarily due to the increase in net revenue
combined with a reduction in freight as a percentage of revenues and a decrease of fixed manufacturing costs. Cost
of revenues for the year ended March 31, 2014 was 83.6% of revenues, as compared to 144.3% of revenues for the prior year.
Our cost of revenues are primarily comprised of freight charges, payroll and related expenses related to our operations center
in California, third-party charges for our European and Asian operations centers in Holland and Singapore, depreciation expenses
of our Cryoport Express® Shippers and supplies and consumables used for our solutions. The increase in cost of revenues is
primarily due to freight charges from the growth in shipments.
Selling, general
and administrative expenses. Selling, general and administrative expenses decreased $306,000, or 5.6% for the year ended
March 31, 2014 as compared to the prior year. This decrease is primarily related to a severance payment of approximately
$180,000 paid to the former Chief Executive Officer in April 2012 and a decrease in board of director stock-based compensation.
Partially offsetting these decreases is an increase in compensation related to replacement of the Chief Executive Officer and
an increase in expenses related to sales and marketing activities compared to previous year.
Research
and development expenses. Research and development expenses decreased $16,000 or 3.8% for the year ended March 31,
2014, as compared to the prior year. Our research and development efforts are focused on continually improving the features of
the Cryoport Express® Solutions including the Company’s cloud-based
logistics management platform, the CryoportalTM, the Cryoport Express® Shippers and development
of additional accessories to facilitate the efficient shipment of life science commodities using our solution. We use an outside
software development company and other third parties to provide some of these services. Research and development expenses to date
have consisted primarily of costs associated with continually improving the features of the Cryoport Express® Solution
including the web based customer service portal and the Cryoport Express® Shippers. Further, these efforts are
expected to lead to the introduction of shippers of varying sizes based on market requirements, constructed of lower cost materials
and utilizing high volume manufacturing methods that will make it practical to provide the cryogenic packages offered by the Cryoport
Express® Solution. Other research and development effort has been directed toward improvements to the liquid nitrogen
retention system to render it more reliable in the general shipping environment and to the design of the outer packaging. Alternative
phase change materials in place of liquid nitrogen may be used to increase the potential markets these shippers can serve such
as ambient and 2°-8°C markets.
Debt conversion
expense. Debt conversion expense for the year ended March 31, 2014 of $13.7 million was related to the induced conversion
of $4,127,200 of aggregate principal and accrued interest from the convertible bridge notes into shares of common stock and
warrants. Debt conversion expense represents the fair value of the securities transferred in excess of the fair value of the securities
issuable upon the original conversion terms of the bridge notes. The Company calculated the fair value of the common stock
issued by using the closing price of the stock on the date of issuance. The fair value of the warrants was calculated using
the Black-Scholes option pricing model.
Interest expense.
Interest expense increased $712,000 for the year ended March 31, 2014, as compared to the prior year. Interest expense for
the year ended March 31, 2014 included amortization of the debt discount and deferred financing fees of approximately $678,900,
interest expense on our bridge notes of approximately $71,600 and accrued interest on our related party notes payable of approximately
$36,500. Interest expense for the year ended March 31, 2013 included amortization of the debt discount of approximately $17,500,
interest expense on our convertible debentures of approximately $9,900 and accrued interest on our related party notes payable
of approximately $42,200.
Change in fair
value of derivative liabilities. The gain for the year ended March 31, 2014 was the result of a decrease in the value
of our warrant derivatives, due primarily to a decrease in our stock price.
Other expense,
net. The other expense, net for the year ended March 31, 2014 is primarily due to administrative charges and foreign
exchange losses on accounts receivable and payable invoices.
Liquidity and Capital Resources
As of June 30, 2014,
the Company had cash and cash equivalents of $170,500 and negative working capital of $1.6 million. Historically, we have
financed our operations primarily through sales of our debt and equity securities.
For the three months
ended June 30, 2014, we used $917,000 of cash for operations primarily as a result of the net loss of $2.3 million offset by non-cash
expenses of $1.3 million primarily comprised of amortization of debt discount and deferred financing costs, stock-based compensation
expense, and depreciation and amortization. The net loss was also partially offset by improved collections and related reduction
in accounts receivable of $28,300. Net operating losses overall decreased primarily as a result of the increase in revenues and
improved gross margin, partially offset by increased operating expenses.
Net cash provided
by financing activities totaled $718,000 during the three months ended June 30, 2014, and resulted from proceeds from the issuance
of convertible preferred stock of $780,300 and proceeds from the exercise of stock options and warrants of $11,600, partially
offset by the repayment of convertible debentures of $50,000 and the repayment of related party notes of $24,000.
As
discussed in Note 2 of the accompanying June 30, 2014 condensed consolidated financial statements, there exists substantial
doubt regarding the Company’s ability to continue as a going concern. The Company received gross proceeds of $1.0 million
(approximately $770,700 after offering costs) in exchange for the issuance of 86,797 shares of convertible preferred stock in
the first quarter of fiscal 2015 which is further described in Note 7 in the accompanying June 30, 2014 condensed consolidated
financial statements. The funds raised are being used for working capital purposes and to continue our sales efforts to advance
the Company’s commercialization of the Cryoport Express® Solutions.
However, the Company’s management recognizes that the Company will need to obtain additional capital to fund its operations
until sustained profitable operations are achieved. Management is currently working on such funding alternatives in order to secure
sufficient operating capital through the end of fiscal year 2015. In addition, management will continue to review its operations
for further cost reductions to extend the time that the Company can operate with its current cash on hand and additional bridge
financing and to utilize third parties for services such as its international recycling and refurbishment centers to provide for
greater flexibility in aligning operational expenses with the changes in sales volumes.
Additional funding
plans may include obtaining additional capital through equity and/or debt funding sources; however, no assurance can be given
that additional capital, if needed, will be available when required or upon terms acceptable to the Company.
Off-Balance Sheet Arrangements
We do not have any
off balance sheet arrangements within the meaning of Item 303(a)(4) of Regulation S-K.
Contractual Obligations
The following table summarizes our contractual
obligations as of March 31, 2014, and the effects such obligations are expected to have on liquidity and cash flow in future
periods ($ in ‘000’s):
| | |
Total | | |
Less than
1 Year | | |
1-3 Years | | |
4-5 Years | | |
After
5 Years | |
| Contractual obligations | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating lease
obligations(1) | |
$ | 220 | | |
$ | 193 | | |
$ | 27 | | |
$ | — | | |
$ | — | |
| Bridge notes(2) | |
| 1,807 | | |
| 1,807 | | |
| — | | |
| — | | |
| — | |
| Other
obligations (3) | |
| 1,358 | | |
| 1,358 | | |
| — | | |
| — | | |
| — | |
| Total | |
$ | 3,385 | | |
$ | 3,358 | | |
$ | 27 | | |
$ | — | | |
$ | — | |
| (1) | The operating lease obligations are
primarily related to the facility lease for our principal executive office in Lake Forest,
California expiring June 30, 2015; and for our San Diego, California facility expiring
December 31, 2014. |
| | | |
| (2) | Bridge notes represent unsecured convertible
promissory notes and accrued interest at 5% per annum which were issued in the third
and fourth quarter of 2014 to certain accredited investors pursuant to the terms of subscription
agreements and letters of investment intent. All principal and accrued interest was due
June 30, 2014. These Bridge notes have since been either repaid or converted. |
| | | |
| (3) | Other obligations represent
outstanding unsecured indebtedness and accrued interest owed to four related parties
which bear interest at the rate of 6% per annum. Any unpaid principal and accrued interest
is due at maturity on various dates through March 1, 2015. |
Impact of Inflation
From time to time,
Cryoport experiences price increases from third party manufacturers and these increases cannot always be passed on to Cryoport’s
customers. While these price increases have not had a material impact on Cryoport’s historical operations or profitability
in the past, they could affect revenues in the future.
Critical Accounting Policies and Estimates
Management’s
discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this prospectus,
are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the U.S. (“U.S. GAAP”) Our significant accounting policies are described in the notes to the audited consolidated
financial statements contained elsewhere in this prospectus. Included within these policies are our “critical accounting
policies.” Critical accounting policies are those policies that are most important to the preparation of our consolidated
financial statements and require management’s most subjective and complex judgment due to the need to make estimates about
matters that are inherently uncertain. Although we believe that our estimates and assumptions are reasonable, actual results may
differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material
impact on our results of operations and/or financial condition.
We believe that the
critical accounting policies that most impact the consolidated financial statements are as described below.
Basis of Presentation
The accompanying
consolidated financial statements have been prepared in accordance with U.S. GAAP.
Principles of Consolidation
The consolidated
financial statements include the accounts of Cryoport, Inc. and its wholly owned subsidiary, Cryoport Systems, Inc. All intercompany
accounts and transactions have been eliminated.
Use of Estimates
The preparation of
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimated amounts.
The Company’s significant estimates include allowances for doubtful accounts, recoverability of long-lived assets, allowance
for inventory obsolescence, deferred taxes and their accompanying valuations, valuation of derivative liabilities and valuation
of common stock, warrants and stock options issued for products or services.
Fair Value of Financial Instruments
The Company’s
financial instruments consist of cash and cash equivalents, accounts receivable, related-party notes payable, convertible notes
payable, accounts payable and accrued expenses. The carrying value for all such instruments approximates fair value at March 31,
2014 and 2013 due to their short-term nature. The difference between the fair value and recorded values of the related party notes
payable is not significant.
Cash and Cash Equivalents
The Company considers
highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Concentrations of Credit Risk
The Company maintains
its cash accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(“FDIC”) with basic deposit insurance coverage limits up to $250,000 per owner. At March 31, 2014 and 2013, the
Company had cash balances of approximately $159,000 and $214,000, respectively, which exceeded the FDIC insurance limit. The Company
performs ongoing evaluations of these institutions to limit its concentration risk exposure.
Customers
The Company grants
credit to customers within the U.S. and to a limited number of international customers and does not require collateral. Revenues
from international customers are generally secured by advance payments except for a limited number of established foreign customers.
The Company generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability
to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves
for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes
is sufficient. Accounts receivable at March 31, 2014 and 2013 are net of reserves for doubtful accounts of $24,600 and $8,700,
respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts.
The majority of the
Company’s customers are in the biotechnology, pharmaceutical and life science industries. Consequently, there is a concentration
of accounts receivable within these industries, which is subject to normal credit risk. At March 31, 2014, there was one customer
that accounted for 30.6% of net accounts receivable. No other single customer owed us more than 10% of net accounts receivable
at March 31, 2014 and 2013. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not
exceeded our estimates.
The Company has revenue
from foreign customers primarily in Europe, Japan, Canada, India and Australia. During fiscal years 2014 and 2013, the Company
had revenues from foreign customers of approximately $434,000 and $161,000, respectively, which constituted approximately 16.3%
and 14.6% of total revenues, respectively. For the fiscal year ended March 31, 2014, there was one customer that accounted
for 30.8% of net revenues. No other single customer generated over 10% of net revenues during 2014 and 2013.
Inventories
The Company’s
inventories consist of accessories that are sold and shipped to customers along with pay-per-use containers that are not returned
to the Company with the containers at the culmination of the customer’s shipping cycle. Inventories are stated at the lower
of cost or current estimated market value. Cost is determined using the standard cost method which approximates the first-in,
first-to-expire method. Inventories are reviewed periodically for slow-moving or obsolete status. The Company writes down the
carrying value of its inventories to reflect situations in which the cost of inventories is not expected to be recovered. Once
established, write-downs of inventories are considered permanent adjustments to the cost basis of the obsolete or excess inventories.
Raw materials and finished goods include material costs less reserves for obsolete or excess inventories. The Company evaluates
the current level of inventories considering historical trends and other factors, and based on the evaluation, records adjustments
to reflect inventories at its net realizable value. These adjustments are estimates, which could vary significantly from actual
results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These
estimates require us to make assessments about future demand for the Company’s products in order to categorize the status
of such inventories items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of
the Company’s forecasts of market conditions, industry trends, competition and other factors.
Property and Equipment
The Company provides
shipping containers to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements
are similar to the accounting standard for leases since they convey the right to use the container over a period of time. The
Company retains the title to the containers and provides its customers the use of the container for a specific shipping cycle.
At the culmination of the customer’s shipping cycle, the container is returned to the Company. As a result, the Company
classifies the containers as fixed assets for the per-use container program.
Property and equipment
are recorded at cost. Cryogenic shippers, which comprise of 89% and 87% of the Company’s net property and equipment balance
at March 31, 2014 and 2013, respectively, are depreciated using the straight-line method over their estimated useful lives
of three years. Equipment and furniture are depreciated using the straight-line method over their estimated useful lives (generally
three to seven years) and leasehold improvements are amortized using the straight-line method over the estimated useful life of
the asset or the lease term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful
life of the assets or term of the lease, whichever is shorter and included in depreciation expense.
Betterments, renewals
and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the
accounts, and the gain or loss on disposition is recognized in current operations.
Intangible Assets
Intangible assets
are comprised of patents and trademarks and software development costs. The Company capitalizes costs of obtaining patents and
trademarks, which are amortized, using the straight-line method over their estimated useful life of five years. The Company capitalizes
certain costs related to software developed for internal use. Software development costs incurred during the preliminary or maintenance
project stages are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized
using the straight-line method over the estimated useful life of the software, which is five years. Capitalized costs include
purchased materials and costs of services including the valuation of warrants issued to consultants.
Long-lived Assets
If indicators of
impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of
such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount
of such impairment by comparing the fair value to the carrying value. We believe the future cash flows to be received from the
long-lived assets will exceed the assets’ carrying value, and accordingly, we have not recognized any impairment losses
through March 31, 2014.
Deferred Financing
Costs
Deferred financing
costs represent costs incurred in connection with the issuance of the convertible notes payable and private equity financing.
Deferred financing costs related to the issuance of debt are being amortized over the term of the financing instrument using the
effective interest method while deferred financing costs from equity financings are netted against the gross proceeds received
from the equity financings.
In connection with
the 5% Bridge Notes, during the third and fourth quarter of fiscal 2014, the Company incurred financing costs that have been capitalized
and are being amortized over the term of the convertible bridge notes payable using the straight-line method which approximates
the effective interest method.
Convertible
Debentures
If a conversion feature
of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is
below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by
the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes
the discount to interest expense over the life of the debt using the effective interest rate method.
Derivative Liabilities
Certain of the Company’s
issued and outstanding common stock purchase warrants which have exercise price reset features are treated as derivatives for
accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash
flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting,
and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the
warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an
active securities market, and as such, the Company estimates the fair value of these warrants using the Black-Scholes option pricing
model (“Black-Scholes”).
Income Taxes
The Company accounts
for income taxes under the provision of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 740, Income Taxes, or ASC 740. As of March 31, 2014 and 2013, there were no unrecognized tax benefits
included in the accompanying consolidated balance sheets that would, if recognized, affect the effective tax rates.
Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred
tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Based on the
weight of available evidence, the Company’s management has determined that it is more likely than not that the net deferred
tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets.
The Company’s income tax provision consists of state minimum taxes.
The Company’s
policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual
for interest or penalties on its consolidated balance sheets at March 31, 2014 and 2013, respectively and has not recognized
interest and/or penalties in the consolidated statement of operations for the years ended March 31, 2014 and 2013. The Company
is subject to taxation in the U.S. and various state jurisdictions. As of March 31, 2014, the Company is no longer subject
to U.S. federal examinations for years before 2010 and for California franchise and income tax examinations for years before 2009.
However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating
losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry forward amount.
The Company is not currently under examination by U.S. federal or state jurisdictions.
Revenue Recognition
The Company provides
shipping containers to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements
are similar to the accounting standard for leases since they convey the right to use the containers over a period of time. The
Company retains title to the containers and provides its customers the use of the container for a specified shipping cycle. At
the culmination of the customer’s shipping cycle, the container is returned to the Company.
The Company recognizes
revenue for the use of the shipper at the time of the delivery of the shipper to the end user of the enclosed materials, and at
the time that collectability is reasonably certain. Revenue is based on gross net of discounts and allowances.
The Company also
provides logistics support and management to some customers, which may include onsite logistics personnel. Revenue is recognized
for these services as services are rendered and at the time that collectability is reasonably certain.
Accounting for Shipping and Handling
Revenue, Fees and Costs
The Company classifies
amounts billed for shipping and handling as revenue. Shipping and handling fees and costs are included in cost of revenues in
the accompanying consolidated statements of operations.
Research and Development Expenses
Expenditures relating
to research and development are expensed in the period incurred.
Stock-based Compensation
The Company accounts
for stock-based payments to employees and directors in accordance with stock-based payment accounting guidance which requires
all stock-based payments to employees and directors, including grants of employee stock options and warrants, to be recognized
based upon their fair values. The fair value of stock-based awards is estimated at grant date using Black-Scholes and the portion
that is ultimately expected to vest is recognized as compensation cost over the requisite service period.
Since stock-based
compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture
rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future
periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in
which the change in estimate occurs. The estimated forfeiture rates at March 31, 2014 and 2013 was zero as the Company has
not had a significant history of forfeitures and does not expect significant forfeitures in the future.
Cash flows from the
tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options or warrants are classified
as financing cash flows. Due to the Company’s loss position, there were no such tax benefits during years ended March 31,
2014 and 2013.
The Company uses
Black-Scholes to estimate the fair value of stock-based awards. The determination of fair value using Black-Scholes is affected
by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected
stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.
Equity Instruments Issued to Non-Employees
for Acquiring Goods or Services
Issuances of the
Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of
the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment
for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty
considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance
is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods
prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at
the then-current fair values at each of those interim financial reporting dates.
Basic and Diluted Net Income (Loss)
Per Share
We calculate basic
and diluted net income (loss) per share using the weighted average number of common shares outstanding during the periods presented,
and adjust the amount of net income (loss) used in this calculation for preferred stock dividends (if any) declared during the
period. In periods of a net loss position, basic and diluted weighted average shares are the same. For the diluted earnings per
share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants
and other common stock equivalents outstanding during the periods.
The following shows the amounts used in
computing net loss per share for each of the two years in the period ended March 31, 2014:
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Net loss | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Less: | |
| | | |
| | |
| Preferred dividends paid in cash or stock | |
| — | | |
| — | |
| Loss attributable to Cryoport stockholders | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Weighted average shares issued and outstanding | |
| 48,850,513 | | |
| 37,760,628 | |
| Basic and diluted net loss per share | |
$ | (0.40 | ) | |
$ | (0.17 | ) |
The following table
sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been
anti-dilutive:
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Stock options | |
| 3,458,313 | | |
| 411,762 | |
| Warrants | |
| 3,221,728 | | |
| — | |
| | |
| 6,680,041 | | |
| 411,762 | |
Segment Reporting
We currently operate
in one reportable segment.
Fair Value Measurements
We measure fair value
based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the
inputs used to measure fair value. These tiers include the following:
Level 1: Quoted
prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable
prices that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include quoted prices
for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or liabilities. Currently we do not
have any items classified as Level 2.
Level 3: Unobservable
inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
In determining
fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs
to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.
We did not elect
the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair value.
Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and
payable, are reported at their historical carrying values.
The carrying values
of our assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2014 and 2013
are classified in the table below in one of the three categories of the fair value hierarchy described below:
| | |
Fair Value Measurements | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| March 31, 2013 | |
| | | |
| | | |
| | | |
| | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Derivative liabilities | |
$ | — | | |
$ | — | | |
$ | 20,848 | | |
$ | 20,848 | |
The following summarizes
the activity of Level 3 inputs measured on a recurring basis for the years ended March 31, 2014 and 2013:
| | |
Fair Value Measurements of
Unobservable Inputs (Level 3) | |
| | |
| |
| Balance at March 31, 2012 | |
$ | 37,334 | |
| Transfers in / (out) of Level 3 | |
| — | |
| Adjustments resulting from a change
in fair value of derivative liabilities | |
| (16,486 | ) |
| Balance at March 31, 2013 | |
| 20,848 | |
| Transfers in / (out) of Level 3 | |
| — | |
| Adjustments resulting from a change
in fair value of derivative liabilities | |
| (20,848 | ) |
| Balance at March 31, 2014 | |
$ | — | |
The fair value of
derivative liabilities were measured on their respective origination dates and at the end of each reporting period using Level 3
inputs. The significant assumptions we use in the calculations under Black-Scholes as of March 31, 2014 and 2013 included an expected
term based on the remaining contractual life of the warrants, a risk-free interest rate based upon observed interest rates appropriate
for the expected term of the instruments, volatility based on the historical volatility of our common stock, and a zero dividend
rate based on our past, current and expected practices of granting dividends on common stock.
Foreign Currency Translation
We record foreign
currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included
in results of operations. Foreign currency transaction gains and losses have not been significant for any of the periods presented.
Recent Accounting Pronouncements
In July 2013, the FASB
issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement presentation
of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.
The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15,
2013, with an option for early adoption. This pronouncement is effective for reporting periods beginning on or after January 1,
2013. The adoption of ASU 2011-11 did not have a material impact on the Company’s consolidated financial statements.
In May 2014, the FASB
issued ASU No. 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements
in FASB Topic 605, "Revenue Recognition". The ASU implements a five-step process for customer contract revenue recognition
that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures
regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions
include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction
price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances.
The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited.
Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.
Management is currently assessing the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.
BUSINESS
Overview
Through a combination
of purpose-built proprietary packaging, information technology and specialized cold chain logistics knowhow, we provide frozen
shipping logistics solutions to the life sciences industry. We view our solutions as disruptive to “older technologies”
in that our solutions provide reliable, economic alternatives to existing solutions and services utilized for frozen shipping
in life sciences including stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals,
infectious substances, and other items that require continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express®
Solutions include sophisticated cloud-based logistics management software we have branded as the Cryoportal™, which
supports the management of the entire shipment process through a single interface, including initial order input, document preparation,
customs clearance, courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique
and incisive information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains
a fully documented “chain-of-custody” and, at the client’s option, “chain-of-condition” for every
shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process.
This recorded and archived information allows our customers to meet exacting requirements necessary for scientific work and for
regulatory purposes.
Our Cryoport Express®
Solutions also include our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express® Shippers,
which are cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen
(“LN2”) “dry vapor” technology. Cryoport Express® Shippers are IATA certified and validated
to maintain stable temperatures of minus 150° C and below for a 10-plus day dynamic shipment period. The Company currently
features two Cryoport Express® Shipper models, the Standard Dry Shipper (holding up to 75-2.0 ml vials) and the
High Volume Dry Shipper (holding up to 500-2.0 ml vials).
Amongst our solutions,
we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting Cryoport
Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and
reseals the shipping box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up.
Cryoport arranges for the pick-up of the parcel by a shipping service provider for delivery to the customer’s intended
recipient. The recipient simply opens the box and shipper and removes the frozen commodity. The recipient only needs
to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for pre-arranged
carrier pick up. The Cryoport Express® Shipper is returned to us for cleaning, quality assurance testing, recharging
and reuse.
In late 2012, we
shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics solutions
provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution,” we also provide the following value-added solutions that were developed to address our various clients’
needs:
| · | “Customer
Staged Solution,” under which we supply an inventory of our Cryoport Express®
Shippers to our customer, in an uncharged state, enabling our customer (after training/certification)
to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with
shipping and delivery service providers for the transportation of the package. Once the
order is released, our customer services professionals monitor the shipment and the return
of the shipper to us for cleaning, quality assurance testing and reuse. |
| · | “Customer
Managed Solution,” a limited customer implemented solution whereby we supply
our Cryoport Express® Shippers to clients in a fully charged state, but leaving it
to the client to manage the shipping, including the selection of the shipping and delivery
service provider and the return of the shipper to us. Under this Solution, the customer
accepts a significant level of risk for a successful shipment. |
| · | “Powered
by CryoportSM,” is made available to providers of shipping and
delivery services who seek to offer a “branded” cryogenic shipping solution
as part of their service offerings. By negotiation, this solution can be private labeled
as long as “powered by CryoportSM” appears prominently
on the offering software interface and prominently on the packaging,. |
| · | “Integrated
Solution” is our most comprehensive and complex
outsourcing solution. It usually involves our management of the entire cryogenic logistics
process for our client, including the location of our employees at the client’s
site to manage the client’s cryogenic logistics in total. |
| · | “Life
Science Point-of-Care Repository Solution” whereby we supply our Cryoport
Express® Shippers to ship and store cryogenically preserved life science
products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care
site, with the Cryoport Express® Shippers serving as a temporary freezer/repository
enabling the efficient distribution of temperature sensitive allogeneic cell-based therapies
without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined
process including the shipment’s return to Cryoport where the Cryoport Express®
Shipper is cleaned, tested for quality assurance and then returned to inventory
for reuse. |
| · | “Personalized
Medicine and Cell-based Immunotherapy Solution” whereby our Cryoport Express®
Solutions serves as an enabling technology for the safe manufacture of the rapidly
expanding autologous cellular-based immunotherapy market by providing a comprehensive
logistics solution for the verified chain of custody and condition transport from, (a)
the collection of the patient’s cells in a hospital setting, to (b) a central processing
facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically
preserved return of these irreplaceable cells to a point-of-care treatment facility.
The Cryoport Express® Shippers can then serve as a temporary freezer/repository
to allow the efficient distribution of this personalized medicine to patients when and
where they need it most without the expense, inconvenience, and potential costly failure
of an on-sight, cryopreservation apparatus. Our customer services professionals monitor
each shipment throughout the predetermined process including the shipment’s return
to Cryoport where the Cryoport Express® Shipper is cleaned, tested for
quality assurance and then returned to inventory for reuse. |
One of our distribution
partners is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping logistics
services through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets
and sells Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx® Deep
Frozen Shipping Solution on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely
with FedEx to further align its sales efforts and accelerate penetration within FedEx’s life sciences customer base through
improved processes, sales incentives, joint customer calls and more frequent communication at the sales and executive level. In
addition, FedEx has developed a FedEx branded version of the CryoportalTM software platform, which is “powered
by Cryoport” for use by FedEx and its customers giving them access to the full capabilities of our logistics management
platform.
In January 2013, we
entered into a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with a
non-exclusive license and right to use a customized version of our CryoportalTM for the management of shipments made
by FedEx customers. The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx
Agreement, expires on December 31, 2015. FedEx has the right to terminate this agreement at any time for convenience upon 180
days’ notice.
In June 2014, we added
DHL as our second distribution partner by entering into an agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”),
whereby DHL can offer our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global
basis. This relationship with DHL is a further implementation of the Company’s expansion of distribution partnerships under
the “powered by CryoportSM” model described above, allowing us to expand our sales and marketing
reach through our partners and build awareness of the benefits our validated cryogenic solution offerings. DHL has announced that
it will add 15 more certified Life Sciences stations in the second quarter of 2014 to its existing Thermonet network of 45 stations
already in operation. This expanded network will now be able to offer Cryoport’s cryogenic solutions under the DHL brands.
In addition, DHL’s customer will continue to be able to 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 platform, the CryoportalTM, is integrated to DHL’s tracking and billing systems to provide
DHL life sciences and healthcare customers with a seamless way of shipping their critical biological material worldwide.
In December 2012,
we signed an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant
to which we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing
on-site logistics personnel and its logistics management platform, the CryoportalTM, to manage shipments from the Zoetis
manufacturing site in the United States to domestic customers as well as various international distribution centers. As part of
our logistics management services, Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’
logistics, ensuring products arrive at their destinations in specified conditions, on-time and with the optimum uses of resources.
The Company manages Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers.
In July 2013 the agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry
vaccine to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October
2013, the agreement was further amended to further expand Cryoport’s services to include the logistics management for a
second poultry vaccine.
In February 2014,
we entered into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage
biotechnology company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will
be using Cryoport Express® Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures
and also provide Cryoport Express® Solutions to other biologics suppliers within the orthopedic arena. The agreement
combines Cryoport’s proprietary, purpose-built cold chain logistics solutions for cell-based and advanced biologic tissue
forms with Liventa’s distribution capability to orthopedic care providers. The implementation of Cryoport’s solution
will eliminate dry ice shipping and related risks of degradation and also eliminate the need for expensive onsite cryogenic freezers
for storage of cell-based orthopedic therapies. This will enable Liventa to better serve small or mobile clinics, pharmacies,
family practice, and orthopedic specialty care providers. Surgical centers and hospitals will also benefit from better logistics
and the elimination of issues surrounding dry ice transport and storage. The agreement has an initial three-year term and may
be renewed for consecutive three-year terms, unless earlier terminated by either party. Liventa also agreed to certain performance
criteria and the issuance of 150,000 shares of its common stock to Cryoport in exchange for the exclusive right to offer, market
and promote Cryoport Express® Solutions for cellular-based therapies requiring cryogenic temperatures for use in
orthopedic indications in the United States.
We
offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells
and cell lines, diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood,
vaccines, tissue, animal husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems.
These companies operate within heavily regulated environments and as such, changing vendors and distribution practices typically
require a number of steps which may include the audit of our facilities, review of our procedures, qualifying us as a vendor,
and performing test shipments. This process can take up to nine months or longer to complete prior to a potential customer adopting
one or more of our Cryoport Express® Solutions.
Corporate History and Structure
We are a Nevada corporation
originally incorporated under the name G.T.5-Limited (“GT5”) on May 25, 1990. In connection with a Share Exchange
Agreement, on March 15, 2005 we changed our name to Cryoport, Inc. and acquired all of the issued and outstanding shares
of common stock of Cryoport Systems, Inc., a California corporation, in exchange for 2,410,811 shares of our common stock (which
represented approximately 81% of the total issued and outstanding shares of common stock following the close of the transaction).
Cryoport Systems, Inc., which was originally formed in 1999 as a California limited liability company, and subsequently reorganized
into a California corporation on December 11, 2000, remains the operating company under Cryoport, Inc. Our principal executive
offices are located at 20382 Barents Sea Circle, Lake Forest, CA 92630. The telephone number of our principal executive offices
is (949) 470-2300, and our main corporate website is www.Cryoport.com. The information on, or that can be accessed through our
website is not part of this Annual Report.
The Company became
public by a reverse merger with a shell company in May 2005. Over time the Company has transitioned from being a development company
to a fully operational public company, providing cold chain logistics solutions to the biotechnology and life sciences industries
globally.
Since fiscal year
2011 the Company has taken significant steps towards commercialization of the Cryoport Express® logistics solutions
in validating, perfecting and expanding its features. The Company has now managed shipments of its Cryoport Express®
Shippers through its CryoportalTM into and out of over 70 countries, handling a vast array of different biological
products and specimens.
During fiscal year
2012, the Company completed the external validation of its Cryoport Express Standard Shipper to ISTA 7E standards and introduced
the Cryoport Express® High Volume Shipper in response to customer demand. The Company also set up its European
distribution depot in Holland to better serve its customer base and support sales efforts in Europe.
During fiscal year
2013, the Company elected Jerrell Shelton President and CEO, realigned its sales team and introduced a solutions sales and operating
strategy. In addition, and as part of its global expansion plans, the Company set up its Asian distribution depot in Singapore.
The Company also formed a Commercial Advisory Board (CAB) with Bill Taaffe, a founding member of ICON Clinical Research becoming
its first member.
Since the beginning
of fiscal year 2014 the Company’s Board of Directors (“Board”) has added certain members to better align the
experience and competencies of the directors with the Company’s strategic direction. In March 2013, Richard G. Rathmann,
a fund manager, investor and advisor to life science companies over the past 20 years, was appointed to the Board. In September
2013, Mr. Rathmann was elected Chairman of the Board. Also in September 2013, Mr. Edward Zecchini, an executive with over thirty
years of experience in the healthcare and information technology industries was appointed to the Board. Most recently, in June
2014, the Board appointed Dr. Ramkumar Mandalam to the Board. Dr. Mandalam has over twenty years of experience in the development
of biologics and is currently the President and Chief Executive Officer of Cellerant Therapeutics, Inc., a clinical-stage biotechnology
company. The Company’s two remaining Board members, Stephen Wasserman and Jerrell Shelton, who is the President and Chief
Executive Officer of Cryoport, joined the Board in 2012. The Company’s five person Board has four independent Board members,
as determined by NASDAQ Rule 5605(a)(2) and the related rules of the Securities and Exchange Commission.
Cryoport Express®
Solutions
Cryoport Express®
Solutions consist of the CryoportalTM, a cloud-based logistics management software which programmatically assists
in the management of all aspects of the logistics operations including the Cryoport Express® Shippers and the Cryoport
Express® Smart Pak data logger. The CryoportalTM is capable of producing Cryoport Express®
Analytics which reports shipment performance metrics and evaluates temperature-monitoring data collected by the data logger
during shipment. Cryoport Express® Solutions are focused on improving the reliability of frozen shipping while
reducing our clients’ overall operating costs. This is accomplished by providing a complete end-to-end solution for the
transport and monitoring of frozen or cryogenically preserved biological or pharmaceutical materials shipped primarily though
integrators and specialty couriers. Certain of the intellectual property underlying our Cryoport Express ® Solutions
(other than that related to the Cryoport Express® Shippers) has been, and continues to be, developed under a contract
with an outside software development company, with the underlying technology licensed to us for exclusive use in our field of
use.
CryoportalTM
The CryoportalTM
is used by Cryoport, our customers and our business partners to automate the entry of orders, prepare customs documentation
and to facilitate status and location monitoring of shipped orders while in transit. It is used by Cryoport to assist in managing
logistics operations and to reduce administrative costs typically provisioned through manual labor relating to order-entry, order
processing, preparation of shipping documents and back-office accounting. It is also used to support the high level of customer
service expected by the industry. Certain features of the CryoportalTM reduce operating costs and facilitate the scaling
of Cryoport’s business, but more importantly they offer significant value to the customer in terms of cost avoidance and
risk mitigation. Examples of these features include automation of order entry, development of Key Performance Indicators (“KPI”)
to support our efforts for continuous process improvements in our business, and programmatic exception monitoring to detect and
sometimes anticipate delays in the shipping process, often before the customer or the shipping company becomes aware of them.
The CryoportalTM
also serves as the communications center for the management, collection and analysis of Smart Pak data collected from Smart
Pak data loggers in the field. Data is converted into pre-designed reports containing valuable and often actionable information
that becomes the quality control standard or “pedigree” of the shipment. This information can be utilized by Cryoport
to provide valuable feedback to our clients relating to their shipments.
The Cryoportal™
software platform has been developed as a carrier-agnostic system, allowing the customer and the Cryoport Client Care team to
work with multiple integrators, freight forwarders and/or couriers depending on the specific requirements and customer preferences.
To increase operational efficiencies the Cryoportal™ has already been integrated with the tracking systems of FedEx, DHL
and UPS and is planning to integrate with other key logistics providers.
The CryoportalTM
was developed for time- and temperature-sensitive shipments that are required to maintain specific temperatures, such as
ambient (between 20° and 25°C), chilled (between 2° and 8°C) or frozen (minus 10°C or less all the way down
to cryogenic temperatures) to ensure that the shipped specimen is not subject to degradation or out of its designated “safe”
range. While our current focus is on frozen shipments within the biotechnology and life sciences industries using the logistics
solutions described herein, the use of the CryoportalTM can and may be extended into other temperature ranges.
The Cryoport Express®
Shippers
Our Cryoport Express®
Shippers are cryogenic dry vapor shippers capable of maintaining cryogenic temperatures of minus 150° Celsius or below
for a dynamic shipping period of 10 or more days. A dry cryogenic shipper is a device that uses liquid nitrogen contained inside
a vacuum insulated bottle which serves as a refrigerant to provide stable storage temperatures below minus 150° Celsius. Our
Cryoport Express® Shippers are designed to ensure that there is no pressure build up as the liquid nitrogen evaporates
or spillage of liquid nitrogen. We have developed a proprietary retention system to ensure that liquid nitrogen stays inside the
vacuum container, which allows the shipper to be designated as a dry shipper meeting IATA requirements. Biological or pharmaceutical
specimens are stored in a specimen chamber, referred to as a “well” inside the container, refrigeration is provided
by cold nitrogen gas evolving from the liquid nitrogen entrapped within the retention system. Specimens that may be transported
using our cryogenic shipper include live cell scientific or pharmaceutical commodities such as cancer vaccines, diagnostic materials,
semen, eggs and embryos, infectious substances and other items that require continuous exposure to frozen or cryogenic temperatures
(e.g., temperatures below minus 150° Celsius).
An important feature
of our Cryoport Express® Shippers is their compliance with the stringent packaging requirements of IATA Packing
Instructions 602 and 650, respectively. These specifications include meeting internal pressure (hydraulic) and drop performance
requirements. Under IATA guidelines, Cryoport Express® Shippers are classified as “Non-hazardous” while
dry ice and liquid nitrogen are classified as “Dangerous Goods.” Our shippers are also in compliance with ICAO regulations
that prohibit egress of liquid nitrogen residue from the shipping packages. The International Civil Aviation Organization (“ICAO”)
is a United Nations organization that develops regulations for the safe transport of dangerous goods by air.
We currently offer
two sizes of dry vapor shippers, the Cryoport Express ® Standard Shipper with a storage capacity of up to 75 0.2ml
vials and the Cryoport Express® High Volume Shipper that was introduced in January of 2012 with a capacity of up
to 500 0.2ml vials.
Cryoport Express ®
Standard Shippers
The Cryoport Express®
Standard Shippers are lightweight, low-cost, re-usable dry vapor liquid nitrogen storage containers that we believe combine
the best features of packaging, cryogenics and high vacuum technology. A Cryoport Express ® Standard Shipper is
composed of an aluminum metallic dewar flask, with a well for holding the biological material in the inner chamber. The dewar
flask, or “thermos bottle,” is an example of a practical device in which the conduction, convection and radiation
of heat are reduced as much as possible. The inner chamber of the shipper is surrounded by a high surface, low-density material
which retains the liquid nitrogen in-situ by absorption, adsorption and surface tension. Absorption is defined as the taking up
of matter in bulk by other matter, as in the dissolving of a gas by a liquid, whereas adsorption is the surface retention of solid,
liquid or gas molecules, atoms or ions by a solid or liquid. This material absorbs liquid nitrogen several times faster than currently
used materials, while providing the shipper with a hold time and capacity to transport biological materials safely and conveniently.
The annular space between the inner and outer dewar chambers is evacuated to a very high vacuum (10-6 Torr). The specimen-holding
chamber has a primary cap to enclose the specimens, and a removable and replaceable secondary cap to further enclose the specimen-holding
container and to contain the liquid nitrogen. The entire dewar vessel is then wrapped in a plurality of insulating and cushioning
materials and placed in a disposable outer packaging made of recyclable material. The Cryoport Express ® Standard
Shipper has a storage capacity of up to 75 0.2ml vials.
The technology underlying
the Cryoport Express® Standard Shipper has been refined over the past five years. Our current shippers use aircraft
grade aluminum and other lower weight materials, reducing freight cost which is based on dimensional weight. We maintain ongoing
development efforts related to our shippers that are principally focused on material properties, particularly those properties
related to our low temperature requirement, vacuum retention characteristics, such as the permeability of the materials, and lower
weight materials in an effort to meet the life sciences market needs for achieving the lowest cost frozen and cryogenic shipping
solution.
Cryoport Express®
High Volume Shippers
The Cryoport Express®
High Volume Shipper also uses a dry vapor liquid nitrogen (LN2) technology to maintain minus 150° C temperatures with
a dynamic shipping endurance of 10 days. The Cryoport Express ® High Volume Shipper is based on the same dry vapor
technology as Cryoport’s original standard dry shipper and utilizes an absorbent material to hold LN2, thus providing
the extended endurance time and IATA validation as a non-hazardous shipping container. The high volume dry shipper is reusable
and recyclable, making it a highly sustainable and cost effective method of transporting life science materials. The Cryoport
Express ® High Volume Shipper has a storage capacity of up to 500 0.2ml vials.
We believe Cryoport
Express® Solutions are the best and most cost effective solution available in the biotechnology and life sciences
markets and satisfy customer needs and scientific and regulatory requirements relating to the shipment of time- and temperature-critical,
frozen and refrigerated transport of biological materials, such as stem cells, cell lines, pharmaceutical clinical trial samples,
gene biotechnology, infectious materials handling, animal and human reproduction markets. Due to our proprietary technology and
innovative design, our shippers are less prone to losing functional hold time when not kept in an upright position than the competing
products because our proprietary dry vapor technology and innovative design prevent the spilling or leakage of the liquid nitrogen
when the container is tipped or on its side which would otherwise adversely affect the functional hold time of the shipper.
An important feature
of our Cryoport Express® Shippers is their compliance with the stringent packaging requirements of IATA Packing
Instructions 602 and 650, respectively. These specifications include meeting internal pressure (hydraulic) and drop performance
requirements.
The Cryoport Express®
Smart Pak
Temperature monitoring
is a high value feature from our customers’ perspective as it is an effective and reliable method to determine that the
shipment materials were not damaged or did not experience degradation during shipment due to temperature fluctuations. Our Smart
Pak System is a self-contained automated data logger capable of recording cryogenic temperatures of samples shipped in our Cryoport
Express® Shippers. The data-logging temperature probe is in the vapor plug of the shipper for the most accurate
reading. The temperature mapping includes both the temperature inside the chamber (which is closest to the actual biomaterial)
and the external temperature. This reading, combined with the mapping of every shipment check-in point, provides a holistic view
of the complete shipping process. At the client’s election, shipments can have a full chain-of-custody and chain-of-condition with
both data monitoring and analysis available.
Chain-of-Condition
Data monitoring starts
with a custom-built data logger. The data logger can be set up to report during the shipment and/or after the shipment. For those
shipments involving biologics or clinical trials or any other material that needs to be verified before receiving, the information
recorded by the data logger can be downloaded to the data station onsite. Alternatively, Cryoport can upload the temperature data
from the data logger for analysis to the CryoportalTM upon return of the shipper. The CryoportalTM also
acts as the data repository for all shipment and temperature information, which the customer can access remotely through the internet.
Chain of condition service is available at the client’s election.
Chain-of-Custody
When overlaid with
the carrier check-ins, the data monitor and analysis also provides a chain of custody. The report from the data monitor serves
as analysis for temperature monitoring of the entire shipment as well as a tampering warning. If the client has elected to have
chain of condition monitoring, each time the container is opened there is a temperature record. The report identifies outlier
temperature excursions such as opening the shipment in customs or tampering and thus will allow for more conclusive investigations
to ensure that specimens were not adversely impacted during shipment.
Cryoport Express®
Analytics
The CryoportalTM
is an important information technology element of our business strategy and has been designed to support planned future
features to allow for an expansion of our solutions offering. Analytics is a term used by IT professionals to refer to performance
benchmarks or Key Performance Indicators (KPI’s) that management utilizes to measure performance against desired standards.
Examples for analytics tracked through the CryoportalTM include time-based metrics for order processing time and on-time
deliveries by our shipping partners, as well as profiling shipping lanes to determine average transit times and predicting potential
shipping exceptions based on historical metrics. The analytical results are being utilized by Cryoport to render consultative
and proactive customer services.
Biological Material Holders
A patented containment
bag is used in connection with the shipment of infectious or dangerous goods using the Cryoport Express® Shippers. Up to 75
cryovials (polypropylene vials with high-density polyethylene closures), set on aluminum canes are placed into an absorbent pouch,
which is designed to contain the entire contents of all the vials in the event of leakage. This pouch is then placed in a watertight
Tyvek bag (secondary packaging) capable of withstanding cryogenic temperatures, and then sealed. This bag is then placed into
the well of the Cryoport Express® Shipper.
Logistics Expertise and Support
Cryoport’s
client services professionals provide 24/7/365 live logistics and monitoring services with specialized knowledge in the domestic
and global logistics of life sciences material requiring cryogenic temperatures. The Cryoport logistics professionals have validated
shipping lanes in and out of more than 70 countries to date to ensure shipments maintain cryogenic temperatures and arrive securely
and on time.
Other Product Candidates and Development
Activities
We are continuing
our research and development efforts to further refine our current technology as well as explore opportunities with partners to
offer complementary packaging solutions for frozen temperature (minus 10° Celsius or less), chilled temperature (2° to
8° Celsius) and ambient temperature (between 20° and 25° Celsius) shipping markets.
We also continue
to further expand the functionality of our CryoportalTM to ensure a high level of effectiveness and efficiency in the
cold chain logistics process and to allow for intelligent and easy data monitoring and analysis.
Government Regulation
The shipping of diagnostic
specimens, infectious substances and dangerous goods, whether via air or ground, falls under the jurisdiction of many state, federal
and international agencies. The quality of the containers, packaging materials and insulation that protect a specimen determine
whether or not it will arrive in a usable condition. Many of the regulations for transporting dangerous goods in the United States
are determined by international rules formulated under the auspices of the United Nations.
The ICAO is the United
Nations organization that develops regulations (Technical Instructions) for the safe transport of dangerous goods by air. If shipment
is by air, compliance with the rules established by IATA is required. IATA is a trade association made up of airlines and air
cargo couriers that publishes annual editions of the IATA Dangerous Goods Regulations. These regulations interpret and add to
the ICAO Technical Instructions to reflect industry practices. Additionally, the Centers for Disease Control (“CDC”)
has regulations (published in the Code of Federal Regulations) for interstate shipping of specimens, and OSHA also addresses the
safe handling of Class 6.2 Substances.
Our Cryoport Express
® Shippers meet Packing Instructions 602 and 650 and are certified for the shipment of Class 6.2 Dangerous Goods
per the requirements of the ICAO Technical Instructions for the Safe Transport of Dangerous Goods by Air and IATA. Our present
and planned future versions of the Cryoport Smart Pak data logger will likely be subject to regulation by the FAA, FCC, FDA, IATA
and possibly other agencies which may be difficult to determine on a global basis.
We are also subject
to numerous other federal, state and local laws relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant
costs to comply with such laws and regulations now or in the future.
Manufacturing and Raw Materials
Manufacturing.
Due to our currently adequate levels of dewar inventories, manufacturing is currently suspended. The component parts for our shippers
are primarily manufactured at third party manufacturing facilities. We also have a warehouse at our facility in Lake Forest, California,
where we are capable of manufacturing certain parts and to fully assemble our shippers. Most of the components that we use in
the manufacture of our shippers are available from more than one qualified supplier. For some components, however, there are relatively
few alternate sources of supply and the establishment of additional or replacement suppliers may not be accomplished immediately,
however, we have identified alternate qualified suppliers. Should this occur, we believe that with our current level of shippers
we have enough inventory to cover our forecasted demand.
There are no specific
agreements with any manufacturer nor are there any long term commitments to any manufacturer. We believe that most of the manufacturers
currently used by us could be replaced within a short period of time as none have a proprietary component or a substantial capital
investment specific to our shippers.
Our production and
manufacturing process incorporates innovative technologies developed for aerospace and other industries which are cost effective,
easier to use and more functional than the traditional dry ice devices and other methods currently used for the shipment of temperature-sensitive
materials. Our manufacturing process uses non-hazardous cleaning solutions, which are provided and disposed of by a supplier approved
by the Environmental Protection Agency (the “EPA”). EPA compliance costs for us are therefore negligible.
Cryoport Express
® High Volume Shippers are purchased from a third party and modified to meet our specifications using our proprietary
technology and know-how.
Our data loggers
have been acquired from a single source with the calibration done by an independent third party. We are currently considering
adding alternate data loggers with greater range of functionality.
Raw Materials.
Various common raw materials are used in the manufacture of our shippers and in the development of our technologies. These raw
materials are generally available from several alternate distributors and manufactures. We have not experienced any significant
difficulty in obtaining these raw materials and we do not consider raw material availability to be a significant factor in our
business.
Patents and Proprietary Rights
In order to remain
competitive, we must develop and maintain protection on the proprietary aspects of our technologies. We rely on a combination
of patents, copyrights, trademarks, trade secret laws and confidentiality agreements to protect our intellectual property rights.
We currently own three registered U.S. trademarks and three issued U.S. patents primarily covering various aspects of our Cryoport
Express® Shippers.
In addition, we have
a pending U.S. patent application for various aspects of our shipper and web-portal, which includes, in part, various aspects
of our business model referred to as the Cryoport Express® System. We have also filed a U.S. provisional patent application
for a smart label which will communicate electronically with our data logger. We intend to file additional patent applications
to strengthen our intellectual property rights.
The technology covered
by the above indicated issued patents relates to matters specific to the use of liquid nitrogen shippers in connection with the
shipment of biological materials. The concepts include those of disposability, package configuration details, liquid nitrogen
retention systems, systems related to thermal performance, systems related to packaging integrity, and matters generally relevant
to the containment of liquid nitrogen. Similarly, the trademarks mentioned relate to the cryogenic temperature shipping activity.
Issued patents and trademarks currently owned by us include:
| Type: | |
No. | | |
Issued | |
Expiration |
| Patent | |
| 6,467,642 | | |
Oct. 22, 2002 | |
Jan. 2, 2021 |
| Patent | |
| 6,119,465 | | |
Sep. 19, 2000 | |
Feb. 10, 2019 |
| Patent | |
| 6,539,726 | | |
Apr. 1, 2003 | |
May 8, 2021 |
| | |
| | | |
| |
|
| Trademark | |
| 3,569,471 | | |
Feb. 3, 2009 | |
Feb. 3, 2019 |
| Trademark | |
| 3,589,928 | | |
Mar. 17, 2009 | |
Mar. 17, 2019 |
| Trademark | |
| 2,632,328 | | |
Oct. 8, 2002 | |
Oct. 8, 2022 |
Our success depends
in part upon our ability to develop proprietary products and technologies and to obtain patent coverage for these products and
technologies. We intend to file trademark and patent applications covering any newly developed products, methods and technologies.
However, there can be no guarantee that any of our pending or future filed applications will be issued as patents. There can be
no guarantee that the U.S. Patent and Trademark Office or some third party will not initiate an interference proceeding involving
any of our pending applications or issued patents. Finally, there can be no guarantee that our issued patents or future issued
patents, if any, will provide adequate protection from competition.
Patents provide some
degree of protection for our proprietary technology. However, the pursuit and assertion of patent rights involve complex legal
and factual determinations and, therefore, are characterized by significant uncertainty. In addition, the laws governing patent
issuance and the scope of patent coverage continue to evolve. Moreover, the patent rights we possess or are pursuing generally
cover our technologies to varying degrees. As a result, we cannot ensure that patents will issue from any of our patent applications,
or that any of its issued patents will offer meaningful protection. In addition, our issued patents may be successfully challenged,
invalidated, circumvented or rendered unenforceable so that our patent rights may not create an effective barrier to competition.
Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as the laws of the United
States. There can be no assurance that any patents issued to us will provide a legal basis for establishing an exclusive market
for our products or provide us with any competitive advantages, or that patents of others will not have an adverse effect on our
ability to do business or to continue to use our technologies freely.
We previously granted
a first priority security interest in generally all of our assets, including our intellectual property, to secure the repayment
of the convertible debentures we issued in October 2007 and in May 2008 (collectively, the “Debentures”) to four institutional
investors. The Debentures were fully repaid by June 2012 and we are in the process of obtaining permission from the institutional
investors to terminate the security interest in our assets.
We may be subject
to third parties filing claims that our technologies or products infringe on their intellectual property. We cannot predict whether
third parties will assert such claims against us or whether those claims will hurt our business. If we are forced to defend against
such claims, regardless of their merit, we may face costly litigation and diversion of management’s attention and resources.
As a result of any such disputes, we may have to develop, at a substantial cost, non-infringing technology or enter into licensing
agreements. These agreements may be unavailable on terms acceptable to such third parties, or at all, which could seriously harm
our business or financial condition.
We also rely on trade
secret protection of our intellectual property. We attempt to protect trade secrets by entering into confidentiality agreements
with third parties, employees and consultants, although, in the past, we have not always obtained such agreements. It is possible
that these agreements may be breached, invalidated or rendered unenforceable, and if so, our trade secrets could be disclosed
to our competitors. Despite the measures we have taken to protect our intellectual property, parties to such agreements may breach
confidentiality provisions in our contracts or infringe or misappropriate our patents, copyrights, trademarks, trade secrets and
other proprietary rights. In addition, third parties may independently discover or invent competitive technologies, or reverse
engineer our trade secrets or other technology. Therefore, the measures we are taking to protect our proprietary technology may
not be adequate.
Customers and Distribution
As a result of growing
globalization, including such areas as biotechnology and life science, clinical trials, distribution of pharmaceutical products
and reproductive medicine, the requirement for effective and reliable solutions for keeping clinical samples, pharmaceutical products
and other specimen at frozen temperatures takes on added significance due to more complex shipping routes, extended shipping times,
custom delays and logistics challenges. Today, such specimens are traditionally shipped in styrofoam cardboard insulated containers
packed with dry ice, gel/freezer packs or a combination thereof. The current dry ice solutions have limitations that severely
limit their effective use for both short and long-distances (e.g., international). Conventional dry ice shipments often require
labor-intensive “re-icing” operations resulting in higher labor and shipping costs.
We believe our patented
Cryoport Express® Shippers, the Cryoportal™ and our logistics expertise make us well positioned to take advantage of
the growing demand for effective and efficient international transport of temperature sensitive materials resulting from continued
globalization. Of particular significance is the trend within the life sciences and biotechnology industries toward globalization.
We provide domestic
shipping solutions in situations where specimens must be kept at frozen temperatures and in regions where there is a high priority
placed on maintaining the integrity of materials shipped at these temperatures.
Pharmaceutical
Clinical Trials. Every United States based pharmaceutical company developing a new drug must seek drug development protocol
approval by the FDA. These clinical trials are to test the safety and efficacy of the potential new drug among other things. A
significant amount of clinical trial activity is managed by a number of large Clinical Research Organizations (“CROs”).
In connection with
the clinical trials, due to globalization, companies can be enrolled from all over the world and may need to regularly submit
a blood or other specimen at the local hospital, doctor’s office or laboratory. These samples are then sent to specified
testing laboratories, which may be local or in another country. The testing laboratories will typically set the requirements for
the storage and shipment of blood specimens. In addition, drugs used by the patients may require frozen shipping to the sites
of the clinical trials. While both domestic and international shipping of these specimens is accomplished using dry ice today,
international shipments especially present several problems, as dry ice, under the best of circumstances, can only provide freezing
for one to two days in the absence of re-icing (which is quite costly). Because shipments of packages internationally can take
longer than one to two days or be delayed due to flight cancellations, incorrect destinations, labor problems, ground logistics,
customs delays and safety reasons, dry ice is not always a reliable and/or cost effective option. Clinical trial specimens are
often irreplaceable because each one represents clinical data at a prescribed point in time, in a series of specimens on a given
patient, who may be participating in a trial for years. Sample integrity during the shipping process is vital to retaining the
maximum number of patients in each trial. Our shippers are ideally suited for this market, as our longer hold time ensures that
specimens can be sent over long distances with minimal concern that they will arrive in a condition that will cause their exclusion
from the trial. There are also many instances in domestic shipments where Cryoport Express ® Shippers will provide
higher reliability and be cost effective.
Furthermore, the
IATA requires that all airborne shipments of laboratory specimens be transmitted in either IATA Instruction 650 or 602 certified
packaging. We have developed and obtained IATA certification of our Cryoport Express ® System, which is ideally
suited for this market, in particular due to the elimination of the cost to return the reusable shipper.
Biotechnology
and Diagnostic Companies. The biotechnology market includes basic and applied research and development in diverse areas such
as stem cells, cloning, gene therapy, DNA tumor vaccines, tissue engineering, genomics, and blood products. Companies participating
in the foregoing fields rely on the frozen transport of specimens in connection with their research and development efforts, for
which our Cryoport Express ® Shippers are ideally suited.
Cell Therapy Companies.
Rapid advancements are underway in the research and development of cell based therapies, which involves cellular material
being injected into a patient. In allogeniec cell therapy, the donor is a different person to the recipient of the cells. Autologous
cell therapy is a therapeutic intervention that uses an individual’s cells, which are cultured and expanded outside the
body, and reintroduced into the donor. Once cells are processed, in either case, they must be shipped cryogenically for which
our Cryoport Express ® Shippers are ideally suited.
Central Laboratories.
With the increase and globalization of clinical studies and trials, logistics has become more complex and ensuring sample
integrity has become more challenging. International courier costs are now consuming a significant portion of global protocol
budgets. We believe laboratories performing the testing of samples collected during the conduct of these global multi-site studies
are looking for reliable state-of-the-art logistics solutions.
Pharmaceutical
Distribution. The current focus for the Cryoport Express ® System also includes the area of pharmaceutical
distribution. There are a significant number of therapeutic drugs and vaccines currently or anticipated soon to be undergoing
clinical trials. After the FDA approves them for commercial marketing, it will be necessary for the manufacturers to have a reliable
and economical method of distribution to the physician who will administer the product to the patient. It is likely that the most
efficient and reliable method of distribution will be to ship a single dosage to the administering physician. These drugs are
typically identified to individual patients and therefore will require a complete tracking history from the manufacturer to the
patient. The most reliable method of doing this is to ship a unit dosage specifically for each patient. If such drugs require
maintenance at frozen or cryogenic temperatures, each such shipment will require a frozen or cryogenic shipping package. Cryoport
can provide the technology to meet this anticipated need.
Distribution
of Vaccines and Biologic Therapies. There are a variety of vaccines and other drugs or
therapies that require distribution at frozen or cryogenic temperatures. We anticipate significant growth in this area, in particular
therapies based upon stem cells. It is likely that the most efficient and reliable method of distribution will be to ship a single
dosage or a limited supply to the physician for administration to a patient.
In February 2013,
we started providing comprehensive logistics management services for the lead poultry vaccine distribution of Zoetis, Inc. In
October 2013, Zoetis engaged us to manage distribution of an additional vaccine.
One of our strategic
alliance partners, Liventa Bioscience, Inc., is, in part, basing its business strategy on using our Cryoport Express®
Shippers to deliver supplies of cell-based therapies to physicians, which will be able to keep the shippers at the physician’s
facility for up to one week and thus avoid the need to invest in costly cryogenic refrigeration equipment for commodity storage.
With the inclusion of our Cryoport Express® Smart Pak data logger, Liventa and the physician will have assurance
that cryogenic temperatures were maintained within the shipper.
Fertility Clinics
and In Vitro Fertilization (“IVF”). Maintaining cryogenic temperatures during shipping and transfer of in vitro
fertilization specimens like eggs, sperm, or embryos is critical for cell integrity in order to retain viability, stabilize the
cells, and ensure reproducible results and successful IVF treatment. There are approximately 3,300 fertility clinics worldwide.
Cryoport anticipates that this market will continue to grow; in the United States alone, the fertility market has grown to more
than $4.0 billion with over 1.3 million women seeking treatment each year. In the worldwide market, it is reported that there
are more than one billion IVF cycles per year and growing.
Sales and Marketing
We currently have
two sales directors in the United States, one sales director in Europe, one inside sales representative focused on Reproductive
Medicine/IVF and a part time senior director of marketing promoting the use of our Cryoport Express® Solutions on a direct
basis, in addition to the distribution channels we are establishing. Given the global nature of our business, our sales and marketing
initiatives should more thoroughly cover the Americas, Europe and Asia. For the fiscal year ended March 31, 2014, we had
one customer that accounted for 30.8% of net revenues. No other single customer generated over 10% of our net revenues during
2014 and 2013.
Our geographical
revenues for the fiscal year ended March 31, 2014 were as follows:
| USA | |
| 83.7 | % |
| Europe | |
| 6.7 | % |
| Asia | |
| 3.7 | % |
| Rest of World | |
| 5.9 | % |
We renewed our agreement
with FedEx and plan to further expand our revenues and marketing efforts through the establishment of additional strategic partnerships
with global integrators and freight forwarders. Subject to available financial resources, we also plan to hiring additional sales
and marketing personnel and implement marketing initiatives intended to increase awareness of the Cryoport Express®
Solutions.
Cryoport Operations Centers
In addition to the
services provided through our facility in Lake Forest, California, we have contracted with third parties to run our European Operations
Center (located in Leiden, Holland) and Asian Operations Center (located in Singapore). The operations centers provide warehousing,
shipping, receiving, refurbishing and recycling services for our shipping containers. This approach is a cost-effective way to
initiate operations outside of the US and allows us to scale up as our business grows globally. In March 2013, we shut down a
small third-party operations center in New Delhi, India without impact on our business or customers.
Industry and Competition
Our products and
services are sold into a rapidly growing segment of the logistics industry focused on the temperature sensitive packaging and
shipping of biological materials. Expenditures for “value added” packaging for frozen transport have been increasing
for the past several years and, due in part to continued globalization, are expected to continue to increase even more in the
future as more domestic and international biotechnology firms introduce pharmaceutical products that require continuous refrigeration
at cryogenic temperatures. We believe this will require a greater dependence on passively controlled temperature transport systems
(i.e., systems having no external power source). In addition, we expect that industry standards and regulations will be introduced
globally, requiring more comprehensive tracking and validation of shipping temperatures.
We believe that growth
in the following markets has resulted in the need for increased reliability, efficiencies and greater flexibility in the temperature
sensitive segment of the logistics market:
| · | gene
and stem cell biotechnology |
| · | commercial
drug product distribution |
| · | clinical
trials, including transport of tissue culture samples |
| · | infectious
sample materials |
| · | inter/intra-laboratory
diagnostic testing |
| · | temperature-sensitive
specimens |
| · | biological
samples, in general |
Many of the biological
products in these above markets require transport in a frozen state as well as the need for shipping containers which have the
ability to maintain a frozen, cryogenic environment (e.g., minus 150° Celsius) for a period ranging from two to ten days (depending
on the distance and mode of shipment). These products include stem cells, semen, embryo, tissue, tissue cultures, cultures of
viruses and bacteria, enzymes, DNA materials, vaccines and certain pharmaceutical products.
One of the integral
parts of our solutions are our Cryoport Express® Shippers that are based on a liquid nitrogen dry vapor technology. The following
paragraphs compare our shippers with dry ice and liquid nitrogen shipping methods. Our solutions integrate the Cryoport Express®
Shippers with our CryoportalTM logistics software platform and our cold chain logistics know-how that are comprehensive
and tailored to client requirements.
Cryoport Express Shippers (Liquid
Nitrogen Dry Vapor) compared to Dry Ice Shipments
One problem faced
by many companies operating in these specialized markets is the limited number of cryogenic shipping systems serving their needs.
The currently adopted protocol and the most common method for packaging frozen transport in these industries is the use of solid-state
carbon dioxide (dry ice). Dry ice is and has been used extensively in shipping to maintain a frozen state for a period of one
to four days. Dry ice is used in the transport of many biological products, such as pharmaceuticals, laboratory specimens and
certain infectious materials. The common approach to shipping these items via ground freight is to pack the product in a container,
such as an expanded polystyrene (styrofoam) box or a molded polyurethane box, with a variable quantity of dry ice. The box is
taped or strapped shut and shipped to its destination with freight charges based on its initial shipping weight. All dry ice shipping
is considered dangerous goods shipping, requiring extra packaging steps and adding costs. It gives off carbon dioxide and sublimates
unevenly and in short duration.
With respect to shipments
via specialized courier services, there is no standardized method or device currently in use for the purpose of transporting temperature-sensitive
frozen biological specimens. One common method for courier transport of biological materials is to place frozen specimens, refrigerated
specimens, and ambient specimens into a compartmentalized container, similar in size to a 55 quart Coleman or Igloo cooler. The
freezer compartment in the container is loaded with a quantity of dry ice at minus 78° Celsius, while the refrigerated compartment
at 8° Celsius utilizes ice substitutes.
Two manufacturers
of the polystyrene and polyurethane containers frequently used in the shipping and courier transport of dry ice frozen specimens
are Insulated Shipping Containers, Inc. and Tegrant (formerly SCA Thermosafe). When these containers are used with dry ice, the
average sublimation rate (e.g., the rate at which dry ice turns from a solid to a gaseous state) in a container with a 1 1/2
inch wall thickness is slightly less than three pounds per 24 hours. Other existing refrigerant systems employ the use of
gel packs and ice substitutes for temperature maintenance. Gels and eutectic solutions (phase changing materials) with a wide
range of phasing temperatures have been developed in recent years to meet the needs of products with varying specific temperature
control requirements.
The use of dry ice
and ice substitutes, however, regardless of external packaging used, are frequently inadequate because they do not provide low
enough storage temperatures and, in the case of dry ice, last for only a few days without re-icing. As a result, companies run
the risk of increased costs due to lost specimens and additional shipping charges due to the need to re-ice.
Some of the other
disadvantages to using dry ice for shipping or transporting temperature sensitive products are as follows:
| • | availability
of a dry ice source; |
| • | handling
and storage of the dry ice; |
| • | compliance
with local, state and federal regulations relating to the storage and use of dry ice; |
| • | dangerous
goods shipping regulations; |
| • | weight
of containers when packed with dry ice; |
| • | securing
a shipping container with a high enough R-value (which is a measure of thermal resistance)
to hold the dry ice and product for the required time period; |
| • | securing
a shipping container that meets the requirements of IATA, the DOT, the CDC, and other
regulatory agencies; and |
| • | emission
of greenhouse gases (primarily carbon dioxide) into the environment. |
Due to the limitations
of dry ice, specimens that require frozen shipping are more securely shipped at true cryogenic temperatures using a service such
as liquid nitrogen dry vapor shippers (Cryoport Express Shippers), or liquid nitrogen shippers where the specimen is kept over
actual liquid nitrogen. However, liquid nitrogen is hazardous and has many pitfalls including safety and expense.
Cryoport Express Shippers (Liquid
Nitrogen Dry Vapor) compared to Liquid Nitrogen Dewars/Tanks
There are distinct
disadvantages when using liquid nitrogen compared to the dry vapor liquid nitrogen used in Cryoport Express® Shippers.
Liquid nitrogen dewars/tanks are classified as dangerous goods and cannot be shipped as parcel. In addition, the liquid nitrogen
has to be disposed of prior to returning the dewar/tank to its origin. These issues add additional procedural steps and costs
to the shipment. In addition, there is a risk of liquid nitrogen leakage if the dewar/tank tips to the side during transport,
which can cause bodily injury and compromise the specimen being shipped. Due to the use of our proprietary technology, our Cryoport
Express ® Shippers are not prone to leakage when on their side or inverted, thereby protecting the integrity of
our shipper’s hold time and being safe for handling.
While both liquid
nitrogen dry vapor and liquid nitrogen shippers provide solutions to the issues encountered when shipping with dry ice, liquid
nitrogen shippers have some draw backs. For example, the cost for a liquid nitrogen shipper typically can range from $650 to $4,000
per unit, which can substantially limit their use for the transport of many common biologics, particularly with respect to small
quantities such as is the case with direct to the physician drug delivery. Because of the initial cost and limited production
of these containers, they are designed to be reusable. However, the cost of returning these containers can be significant, particularly
in international markets, because most applications require only one-way shipping. In addition, the logistics support of cryogenic
shippers requires more sophisticated logistics management and discipline to ensure shippers are returned and recycled, especially
for international shipments, which many companies do not have in place.
Cryoport’s
solutions are totally comprehensive and integrated for maximum reliability, economy and total effectiveness. Cryoport’s
total logistics solution enables life sciences companies to utilize the superior liquid nitrogen dry vapor technology without
having to make capital investments or developing in-house logistics expertise and systems by offering a complete solution which
includes the cloud-based CryoportalTM logistics management platform, the temperature monitoring system and the 24/7/365
logistics support. Cryoport allows the customer to outsource logistics and focus on its core competencies while maintaining visibility
of all shipping related information.
Within our intended
biotechnology and life sciences markets for Cryoport Express ® Shippers, there is limited known direct competition.
We compete with liquid nitrogen and dry ice solutions by reason of the improved and integrated hardware and software technology
in our products including our comprehensive logistics management software and through the use of our service enabled business
model. The Cryoport Express ® Solution provides a simple and cost effective solution for the frozen or cryogenic
transport of biotech and life sciences materials. The CryoportalTM assists with the management, scheduling and shipping
of the Cryoport Express ® Shippers removing the burdens associated with other methods.
Traditional dry ice
shippers and liquid nitrogen tank suppliers, such as MVE/Chart Industries, Taylor Wharton and Air Liquide, offer various models
of dry vapor liquid nitrogen shippers that are not as cost efficient for multi-use and multi-shipment purposes due to their significantly
greater unit costs and unit weight (which may substantially increase the shipping cost). On the other hand, they are more established
and have larger organizations and have greater financial, operational, sales and marketing resources, have a broader manufactured
product offering of other liquid nitrogen products and more experience in research and development than we do.
Factors that we believe
give us a competitive advantage are attributable to our software and shipping container which allows our shipper to retain liquid
nitrogen when placed in non-upright positions, the overall “leak- proofness” of our package which determines compliance
with shipping regulations and the overall weight and volume of the package which determines shipping costs, and our business model
represented by the merged integration of our shipper with CryoportalTM and Smart Pak data logger into a seamless shipping,
tracking and monitoring solution.
Other companies that
offer potentially competitive products include Industrial Insulation Systems, which offers cryogenic transport units and has partnered
with Marathon Products Inc., a manufacturer and global supplier of wireless temperature data collecting devices used for documenting
environmentally sensitive products through the cold chain and Kodiak Thermal Technologies, Inc. which offers, among other containers,
a repeat use active-cool container that uses free piston stirling cycle technology. While not having their own shipping devices,
BioStorage Technologies is potentially a competitive company through their management services offered for cold-chain logistics
and long-term biomaterial storage. Cryogena offers a single use disposable LN2 shipper with better performance than dry ice, but
it does not perform as well and is not as cost-effective as the Cryoport solution when all costs are considered. In addition,
BioMatrica, Inc. is developing and offering technology that stabilizes biological samples and research materials at room temperature.
They presently offer these technologies primarily to research and academic institutions; however, their technology may eventually
enter the broader cold-chain market. Fisher BioServices, part of Thermo Fisher Scientific, provides cell therapy logistics services, maintaining
cold chain from manufacturer to patient bedside. They provide customized solutions in biospecimen collection kits,
biospecimen shipping, lab processing, biobanking and clinical trial support services.
Research and Development
Our research and
development efforts are focused on continually improving the features of our Cryoport Express® Solutions including
the cloud-based CryoportalTM and the Cryoport Express® Shippers. These efforts are expected to lead
to the introduction of shippers of varying sizes based on market requirements, constructed of lower cost materials and utilizing
high volume manufacturing methods that will make it practical to provide the cryogenic packages offered with the Cryoport Express®
Solutions. Alternative phase change materials in place of liquid nitrogen may be used to increase the potential markets
these shippers can serve such as ambient and 2°-8°C markets. Our research and development expenditures for the fiscal
years ended March 31, 2014 and 2013 were $409,100 and $425,400, respectively with the largest portion being spent on software
maintenance and development.
Employees
The efforts of our
employees are critical to our success. We believe that we have assembled a strong management team with the experience and expertise
needed to execute our business strategy. We anticipate hiring additional personnel as needs dictate to implement our growth strategy.
As of July 31, 2014, we had twenty full-time employees, two consultants and one temporary employee.
Insurance
We currently maintain
general liability insurance, with coverage in the amount of $1 million per occurrence, subject to a $2 million annual limitation.
Claims may be made against us that exceed these limits. In fiscal year 2014, we did not experience any claims against our professional
liability insurance. Our liability policy is an “occurrence” based policy. Thus, our policy is complete when we purchased
it and following cancellation of the policy it continues to provide coverage for future claims based on conduct that took place
during the policy term. However, our insurance may not protect us against all liability because our policies typically have various
exceptions to the claims covered and also require us to assume some costs of the claim even though a portion of the claim may
be covered. In addition, if we expand into new markets, we may not be aware of the need for, or be able to obtain insurance coverage
for such activities or, if insurance is obtained, the dollar amount of any liabilities incurred could exceed our insurance coverage.
A partially or completely uninsured claim, if successful and of significant magnitude, could have a material adverse effect on
our business, financial condition and results of operations.
We also maintain
product liability insurance with coverage in the amount of $1,000,000 per year. In addition, we currently maintain cargo insurance
for shipments for one customer, with coverage of up to $10,000 per shipment.
DESCRIPTION OF
PROPERTY
We do not own real
property. We currently lease two facilities, with approximately 12,000 square feet of corporate, research and development, and
warehouse facilities, located in Lake Forest, California (“Lake Forest Facility”) and approximately 4,100 square feet
of corporate offices located in San Diego, California (“San Diego Facility”). In June 2010, the Company entered into
a third amendment to the Lake Forest Facility lease and extended the lease for sixty months commencing July 1, 2010 with
a right to cancel the lease with a minimum of 120 day written notice at any time after December 31, 2012. On November 28,
2011, the Company entered into a lease agreement for the corporate offices in San Diego for a thirty six month period ending December 31,
2014.
The Company currently
makes base lease payments of approximately $17,000 per month, due at the beginning of each month. We believe that these facilities
are adequate, suitable and of sufficient capacity to support our immediate needs. Additional space may be required, however, as
we expand our research and development, manufacturing and selling and marketing activities.
LEGAL PROCEEDINGS
In the ordinary course
of business, we are at times subject to various legal proceedings and disputes, including product liability claims. We currently
are not aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse
effect on our business, operating results or cash flows. It is our practice to accrue for open claims based on our historical
experience and available insurance coverage.
DIRECTORS AND EXECUTIVE
OFFICERS
Directors and Executive Officers
The following table
sets for the name and age of each director and executive officer, the year first elected as a director and/or executive officer
and the position(s) held with Cryoport:
| Name |
|
Age |
|
Position |
|
Date
Elected |
| Jerrell W. Shelton |
|
69 |
|
President, Chief Executive Officer, Director |
|
2012 |
| Robert S. Stefanovich |
|
49 |
|
Chief Financial Officer, Treasurer and Corporate Secretary |
|
2011 |
| Edward Zecchini |
|
53 |
|
Director |
|
2013 |
| Richard G. Rathmann |
|
53 |
|
Director |
|
2013 |
| Ramkumar Mandalam |
|
49 |
|
Director |
|
2014 |
Background of Directors
and Officers:
Jerrell W. Shelton,
age 69, became President and Chief Executive Officer of the Company on November 5, 2012. He served on the Board of Directors and
standing committees of Solera Holdings, Inc. from April 2007 through November 2011. From June 2004 to May 2006, Mr. Shelton
was the Chairman and CEO of Wellness, Inc., a provider of advanced, integrated hospital and clinical environments. Prior to that,
he served as CEO of IBM’s WebFountain. From October 1998 to October 1999, Mr. Shelton was Chairman, President and CEO
of NDC Holdings II, Inc. Between October 1996 and July 1998, he was President and CEO of Continental Graphics Holdings, Inc. and
from October 1991 to July 1996, Mr. Shelton served as President and CEO of Thomson Business Information Group. Mr. Shelton
has a B.S. in Business Administration from the University of Tennessee and an M.B.A. from Harvard University. Mr. Shelton
currently serves on the Advisory Board of Directors and the Nominating and Stewardship committee of the Smithsonian Institution
Libraries.
Robert S. Stefanovich,
age 49, became Chief Financial Officer, Treasurer and Corporate Secretary for the Company on June 27, 2011 following the
Company’s filing of its Form 10–K for the fiscal year ended March 31, 2011. On June 15, 2012, Mr. Stefanovich
was appointed Principal Executive Officer. From November 2007 through March 2011, Mr. Stefanovich served as Chief
Financial Officer of Novalar Pharmaceuticals, Inc., a venture-backed specialty pharmaceutical company. Prior to that, he held
several senior positions, including interim Chief Financial Officer of Xcorporeal, Inc., a publicly traded medical device company,
Executive Vice President and Chief Financial Officer of Artemis International Solutions Corporation, a publicly traded software
company, Chief Financial Officer and Secretary of Aethlon Medical Inc., a publicly traded medical device company and Vice President
of Administration at SAIC, a Fortune 500 company. Mr. Stefanovich also served as a member of the Software Advisory Group
and an Audit Manager with Price Waterhouse LLP’s (now PricewaterhouseCoopers) hi-tech practice in San Jose, CA and Frankfurt,
Germany. He currently also serves as a board member of Project InVision International, a provider of business performance improvement
solutions. He received his Masters of Business Administration and Engineering from University of Darmstadt, Germany.
Edward
J. Zecchini, age 53 became a member of the Board on
September 13, 2013, and serves as Chairman of the Nominating and Governance Committee of the Board and member of the Audit Committee and the Compensation Committee. Mr. Zecchini
currently serves as Executive Vice President and Chief Technology Officer at Sandata Technologies, LLC, a leading nationwide
provider of information technology solutions to the home healthcare industry, which he joined in May 2010. Prior to that,
Mr. Zecchini served as President and Chief Executive Officer of IT Analytics LLC from March 2008 to April 2010, Executive
Vice President of Operations and Chief Information Officer of Touchstone Healthcare Partnership from May 2007 to February
2008 and Senior Vice President and Chief Information Officer of HealthMarkets, Inc. from October 2004 to April 2007. Earlier
in his career he held senior level positions at Thomson Healthcare and SportsTicker, Inc. Mr. Zecchini has over thirty years
of experience in the healthcare and information technology industries. Mr. Zecchini holds a Bachelor of Arts degree from
the State University of New York. Mr. Zecchini currently serves on the board of directors of Insur I.Q. LLC. The Board
concluded that Mr. Zecchini should serve as a director on our Board in light of his experience in the healthcare
and information technology industries.
Richard G.
Rathmann, age 53, became a member of our Board in March 2013 and serves as the Chairman of the Board, Chairman of the
Compensation Committee and member of the Audit Committee. Mr. Rathmann served for the past eighteen years as a director
of various for-profit and non-profit companies. He is the manager of GBR Investments, LLC since 2005 and has served as
the Executive Director of the Rathmann Family Foundation since 2002. Mr. Rathmann received his bachelor’s degree
from the University of Colorado and his juris doctor degree from Boston College Law School. Mr. Rathmann currently
serves on the board of directors of PIN Pharma, the Rathmann Family Foundation, and Cellerant Therapeutics, where he served
as Chairman from 2007 to 2012.
Ramkumar Mandalam,
Ph.D., age 49, became a member of the Company’s Board on June 16, 2014 and currently serves as a member of the Compensation
Committee and the Nomination and Governance Committee. Dr. Mandalam is the President and CEO of Cellerant Therapeutics, Inc.,
a clinical stage biotechnology company developing novel cell-based and antibody therapies for cancer treatment and blood-related
disorders. Prior to joining Cellerant in 2005, he was the Executive Director of Product Development at Geron Corporation, a biopharmaceutical
company where he managed the development and manufacturing of cell based therapies for treatment of degenerative diseases and
cancer. From 1994 to 2000, he held various positions in research and development at Aastrom Biosciences, where he was responsible
for programs involving ex vivo expansion of human bone marrow stem cells and dendritic cells. Dr. Mandalam received his Ph.D.
in Chemical Engineering from the University of Michigan, Ann Arbor, Michigan. Dr. Mandalam is the author or co-author of several
publications, patent applications, and abstracts. The Board concluded that Dr. Mandalam should serve as a director on our Board
in light of his knowledge and experience within the biotechnology and cell-based therapies.
The directors and
officers of Cryoport hold office until their successors are elected and qualified, or until their death, resignation, or removal.
None of the directors
or officers listed above has:
| • | Had a bankruptcy petition
filed by or against any business of which that person was a general partner of executive
officer either at the time of the bankruptcy or within two years prior to that time; |
| • | Had any conviction in a criminal
proceeding, or been subject to a pending criminal proceeding; |
| • | Been subject to any order,
judgment, or decree by any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting such person’s involvement
in any type of business, securities or banking activities; and |
| • | Been found by a court of
competent jurisdiction, the Commission, or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law. |
Director Independence
The Company is quoted
on the Over-The-Counter Bulletin Board system, which does not require director independence requirements. However, for purposes
of determining director independence, we have applied the definitions set forth in NASDAQ Rule 5605(a)(2) which states, generally,
that a director is not considered to be independent if he or she is, or at any time during the past three years was an employee
of the Company; or if he or she (or his or her family member) accepted compensation from the Company in excess of $120,000 during
any twelve month period within the three years preceding the determination of independence. Our Board has affirmatively determined
that Mr. Mandalam, Mr. Rathmann, and Mr. Zecchini are “independent” as such term is defined under NASDAQ
Rule 5605(a)(2) and the related rules of the Securities and Exchange Commission (the “SEC”). We intend to maintain
at least two independent directors on the Board.
Committees of the Board of Directors
Our Board of Directors
has established an Audit Committee, a Compensation Committee and a Nomination and Governance Committee.
Audit Committee
The functions of
the Audit Committee are to (i) review the qualifications of the independent auditors, our annual and interim financial statements,
the independent auditor’s report, significant reporting or operating issues and corporate policies and procedures as they
relate to accounting and financial controls; and (ii) to consider and review other matters relating to our financial and
accounting affairs. The Company’s Board has a formally established Audit Committee and adopted an Audit Committee charter.
The Audit Committee’s charter is available on the Company’s website at www.cryoport.com under the tab “Corporate
Governance” which is found under the heading “Company.” Information on the website does not constitute a part
of this Proxy Statement.
The current
members of the Audit Committee are Mr. Richard G. Rathmann, who is the Audit Committee Chairman, and Mr. Edward J. Zecchini.
The Company has determined that there is currently no “audit committee financial expert” as defined
in Item 407(d)(5)(ii) of Regulation S-K of the SEC rules serving on its Audit Committee. The Company does not
currently have an “audit committee financial expert” serving on its Audit Committee because the
Company’s prior “audit committee financial expert” is no longer a member of the Board of Directors. The
Company is in the process of identifying a new director to add to the Board of Directors that would qualify as an
“audit committee financial expert.” During the fiscal 2014, the Company’s Audit Committee held four meetings. In
addition, the Audit Committee regularly held discussions regarding the consolidated financial statements of the Company
during Board meetings.
Compensation Committee
The purpose of the
Compensation Committee is to discharge the Board’s responsibilities relating to compensation of the Company’s directors
and executive officers, to produce an annual report on executive compensation for inclusion in the Company’s Proxy Statement,
as necessary, and to oversee and advise the Board on the adoption of policies that govern the Company’s compensation programs
including stock incentive and benefit plans. In May 2010, the Company’s Board established the Compensation Committee. Previously,
the Committee was known as the “Compensation and Governance Committee.” The Compensation Committee’s charter
is available on the Company’s website at www.cryoport.com under the tab “Corporate Governance” which is found
under the heading “Company.” Information on the website does not constitute a part of this prospectus.
The
current members of the Compensation Committee are Mr. Richard G. Rathmann, who is the Chairperson, Mr. Ramkumar
Mandalam, and Mr. Edward J. Zecchini, each of whom is independent under applicable independence requirements. Each of the
current members of the Compensation Committee is a “non-employee director” under Section 16 of the Exchange
Act and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”). The Compensation Committee met two times during fiscal 2014.
Nomination and Governance Committee
In May 2010, the
Company established the Nomination and Governance Committee. The function of the Nomination and Governance Committee is to (i) make
recommendations to the Board regarding the size of the Board, (ii) make recommendations to the Board regarding criteria for
the selection of director nominees, (iii) identify and recommend to the Board for selection as director nominees individuals
qualified to become members of the Board, (iv) recommend committee assignments to the Board, (v) recommend to the Board
corporate governance principles and practices appropriate to the Company, and (vi) lead the Board in an annual review of
its performance. The Nomination and Governance Committee’s charter is available on the Company’s website at www.cryoport.com
under the tab “Corporate Governance” which is found under the heading “Company.” Information on the website
does not constitute a part of this Registration Statement.
The current
members of the Nomination and Governance Committee are Mr. Edward Zecchini, who is the Chairperson, Mr. Ramkumar Mandalam,
and Mr. Richard G. Rathmann. The Nomination and Governance Committee met two times during fiscal 2014.
EXECUTIVE COMPENSATION
Executive Officers of the Company
The Company’s
current executive officers are as follows:
Jerrell W. Shelton,
age 68, became President and Chief Executive Officer of the Company on November 5, 2012. He served on the Board of Directors and
standing committees of Solera Holdings, Inc. from April 2007 through November 2011. From June 2004 to May 2006, Mr. Shelton
was the Chairman and CEO of Wellness, Inc., a provider of advanced, integrated hospital and clinical environments. Prior to that,
he served as CEO of IBM’s WebFountain. From October 1998 to October 1999, Mr. Shelton was Chairman, President and CEO
of NDC Holdings II, Inc. Between October 1996 and July 1998, he was President and CEO of Continental Graphics Holdings, Inc. and
from October 1991 to July 1996, Mr. Shelton served as President and CEO of Thomson Business Information Group. Mr. Shelton
has a B.S. in Business Administration from the University of Tennessee and an M.B.A. from Harvard University. Mr. Shelton
currently serves on the Advisory Board of Directors and the Nominating and Stewardship committee of the Smithsonian Institution
Libraries.
Robert S. Stefanovich,
age 49, became Chief Financial Officer, Treasurer and Corporate Secretary for the Company on June 27, 2011 following the
Company’s filing of its Form 10–K for the fiscal year ended March 31, 2011. From June 15, 2012 to November
4, 2012, Mr. Stefanovich served as the Principal Executive Officer of the Company. From November 2007 through March 2011,
Mr. Stefanovich served as Chief Financial Officer of Novalar Pharmaceuticals, Inc., a venture-backed specialty pharmaceutical
company. Prior to that, he held several senior positions, including interim Chief Financial Officer of Xcorporeal, Inc., a publicly
traded medical device company, Executive Vice President and Chief Financial Officer of Artemis International Solutions Corporation,
a publicly traded software company, Chief Financial Officer and Secretary of Aethlon Medical Inc., a publicly traded medical device
company and Vice President of Administration at SAIC, a Fortune 500 company. Mr. Stefanovich also served as a member of the
Software Advisory Group and an Audit Manager with Price Waterhouse LLP’s (now PricewaterhouseCoopers) hi-tech practice in
San Jose, CA and Frankfurt, Germany. He currently also serves as a board member of Project InVision International, a provider
of business performance improvement solutions. He received his Masters of Business Administration and Engineering from University
of Darmstadt, Germany.
SUMMARY COMPENSATION TABLE
The following table
contains information with respect to the compensation for the fiscal years ended March 31, 2014 and 2013 of our chief executive
officer, chief financial officer and former chief executive officer. We refer to the executive officers identified in this table
as our “Named Executive Officers.”
| Name and Principal Position | |
Fiscal
Year | |
Salary (1)
($) | | |
Bonus
($) | | |
Option
Awards (5)
($) | | |
All Other
Compensation
($) | | |
Total
Compensation
($) | |
| Jerrell W. Shelton | |
2014 | |
| 300,000 | (4) | |
| — | | |
| 930,358 | (3) | |
| — | | |
| 1,230,358 | |
| President and Chief Executive Officer | |
2013 | |
| 122,885 | (9) | |
| — | | |
| 295,380 | (7) | |
| 4,409 | (8) | |
| 422,674 | |
| Robert S. Stefanovich | |
2014 | |
| 225,000 | (4) | |
| — | | |
| 201,028 | (6) | |
| — | | |
| 426,028 | |
| Chief Financial Officer | |
2013 | |
| 225,000 | (4) | |
| — | | |
| 40,652 | (6) | |
| — | | |
| 265,652 | |
| Larry G. Stambaugh | |
2014 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Former President, Chief Executive Officer and Chairman | |
2013 | |
| 6,923 | (2) | |
| — | | |
| — | | |
| 241,115 | (10) | |
| 248,038 | |
| (1) | This
column represents salary as of the last payroll period prior to or immediately after
March 31 of each fiscal year. |
| (2) | On
August 21, 2009, the Compensation Committee approved an employment agreement with Mr.
Stambaugh which had an effective commencement date of August 1, 2009, the details of
which are described below. $57,794 and $360,000 were paid to Mr. Stambaugh in fiscal
2013 and 2012, respectively, per the terms of the employment agreement. Mr. Stambaugh
resigned as President, Chief Executive Officer and Chairman on April 5, 2012. |
| (3) | This
amount represents the fair value of all options granted to Mr. Shelton as compensation
for services as a director and officer of the Company during fiscal 2014. Based on the
recommendation of the Compensation Committee and approval by the Board, on June 28, 2013,
Mr. Shelton was granted an option to purchase 3,902,507 shares of common stock in connection
with his engagement as Chief Executive Officer of the Company. |
| (4) | This
amount represents the annual base salary paid. |
| (5) | This
column represents the total grant date fair value of all stock options granted in fiscal
2014 and the Company’s fiscal year ended March 31, 2013. Pursuant to SEC rules,
the amounts shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. For information on the valuation assumptions with respect to the
grants made in fiscal 2014 and 2013, refer to Note 2 “Summary of Significant
Accounting Policies” in the accompanying consolidated financial statements. |
| (6) | This
amount represents the fair value of all options granted to Mr. Stefanovich as compensation
for services during fiscal 2014 and 2013. Based on the recommendation of the Compensation
Committee and approval by the Board, on June 28, 2013 and August 3, 2012 Mr. Stefanovich
was granted an option to purchase 839,016 and 100,000 shares of common stock, respectively.
The exercise price of the options are equal to the fair value of the Company’s
stock as of the grant date. |
| (7) | This
amount represents the fair value of all options granted to Mr. Shelton as compensation
for services as a director and officer of the Company during fiscal 2013. Based on the
recommendation of the Board, on October 22, 2012, Mr. Shelton was granted an option to
purchase 100,000 shares of the Company’s common stock upon joining the Board. Based
on the recommendation of the Compensation Committee and approval by the Board, on November
5, 2012, Mr. Shelton was granted an option to purchase 1,650,000 shares of common stock
in connection with his engagement as Chief Executive Officer of the Company |
| (8) | This
amount represents board fees paid to Mr. Shelton as compensation for services as a director
of the Company during fiscal 2013 prior to becoming Chief Executive Officer of the Company. |
| (9) | Reflects
a pro-rated salary for Mr. Shelton who began employment with the Company on November
5, 2012. |
| (10) | Amount represents $180,000 severance
payment, $50,871 personal time off payout and $10,244 COBRA reimbursements to Mr. Stambaugh
per the terms of his separation agreement. |
Narrative
Disclosure to Summary Compensation Table
Employment
Contracts
Jerrell
W. Shelton
On November 5,
2012, the Company entered into an employment agreement (the “Initial Agreement”) with Mr. Shelton with respect
to his employment as President and Chief Executive Officer. The Initial Agreement provided a term of six months. The Initial Agreement
provided an initial annual base salary of $300,000 during the Term.
In addition, on the
date of the Initial Agreement, Mr. Shelton was awarded two options giving him the right to acquire an aggregate of 1,650,000
shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock
on the date of the Agreement, or $0.20 per share. The aggregate number of shares was determined by dividing $350,000 by the closing
price of the Company’s common stock on the date of the Agreement, or $0.20 per share, and subtracting 100,000 shares, which
is the number of shares of common stock that Mr. Shelton was given the right to purchase pursuant to the option that was
issued to him in connection with his appointment to the Board of Directors on October 22, 2012. The first option issued in
connection with the Agreement was issued under the Company’s 2011 Stock Incentive Plan and provides Mr. Shelton the
right to purchase 650,000 shares of the common stock of the Company, which is the maximum that may be awarded to Mr. Shelton
in this fiscal year under such plan. Mr. Shelton subsequently exercised 650,000 of these shares in May and November 2013. The
second option provided Mr. Shelton the right to purchase 1,000,000 shares of common stock of the Company and was granted
outside of the Company’s incentive plans. The options vest in six equal monthly installments during the Term and expire
at the earlier of (a) ten years from the date of the Agreement, and (b) five (5) years from the date of the resignation
and/or removal of the Mr. Shelton as a member of the Board of Directors of the Company.
On June 28, 2013,
after the expiration of the Initial Agreement, the Company entered into a new employment agreement (the “Agreement”)
with Mr. Shelton with respect to his employment as President and Chief Executive Officer. The Agreement is effective through May
14, 2017 (the “Term”).
The Agreement provides
an initial annual base salary of $300,000 during the Term. In addition, on the date of the Agreement, Mr. Shelton was awarded
options giving him the right to acquire an aggregate of 3,902,507 shares of the Company’s common stock at an exercise price
equal to the closing price of the Company’s common stock on the date of the Agreement, or $0.27 per share, and such options
were granted outside of the Company’s incentive plans. The option vests immediately with respect to 162,604 shares and the
remaining right to purchase the remaining shares vests in equal monthly installments on the fifth day of each month for forty
six months beginning on July 5, 2013 and ending on May 5, 2017. Provided that such vesting will be accelerated on the date that
the Company files a Form 10-Q or Form 10-K indicating an income from operations for the Company in two consecutive fiscal quarters
and immediately in the event of a change of control of the Company.
The options expire
at the earlier of (a) ten years from the date of the Agreement, and (b) twenty four (24) months from the date of the resignation
and/or removal of the Mr. Shelton as Chief Executive Officer of the Company.
Mr. Shelton has agreed
during the Term and for a period of one year following the termination of the Agreement, not to solicit, induce, entice or attempt
to solicit, induce, or entice any employee of the Company to leave employment with the Company. Payments due to Mr. Shelton
upon a termination of his employment agreement are described below.
Robert
S. Stefanovich
Although the Company
does not have a written employment agreement with Mr. Stefanovich, pursuant to the terms of his offer letter, the Company
has agreed to pay Mr. Stefanovich an annual base salary of $225,000 per year. In addition, he is eligible for an incentive
bonus targeted at 25% of his annual base salary. Mr. Stefanovich is eligible to participate in all employee benefits plans
or arrangements which may be offered by the Company during the term of his agreement. The Company shall pay the cost of Mr. Stefanovich’s
health insurance coverage in accordance with the Company’s plans and policies while he is an employee of the Company. Mr. Stefanovich
is also eligible for fifteen (15) paid time off days a year, and is entitled to receive fringe benefits ordinarily and customarily
provided by the Company to its senior officers. Payments due to Mr. Stefanovich upon a termination of his employment agreement
with the Company are described below.
Larry
G. Stambaugh (former President and Chief Executive Officer)
On August 21,
2009, the Compensation Committee approved an employment agreement with Mr. Stambaugh, the Company’s former Chief Executive
Officer, President and Chairman, which commenced effective as of August 1, 2009 and continued in effect until April 5, 2012
(the “Stambaugh Employment Agreement”), the date of Mr. Stambaugh’s resignation. Pursuant to the terms of the
Stambaugh Employment Agreement, Mr. Stambaugh was paid an annual base salary of $360,000. In connection with Mr. Stambaugh’s
resignation as Chief Executive Officer and Chairman of the Board, the Company paid Mr. Stambaugh a lump sum severance payment
of $180,000 and extended the exercise period of two stock options granted to Mr. Stambaugh on September 10, 2010, with exercise
prices of $0.66 per share until April 5, 2017 with respect to those underlying shares of common stock vested as of April 5, 2012,
which amount to 362,232 and 210,000 shares of the Company’s common stock, respectively.
The Company has no
other employment agreements with executive officers of the Company as of March 31, 2014.
OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR END 2014
The following table
shows information regarding unexercised stock options held by our Named Executive Officers as of fiscal year ended March 31,
2014:
| Name | |
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | | |
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable | | |
Equity
Incentive
Plan Awards
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) | | |
Option
Exercise
Price
($) | | |
Option
Expiration
Date | |
| Jerrell W. Shelton | |
| 100,000 | (1) | |
| — | | |
| — | | |
$ | 0.19 | | |
| 10/21/22 | |
| | |
| 1,000,000 | (2) | |
| — | | |
| — | | |
$ | 0.20 | | |
| 11/4/22 | |
| | |
| 894,324 | (3) | |
| — | | |
| 3,008,183 | (3) | |
$ | 0.27 | | |
| 6/27/23 | |
| Robert Stefanovich | |
| 78,125 | (4) | |
| — | | |
| 46,875 | (4) | |
$ | 0.86 | | |
| 6/19/21 | |
| | |
| — | (5) | |
| — | | |
| 40,000 | (5) | |
$ | 0.43 | | |
| 8/2/22 | |
| | |
| 22,500 | (6) | |
| — | | |
| 37,500 | (6) | |
$ | 0.43 | | |
| 8/2/22 | |
| | |
| 157,316 | (7) | |
| — | | |
| 681,700 | (7) | |
$ | 0.27 | | |
| 6/27/23 | |
| Larry Stambaugh | |
| 362,232 | (8) | |
| — | | |
| — | | |
$ | 0.66 | | |
| 4/5/17 | (10) |
| | |
| 210,000 | (9) | |
| — | | |
| — | (9) | |
$ | 0.66 | | |
| 4/5/17 | (10) |
| (1) | Based
on the recommendation of the Compensation Committee and approval by the Board, Mr. Shelton
was granted an option to purchase 100,000 shares of common stock exercisable at $0.19
per share on October 22, 2012 upon joining the board of directors. Options vests in twelve
equal monthly installments. The exercise price for shares of common stock pursuant to
the options is equal to the fair value of the Company’s stock as of the grant date. |
| (2) | Based
on the recommendation of the Compensation Committee and approval by the Board, Mr. Shelton
was granted an option to purchase 1,650,000 shares of common stock exercisable at $0.20
per share on November 5, 2012, which vests in six equal monthly installments. 650,000
of these options were issued under the 2011 stock option plan and exercised in May and
November 2013 and 1,000,000 were issued outside of a plan. The exercise price for shares
of common stock pursuant to the option is equal to the fair value of the Company’s
stock as of the grant date. |
| (3) | Based on the recommendation of the
Compensation Committee and approval by the Board, Mr. Shelton was granted an option to
purchase 3,902,507 shares of common stock exercisable at $0.27 per share on June 28,
2013. The option vests 2/48th immediately with the remainder vesting 1/48th
per month for 46 months. The exercise price for the shares of common stock pursuant
to the option is equal to the fair value of the Company’s stock on the date of
grant. |
| (4) | Based
on the recommendation of the Compensation Committee and approval by the Board, Mr. Stefanovich
was granted an option to purchase 125,000 shares of common stock exercisable at $0.86
per share on June 20, 2011. The option vests in six month installments over a four year
period. The exercise price for the shares of common stock pursuant to the option is equal
to the fair value of the Company’s stock on the date of grant. |
| (5) | Based on the recommendation of the
Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option
to purchase 40,000 shares of common stock exercisable at $0.43 per share on August 3,
2012. The option vests based on certain performance criteria. The exercise price for
the shares of common stock pursuant to the option is equal to the fair value of the Company’s
stock on the date of grant |
| (6) | Based on the recommendation of the
Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option
to purchase 60,000 shares of common stock exercisable at $0.43 per share on August 3,
2012. The option vests in six month installments over a four year period. The exercise
price for the shares of common stock pursuant to the option is equal to the fair value
of the Company’s stock on the date of grant |
| (7) | Based on the recommendation of the
Compensation Committee and approval by the Board, Mr. Stefanovich was granted an option
to purchase 839,016 shares of common stock exercisable at $0.27 per share on June 28,
2013. The options vest in equal monthly installments over four years. The exercise price
for the shares of common stock pursuant to the option is equal to the fair value of the
Company’s stock on the date of grant. |
| (8) | Based
on the recommendation of the Compensation Committee and approval by the Board, Mr. Stambaugh
was granted an option to purchase 362,232 shares of common stock exercisable at $0.66
per share on September 15, 2010, in lieu of payment of his fiscal year 2010 cash bonus
of $216,000. The option was fully vested at date of grant. The exercise price for shares
of common stock pursuant to the option is equal to the fair value of the Company’s
stock as of the grant date. |
| (9) | Based
on the recommendation of the Compensation Committee and approval by the Board, Mr. Stambaugh
was granted an option to purchase 420,000 shares of common stock exercisable at $0.66
per share on September 15, 2010. The right to exercise the stock option vested as to
25% of the underlying shares of common stock upon grant, with the remaining underlying
shares vesting in equal installments on the first, second and third anniversary of the
grant date. The exercise price for shares of common stock pursuant to the option is equal
to the fair value of the Company’s stock as of the grant date. |
| (10) | In
connection with Mr. Stambaugh’s resignation as Chief Executive Officer and Chairman
of the Board, which was effective on April 5, 2012, the Company extended the exercise
period of two stock options granted to Mr. Stambaugh on September 10, 2010, with exercise
prices of $0.66 per share until April 5, 2017 with respect to those underlying shares
of common stock vested as of April 5, 2012, which amount to 362,232 and 210,000 shares
of the Company’s common stock, respectively. |
Potential Payments On
Termination Or Change In Control
Pursuant to Mr. Shelton’s
employment agreement, if Mr. Shelton terminates the Agreement, dies, or is terminated for “Cause” (as defined in the
agreement), he will be entitled to all compensation and benefits that he earned through the date of termination. If he is terminated
for Cause, the Company may, to the extent allowed by law set off losses, fines or damages that he has caused as a result of his
misconduct. If he is terminated “without cause” (as defined in the agreement), he will be entitled to a continuation
of his base salary for three months following termination and one half of unvested options as of date of termination shall become
fully vested. In the event the Company terminates his employment, except if for “Cause” (as defined in the agreement),
within twelve (12) months after a Change in Control (as defined in the Cryoport, Inc. 2011 Stock Incentive Plan), then, Mr. Shelton
will be entitled to: (i) the continuation of his base salary for twelve (12) months following the date of termination, which shall
be paid in accordance with the Company’s ordinary payroll practices in effect from time to time, and which shall begin on
the first payroll period immediately following the date on which the general release and waiver becomes irrevocable; and (ii) all
options previously granted to Mr. Shelton will become fully vested and exercisable as of the date of termination.
Pursuant to Mr. Stefanovich’s
employment offer, in the event that Mr. Stefanovich’s employment with the Company is terminated as a result of a “change
of control,” as is defined in the Company’s 2009 Stock Incentive Plan, he will be entitled to receive a severance
payment equal to twelve months of his base salary, continuation of health benefits for a period of twelve months, and the unvested
portion of his stock option grants immediately shall vest in full. Separately, in the event his employment is terminated by the
Company for reasons other than cause, Mr. Stefanovich will be entitled to receive a severance payment equal to six months
of his base salary plus continuation of health benefits for a period of six months.
In connection with
Mr. Stambaugh’s resignation as Chief Executive Officer and Chairman of the Board, which was effective on April 5, 2012,
the Company paid Mr. Stambaugh a lump sum severance payment of $180,000 and extended the exercise period of two stock options
granted to Mr. Stambaugh on September 10, 2010, with exercise prices of $0.66 per share until April 5, 2017 with respect to those
underlying shares of common stock vested as of April 5, 2012, which amount to 362,232 and 210,000 shares of the Company’s
common stock, respectively.
The 2002 Plan, 2009
Plan and 2011 Plan each provide that in the event of a “change of control,” the applicable option agreement may provide
that such options or shares will become fully vested and may be immediately exercised by the person who holds the option, at the
discretion of the board.
The Company does
not provide any additional payments to named executive officers upon their resignation, termination, retirement, or upon a change
of control.
DIRECTOR COMPENSATION
Compensation for
the Board is governed by the Company’s Compensation Committee. Effective August 21, 2009 through May 2, 2012 the
fees payable to non-employee directors were set at a flat fee of $15,000 per quarter with no additional fees payable for committee
membership or serving as chairman of a committee. Effective May 3, 2012, the cash compensation that each non-employee director
is paid is $40,000 annually, except for the non-employee Chairman of the Board who is paid $56,000 annually. In addition, each
non-employee director who serves as Chairman of one or more Board Committees will be paid additional cash compensation of $8,000
annually for all Committee Chairmanships.
Effective May 3,
2012, each non-employee director is awarded a stock option to purchase 50,000 shares of the Company’s common stock on the
date of the Company’s annual meeting of stockholders, except for the non-employee Chairman of the Board who is awarded a
stock option to purchase 80,000 shares of the Company’s common stock. In addition, each new non-employee director will be
granted a stock option to purchase 100,000 shares of the Company’s common stock upon joining the Board.
On May 3, 2012, Mr.
Michelin was granted options to purchase a total of 60,000 shares of the Company’s common stock with an exercise price of
$0.44 per share which vested on September 22, 2012 for his service as a director, Chairman of the Audit Committee, and as a member
of the Compensation Committee and the Nomination and Governance Committee during fiscal 2012 and fiscal 2013 and Lead Independent
Director during fiscal 2012. The options to purchase a total of 35,000 shares were issued in connection with the services he provided
during fiscal 2012.
On May 3, 2012, Mr.
Wasserman was granted options to purchase a total of 138,356 shares of the Company’s common stock with an exercise price
of $0.44 per share which vested on March 29, 2013 for his service as a director, Chairman of the Board and member of the Compensation
Committee, Audit Committee and Governance and Nominating Committee during fiscal 2012 and fiscal 2013.
On May 3, 2012, Ms.
Muller was granted options to purchase a total of 166,438 shares of the Company’s common stock with an exercise price of
$0.44 per share of which 116,438 shares immediately vested and the remaining 50,000 shares vested on September 22, 2012 for her
service as a director, Chairman of the Compensation Committee and Nomination and Governance Committee, and a member of the Audit
Committee during fiscal 2012 and fiscal 2013. The options to purchase a total of 127,771 shares were issued in connection with
the services she provided during fiscal 2012.
On July 12, 2012,
Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 100,000 shares of the Company’s common
stock with an exercise price of $0.36 per share which were fully vested upon issuance for their service as the Office of the Chief
Executive for the months of April, May, and June 2012.
Annual awards were
granted at the shareholders meeting on September 13, 2012. Mr. Michelin, Ms. Muller and Mr. Wasserman were each granted an option
to purchase 50,000, 50,000 and 80,000 shares, respectively, of the Company’s common stock with an exercise price of $0.30
per share
On October 9, 2012,
Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 125,000 shares of the Company’s common
stock with an exercise price of $0.17 per share which were fully vested upon issuance for their service as the Office of the Chief
Executive for the months of July, August and September 2012.
On December 12, 2012,
Mr. Michelin, Mr. Wasserman, and Ms. Muller were each granted an option to purchase 50,000, 100,000 and 100,000 shares, respectively,
of the Company’s common stock with an exercise price of $0.18 per share which were fully vested upon issuance for their
service as the Office of the Chief Executive for the month of October and part of November 2012.
Annual awards were
granted at the shareholders meeting on September 6, 2013. Mr. Rathmann and Mr. Wasserman were each granted an option to purchase
80,000 and 50,000 shares, respectively, of the Company’s common stock with an exercise price of $0.38 per share.
On September 13,
2013, Mr. Zecchini was granted an option to purchase 100,000 shares of the Company’s common stock with an exercise price
of $0.40 per share when he joined the board.
The following table
sets forth the director compensation of the non-employee directors of the Company during fiscal 2014.
| Name | |
Fees Earned
Or Paid in
Cash
($)(1) | | |
Stock
Awards
($) | | |
Option
Awards
($)(2) | | |
All Other
Compensation
($) | | |
Total
($) | |
| Adam M.
Michelin(3) | |
$ | 24,000 | | |
$ | — | | |
$ | — | | |
| — | | |
$ | 24,000 | |
| Karen Muller(3) | |
| 24,000 | | |
| — | | |
| — | | |
| — | | |
| 24,000 | |
| Richard Rathmann | |
| 56,445 | | |
| — | | |
| 26,300 | | |
| — | | |
| 82,745 | |
| Stephen Wasserman(4) | |
| 52,108 | | |
| — | | |
| 16,438 | | |
| — | | |
| 68,546 | |
| Edward Zecchini | |
| 26,400 | | |
| — | | |
| 34,632 | | |
| — | | |
| 61,032 | |
(1) Fees earned or paid in
cash as shown in this schedule represent payments and accruals for directors’ services earned during fiscal 2014.
(2) This column represents
the total grant date fair value of all stock options granted in fiscal 2014. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based vesting conditions. For information on the valuation assumptions
with respect to the grants made in fiscal 2014, refer to Note 2 “Summary of Significant Accounting Policies” in
the accompanying consolidated financial statements.
(3) Mrs. Muller and Mr. Michelin served
as directors of the Company through the Company’s annual meeting of stockholders on September 6, 2013.
(4) Mr. Stephen Wasserman served as director of the
Company through the Company’s annual meeting of stockholders on August 29, 2014.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
None
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
sets forth information with respect to the beneficial ownership of the Company’s common stock as of July 31, 2014, by each
person or group of affiliated persons known to the Company to beneficially own 5% or more of its common stock, each director,
each named executive officer, and all of its directors and named executive officers as a group. As of July 31, 2014, there were
60,037,846 shares of common stock outstanding. Unless otherwise indicated, the address of each beneficial owner listed below is
c/o Cryoport, Inc., 20382 Barents Sea Circle, Lake Forest, CA 92630.
The following table
gives effect to the shares of common stock issuable within 60 days of July 31, 2014, upon the exercise of all options and other
rights beneficially owned by the indicated stockholders on that date. Unless otherwise indicated, the persons named in the table
have sole voting and sole investment control with respect to all shares beneficially owned.
| Beneficial Owner | |
Number of Shares
of
Preferred Stock
Beneficially Owned | | |
Number of Shares
of
Common Stock
Beneficially Owned(2) | | |
Percentage of Shares
of Common Stock
Beneficially
Owned(5) | |
| Executive Officers and Directors: | |
| | | |
| | | |
| | |
| Jerrell W. Shelton | |
| 11,314 | | |
| 3,632,070 | (1) | |
| 5.8 | % |
| Robert S. Stefanovich | |
| | | |
| 385,943 | (1) | |
| * | |
| Adam M. Michelin | |
| | | |
| 536,891 | (1) | |
| * | |
| Karen M. Muller | |
| | | |
| 541,438 | (1) | |
| * | |
| Richard Rathmann | |
| 9,376 | (4) | |
| 4,377,965 | (1) | |
| 7.1 | % |
| Stephen E. Wasserman | |
| | | |
| 593,356 | (1) | |
| 1.0 | % |
| Edward Zecchini | |
| | | |
| 100,000 | (1) | |
| * | |
| Ramkumar Mandalam Ph.D. | |
| | | |
| 25,000 | (1) | |
| * | |
| | |
| | | |
| | | |
| | |
| All directors and named executive officers as a group
(8 persons) | |
| | | |
| 10,192,663 | (1) | |
| 15.2 | % |
| | |
| | | |
| | | |
| | |
| Other Stockholders: | |
| | | |
| | | |
| | |
| Cranshire Capital Master Fund(3) | |
| | | |
| 3,449,625 | (1) | |
| 5.4 | % |
| | |
| | | |
| | | |
| | |
| Total for all Directors, Executive Officers and Other
Stockholders | |
| | | |
| 13,642,288 | | |
| 19.2 | % |
| (1) | Includes
shares which individuals shown above have the right to acquire as of July 31, 2014, or
within 60 days thereafter, pursuant to outstanding stock options, warrants and/or
preferred stock as follows: Mr. Shelton—2,972,070 shares; Mr. Stefanovich—385,943
shares; Mr. Michelin—532,755 shares; Ms. Muller—541,438 shares; Mr.
Rathmann—2,454,540 of which 689,726 are individually owned by Mr. Rathmann and
1,764,814 are owned by GBR Investments,LLC of which Mr. Rathmann is the manager; Mr. Wasserman—593,356;
Mr. Zecchini—100,000; Dr. Mandalam—25,000 shares; Cranshire Capital—3,449,625
shares. |
| (2) | The
number and percentage of shares beneficially owned is determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule, beneficial
ownership includes any shares as to which the selling security holder has sole or shared
voting power or investment power and also any shares which the selling security holder
has the right to acquire within 60 days. Includes preferred stock on an as-converted
basis of 30 shares of common stock for each share of preferred stock. |
| (3) | Cranshire Capital Master Fund, Ltd.
address is 3100 Dundee Road, Suite 703, Northbrook, IL 60062. |
| (4) | GBR Investments, LLC of which Mr. Rathmann
is the manager. |
| (5) | Includes
preferred stock on an as-converted basis of 30 shares of common stock for each share
of preferred stock. |
Equity Compensation Plan
Information
We currently
maintain three equity compensation plans, referred to as the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009
Stock Incentive Plan (the “2009 Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan”). Our Compensation
Committee is responsible for making, reviewing and recommending grants of options and other awards under these plans which are
approved by the Board.
The 2002
Plan, which was approved by our stockholders in October 2002, allows for the grant of options to purchase up to 500,000 shares
of the Company’s common stock. The 2002 Plan provides for the granting of options to purchase shares of our common stock
at prices not less than the fair market value of the stock at the date of grant and generally expire 10 years after the date of
grant. The stock options are subject to vesting requirements, generally three or four years. The 2002 Plan also provides for the
granting of restricted shares of common stock subject to vesting requirements. As of June 30, 2014, no shares are available for
future issuances as the 2002 Plan has expired.
The 2009
Plan, which was approved by our stockholders at our 2009 Annual Meeting of Stockholders held on October 9, 2009, provides
for the grant of stock-based incentives. The 2009 Plan allows for the grant of up to 1,200,000 shares of our common stock for
awards to our officers, directors, employees and consultants. The 2009 Plan provides for the grant of incentive stock options,
nonqualified stock options, restricted stock rights, restricted stock, performance share units, performance shares, performance
cash awards, stock appreciation rights, and stock grant awards. The 2009 Plan also permits the grant of awards that qualify for
the “performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed
by Section 162(m) of the Code. As of July 31, 2014, a total of 303,768 shares of our common stock remained available for
future grants under the 2009 Plan.
The
2011 Plan, as amended, which was approved by our stockholders at our 2011 Annual Meeting of Stockholders held
on September 22, 2011 and, with respect to the amendments, at our 2012, 2013 and 2014 Annual Meeting of Stockholders
held on September 13, 2012, September 6, 2013 and August 29, 2014, respectively, provides for the grant of stock-based
incentives. The 2011 Plan allows for the grant of up to 13,900,000 shares of our common stock for awards to our officers,
directors, employees and consultants. The 2011 Plan provides for the grant of incentive stock options, nonqualified stock
options, restricted stock rights, restricted stock, performance share units, performance shares, performance cash awards,
stock appreciation rights, and stock grant awards. The 2011 Plan also permits the grant of awards that qualify for the
“performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed
by Section 162(m) of the Code. Awards may be granted under the 2011 Plan until September 21, 2021 or until all
shares available for Awards under the 2011 Plan have been purchased or acquired unless the stockholders of the Company vote
to approve an extension of the 2011 Plan prior to such expiration date. As of July 31, 2014, a total of 8,468,042 shares
remained available for future grants under the 2011 Plan.
In addition
to the stock options issued pursuant to the Company’s three stock incentive plans, the Company has granted warrants to employees,
officers, non-employee directors and consultants. The warrants are generally not subject to vesting requirements and have ten-year
terms.
The following
table sets forth certain information as of July 31, 2014 concerning the Company’s common stock that may be issued upon the
conversion of outstanding preferred stock, exercise of options or warrants or pursuant to purchases of stock under the 2002 Plan,
the 2009 Plan, the 2011 Plan and other stock based compensation:
| Plan Category | |
(a)
Number of Securities
to be Issued Upon the
Exercise of
Outstanding Options
and Warrants | | |
(b)
Weighted-Average
Exercise Price of
Outstanding
Options and
Warrants | | |
(c)
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a)) | |
| Equity compensation plans approved by stockholders | |
| 5,774,698 | | |
$ | 0.47 | | |
| 8,771,810 | |
| Equity compensation plans not
approved by stockholders(1) | |
| 6,811,432 | | |
$ | 0.57 | | |
| N/A | |
| | |
| | | |
| | | |
| | |
| | |
| 12,586,130 | | |
| | | |
| 8,771,810 | |
| (1) | During
November 5, 2012 through July 31, 2014, a total of 6,548,577 options were granted to
employees outside of an option plan. In the past the Company has issued warrants to purchase
327,415 shares of common stock in exchange for services provided to the Company, of which
warrants to purchase 262,855 shares of common stock are outstanding. The exercise prices
ranged from $2.80 to $10.80 and generally vested upon issuance. 15 consultants and former
officers and directors received warrants to purchase 327,415 shares of common stock in
this manner. |
Change in Control Agreements
There are no understandings,
arrangements or agreements known by management at this time which would result in a change in control of the Company or any subsidiary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has established
policies and other procedures regarding approval of transactions between the Company and any employee, officer, director, and
certain of their family members and other related persons, including those required to be reported under Item 404 of Regulation
S-K. These policies and procedures are generally not in writing, but are evidenced by long standing principles set forth in our
Code of Conduct or adhered to by our Board. As set forth in the Audit Committee Charter, the Audit Committee reviews and approves
all related-party transactions after reviewing such transaction for potential conflicts of interests and improprieties. Accordingly,
all such related-party transactions are submitted to the Audit Committee for ongoing review and oversight. Generally speaking,
we enter into related-party transactions only on terms that we believe are at least as favorable to our company as those that
we could obtain from an unrelated third party.
The following related-party
transaction were approved or ratified by at least two independent directors and future material affiliated transactions will be
approved by a majority of the independent directors who do not have an interest in the transaction and who had access, at the
issuer’s expense, to issuer’s or independent legal counsel.
On May 9, 2013, Richard
Rathmann, Director, invested $100,000 in the Bridge Notes offered by the Company to certain accredited investors. For information
on terms related to the Bridge Notes, refer to Note 8 “Convertible Debentures Payable” in the accompanying March 31,
2014 consolidated financial statements. In addition, on July 12, 2013, GBR Investments, LLC, invested $100,000 in the Bridge
Notes offered by the Company to certain accredited investors and also received a warrant to purchase 400,000 shares of common
stock at an exercise price of $0.25 per share, pursuant to the terms of such offering. Richard Rathmann is the Manager of
GBR investments, LLC and is considered an indirect beneficial owner of these securities.
During the year ended
March 31, 2014, the Company issued to certain accredited investors various unsecured promissory notes with the terms as described
under Note 7 in the accompanying March 31, 2014 consolidated financial statements. These unsecured promissory notes included $120,000
of the 5% Bridge Notes issued to Jerrell Shelton, the Company’s Chief Executive Officer, $100,000 of the Bridge Notes issued
to Richard Rathmann, a member of the Board of Directors of the Company, $200,000 of the Bridge Notes and $100,000 of the 5% Bridge
Notes issued to GBR Investments, LLC, of which Richard Rathmann, is the manager. In May 2014, both note holders elected to convert
all principal and interest into a newly established Class A Convertible Preferred Stock and warrants to purchase common stock
of Cryoport as further described in Note 15 in the accompanying March 31, 2014 consolidated financial statements.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the
Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered
class of the Company’s equity securities, to file with the SEC reports of beneficial ownership and reports of changes in
beneficial ownership in the Company’s securities. Such directors, executive officers and 10% stockholders are also required
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a
review of the copies of such forms received by it, the Company believes that during fiscal 2014, all Section 16(a) filings applicable
to its directors, officers, and 10% stockholders were filed on a timely basis.
SELLING SECURITY
HOLDERS
This prospectus covers
the resale from time to time by the selling stockholders identified in the table below of:
| • | 6,306,467 shares of our common
stock sold in the 2012 Private Placement; |
| • | 10,005,929 shares of our
common stock issuable upon exercise of warrants sold in the 2012 Private Placement; |
| • | 10,213,058 shares of our
common stock sold in the 2011 Private Placement; |
| • | 15,308,772 shares of our
common stock issuable upon exercise of warrants sold in the 2011 Private Placement; |
| • | 3,454,611 shares of common
stock sold in the 2010 Private Placement; |
| • | 5,890,317 shares of common
stock issuable upon exercise of warrants sold in the 2010 Private Placement; and |
| • | 200,000 shares of common
stock issuable upon exercise of a warrant issued to a consultant in March 2011. |
In February and March
2012, we conducted a private placement (the “2012 Private Placement”) pursuant to which we sold and issued an aggregate
of 9,477,554 shares of common stock at a price of $0.55 per share and common stock purchase warrants to acquire 10,005,929 shares
of common stock, for gross proceeds of $5,212,655. Each common stock purchase warrant entitles the holder to acquire one common
share of the Company at the exercise price of $0.69 per share for a period of five years after the date of issuance. Under the
terms of the registration rights agreement entered into as part of the offering, we filed the registration statement on Form S-1
(Registration No. 333-180326), which was declared effective on June 21, 2012, and we agreed to use our best efforts to cause the
registration statement to remain effective until all securities covered by the registration statement either have been sold, under
the registration statement or pursuant to Rule 144 under the Securities Act of 1933, as amended, or may be sold without volume
or manner-of-sale restrictions pursuant to Rule 144, and without the requirement for the Company to be in compliance with the
current public information requirement under Rule 144 or the Company is in compliance with the current public information requirement
under Rule 144.
In February 2011,
we conducted a private placement (the “2011 Private Placement”) pursuant to which we sold and issued an aggregate
of 13,362,089 shares of common stock at a price of $0.70 per share and common stock purchase warrants to acquire 15,755,915 shares
of common stock, for gross proceeds of $9,353,462. Each common stock purchase warrant entitles the holder to acquire one common
share of the Company at the exercise price of $0.77 per share for a period of five years after the date of issuance. Under the
terms of the registration rights agreement entered into as part of the offering, we filed the registration statement on Form S-1
(Registration No. 333-173263), which was declared effective on April 28, 2011, and we agreed to use our best efforts
to cause the registration statement to remain effective until all securities covered by the registration statement either have
been sold, under the registration statement or pursuant to Rule 144 under the Securities Act of 1933, as amended, or may be sold
without volume or manner-of-sale restrictions pursuant to Rule 144, and without the requirement for the Company to be in compliance
with the current public information requirement under Rule 144 or the Company is in compliance with the current public information
requirement under Rule 144.
From August 2010
to October 2010, we conducted a private placement (the “2010 Private Placement”) pursuant to which we sold and issued
an aggregate of 5,532,418 shares of common stock at a price of $0.70 per share and common stock purchase warrants to acquire 6,755,293
shares of common stock, for gross proceeds of $3,872,702. Each common stock purchase warrant entitles the holder to acquire one
common share of the Company at the exercise price of $0.77 per share for a period of five years after the date of issuance. Under
the terms of the registration rights agreement entered into as part of the offering, we filed the registration statement on Form
S-1 (Registration No. 333-170027), which was declared effective on December 29, 2010, and we agreed to use our best
efforts to cause the registration statement to remain effective until all securities covered by the registration statement either
have been sold, under the registration statement or pursuant to Rule 144 under the Securities Act of 1933, as amended, or may
be sold without volume or manner-of-sale restrictions pursuant to Rule 144, and without the requirement for the Company to be
in compliance with the current public information requirement under Rule 144 or the Company is in compliance with the current
public information requirement under Rule 144.
SELLING SECURITY
HOLDER TABLE
The following table
sets forth the number of shares of common stock beneficially owned by the selling security holders as of July 31, 2014, the number
of shares of common stock covered by this prospectus on behalf of the selling security holders, and the total number of shares
of common stock that the selling security holders will beneficially own upon completion of the offering. This table assumes that
the stockholders will offer for sale all of the shares of common stock covered by this prospectus. As of July 31, 2014, we had
60,037,846 shares of common stock issued and outstanding.
The common stock
may be offered under this prospectus from time to time by the selling security holders, or by any of their respective pledgees,
donees, transferees, or other successors in interest. The amounts set forth below are based upon information provided to us by
the stockholders, or our records, as of July 31, 2014, and are accurate to the best of our knowledge. It is possible, however,
that the selling security holders may acquire or dispose of additional shares of common stock from time to time after the date
of this prospectus.
The inclusion of
any securities in the following table does not constitute an admission of beneficial ownership by the persons named below. Except
as indicated in the footnotes to the table, no selling security holder has had any material relationship with us or our predecessors
or affiliates during the last three years.
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Adam Michelin | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| Alexander Coleman Ravich 1991 Trust | |
| 50,000 | | |
| 0.08 | % | |
| 50,000 | | |
| - | | |
| 0.00 | % |
| Allen Fedor | |
| 899,736 | | |
| 1.50 | % | |
| 28,600 | | |
| 871,136 | | |
| 0.95 | % |
| Alyssa Danielle Ravich Trust 1991 Trust | |
| 50,000 | | |
| 0.08 | % | |
| 50,000 | | |
| - | | |
| 0.00 | % |
| Andrew Curran | |
| 3,504,093 | | |
| 5.84 | % | |
| 1,074,286 | | |
| 2,429,807 | | |
| 2.66 | % |
| Andrew Reznick | |
| 143,850 | | |
| 0.24 | % | |
| 40,000 | | |
| 103,850 | | |
| 0.11 | % |
| Annette Vandehey | |
| 42,860 | | |
| 0.07 | % | |
| 42,860 | | |
| - | | |
| 0.00 | % |
| Arleigh Aschbrook | |
| 34,800 | | |
| 0.06 | % | |
| 34,800 | | |
| - | | |
| 0.00 | % |
| Ashdon Select Managers | |
| 145,224 | | |
| 0.24 | % | |
| 145,224 | | |
| - | | |
| 0.00 | % |
| Babak Fardin | |
| 70,000 | | |
| 0.12 | % | |
| 70,000 | | |
| - | | |
| 0.00 | % |
| Barbara Johnson | |
| 66,410 | | |
| 0.11 | % | |
| 16,000 | | |
| 50,410 | | |
| 0.06 | % |
| Benton Case Jr. | |
| 163,288 | | |
| 0.27 | % | |
| 40,000 | | |
| 123,288 | | |
| 0.13 | % |
| Beth Dryden | |
| 300,000 | | |
| 0.50 | % | |
| 300,000 | | |
| - | | |
| 0.00 | % |
| Beth Dryden, Trustee of the Hopfenspirger 2011 Grat Retained Annuity Trust | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| Bill and Jennifer Finley | |
| 42,972 | | |
| 0.07 | % | |
| 42,972 | | |
| - | | |
| 0.00 | % |
| Bill Thompson | |
| 217,428 | | |
| 0.36 | % | |
| 217,428 | | |
| - | | |
| 0.00 | % |
| Blue Earth Fund LP | |
| 176,189 | | |
| 0.29 | % | |
| 176,189 | | |
| - | | |
| 0.00 | % |
| Blue River Properties LLP | |
| 201,144 | | |
| 0.34 | % | |
| 201,144 | | |
| - | | |
| 0.00 | % |
| BMO Nezbitt Burns, Inc | |
| 800,000 | | |
| 1.33 | % | |
| 800,000 | | |
| - | | |
| 0.00 | % |
| Bradley W. Baker | |
| 363,638 | | |
| 0.61 | % | |
| 363,638 | | |
| - | | |
| 0.00 | % |
| BridgePointe Masters Fund Ltd | |
| 140,000 | | |
| 0.23 | % | |
| 140,000 | | |
| - | | |
| 0.00 | % |
| Brio Capital Master Fund Ltd | |
| 492,965 | | |
| 0.82 | % | |
| 492,965 | | |
| - | | |
| 0.00 | % |
| Broms Financial, LLC | |
| 571,428 | | |
| 0.95 | % | |
| 571,428 | | |
| - | | |
| 0.00 | % |
| Bryan Spille | |
| 30,000 | | |
| 0.05 | % | |
| 30,000 | | |
| - | | |
| 0.00 | % |
| Burguete Investment Partnership, LP | |
| 727,274 | | |
| 1.21 | % | |
| 727,274 | | |
| - | | |
| 0.00 | % |
| Carla Muff | |
| 2,500 | | |
| 0.00 | % | |
| 2,500 | | |
| - | | |
| 0.00 | % |
| Carlene F Cooke | |
| 25,000 | | |
| 0.04 | % | |
| 25,000 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Celtic Enterprises Ltd | |
| 1,111,948 | | |
| 1.85 | % | |
| 135,714 | | |
| 976,234 | | |
| 1.07 | % |
| Cindy Federwitz | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Craig Laughlin | |
| 30,000 | | |
| 0.05 | % | |
| 30,000 | | |
| - | | |
| 0.00 | % |
| Craig S Stevenson | |
| 772,805 | | |
| 1.29 | % | |
| 402,000 | | |
| 370,805 | | |
| 0.41 | % |
| Craig-Hallum Capital Group 401k Alexander Knopick 401k Contributory Acct | |
| 83,638 | | |
| 0.14 | % | |
| 83,638 | | |
| - | | |
| 0.00 | % |
| Craig-Hallum Capital Group 401k George Sutton 401k Contributory Acct | |
| 90,910 | | |
| 0.15 | % | |
| 90,910 | | |
| - | | |
| 0.00 | % |
| Craig-Hallum Capital Group LLC | |
| 189,551 | | |
| 0.32 | % | |
| 189,551 | | |
| - | | |
| 0.00 | % |
| Cranshire Capital Master Fund, Ltd. | |
| 3,416,295 | | |
| 5.69 | % | |
| 3,391,295 | | |
| 25,000 | | |
| 0.03 | % |
| Crispian VC Fund II, LP | |
| 490,000 | | |
| 0.82 | % | |
| 490,000 | | |
| - | | |
| 0.00 | % |
| Dan Schmidt | |
| 180,000 | | |
| 0.30 | % | |
| 180,000 | | |
| - | | |
| 0.00 | % |
| Daniel Gage | |
| 331,552 | | |
| 0.55 | % | |
| 128,428 | | |
| 203,124 | | |
| 0.22 | % |
| Daniel Rueter | |
| 192,858 | | |
| 0.32 | % | |
| 192,858 | | |
| - | | |
| 0.00 | % |
| Daryl R. McNab | |
| 73,428 | | |
| 0.12 | % | |
| 73,428 | | |
| - | | |
| 0.00 | % |
| Daryl Skiba | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| David A Dent | |
| 427,136 | | |
| 0.71 | % | |
| 100,000 | | |
| 327,136 | | |
| 0.36 | % |
| David and Lisa Hintermeister | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| David Capuano | |
| 15,000 | | |
| 0.02 | % | |
| 15,000 | | |
| - | | |
| 0.00 | % |
| David Hansen | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| David Holperin | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| David Olshansky | |
| 758,574 | | |
| 1.26 | % | |
| 200,000 | | |
| 558,574 | | |
| 0.61 | % |
| Dean Jacklitch Trust | |
| 1,590,438 | | |
| 2.65 | % | |
| 400,856 | | |
| 1,189,582 | | |
| 1.30 | % |
| Deerfield Speical Situations Fund International Master Fund, Ltd | |
| 1,060,000 | | |
| 1.77 | % | |
| 1,060,000 | | |
| - | | |
| 0.00 | % |
| Deerfield Speical Situations Fund L.P. | |
| 758,182 | | |
| 1.26 | % | |
| 758,182 | | |
| - | | |
| 0.00 | % |
| Dennis D Gonyea | |
| 72,730 | | |
| 0.12 | % | |
| 72,730 | | |
| - | | |
| 0.00 | % |
| Dennis J. Holland | |
| 171,428 | | |
| 0.29 | % | |
| 171,428 | | |
| - | | |
| 0.00 | % |
| Dorothy J Hoel | |
| 72,725 | | |
| 0.12 | % | |
| 72,725 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Dr Paul & Nancy Seel Jt/WRos | |
| 145,450 | | |
| 0.24 | % | |
| 145,450 | | |
| - | | |
| 0.00 | % |
| E. Terry Skone TTEE of the E Terry Skone Rev Trust dated 11/30/2005 | |
| 145,450 | | |
| 0.24 | % | |
| 145,450 | | |
| - | | |
| 0.00 | % |
| Edward T. Halloran | |
| 72,000 | | |
| 0.12 | % | |
| 72,000 | | |
| - | | |
| 0.00 | % |
| Elmer Robert Salovich Revocable Trust | |
| 409,172 | | |
| 0.68 | % | |
| 109,090 | | |
| 300,082 | | |
| 0.33 | % |
| Emergent Financial Group, Inc. | |
| 2,608,729 | | |
| 4.35 | % | |
| 58,824 | | |
| 2,549,905 | | |
| 2.79 | % |
| Empery Asset Master, LTD | |
| 100,000 | | |
| 0.17 | % | |
| 100,000 | | |
| - | | |
| 0.00 | % |
| Enable Growth Partners, L.P. | |
| 321,818 | | |
| 0.54 | % | |
| 321,818 | | |
| - | | |
| 0.00 | % |
| Entrust Midwest LLC, FBO Gary Collins | |
| 30,000 | | |
| 0.05 | % | |
| 30,000 | | |
| - | | |
| 0.00 | % |
| Entrust Midwest, LLC FBO Brian Ertel IRA #4233 | |
| 36,000 | | |
| 0.06 | % | |
| 36,000 | | |
| - | | |
| 0.00 | % |
| First Clearing LLC, Custodian FBO of Bruce Zwick IRA | |
| 71,430 | | |
| 0.12 | % | |
| 71,430 | | |
| - | | |
| 0.00 | % |
| First Clearing, LLC Custodian, FBO of Mark Ravich IRA | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| First State Bank and Trust, Custodian FBO Thomas E. Elbert Roth IRA #2 | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Fred Williams Jr | |
| 519,478 | | |
| 0.87 | % | |
| 519,478 | | |
| - | | |
| 0.00 | % |
| Freestone Advantage Partners II, LP | |
| 18,182 | | |
| 0.03 | % | |
| 18,182 | | |
| - | | |
| 0.00 | % |
| Gaetan A. Riopel | |
| 738,858 | | |
| 1.23 | % | |
| 285,658 | | |
| 453,200 | | |
| 0.50 | % |
| Gary A. Bergren | |
| 72,730 | | |
| 0.12 | % | |
| 72,730 | | |
| - | | |
| 0.00 | % |
| Gary Eikaas | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| Gemini Master Fund, LTD | |
| 400,000 | | |
| 0.67 | % | |
| 400,000 | | |
| - | | |
| 0.00 | % |
| Gene F. Happe | |
| 643,522 | | |
| 1.07 | % | |
| 100,000 | | |
| 543,522 | | |
| 0.59 | % |
| George and Kathy Sutton | |
| 142,856 | | |
| 0.24 | % | |
| 142,856 | | |
| - | | |
| 0.00 | % |
| George Edward Scalise | |
| 181,820 | | |
| 0.30 | % | |
| 181,820 | | |
| - | | |
| 0.00 | % |
| Gilya Alchits | |
| 550,220 | | |
| 0.92 | % | |
| 242,000 | | |
| 308,220 | | |
| 0.34 | % |
| Goetsch Financal Inc 401K | |
| 58,180 | | |
| 0.10 | % | |
| 58,180 | | |
| - | | |
| 0.00 | % |
| Paul Gonyea | |
| 214,284 | | |
| 0.36 | % | |
| 214,284 | | |
| - | | |
| 0.00 | % |
| Gregory Gentling | |
| 2,629,387 | | |
| 4.38 | % | |
| 1,082,688 | | |
| 1,546,699 | | |
| 1.69 | % |
| Grossman Roth IRA, Marc A. | |
| 14,286 | | |
| 0.02 | % | |
| 14,286 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Grossman, Marc A. | |
| 285,716 | | |
| 0.48 | % | |
| 285,716 | | |
| - | | |
| 0.00 | % |
| Hartz Capital Investments, LLC | |
| 100,000 | | |
| 0.17 | % | |
| 100,000 | | |
| - | | |
| 0.00 | % |
| HCP Opportunity Fund, LP | |
| 320,000 | | |
| 0.53 | % | |
| 320,000 | | |
| - | | |
| 0.00 | % |
| Howard Manake | |
| 2,291,520 | | |
| 3.82 | % | |
| 257,614 | | |
| 2,033,906 | | |
| 2.22 | % |
| Hudson Bay Master Fund LTD | |
| 545,456 | | |
| 0.91 | % | |
| 545,456 | | |
| - | | |
| 0.00 | % |
| Iroquois Master Fund Ltd. | |
| 477,818 | | |
| 0.80 | % | |
| 477,818 | | |
| - | | |
| 0.00 | % |
| James Behm | |
| 797,042 | | |
| 1.33 | % | |
| 385,658 | | |
| 411,384 | | |
| 0.45 | % |
| James Brown | |
| 50,000 | | |
| 0.08 | % | |
| 50,000 | | |
| - | | |
| 0.00 | % |
| James Denver | |
| 250,000 | | |
| 0.42 | % | |
| 250,000 | | |
| - | | |
| 0.00 | % |
| James H. Zavoral, Jr. | |
| 200,000 | | |
| 0.33 | % | |
| 200,000 | | |
| - | | |
| 0.00 | % |
| James J Tiampo Money Puchase Plan and Trust | |
| 363,638 | | |
| 0.61 | % | |
| 363,638 | | |
| - | | |
| 0.00 | % |
| James Lee | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| Jeffrey C Brown Profit Sharing Plan & Trust 401K | |
| 272,726 | | |
| 0.45 | % | |
| 272,726 | | |
| - | | |
| 0.00 | % |
| Jeffrey Williams | |
| 151,428 | | |
| 0.25 | % | |
| 151,428 | | |
| - | | |
| 0.00 | % |
| Jerold Fahrner Trust | |
| 342,856 | | |
| 0.57 | % | |
| 342,856 | | |
| - | | |
| 0.00 | % |
| JMJ Financial | |
| 360,000 | | |
| 0.60 | % | |
| 360,000 | | |
| - | | |
| 0.00 | % |
| John Connor | |
| 171,428 | | |
| 0.29 | % | |
| 171,428 | | |
| - | | |
| 0.00 | % |
| John W. Schreiner | |
| 1,032,673 | | |
| 1.72 | % | |
| 405,714 | | |
| 626,959 | | |
| 0.69 | % |
| Jon and Annette Vandehey | |
| 566,412 | | |
| 0.94 | % | |
| 265,714 | | |
| 300,698 | | |
| 0.33 | % |
| Joni K. Voldness | |
| 15,000 | | |
| 0.02 | % | |
| 15,000 | | |
| - | | |
| 0.00 | % |
| Jordan Family LLC | |
| 1,719,656 | | |
| 2.86 | % | |
| 600,000 | | |
| 1,119,656 | | |
| 1.22 | % |
| Joseph Hennen | |
| 131,428 | | |
| 0.22 | % | |
| 131,428 | | |
| - | | |
| 0.00 | % |
| Judith Hennen or Joseph Hennan | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Katherine O'Leary | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Keith Steller | |
| 130,015 | | |
| 0.22 | % | |
| 71,428 | | |
| 58,587 | | |
| 0.06 | % |
| Kevin Clark | |
| 539,917 | | |
| 0.90 | % | |
| 90,910 | | |
| 449,007 | | |
| 0.49 | % |
| Kevin J. Caulfield | |
| 91,000 | | |
| 0.15 | % | |
| 91,000 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Kyle Gillespie | |
| 72,000 | | |
| 0.12 | % | |
| 72,000 | | |
| - | | |
| 0.00 | % |
| Lacuna Hedge Fund LLLP | |
| 1,233,465 | | |
| 2.05 | % | |
| 1,233,465 | | |
| - | | |
| 0.00 | % |
| Larry Hopfenspirger | |
| 1,736,050 | | |
| 2.89 | % | |
| 509,090 | | |
| 1,226,960 | | |
| 1.34 | % |
| Larry R. Carlson | |
| 450,562 | | |
| 0.75 | % | |
| 94,000 | | |
| 356,562 | | |
| 0.39 | % |
| Lawrence Lappin | |
| 500,000 | | |
| 0.83 | % | |
| 500,000 | | |
| - | | |
| 0.00 | % |
| Loral I. Delaney | |
| 42,856 | | |
| 0.07 | % | |
| 42,856 | | |
| - | | |
| 0.00 | % |
| Louis Doering IRA | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| M. Elizabeth Patrin | |
| 84,000 | | |
| 0.14 | % | |
| 84,000 | | |
| - | | |
| 0.00 | % |
| Maletis Partners LP | |
| 663,680 | | |
| 1.11 | % | |
| 363,638 | | |
| 300,042 | | |
| 0.33 | % |
| Mark Ravich | |
| 1,084,509 | | |
| 1.81 | % | |
| 550,000 | | |
| 534,509 | | |
| 0.58 | % |
| Martha McKelvey | |
| 80,000 | | |
| 0.13 | % | |
| 80,000 | | |
| - | | |
| 0.00 | % |
| Mary F. Hauser | |
| 445,488 | | |
| 0.74 | % | |
| 357,142 | | |
| 88,346 | | |
| 0.10 | % |
| Matt Nelson | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| Maxim Partners LLC | |
| 300,000 | | |
| 0.50 | % | |
| 300,000 | | |
| - | | |
| 0.00 | % |
| Melvyn H. Reznick | |
| 1,989,093 | | |
| 3.31 | % | |
| 899,428 | | |
| 1,089,665 | | |
| 1.19 | % |
| Michael and Tracy Gardner | |
| 131,688 | | |
| 0.22 | % | |
| 131,688 | | |
| - | | |
| 0.00 | % |
| Michael Bartholomew, | |
| 28,572 | | |
| 0.05 | % | |
| 28,572 | | |
| - | | |
| 0.00 | % |
| Michael Goetsch | |
| 131,500 | | |
| 0.22 | % | |
| 131,500 | | |
| - | | |
| 0.00 | % |
| Michael J Roach | |
| 200,000 | | |
| 0.33 | % | |
| 200,000 | | |
| - | | |
| 0.00 | % |
| Michael Malouf | |
| 50,000 | | |
| 0.08 | % | |
| 50,000 | | |
| - | | |
| 0.00 | % |
| Michael Paul Reznick | |
| 696,150 | | |
| 1.16 | % | |
| 437,144 | | |
| 259,006 | | |
| 0.28 | % |
| Michael R. Waterhouse | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Michael Reardon | |
| 1,229,466 | | |
| 2.05 | % | |
| 1,229,466 | | |
| - | | |
| 0.00 | % |
| Michael Stephan | |
| 37,000 | | |
| 0.06 | % | |
| 37,000 | | |
| - | | |
| 0.00 | % |
| Micro Pipe Fund I, LLC | |
| 492,858 | | |
| 0.82 | % | |
| 492,858 | | |
| - | | |
| 0.00 | % |
| MLPF&S Cust FPO Michael J Hasslinger IRRA FBO Michael J Hasslinger | |
| 363,636 | | |
| 0.61 | % | |
| 363,636 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| MLPF&S FPO Gary S Kohler IRA FBO Gary Kohler | |
| 545,456 | | |
| 0.91 | % | |
| 545,456 | | |
| - | | |
| 0.00 | % |
| MOG Capital LLC | |
| 714,284 | | |
| 1.19 | % | |
| 714,284 | | |
| - | | |
| 0.00 | % |
| Morris Steller | |
| 742,286 | | |
| 1.24 | % | |
| 742,286 | | |
| - | | |
| 0.00 | % |
| Neal Prahl | |
| 28,568 | | |
| 0.05 | % | |
| 28,568 | | |
| - | | |
| 0.00 | % |
| Neuville Family Trust | |
| 200,000 | | |
| 0.33 | % | |
| 200,000 | | |
| - | | |
| 0.00 | % |
| Norman Ravich | |
| 71,430 | | |
| 0.12 | % | |
| 71,430 | | |
| - | | |
| 0.00 | % |
| Pamela Smith | |
| 220,000 | | |
| 0.37 | % | |
| 220,000 | | |
| - | | |
| 0.00 | % |
| Patricia Jacklitch | |
| 196,813 | | |
| 0.33 | % | |
| 86,000 | | |
| 110,813 | | |
| 0.12 | % |
| Patricia Klaras | |
| 20,000 | | |
| 0.03 | % | |
| 20,000 | | |
| - | | |
| 0.00 | % |
| Patricia Neuville | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Paul Bigler | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| Paul Bukoskey | |
| 93,182 | | |
| 0.16 | % | |
| 28,600 | | |
| 64,582 | | |
| 0.07 | % |
| Paul Huber | |
| 45,600 | | |
| 0.08 | % | |
| 45,600 | | |
| - | | |
| 0.00 | % |
| Paul J. Linstroth | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| Paul Ravich | |
| 364,000 | | |
| 0.61 | % | |
| 364,000 | | |
| - | | |
| 0.00 | % |
| Paul Schultz | |
| 918,996 | | |
| 1.53 | % | |
| 274,284 | | |
| 644,712 | | |
| 0.71 | % |
| Pennington Capital LLC | |
| 600,000 | | |
| 1.00 | % | |
| 600,000 | | |
| - | | |
| 0.00 | % |
| Peter Voldness | |
| 1,608,083 | | |
| 2.68 | % | |
| 1,608,083 | | |
| - | | |
| 0.00 | % |
| R. William Torhost, Jr. | |
| 28,600 | | |
| 0.05 | % | |
| 28,600 | | |
| - | | |
| 0.00 | % |
| Randy Rageth | |
| 285,714 | | |
| 0.48 | % | |
| 285,714 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBC David Schepers IRA | |
| 157,142 | | |
| 0.26 | % | |
| 157,142 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBC Scott T Johnson IRA | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBO David Murphy | |
| 20,000 | | |
| 0.03 | % | |
| 20,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBO Judy Scollard Roth IRA | |
| 31,144 | | |
| 0.05 | % | |
| 31,144 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBO Louis Doering IRA | |
| 70,000 | | |
| 0.12 | % | |
| 70,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Corporation Custodian FBO Thomas Scollard Roth IRA | |
| 25,430 | | |
| 0.04 | % | |
| 25,430 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| RBC Capital Markets Custodian FBO Gregory Alan Rueter IRA | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Custodian FBO Gregory Rueter SEP IRA | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets Custodian FBO Valerian A. Burdick | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets LLC Custodian FBO Carol Aschbrook | |
| 33,800 | | |
| 0.06 | % | |
| 33,800 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets LLC Custodian FBO Paul Bukoskey | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| RBC Capital Markets, LLC Cust FBO Arleigh Aschebrook Roth IRA | |
| 151,184 | | |
| 0.25 | % | |
| 56,000 | | |
| 95,184 | | |
| 0.10 | % |
| RBC Capital Markets, LLC Cust FBO Janice A. Waterhouse SEP IRA | |
| 71,110 | | |
| 0.12 | % | |
| 20,000 | | |
| 51,110 | | |
| 0.06 | % |
| Richard O'Leary | |
| 126,624 | | |
| 0.21 | % | |
| 126,624 | | |
| - | | |
| 0.00 | % |
| Richard Randall | |
| 285,428 | | |
| 0.48 | % | |
| 285,428 | | |
| - | | |
| 0.00 | % |
| Richard Thompson | |
| 300,570 | | |
| 0.50 | % | |
| 300,570 | | |
| - | | |
| 0.00 | % |
| Ro Shirole | |
| 60,000 | | |
| 0.10 | % | |
| 60,000 | | |
| - | | |
| 0.00 | % |
| Robert G Allison | |
| 290,910 | | |
| 0.48 | % | |
| 290,910 | | |
| - | | |
| 0.00 | % |
| Robert J Evans | |
| 585,000 | | |
| 0.97 | % | |
| 585,000 | | |
| - | | |
| 0.00 | % |
| Robert McKelvey | |
| 345,970 | | |
| 0.58 | % | |
| 345,970 | | |
| - | | |
| 0.00 | % |
| Robert Olson | |
| 15,000 | | |
| 0.02 | % | |
| 15,000 | | |
| - | | |
| 0.00 | % |
| Robert Salovich | |
| 220,000 | | |
| 0.37 | % | |
| 220,000 | | |
| - | | |
| 0.00 | % |
| Roger Hoy | |
| 571,428 | | |
| 0.95 | % | |
| 571,428 | | |
| - | | |
| 0.00 | % |
| Ron Eldred | |
| 228,574 | | |
| 0.38 | % | |
| 228,574 | | |
| - | | |
| 0.00 | % |
| Ronald P. Holtan | |
| 10,910 | | |
| 0.02 | % | |
| 10,910 | | |
| - | | |
| 0.00 | % |
| Ross Bjella | |
| 20,000 | | |
| 0.03 | % | |
| 20,000 | | |
| - | | |
| 0.00 | % |
| Ross Gramstad | |
| 150,000 | | |
| 0.25 | % | |
| 150,000 | | |
| - | | |
| 0.00 | % |
| Sanford and Linda Brink | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| Sasha Gentling | |
| 285,714 | | |
| 0.48 | % | |
| 285,714 | | |
| - | | |
| 0.00 | % |
| Scott Gambill | |
| 6,100 | | |
| 0.01 | % | |
| 6,100 | | |
| - | | |
| 0.00 | % |
| Scott Jenkins, Trustee of the Jenkins Living Trust | |
| 214,428 | | |
| 0.36 | % | |
| 214,428 | | |
| - | | |
| 0.00 | % |
| Scott Strommen | |
| 300,000 | | |
| 0.50 | % | |
| 300,000 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Scott Thiss | |
| 67,428 | | |
| 0.11 | % | |
| 67,428 | | |
| - | | |
| 0.00 | % |
| Sheldon Fleck | |
| 1,150,076 | | |
| 1.92 | % | |
| 633,500 | | |
| 516,576 | | |
| 0.56 | % |
| Stan Caplan | |
| 300,000 | | |
| 0.50 | % | |
| 300,000 | | |
| - | | |
| 0.00 | % |
| Stanford Baratz, Trustee of the Stanford Baratz Revocable Trust | |
| 242,886 | | |
| 0.40 | % | |
| 142,858 | | |
| 100,028 | | |
| 0.11 | % |
| Steven Cheney | |
| 210,000 | | |
| 0.35 | % | |
| 210,000 | | |
| - | | |
| 0.00 | % |
| Steven Hanson | |
| 142,856 | | |
| 0.24 | % | |
| 142,856 | | |
| - | | |
| 0.00 | % |
| Stoll III, Edward | |
| 172,000 | | |
| 0.29 | % | |
| 172,000 | | |
| - | | |
| 0.00 | % |
| Super Angel Capital LLC | |
| 200,000 | | |
| 0.33 | % | |
| 200,000 | | |
| - | | |
| 0.00 | % |
| Sylvia Zamow | |
| 40,000 | | |
| 0.07 | % | |
| 40,000 | | |
| - | | |
| 0.00 | % |
| Tarlow Family Trust | |
| 142,858 | | |
| 0.24 | % | |
| 142,858 | | |
| - | | |
| 0.00 | % |
| Ted R. Stollie | |
| 28,570 | | |
| 0.05 | % | |
| 28,570 | | |
| - | | |
| 0.00 | % |
| Theodore and Patricia Neuville | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Theodore Tilton | |
| 167,856 | | |
| 0.28 | % | |
| 167,856 | | |
| - | | |
| 0.00 | % |
| Thomas Elbert | |
| 72,000 | | |
| 0.12 | % | |
| 72,000 | | |
| - | | |
| 0.00 | % |
| Thomas F. Duszynski | |
| 142,858 | | |
| 0.24 | % | |
| 142,858 | | |
| - | | |
| 0.00 | % |
| Thomas Heinzen | |
| 224,000 | | |
| 0.37 | % | |
| 224,000 | | |
| - | | |
| 0.00 | % |
| Timothy Zappia | |
| 35,600 | | |
| 0.06 | % | |
| 35,600 | | |
| - | | |
| 0.00 | % |
| Tom Vandehey | |
| 142,856 | | |
| 0.24 | % | |
| 142,856 | | |
| - | | |
| 0.00 | % |
| Tracy Gardner | |
| 71,428 | | |
| 0.12 | % | |
| 71,428 | | |
| - | | |
| 0.00 | % |
| Watch Dog Investment Inc. | |
| 142,856 | | |
| 0.24 | % | |
| 142,856 | | |
| - | | |
| 0.00 | % |
| WDS Partners LLC | |
| 85,714 | | |
| 0.14 | % | |
| 85,714 | | |
| - | | |
| 0.00 | % |
| Westcliff Aggressive Growth, LP | |
| 139,954 | | |
| 0.23 | % | |
| 139,954 | | |
| - | | |
| 0.00 | % |
| Westcliff Foundation | |
| 25,025 | | |
| 0.04 | % | |
| 25,025 | | |
| - | | |
| 0.00 | % |
| Westcliff Fund, LP | |
| 796,005 | | |
| 1.33 | % | |
| 796,005 | | |
| - | | |
| 0.00 | % |
| Westcliff Long/Short, LP | |
| 439,644 | | |
| 0.73 | % | |
| 439,644 | | |
| - | | |
| 0.00 | % |
| Westcliff Partners, LP | |
| 236,738 | | |
| 0.39 | % | |
| 236,738 | | |
| - | | |
| 0.00 | % |
| Westcliff Ventures Fund, LP | |
| 250,173 | | |
| 0.42 | % | |
| 250,173 | | |
| - | | |
| 0.00 | % |
| Name of Investor | |
Total
Number of
Shares
Beneficially
Owned | | |
Percentage
of Shares
Owned | | |
Total Number
of Shares
Offered | | |
Shares
Owned after
Offering | | |
Percentage
of Shares
Owned
after
Offering | |
| Willaim H. Earls | |
| 1,200,000 | | |
| 2.00 | % | |
| 1,200,000 | | |
| - | | |
| 0.00 | % |
| William H Baxter Trustee FBO William H. Baxter Revocable Trust u/a dtd 7/3/96 | |
| 72,730 | | |
| 0.12 | % | |
| 72,730 | | |
| - | | |
| 0.00 | % |
| Total | |
| 74,748,020 | | |
| | | |
| 51,379,154 | | |
| 23,368,866 | | |
| | |
| (1) | Representatives of this security holder have advised us that
Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive Growith,
LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff Long/Short,
LP, and Westcliff Management, LLC ("Westcliff"), is the general partner and/or
investment adviser. Richard S. Spencer III, as managing member of Westcliff, has discretionary
authority to purchase, vote and dispose of the securities except to the extent of their
respective pecuniary interests therein. |
| (2) | Representatives of this security holder have advised us that
Lowell L. Hancuh, Partner is the natural person with voting and dispositive power with
respect to the securities held by this security holder. |
| (3) | Representatives of this security holder have advised us that
David T. Machemehl is the natural person with voting and dispositive power with respect
to the securities held by this security holder. |
| (4) | Representatives of this security holder have advised us that
Dean Jacklitch, Trustee is the natural person with voting and dispositive power with
respect to the securities held by this security holder. |
| (5) | Representatives of this security holder have advised us that
Representatives of this security holder have advised us that Peter B. Voldness is the
natural person with voting and dispositive power with respect to the securities held
by this security holder. This security holder acquired the securities as compensation
for activities relating to acting as placement agent in the 2010 and 2011 Private Placement
and is a registered broker-dealer. |
| (6) | Representatives of this security holder have advised us that
Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd ("EAM"),
has discretionary authority to vote and dispose of the shares held by EAM and may be
deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their
capacity as investment managers of Empery Asset Management LP, may also be deemed to
have investment discretion and voting power over the shares held by EAM. Mr. Hoe and
Mr. Lane disclaim any beneficial ownership of these shares. |
| (7) | Representatives of this security holder have advised us that
Steven Winters is the natural person with voting and dispositive power with respect to
the securities held by this security holder. |
| (8) | Representatives of this security holder have advised us that
Empery Asset Management LP, the authorized agent of Hartz Capital Investments, LLC ("HCI"),
has discretionary authority to vote and dispose of the shares held by HCI and may be
deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their
capacity as investment managers of Empery Asset Management LP, may also be deemed to
have investment discretion and voting power over the shares held by HCI. Mr. Hoe and
Mr. Lane disclaim any beneficial ownership of these shares. |
| (9) | Representatives of this security holder have advised us that
Jason Hammerman is the natural person with voting and dispositive power with respect
to the securities held by this security holder. |
| (10) | Representatives of this security holder have advised us
that Hudson Bay Capital Management, L.P., the investment manager of Hudson Bay Master
Fund Ltd., has boting and investment power over these securities. Sander Gerber is the
managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson
Bay Capital Management L.P. Sander Gerber disclaims beneficial ownership over these securities. |
| (11) | Representatives of this security holder have advised us
that Patricia J. Jordan, Chief Manager is the natural person with voting and dispositive
power with respect to the securities held by this security holder. |
| (12) | Representatives of this security holder have advised us
that Richard O'Leary is the natural person with voting and dispositive power with respect
to the securities held by this security holder. |
| (13) | Representatives of this security holder have advised us
that David Mickelson is the natural person with voting and dispositive power with respect
to the securities held by this security holder. |
| (14) | Representatives of this security holder have advised us
that Louis Neuville is the natural person with voting and dispositive power with respect
to the securities held by this security holder. |
| (15) | Representatives of this security holder have advised us
that Joseph Fredrick Reece (cm) is the natural person with voting and dispositive power
with respect to the securities held by this security holder. |
| (16) | Representatives of this security holder have advised us
that Ted Robert Storlie is the natural person with voting and dispositive power with
respect to the securities held by this security holder. |
| (17) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (18) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (19) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (20) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (21) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (22) | Representatives of this security holder have advised us
that Ashdon Select Managers, Chrysler LLC Master Retirement Trust, Westcliff Aggressive
Growith, LP, Westcliff Partners, LP, Westcliff Foundation., Westcliff Fund, LP, Westcliff
Long/Short, LP, and Westcliff Management, LLC ("Westcliff"), is the general
partner and/or investment adviser. Richard S. Spencer III, as managing member of Westcliff,
has discretionary authority to purchase, vote and dispose of the securities except to
the extent of their respective pecuniary interests therein. |
| (23) | Please see the table Summary of Shares Offered below for
a description of the source of the shares of common stock being offered by each of the
stockholders. |
Summary of Shares Offered
| | The following table identifies the source of the shares of common
stock being offered by each selling stockholder. |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| Adam Michelin | |
| - | | |
| - | | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| 60,000 | |
| Alexander Coleman Ravich 1991 Trust | |
| - | | |
| - | | |
| - | | |
| - | | |
| 25,000 | | |
| 25,000 | | |
| 50,000 | |
| Allen Fedor | |
| - | | |
| - | | |
| 14,300 | | |
| 14,300 | | |
| - | | |
| - | | |
| 28,600 | |
| Alyssa Danielle Ravich Trust 1991 Trust | |
| - | | |
| - | | |
| - | | |
| - | | |
| 25,000 | | |
| 25,000 | | |
| 50,000 | |
| Andrew Curran | |
| 107,143 | | |
| 107,143 | | |
| 175,000 | | |
| 175,000 | | |
| 255,000 | | |
| 255,000 | | |
| 1,074,286 | |
| Andrew Reznick | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| 40,000 | |
| Annette Vandehey | |
| - | | |
| - | | |
| 21,430 | | |
| 21,430 | | |
| - | | |
| - | | |
| 42,860 | |
| Arleigh Aschbrook | |
| - | | |
| - | | |
| - | | |
| - | | |
| 17,400 | | |
| 17,400 | | |
| 34,800 | |
| Ashdon Select Managers | |
| - | | |
| - | | |
| 72,181 | | |
| 73,043 | | |
| - | | |
| - | | |
| 145,224 | |
| Babak Fardin | |
| - | | |
| - | | |
| - | | |
| - | | |
| 35,000 | | |
| 35,000 | | |
| 70,000 | |
| Barbara Johnson | |
| - | | |
| - | | |
| 8,000 | | |
| 8,000 | | |
| - | | |
| - | | |
| 16,000 | |
| Benton Case Jr. | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 40,000 | |
| Beth Dryden | |
| - | | |
| - | | |
| 150,000 | | |
| 150,000 | | |
| - | | |
| - | | |
| 300,000 | |
| Beth Dryden, Trustee of the Hopfenspirger 2011 Grat Retained Annuity
Trust | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| Bill and Jennifer Finley | |
| 14,286 | | |
| 14,286 | | |
| 7,200 | | |
| 7,200 | | |
| - | | |
| - | | |
| 42,972 | |
| Bill Thompson | |
| 35,714 | | |
| 35,714 | | |
| 46,000 | | |
| 46,000 | | |
| 27,000 | | |
| 27,000 | | |
| 217,428 | |
| Blue Earth Fund LP | |
| 71,428 | | |
| 104,761 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 176,189 | |
| Blue River Properties LLP | |
| 28,572 | | |
| 28,572 | | |
| 72,000 | | |
| 72,000 | | |
| - | | |
| - | | |
| 201,144 | |
| BMO Nezbitt Burns, Inc | |
| - | | |
| - | | |
| 400,000 | | |
| 400,000 | | |
| - | | |
| - | | |
| 800,000 | |
| Bradley W. Baker | |
| - | | |
| - | | |
| - | | |
| - | | |
| 181,819 | | |
| 181,819 | | |
| 363,638 | |
| BridgePointe Masters Fund Ltd | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 140,000 | | |
| 140,000 | |
| Brio Capital Master Fund Ltd | |
| 89,285 | | |
| 130,952 | | |
| - | | |
| - | | |
| - | | |
| 272,728 | | |
| 492,965 | |
| Broms Financial, LLC | |
| - | | |
| - | | |
| 285,714 | | |
| 285,714 | | |
| - | | |
| - | | |
| 571,428 | |
| Bryan Spille | |
| - | | |
| - | | |
| 15,000 | | |
| 15,000 | | |
| - | | |
| - | | |
| 30,000 | |
| Burguete Investment Partnership, LP | |
| - | | |
| - | | |
| - | | |
| - | | |
| 363,637 | | |
| 363,637 | | |
| 727,274 | |
| Carla Muff | |
| - | | |
| - | | |
| - | | |
| 2,500 | | |
| - | | |
| - | | |
| 2,500 | |
| Carlene F Cooke | |
| - | | |
| 10,000 | | |
| - | | |
| 15,000 | | |
| - | | |
| - | | |
| 25,000 | |
| Celtic Enterprises Ltd | |
| 17,857 | | |
| 17,857 | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | | |
| 135,714 | |
| Cindy Federwitz | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Craig Laughlin | |
| - | | |
| - | | |
| 15,000 | | |
| 15,000 | | |
| - | | |
| - | | |
| 30,000 | |
| Craig S Stevenson | |
| - | | |
| - | | |
| 101,000 | | |
| 101,000 | | |
| 100,000 | | |
| 100,000 | | |
| 402,000 | |
| Craig-Hallum Capital Group 401k Alexander Knopick 401k Contributory
Acct | |
| - | | |
| - | | |
| - | | |
| - | | |
| 41,819 | | |
| 41,819 | | |
| 83,638 | |
| Craig-Hallum Capital Group 401k George Sutton 401k Contributory
Acct | |
| - | | |
| - | | |
| - | | |
| - | | |
| 45,455 | | |
| 45,455 | | |
| 90,910 | |
| Craig-Hallum Capital Group LLC | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 189,551 | | |
| 189,551 | |
| Cranshire Capital Master Fund, Ltd. | |
| - | | |
| 1,514,283 | | |
| - | | |
| 1,704,285 | | |
| - | | |
| 172,727 | | |
| 3,391,295 | |
| Crispian VC Fund II, LP | |
| - | | |
| - | | |
| 145,000 | | |
| 145,000 | | |
| 100,000 | | |
| 100,000 | | |
| 490,000 | |
| Dan Schmidt | |
| - | | |
| - | | |
| 40,000 | | |
| 40,000 | | |
| 50,000 | | |
| 50,000 | | |
| 180,000 | |
| Daniel Gage | |
| 35,714 | | |
| 35,714 | | |
| 28,500 | | |
| 28,500 | | |
| - | | |
| - | | |
| 128,428 | |
| Daniel Rueter | |
| 53,572 | | |
| 53,572 | | |
| 42,857 | | |
| 42,857 | | |
| - | | |
| - | | |
| 192,858 | |
| Daryl R. McNab | |
| 16,714 | | |
| 16,714 | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 73,428 | |
| Daryl Skiba | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| David A Dent | |
| - | | |
| - | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | | |
| 100,000 | |
| David and Lisa Hintermeister | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 60,000 | |
| David Capuano | |
| - | | |
| - | | |
| - | | |
| 15,000 | | |
| - | | |
| - | | |
| 15,000 | |
| David Hansen | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| David Holperin | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| David Olshansky | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 100,000 | | |
| 200,000 | |
| Dean Jacklitch Trust | |
| 71,428 | | |
| 71,428 | | |
| 29,000 | | |
| 29,000 | | |
| 100,000 | | |
| 100,000 | | |
| 400,856 | |
| Deerfield Speical Situations Fund International Master Fund, Ltd | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,060,000 | | |
| 1,060,000 | |
| Deerfield Speical Situations Fund L.P. | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 758,182 | | |
| 758,182 | |
| Dennis D Gonyea | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,730 | | |
| 72,730 | |
| Dennis J. Holland | |
| 55,714 | | |
| 55,714 | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 171,428 | |
| Dorothy J Hoel | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,725 | | |
| 72,725 | |
| Dr Paul & Nancy Seel Jt/WRos | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,725 | | |
| 72,725 | | |
| 145,450 | |
| E. Terry Skone TTEE of the E Terry Skone Rev Trust dated 11/30/2005 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,725 | | |
| 72,725 | | |
| 145,450 | |
| Edward T. Halloran | |
| - | | |
| - | | |
| 36,000 | | |
| 36,000 | | |
| - | | |
| - | | |
| 72,000 | |
| Elmer Robert Salovich Revocable Trust | |
| - | | |
| - | | |
| - | | |
| - | | |
| 54,545 | | |
| 54,545 | | |
| 109,090 | |
| Emergent Financial Group, Inc. | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 58,824 | | |
| 58,824 | |
| Empery Asset Master, LTD | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| - | | |
| - | | |
| 100,000 | |
| Enable Growth Partners, L.P. | |
| - | | |
| - | | |
| - | | |
| - | | |
| 90,909 | | |
| 230,909 | | |
| 321,818 | |
| Entrust Midwest LLC, FBO Gary Collins | |
| - | | |
| - | | |
| 15,000 | | |
| 15,000 | | |
| - | | |
| - | | |
| 30,000 | |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| Entrust Midwest, LLC FBO Brian Ertel IRA #4233 | |
| - | | |
| - | | |
| 18,000 | | |
| 18,000 | | |
| - | | |
| - | | |
| 36,000 | |
| First Clearing LLC, Custodian FBO of Bruce Zwick IRA | |
| - | | |
| - | | |
| 35,715 | | |
| 35,715 | | |
| - | | |
| - | | |
| 71,430 | |
| First Clearing, LLC Custodian, FBO of Mark Ravich IRA | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| First State Bank and Trust, Custodian FBO Thomas E. Elbert Roth
IRA #2 | |
| - | | |
| - | | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| 71,428 | |
| Fred Williams Jr | |
| 71,428 | | |
| 71,428 | | |
| 142,857 | | |
| 142,857 | | |
| 45,454 | | |
| 45,454 | | |
| 519,478 | |
| Freestone Advantage Partners II, LP | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,091 | | |
| 9,091 | | |
| 18,182 | |
| Gaetan A. Riopel | |
| 71,429 | | |
| 71,429 | | |
| 71,400 | | |
| 71,400 | | |
| - | | |
| - | | |
| 285,658 | |
| Gary A. Bergren | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,730 | | |
| 72,730 | |
| Gary Eikaas | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 40,000 | |
| Gemini Master Fund, LTD | |
| - | | |
| - | | |
| 200,000 | | |
| 200,000 | | |
| - | | |
| - | | |
| 400,000 | |
| Gene F. Happe | |
| - | | |
| - | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | | |
| 100,000 | |
| George and Kathy Sutton | |
| 35,714 | | |
| 35,714 | | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| 142,856 | |
| George Edward Scalise | |
| - | | |
| - | | |
| - | | |
| - | | |
| 90,910 | | |
| 90,910 | | |
| 181,820 | |
| Gilya Alchits | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| 46,000 | | |
| 46,000 | | |
| 242,000 | |
| Goetsch Financal Inc 401K | |
| - | | |
| - | | |
| - | | |
| - | | |
| 29,090 | | |
| 29,090 | | |
| 58,180 | |
| Paul Gonyea | |
| - | | |
| - | | |
| 107,142 | | |
| 107,142 | | |
| - | | |
| - | | |
| 214,284 | |
| Gregory Gentling | |
| 214,286 | | |
| 214,286 | | |
| 142,857 | | |
| 142,857 | | |
| 184,201 | | |
| 184,201 | | |
| 1,082,688 | |
| Grossman Roth IRA, Marc A. | |
| - | | |
| - | | |
| - | | |
| 14,286 | | |
| - | | |
| - | | |
| 14,286 | |
| Grossman, Marc A. | |
| - | | |
| - | | |
| 1 | | |
| 85,715 | | |
| - | | |
| - | | |
| 85,716 | |
| Hartz Capital Investments, LLC | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| - | | |
| - | | |
| 100,000 | |
| HCP Opportunity Fund, LP | |
| - | | |
| - | | |
| - | | |
| - | | |
| 160,000 | | |
| 160,000 | | |
| 320,000 | |
| Howard Manake | |
| 29,357 | | |
| 29,357 | | |
| 35,450 | | |
| 35,450 | | |
| 64,000 | | |
| 64,000 | | |
| 257,614 | |
| Hudson Bay Master Fund LTD | |
| - | | |
| - | | |
| - | | |
| - | | |
| 272,728 | | |
| 272,728 | | |
| 545,456 | |
| Iroquois Master Fund Ltd. | |
| - | | |
| 104,761 | | |
| 48,239 | | |
| 143,000 | | |
| 90,909 | | |
| 90,909 | | |
| 477,818 | |
| James Behm | |
| 71,429 | | |
| 71,429 | | |
| 71,400 | | |
| 71,400 | | |
| 50,000 | | |
| 50,000 | | |
| 385,658 | |
| James Brown | |
| - | | |
| - | | |
| 25,000 | | |
| 25,000 | | |
| - | | |
| - | | |
| 50,000 | |
| James Denver | |
| - | | |
| - | | |
| - | | |
| - | | |
| 125,000 | | |
| 125,000 | | |
| 250,000 | |
| James H. Zavoral, Jr. | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 100,000 | | |
| 200,000 | |
| James J Tiampo Money Puchase Plan and Trust | |
| - | | |
| - | | |
| - | | |
| - | | |
| 181,819 | | |
| 181,819 | | |
| 363,638 | |
| James Lee | |
| - | | |
| - | | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| 60,000 | |
| Jeffrey C Brown Profit Sharing Plan & Trust 401K | |
| - | | |
| - | | |
| - | | |
| - | | |
| 136,363 | | |
| 136,363 | | |
| 272,726 | |
| Jeffrey Williams | |
| 35,714 | | |
| 35,714 | | |
| 40,000 | | |
| 40,000 | | |
| - | | |
| - | | |
| 151,428 | |
| Jerold Fahrner Trust | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| - | | |
| 100,000 | | |
| 100,000 | | |
| 342,856 | |
| JMJ Financial | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,000 | | |
| 180,000 | | |
| 360,000 | |
| John Connor | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | | |
| 171,428 | |
| John W. Schreiner | |
| 142,857 | | |
| 142,857 | | |
| 60,000 | | |
| 60,000 | | |
| - | | |
| - | | |
| 405,714 | |
| Jon and Annette Vandehey | |
| 92,857 | | |
| 92,857 | | |
| 40,000 | | |
| 40,000 | | |
| - | | |
| - | | |
| 265,714 | |
| Joni K. Voldness | |
| - | | |
| - | | |
| - | | |
| 15,000 | | |
| - | | |
| - | | |
| 15,000 | |
| Jordan Family LLC | |
| - | | |
| - | | |
| 300,000 | | |
| 300,000 | | |
| - | | |
| - | | |
| 600,000 | |
| Joseph Hennen | |
| 35,714 | | |
| 35,714 | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 131,428 | |
| Judith Hennen or Joseph Hennan | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Katherine O'Leary | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Keith Steller | |
| 14,286 | | |
| 14,286 | | |
| 21,428 | | |
| 21,428 | | |
| - | | |
| - | | |
| 71,428 | |
| Kevin Clark | |
| - | | |
| - | | |
| - | | |
| - | | |
| 45,455 | | |
| 45,455 | | |
| 90,910 | |
| Kevin J. Caulfield | |
| - | | |
| - | | |
| - | | |
| - | | |
| 45,500 | | |
| 45,500 | | |
| 91,000 | |
| Kyle Gillespie | |
| - | | |
| - | | |
| 36,000 | | |
| 36,000 | | |
| - | | |
| - | | |
| 72,000 | |
| Lacuna Hedge Fund LLLP | |
| - | | |
| - | | |
| - | | |
| 500,000 | | |
| 278,920 | | |
| 454,545 | | |
| 1,233,465 | |
| Larry Hopfenspirger | |
| - | | |
| - | | |
| - | | |
| 400,000 | | |
| 54,545 | | |
| 54,545 | | |
| 509,090 | |
| Larry R. Carlson | |
| - | | |
| - | | |
| 22,000 | | |
| 22,000 | | |
| 25,000 | | |
| 25,000 | | |
| 94,000 | |
| Lawrence Lappin | |
| - | | |
| - | | |
| 150,000 | | |
| 150,000 | | |
| 100,000 | | |
| 100,000 | | |
| 500,000 | |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| Loral I. Delaney | |
| 21,428 | | |
| 21,428 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 42,856 | |
| Louis Doering IRA | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| M. Elizabeth Patrin | |
| - | | |
| - | | |
| 42,000 | | |
| 42,000 | | |
| - | | |
| - | | |
| 84,000 | |
| Maletis Partners LP | |
| - | | |
| - | | |
| - | | |
| - | | |
| 181,819 | | |
| 181,819 | | |
| 363,638 | |
| Mark Ravich | |
| - | | |
| - | | |
| 225,000 | | |
| 225,000 | | |
| 50,000 | | |
| 50,000 | | |
| 550,000 | |
| Martha McKelvey | |
| - | | |
| - | | |
| 40,000 | | |
| 40,000 | | |
| - | | |
| - | | |
| 80,000 | |
| Mary F. Hauser | |
| 128,571 | | |
| 128,571 | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | | |
| 357,142 | |
| Matt Nelson | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 60,000 | |
| Maxim Partners LLC | |
| - | | |
| - | | |
| - | | |
| 300,000 | | |
| - | | |
| - | | |
| 300,000 | |
| Melvyn H. Reznick | |
| 185,714 | | |
| 185,714 | | |
| 200,000 | | |
| 200,000 | | |
| 64,000 | | |
| 64,000 | | |
| 899,428 | |
| Michael and Tracy Gardner | |
| - | | |
| - | | |
| 38,571 | | |
| 38,571 | | |
| 27,273 | | |
| 27,273 | | |
| 131,688 | |
| Michael Bartholomew, | |
| 14,286 | | |
| 14,286 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 28,572 | |
| Michael Goetsch | |
| - | | |
| 31,500 | | |
| - | | |
| 100,000 | | |
| - | | |
| - | | |
| 131,500 | |
| Michael J Roach | |
| - | | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 100,000 | | |
| 200,000 | |
| Michael Malouf | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 50,000 | | |
| 50,000 | |
| Michael Paul Reznick | |
| 28,572 | | |
| 28,572 | | |
| 150,000 | | |
| 150,000 | | |
| 40,000 | | |
| 40,000 | | |
| 437,144 | |
| Michael R. Waterhouse | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Michael Reardon | |
| - | | |
| - | | |
| 610,438 | | |
| 619,028 | | |
| - | | |
| - | | |
| 1,229,466 | |
| Michael Stephan | |
| 18,500 | | |
| 18,500 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 37,000 | |
| Micro Pipe Fund I, LLC | |
| - | | |
| - | | |
| 321,429 | | |
| 171,429 | | |
| - | | |
| - | | |
| 492,858 | |
| MLPF&S Cust FPO Michael J Hasslinger IRRA FBO Michael J Hasslinger | |
| - | | |
| - | | |
| - | | |
| - | | |
| 181,818 | | |
| 181,818 | | |
| 363,636 | |
| MLPF&S FPO Gary S Kohler IRA FBO Gary Kohler | |
| - | | |
| - | | |
| - | | |
| - | | |
| 272,728 | | |
| 272,728 | | |
| 545,456 | |
| MOG Capital LLC | |
| 190,475 | | |
| 523,809 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 714,284 | |
| Morris Steller | |
| 157,143 | | |
| 157,143 | | |
| 214,000 | | |
| 214,000 | | |
| - | | |
| - | | |
| 742,286 | |
| Neal Prahl | |
| 14,284 | | |
| 14,284 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 28,568 | |
| Neuville Family Trust | |
| 42,858 | | |
| 42,858 | | |
| 57,142 | | |
| 57,142 | | |
| - | | |
| - | | |
| 200,000 | |
| Norman Ravich | |
| - | | |
| - | | |
| 35,715 | | |
| 35,715 | | |
| - | | |
| - | | |
| 71,430 | |
| Pamela Smith | |
| - | | |
| - | | |
| 110,000 | | |
| 110,000 | | |
| - | | |
| - | | |
| 220,000 | |
| Patricia Jacklitch | |
| - | | |
| - | | |
| 43,000 | | |
| 43,000 | | |
| - | | |
| - | | |
| 86,000 | |
| Patricia Klaras | |
| - | | |
| - | | |
| - | | |
| 20,000 | | |
| - | | |
| - | | |
| 20,000 | |
| Patricia Neuville | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Paul Bigler | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 40,000 | |
| Paul Bukoskey | |
| - | | |
| - | | |
| 14,300 | | |
| 14,300 | | |
| - | | |
| - | | |
| 28,600 | |
| Paul Huber | |
| - | | |
| - | | |
| 22,800 | | |
| 22,800 | | |
| - | | |
| - | | |
| 45,600 | |
| Paul J. Linstroth | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| Paul Ravich | |
| - | | |
| - | | |
| - | | |
| - | | |
| 182,000 | | |
| 182,000 | | |
| 364,000 | |
| Paul Schultz | |
| 107,142 | | |
| 107,142 | | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| 274,284 | |
| Pennington Capital LLC | |
| - | | |
| - | | |
| - | | |
| - | | |
| 300,000 | | |
| 300,000 | | |
| 600,000 | |
| Peter Voldness | |
| - | | |
| 340,000 | | |
| - | | |
| 1,168,083 | | |
| 50,000 | | |
| 50,000 | | |
| 1,608,083 | |
| R. William Torhost, Jr. | |
| - | | |
| - | | |
| 14,300 | | |
| 14,300 | | |
| - | | |
| - | | |
| 28,600 | |
| Randy Rageth | |
| - | | |
| - | | |
| 142,857 | | |
| 142,857 | | |
| - | | |
| - | | |
| 285,714 | |
| RBC Capital Markets Corporation Custodian FBC David Schepers IRA | |
| 35,714 | | |
| 35,714 | | |
| 42,857 | | |
| 42,857 | | |
| - | | |
| - | | |
| 157,142 | |
| RBC Capital Markets Corporation Custodian FBC Scott T Johnson IRA | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| RBC Capital Markets Corporation Custodian FBO David Murphy | |
| - | | |
| - | | |
| 10,000 | | |
| 10,000 | | |
| - | | |
| - | | |
| 20,000 | |
| RBC Capital Markets Corporation Custodian FBO Judy Scollard Roth
IRA | |
| 8,572 | | |
| 8,572 | | |
| 7,000 | | |
| 7,000 | | |
| - | | |
| - | | |
| 31,144 | |
| RBC Capital Markets Corporation Custodian FBO Louis Doering IRA | |
| - | | |
| - | | |
| 35,000 | | |
| 35,000 | | |
| - | | |
| - | | |
| 70,000 | |
| RBC Capital Markets Corporation Custodian FBO Thomas Scollard Roth
IRA | |
| 5,715 | | |
| 5,715 | | |
| 7,000 | | |
| 7,000 | | |
| - | | |
| - | | |
| 25,430 | |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| RBC Capital Markets Custodian FBO Gregory Alan Rueter
IRA | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 60,000 | |
| RBC Capital Markets Custodian FBO Gregory Rueter SEP IRA | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 60,000 | |
| RBC Capital Markets Custodian FBO Valerian A. Burdick | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 40,000 | |
| RBC Capital Markets LLC Custodian FBO Carol Aschbrook | |
| - | | |
| - | | |
| - | | |
| - | | |
| 16,900 | | |
| 16,900 | | |
| 33,800 | |
| RBC Capital Markets LLC Custodian FBO Paul Bukoskey | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| 40,000 | |
| RBC Capital Markets, LLC Cust FBO Arleigh Aschebrook Roth
IRA | |
| - | | |
| - | | |
| 28,000 | | |
| 28,000 | | |
| - | | |
| - | | |
| 56,000 | |
| RBC Capital Markets, LLC Cust FBO Janice A. Waterhouse SEP IRA | |
| - | | |
| - | | |
| 10,000 | | |
| 10,000 | | |
| - | | |
| - | | |
| 20,000 | |
| Richard O'Leary | |
| - | | |
| 35,714 | | |
| - | | |
| - | | |
| 45,455 | | |
| 45,455 | | |
| 126,624 | |
| Richard Randall | |
| 35,714 | | |
| 35,714 | | |
| 107,000 | | |
| 107,000 | | |
| - | | |
| - | | |
| 285,428 | |
| Richard Thompson | |
| 57,143 | | |
| 57,143 | | |
| 57,142 | | |
| 57,142 | | |
| 36,000 | | |
| 36,000 | | |
| 300,570 | |
| Ro Shirole | |
| - | | |
| - | | |
| 30,000 | | |
| 30,000 | | |
| - | | |
| - | | |
| 60,000 | |
| Robert G Allison | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 290,910 | | |
| 290,910 | |
| Robert J Evans | |
| - | | |
| - | | |
| 135,000 | | |
| 150,000 | | |
| 150,000 | | |
| 150,000 | | |
| 585,000 | |
| Robert McKelvey | |
| 35,714 | | |
| 50,256 | | |
| 40,000 | | |
| 220,000 | | |
| - | | |
| - | | |
| 345,970 | |
| Robert Olson | |
| - | | |
| - | | |
| - | | |
| 15,000 | | |
| - | | |
| - | | |
| 15,000 | |
| Robert Salovich | |
| - | | |
| - | | |
| 110,000 | | |
| 110,000 | | |
| - | | |
| - | | |
| 220,000 | |
| Roger Hoy | |
| - | | |
| - | | |
| 285,714 | | |
| 285,714 | | |
| - | | |
| - | | |
| 571,428 | |
| Ron Eldred | |
| 71,429 | | |
| 71,429 | | |
| 42,858 | | |
| 42,858 | | |
| - | | |
| - | | |
| 228,574 | |
| Ronald P. Holtan | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,455 | | |
| 5,455 | | |
| 10,910 | |
| Ross Bjella | |
| 10,000 | | |
| 10,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,000 | |
| Ross Gramstad | |
| - | | |
| - | | |
| 75,000 | | |
| 75,000 | | |
| - | | |
| - | | |
| 150,000 | |
| Sanford and Linda Brink | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 40,000 | |
| Sasha Gentling | |
| 71,429 | | |
| 71,429 | | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| - | | |
| 285,714 | |
| Scott Gambill | |
| - | | |
| - | | |
| - | | |
| 6,100 | | |
| - | | |
| - | | |
| 6,100 | |
| Scott Jenkins, Trustee of the Jenkins Living Trust | |
| 71,428 | | |
| - | | |
| 71,500 | | |
| 71,500 | | |
| - | | |
| - | | |
| 214,428 | |
| Scott Strommen | |
| - | | |
| - | | |
| 150,000 | | |
| 150,000 | | |
| - | | |
| - | | |
| 300,000 | |
| Scott Thiss | |
| 31,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 67,428 | |
| Sheldon Fleck | |
| - | | |
| - | | |
| 283,500 | | |
| 350,000 | | |
| - | | |
| - | | |
| 633,500 | |
| Stan Caplan | |
| - | | |
| - | | |
| - | | |
| 100,000 | | |
| 50,000 | | |
| 150,000 | | |
| 300,000 | |
| Stanford Baratz, Trustee of the Stanford Baratz Revocable Trust | |
| - | | |
| - | | |
| 71,429 | | |
| 71,429 | | |
| - | | |
| - | | |
| 142,858 | |
| Steven Cheney | |
| - | | |
| - | | |
| 105,000 | | |
| 105,000 | | |
| - | | |
| - | | |
| 210,000 | |
| Steven Hanson | |
| - | | |
| - | | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| - | | |
| 142,856 | |
| Stoll III, Edward | |
| - | | |
| - | | |
| 86,000 | | |
| 86,000 | | |
| - | | |
| - | | |
| 172,000 | |
| Super Angel Capital LLC | |
| - | | |
| - | | |
| 100,000 | | |
| 100,000 | | |
| - | | |
| - | | |
| 200,000 | |
| Sylvia Zamow | |
| - | | |
| - | | |
| 20,000 | | |
| 20,000 | | |
| - | | |
| - | | |
| 40,000 | |
| Tarlow Family Trust | |
| 71,429 | | |
| 71,429 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 142,858 | |
| Ted R. Stollie | |
| - | | |
| - | | |
| 14,285 | | |
| 14,285 | | |
| - | | |
| - | | |
| 28,570 | |
| Theodore and Patricia Neuville | |
| - | | |
| - | | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| 71,428 | |
| Theodore Tilton | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| 25,000 | | |
| - | | |
| - | | |
| 167,856 | |
| Thomas Elbert | |
| - | | |
| - | | |
| 36,000 | | |
| 36,000 | | |
| - | | |
| - | | |
| 72,000 | |
| Thomas F. Duszynski | |
| 35,715 | | |
| 35,715 | | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| 142,858 | |
| Thomas Heinzen | |
| - | | |
| 44,000 | | |
| - | | |
| 180,000 | | |
| - | | |
| - | | |
| 224,000 | |
| Timothy Zappia | |
| - | | |
| - | | |
| 17,800 | | |
| 17,800 | | |
| - | | |
| - | | |
| 35,600 | |
| Tom Vandehey | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 142,856 | |
| Tracy Gardner | |
| 35,714 | | |
| 35,714 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 71,428 | |
| Watch Dog Investment Inc. | |
| - | | |
| - | | |
| 71,428 | | |
| 71,428 | | |
| - | | |
| - | | |
| 142,856 | |
| WDS Partners LLC | |
| - | | |
| - | | |
| 42,857 | | |
| 42,857 | | |
| - | | |
| - | | |
| 85,714 | |
| Westcliff Aggressive Growth, LP | |
| - | | |
| - | | |
| 69,074 | | |
| 70,880 | | |
| - | | |
| - | | |
| 139,954 | |
| Westcliff Foundation | |
| - | | |
| - | | |
| 12,367 | | |
| 12,658 | | |
| - | | |
| - | | |
| 25,025 | |
| | |
2010
PIPE OFFERING | | |
2011
PIPE OFFERING | | |
2012
PIPE OFFERING | | |
TOTAL
ALL
PIPE
OFFERINGS | |
| Name
of Investor | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares | | |
Warrants | | |
Shares
&
Warrants | |
| Westcliff Fund, LP | |
| - | | |
| - | | |
| 395,157 | | |
| 400,848 | | |
| - | | |
| - | | |
| 796,005 | |
| Westcliff Long/Short, LP | |
| - | | |
| - | | |
| 219,611 | | |
| 220,033 | | |
| - | | |
| - | | |
| 439,644 | |
| Westcliff Partners, LP | |
| - | | |
| - | | |
| 117,028 | | |
| 119,710 | | |
| - | | |
| - | | |
| 236,738 | |
| Westcliff Ventures Fund, LP | |
| - | | |
| - | | |
| 123,516 | | |
| 126,657 | | |
| - | | |
| - | | |
| 250,173 | |
| Willaim H. Earls | |
| - | | |
| - | | |
| 600,000 | | |
| 600,000 | | |
| - | | |
| - | | |
| 1,200,000 | |
| William H Baxter Trustee FBO William H. Baxter Revocable Trust u/a
dtd 7/3/96 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 72,730 | | |
| 72,730 | |
| Total | |
| 3,454,611 | | |
| 5,890,317 | | |
| 10,213,058 | | |
| 15,508,772 | | |
| 6,306,467 | | |
| 10,005,929 | | |
| 51,379,154 | |
PLAN OF DISTRIBUTION
The selling security
holders, which as used herein includes donees, pledgees, transferees, or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this prospectus from a selling security holder as a gift,
pledge, partnership distribution, or other transfer, may, from time to time, sell, transfer, or otherwise dispose of any or all
of their shares of common stock or interests in shares of common stock on any stock exchange, market, or trading facility on which
the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the
time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated
prices.
The selling security
holders may use any one or more of the following methods when disposing of shares or interests therein:
| • | ordinary brokerage transactions
and transactions in which the broker-dealer solicits purchasers; |
| • | block trades in which the
broker-dealer will attempt to sell the shares as agent, but may position and resell a
portion of the block as principal to facilitate the transaction; |
| • | purchases by a broker-dealer
as principal and resale by the broker-dealer for its account; |
| • | an exchange distribution
in accordance with the rules of the applicable exchange; |
| • | privately negotiated transactions; |
| • | short sales effected after
the date the registration statement of which this prospectus is a part is declared effective
by the SEC; |
| • | through the writing or settlement
of options or other hedging transactions, whether through an options exchange or otherwise; |
| • | broker-dealers may agree
with the selling stockholders to sell a specified number of such shares at a stipulated
price per share; |
| • | a combination of any such
methods of sale; and |
| • | any other method permitted
by applicable law. |
The selling security
holders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares
of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee, or other
successors in interest as selling security holders under this prospectus. The selling security holders also may transfer the shares
of common stock in other circumstances, in which case the transferees, pledges, or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In connection with
the sale of our common stock or interests therein, the selling security holders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions
they assume. The selling security holders may also sell shares of our common stock short and deliver these securities to close
out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling
security holders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus
(as supplemented or amended to reflect such transaction).
The aggregate proceeds
to the selling security holders from the sale of the common stock offered by them will be the purchase price of the common stock
less discounts or commissions, if any. Each of the selling security holders reserves the right to accept and, together with their
agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.
The selling security
holders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities
Act of 1933, as amended, provided that they meet the criteria and conform to the requirements of that rule.
Any underwriters,
broker-dealers, or agents that participate in the sale of the common stock or interests therein may be “underwriters”
within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions, or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the Securities Act.
To the extent required,
the shares of our common stock to be sold, the names of the selling security holders, the respective purchase prices and public
offering prices, the names of any agent, dealer, or underwriter, any applicable commissions or discounts with respect to a particular
offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.
In order to comply
with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered
or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We have advised the
selling security holders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares
in the market and to the activities of the selling security holders and their affiliates. In addition, to the extent applicable
we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling security
holders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling security holders
may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to
indemnify the selling security holders against liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.
We have agreed with
the selling security holders to keep the registration statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance
with the registration statement or (2) the date on which the shares may be sold without restriction pursuant to Rule 144
of the Securities Act.
DESCRIPTION OF
SECURITIES
Our authorized capital
consists of 250,000,000 shares of common stock, $0.001 par value per share, of which 60,037,846 shares of common stock were issued
and outstanding as of July 31, 2014, and 2,500,000 shares of “blank check” preferred stock, $0.001 par value per share,
of which 800,000 shares have been designated as Class A Convertible Preferred Stock. 301,739 shares of Class A Convertible Preferred
Stock were issued and outstanding as of July 31, 2014. The following description is a summary and is qualified in its entirety
by our Amended and Restated Articles of Incorporation and Bylaws as currently in effect, copies of which are referenced as exhibits
herein, and the provisions of the Nevada Revised Statutes.
Common Stock
Subject to the preferential
rights of any outstanding preferred stock, each holder of common stock is entitled to receive ratable dividends, if any, as may
be declared by the Board of Directors out of funds legally available for the payment of dividends. As of the date of this prospectus,
we have not paid any dividends on our common stock, and none are contemplated in the foreseeable future. We anticipate that all
earnings that may be generated from our operations will be used to finance our growth.
Holders of common
stock are entitled to one vote for each share held of record. There are no cumulative voting rights in the election of directors.
Thus the holders of more than 50% of the outstanding shares of common stock can elect all of our directors if they choose to do
so.
The holders of our
common stock have no preemptive, subscription, conversion or redemption rights. Upon our liquidation, dissolution or winding-up,
the holders of our common stock are entitled to receive our assets pro rata.
Blank Check Preferred Stock
Our Board of Directors
is empowered, without further action by stockholders, to issue from time to time one or more series of preferred stock, with such
designations, rights, preferences and limitations as the Board may determine by resolution. The rights, preferences and limitations
of separate series of preferred stock may differ with respect to such matters among such series as may be determined by the Board,
including, without limitation, the rate of dividends, method and nature of payment of dividends, terms of redemption, amounts
payable on liquidation, sinking fund provisions (if any), conversion rights (if any) and voting rights. Certain issuances of preferred
stock may have the effect of delaying or preventing a change in control of our company that some stockholders may believe is not
in their interest.
Class A Convertible Preferred Stock
This registration
statement does not register the resale of any shares of Class A Convertible Preferred Stock.
Dividends accrue on
shares of Class A Convertible Preferred Stock (the “Preferred Stock”) at the rate of $0.96 per annum. Such dividends
accrue day-to-day and are cumulative, and payable when, as, and if declared by the Board of Directors. In the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the Company, holders of Preferred Stock then outstanding are entitled
to receive a preference payment equal to $12.00 per share (subject to appropriate adjustment in the event of a stock dividend,
split, combination, or other similar recapitalization) plus any accrued dividends, but unpaid thereon, whether or not declared,
together with any other dividends declared but unpaid thereon. Shares of Preferred Stock vote together with the common stock on
an as-converted basis; provided that the holder of Class A Convertible Preferred Stock will be entitled to cast thirty votes for
each whole share of Class A Convertible Preferred Stock held by such holder as of the record date for determining stockholders
entitled to vote on such matter. At any time after September 1, 2014, shares of Preferred Stock are convertible into shares of
Common Stock, at the rate of thirty Common Stock for one share of Preferred Stock. In addition, accrued but unpaid dividends on
the Preferred Stock will also be convertible into common stock after September 1, 2014 at the rate of one share for each $0.40
of dividend. Such conversion is subject to adjustment in the event of any stock split or combination, certain dividends and distributions,
and any reorganization, recapitalization, reclassification, consolidation, or merger involving the Company. Shares of the Preferred
Stock are subject to redemption by the Company at any time on or after January 15, 2017, upon payment of $12.00 per share (subject
to appropriate adjustment in the event of a stock dividend, split, combination, or other similar recapitalization) plus all accrued
but unpaid dividends thereon. The Preferred Stock is subject to a liquidation preference over common stock equal to $12 per share
and the unpaid accrued dividend. Holders of the Preferred Stock will vote with holders of the Company’s common stock, but
will have thirty votes per share of Preferred Stock held compared to one vote for each share of common stock.
Warrants
This registration
statement does not register the resale of the warrants, but does register for resale the shares of common stock issuable upon
exercise of the warrants.
The warrant provides
that the warrant exercise price is subject to adjustment from time to time if we (i) pay a stock dividend or otherwise make
a distribution or distributions on shares of our common stock or any other equity or equity equivalent securities payable in shares
of common stock, (ii) subdivide outstanding shares of common stock into a larger number of shares, (iii) combine (including
by way of reverse stock split) outstanding shares of common stock into a smaller number of shares or (iv) issue by reclassification
of shares of the common stock any shares of our capital stock. For example, if we were to conduct a 4-for-1 stock split such that
each outstanding share became four shares of common stock, the exercise price of the warrant would be reduced to one-quarter of
the exercise price in effect immediately prior to the stock split and the number of shares acquirable upon a subsequent exercise
of the warrant shall be multiplied by four.
Transfer Agent and Registrar
The Transfer Agent
and Registrar for our common stock is Continental Stock Transfer & Trust Company, 17 Battery Place, 8th Floor, New York,
New York 10004.
Nevada Anti-Takeover Law and Charter and Bylaws Provisions
Nevada revised statutes
sections 78.378 to 78.3793 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations
unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. This
statute currently does not apply to our Company because in order to be applicable we would have to have as shareholders a specified
number of Nevada residents and we would have to do business in Nevada directly or through an affiliate.
LEGAL MATTERS
Certain legal matters
in connection with the offering and the validity of the common stock offered by this prospectus was passed upon by Snell &
Wilmer L.L.P., Costa Mesa, California.
EXPERTS
The consolidated
financial statements of Cryoport, Inc. as of March 31, 2014 and 2013 and for the years then ended, included in this prospectus,
have been audited by KMJ Corbin & Company LLP, an independent registered public accounting firm, as stated in their report
appearing herein, and elsewhere in the registration statement, and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are required to
comply with the information and periodic reporting requirements of the Exchange Act, and, in accordance with the requirements
of the Exchange Act, will file periodic reports, proxy statements and other information with the SEC. These periodic reports,
proxy statements and other information will be available for inspection and copying at the regional offices, public reference
facilities and internet site of the SEC referred to below.
We filed with the
SEC a registration statement on Form S-1 under the Securities Act for the common stock and warrants to be sold in this offering.
This prospectus does not contain all of the information in the registration statement and the exhibits and schedules that were
filed with the registration statement. For further information with respect to the common stock, warrants and us, we refer you
to the registration statement and the exhibits and schedules that were filed with the registration statement. Statements made
in this prospectus regarding the contents of any contract, agreement or other document that is filed as an exhibit to the registration
statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit
to the registration statement.
A copy of the registration
statement and the exhibits and schedules that were filed with the registration statement may be inspected without charge at the
public reference facilities maintained by the SEC, 100 F Street, Washington, DC 20549. Copies of all or any part of the registration
statement may be obtained from the SEC upon payment of the prescribed fee. Information regarding the operation of the public reference
rooms may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically with the SEC. The address of the site is http://www.sec.gov.
You can find more
information about us on our website, which is located at http://www.cryoport.com.
DISCLOSURE OF
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under the Nevada
Revised Statutes and our Articles of Incorporation, as amended, our directors will have no personal liability to us or our stockholders
for monetary damages incurred as the result of the breach or alleged breach by a director of his “duty of care.” This
provision does not apply to the directors’ (i) acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation
or its stockholders or that involve the absence of good faith on the part of the director, (iii) approval of any transaction
from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless disregard for the
director’s duty to the corporation or its stockholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director’s duties, of a risk of serious injury to the corporation or
its stockholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts to an abdication
of the director’s duty to the corporation or its stockholders, or (vi) approval of an unlawful dividend, distribution,
stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence in the performance
of duties, including gross negligence.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication
of such issue.
CRYOPORT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014 and 2013
(Unaudited)
Report of Independent Registered Public
Accounting Firm
The Board of Directors and
Stockholders of Cryoport, Inc.
We have audited the
accompanying consolidated balance sheets of CryoPort, Inc. (the “Company”) as of March 31, 2014 and 2013, and
the related consolidated statements of operations, stockholders’ (deficit) equity and cash flows for each of the years in
the two-year period ended March 31, 2014. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of CryoPort, Inc. at March 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the
two-year period ended March 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern. As described in Note
1 to the consolidated financial statements, the Company has incurred recurring operating losses and has had negative cash flows
from operations since inception. Although the Company has cash and cash equivalents of $369,581 at March 31, 2014, management
has estimated that cash on hand, which include proceeds from convertible bridge notes received in the fourth quarter of fiscal
2014, will only be sufficient to allow the Company to continue its operations into the second quarter of fiscal 2015. These matters
raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ KMJ Corbin & Company LLP
Costa Mesa, California
June 25, 2014
Cryoport, Inc. and Subsidiary
Consolidated Balance Sheets
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| ASSETS | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 369,581 | | |
$ | 563,104 | |
| Accounts receivable, net of allowance for doubtful
accounts of $24,600 and $8,700, respectively | |
| 515,825 | | |
| 217,097 | |
| Inventories | |
| 29,703 | | |
| 39,212 | |
| Other current assets | |
| 196,505 | | |
| 138,892 | |
| Total current assets | |
| 1,111,614 | | |
| 958,305 | |
| Property and equipment, net | |
| 408,892 | | |
| 505,485 | |
| Intangible assets, net | |
| 180,086 | | |
| 272,263 | |
| Deposits and other assets | |
| 9,358 | | |
| 19,744 | |
| Total assets | |
$ | 1,709,950 | | |
$ | 1,755,797 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’
DEFICIT | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Accounts payable and other accrued expenses | |
$ | 579,678 | | |
$ | 858,709 | |
| Accrued compensation and related expenses | |
| 454,288 | | |
| 217,432 | |
| Convertible debentures payable and accrued interest,
net of discount of $184,750 in 2014 | |
| 1,622,359 | | |
| 1,304,419 | |
| Current portion of related party notes payable | |
| 1,358,120 | | |
| 96,000 | |
| Derivative liabilities | |
| — | | |
| 20,848 | |
| Total current liabilities | |
| 4,014,445 | | |
| 2,497,408 | |
| Related party notes payable and
accrued interest, net of current portion | |
| — | | |
| 1,321,664 | |
| Total liabilities | |
| 4,014,445 | | |
| 3,819,072 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| Stockholders’ (Deficit) Equity: | |
| | | |
| | |
| Preferred stock, $0.001 par value; 2,500,000 shares
authorized; no shares issued and outstanding | |
| — | | |
| — | |
| Common stock, $0.001 par value; 250,000,000 shares
authorized; 59,979,954 and 37,760,628 issued and outstanding at March 31, 2014 and 2013, respectively | |
| 59,980 | | |
| 37,761 | |
| Additional paid-in capital | |
| 83,512,399 | | |
| 64,210,412 | |
| Accumulated deficit | |
| (85,876,874 | ) | |
| (66,311,448 | ) |
| Total stockholders’ deficit | |
| (2,304,495 | ) | |
| (2,063,275 | ) |
| Total liabilities and stockholders’
deficit | |
$ | 1,709,950 | | |
$ | 1,755,797 | |
See accompanying notes to consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Consolidated Statements of Operations
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Revenues | |
$ | 2,659,943 | | |
$ | 1,100,539 | |
| Cost of revenues | |
| 2,222,988 | | |
| 1,587,823 | |
| Gross margin (loss) | |
| 436,955 | | |
| (487,284 | ) |
| Operating costs and expenses: | |
| | | |
| | |
| Selling, general and administrative | |
| 5,106,219 | | |
| 5,411,728 | |
| Research and development | |
| 409,111 | | |
| 425,446 | |
| Total operating costs and expenses | |
| 5,515,330 | | |
| 5,837,174 | |
| Loss from operations | |
| (5,078,375 | ) | |
| (6,324,458 | ) |
| Other (expense) income: | |
| | | |
| | |
| Debt conversion expense | |
| (13,713,767 | ) | |
| — | |
| Interest expense | |
| (784,454 | ) | |
| (72,861 | ) |
| Other expense, net | |
| (8,078 | ) | |
| — | |
| Change in fair value of derivatives | |
| 20,848 | | |
| 16,486 | |
| Loss before provision for income taxes | |
| (19,563,826 | ) | |
| (6,380,833 | ) |
| Provision for income taxes | |
| (1,600 | ) | |
| (1,600 | ) |
| Net loss | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Net loss per common share –
basic and diluted | |
$ | (0.40 | ) | |
$ | (0.17 | ) |
| Weighted average shares outstanding – basic
and diluted | |
| 48,850,513 | | |
| 37,760,628 | |
See accompanying notes to consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Consolidated Statements of Stockholders’
(Deficit) Equity
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Total | |
| | |
Preferred Stock | | |
Common
Stock | | |
Additional | | |
Accumulated | | |
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-In Capital | | |
Deficit | | |
(Deficit)
Equity | |
| Balance at
March 31, 2012 | |
| — | | |
$ | — | | |
| 37,760,628 | | |
$ | 37,761 | | |
$ | 63,620,774 | | |
$ | (59,929,015 | ) | |
$ | 3,729,520 | |
| Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (6,382,433 | ) | |
| (6,382,433 | ) |
| Offering costs in connection
with the February 2012 private placement offering | |
| — | | |
| — | | |
| — | | |
| — | | |
| (103,542 | ) | |
| — | | |
| (103,542 | ) |
| Stock-based
compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 693,180 | | |
| — | | |
| 693,180 | |
| Balance at March 31,
2013 | |
| — | | |
| — | | |
| 37,760,628 | | |
| 37,761 | | |
| 64,210,412 | | |
| (66,311,448 | ) | |
| (2,063,275 | ) |
| Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (19,565,426 | ) | |
| (19,565,426 | ) |
| Stock-based compensation
expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 678,119 | | |
| — | | |
| 678,119 | |
| Estimated relative fair
value of warrants issued in connection with convertible bridge notes payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| 478,229 | | |
| — | | |
| 478,229 | |
| Issuance of common stock
upon exercise of options and warrants | |
| — | | |
| — | | |
| 1,583,315 | | |
| 1,583 | | |
| 325,307 | | |
| — | | |
| 326,890 | |
| Issuance of common stock
units upon conversion of convertible bridge notes and accrued interest | |
| — | | |
| — | | |
| 20,636,011 | | |
| 20,636 | | |
| 4,106,565 | | |
| — | | |
| 4,127,201 | |
| Induced
debt conversion expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 13,713,767 | | |
| — | | |
| 13,713,767 | |
| Balance
at March 31, 2014 | |
| — | | |
$ | — | | |
| 59,979,954 | | |
$ | 59,980 | | |
$ | 83,512,399 | | |
$ | (85,876,874 | ) | |
$ | (2,304,495 | ) |
See accompanying notes to consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Consolidated Statements of Cash Flows
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Cash Flows From Operating Activities: | |
| | | |
| | |
| Net loss | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Adjustments to reconcile net loss to net cash used
in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 311,590 | | |
| 393,959 | |
| Amortization of debt discount and deferred financing
costs | |
| 678,915 | | |
| 17,514 | |
| Stock-based compensation expense | |
| 678,119 | | |
| 693,180 | |
| Change in fair value of derivative instruments | |
| (20,848 | ) | |
| (16,486 | ) |
| Loss on write-off of intangible assets | |
| — | | |
| 17,046 | |
| Loss on disposal of cryogenic shippers | |
| 16,066 | | |
| 51,033 | |
| Reserve for bad debt | |
| 24,876 | | |
| — | |
| Debt conversion expense | |
| 13,713,767 | | |
| — | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable, net | |
| (323,604 | ) | |
| (70,973 | ) |
| Inventories | |
| 9,509 | | |
| 12,542 | |
| Other assets | |
| (26,588 | ) | |
| 34,912 | |
| Accounts payable and other accrued expenses | |
| (221,929 | ) | |
| 443,568 | |
| Accrued compensation and related expenses | |
| 236,856 | | |
| (18,564 | ) |
| Accrued interest | |
| 108,038 | | |
| 39,558 | |
| Net cash used in operating activities | |
| (4,380,659 | ) | |
| (4,785,144 | ) |
| Cash Flows From Investing Activities: | |
| | | |
| | |
| Purchases of intangible assets | |
| — | | |
| (22,482 | ) |
| Purchases of property and equipment | |
| (138,886 | ) | |
| (156,200 | ) |
| Net cash used in investing activities | |
| (138,886 | ) | |
| (178,682 | ) |
| Cash Flows From Financing Activities: | |
| | | |
| | |
| Proceeds from exercise of stock options and warrants | |
| 326,890 | | |
| — | |
| Proceeds from issuance of convertible debt | |
| 4,558,301 | | |
| 1,294,500 | |
| Repayment of convertible debt | |
| — | | |
| (82,800 | ) |
| Repayment of offering and deferred financing costs | |
| (463,169 | ) | |
| (206,305 | ) |
| Repayment of related party notes
payable | |
| (96,000 | ) | |
| (96,000 | ) |
| Net cash provided by financing
activities | |
| 4,326,022 | | |
| 909,395 | |
| Net decrease in cash and cash equivalents | |
| (193,523 | ) | |
| (4,054,431 | ) |
| Cash and cash equivalents —
beginning of year | |
| 563,104 | | |
| 4,617,535 | |
| Cash and cash equivalents —
end of year | |
$ | 369,581 | | |
$ | 563,104 | |
| Supplemental Disclosure of Cash
Flow Information: | |
| | | |
| | |
| Cash paid for interest | |
$ | — | | |
$ | 15,676 | |
| Cash paid for income taxes | |
$ | 1,600 | | |
$ | 1,600 | |
| Supplemental Disclosure of Non-Cash
Investing and Financing Activities: | |
| | | |
| | |
| Offering costs in connection
with equity financing included in accounts payable | |
$ | — | | |
$ | 53,747 | |
| Deferred financing costs in
connection with convertible debt payable included in accounts payable | |
$ | 30,120 | | |
$ | 38,475 | |
| Release of restricted cash
for repayment of convertible debentures | |
$ | — | | |
$ | 251,368 | |
| Estimated relative fair value
of warrants issued in connection with convertible bridge notes payable | |
$ | 478,229 | | |
$ | — | |
| Conversion of bridge notes
payable and accrued interest into common stock units | |
$ | 4,127,201 | | |
$ | — | |
See accompanying notes to consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Notes to Consolidated Financial Statements
Note 1. Nature of the Business
Cryoport Inc. (the
“Company”, “Cryoport” or “we”) is a Nevada corporation originally incorporated under the name
G.T.5-Limited (“GT5”) on May 25, 1990. In connection with a Share Exchange Agreement, on March 15, 2005 we changed
our name to Cryoport, Inc. and acquired all of the issued and outstanding shares of common stock of Cryoport Systems, Inc., a
California corporation, in exchange for 2,410,811 shares of our common stock (which represented approximately 81% of the total
issued and outstanding shares of common stock following the close of the transaction). Cryoport Systems, Inc., which was originally
formed in 1999 as a California limited liability company, and subsequently reorganized into a California corporation on December
11, 2000, remains the operating company under Cryoport, Inc. We became “publicly held” by the reverse merger with
GT5 described above. Over time we have transitioned from being a development company to a fully operational public company, providing
cold chain logistics solutions to the biotechnology and life sciences industries, globally.
Through a combination
of purpose-built proprietary packaging, information technologies and specialized logistics knowhow, we provide frozen shipping
logistics solutions to the life sciences industry. We view our solutions as disruptive to “older technologies” in
that our solutions provide reliable, economic alternatives to existing solutions and services utilized for frozen shipping in
life sciences including stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals,
infectious substances and other items that require continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express®
Solutions includes sophisticated cloud-based logistics management software we have branded as the Cryoportal™ which
supports the management of the entire shipment process through a single interface, including initial order input, document preparation,
customs clearance, courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique
and incisive information dashboards and validation documentation for every shipment. The Cryoportal™ records and retains
a fully documented “chain-of-custody” and, at the client’s option, “chain-of-condition” for every
shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process.
This recorded and archived information allows our customers to meet exacting requirements necessary for scientific work and for
regulatory purposes.
Our Cryoport Express®
Solutions also includes our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express® Shippers,
which are cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen
(“LN2”) “dry vapor” technology. Cryoport Express® Shippers are International Air Transport
Association (“IATA”) certified, and validated to maintain stable temperatures of minus 150° C and below for a
10-plus day dynamic shipment period. The Company currently features two Cryoport Express® Shipper models, the Standard
Dry Shipper (holding up to 75-2.0 ml vials) and the High Volume Dry Shipper (holding up to 500-2.0 ml vials).
Amongst our solutions,
we offer a “turnkey” solution, which can be accessed through our cloud-based Cryoportal™ or by contacting Cryoport
Client Care for order entry. Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and
reseals the shipping box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up.
Cryoport arranges for the pick-up of the parcel by a shipping service provider for delivery to the customer’s intended
recipient. The recipient simply opens the box and shipper and removes the frozen commodity. The recipient only needs
to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for pre-arranged
carrier pick up. The Cryoport Express® Shipper is returned to us for cleaning, quality assurance testing, recharging
and reuse.
In late 2012, we
shifted our focus from being a developer of cryogenic shippers and software to being a comprehensive frozen logistics solutions
provider to the life sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key
Solution”, we also provide the following value-added solutions that were developed to address our various clients’
needs:
| · | “Customer
Staged Solution,” under which we supply an inventory of our Cryoport Express®
Shippers to our customer, in an uncharged state, enabling our customer (after training/certification)
to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with
shipping and delivery service providers for the transportation of the package. Once the
order is released, our customer services professionals monitor the shipment and the return
of the shipper to us for cleaning, quality assurance testing and reuse. |
| · | “Customer
Managed Solution,” a limited customer implemented, solution, whereby we
supply our Cryoport Express® Shippers to clients in a fully charged state, but leaving
it to the client to manage the shipping, including the selection of the shipping and
delivery service provider and the return of the shipper to us. Under this solution, the
customer accepts a significant level of the risk for a successful shipment. |
| · | “Powered
by CryoportSM” is made available to providers of shipping and
delivery services who seek to offer a “branded” cryogenic shipping solution
as part of their service offerings. By negotiation, this solution can be private labeled
as long as “powered by CryoportSM” appears prominently
on the offering software interface and prominently on the packaging, which is provided
by the client after minimum volume requirements are met. |
| · | “Integrated
Solution” is our most comprehensive and complex
outsourcing solution. It usually involves our management of the entire cryogenic logistics
process for our client, including the location of our employees at the client’s
site to manage the client’s cryogenic logistics, in total. |
| · | “Life
Science Point-of-Care Repository Solution” whereby we supply our Cryoport
Express® Shippers to ship and store cryogenically preserved life science
products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care
site, with the Cryoport Express® Shippers serving as a temporary freezer/repository
enabling the efficient distribution of temperature sensitive allogeneic cell-based therapies
without the expense, inconvenience, and potential costly failure of an on-sight, cryopreservation
apparatus. Our customer services professionals monitor each shipment throughout the predetermined
process including the shipment’s return to Cryoport where the Cryoport Express®
Shipper is cleaned, tested for quality assurance and then returned to inventory
for reuse. |
| · | “Personalized
Medicine and Cell-based Immunotherapy Solution” whereby our Cryoport Express®
Solutions serves as an enabling technology for the safe manufacture of the rapidly
expanding autologous cellular-based immunotherapy market by providing a comprehensive
logistics solution for the verified chain of custody and condition transport from, (a)
the collection of the patient’s cells in a hospital setting, to (b) a central processing
facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically
preserved return of these irreplaceable cells to a point-of-care treatment facility.
The Cryoport Express® Shippers can then serve as a temporary freezer/repository
to allow the efficient distribution of this personalized medicine to patients when and
where they need it most without the expense, inconvenience, and potential costly failure
of an on-sight, cryopreservation apparatus. Our customer services professionals monitor
each shipment throughout the predetermined process including the shipment’s return
to Cryoport where the Cryoport Express® Shipper is cleaned, tested for
quality assurance and then returned to inventory for reuse. |
One of our distribution partners
is Federal Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping logistics services
through the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets and sells
Cryoport’s services for frozen temperature-controlled cold chain transportation as its FedEx® Deep Frozen
Shipping Solution on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely with FedEx
to further align its sales efforts and accelerate penetration within FedEx’s life sciences customer base through improved
processes, sales incentives, joint customer calls and more frequent communication at the sales and executive level. In addition,
FedEx has developed a FedEx branded version of the CryoportalTM software platform, which is “powered by Cryoport”
for use by FedEx and its customers giving them access to the full capabilities of our logistics management platform.
In January 2013, we entered into
a master agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with a non-exclusive
license and right to use a customized version of our CryoportalTM for the management of shipments made by FedEx customers.
The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx Agreement, expires
on December 31, 2015.
In June 2014, we added DHL as
our second distribution partner by entering into an agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”),
whereby DHL can offer our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global
basis. This relationship with DHL is a further implementation of the Company’s expansion of distribution partnerships under
the “powered by CryoportSM” model described above, allowing us to expand our sales and marketing
reach through our partners and build awareness of the benefits our validated cryogenic solution offerings. DHL has announced that
it will add 15 more certified Life Sciences stations in the second quarter of 2014 to its existing Thermonet network of 45 stations
already in operation. This expanded network will now be able to offer Cryoport’s cryogenic solutions under the DHL brands.
In addition, DHL’s customer will continue to be able to 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 platform, the CryoportalTM, is integrated to DHL’s tracking and billing systems to provide
DHL life sciences and healthcare customers with a seamless way of shipping their critical biological material worldwide.
In December 2012, we signed
an agreement with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant to which
we were engaged to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing on-site
logistics personnel and its logistics management platform, the CryoportalTM, to manage shipments from the Zoetis manufacturing
site in the United States to domestic customers as well as various international distribution centers. As part of our logistics
management services, Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’ logistics,
ensuring products arrive at their destinations in specified conditions, on-time and with the optimum uses of resources. The Company
manages Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers. In July 2013
the agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry vaccine
to all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October 2013, the
agreement was further amended to further expand Cryoport’s services to include the logistics management for a second poultry
vaccine.
In February 2014, we entered
into a services agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage biotechnology
company focused on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using Cryoport
Express® Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide
Cryoport Express® Solutions to other biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s
proprietary, purpose-built cold chain logistics solutions for cell-based and advanced biologic tissue forms with Liventa’s
distribution capability to orthopedic care providers. The implementation of Cryoport’s solution will eliminate dry ice shipping
and related risks of degradation and also eliminate the need for expensive onsite cryogenic freezers for storage of cell-based
orthopedic therapies. This will enable Liventa to better serve small or mobile clinics, pharmacies, family practice, and orthopedic
specialty care providers. Surgical centers and hospitals will also benefit from better logistics and the elimination of issues
surrounding dry ice transport and storage. The agreement has an initial three-year term and may be renewed for consecutive three-year
terms. Liventa also agreed to certain performance criteria and the issuance of 150,000 shares of its common stock to Cryoport
in exchange for the exclusive right to offer, market and promote Cryoport Express® Solutions for cellular-based
therapies requiring cryogenic temperatures for use in orthopedic indications in the United States.
We
offer our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells
and cell lines, diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood,
vaccines, tissue, animal husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems.
These companies operate within heavily regulated environments and as such, changing vendors and distribution practices typically
require a number of steps which may include the audit of our facilities, review of our procedures, qualifying us as a vendor,
and performing test shipments. This process can take up to nine months or longer to complete prior to a potential customer adopting
one or more of our Cryoport Express® Solutions.
Going Concern
The consolidated
financial statements have been prepared using the accrual method of accounting in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities in the normal course of business. We have sustained operating losses
since our inception and have used substantial amounts of working capital in our operations. Further, at March 31, 2014, we had
an accumulated deficit of $85.9 million. During the year ended March 31, 2014, we used cash in operations of $4.4 million and
had a net loss of $19.6 million, which included a one-time, non-cash debt conversion expense of $13.7 million.
We
expect to continue to incur substantial additional operating losses from costs related to the commercialization of our Cryoport
Express® Solutions and do not expect that revenues from operations will be
sufficient to satisfy our funding requirements in the near term. We believe that our cash resources at March 31, 2014, additional
funds raised subsequent to March 31, 2014 through the current preferred stock offering (see Note 15), together with the revenues
generated from our services will be sufficient to sustain our planned operations into the second quarter of fiscal year 2015;
however, we must obtain additional capital to fund operations thereafter and for the achievement of sustained profitable operations.
These factors raise substantial doubt about our ability to continue as a going concern. We are currently working on funding alternatives
in order to secure sufficient operating capital to allow us to continue to operate as a going concern.
Future
capital requirements will depend upon many factors, including the success of our commercialization efforts and the level of customer
adoption of our Cryoport Express® Solutions as well as our ability to establish
additional collaborative arrangements. We cannot make any assurances that the sales ramp will lead to achievement of sustained
profitable operations or that any additional financing will be completed on a timely basis and on acceptable terms or at all.
Management’s inability to successfully achieve significant revenue increases or implement cost reduction strategies or to
complete any other financing will adversely impact our ability to continue as a going concern. To address this issue, the Company
is seeking additional capitalization to properly fund our efforts to become a self-sustaining financially viable entity.
Note 2. Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying
consolidated financial statements have been prepared in accordance with U.S. GAAP.
Principles of Consolidation
The consolidated
financial statements include the accounts of Cryoport, Inc. and its wholly owned subsidiary, Cryoport Systems, Inc. All intercompany
accounts and transactions have been eliminated.
Use of Estimates
The preparation of
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimated amounts.
The Company’s significant estimates include allowances for doubtful accounts, recoverability of long-lived assets, allowance
for inventory obsolescence, deferred taxes and their accompanying valuations, valuation of derivative liabilities and valuation
of common stock, warrants and stock options issued for products or services.
Fair Value of Financial Instruments
The Company’s
financial instruments consist of cash and cash equivalents, accounts receivable, related-party notes payable, convertible notes
payable, accounts payable and accrued expenses. The carrying value for all such instruments approximates fair value at March 31,
2014 and 2013 due to their short-term nature. The difference between the fair value and recorded values of the related party notes
payable is not significant.
Cash and Cash Equivalents
The Company considers
highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Concentrations of Credit Risk
The Company maintains
its cash accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(“FDIC”) with basic deposit insurance coverage limits up to $250,000 per owner. At March 31, 2014 and 2013, the
Company had cash balances of approximately $159,000 and $214,000, respectively, which exceeded the FDIC insurance limit. The Company
performs ongoing evaluations of these institutions to limit its concentration risk exposure.
Customers
The Company grants
credit to customers within the U.S. and to a limited number of international customers and does not require collateral. Revenues
from international customers are generally secured by advance payments except for a limited number of established foreign customers.
The Company generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability
to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves
for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes
is sufficient. Accounts receivable at March 31, 2014 and 2013 are net of reserves for doubtful accounts of $24,600 and $8,700,
respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts.
The majority of the
Company’s customers are in the biotechnology, pharmaceutical and life science industries. Consequently, there is a concentration
of accounts receivable within these industries, which is subject to normal credit risk. At March 31, 2014, there was one customer
that accounted for 30.6% of net accounts receivable. No other single customer owed us more than 10% of net accounts receivable
at March 31, 2014 and 2013. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not
exceeded our estimates.
The Company has revenue
from foreign customers primarily in Europe, Japan, Canada, India and Australia. During fiscal years 2014 and 2013, the Company
had revenues from foreign customers of approximately $434,000 and $161,000, respectively, which constituted approximately 16.3%
and 14.6% of total revenues, respectively. For the fiscal year ended March 31, 2014, there was one customer that accounted
for 30.8% of net revenues. No other single customer generated over 10% of net revenues during 2014 and 2013.
Inventories
The Company’s
inventories consist of accessories that are sold and shipped to customers along with pay-per-use containers that are not returned
to the Company with the containers at the culmination of the customer’s shipping cycle. Inventories are stated at the lower
of cost or current estimated market value. Cost is determined using the standard cost method which approximates the first-in,
first-to-expire method. Inventories are reviewed periodically for slow-moving or obsolete status. The Company writes down the
carrying value of its inventories to reflect situations in which the cost of inventories is not expected to be recovered. Once
established, write-downs of inventories are considered permanent adjustments to the cost basis of the obsolete or excess inventories.
Raw materials and finished goods include material costs less reserves for obsolete or excess inventories. The Company evaluates
the current level of inventories considering historical trends and other factors, and based on the evaluation, records adjustments
to reflect inventories at its net realizable value. These adjustments are estimates, which could vary significantly from actual
results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These
estimates require us to make assessments about future demand for the Company’s products in order to categorize the status
of such inventories items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of
the Company’s forecasts of market conditions, industry trends, competition and other factors.
Property and Equipment
The Company provides
shipping containers to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements
are similar to the accounting standard for leases since they convey the right to use the container over a period of time. The
Company retains the title to the containers and provides its customers the use of the container for a specific shipping cycle.
At the culmination of the customer’s shipping cycle, the container is returned to the Company. As a result, the Company
classifies the containers as fixed assets for the per-use container program.
Property and equipment
are recorded at cost. Cryogenic shippers, which comprise of 89% and 87% of the Company’s net property and equipment balance
at March 31, 2014 and 2013, respectively, are depreciated using the straight-line method over their estimated useful lives
of three years. Equipment and furniture are depreciated using the straight-line method over their estimated useful lives (generally
three to seven years) and leasehold improvements are amortized using the straight-line method over the estimated useful life of
the asset or the lease term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful
life of the assets or term of the lease, whichever is shorter and included in depreciation expense.
Betterments, renewals
and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed
as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the
accounts, and the gain or loss on disposition is recognized in current operations.
Intangible Assets
Intangible assets
are comprised of patents and trademarks and software development costs. The Company capitalizes costs of obtaining patents and
trademarks, which are amortized, using the straight-line method over their estimated useful life of five years. The Company capitalizes
certain costs related to software developed for internal use. Software development costs incurred during the preliminary or maintenance
project stages are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized
using the straight-line method over the estimated useful life of the software, which is five years. Capitalized costs include
purchased materials and costs of services including the valuation of warrants issued to consultants.
Long-lived Assets
If indicators of
impairment exist, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of
such assets can be recovered through undiscounted future operating cash flows. If impairment is indicated, we measure the amount
of such impairment by comparing the fair value to the carrying value. We believe the future cash flows to be received from the
long-lived assets will exceed the assets’ carrying value, and accordingly, we have not recognized any impairment losses
through March 31, 2014.
Deferred Financing Costs
Deferred financing
costs represent costs incurred in connection with the issuance of the convertible notes payable and private equity financing.
Deferred financing costs related to the issuance of debt are being amortized over the term of the financing instrument using the
effective interest method while deferred financing costs from equity financings are netted against the gross proceeds received
from the equity financings.
In connection with
the 5% Bridge Notes, during the third and fourth quarter of fiscal 2014, the Company incurred financing costs that have been capitalized
and are being amortized over the term of the convertible bridge notes payable using the straight-line method which approximates
the effective interest method (see Note 8).
During the year ended
March 31, 2013, the Company incurred $103,542 of offering costs in connection with the private placement that closed in February
and March 2012, which were charged to additional paid-in capital and netted against the proceeds received in the private placements.
As of March 31, 2013, offering costs of $53,747 related to the private placement were included in accounts payable and accrued
expenses in the accompanying consolidated balance sheet.
Convertible Debentures
If a conversion feature
of conventional convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is
below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by
the Company as a debt discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes
the discount to interest expense over the life of the debt using the effective interest rate method.
Derivative Liabilities
Certain of the Company’s
issued and outstanding common stock purchase warrants which have exercise price reset features are treated as derivatives for
accounting purposes. The common stock purchase warrants were not issued with the intent of effectively hedging any future cash
flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting,
and as such, all future changes in the fair value of these warrants are recognized currently in earnings until such time as the
warrants are exercised, expire or the related rights have been waived. These common stock purchase warrants do not trade in an
active securities market, and as such, the Company estimates the fair value of these warrants using the Black-Scholes option pricing
model (“Black-Scholes”) (see Note 9).
Income Taxes
The Company accounts
for income taxes under the provision of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 740, Income Taxes , or ASC 740. As of March 31, 2014 and 2013, there were no unrecognized tax benefits
included in the accompanying consolidated balance sheets that would, if recognized, affect the effective tax rates.
Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred
tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Based on the
weight of available evidence, the Company’s management has determined that it is more likely than not that the net deferred
tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets.
The Company’s income tax provision consists of state minimum taxes.
The Company’s
policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual
for interest or penalties on its consolidated balance sheets at March 31, 2014 and 2013, respectively and has not recognized
interest and/or penalties in the consolidated statement of operations for the years ended March 31, 2014 and 2013. The Company
is subject to taxation in the U.S. and various state jurisdictions. As of March 31, 2014, the Company is no longer subject
to U.S. federal examinations for years before 2010 and for California franchise and income tax examinations for years before 2009.
However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating
losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry forward amount.
The Company is not currently under examination by U.S. federal or state jurisdictions.
Revenue Recognition
The Company provides
shipping containers to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements
are similar to the accounting standard for leases since they convey the right to use the containers over a period of time. The
Company retains title to the containers and provides its customers the use of the container for a specified shipping cycle. At
the culmination of the customer’s shipping cycle, the container is returned to the Company.
The Company recognizes
revenue for the use of the shipper at the time of the delivery of the shipper to the end user of the enclosed materials, and at
the time that collectability is reasonably certain. Revenue is based on gross net of discounts and allowances.
The Company also
provides logistics support and management to some customers, which may include onsite logistics personnel. Revenue is recognized
for these services as services are rendered and at the time that collectability is reasonably certain.
Accounting for Shipping and Handling
Revenue, Fees and Costs
The Company classifies
amounts billed for shipping and handling as revenue. Shipping and handling fees and costs are included in cost of revenues in
the accompanying consolidated statements of operations.
Research and Development Expenses
Expenditures relating
to research and development are expensed in the period incurred.
Stock-based Compensation
The Company accounts
for stock-based payments to employees and directors in accordance with stock-based payment accounting guidance which requires
all stock-based payments to employees and directors, including grants of employee stock options and warrants, to be recognized
based upon their fair values. The fair value of stock-based awards is estimated at grant date using Black-Scholes and the portion
that is ultimately expected to vest is recognized as compensation cost over the requisite service period.
Since stock-based
compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture
rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future
periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in
which the change in estimate occurs. The estimated forfeiture rates at March 31, 2014 and 2013 was zero as the Company has
not had a significant history of forfeitures and does not expect significant forfeitures in the future.
Cash flows from the
tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options or warrants are classified
as financing cash flows. Due to the Company’s loss position, there were no such tax benefits during years ended March 31,
2014 and 2013.
The Company uses
Black-Scholes to estimate the fair value of stock-based awards. The determination of fair value using Black-Scholes is affected
by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected
stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.
The Company’s
stock-based compensation plans are discussed further in Note 12.
Equity Instruments Issued to Non-Employees
for Acquiring Goods or Services
Issuances of the
Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of
the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment
for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty
considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance
is complete. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods
prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at
the then-current fair values at each of those interim financial reporting dates.
Basic and Diluted Net Income (Loss)
Per Share
We calculate basic
and diluted net income (loss) per share using the weighted average number of common shares outstanding during the periods presented,
and adjust the amount of net income (loss) used in this calculation for preferred stock dividends (if any) declared during the
period. In periods of a net loss position, basic and diluted weighted average shares are the same. For the diluted earnings per
share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants
and other common stock equivalents outstanding during the periods.
The following shows the amounts used in
computing net loss per share for each of the two years in the period ended March 31, 2014:
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Net loss | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Less: | |
| | | |
| | |
| Preferred dividends paid in cash or stock | |
| — | | |
| — | |
| Loss attributable to Cryoport stockholders | |
$ | (19,565,426 | ) | |
$ | (6,382,433 | ) |
| Weighted average shares issued and outstanding | |
| 48,850,513 | | |
| 37,760,628 | |
| Basic and diluted net loss per share | |
$ | (0.40 | ) | |
$ | (0.17 | ) |
The following table
sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been
anti-dilutive:
| | |
Years Ended March 31, | |
| | |
2014 | | |
2013 | |
| Stock options | |
| 3,458,313 | | |
| 411,762 | |
| Warrants | |
| 3,221,728 | | |
| — | |
| | |
| 6,680,041 | | |
| 411,762 | |
Segment Reporting
We currently operate
in one reportable segment.
Fair Value Measurements
We measure fair value
based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the
inputs used to measure fair value. These tiers include the following:
Level 1: Quoted
prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable
prices that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include quoted prices
for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or liabilities. Currently we do not
have any items classified as Level 2.
Level 3: Unobservable
inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
In determining fair
value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs
to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.
We did not elect
the fair value option, as allowed, to account for financial assets and liabilities that were not previously carried at fair value.
Therefore, material financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and
payable, are reported at their historical carrying values.
The carrying values
of our assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2014 and 2013
are classified in the table below in one of the three categories of the fair value hierarchy described below:
| | |
Fair Value Measurements | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| March 31, 2013 | |
| | | |
| | | |
| | | |
| | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Derivative liabilities | |
$ | — | | |
$ | — | | |
$ | 20,848 | | |
$ | 20,848 | |
The following
summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended March 31, 2014 and 2013:
| | |
Fair Value Measurements of
Unobservable Inputs (Level 3) | |
| | |
| |
| Balance at March 31, 2012 | |
$ | 37,334 | |
| Transfers in / (out) of Level 3 | |
| — | |
| Adjustments resulting from a
change in fair value of derivative liabilities | |
| (16,486 | ) |
| Balance at March 31, 2013 | |
| 20,848 | |
| Transfers in / (out) of Level 3 | |
| — | |
| Adjustments resulting from a
change in fair value of derivative liabilities | |
| (20,848 | ) |
| Balance at March 31, 2014 | |
$ | — | |
The fair value of
derivative liabilities were measured on their respective origination dates and at the end of each reporting period using Level 3
inputs. The significant assumptions we use in the calculations under Black-Scholes as of March 31, 2014 and 2013 included an expected
term based on the remaining contractual life of the warrants, a risk-free interest rate based upon observed interest rates appropriate
for the expected term of the instruments, volatility based on the historical volatility of our common stock, and a zero dividend
rate based on our past, current and expected practices of granting dividends on common stock.
Foreign Currency Translation
We record foreign
currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included
in results of operations. Foreign currency transaction gains and losses have not been significant for any of the periods presented.
Recent Accounting Pronouncements
In July 2013, the FASB
issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax
Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement presentation
of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.
The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15,
2013, with an option for early adoption. This pronouncement is effective for reporting periods beginning on or after January 1,
2013. The adoption of ASU 2011-11 did not have a material impact on the Company’s consolidated financial statements.
In May 2014, the FASB
issued ASU No. 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements
in FASB Topic 605, "Revenue Recognition". The ASU implements a five-step process for customer contract revenue recognition
that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures
regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions
include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction
price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances.
The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited.
Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.
Management is currently assessing the impact the adoption of ASU 2014-09 will have on our consolidated financial statements.
Note 3. Inventories
Inventories consist
of the following:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| Raw materials | |
$ | 18,283 | | |
$ | 28,533 | |
| Finished goods | |
| 11,420 | | |
| 10,679 | |
| | |
$ | 29,703 | | |
$ | 39,212 | |
Note 4. Property and Equipment
Property and equipment consist
of the following:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| Cryogenic shippers | |
$ | 1,037,286 | | |
$ | 962,565 | |
| Furniture and fixtures | |
| 30,746 | | |
| 30,746 | |
| Machinery and equipment | |
| 386,731 | | |
| 380,526 | |
| Leasehold improvements | |
| 30,913 | | |
| 30,913 | |
| | |
| 1,485,676 | | |
| 1,404,750 | |
| Less accumulated depreciation and amortization | |
| (1,076,784 | ) | |
| (899,265 | ) |
| | |
$ | 408,892 | | |
$ | 505,485 | |
Total depreciation
and amortization expense related to property and equipment amounted to $219,400 and $281,700 for the years ended March 31,
2014 and 2013, respectively.
Note 5. Intangible Assets
Intangible assets
consist of the following:
| | |
March 31, 2014 | | |
| |
| | |
Gross
Amount | | |
Accumulated
Amortization | | |
Net
Amount | | |
Weighted
Average
Amortization
Period (years) | |
| | |
| | |
| | |
| | |
| |
| Patents and trademarks | |
$ | 154,214 | | |
$ | (55,712 | ) | |
$ | 98,502 | | |
| 4.9 | |
| Software development costs for
internal use | |
| 547,127 | | |
| (465,543 | ) | |
| 81,584 | | |
| 1.6 | |
| Total intangible assets | |
$ | 701,341 | | |
$ | (521,255 | ) | |
$ | 180,086 | | |
| | |
| | |
March 31, 2013 | | |
| |
| | |
Gross
Amount | | |
Accumulated
Amortization | | |
Net
Amount | | |
Weighted
Average
Amortization
Period (years) | |
| Patents and trademarks | |
$ | 154,214 | | |
$ | (54,251 | ) | |
$ | 99,963 | | |
| 5.9 | |
| Software development costs for
internal use | |
| 547,127 | | |
| (374,827 | ) | |
| 172,300 | | |
| 2.6 | |
| Total intangible assets | |
$ | 701,341 | | |
$ | (429,078 | ) | |
$ | 272,263 | | |
| | |
Amortization expense
for intangible assets for the years ended March 31, 2014 and 2013 was $92,200 and $112,300, respectively.
Future amortization
of intangible assets is as follows:
| Years Ending March 31, | |
| |
| 2015 | |
$ | 62,884 | |
| 2016 | |
| 49,770 | |
| 2017 | |
| 28,199 | |
| 2018 | |
| 19,617 | |
| 2019 | |
| 19,616 | |
| | |
$ | 180,086 | |
Note 6. Accrued Compensation and
Related Expenses
Accrued compensation
and related expenses consist of the following:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| Accrued salary and wages | |
$ | 80,328 | | |
$ | 85,554 | |
| Accrued paid time off | |
| 155,166 | | |
| 92,376 | |
| Accrued board of director fees | |
| 214,553 | | |
| 38,000 | |
| Other accrued obligations | |
| 4,241 | | |
| 1,502 | |
| | |
$ | 454,288 | | |
$ | 217,432 | |
Note 7. Related Party Transactions
Related Party Notes Payable
As of March 31,
2014 and 2013, the Company had aggregate principal balances of $555,500 and $651,500, respectively, in outstanding unsecured indebtedness
owed to four related parties, including former members of the Company’s board of directors, representing working capital
advances made to the Company from February 2001 through March 2005. These notes bear interest at the rate of 6% per annum
and provide for aggregate monthly principal payments which began April 1, 2006 of $2,500, and which increased by an aggregate
of $2,500 every nine months to a maximum of $10,000 per month. As of March 31, 2014, the aggregate principal payments totaled
$8,000 per month. Any remaining unpaid principal and accrued interest is due at maturity on various dates through March 1,
2015.
Related-party interest
expense under these notes was $36,500 and $42,200 for the years ended March 31, 2014 and 2013, respectively. Accrued interest,
which is included in related party notes payable in the accompanying consolidated balance sheets, amounted to $802,600 and $766,200
as of March 31, 2014 and 2013, respectively.
Convertible Bridge Notes
During the year ended
March 31, 2014, the Company issued to certain accredited investors various unsecured promissory notes with the terms as described
under Note 8. These unsecured promissory notes included $120,000 of the 5% Bridge Notes (as defined below) issued to Jerrell Shelton,
the Company’s Chief Executive Officer, $100,000 of the Bridge Notes (as defined below) issued to Richard Rathmann, a member
of the Board of Directors of the Company, $200,000 of the Bridge Notes and $100,000 of the 5% Bridge Notes issued to GBR Investments,
LLC, of which Richard Rathmann is the manager.
Note 8. Convertible Notes Payable
2013 and 2014 Bridge Notes
In the fourth quarter
of fiscal 2013 and first nine months of fiscal 2014, the Company issued to certain accredited investors unsecured convertible
promissory notes (the “Bridge Notes”) in the original principal amount of $1,294,500 and $2,765,301, respectively,
for total principal of $4,059,801, pursuant to the terms of subscription agreements and letters of investment intent.
The Bridge Notes
accrued interest at a rate of 15% per annum from date of issuance until January 31, 2013 and at a rate of 5% per
annum from February 1, 2013 through the date of payment, in each case on a non-compounding basis. All principal and interest
under the Bridge Notes were due on December 31, 2013. Accrued interest related to these notes amounted to $0 and $9,900,
as of March 31, 2014 and 2013, respectively.
In connection with
the issuance of the Bridge Notes to three accredited investors totaling $400,000 in June, July and August 2013, the Company granted
these investors warrants to purchase 1,797,457 shares of common stock at an exercise prices ranging from $0.19 to $0.29 per share.
The relative fair value of the warrants of $199,200 was recorded as a debt discount and was amortized to interest expense using
the straight-line method which approximated the effective interest method over the term of the Bridge Notes. These Bridge Notes
accrued interest at 8% per annum from the date of issuance through date of payment, on a non-compounding basis. All other terms
of these Bridge Notes are consistent with the rest of the Bridge Notes. Upon conversion of the Bridge Notes in September and October
2013, the remaining unamortized debt discount was amortized to interest expense.
In September and
October 2013, the Bridge Note holders accepted an offer by the Company and converted an aggregate of $4,127,202 of outstanding
principal and accrued interest under the Bridge Notes into 20,636,011 units (the “Units”) at a price of $0.20 per
Unit, with each Unit consisting of (i) one share of common stock of the Company (“Common Stock”) and (ii) one
warrant to purchase one share of Common Stock at an exercise price of $0.37 per share. The warrants are exercisable beginning
on March 31, 2014 and have a term of five years from date of issuance. As the transaction was considered an induced conversion
under the applicable accounting guidance, the Company recognized $13,713,767 in debt conversion expense representing the fair
value of the securities transferred in excess of the fair value of the securities issuable upon the original conversion terms
of the Bridge Notes. The Company calculated the fair value of the common stock issued by using the closing price of the stock
on the date of issuance. The fair value of the warrants was calculated using Black-Scholes.
Upon conversion of
the Bridge Notes, the remaining unamortized debt discount was amortized to interest expense. During the years ended March 31,
2014 and 2013, the Company amortized $199,200 and $0, respectively, to interest expense.
5% Bridge Notes
From December 2013
to March 2014, the Company issued to certain accredited investors unsecured convertible promissory notes (the “5% Bridge
Notes”) in the original principal amount of $1,793,000, pursuant to the terms of subscription agreements and letters of
investment intent. This includes two notes in the aggregate amount of $120,000 issued to Jerrell Shelton, the Company’s
Chief Executive Officer, on December 11, 2013 and January 10, 2014 as well as a note in the amount of $100,000 issued to GBR Investments,
LLC on February 3, 2014, of which Richard Rathmann, a Director of the Company, is the manager.
The 5% Bridge Notes
accrue interest at a rate of 5% per annum from the date of issuance through date of payment, on a non-compounding basis.
All principal and interest under the 5% Bridge Notes becomes due on June 30, 2014. Accrued interest related to these notes of
$14,100 is included in convertible debentures payable and accrued interest, net of discount in the accompanying consolidated balance
sheet at March 31, 2014.
In connection with
the issuance of the 5% Bridge Notes, the Company granted these investors warrants to purchase 896,500 shares of common stock at
an exercise price of $0.49 per share. The warrants are exercisable on May 31, 2014 and expire on December 31, 2018. The relative
fair value of the warrants of $279,100 was recorded as a debt discount and is amortized to interest expense using the straight-line
method which approximates the effective interest method over the term of the 5% Bridge Notes. During the year ended March
31, 2014, the Company amortized $94,300 of the debt discount to interest expense for these notes.
In the event the
Company designates and issues one or more types of equity securities while the 5% Bridge Notes are outstanding (“Subsequent
Offering”), the Company must provide written notice to the holders of the notes and such holders will have a right to convert
up to all of the principal and accrued unpaid interest on the notes into shares of such equity securities on the same terms as
the Subsequent Offering during the ten days following the provision of such notice. The conversion price for these equity securities
will be 90% of the offering price for the equity securities. The Company was unable to value the conversion feature of these 5%
Bridge Notes given the absence of a conversion rate and the convertibility of the 5% Bridge Notes being contingent upon the completion
of a Subsequent Offering. In May 2014, note holders with the principal amount of $1,743,000 converted their notes (see Note 15).
Emergent Financial
Group, Inc. (“Emergent”) served as the Company’s placement agent in connection with the original placement of
the Bridge Notes and 5% Bridge Notes and earned a commission of 9% of the original principal balance of such notes. Debt financing
costs of $375,900 and $116,500 in 2014 and 2013, respectively, comprised primarily of the commission earned by Emergent, of which
$98,400 and $107,800 is recorded in other current assets in the accompanying consolidated balance sheets as of March 31, 2014
and 2013, respectively, and are being amortized to interest expense using the straight-line method which approximates the
effective interest method over the term of the notes.
In connection with
the conversion of the Bridge Notes in September and October 2013, Emergent received warrants to purchase 1,911,259 shares of common
stock at an exercise price of $0.20 per share. The warrants were exercisable beginning March 31, 2014 and have an expiration date
of June 30, 2018. Emergent did not receive any compensation with respect to the 5% Bridge Note in the principal amount of $120,000
issued to Jerrell Shelton, the Chief Executive Officer of the Company and $100,000 issued to GBR Investments, LLC , of which Richard
Rathmann, a Director of the Company, is the manager. During the years ended March 31, 2014 and 2013, the Company amortized $385,400
and $8,700, respectively, to interest expense.
Note 9. Derivative Liabilities
In accordance with
applicable accounting guidance, certain of the Company’s outstanding warrants to purchase shares of common stock were treated
as derivatives because these instruments had reset or ratchet provisions in the event the Company raises additional capital at
a lower price, among other adjustments. As such, the fair value of these common stock purchase warrants were treated as derivative
liabilities since their date of issuance or modification. Changes in fair value were recorded as non-operating, non-cash income
or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company
will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date,
the Company will record non-operating, non-cash income. As of March 31, 2014 and 2013, the Company had derivative warrant liabilities
with fair values of $0 and $20,848, respectively. The derivative warrants expire in April 2014.
During the year ended
March 31, 2014 and 2013, the Company recognized aggregate gains of $20,848 and $16,486, respectively, due to the change in fair
value of its derivative instruments.
The Company’s
common stock purchase warrants do not trade in an active securities market, and as such, the Company estimated the fair value
of these warrants using Black-Scholes using the following assumptions:
| | |
March
31, | |
| | |
2014 | | |
2013 | |
| Expected life (years) | |
| 0.01
to 0.81 | | |
| 1.01
to 1.81 | |
| Risk-free interest rate | |
| 0.03% - 0.15% | | |
| 0.14%-0.33% | |
| Volatility | |
| 70% -
144% | | |
| 129%
- 158% | |
| Dividend yield | |
| — | | |
| — | |
Historical volatility
was computed using daily pricing observations for recent periods that correspond to the remaining term of the warrants, which
had an original term of five years from the date of issuance. The expected life is based on the remaining term of the warrants.
The risk-free interest rate is based on U.S. Treasury securities with a maturity corresponding to the remaining term of the warrants.
Note 10. Commitments
and Contingencies
Facility
and Equipment Leases
We lease 11,900 square
feet of corporate, research and development, and warehouse facilities in Lake Forest, California under an operating lease expiring
June 30, 2015 which includes the right to cancel the lease with a minimum of 120 day written notice at any time after December 31,
2012. We also lease corporate facilities in San Diego, California under a non-cancelable operating lease expiring December 31,
2014. Each lease agreement contains certain scheduled rent increases which are accounted for on a straight-line basis.
Future minimum lease
payments are as follows:
| Years ending March 31, | |
Operating
Leases | |
| 2015 | |
$ | 192,800 | |
| 2016 | |
| 26,700 | |
| | |
$ | 219,500 | |
Rent expense for
the years ended March 31, 2014 and 2013 was approximately $178,000 and $204,000, respectively.
Employment Agreements
We have entered into
employment agreements with certain of our officers under which payment and benefits would become payable in the event of termination
by us for any reason other than cause, or upon a change in control of our Company, or by the employee for good reason.
Consulting and Engineering Services
Effective November 1,
2010, the Company entered into a Second Amendment to Master Consulting and Engineering Services Agreement (the “Second Amendment”)
with KLATU Networks, LLC (“KLATU”), which amended the Master Consulting and Engineering Services Agreement between
the parties dated as of October 9, 2007 (the “Agreement”), as amended by the First Amendment to Master Consulting
and Engineering Services Agreement between the parties dated as of April 23, 2009. The parties entered into the Second Amendment
to clarify their mutual intent and understanding that all license rights granted to the Company under the Agreement, as amended,
shall survive any termination or expiration of the Agreement. In addition, in recognition that the Company has paid KLATU less
than the market rate for comparable services, the Second Amendment provides that if the Company terminates the Agreement without
cause, which the Company has no intention of doing, or liquidates, KLATU shall be entitled to receive additional consideration
for its services provided from the commencement of the Agreement through such date of termination, which additional compensation
shall not be less than $2 million plus two times the “cost of work” (as defined in the Agreement). Any such additional
compensation would be payable in three equal installments within 12 months following the date the amount of such additional compensation
is determined. If KLATU terminates that agreement, no such payments are payable.
The agreement provides
for one year terms ending on December 31 of each year, but it automatically renews for one year periods unless otherwise
terminated. Consulting fees for services provided by KLATU were $395,300 and $401,100 for the years ended March 31, 2014
and 2013, respectively.
Litigation
The Company may become
a party to product litigation in the normal course of business. The Company accrues for open claims based on its historical experience
and available insurance coverage. In the opinion of management, there are no legal matters involving the Company that would have
a material adverse effect upon the Company’s consolidated financial condition or results of operations.
Indemnities and Guarantees
The Company has made
certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation
to certain actions or transactions. The guarantees and indemnities do not provide for any limitation of the maximum potential
future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments
for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying
consolidated balance sheets.
The Company indemnifies
its directors, officers, employees and agents, as permitted under the laws of the States of California and Nevada. In connection
with its facility leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities. The
duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement.
Note 11. Stockholders’
Equity
Authorized
Stock
The Company has 250,000,000
authorized shares of common stock with a par value of $0.001 per share. In September 2011, our stockholders approved an amendment
to the Amended and Restated Articles of Incorporation to authorize a class of undesignated or "blank check" preferred
stock, consisting of 2,500,000 shares at $0.001 par value per share. Shares of preferred stock may be issued in one or more series,
with such rights, preferences, privileges and restrictions to be fixed by the Company's board of directors. In May 2014, our stockholders
approved a Certificate of Designation, which designated 800,000 shares of preferred stock as Class A Preferred Stock (See Note
15).
Common Stock Reserved
for Future Issuance
As of March 31, 2014,
approximately 73.1 million shares of common stock were issuable upon conversion or exercise of rights granted under prior
financing arrangements, stock options and warrants, as follows:
| Exercise of stock options | |
| 11,894,205 | |
| Exercise of warrants | |
| 61,194,343 | |
| Total shares of common stock reserved for future issuances | |
| 73,088,548 | |
Note 12. 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. Included in outstanding warrants are 262,856 and 312,856 warrants at March 31, 2014
and 2013, respectively issued to employees or directors. Our outstanding warrants expire on varying dates through July 2019. A
summary of warrant activity is as follows:
| | |
Number of
Shares | | |
Weighted-
Average
Exercise
Price/Share | | |
Weighted-
Average
Remaining
Contractual
Term (Years) | | |
Aggregate
Intrinsic
Value (1) | |
| Outstanding — March 31, 2012 | |
| 37,144,504 | | |
$ | 1.18 | | |
| | | |
| | |
| Issued | |
| 30,000 | | |
| 0.50 | | |
| | | |
| | |
| Exercised | |
| — | | |
| — | | |
| | | |
| | |
| Forfeited | |
| (123,376 | ) | |
| 0.77 | | |
| | | |
| | |
| Expired | |
| (23,929 | ) | |
| 8.89 | | |
| | | |
| | |
| Outstanding — March 31, 2013 | |
| 37,027,199 | | |
| 1.18 | | |
| | | |
| | |
| Issued | |
| 25,241,227 | | |
| 0.35 | | |
| | | |
| | |
| Exercised | |
| (926,315 | ) | |
| 0.22 | | |
| | | |
| | |
| Forfeited | |
| (39,728 | ) | |
| 8.49 | | |
| | | |
| | |
| Expired | |
| (108,040 | ) | |
| 7.96 | | |
| | | |
| | |
| Outstanding — March 31, 2014 | |
| 61,194,343 | | |
$ | 0.84 | | |
| 2.9 | | |
$ | 3,987,500 | |
| Vested (exercisable) — March 31, 2014 | |
| 60,297,010 | | |
$ | 0.84 | | |
| 2.9 | | |
$ | 3,960,600 | |
| (1) | Aggregate intrinsic
value represents the difference between the exercise price of the warrant and the closing
market price of the common stock on March 31, 2014, which was $0.52 per share. |
The following table summarizes information
with respect to warrants outstanding and exercisable at March 31, 2014:
| Exercise Price | |
Number
Outstanding | | |
Weighted-
Average
Remaining
Contractual
Life (Years) | | |
Weighted-
Average
Exercise Price | | |
Number
Exercisable | | |
Weighted-
Average
Exercise Price | |
| $0.19 – 0.20 | |
| 2,437,574 | | |
| 4.3 | | |
$ | 0.20 | | |
| 2,437,574 | | |
$ | 0.20 | |
| $0.21 – 0.37 | |
| 20,980,838 | | |
| 4.5 | | |
$ | 0.37 | | |
| 20,980,838 | | |
$ | 0.37 | |
| $0.38 – 0.69 | |
| 10,932,429 | | |
| 3.0 | | |
$ | 0.67 | | |
| 10,035,929 | | |
$ | 0.69 | |
| $0.70 – 0.92 | |
| 21,431,557 | | |
| 1.7 | | |
$ | 0.77 | | |
| 21,431,557 | | |
$ | 0.77 | |
| $0.93 – 10.80 | |
| 5,411,945 | | |
| 0.9 | | |
$ | 3.53 | | |
| 5,411,112 | | |
$ | 3.53 | |
| | |
| 61,194,343 | | |
| | | |
| | | |
| 60,297,010 | | |
| | |
Stock Options
We have three stock
incentive plans: the 2002 Stock Incentive Plan, or the 2002 Plan, the 2009 Stock Incentive Plan, or the 2009 Plan and the 2011
Stock Incentive Plan, or the 2011 Plan (collectively, the “Plans”). The 2002 Plan authorizes the grant of incentive
awards, including stock options, for the purchase of up to a total of 500,000 shares and has no shares available for future
issuances as the 2002 Plan has expired. Subsequent to the adoption of the 2011 Plan, no new options have been granted pursuant
the 2009 Plan or 2002 Plan. In September 2009, the stockholders approved the issuance of up to 1,200,000 shares of common
stock available for issuance under the 2009 Plan and as of March 31, 2014, the Company has 299,741 shares available for future
awards under the 2009 Plan. In September 2011, the stockholders authorized the issuance of up to 2,300,000 shares of the Company's
common stock. On September 13, 2012, the stockholders approved an increase to the number of shares of the Company’s
common stock available for issuance by 3,000,000 shares. On September 6, 2013 the stockholders approved an increase to the
number of shares of the Company’s common stock available for issuance by 7,100,000 shares. As of March 31, 2014, there were
7,405,004 incentive awards available for grant under the 2011 Plan.
During each of the
two years in the period ended March 31, 2014, we granted stock options at exercise prices equal to or greater than the quoted
market price of our common stock on the grant date. The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average assumptions:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| Expected life (years) | |
| 1.6 – 6.02 | | |
| 2.6 -10.0 | |
| Risk-free interest rate | |
| 0.19% - 1.84% | | |
| 0.63%-2.22% | |
| Volatility | |
| 127% - 140% | | |
| 124% - 166% | |
| Dividend yield | |
| 0% | | |
| 0% | |
The expected option
life assumption is estimated based on the simplified method. Accordingly, the Company has utilized the average of the contractual
term of the options and the weighted average vesting period for all options to calculate the expected option term. The risk-free
interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options.
The expected volatility is based on the historical volatility of our stock commensurate with the expected life of the stock-based
award. We do not anticipate paying dividends on the common stock in the foreseeable future.
We recognize stock-based
compensation cost over the vesting period using the straight-line single option method. Stock-based compensation expense is recognized
only for those awards that are ultimately expected to vest. An estimated forfeiture rate has been applied to unvested awards for
the purpose of calculating compensation cost. The estimated forfeiture rate of 0% per year is based on the historical forfeiture
activity of unvested stock options. These estimates are revised, if necessary, in future periods if actual forfeitures differ
from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.
A summary of stock option activity is
as follows:
| | |
Number
of
Shares | | |
Weighted-
Average
Exercise
Price/Share | | |
Weighted-
Average
Remaining
Contractual
Term (Years) | | |
Aggregate
Intrinsic
Value
(1) | |
| Outstanding — March 31, 2012 | |
| 1,355,132 | | |
$ | 1.14 | | |
| | | |
| | |
| Granted (weighted-average fair value of $0.26 per share) | |
| 4,063,109 | | |
| 0.29 | | |
| | | |
| | |
| Exercised | |
| — | | |
| — | | |
| | | |
| | |
| Forfeited | |
| (322,500 | ) | |
| 0.98 | | |
| | | |
| | |
| Expired | |
| — | | |
| — | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Outstanding — March 31, 2013 | |
| 5,095,741 | | |
$ | 0.47 | | |
| | | |
| | |
| Granted (weighted-average fair value of $0.24 per share) | |
| 7,673,272 | | |
| 0.28 | | |
| | | |
| | |
| Exercised | |
| (657,000 | ) | |
| 0.20 | | |
| | | |
| | |
| Forfeited | |
| (197,808 | ) | |
| 0.32 | | |
| | | |
| | |
| Expired | |
| (20,000 | ) | |
| 6.00 | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Outstanding — March 31, 2014 | |
| 11,894,205 | | |
$ | 0.35 | | |
| 8.6 | | |
$ | 2,578,900 | |
| | |
| | | |
| | | |
| | | |
| | |
| Vested (exercisable) — March 31, 2014 | |
| 5,543,002 | | |
$ | 0.42 | | |
| 8.0 | | |
$ | 1,110,600 | |
| | |
| | | |
| | | |
| | | |
| | |
| Unvested (unexercisable) — March 31,
2014 | |
| 6,351,203 | | |
$ | 0.30 | | |
| 3.0 | | |
$ | 1,468,300 | |
| (1) | Aggregate intrinsic value represents
the difference between the exercise price of the option and the closing market price
of the common stock on March 31, 2014, which was $0.52 per share. |
The following table
summarizes information with respect to stock options outstanding and exercisable at March 31, 2014:
Exercise
Price | |
Number
Outstanding | | |
Weighted-
Average
Remaining
Contractual
Life
(Years) | | |
Weighted-
Average
Exercise
Price | | |
Number
Exercisable | | |
Weighted-
Average
Exercise
Price | |
| $0.17 – 0.48 | |
| 10,523,036 | | |
| 8.9 | | |
$ | 0.27 | | |
| 4,428,083 | | |
$ | 0.27 | |
| $0.52 – 0.98 | |
| 1,234,469 | | |
| 6.3 | | |
$ | 0.66 | | |
| 987,594 | | |
$ | 0.66 | |
| $1.05 – 2.20 | |
| 48,600 | | |
| 6.4 | | |
$ | 1.64 | | |
| 39,225 | | |
$ | 1.69 | |
| $4.30 – 8.31 | |
| 88,100 | | |
| 2.3 | | |
$ | 4.74 | | |
| 88,100 | | |
$ | 4.74 | |
| | |
| 11,894,205 | | |
| | | |
| | | |
| 5,543,002 | | |
| | |
As of March 31, 2014,
there was unrecognized compensation expense of $1.6 million related to unvested stock options, which we expect to recognize
over a weighted average period of 3.0 years.
Note 13. Income Taxes
Significant components
of the Company’s deferred tax assets as of March 31, 2014 and 2013 are shown below:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| | |
(000’s) | |
| Deferred tax assets: | |
| | | |
| | |
| Net operating loss carryforward | |
$ | 15,379 | | |
$ | 13,505 | |
| Research credits | |
| 60 | | |
| 51 | |
| Expenses recognized for granting of options and warrants | |
| 1,651 | | |
| 1,319 | |
| Accrued expenses and reserves | |
| 135 | | |
| 32 | |
| Valuation allowance | |
| (17,225 | ) | |
| (14,907 | ) |
| | |
$ | — | | |
$ | — | |
Based on the weight
of available evidence, the Company’s management has determined that it is more likely than not that the net deferred tax
assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets.
The Company’s income tax provision consists of state minimum taxes.
The income tax provision
differs from that computed using the federal statutory rate applied to income before taxes as follows:
| | |
March 31, | |
| | |
2014 | | |
2013 | |
| Computed tax benefit at federal statutory rate | |
$ | (6,650,000 | ) | |
$ | (2,169,000 | ) |
| State tax, net of federal benefit | |
| (327,000 | ) | |
| (359,000 | ) |
| Warrant MTM Adjustment | |
| (7,000 | ) | |
| (6,000 | ) |
| Induced conversion costs | |
| 4,663,000 | | |
| — | |
| Interest expense | |
| — | | |
| 1,000 | |
| Permanent items and other | |
| 4,600 | | |
| 215,600 | |
| Valuation allowance | |
| 2,318,000 | | |
| 2,319,000 | |
| | |
$ | 1,600 | | |
$ | 1,600 | |
At March 31,
2014, the Company has federal and state net operating loss carryforwards of approximately $39,086,000 and $35,759,000 which will
begin to expire in 2020, unless previously utilized, and as of 2012 have already begun to for state carryforwards. At March 31,
2014, the Company has federal and California research and development tax credits of approximately $18,000 and $64,000, respectively.
The federal research tax credit begins to expire in 2026 unless previously utilized and the California research tax credit has
no expiration date.
Utilization
of the net operating loss and research and development carryforwards might be subject to a substantial annual limitation due to
ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state and foreign provisions. These ownership
changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income
and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a
transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points
of the outstanding stock of a company by certain stockholders or public groups. Since the Company’s formation, the Company
has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders’
subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change
in the future upon subsequent disposition.
The Company has not
completed a study to assess whether an ownership change has occurred. If the Company has experienced an ownership change, utilization
of the NOL or R&D credit carryforwards would be subject to an annual limitation under Section 382 of the Code, which
is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable
long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration
of a portion of the NOL or R&D credit carryforwards before utilization. Further, until a study is completed and any limitation
is known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Due to the
existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective
tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred
tax assets with a corresponding reduction of the valuation allowance.
On September 13,
2013, the U.S. Treasury Department released final income tax regulations on the deduction and capitalization of expenditures related
to tangible property. These final regulations apply to tax years beginning on or after January 1, 2014, and may be adopted in
earlier years. The Company does not intend to early adopt the tax treatment of expenditures to improve tangible property and the
capitalization of inherently facilitative costs to acquire tangible property as of January 1, 2013. The tangible property regulations
will require the Company to make additional tax accounting method changes as of January 1, 2014; however, management does not
anticipate the impact of these changes to be material to the Company’s consolidated financial position, its results of operations
and its footnote disclosures.
Note 14. Quarterly Financial Data
(Unaudited)
A summary of quarterly
financial data is as follows ($ in ‘000’s):
| | |
Quarter
Ended | |
| | |
June
30 | | |
September 30 | | |
December
31 | | |
March
31 | |
| Year ended March 31, 2014 | |
| | | |
| | | |
| | | |
| | |
| Total revenues | |
$ | 488 | | |
$ | 580 | | |
$ | 757 | | |
$ | 835 | |
| Gross margin | |
$ | 55 | | |
$ | 72 | | |
$ | 167 | | |
$ | 143 | |
| Operating loss | |
$ | (1,260 | ) | |
$ | (1,287 | ) | |
$ | (1,257 | ) | |
$ | (1,274 | ) |
| Net loss | |
$ | (1,324 | ) | |
$ | (14,960 | ) | |
$ | (1,840 | ) | |
$ | (1,441 | ) |
| Net loss per share, basic and diluted | |
$ | (0.03 | ) | |
$ | (0.38 | ) | |
$ | (0.03 | ) | |
$ | (0.02 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Year ended March 31, 2013 | |
| | | |
| | | |
| | | |
| | |
| Total revenues | |
$ | 191 | | |
$ | 234 | | |
$ | 307 | | |
$ | 368 | |
| Gross loss | |
$ | (163 | ) | |
$ | (111 | ) | |
$ | (62 | ) | |
$ | (153 | ) |
| Operating loss | |
$ | (1,541 | ) | |
$ | (1,554 | ) | |
$ | (1,549 | ) | |
$ | (1,681 | ) |
| Net loss | |
$ | (1,546 | ) | |
$ | (1,551 | ) | |
$ | (1,567 | ) | |
$ | (1,717 | ) |
| Net loss per share, basic and diluted | |
$ | (0.04 | ) | |
$ | (0.04 | ) | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
Earnings per basic
and diluted shares are computed independently for each of the quarters presented based on basic and diluted shares outstanding
per quarter and, therefore, may not sum to the totals for the year.
Note 15. Subsequent Events
Designation of Class A Preferred
Stock
On May 2, 2014, the
Company filed with the Secretary of State of the State of Nevada a Certificate of Designation which designated 800,000 shares
of the Company’s previously authorized preferred stock, par value $0.001, as Class A Preferred Stock (“Preferred Stock”).
The rights, preferences, and
privileges of the Preferred Stock are summarized as follows:
| · | Dividends
shall accrue on shares of Preferred Stock at the rate of $0.96 per annum. Such dividends
shall accrue day-to-day, shall be cumulative, and shall be payable on when, as, and if
declared by the Board of Directors of the Company. |
| · | In
the event of any voluntary or involuntary liquidation, dissolution, or winding up of
the Registrant, holders of Preferred Stock then outstanding shall be entitled to receive
a preference payment equal to $12.00 per share (subject to appropriate adjustment in
the event of a stock dividend, split, combination, or other similar recapitalization)
plus any accrued dividends, but unpaid thereon, whether or not declared, together with
any other dividends declared but unpaid thereon. |
| · | Shares
of Preferred Stock shall vote together with the common stock on an as-converted basis. |
| · | At
any time after September 1, 2014, shares of Preferred Stock shall be convertible into
thirty shares of Common Stock. In addition, accrued but unpaid dividends on the Preferred
Stock will also be convertible into common stock after September 1, 2014 at the rate
of one share for each $0.40 of dividend. Such conversion is subject to adjustment in
the event of any stock split or combination, certain dividends and distributions, and
any reorganization, recapitalization, reclassification, consolidation, or merger involving
the Company. |
| · | Shares
of the Preferred Stock shall be subject to redemption by the Company at any time on or
after January 15, 2017, upon payment of $12.00 per share (subject to appropriate adjustment
in the event of a stock dividend, split, combination, or other similar recapitalization)
plus all accrued but unpaid dividends thereon. |
| · | The
Preferred Stock is subject to a liquidation preference over common stock equal to $12
per share and the unpaid accrued dividend. Holders of the Preferred Stock will vote with
holders of the Company’s common stock, but will have thirty votes per share of
Preferred Stock held compared to one vote for each share of common stock. |
Issuance of Class A Preferred Stock
In May 2014, the
Company entered into definitive agreements for a private placement of its securities to certain institutional and accredited investors
(the “Investors”) pursuant to certain Subscription Agreements and Elections to Convert between the Company and the
Investors. Through June 13, 2014, aggregate gross cash proceeds of $839,600 (approximately $628,700 after estimated cash offering
expenses) were collected in exchange for the issuance of 69,964 shares of our Class A Preferred Stock, and warrants, exercisable
for five years, to purchase up to a total of 559,712 shares of our common stock at an exercise price of $0.50 per share.
The Company intends to use the net proceeds for working capital purposes.
Pursuant to the Subscription
Agreements, the Company issued shares of a newly established Class A Preferred Stock and warrants to purchase common stock of
Cryoport. The shares and warrants were issued as a unit (a “Unit”) consisting of (i) one share of Class A Convertible
Preferred Stock and (ii) one warrant to purchase eight (8) shares of Common Stock at an exercise price of $0.50 per share,
which are immediately exercisable and may be exercised at any time on or before March 31, 2019.
Pursuant to the terms
of the 5% Bridge Notes issued by the Company between December 6, 2013 and March 13, 2014 with a total original principal amount
of $1,793,000 (the “5% Bridge Notes”), the issuance of the Units to Investors at $12.00 per Unit entitled the holders
of the 5% Bridge Notes to convert up to the entire principal amount and accrued interest under the 5% Bridge Notes into Units
at a rate of $10.80 per Unit. Through June 13, 2014, 5% Bridge Note holders totaling $1,743,000 in original principal sum
elected to convert their 5% Bridge Notes, including accrued interest, for Units in exchange for the issuance of 163,608 shares
of our Class A Preferred Stock and warrants to purchase up to 1,308,864 shares of our commons stock at an exercise price of $0.50
per share. Two of the 5% Bridge Note holders that executed Subscription Agreements to convert 5% Bridge Notes in the aggregate
principal amount of $220,000, are affiliates of the Company – Jerrell W. Shelton, the Company’s Chief Executive Officer,
and GBR Investments, LLC, which is managed by Richard Rathmann, a Director and Chairman of the Board of Directors of the Company
(collectively, the “Affiliates”).
Emergent Financial
Group, Inc. served as the Company’s placement agent in this transaction and received, with respect to the gross proceeds
received from Investors who converted their 5% Bridge Notes into Units (not including those conversions by the Affiliates), a
commission of 3% and a non-accountable finance fee of 1% of such proceeds, and with respect to gross proceeds received from all
other Investors, a commission of 10% and a non-accountable finance fee of 3% of the aggregate gross proceeds received from such
Investors, plus reimbursement of legal expenses of up to $40,000. Emergent Financial Group, Inc. will also be issued a warrant
to purchase three shares of Common Stock at an exercise price of $0.50 per share for each Unit issued in this transaction. The
Company and Emergent Financial Group, Inc. have agreed that the offering of Units to new Investors will conclude on July 14, 2014.
As of June 13, 2014, 233,572 shares
of Preferred Stock and 1,868,576 of the related warrants were outstanding for Investors and 638,646 warrants were outstanding
for Emergent in connection with the Preferred Stock offering and the 5% Bridge Notes conversion.
Cryoport, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
| | |
June 30, | | |
March 31, | |
| | |
2014 | | |
2014 | |
| | |
(unaudited) | | |
| |
| ASSETS | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 170,505 | | |
$ | 369,581 | |
| Accounts receivable, net of allowance for doubtful accounts of $19,200 and
$24,600, respectively | |
| 492,865 | | |
| 515,825 | |
| Inventories | |
| 38,601 | | |
| 29,703 | |
| Other current assets | |
| 81,421 | | |
| 196,505 | |
| | |
| | | |
| | |
| Total current assets | |
| 783,392 | | |
| 1,111,614 | |
| Property and equipment, net | |
| 364,728 | | |
| 408,892 | |
| Intangible assets, net | |
| 167,425 | | |
| 180,086 | |
| Deposits and other assets | |
| 9,358 | | |
| 9,358 | |
| | |
| | | |
| | |
| Total assets | |
$ | 1,324,903 | | |
$ | 1,709,950 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Accounts payable and other accrued expenses | |
$ | 538,988 | | |
$ | 579,678 | |
| Accrued compensation and related expenses | |
| 502,015 | | |
| 454,288 | |
| Convertible debentures payable and accrued interest, net of discount of $184,750
at March 31, 2014 | |
| — | | |
| 1,622,359 | |
| Current portion of related party notes payable | |
| 1,342,334 | | |
| 1,358,120 | |
| | |
| | | |
| | |
| Total current liabilities | |
| 2,383,337 | | |
| 4,014,445 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| Stockholders’ (Deficit) 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; 250,405 and 0 shares issued and outstanding at June 30, 2014 and March 31, 2014, respectively (aggregate liquidation
preference of $3,032,583 at June 30, 2014) | |
| 250 | | |
| — | |
| Common stock, $0.001 par value; 250,000,000 shares
authorized; 60,037,846 and 59,979,954 issued and outstanding at June 30, 2014 and March 31, 2014, respectively | |
| 60,038 | | |
| 59,980 | |
| Additional paid-in capital | |
| 87,797,202 | | |
| 83,512,399 | |
| Accumulated deficit | |
| (88,915,924 | ) | |
| (85,876,874 | ) |
| | |
| | | |
| | |
| Total stockholders’ deficit | |
| (1,058,434 | ) | |
| (2,304,495 | ) |
| | |
| | | |
| | |
| Total liabilities and stockholders’ deficit | |
$ | 1,324,903 | | |
$ | 1,709,950 | |
See accompanying notes to condensed consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Condensed Consolidated Statements of
Operations
(unaudited)
| | |
For the Three Months
Ended
June 30, | |
| | |
2014 | | |
2013 | |
| Revenues | |
$ | 936,588 | | |
$ | 487,963 | |
| Cost of revenues | |
| 597,233 | | |
| 433,321 | |
| Gross margin | |
| 339,355 | | |
| 54,642 | |
| Operating costs and expenses: | |
| | | |
| | |
| Selling, general and administrative | |
| 1,427,850 | | |
| 1,222,074 | |
| Research and development | |
| 79,244 | | |
| 92,643 | |
| Total operating costs and expenses | |
| 1,507,094 | | |
| 1,314,717 | |
| Loss from operations | |
| (1,167,739 | ) | |
| (1,260,075 | ) |
| Other (expense) income: | |
| | | |
| | |
| Interest expense | |
| (1,128,878 | ) | |
| (82,219 | ) |
| Other income, net | |
| 953 | | |
| — | |
| Change in fair value of derivatives | |
| — | | |
| 18,757 | |
| Loss before provision for income taxes | |
| (2,295,664 | ) | |
| (1,323,537 | ) |
| Provision for income taxes | |
| (1,600 | ) | |
| — | |
| Net loss | |
| (2,297,264 | ) | |
| (1,323,537 | ) |
| Preferred stock beneficial conversion charge | |
| (741,786 | ) | |
| — | |
| Undeclared cumulative preferred dividends | |
| (27,723 | ) | |
| — | |
| Net loss attributable to common stockholders | |
$ | (3,066,773 | ) | |
$ | (1,323,537 | ) |
| Net loss attributable to common stockholders – basic
and diluted | |
$ | (0.05 | ) | |
$ | (0.03 | ) |
| Weighted average shares outstanding – basic and diluted | |
| 59,989,321 | | |
| 38,062,826 | |
See accompanying notes to condensed consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Condensed Consolidated Statements of
Cash Flows
| | |
For the Three Months
Ended
June 30, | |
| | |
2014 | | |
2013 | |
| Cash Flows From Operating Activities: | |
| | | |
| | |
| Net loss | |
$ | (2,297,264 | ) | |
$ | (1,323,537 | ) |
| Adjustments to reconcile net loss to net cash used in
operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 55,140 | | |
| 89,443 | |
| Amortization of debt discount and deferred financing
costs | |
| 1,110,013 | | |
| 50,883 | |
| Stock-based compensation expense | |
| 167,094 | | |
| 157,203 | |
| Change in fair value of derivative instruments | |
| — | | |
| (18,757 | ) |
| Loss on disposal of cryogenic shippers | |
| 1,685 | | |
| — | |
| Recovery of bad debt | |
| (5,349 | ) | |
| — | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable, net | |
| 28,309 | | |
| (140,605 | ) |
| Inventories | |
| (8,898 | ) | |
| (13,652 | ) |
| Other assets | |
| (13,388 | ) | |
| (10,767 | ) |
| Accounts payable and other accrued expenses | |
| (20,228 | ) | |
| (54,278 | ) |
| Accrued compensation and related expenses | |
| 47,727 | | |
| 63,013 | |
| Accrued interest | |
| 18,110 | | |
| 30,063 | |
| | |
| | | |
| | |
| Net cash used in operating activities | |
| (917,049 | ) | |
| (1,170,991 | ) |
| | |
| | | |
| | |
| Cash Flows From Investing Activities: | |
| | | |
| | |
| Purchases of property and equipment | |
| — | | |
| (131,259 | ) |
| | |
| | | |
| | |
| Net cash used in investing activities | |
| — | | |
| (131,259 | ) |
| | |
| | | |
| | |
| Cash Flows From Financing Activities: | |
| | | |
| | |
| Proceeds from the issuance of preferred stock, net of
offering costs | |
| 780,342 | | |
| — | |
| Proceeds from exercise of stock options and warrants | |
| 11,631 | | |
| 100,000 | |
| Proceeds from issuance of convertible debentures | |
| — | | |
| 958,151 | |
| Repayment of convertible debentures | |
| (50,000 | ) | |
| — | |
| Repayment of offering and deferred costs | |
| — | | |
| (67,475 | ) |
| Repayment of related party notes
payable | |
| (24,000 | ) | |
| (24,000 | ) |
| | |
| | | |
| | |
| Net cash provided by financing
activities | |
| 717,973 | | |
| 966,676 | |
| | |
| | | |
| | |
| Net decrease in cash and cash equivalents | |
| (199,076 | ) | |
| (335,574 | ) |
| Cash and cash equivalents —
beginning of period | |
| 369,581 | | |
| 563,104 | |
| | |
| | | |
| | |
| Cash and cash equivalents —
end of period | |
$ | 170,505 | | |
$ | 227,530 | |
| | |
| | | |
| | |
| Supplemental Disclosure of Non-Cash
Investing and Financing Activities: | |
| | | |
| | |
| Offering costs in connection with
convertible preferred stock included in accounts payable | |
$ | 9,658 | | |
$ | — | |
| Deferred financing costs in connection
with convertible debentures payable included in accounts payable | |
$ | — | | |
$ | 70,234 | |
| Estimated relative fair value
of warrants issued in connection with convertible debentures payable | |
$ | — | | |
$ | 106,999 | |
| Accretion of convertible preferred
stock beneficial conversion feature and relative fair value of warrants issued in connection with the convertible preferred
stock units to accumulated deficit | |
$ | 741,786 | | |
$ | — | |
| Conversion of convertible debentures
payable and accrued interest into convertible preferred stock units | |
$ | 1,766,997 | | |
$ | — | |
See accompanying notes to condensed consolidated
financial statements.
Cryoport, Inc. and Subsidiary
Notes to Condensed Consolidated Financial
Statements
For the Three Months Ended June 30,
2014 and 2013
(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 months
ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending March 31, 2015.
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 Annual Report on Form 10-K for the fiscal year ended March 31,
2014.
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 Inc. (the “Company”,
“Cryoport” or “we”) is a Nevada corporation originally incorporated under the name G.T.5-Limited (“GT5”)
on May 25, 1990. In connection with a Share Exchange Agreement, on March 15, 2005 we changed our name to Cryoport, Inc. and acquired
all of the issued and outstanding shares of common stock of Cryoport Systems, Inc., a California corporation, in exchange for
2,410,811 shares of our common stock (which represented approximately 81% of the total issued and outstanding shares of common
stock following the close of the transaction). Cryoport Systems, Inc., which was originally formed in 1999 as a California limited
liability company, and subsequently reorganized into a California corporation on December 11, 2000, remains an operating company
under Cryoport, Inc. We became “publicly held” by the reverse merger with GT5 described above. Over time we have transitioned
from being a development company to a fully operational public company, providing cold chain logistics solutions to the biotechnology
and life sciences industries, globally.
Through a combination of purpose-built
proprietary packaging, information technologies and specialized logistics knowhow, we provide frozen shipping logistics solutions
to the life sciences industry. We view our solutions as disruptive to “older technologies” in that our solutions provide
reliable, economic alternatives to existing solutions and services utilized for frozen shipping in life sciences including stem
cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, bio-pharmaceuticals, infectious substances
and other items that require continuous exposure to frozen or cryogenic temperatures.
Our Cryoport Express® Solutions
includes sophisticated cloud-based logistics management software we have branded as the Cryoportal™ which supports the management
of the entire shipment process through a single interface, including initial order input, document preparation, customs clearance,
courier management, shipment tracking, issue resolution, and delivery. The Cryoportal™ provides unique and incisive information
dashboards and validation documentation for every shipment. The Cryoportal™ records and retains a fully documented “chain-of-custody”
and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy,
and stability of shipped commodities are maintained throughout the process. This recorded and archived information allows our
customers to meet exacting requirements necessary for scientific work and for regulatory purposes.
Our Cryoport Express® Solutions
also includes our liquid nitrogen dry vapor shippers we have branded as our Cryoport Express® Shippers, which are
cost-effective and reusable cryogenic transport containers (patented vacuum flasks) utilizing innovative liquid nitrogen (“LN2”)
“dry vapor” technology. Cryoport Express® Shippers are International Air Transport Association (“IATA”)
certified, and validated to maintain stable temperatures of minus 150° C and below for a 10-plus day dynamic shipment period.
The Company currently features two Cryoport Express® Shipper models, the Standard Dry Shipper (holding up to 75-2.0
ml vials) and the High Volume Dry Shipper (holding up to 500-2.0 ml vials).
Amongst our solutions, we offer a “turnkey”
solution, which can be accessed through our cloud-based Cryoportal™ or by contacting Cryoport Client Care for order entry.
Once the order is placed, we ship a fully charged Cryoport Express® Shipper to the customer who
conveniently loads their frozen commodity into the inner chamber of the shipper. The customer then closes the shipper and
reseals the shipping box displaying the recipient’s address (“Flap A”) for pre-arranged carrier pick up.
Cryoport arranges for the pick-up of the parcel by a shipping service provider for delivery to the customer’s intended
recipient. The recipient simply opens the box and shipper and removes the frozen commodity. The recipient only needs
to reseal the box, displaying the nearest Cryoport Operations Center address (“Flap B”) and set it out for pre-arranged
carrier pick up. The Cryoport Express® Shipper is returned to us for cleaning, quality assurance testing, recharging
and reuse.
In late 2012, we shifted our focus from
being a developer of cryogenic shippers and software to being a comprehensive frozen logistics solutions provider to the life
sciences industry, which was accomplished by broadening our service offerings. Now, in addition to our “Turn-key Solution”,
we also provide the following value-added solutions that were developed to address our various clients’ needs:
| · | “Customer
Staged Solution,” under which we supply an inventory of our Cryoport Express®
Shippers to our customer, in an uncharged state, enabling our customer (after training/certification)
to charge them with liquid nitrogen and use our Cryoportal™ to enter orders with
shipping and delivery service providers for the transportation of the package. Once the
order is released, our customer services professionals monitor the shipment and the return
of the shipper to us for cleaning, quality assurance testing and reuse. |
| · | “Customer
Managed Solution,” a limited customer implemented, solution, whereby we
supply our Cryoport Express® Shippers to clients in a fully charged state, but leaving
it to the client to manage the shipping, including the selection of the shipping and
delivery service provider and the return of the shipper to us. Under this solution, the
customer accepts a significant level of the risk for a successful shipment. |
| · | “Powered
by CryoportSM” is made available to providers of shipping and
delivery services who seek to offer a “branded” cryogenic shipping solution
as part of their service offerings. By negotiation, this solution can be private labeled
as long as “powered by CryoportSM”
appears prominently on the offering software interface and prominently on the packaging,
which is provided by the client after minimum volume requirements are met. |
| · | “Integrated
Solution” is our most comprehensive and complex outsourcing solution. It usually
involves our management of the entire cryogenic logistics process for our client, including
the location of our employees at the client’s site to manage the client’s
cryogenic logistics, in total. |
| · | “Life
Science Point-of-Care Repository Solution” whereby we supply our Cryoport
Express® Shippers to ship and store cryogenically preserved life science
products for up to 6 days (or longer periods with substitute Shippers) at a point-of-care
site, with the Cryoport Express® Shippers serving as a temporary freezer/repository
enabling the efficient distribution of temperature sensitive allogeneic cell-based
therapies without the expense, inconvenience, and potential costly failure of an on-sight,
cryopreservation apparatus. Our customer services professionals monitor each shipment
throughout the predetermined process including the shipment’s return to Cryoport
where the Cryoport Express® Shipper is cleaned, tested for quality assurance
and then returned to inventory for reuse. |
| · | “Personalized
Medicine and Cell-based Immunotherapy Solution” whereby our Cryoport Express®
Solutions serves as an enabling technology for the safe manufacture of the rapidly
expanding autologous cellular-based immunotherapy market by providing a comprehensive
logistics solution for the verified chain of custody and condition transport from, (a)
the collection of the patient’s cells in a hospital setting, to (b) a central processing
facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically
preserved return of these irreplaceable cells to a point-of-care treatment facility.
The Cryoport Express® Shippers can then serve as a temporary freezer/repository
to allow the efficient distribution of this personalized medicine to patients when and
where they need it most without the expense, inconvenience, and potential costly failure
of an on-sight, cryopreservation apparatus. Our customer services professionals monitor
each shipment throughout the predetermined process including the shipment’s return
to Cryoport where the Cryoport Express® Shipper is cleaned, tested for
quality assurance and then returned to inventory for reuse. |
One of our distribution partners is Federal
Express Corporation (“FedEx”). We have an agreement with FedEx to provide frozen shipping logistics services through
the combination of our purpose-built proprietary technologies and turnkey management processes. FedEx markets and sells Cryoport’s
services for frozen temperature-controlled cold chain transportation as its FedEx® Deep Frozen Shipping Solution
on a non-exclusive basis and at its sole expense. During fiscal year 2013, the Company worked closely with FedEx to further align
its sales efforts and accelerate penetration within FedEx’s life sciences customer base through improved processes, sales
incentives, joint customer calls and more frequent communication at the sales and executive level. In addition, FedEx has developed
a FedEx branded version of the CryoportalTM software platform, which is “powered by Cryoport” for
use by FedEx and its customers giving them access to the full capabilities of our logistics management platform.
In January 2013, we entered into a master
agreement (“FedEx Agreement”) with FedEx renewing these services and providing FedEx with a non-exclusive license
and right to use a customized version of our CryoportalTM for the management of shipments made by FedEx customers.
The FedEx Agreement became effective on January 1, 2013 and, unless sooner terminated as provided in the FedEx Agreement, expires
on December 31, 2015.
In June 2014, we added DHL as our second
major distribution partner by entering into an agreement with LifeConEx, a part of DHL Global Forwarding (“DHL”),
whereby DHL can offer our validated and comprehensive cryogenic solutions to its life sciences and healthcare customers on a global
basis. This relationship with DHL is a further implementation of the Company’s expansion of distribution partnerships under
the “powered by CryoportSM” model described above, allowing us to expand our sales and marketing
reach through our partners and build awareness of the benefits our validated cryogenic solution offerings. DHL has announced that
it will add 15 more certified Life Sciences stations in the second quarter of 2014 to its existing Thermonet network of 45 stations
already in operation. This expanded network will now be able to offer Cryoport’s cryogenic solutions under the DHL brands.
In addition, DHL’s customer will continue to be able to 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 platform, the CryoportalTM, is integrated to DHL’s tracking and billing systems to provide
DHL life sciences and healthcare customers with a seamless way of shipping their critical biological material worldwide.
In December 2012, we signed an agreement
with Pfizer Inc. relating to Zoetis Inc. (formerly the animal health business unit of Pfizer Inc.) pursuant to which we were engaged
to manage frozen shipments of a key poultry vaccine. Under this arrangement, the Company is providing on-site logistics personnel
and its logistics management platform, the CryoportalTM, to manage shipments from the Zoetis manufacturing site in
the United States to domestic customers as well as various international distribution centers. As part of our logistics management
services, Cryoport is constantly analyzing shipping data and processes to further streamline Zoetis’ logistics, ensuring
products arrive at their destinations in specified conditions, on-time and with the optimum uses of resources. The Company manages
Zoetis’ total fleet of dewar flask shippers used for this purpose, including liquid nitrogen shippers. In July 2013 the
agreement was amended to expand Cryoport’s scope to manage all logistics of Zoetis’ key frozen poultry vaccine to
all Zoetis’ international distribution centers as well as all domestic shipments of this vaccine. In October 2013, the agreement
was further amended to further expand Cryoport’s services to include the logistics management for a second poultry vaccine.
In February 2014, we entered into a services
agreement with Liventa Bioscience, Inc. (“Liventa”), a privately-held, commercial stage biotechnology company focused
on cell-based, advanced biologics in the orthopedic industry. Under this agreement, Liventa will be using Cryoport Express®
Solutions for the logistics of its cell-based therapies requiring cryogenic temperatures and also provide Cryoport Express®
Solutions to other biologics suppliers within the orthopedic arena. The agreement combines Cryoport’s proprietary,
purpose-built cold chain logistics solutions for cell-based and advanced biologic tissue forms with Liventa’s distribution
capability to orthopedic care providers. The implementation of Cryoport’s solution will eliminate dry ice shipping and related
risks of degradation and also eliminate the need for expensive onsite cryogenic freezers for storage of cell-based orthopedic
therapies. This will enable Liventa to better serve small or mobile clinics, pharmacies, family practice, and orthopedic specialty
care providers. Surgical centers and hospitals will also benefit from better logistics and the elimination of issues surrounding
dry ice transport and storage. The agreement has an initial three-year term and may be renewed for consecutive three-year terms.
Liventa also agreed to certain performance criteria and the issuance of 150,000 shares of its common stock to Cryoport in exchange
for the exclusive right to offer, market and promote Cryoport Express® Solutions for cellular-based therapies requiring
cryogenic temperatures for use in orthopedic indications in the United States.
We offer
our solutions to companies in the life sciences industry and specific verticals including manufacturers of stem cells and
cell lines, diagnostic laboratories, bio-pharmaceuticals, contract research organizations, in-vitro fertilization, cord blood,
vaccines, tissue, animal husbandry, and other producers of commodities requiring reliable frozen solutions for logistics problems.
These companies operate within heavily regulated environments and as such, changing vendors and distribution practices typically
require a number of steps which may include the audit of our facilities, review of our procedures, qualifying us as a vendor,
and performing test shipments. This process can take up to nine months or longer to complete prior to a potential customer adopting
one or more of our Cryoport Express® Solutions.
Going Concern
The unaudited condensed consolidated financial
statements have been prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared on a
going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business.
We have sustained operating losses since our inception and have used substantial amounts of working capital in our operations.
Further, at June 30, 2014, we had an accumulated deficit of $88.9 million. During the quarter ended June 30, 2014, we used cash
in operations of $917,000 and had a net loss of $2.3 million.
We expect
to continue to incur substantial additional operating losses from costs related to the commercialization of our Cryoport Express®
Solutions and do not expect that revenues from operations will be sufficient to satisfy our funding requirements in the
near term. We believe that our cash resources at June 30, 2014, additional funds raised subsequent to June 30, 2014 through the
current convertible preferred stock offering (see Note 7), together with the revenues generated from our services will be sufficient
to sustain our planned operations into the second quarter of fiscal year 2015; however, we must obtain additional capital to fund
operations thereafter and for the achievement of sustained profitable operations. These factors raise substantial doubt about
our ability to continue as a going concern. We are currently working on funding alternatives in order to secure sufficient operating
capital to allow us to continue to operate as a going concern.
Future capital
requirements will depend upon many factors, including the success of our commercialization efforts and the level of customer adoption
of our Cryoport Express® Solutions as well as our ability to establish additional
collaborative arrangements. We cannot make any assurances that the sales ramp will lead to achievement of sustained profitable
operations or that any additional financing will be completed on a timely basis and on acceptable terms or at all. Management’s
inability to successfully achieve significant revenue increases or implement cost reduction strategies or to complete any other
financing will adversely impact our ability to continue as a going concern. To address this issue, the Company is seeking additional
capitalization to properly fund our efforts to become a self-sustaining financially viable entity.
Note 3. Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying condensed consolidated
financial statements have been prepared in accordance with U.S. GAAP.
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.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could differ from estimated amounts. The Company’s
significant estimates include allowances for doubtful accounts, recoverability of long-lived assets, allowance for inventory obsolescence,
deferred taxes and their accompanying valuations and valuation of equity instruments.
Fair Value of Financial Instruments
The Company’s financial instruments
consist of cash and cash equivalents, accounts receivable, related-party notes payable, convertible notes payable, accounts payable
and accrued expenses. The carrying value for all such instruments approximates fair value at June 30, 2014 and March 31, 2014
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 U.S. and to a limited number of international customers and does not require collateral. Revenues from international
customers are generally secured by advance payments except for a limited number of established foreign customers. The Company
generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability to collect
receivables is affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves for uncollectible
amounts are provided based on past experience and a specific analysis of the accounts, which management believes is sufficient.
Accounts receivable at June 30, 2014 and March 31, 2014 are net of reserves for doubtful accounts of $19,200 and $24,600, respectively.
Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts.
The majority of the Company’s customers
are in the biotechnology, pharmaceutical and life science industries. Consequently, there is a concentration of accounts receivable
within these industries, which is subject to normal credit risk. At June 30, 2014 and March 31, 2014, there was one customer that
accounted for 39.4% and 30.6%, respectively, of net accounts receivable. No other single customer owed us more than 10% of net
accounts receivable at June 30, 2014 and March 31, 2014. The Company maintains reserves for bad debt and such losses, in the aggregate,
historically have not exceeded our estimates.
The Company has revenue from foreign customers
primarily in Europe, Japan, Canada, India and Australia. During three months ended June 30, 2014 and 2013, the Company had revenues
from foreign customers of approximately $183,500 and $57,200, respectively, which constituted approximately 19.6% and 11.7% of
total revenues, respectively.
For the three months ended June 30, 2014
and 2013, there was one customer that accounted for 30.4% and 30.3% of revenues, respectively. No other single customer generated
over 10% of revenues during the three months ended June 30, 2014 and 2013.
Inventories
The Company’s inventories consist
of accessories that are sold and shipped to customers along with pay-per-use containers that are not returned to the Company with
the containers at the culmination of the customer’s shipping cycle. Inventories are stated at the lower of cost or current
estimated market value. Cost is determined using the standard cost method which approximates the first-in, first-to-expire method.
Inventories are reviewed periodically for slow-moving or obsolete status. The Company writes down the carrying value of its inventories
to reflect situations in which the cost of inventories is not expected to be recovered. Once established, write-downs of inventories
are considered permanent adjustments to the cost basis of the obsolete or excess inventories. Raw materials and finished goods
include material costs less reserves for obsolete or excess inventories. The Company evaluates the current level of inventories
considering historical trends and other factors, and based on the evaluation, records adjustments to reflect inventories at its
net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions,
customer demand, competition or other relevant factors differ from expectations. These estimates require us to make assessments
about future demand for the Company’s products in order to categorize the status of such inventories items as slow-moving,
obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of the Company’s forecasts of market
conditions, industry trends, competition and other factors.
Property and Equipment
The Company provides shipping containers
to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements are similar to the
accounting standard for leases since they convey the right to use the container over a period of time. The Company retains the
title to the containers and provides its customers the use of the container for a specific shipping cycle. At the culmination
of the customer’s shipping cycle, the container is returned to the Company. As a result, the Company classifies the containers
as fixed assets for the per-use container program.
Property and equipment are recorded at
cost. Cryogenic shippers are depreciated using the straight-line method over their estimated useful lives of three years. Equipment
and furniture are depreciated using the straight-line method over their estimated useful lives (generally three to seven years)
and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease
term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful life of the assets
or term of the lease, whichever is shorter and included in depreciation expense.
Betterments, renewals and extraordinary
repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The
cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the
gain or loss on disposition is recognized in current operations.
Intangible Assets
Intangible assets are comprised of patents
and trademarks and software development costs. The Company capitalizes costs of obtaining patents and trademarks, which are amortized,
using the straight-line method over their estimated useful life of five years. The Company capitalizes certain costs related to
software developed for internal use. Software development costs incurred during the preliminary or maintenance project stages
are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized using the
straight-line method over the estimated useful life of the software, which is five years. Capitalized costs include purchased
materials and costs of services including the valuation of warrants issued to consultants.
Long-lived Assets
If indicators of impairment exist, we
assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered
through undiscounted future operating cash flows. If impairment is indicated, we measure the amount of such impairment by comparing
the fair value to the carrying value. We believe the future cash flows to be received from the long-lived assets will exceed the
assets’ carrying value, and accordingly, we have not recognized any impairment losses through June 30, 2014.
Deferred Financing Costs
Deferred financing costs represent costs
incurred in connection with the issuance of the convertible notes payable and private equity financing. Deferred financing costs
related to the issuance of debt are being amortized over the term of the financing instrument using the effective interest method
while deferred financing costs from equity financings are netted against the gross proceeds received from the equity financings.
Convertible Debentures
If a conversion feature of conventional
convertible debt is not accounted for as a derivative instrument and provides for a rate of conversion that is below market value,
this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt
discount. The convertible debt is recorded net of the discount related to the BCF. The Company amortizes the discount to interest
expense over the life of the debt using the effective interest rate method.
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, 2014 and March 31, 2014, 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, 2014 and March 31, 2014, respectively and has not recognized interest
and/or penalties in the condensed consolidated statement of operations for the three months ended June 30, 2014 and 2013. The
Company is subject to taxation in the U.S. and various state jurisdictions. As of June 30, 2014, the Company is no longer subject
to U.S. federal examinations for years before 2010 and for California franchise and income tax examinations for years before 2009.
However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating
losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry forward amount.
The Company is not currently under examination by U.S. federal or state jurisdictions.
Revenue Recognition
The Company provides shipping containers
to its customers and charges a fee in exchange for the use of the container. The Company’s arrangements are similar to the
accounting standard for leases since they convey the right to use the containers over a period of time. The Company retains title
to the containers and provides its customers the use of the container for a specified shipping cycle. At the culmination of the
customer’s shipping cycle, the container is returned to the Company.
The Company recognizes revenue for the
use of the shipper at the time of the delivery of the shipper to the end user of the enclosed materials, and at the time that
collectability is reasonably certain. Revenue is based on gross net of discounts and allowances.
The Company also provides logistics support
and management to some customers, which may include onsite logistics personnel. Revenue is recognized for these services as services
are rendered and at the time that collectability is reasonably certain.
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.
Research and Development Expenses
Expenditures relating to research and
development are expensed in the period incurred.
Stock-based Compensation
The Company accounts for stock-based payments
to employees and directors in accordance with stock-based payment accounting guidance which requires all stock-based payments
to employees and directors, including grants of employee stock options and warrants, to be recognized based upon their fair values.
The fair value of stock-based awards is estimated at grant date using 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.
Since stock-based compensation is recognized
only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate to unvested awards
for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future periods if actual forfeitures
differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate
occurs. The estimated forfeiture rates at June 30, 2014 and March 31, 2014 was zero as the Company has not had a significant history
of forfeitures and does not expect significant forfeitures in the future.
Cash flows from the tax benefits resulting
from tax deductions in excess of the compensation cost recognized for those options or warrants are classified as financing cash
flows. Due to the Company’s loss position, there were no such tax benefits during the three months ended June 30, 2014 and
2013.
The Company uses Black-Scholes to estimate
the fair value of stock-based awards. The determination of fair value using Black-Scholes is affected by the Company’s stock
price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility,
risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.
The Company’s stock-based compensation
plans are discussed further in Note 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 cumulative preferred
stock dividends, (if any), 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, 2014 and March 31, 2014, the Company had cumulative,
undeclared, dividends that have not been accrued related to its preferred stock of $27,700 and $0, respectively, which were added
to the net loss on the condensed consolidated statement of operations in order to calculate net loss per common share attributable
to common stockholders.
The following shows the amounts used in computing net loss
per share for the three months ended June 30:
| | |
Three Months Ended June
30, | |
| | |
2014 | | |
2013 | |
| Net loss | |
$ | (2,297,264 | ) | |
$ | (1,323,537 | ) |
| Less: | |
| | | |
| | |
| Preferred stock beneficial conversion charge | |
| (741,786 | ) | |
| — | |
| Undeclared cumulative preferred
dividends | |
| (27,723 | ) | |
| — | |
| Loss attributable to Cryoport common
stockholders | |
$ | (3,066,773 | ) | |
$ | (1,323,537 | ) |
| Weighted average shares issued and outstanding | |
| 59,989,321 | | |
| 38,062,826 | |
| Basic and diluted net loss per
share | |
$ | (0.05 | ) | |
$ | (0.03 | ) |
The following table
sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been
anti-dilutive:
| | |
Three Months Ended June
30, | |
| | |
2014 | | |
2013 | |
| Stock options | |
| 4,068,596 | | |
| 949,849 | |
| Warrants | |
| 5,225,350 | | |
| 21,322 | |
| | |
| 9,293,946 | | |
| 971,171 | |
Preferred shares
of 250,405, which are convertible into 7,512,150 shares of common stock, were excluded from the above table as they are not exercisable
until September 1, 2014.
Segment Reporting
We currently
operate in one reportable segment.
Fair
Value Measurements
We measure
fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes
the inputs used to measure fair value. These tiers include the following:
Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value
hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices
that are based on inputs not quoted on active markets, but corroborated by market data. These inputs include quoted prices for
similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets or liabilities. Currently we do not have
any items classified as Level 2.
Level 3: Unobservable
inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
In determining fair value, we utilize
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible,
as well as consider counterparty credit risk in the assessment of fair value.
We did not elect the fair value option,
as allowed, to account for financial assets and liabilities that were not previously carried at fair value. Therefore, material
financial assets and liabilities that are not carried at fair value, such as trade accounts receivable and payable, are reported
at their historical carrying values. We have no assets or liabilities that are required to be measured at fair value on a recurring
basis as of June 30, 2014 and March 31, 2014.
Foreign Currency Translation
We record foreign currency transactions
at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included in results of operations.
Foreign currency transaction gains and losses have not been significant for any of the periods presented.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers”. ASU 2014-09 supersedes the revenue recognition requirements in FASB Topic
605, "Revenue Recognition". The ASU implements a five-step process for customer contract revenue recognition that focuses
on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding
the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include
the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction
price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances.
The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited.
Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.
Management is currently assessing the impact the adoption of ASU 2014-09 will have on our condensed consolidated financial statements.
Note 4. Related Party Transactions
5% Bridge Notes
From December 2013 to March 2014, the
Company issued to certain accredited investors unsecured convertible promissory notes (the “5% Bridge Notes”) in the
original principal amount of $1,793,000, pursuant to the terms of subscription agreements and letters of investment intent. This
includes two notes in the aggregate amount of $120,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer,
on December 11, 2013 and January 10, 2014 as well as a note in the amount of $100,000 issued to GBR Investments, LLC on February
3, 2014, of which Richard Rathmann, a Director of the Company, is the manager (See Notes 5 and 7).
Related Party Notes Payable
As of June 30, 2014
and March 31, 2014, the Company had aggregate principal balances of $531,500 and $555,500, respectively, in outstanding unsecured
indebtedness owed to four related parties, including former members of the Company’s board of directors, representing working
capital advances made to the Company from February 2001 through March 2005. These notes bear interest at the rate of 6% per annum
and provide for aggregate monthly principal payments which began April 1, 2006 of $2,500, and which increased by an aggregate
of $2,500 every nine months to a maximum $10,000 per month. As of June 30, 2014, the aggregate principal payments totaled $8,000
per month. Any remaining principal and accrued interest is due at maturity on various dates through March 1, 2015.
Note 5. Convertible Notes Payable
5% Bridge Notes
From December 2013 to March 2014, the
Company issued to certain accredited investors unsecured convertible promissory notes in the original principal amount of $1,793,000,
pursuant to the terms of subscription agreements and letters of investment intent. This includes two notes in the aggregate amount
of $120,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer, on December 11, 2013 and January 10, 2014
as well as a note in the amount of $100,000 issued to GBR Investments, LLC on February 3, 2014, of which Richard Rathmann, a Director
of the Company, is the manager.
The 5% Bridge Notes accrued interest at
a rate of 5% per annum from the date of issuance through date of payment, on a non-compounding basis. All principal and interest
under the 5% Bridge Notes became due on June 30, 2014.
In connection with the issuance of the
5% Bridge Notes, the Company granted these investors warrants to purchase 896,500 shares of common stock at an exercise price
of $0.49 per share. The warrants were exercisable on May 31, 2014 and expire on December 31, 2018. The relative fair value of
the warrants of $279,100 was recorded as a debt discount and was amortized to interest expense using the straight-line method
which approximated the effective interest method over the term of the 5% Bridge Notes. During the three months ended June
30, 2014, the Company amortized $184,700 of the debt discount to interest expense for these notes.
The agreement allowed that in the event
the Company designated and issued one or more types of equity securities while the 5% Bridge Notes were outstanding (“Subsequent
Offering”), the Company must provide written notice to the holders of the notes and such holders had a right to convert
up to all of the principal and accrued unpaid interest on the notes into shares of such equity securities on the same terms as
the Subsequent Offering during the ten days following the provision of such notice. The conversion price for these equity securities
was 90% of the offering price for the equity securities in the Subsequent Offering. At the time of issuance, the Company was unable
to value the conversion feature of these 5% Bridge Notes given the absence of a fixed conversion rate and the convertibility of
the 5% Bridge Notes was contingent upon the completion of a Subsequent Offering. However, on May 6, 2014, the Company completed
the first convertible preferred stock offering which established a firm commitment date. This triggered the valuation of the beneficial
conversion feature of the 5% Bridge Notes which aggregated $826,900 and was recorded as interest expense during the three months
ended June 30, 2014. Note holders with a principal amount of $1,743,000, together with $24,000 of accrued interest, converted
their 5% Bridge Notes to convertible preferred stock units (see Note 7) and one note holder was paid principal and interest of
$50,753.
Emergent Financial Group, Inc. (“Emergent”)
served as the Company’s placement agent in connection with the original placement of the 5% Bridge Notes and earned a commission
of 9% of the original principal balance of such notes. Debt financing costs of $151,570, comprised primarily of the commission
earned by Emergent, and were amortized to interest expense using the straight-line method which approximates the effective interest
method over the term of the notes. During the three months ended June 30, 2014, the Company amortized $98,400 of the debt financing
costs to interest expense for these notes.
Note 6. Commitments and Contingencies
Facility and Equipment Leases
We lease 11,900 square
feet of corporate, research and development, and warehouse facilities in Lake Forest, California under an operating lease expiring
June 30, 2015 which includes the right to cancel the lease with a minimum of 120 day written notice. We also lease corporate
facilities in San Diego, California under a non-cancelable operating lease expiring December 31, 2014. Each lease agreement contains
certain scheduled rent increases which are accounted for on a straight-line basis.
Employment Agreements
We have entered into employment agreements
with certain of our officers under which payment and benefits would become payable in the event of termination by us for any reason
other than cause, or upon a change in control of our Company, or by the employee for good reason.
Consulting and Engineering Services
Effective November 1, 2010, the Company
entered into a Second Amendment to Master Consulting and Engineering Services Agreement (the “Second Amendment”) with
KLATU Networks, LLC (“KLATU”), which amended the Master Consulting and Engineering Services Agreement between the
parties dated as of October 9, 2007 (the “Agreement”), as amended by the First Amendment to Master Consulting
and Engineering Services Agreement between the parties dated as of April 23, 2009. The parties entered into the Second Amendment
to clarify their mutual intent and understanding that all license rights granted to the Company under the Agreement, as amended,
shall survive any termination or expiration of the Agreement. In addition, in recognition that the Company has paid KLATU less
than the market rate for comparable services, the Second Amendment provides that if the Company terminates the Agreement without
cause, which the Company has no intention of doing, or liquidates, KLATU shall be entitled to receive additional consideration
for its services provided from the commencement of the Agreement through such date of termination, which additional compensation
shall not be less than $2 million plus two times the “cost of work” (as defined in the Agreement). Any such additional
compensation would be payable in three equal installments within 12 months following the date the amount of such additional compensation
is determined. If KLATU terminates that agreement, no such payments are payable.
The agreement provides for one year terms
ending on December 31 of each year, but it automatically renews for one year periods unless otherwise terminated.
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
leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities. The duration of the
guarantees and indemnities varies, and is generally tied to the life of the agreement.
Note 7. Stockholders’ Equity
Authorized Stock
The Company has 250,000,000
authorized shares of common stock with a par value of $0.001 per share. In September 2011, our stockholders approved an amendment
to the Amended and Restated Articles of Incorporation to authorize a class of undesignated or "blank check" preferred
stock, consisting of 2,500,000 shares at $0.001 par value per share. Shares of preferred stock may be issued in one or more series,
with such rights, preferences, privileges and restrictions to be fixed by the Company's board of directors.
Designation of Class A Convertible Preferred Stock
On May 2, 2014, the
Company filed with the Secretary of State of the State of Nevada a Certificate of Designation which designated 800,000 shares
of the Company’s previously authorized preferred stock, par value $0.001, as Class A Convertible Preferred Stock (“Preferred
Stock”).
The rights, preferences, and
privileges of the Preferred Stock are summarized as follows:
| · | Dividends
shall accrue on shares of Preferred Stock at the rate of $0.96 per annum. Such dividends
shall accrue day-to-day, shall be cumulative, and shall be payable on when, as, and if
declared by the Board of Directors of the Company. |
| · | In
the event of any voluntary or involuntary liquidation, dissolution, or winding up of
the Company, holders of Preferred Stock then outstanding shall be entitled to receive
a liquidation preference payment equal to $12.00 per share (subject to appropriate adjustment
in the event of a stock dividend, split, combination, or other similar recapitalization)
plus any accrued dividends, but unpaid thereon, whether or not declared, together with
any other dividends declared but unpaid thereon. |
| · | Shares
of Preferred Stock shall vote together with the common stock on an as-converted basis.
Holders of the Preferred Stock will have thirty votes per share of Preferred Stock held
compared to one vote for each share of the Company’s common stock. |
| · | At
any time after September 1, 2014, shares of Preferred Stock shall be convertible into
thirty shares of common stock. In addition, accrued but unpaid dividends on the Preferred
Stock, whether or not declared, will also be convertible into common stock after September
1, 2014 at the rate of one share for each $0.40 of dividend. Such conversion is subject
to adjustment in the event of any stock split or combination, certain dividends and distributions,
and any reorganization, recapitalization, reclassification, consolidation, or merger
involving the Company. |
| · | Shares
of the Preferred Stock shall be subject to redemption by the Company at any time on or
after January 15, 2017, upon payment of $12.00 per share (subject to appropriate adjustment
in the event of a stock dividend, split, combination, or other similar recapitalization)
plus all accrued but unpaid dividends, whether or not declared, thereon. |
Issuance of Class A Convertible Preferred Stock
In May 2014, the
Company entered into definitive agreements for a private placement of its securities to certain institutional and accredited investors
(the “Investors”) pursuant to certain subscription agreements and elections to convert between the Company and the
Investors. Through June 30, 2014, aggregate gross cash proceeds of $1.0 million (approximately $770,700 after offering costs)
were collected in exchange for the issuance of 86,797 shares of our Class A Convertible Preferred Stock, and warrants, exercisable
for five years, to purchase up to a total of 694,376 shares of our common stock at an exercise price of $0.50 per share.
The Company intends to use the net proceeds for working capital purposes.
Pursuant to the subscription
agreements, the Company issued shares of a newly established Class A Convertible Preferred Stock and warrants to purchase common
stock of Cryoport. The shares and warrants were issued as a unit (a “Unit”) consisting of (i) one share of Class A
Convertible Preferred Stock and (ii) one warrant to purchase eight (8) shares of the Company’s common stock at an exercise
price of $0.50 per share, which are immediately exercisable and may be exercised at any time on or before March 31, 2019.
Pursuant to the terms
of the 5% Bridge Notes issued by the Company between December 2013 and March 2014 with a total original principal amount of $1,793,000,
the issuance of the Units to Investors at $12.00 per Unit entitled the holders of the 5% Bridge Notes to convert up to the entire
principal and accrued interest amount under the 5% Bridge Notes into Units at a rate of $10.80 per Unit. Through June 30, 2014,
5% Bridge Note holders totaling $1,743,000 in original principal sum elected to convert their 5% Bridge Notes, including
accrued interest of $24,000, for Units in exchange for the issuance of 163,608 shares of our Class A Convertible Preferred Stock
and warrants to purchase up to 1,308,864 shares of our commons stock at an exercise price of $0.50 per share. Two of the 5% Bridge
Note holders that executed subscription agreements to convert 5% Bridge Notes in the aggregate principal amount of $220,000, are
affiliates of the Company – Jerrell W. Shelton, the Company’s Chief Executive Officer, and GBR Investments, LLC, which
is managed by Richard Rathmann, a Director and Chairman of the Board of Directors of the Company (collectively, the “Affiliates”).
The fair value of the beneficial conversion
feature of the convertible preferred stock issuance and the relative fair value of the warrants issued, aggregated $1,947,700
through June 30, 2014. This amount is being accreted to accumulated deficit and additional paid in capital through September 1,
2014, the earliest date that the preferred stock becomes convertible. During the three months ended June 30, 2014, the Company
accreted $741,800 of the $1,947,700 to accumulated deficit and additional paid-in capital.
Emergent Financial
Group, Inc. served as the Company’s placement agent in this transaction and received, with respect to the gross proceeds
received from Investors who converted their 5% Bridge Notes into Units (not including those conversions by the Affiliates), a
commission of 3% and a non-accountable finance fee of 1% of such proceeds, and with respect to gross proceeds received from all
other Investors, a commission of 10% and a non-accountable finance fee of 3% of the aggregate gross proceeds received from such
Investors, plus reimbursement of legal expenses of up to $40,000. Emergent Financial Group, Inc. will also be issued a warrant
to purchase three shares of common stock at an exercise price of $0.50 per share for each Unit issued in this transaction. The
Company and Emergent Financial Group, Inc. have agreed that the offering of Units to new Investors will conclude on August 15,
2014.
As of June 30, 2014,
250,405 shares of Preferred Stock and 2,003,240 of the related warrants were outstanding for Investors and 689,145 warrants
were outstanding for Emergent in connection with the Preferred Stock offering and the 5% Bridge Note conversions.
No dividends have
been declared as of June 30, 2014, however, the cumulative preferred stock dividend of $27,700 is included in earnings per share
(see Note 3) and the liquidation preference.
Common Stock Reserved for Future
Issuance
As of June 30, 2014,
approximately 75.6 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 | |
| 11,998,275 | |
| Exercise of warrants | |
| 63,609,031 | |
| Total shares of common stock reserved
for future issuances | |
| 75,607,306 | |
Preferred shares
of 250,405, which are convertible into 7,512,150 shares of common stock, were excluded from the above table as they are not exercisable
until September 1, 2014.
Note 8. 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 July 2019. 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 — March 31, 2014 | |
| 61,194,343 | | |
| 0.84 | | |
| | | |
| | |
| Issued | |
| 2,692,385 | | |
| 0.50 | | |
| | | |
| | |
| Exercised | |
| (50,000 | ) | |
| 0.20 | | |
| | | |
| | |
| Forfeited | |
| — | | |
| — | | |
| | | |
| | |
| Expired | |
| (227,697 | ) | |
| 2.44 | | |
| | | |
| | |
| Outstanding — June 30, 2014 | |
| 63,609,031 | | |
$ | 0.82 | | |
| 2.8 | | |
$ | 3,242,900 | |
| Vested (exercisable) — June 30, 2014 | |
| 63,609,031 | | |
$ | 0.82 | | |
| 2.8 | | |
$ | 3,342,900 | |
| (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, 2014, which was $0.49 per share. |
The fair value of
each warrant grant was estimated on the date of grant using Black-Scholes with the following weighted average assumptions:
| Expected life (years) | |
4.8 – 4.9 |
| Risk-free interest rate | |
1.45% - 1.64% |
| Volatility | |
123.5 – 125.3% |
| Dividend yield | |
0% |
Stock Options
We have three stock
incentive plans: the 2002 Stock Incentive Plan, or the 2002 Plan, the 2009 Stock Incentive Plan, or the 2009 Plan and the 2011
Stock Incentive Plan, or the 2011 Plan (collectively, the “Plans”). The 2002 Plan authorizes the grant of incentive
awards, including stock options, for the purchase of up to a total of 500,000 shares and has no shares available for future
issuances as the 2002 Plan has expired. Subsequent to the adoption of the 2011 Plan, no new options have been granted pursuant
the 2009 Plan or 2002 Plan. In September 2009, the stockholders approved the issuance of up to 1,200,000 shares of common
stock available for issuance under the 2009 Plan and as of June 30, 2014, the Company has 303,768 shares available for future
awards under the 2009 Plan. In September 2011, the stockholders authorized the issuance of up to 2,300,000 shares of the Company's
common stock. On September 13, 2012, the stockholders approved an increase to the number of shares of the Company’s
common stock available for issuance by 3,000,000 shares. On September 6, 2013 the stockholders approved an increase to the
number of shares of the Company’s common stock available for issuance by 7,100,000 shares. As of June 30, 2014, there were
7,293,042 incentive awards available for grant under the 2011 Plan.
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) | |
1.6 – 6.0 |
| Risk-free interest rate | |
0.31% - 2.03% |
| Volatility | |
124.6 – 127.7% |
| 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 cost over the vesting period using the straight-line single option method. Stock-based compensation expense is recognized
only for those awards that are ultimately expected to vest. An estimated forfeiture rate has been applied to unvested awards for
the purpose of calculating compensation cost. The estimated forfeiture rate of 0% per year is based on the historical forfeiture
activity of unvested stock options. These estimates are revised, if necessary, in future periods if actual forfeitures differ
from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.
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 — March 31, 2014 | |
| 11,894,205 | | |
$ | 0.35 | | |
| | | |
| | |
| Granted (weighted-average fair value of $0.42 per share) | |
| 274,000 | | |
| 0.50 | | |
| | | |
| | |
| Exercised | |
| (7,892 | ) | |
| 0.27 | | |
| | | |
| | |
| Forfeited | |
| (162,038 | ) | |
| 0.30 | | |
| | | |
| | |
| Expired | |
| — | | |
| — | | |
| | | |
| | |
| Outstanding — June 30, 2014 | |
| 11,998,275 | | |
$ | 0.36 | | |
| 8.4 | | |
$ | 2,233,700 | |
| Vested (exercisable) — June 30, 2014 | |
| 6,067,977 | | |
$ | 0.41 | | |
| 7.8 | | |
$ | 1,077,000 | |
| Unvested (unexercisable) — June 30, 2014 | |
| 5,930,298 | | |
$ | 0.30 | | |
| 2.8 | | |
$ | 1,156,700 | |
| (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, 2014, which was $0.49 per share. |
As of June 30, 2014,
there was unrecognized compensation expense of $1.5 million related to unvested stock options, which we expect to recognize
over a weighted average period of 2.8 years.
Note 9. Subsequent Events
On July 16, 2014,
the Company issued additional shares of the Class A Convertible Preferred Stock to Investors. Gross proceeds of $303,600 (approximately
$264,100 after offering costs) were collected in exchange for the issuance of 25,300 shares of our Class A Convertible Preferred
Stock, and warrants, exercisable for five years, to purchase up to a total of 202,400 shares of our common stock at an exercise
price of $0.50 per share. The Company intends to use the net proceeds for working capital purposes.
51,379,154 Shares
CRYOPORT, INC.
PROSPECTUS
Until September
30, 2014 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock,
whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in
addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only
on the information contained or incorporated by reference to this prospectus in deciding whether to purchase our common stock.
We have not authorized anyone to provide you with information different from that contained or incorporated by reference to this
prospectus. Under no circumstances should the delivery to you of this prospectus or any sale made pursuant to this prospectus
create any implication that the information contained in this prospectus is correct as of any time after the date of this prospectus.
To the extent that any facts or events arising after the date of this prospectus, individually or in the aggregate, represent
a fundamental change in the information presented in this prospectus, this prospectus will be updated to the extent required by
law.
The date of this prospectus is
September 5, 2014.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table
sets forth an estimate of the costs and expenses payable by us in connection with the offering described in this registration
statement. All of the amounts shown are estimates except the SEC registration fee:
| SEC Registration Fee | |
$ | 1,569.45 | |
| Accounting Fees and Expenses | |
$ | 10,000.00 | * |
| Printing and Engraving Expenses | |
$ | 10,000.00 | * |
| Blue Sky Filing Fees | |
$ | 20,000.00 | * |
| Legal Fees and Expenses | |
$ | 30,000.00 | * |
| Miscellaneous | |
$ | 15,000.00 | * |
| Total | |
$ | 86,569.45 | |
ITEM 14. INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Under the Nevada
Revised Statutes and our Amended and Restated Articles of Incorporation, as amended, our directors will have no personal liability
to us or our stockholders for monetary damages incurred as the result of the breach or alleged breach by a director of his “duty
of care.” This provision does not apply to the directors’ (i) acts or omissions that involve intentional misconduct
or a knowing and culpable violation of law, (ii) acts or omissions that a director believes to be contrary to the best interests
of the corporation or its stockholders or that involve the absence of good faith on the part of the director, (iii) approval
of any transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a reckless
disregard for the director’s duty to the corporation or its stockholders in circumstances in which the director was aware,
or should have been aware, in the ordinary course of performing a director’s duties, of a risk of serious injury to the
corporation or its stockholders, (v) acts or omissions that constituted an unexcused pattern of inattention that amounts
to an abdication of the director’s duty to the corporation or its stockholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally absolve directors of personal liability for negligence
in the performance of duties, including gross negligence.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 15. RECENT
SALES OF UNREGISTERED SECURITIES
The following is
a summary of transactions by Cryoport during the past three years involving the issuance and sale of Cryoport’s securities
that were not registered under the Securities Act. Unless otherwise indicated, the issuance of the securities in the transactions
below were deemed to be exempt from registration under the Securities Act by virtue of the exemption under Section 4(2) of
the Securities Act as a transaction by an issuer not involving a public offering, or by virtue of the exemption under Rule 506
of the Securities Act and Regulation D promulgated thereunder.
Between May and July
2014, the Company conducted a private placement pursuant to which the Company sold and issued an aggregate of 138,131 shares of
Class A Convertible Preferred Stock and warrants to purchase 1,105,048 shares of common stock, at $12.00 per unit, for gross proceeds
of $1,657,576. In addition, the Company issued an aggregate of 163,608 shares of Class A Convertible Preferred Stock and warrants
to purchase 1,308,864 shares of common stock of the Company in exchange for the conversion of the 5% Bridge Notes with an original
principal and accrued interest amount of $1,766,997. Emergent Financial Group, Inc. served as the Company’s placement agent
in this transaction and received, with respect to the gross proceeds received from investors who converted their 5% Bridge Notes,
a commission of 3% and a non-accountable finance fee of 1% of such proceeds, and with respect to gross proceeds received from
all other investors, a commission of 10% and a non-accountable finance fee of 3% of the aggregate gross proceeds received from
such investors, plus reimbursement of legal expenses of up to $40,000. Emergent Financial Group, Inc. will also be issued a warrant
to purchase three shares of common stock at an exercise price of $0.50 per share for each unit issued in this transaction.
In the fourth
quarter of fiscal 2014, the Company issued to certain accredited investors 5% Bridge Notes in the original principal amount of
$1,352,000, including a note in the amount of $50,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer as
well as a note in the amount of $100,000 issued to GBR Investments, LLC, of which Richard Rathmann, a Director of the Company,
is the manager. All principal and interest under the 5% Bridge Notes was due on June 30, 2014. In connection therewith, the Company
also granted such accredited investors warrants to purchase 676,000 shares of common stock at an exercise price of $0.49 per share.
The warrants are exercisable on May 31, 2014 and expire on December 31, 2018.
In December 2013,
the Company issued to certain accredited investors 5% Bridge Notes in the original principal amount of $441,000, including a note
in the amount of $70,000 issued to Jerrell Shelton, the Company’s Chief Executive Officer. In connection therewith, the
Company also granted such accredited investors warrants to purchase 220,500 shares of common stock at an exercise price of $0.49
per share. The warrants are exercisable on May 31, 2014 and expire on December 31, 2018. Emergent Financial Group, Inc. served
as the Company’s placement agent in connection with the placement of the 5% Bridge Notes and earned a commission of 9% of
the original principal balance of such notes, excluding the note issued to Jerrell Shelton, or $33,390 at the time of the original
issuance of such notes.
On September 27,
2013, September 30, October 2, and October 3, 2013, the Company issued 20,636,011 units (the “Units”) at a
price of $0.20 per Unit, with each Unit consisting of (i) one share of common stock of the Company and (ii) one warrant to purchase
one share of common stock of the Company at an exercise price of $0.37 per share in exchange for the retirement of $4,127,202
of outstanding principal and interest under the Bridge Notes. The warrants are exercisable beginning on March 31, 2014 and have
a term of five years from date of issuance. The aggregate amount converted includes $101,945 and $202,740 of outstanding principal
and interest under Notes respectively held by Richard G. Rathmann, a director, and GBR Investments, LLC, in which Mr. Rathmann
is the manager. Emergent Financial Group, Inc. served as the Company’s placement agent in connection with the original placement
of the Bridge Notes and was issued a warrant to purchase 1,911,259 shares of common stock of the Company at an exercise price
of $0.20 per share in connection with the conversion of such notes. Emergent Financial Group, Inc. did not receive any compensation
with respect to the Bridge Notes issued to Richard G. Rathmann or GBR Investments, LLC or the conversion of such Bridge Notes.
In addition, the Company issued 100,000 and 122,778 Units to two directors, Stephen Wasserman and Richard G. Rathmann, respectively,
in exchange for the elimination of outstanding board of director fees owed to them by the Company.
On July 12, 2013
and August 12, 2013, GBR Investments, LLC, invested $100,000 in the Bridge Notes and also received a warrant to purchase 400,000
and 344,827 shares of common stock, respectively, at an exercise price of $0.25 and $0.29 per share, respectively. The terms were
set and offered by the Company to certain accredited investors prior to GBR's participation. Richard Rathmann, a member of the
Board of Directors of the Company, is the Manager of GBR investments, LLC and is considered an indirect beneficial owner of these
securities.
During June 2013,
the Company issued warrants to purchase 1,052,630 shares of the Company’s common stock at an exercise price of $0.19 per
share and a five year life to accredited investors in connection with the issuance of certain Bridge Notes in the aggregate amount
of $200,000.
On June 28, 2013,
the Company granted options to three officers of the Company, Jerrell Shelton, Chief Executive Officer, Robert Stefanovich, Chief
Financial Officer and Steve Leatherman, Chief Commercial Officer to purchase 3,902,507 shares, 839,016 shares and 807,054 shares,
respectively, of the Company’s common stock at an exercise price equal to the closing price of the Company’s common
stock, or $0.27 per share. These options were granted outside of the Company’s incentive plans (see Note 7 to the condensed
consolidated financial statements).
In the fourth quarter
of fiscal 2013, the Company issued to certain accredited investors unsecured convertible promissory notes (the “Bridge Notes”)
in the original principal amount of $1,294,500. The Bridge Notes accrue interest at a rate of 15% per annum from date of issuance
until January 31, 2013 and at a rate of 5% per annum from February 1, 2013 through the date of payment, in each case on a non-compounding
basis. All principal and interest under the Bridge Notes will be due on December 31, 2013. In the event the Company designated
and issued preferred stock while the Bridge Notes were outstanding, the Bridge Notes were convertible into shares of such preferred
stock at a conversion rate equal to the price per share paid to the Company in connection with the issuance of such preferred
stock at the option of the holder of the Bridge Notes. Effective on April 19, 2013, the Company amended the Bridge Notes whereby
in the event that the Company issues one or more types of equity securities (a “Transaction”) before the maturity
of the Bridge Notes, the holder may elect to convert all or a portion of the principal and accrued interest into shares of such
equity securities issued in a Transaction at a conversion rate equal to the price per share paid to the Company in connection
with the issuances. The Company is required to notify the holder of a Transaction within 10 days of each Transaction and the holder
has the option until the later of (a) ten (10) days after such notices or (b) December 15, 2013 to elect in writing to convert.
In November 2012, the Company awarded
the Company’s new Chief Executive Officer an option to purchase 1,000,000 shares of the Company’s common stock with
an exercise price of $0.20 per share. The option vests in six equal monthly installments.
In April 2012, the Company issued a warrant
to purchase 30,000 shares of the Company’s common stock at an exercise price of $0.50 per share to a consultant for services
rendered to the Company.
In February and March
2012, the Company conducted a private placement pursuant to which the Company sold and issued an aggregate of 9,477,554 shares
of common stock at a price of $0.55 per share and common stock purchase warrants to acquire 9,477,554 shares of common stock at
an exercise price of $0.69 per share for gross proceeds of $5,212,655. The Company also issued warrants to purchase an aggregate
of 280,000 shares of the Company’s common stock at an exercise price of $0.69 per share to our convertible note holders
in connection with a consent and waiver with respect to defaults that would have been triggered by this private placement.
During the quarter
ended December 31, 2011, the Company issued 150,000 shares of common stock to two accredited investors upon their cash exercise
of warrants issued in conjunction with a private placement financing completed during the previous fiscal year. We received an
aggregate of $115,500 from the exercise of such warrants.
On December 5,
2011, the Company issued a warrant to purchase 155,844 shares of the Company’s common stock at an exercise price of $0.77
to a consultant for services to be rendered over two years. The Company recognized $3,947 in expense related to these warrants
for the three and nine months ended December 31, 2011.
During the quarter
ended September 30, 2011, the Company issued 420,952 shares of common stock to five accredited investors upon their cash
exercise of warrants issued in conjunction with a private placement financing completed during the previous fiscal year. We received
an aggregate of $324,133 from the exercise of such warrants.
On July 1, 2011,
the Company issued a warrant to purchase 10,000 shares of the Company’s common stock at an exercise price of $1.20 to a
consultant for services to be rendered over three years. The Company recognized $8,297 in expense related to these warrants for
the three and six months ended September 30, 2011.
ITEM 16. EXHIBITS
Exhibit
No.
|
|
Description
|
| |
|
|
| 3.1 |
|
Amended and Restated Articles of Incorporation of the Company,
as amended. Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 2012. |
| |
|
|
| 3.2 |
|
Amended and Restated Bylaws of the Company. Incorporated
by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K dated October 23, 2012. |
| |
|
|
| 3.3 |
|
Cryoport Systems, Inc. 2002 Stock Incentive Plan adopted by
the Board of Directors on October 1, 2002. Incorporated by reference to Exhibit 3.13 to the Company’s Registration
Statement on Form 10-SB/A2 dated January 26, 2006. |
| |
|
|
| 3.4 |
|
Certificate of Designation. Incorporated by reference
to Exhibit 3.1 of the Company’s Current Report on Form 8-K dated May 2, 2014. |
| |
|
|
| 4.1.1 |
|
Form of Debenture—Original Issue Discount 8% Secured Convertible
Debenture dated September 28, 2007. Incorporated by reference to Cryoport’s Registration Statement on Form SB-2
dated November 9, 2007. |
| |
|
|
| 4.1.2 |
|
Amendment to Convertible Debenture dated February 19, 2008.
Incorporated by reference to Cryoport’s Current Report on Form 8-K dated March 7, 2008 and referred to as Exhibit 10.1.10. |
| |
|
|
| 4.1.3 |
|
Amendment to Convertible Debenture dated April 30, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated April 30, 2008 and referred to as Exhibit 10.1.11. |
| |
|
|
| 4.1.4 |
|
Annex to Amendment to Convertible Debenture dated April 30,
2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated April 30, 2008 and referred to as Exhibit
10.1.11.1. |
| |
|
|
| 4.1.5 |
|
Amendment to Convertible Debenture dated August 29, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated August 29, 2008. |
| |
|
|
| 4.1.6 |
|
Amendment to Convertible Debenture effective January 27, 2009
and dated February 20, 2009. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated February 19, 2009. |
| |
|
|
| 4.1.7 |
|
Amendment to Debentures and Warrants with Enable Growth Partners
LP, Enable Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and Cryoport
Inc. dated September 1, 2009. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated September 17,
2009. |
| |
|
|
| 4.1.8 |
|
Amendment to Debentures and Warrants, Agreement and Waiver with
Enable Growth Partners LP, Enable Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe
Master Fund Ltd. and Cryoport Inc. dated January 12, 2010. Incorporated by reference to Cryoport’s Current Report on
Form 8-K dated January 15, 2010. |
| |
|
|
| 4.1.9 |
|
Amendment Agreement with Enable Growth Partners LP, Enable Opportunity
Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and Cryoport Inc. dated February
1, 2010. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated February 3, 2010. |
| |
|
|
| 4.1.10 |
|
Amended and Restated Amendment Agreements with Enable Growth
Partners LP, Enable Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd.
and Cryoport Inc. dated February 19, 2010. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated
February 26, 2010. |
| |
|
|
| 4.1.11 |
|
First Amendment to Amended and Restated Amendment Agreements
with Enable Growth Partners LP, Enable Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe
Master Fund Ltd. and Cryoport Inc. dated February 23, 2010. Incorporated by reference to Cryoport’s Current Report
on Form 8-K dated February 26, 2010. |
Exhibit
No. |
|
Description |
| 4.2 |
|
Form of Common Stock Purchase Warrant dated September 28, 2007.
Incorporated by reference to Cryoport’s Registration Statement on Form SB-2 dated November 9, 2007. |
| |
|
|
| 4.3 |
|
Original Issue Discount 8% Secured Convertible Debenture dated
May 30, 2008. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008. |
| |
|
|
| 4.4 |
|
Common Stock Purchase Warrant dated May 30, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008. |
| |
|
|
| 4.5 |
|
Common Stock Purchase Warrant dated May 30, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008. |
| |
|
|
| 4.6 |
|
Form of Warrant and Warrant Certificate in connection with the
February 25, 2010 public offering. Incorporated by reference to Cryoport’s Amendment No. 5 to Form S-1/A Registration
Statement dated February 9, 2010. |
| |
|
|
| 4.7 |
|
Form of Securities Purchase Agreement in connection with the
August to October 2010 private placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1
dated October 19, 2010. |
| |
|
|
| 4.8 |
|
Form of First Amendment to Security Purchase Agreement in connection
with the August to October 2010 private placement. Incorporated by reference to Cryoport’s Registration Statement on
Form S-1 dated October 19, 2010. |
| |
|
|
| 4.9 |
|
Form of Securities Purchase Agreement (Continuation of the Placement)
in connection with the August to October 2010 private placement. Incorporated by reference to Cryoport’s Registration
Statement on Form S-1 dated October 19, 2010. |
| |
|
|
| 4.10 |
|
Registration Rights Agreement in connection with the August
to October 2010 private placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1 dated
October 19, 2010. |
| |
|
|
| 4.11 |
|
Form of Joinder to Registration Rights Agreement in connection
with the August to October 2010 private placement. Incorporated by reference to Cryoport’s Registration Statement on
Form S-1 dated October 19, 2010. |
| |
|
|
| 4.12 |
|
Form of Securities Purchase Agreement in connection with the
February 2011 private placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1
dated April 1, 2011. |
| |
|
|
| 4.13 |
|
Form of Registration Rights Agreement in connection with the
February 2011 private placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1
dated April 1, 2011. |
| |
|
|
| 4.14 |
|
Form of Warrant in connection with the August to October 2010
private placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1/A dated April 22,
2011. |
| |
|
|
| 4.15 |
|
Form of Warrant in connection with the February 2011 private
placement. Incorporated by reference to Cryoport’s Registration Statement on Form S-1/A dated April 22, 2011. |
| |
|
|
| 4.16 |
|
Form of Securities Purchase Agreement. Incorporated by reference
to Cryoport’s Current Report on Form 8-K filed with the SEC on February 24, 2012. |
| |
|
|
| 4.17 |
|
Form of Registration Rights Agreement. Incorporated by reference
to Cryoport’s Current Report on Form 8-K filed with the SEC on February 24, 2012. |
| |
|
|
| 4.18 |
|
Form of Warrant. Incorporated by reference to Cryoport’s
Current Report on Form 8-K filed with the SEC on February 24, 2012. |
| |
|
|
| 4.19 |
|
Warrant issued to Rodman & Renshaw, LLC in connection with
the February 25, 2010 public offering. Incorporated by reference to CryoPort’s Registration Statement on Form S-1 dated
October 19, 2010. |
Exhibit
No. |
|
Description |
| 4.20 |
|
Form of Warrant issued with Convertible
Promissory Notes. Incorporated by reference to Exhibit 4.20 of Cryoport’s Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2013. |
| |
|
|
| 4.21 |
|
Form of Warrant issued upon Conversion
of Convertible Promissory Notes. Incorporated by reference to Exhibit 4.21 of Cryoport’s Quarterly Report
on Form 10-Q for the Quarter Ended September 30, 2013. |
| |
|
|
| 4.22 |
|
Form of Warrant Issued to Placement Agents. Incorporated
by reference to Exhibit 4.22 of Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013. |
| |
|
|
| 4.23 |
|
Form of Warrant issued with Convertible
Promissory Notes (5% Bridge Notes). Incorporated by reference to Exhibit 4.23 of Cryoport’s Quarterly Report
on Form 10-Q for the Quarter Ended December 31, 2013. |
| |
|
|
| 4.24 |
|
Form of Warrant issued in connection with
the May 2014 private placement. Incorporated by reference to Exhibit 4.24 of Cryoport’s Annual Report on Form 10-K filed
with the SEC on June 25, 2014. |
| |
|
|
| 10.1.1 |
|
Commercial Promissory Note between Cryoport, Inc. and D. Petreccia
executed on August 26, 2005. Incorporated by reference to Cryoport’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006. |
| |
|
|
| 10.1.2 |
|
Commercial Promissory Note between Cryoport, Inc. and J. Dell
executed on September 1, 2005. Incorporated by reference to Cryoport’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006. |
| |
|
|
| 10.1.3 |
|
Commercial Promissory Note between Cryoport, Inc. and P. Mullens
executed on September 2, 2005. Incorporated by reference to Cryoport’s Registration Statement on Form 10-SB/A4 dated
February 23, 2006. |
| |
|
|
| 10.1.4 |
|
Commercial Promissory Note between Cryoport,
Inc. and R. Takahashi executed on August 25, 2005. Incorporated by reference to Cryoport’s Registration Statement on
Form 10-SB/A4 dated February 23, 2006. |
| |
|
|
| 10.5.2 |
|
Second Amendment To Lease: Renewal dated
August 24, 2009, between CryoPort, Inc. and Viking Inventors-Barents Sea LLC. Incorporated by reference to Cryoport’s
Amendment No. 1 to Form S-1/A Registration Statement dated January 12, 2010. |
| |
|
|
| 10.5.3 |
|
Third Amendment to Lease: Renewal dated
June 8, 2010 between Viking Investors Barents Sea, LLC. Incorporated by reference to Exhibit 10.5.3 to Cryoport’s Annual
Report on Form 10-K filed with the SEC on June 25, 2013. |
| |
|
|
| 10.6 |
|
Securities Purchase Agreement dated September
27, 2007. Incorporated by reference to Cryoport’s Registration Statement on Form SB-2 dated November 9, 2007 and referred
to as Exhibit 10.6. |
| |
|
|
| 10.7 |
|
Registration Rights Agreement dated September 27, 2007. Incorporated
by reference to Cryoport’s Registration Statement on Form SB-2 dated November 9, 2007 and referred to as Exhibit 10.7. |
| |
|
|
| 10.9 |
|
Security Agreement dated September 27, 2007. Incorporated by
reference to Cryoport’s Registration Statement on Form SB-2 dated November 9, 2007 and referred to as Exhibit 10.8. |
| |
|
|
| 10.10 |
|
Securities Purchase Agreement dated May 30, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008 and referred to as Exhibit 10.10. |
| |
|
|
| 10.11 |
|
Registration Rights Agreement dated May 30, 2008. Incorporated
by reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008 and referred to as Exhibit 10.11. |
Exhibit
No. |
|
Description |
| 10.12 |
|
Waiver dated May 30, 2008. Incorporated by reference to Cryoport’s
Current Report on Form 8-K dated June 9, 2008 and referred to as Exhibit 10.12. |
| |
|
|
| 10.13 |
|
Security Agreement dated May 30, 2008. Incorporated by
reference to Cryoport’s Current Report on Form 8-K dated June 9, 2008 and referred to as Exhibit 10.13. |
| |
|
|
| 10.14 |
|
Consent, Waiver and Agreement with Enable Growth Partners LP,
Enable Opportunity Partners LP, Pierce Diversified Strategy Master Fund LLC, Ena, BridgePointe Master Fund Ltd. and Cryoport
Inc. and its subsidiary dated July 30, 2009. Incorporated by reference to Cryoport’s Current Report on Form 8-K dated
July 29, 2009 and referred to as Exhibit 10.15. |
| 10.15.1 |
|
Master Consulting and Engineering Services Agreement dated October
9, 2007 with KLATU Networks, LLC and CryoPort, Inc. Incorporated by reference to Cryoport, Inc.’s Registration Statement
on Form S-8 dated March 25, 2009 and referred to as Exhibit 10.2. |
| |
|
|
| 10.15.2 |
|
First Amendment to Master Consulting and Engineering Services
Agreement dated as of April 23, 2009, between CryoPort, Inc. and KLATU Networks, LLC. Incorporated by reference to Cryoport’s
Registration Statement on Form S-1/A dated December 17, 2010 and referred to as Exhibit 10.32. |
| |
|
|
| 10.15.3 |
|
Second Amendment to Master Consulting and Engineering Services
Agreement dated as of November 1, 2010, between CryoPort, Inc. and KLATU Networks, LLC. Incorporated by reference to Cryoport’s
Registration Statement on Form S-1/A dated December 17, 2010 and referred to as Exhibit 10.33. |
| |
|
|
| 10.16 |
|
Stock Option Agreement ISO under the 2002 Stock Incentive Plan
of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.14 to the Company’s Registration Statement on Form
10-SB/A2 dated January 26, 2006. |
| |
|
|
| 10.17 |
|
Stock Option Agreement NSO under the 2002 Stock Incentive Plan
of Cryoport Systems, Inc. Incorporated by reference to Exhibit 3.15 to the Company’s Registration Statement on Form
10-SB/A2 dated January 26, 2006. |
| |
|
|
| 10.18 |
|
2009 Stock Incentive Plan of the Company. Incorporated
by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K dated October 15, 2009 and referred to as
Exhibit 10.21. |
| |
|
|
| 10.19 |
|
Form Incentive Stock Option Award Agreement under the 2009 Stock
Incentive Plan of the Company. Incorporated by reference to Exhibit 10.22 of the Company’s Current Report on Form 8-K
dated October 9, 2009. |
| |
|
|
| 10.20 |
|
Form of Non-Qualified Stock Option Award Agreement under the
2009 Stock Incentive Plan of the Company. Incorporated by reference to Exhibit 10.25 of the Company’s Registration Statement
on Form S-8 dated April 27, 2010. |
| |
|
|
| 10.21+ |
|
2011 Stock Incentive Plan (as amended and restated). |
| |
|
|
| 10.22 |
|
Form of Stock Option Award Agreement. Incorporated by reference
to Exhibit 10.37 to Cryoport’s Current Report on Form 8-K filed with the SEC on September 27, 2011. |
| |
|
|
| 10.23 |
|
Form of Non-Qualified Stock Option Award Agreement. Incorporated
by reference to Exhibit 10.38 to Cryoport’s Current Report on Form 8-K filed with the SEC on September 27,
2011. |
| |
|
|
| 10.24 |
|
Form of Convertible Promissory Note. Incorporated by reference
to Exhibit 10.24 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013. |
| |
|
|
| 10.25 |
|
Form of Amendment to Convertible Promissory Note. Incorporated
by reference to Exhibit 10.25 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013. |
| |
|
|
| 10.26 |
|
Form of Convertible Promissory Note. Incorporated by reference
to Exhibit 10.26 to Cryoport’s Annual Report on Form 10-K filed with the SEC on June 25, 2013. |
Exhibit
No. |
|
Description |
| 10.27* |
|
Employment Agreement between the Company and Jerrell Shelton. Incorporated
by reference to the Company’s Current Report on Form 8-K filed on November 6, 2012 and referred to as Exhibit 10.45. |
| |
|
|
| 10.28 |
|
Stock Option Agreement dated November 5, 2012 between the Company
and Jerrell Shelton. Incorporated by reference to Exhibit 10.28 to Cryoport’s Annual Report on Form 10-K filed with
the SEC on June 25, 2013. |
| |
|
|
| 10.29# |
|
Master Agreement between the Company and
Federal Express Corporation dated January 1, 2013. Incorporated by reference to the Company’s Current Report on
Form 8-K filed on January 8, 2013 and referred to as Exhibit 10.1. |
| |
|
|
| 10.30* |
|
Employment Agreement dated June 28, 2013 with Jerrell Shelton. Incorporated
by reference to Exhibit 10.30 to Cryoport’s Current Report on Form 8-K filed with the SEC on July 3, 2013. |
| |
|
|
| 10.31 |
|
Form of Convertible Promissory Notes issued with Warrants. Incorporated
by reference to Exhibit 10.31 to Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013.
|
| |
|
|
| 10.32 |
|
Form of Letter of Tender and Exchange. Incorporated
by reference to Exhibit 10.32 to Cryoport’s Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2013.
|
| |
|
|
| 10.33 |
|
Form of Convertible Promissory Note (5% Bridge Note) issued
with Warrants. Incorporated by reference to Exhibit 10.33 to Cryoport’s Quarterly Report on Form 10-Q for
the Quarter Ended December 31, 2013. |
| |
|
|
| 10.34 |
|
Form of Subscription Agreement in connection
with the May 2014 private placement. Incorporated by reference to Exhibit 10.34 to Cryoport’s Annual Report on Form
10-K filed with the SEC on June 25, 2014. |
| |
|
|
| 10.35 |
|
Form of Election to Convert in connection
with the May 2014 private placement. Incorporated by reference to Exhibit 10.35 to Cryoport’s Annual Report on Form
10-K filed with the SEC on June 25, 2014. |
| |
|
|
10.36
|
|
Form of Indemnification
Agreement Incorporated by reference to Exhibit 10.1 to Cryoport’s Current Report on Form 8-K filed with the SEC
on July 16, 2014. |
| |
|
|
| 21 |
|
Subsidiaries of Registrant. |
| |
|
|
| 23.1+ |
|
Consent of Independent Registered Public Accounting Firm—KMJ
Corbin & Company LLP. |
| |
|
|
| 101.INS† |
|
XBRL Instance Document. |
| |
|
|
| 101.SCH† |
|
XBRL Taxonomy Extension Schema Document. |
| |
|
|
| 101.CAL† |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
Exhibit
No. |
|
Description |
| 101.DEF† |
|
XBRL Taxonomy Extension Definition Linkbase Document. |
| |
|
|
| 101.LAB† |
|
XBRL Taxonomy Extension Label Linkbase Document. |
| |
|
|
| 101.PRE† |
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
| * | Indicates a management contract
or compensatory plan or arrangement. |
| # | Confidential portions omitted and
filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2
promulgated under the Securities Exchange Act of 1934, as amended. |
| † | XBRL
(Extensible Business Reporting Language) information is furnished and not filed or a
part of a registration statement or prospectus for purposes of sections 11 or 12
of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18
of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability
under these sections or otherwise incorporated by reference. |
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby
undertakes:
*(a) (1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) to
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)
to include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and this offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of this offering.
(5) That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(ii) If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating
to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
*(h) Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
| * | Paragraph references correspond
to those of Regulation S-K, Item 512. |
SIGNATURES
Pursuant to the requirements of the Securities
Act, as amended, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Lake Forest, California, on this September 5, 2014.
| |
|
CRYOPORT, INC. |
| |
|
|
| Dated: September 5, 2014 |
|
By: |
/S/ JERRELL W. SHELTON |
| |
|
|
Jerrell W. Shelton |
| |
|
|
Chief Executive Officer and |
| |
|
|
Director |
Pursuant to the requirements of the Securities Exchange Act
of 1933, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature
|
|
Title
|
|
Date
|
| |
|
|
|
|
| /s/
Jerrell W. Shelton |
|
Chief Executive Officer and Director (Principal Executive Officer) |
|
September 5, 2014 |
| Jerrell W. Shelton |
|
|
|
|
| |
|
|
|
|
| /s/
Robert S. Stefanovich |
|
Chief Financial Officer (Principal Financial and Accounting
Officer) |
|
September 5, 2014 |
| Robert S. Stefanovich |
|
|
|
|
| |
|
|
|
|
| /s/ Ramkumar
Mandalam, Ph.D |
|
Director |
|
September 5, 2014 |
| Ramkumar Mandalam |
|
|
|
|
| |
|
|
|
|
| /s/ Edward
Zecchini |
|
Director |
|
September 5, 2014 |
| Edward Zecchini |
|
|
|
|
| |
|
|
|
|
| /s/ Richard
G. Rathmann |
|
Director |
|
September 5, 2014 |
| Richard G. Rathmann |
|
|
|
|
| |
|
|
|
|
| /s/ Stephen
E. Wasserman |
|
Director |
|
September 5, 2014 |
| Stephen E. Wasserman |
|
|
|
|
CryoPort, Inc.
2011 Stock Incentive Plan
(as amended and restated August 29, 2014)
CryoPort, Inc.
2011 Stock Incentive Plan
(as amended and restated August 29, 2014)
ARTICLE
1
ESTABLISHMENT, PURPOSE, EFFECTIVE DATE, AND EXPIRATION DATE
1.1 Purpose.
The purpose of the CryoPort, Inc. 2011 Stock Incentive Plan (the “Plan”) is to promote the interests and long-term
success of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services
for the Company and by motivating such persons to contribute to the continued growth and profitability of the Company. The Plan
seeks to achieve this purpose by providing Awards in the form of Options, Restricted Stock Rights, Restricted Stock, Performance
Shares, Performance Share Units, Performance Cash Awards, Stock Appreciation Rights and Stock Grant Awards. The Plan also permits
the grant of awards that qualify for the “performance-based compensation” exception to the limitations on the deduction
of compensation imposed by Section 162(m) of the Code.
1.2 Effective
Date. The Plan was adopted by the Board of Directors on July 19, 2011 and the Plan will be effective on the date it
is approved by the Company’s stockholders at the Company’s 2011 Annual Meeting (the “Effective Date”).
1.3 Expiration
Date. The Plan will expire on, and no Award may be granted under the Plan after, the tenth (10) anniversary of the
Effective Date unless the stockholders of the Company vote to approve an extension of the Plan prior to such expiration date. Any
Awards that are outstanding on the tenth anniversary of the Effective Date (or such later expiration date as approved by the Company’s
stockholders) shall remain in force according to the terms of the Plan and the Award Agreement.
ARTICLE 2
DEFINITIONS
2.1 Definitions.
When a word or phrase appears in this Plan document with the initial letter capitalized, and the word or phrase does not commence
a sentence, the word or phrase will generally be given the meaning ascribed to it in this Section 2.1 unless a clearly different
meaning is required by the context. The following words and phrases will have the following meanings:
(a) “Affiliate”
means: (i) any member of a “controlled group of corporations” (within the meaning of Section 414(b) of the
Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group; and (ii) any member of
a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code as modified by Section 415(h)
of the Code) that includes the Company as a member of the group. In applying Section 1563(a)(1), (2) and (3) of the Code
for purposes of determining the members of a controlled group of corporations under Section 414(b) of the Code, the language “at
least 50 percent” shall be used instead of “at least 80 percent” each place it appears in Section 1563(a)(1),
(2) and (3) and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining the members
of a group of trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of
the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” each
place it appears in Treasury Regulation Section 1.414(c)-2.
(b) “Annual
Meeting” or “Annual Meeting Date” means the dates established for the annual meetings of the Company’s
stockholders pursuant to the Company’s Bylaws.
(c) “Award”
means any Option, Restricted Stock Right, Restricted Stock, Performance Share, Performance Share Unit, Performance Cash, Stock
Appreciation Right or Stock Grant Award granted pursuant to the Plan.
(d) “Award
Agreement” means any written agreement or other document evidencing an Award.
(e) “Board”
means the Board of Directors of the Company, as constituted from time to time.
(f) “Cause”
means any of the following:
(i) Gross
and willful misconduct which results in material injury to the Company; or
(ii) Engaging
in fraudulent conduct with respect to the Company’s or any of its Affiliates’ business or conduct of a criminal nature
that may have an adverse impact on the Company’s or any of its Affiliates’ standing and reputation; or
(iii) The
material failure or refusal of a Participant to perform the duties required of the Participant by the Board, which inappropriate
failure or refusal is not cured within 30 days following receipt, by Participant, of written notice from the Board specifying
the factors or events constituting such failure or refusal; or
(iv) The
use of drugs and/or alcohol in violation of the Company’s then current Company policies.
(g) “Chief
Executive Officer” or “CEO” means the Chief Executive Officer of the Company.
(h) “Change
in Control” means any one or more of the following events:
(i) The
date that any one person, or more than one person acting as a group (as determined in accordance with Treasury Regulation Section 1.409A-3(i)(5)),
acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of
the total fair market value or total voting power of the stock of the Company. If any one person or more than one person acting
as a group is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company,
the acquisition of additional stock by the same person or persons will not be considered to be a “Change of Control.”
This paragraph (i) only applies when there is a transfer of stock of the Company (or issuance of stock of the Company) and
stock in the Company remains outstanding after the transaction;
(ii) The
date that any one person, or more than one person acting as a group (as determined in accordance with Treasury Regulation Section 1.409A-3(i)(5)),
acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons)
assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value
of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair
market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets; or
(iii) The
date that any person, or more than one person acting as a group (as determined in accordance with Treasury Regulation 1.409A-3(i)(5)),
acquires (or has acquired during the 12-month period ending on the most recent acquisition by such person or persons) ownership
of stock of Company possessing 30% or more of the total voting power of the stock of Company.
The transfer of stock
or assets of the Company in connection with a bankruptcy filing by or against the Company under Title 11 of the United States Code
will not be considered to be a Change of Control for purposes of this Plan. Additionally, a transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before
such transaction.
(i) “Code”
means the Internal Revenue Code of 1986, as amended. All references to the Code shall be interpreted to include a reference
to any applicable regulations, rulings or other official guidance promulgated pursuant to such section of the Code.
(j) “Committee”
means the Compensation Committee or any such committee as may be designated by the Board to administer the Plan, provided that
at all times the membership of such committee shall not be less than two (2) members of the Board. Each Committee member must
be: (i) a “non-employee director” (as defined in Rule 16b-3 under the Exchange Act) if required to meet the
conditions of exemption for the Awards under the Plan from Section 16(b) of the Exchange Act; and (ii) an “outside director”
as defined in Section 162(m) of the Code and the regulations issued thereunder.
(k) “Company”
means CryoPort, Inc., or any successor as provided in Section 20.4.
(l) “Consultant”
means a consultant or adviser who provides services to the Company or an Affiliate as an independent contractor and not as
an Employee; provided however that a Consultant may become Participant this Plan only if he or she (i) is a natural person,
(ii) provides bona fide services to the Company, and (iii) provides services that are not in connection with the offer
or sale of the Company’s securities in a capital-raising transaction and do not promote or maintain a market for the Company’s
securities.
(m) “Covered
Employee” means an Employee who is, or could be, a “covered employee” as defined by Section 162(m) of the
Code.
(n) “Disability”
means the inability of a Participant to engage in any substantially gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. The permanence and degree of impairment shall be supported by medical evidence.
(o) “Effective
Date” means the date on which the stockholders of the Company approve the Plan as described in Section 1.2.
(p) “Employee”
means a common-law employee of the Company or an Affiliate.
(q) “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended. All references to a section of ERISA shall be interpreted
to include a reference to any applicable regulations, rulings or other official guidance promulgated pursuant to such section of
ERISA.
(r) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
(s) “Fair
Market Value” means the closing price of one share of Stock as reported on the OTC Markets or such other exchange on
which the Stock is traded on the date such value is determined. If the Stock is not traded on such date, the fair market value
is the price on the first immediately preceding business day on which Stock was so traded.
(t) “Good
Reason” means any of the following:
(i) A
material diminution by the Company of a Participant’s then existing base salary or incentive compensation opportunity; or
(ii) A
material diminution in a Participant’s authorities, duties and/or responsibilities so as to cause a Participant’s position
with the Company to become of materially less dignity, responsibility and/or importance than those associated with the Participant’s
functions, duties and/or responsibilities immediately prior to such reduction; or
(iii) The
Company’s decision to permanently relocate a Participant’s residence or the Company’s principal business office
by more than 60 miles from its then current location.
(u) “Grant
Date” means the date the Committee approves the Award or a date in the future on which the Committee determines the Award
will become effective.
(v) “Incentive
Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(w) “Non-Qualified
Stock Option” means an Option that is not intended to be an Incentive Stock Option.
(x) “Option”
means the right to purchase Stock at a stated price for a specified period of time. An Option may either be an Incentive Stock
Option or a Non-Qualified Stock Option.
(y) “Participant”
means an individual who, as an Employee, officer or Non-Employee Director of, or Consultant to, the Company, or any Affiliate,
has been granted an Award under the Plan.
(z) “Performance-Based
Award” means an Award granted to select Covered Employees pursuant to Articles 7, 8 and 10 that is subject to the terms
and conditions set forth in Article 11. All Performance-Based Awards are intended to qualify as “performance-based compensation”
exempt from the deduction limitations imposed by Section 162(m) of the Code.
(aa) “Performance
Cash Award” means an Award evidencing the right to receive a payment in cash as determined by the Committee.
(bb) “Performance
Criteria” means the criteria or any combination of criteria, that the Committee selects for purposes of establishing
the Performance Goal or Performance Goals for a Participant during a Performance Period. The Performance Criteria that will be
used to establish Performance Goals are limited to the following: revenue; revenue growth; earnings (including earnings before
interest, taxes, depreciation and amortization); operating income; operating margin; pre- and after-tax income; cash flow (before
and after dividends); cash flow per share (before and after dividends); net earnings; earnings per share; return on equity; return
on capital (including return on total capital or return on invested capital); cash flow return on investment; return on assets
or net assets; economic value added; share price performance; total stockholder return; improvement in or attainment of expense
levels; improvement in or attainment of working capital levels; improvement in or attainment of working capital levels; market
penetration, geographic goals, business expansion goals, development of strategic relationships with customers and/or vendors;
and development and execution on strategic acquisitions. The Committee shall, within the time prescribed by Section 162(m) of the
Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for a particular Performance
Period for a particular Participant.
(cc) “Performance
Goals” means the goal or goals established in writing by the Committee for a Performance Period based on the Performance
Criteria. Depending on the Performance Criteria used to establish Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance, or the performance of a division, Affiliate, or an individual. The Performance Goals may
be stated in terms of absolute levels or relative to another company or companies or to an index or indices.
(dd) “Performance
Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select,
over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s
right to, and the payment of, a Performance-Based Award.
(ee) “Performance
Share” means a right granted to a Participant to receive a payment in the form of Stock, the payment of which is contingent
upon achieving certain performance goals established by the Committee.
(ff) “Performance
Share Unit” means a right granted to a Participant to receive a payment in the form of Stock, cash, or a combination
thereof, the payment of which is contingent upon achieving certain performance goals established by the Committee.
(gg) “Plan”
means the CryoPort, Inc. 2011 Stock Incentive Plan.
(hh) “Restricted
Period” means the period during which Restricted Stock, Restricted Stock Rights, Performance Shares, or Performance Share
Units are subject to restrictions pursuant to the relevant provisions of the Plan.
(ii) “Restricted
Stock” means Stock granted to a Participant pursuant to Article 7 that is subject to certain restrictions and to
the risk of forfeiture.
(jj) “Restricted
Stock Right” means the right granted to a Participant pursuant to Article 7 to receive cash or Stock in the future,
the payment of which is subject to certain restrictions and to the risk of forfeiture.
(kk) “Separation
from Service” means either: (i) the termination of a Participant’s employment with the Company and all Affiliates
due to death, retirement or other reasons; or (ii) a permanent reduction in the level of bona fide services the Participant
provides to the Company and all Affiliates to an amount that is 20% or less of the average level of bona fide services the Participant
provided to the Company and all Affiliates in the immediately preceding 36 months, with the level of bona fide service calculated
in accordance with Treasury Regulation Section 1.409A-1(h)(1)(ii).
Solely for purposes
of determining whether a Participant has a “Separation from Service,” a Participant’s employment relationship
is treated as continuing while the Participant is on military leave, sick leave, or other bona fide leave of absence (if the period
of such leave does not exceed six months, or if longer, so long as the Participant’s right to reemployment with the Company
or an Affiliate is provided either by statute or contract). If the Participant’s period of leave exceeds six months and the
Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed
to terminate on the first day immediately following the expiration of such six-month period. Whether a Termination of Employment
has occurred will be determined based on all of the facts and circumstances and in accordance with regulations issued by the United
States Treasury Department pursuant to Section 409A of the Code.
In the case of a Non-Employee
Director, Separation from Service means that such Director has ceased to be a member of the Board.
(ll) “Specified
Employee” means certain officers and highly compensated Employees of the Company as defined in Treasury Regulation Section 1.409A-1(i).
The identification date for determining whether any Employee is a Specified Employee during any calendar year shall be the September
1 preceding the commencement of such calendar year.
(mm) “Stock”
means the Common Stock of the Company, no par value per share.
(nn) “Stock
Appreciation Right” or “SAR” means the right to receive a payment equal to the excess of the Fair
Market Value of one share of Stock on the date of exercise of the SAR over the grant price of the SAR as determined pursuant to
Article 9 and the applicable Award Agreement.
(oo) “Stock
Grant Award” means the grant of Stock to a Participant.
(pp) “Termination
of Employment” means, in the context of an Award that is subject to the requirements of Section 409A of the Code,
a “Separation from Service”. In the case of any other Award, “Termination of Employment” will be given
its natural meaning.
2.2 Gender and
Number. Except when otherwise indicated by the context, words in the masculine gender when used in this Plan document will
include the feminine gender, the singular includes the plural, and the plural includes the singular.
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.1 General
Eligibility. Awards may be made only to those Participants who are Employees, officers, Consultants to and Non-Employee
Directors of the Company on the Grant Date of the Award.
3.2 Actual Participation.
Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those
to whom Awards will be granted and will determine the nature and amount of each Award.
ARTICLE 4
ADMINISTRATION
4.1 Administration
by the Committee. The Committee shall be responsible for the administration of the Plan. The Committee, by majority action
thereof, is authorized to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, to provide
for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations
necessary for the administration of the Plan, but only to the extent not contrary to the express provisions of the Plan. Determinations,
interpretations, or other actions made or taken by the Committee in good faith pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes of the Plan.
4.2 Authority
of the Committee. The Committee shall have the authority, in its sole discretion, to determine the Participants who:
(i) are entitled to receive Awards under the Plan; (ii) the types of Awards; (iii) the times when Awards shall
be granted; (iv) the number of Awards; (v) the purchase price or exercise price, if any; (vi) the period(s)
during which such Awards shall be exercisable (whether in whole or in part); (vii) the restrictions applicable to
Awards; (viii) the form of each Award Agreement, which need not be the same for each Participant; (ix) the other terms
and provisions of any Award (which need not be identical); and (x) the schedule for lapse of forfeiture restrictions or
restrictions on exercisability of an Award and accelerations or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines. The Committee shall have the authority to modify existing Awards, subject to
Article 16 of this Plan. Notwithstanding the foregoing, the Committee will not have the authority to accelerate the
vesting or waive the forfeiture of any Performance-Based Awards other than as provided in an Award Agreement.
4.3 Award Agreement.
Each Award shall be evidenced by an Award Agreement that shall specify the type of Award granted and such other provisions and
restrictions applicable to such Award as the Committee, in its discretion, shall determine.
4.4 Decisions
Binding. The Committee shall have the authority to interpret the Plan and subject to the provisions of the Plan,
any Award Agreement, and all decisions and determinations by the Committee with respect to the Plan are final, binding and conclusive
on all parties. No member of the Committee shall be liable for any action or determination made in good faith with respect to the
Plan or any Award granted under the Plan.
ARTICLE 5
STOCK SUBJECT TO THE PLAN
5.1 Number of
Shares. Subject to adjustment provided in Section 5.3, the total number of shares of Stock subject to all Awards under
the Plan shall be Thirteen Million Nine Hundred Thousand (13,900,000). Notwithstanding the above, the maximum number of shares
of Stock that may be issued as Incentive Stock Options under the Plan shall be Thirteen Million Nine Hundred Thousand (13,900,000).
The shares to be delivered under the Plan may consist, in whole or in part, of authorized but unissued Stock or shares purchased
on the open market or treasury Stock not reserved for any other purpose.
5.2 Availability
of Stock for Grant. Subject to the express provisions of the Plan, if any Award granted under the Plan terminates, expires,
lapses for any reason, or is paid in cash, any Stock subject to or surrendered for such Award will again be Stock available for
the grant of an Award. The exercise of a stock-settled SAR or broker-assisted “cashless” exercise of an Option (or
a portion thereof) will reduce the number of shares of Stock available for issuance pursuant to Section 5.1 by the entire
number of shares of Stock subject to that SAR or Option (or applicable portion thereof), even though a smaller number of shares
of Stock will be issued upon such an exercise. Also, shares of Stock tendered to pay the exercise price of an Option or tendered
or withheld to satisfy a tax withholding obligation arising in connection with an Award will not become available for grant
or sale under the Plan.
5.3 Adjustment
in Capitalization. In the event of any change in the outstanding shares of Stock by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number
of shares of Stock available under the Plan and subject to each outstanding Award, and its stated exercise price or the basis upon
which the Award is measured, shall be adjusted appropriately by the Committee, whose determination shall be conclusive; provided,
however, that fractional shares shall be rounded to the nearest whole share. Moreover, in the event of such transaction or event,
the Committee, in its discretion, may provide in substitution for any or all outstanding awards under the Plan such alternative
consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection
therewith the surrender of all Awards so replaced. Any adjustment to an Incentive Stock Option shall be made consistent with the
requirements of Section 424 of the Code. Further, with respect to any Option or Stock Appreciation Right that otherwise satisfies
the requirements of the stock rights exception to Section 409A of the Code, any adjustment pursuant to this Section 5.3
shall be made consistent with the requirements of the final regulations promulgated pursuant to Section 409A of the Code.
5.4 Annual
Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in this Plan document to the contrary,
and subject to adjustment upon the occurrence of any of the events indicated in Section 5.3, the maximum number of shares
of Stock that may be granted to any one Participant, who is a Covered Employee, during any of the Company’s fiscal years
with respect to one or more Awards shall be One Million Five Hundred (1,500,000).
ARTICLE 6
STOCK OPTIONS
6.1 Grant of
Options. Subject to the provisions of Article 5 and this Article 6, the Committee, at any time and from time
to time, may grant Options to such Participants and in such amounts as it shall determine.
(a) Exercise
Price. No Option shall be granted at an exercise price that is less than the Fair Market Value of one share of Stock on
the Grant Date.
(b) Time
and Conditions of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole
or in part provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine
the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c) Payment.
The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, promissory note, shares of Stock held for longer than six months (through actual tender or by attestation),
any net-issuance arrangement or other property acceptable to the Committee (including broker-assisted “cashless exercise”
arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants.
(d) Evidence
of Grant. All Options shall be evidenced by a written Award Agreement. The Award Agreement shall reflect the Committee’s
determinations regarding the exercise price, time and conditions of exercise, and forms of payment for the Option and such additional
provisions as may be specified by the Committee.
(e) No
Repricing of Options. The Committee shall not reprice any Options previously granted under the Plan without first obtaining
stockholder approval.
6.2 Incentive
Stock Options. Incentive Stock Options shall be granted only to Participants who are Employees and the terms of any Incentive
Stock Options granted pursuant to the Plan must comply with the following additional provisions of this Section 6.2:
(a) Exercise
Price. Subject to Section 6.2(e), the exercise price per share of Stock shall be set by the Committee, provided that
the exercise price for any Incentive Stock Option may not be less than the Fair Market Value as of the date of the grant.
(b) Exercise.
In no event may any Incentive Stock Option be exercisable for more than ten years from the date of its grant.
(c) Lapse
of Option. An Incentive Stock Option shall lapse in the following circumstances:
(i) The
Incentive Stock Option shall lapse ten years from the date it is granted, unless an earlier time is set in the Award Agreement.
(ii) The
Incentive Stock Option shall lapse 90 days following the effective date of the Participant’s Termination of Employment
for any reason other than the Participant’s death or Disability, unless otherwise provided in the Award Agreement.
(iii) If
the Participant has a Termination of Employment on account of Disability or death before the Option lapses pursuant to paragraph
(i) or (ii) above, the Incentive Stock Option shall lapse, unless it is previously exercised, on the earlier of (a) the
scheduled expiration date of the Option; or (b) 12 months after the date of the Participant’s Termination of Employment
on account of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock Options exercisable at
the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives,
by the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant
fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to receive
the Incentive Stock Option pursuant to the applicable laws of descent and distribution.
(d) Individual
Dollar Limitation. The aggregate Fair Market Value (determined as of the time an Award is made) of all shares of Stock
with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00
or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock
Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock
Options.
(e) Ten
Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the Grant Date, owns stock possessing
more than ten percent of the total combined voting power of all classes of Stock of the Company only if such Option is granted
at a price that is not less than 110% of Fair Market Value on the Grant Date and the Option is exercisable for no more than five
years from the Grant Date.
(f) Expiration
of Incentive Stock Options. No Award of an Incentive Stock Option may be made pursuant to this Plan after the tenth (10) anniversary
of the Effective Date, unless the stockholders of the Company vote to approve an extension of the Plan prior to such expiration
date.
(g) Right
to Exercise. Except as provided in Section 6.2(c)(iii), during a Participant’s lifetime, an Incentive Stock
Option may be exercised only by the Participant.
ARTICLE 7
RESTRICTED STOCK RIGHTS AND RESTRICTED STOCK
7.1 Grant of
Restricted Stock Rights and Restricted Stock. Subject to the provisions of Article 5 and this Article 7, the
Committee, at any time and from time to time, may grant Restricted Stock Rights or Restricted Stock to such Participants and in
such amounts as it shall determine.
7.2 Restricted
Stock Rights.
(a) Voting
Rights. During the Restricted Period, Participants holding the Restricted Stock Rights granted hereunder shall have no
voting rights with respect to the shares subject to such Restricted Stock Rights prior to the issuance of such shares pursuant
to the Plan.
(b) Form
and Timing of Payment. Payment for any vested Restricted Stock Rights Award issued pursuant to this Article 7 shall
be made in one lump sum payment of shares of Stock, cash or a combination thereof, equal to the Fair Market Value (determined as
of a specified date) of a specified number of shares of Stock. As a general rule, the shares payable under any Restrict Stock Rights
Award shall be made on or before June 15 of the calendar year following the calendar year in which the Restricted Stock Rights
vest in accordance with the “short-term deferral” exception to Section 409A as set forth in Treasury Regulation Section 1.409A-1(b)(4).
7.3 Grant of
Restricted Stock.
(a) Issuance
and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the
Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock). These restrictions may
lapse separately or in combination at such times and pursuant to such circumstances, as the Committee determines at the time of
the grant of the Award or thereafter.
(b) Forfeiture.
Except as otherwise determined by the Committee at the time of the grant of the Restricted Stock Award or thereafter, upon Termination
of Employment or the failure to satisfy one or more performance criteria during the applicable Restriction Period, Restricted Stock
that is at that time subject to restrictions shall be forfeited; provided however, that the Committee may provide in any Restricted
Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part
in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions
or forfeiture conditions relating to Restricted Stock.
(c) Certificates
for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, the certificates
must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the
Company may, in its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.
ARTICLE 8
PERFORMANCE SHARES, PERFORMANCE SHARE UNITS AND PERFORMANCE CASH AWARDS
8.1 Grant of
Performance Shares or Performance Share Units. Subject to the provisions of Article 5 and this Article 8, Performance
Shares or Performance Share Units may be granted to Participants at any time and from time to time as shall be determined by the
Committee. The Committee shall have complete discretion in determining the number of Performance Shares or Performance Share Units
granted to each Participant.
8.2 Value of
Performance Shares or Performance Share Units. Each Performance Share and each Performance Share Unit shall have a value
determined by the Committee at the time of grant. The Committee shall set goals (including Performance Goals) for a particular
period (including a Performance Period) in its discretion which, depending on the extent to which the goals are met, will determine
the ultimate value of the Performance Share or Performance Share Units to the Participant.
8.3 Form and
Timing of Payment. Payment for vested Performance Shares shall be made in Stock. Payments for vested Performance Share
Units shall be made in cash, Stock or a combination thereof as determined by the Committee. All payments for Performance Shares
and Performance Share Units shall be made in a lump sum. As a general rule, payment for Performance Shares or Performance Share
Units shall be made on or before March 15 of the calendar year following the calendar year in which the right to the payment
of the Performance Shares or Performance Share Units arises in accordance with the “short-term deferral” exception
to Section 409A as set forth in Treasury Regulation Section 1.409A-1(b)(4).
8.4 Performance
Cash Awards. Subject to the Provisions of this Article 8, Performance Cash Awards may be granted to Participants at
any time and from time to time as determined by the Committee. A Performance Cash Award grants a Participant the right to receive
an amount of cash depending on the satisfaction of one or more goals (including Performance Goals) for a particular period (including
a Performance Period), as determined by the Committee. The Committee shall have complete discretion to determine the amount of
any Performance Cash Award granted to a Participant. Payment for Performance Cash Awards shall be made on or before March 15
of the calendar year following the calendar year in which the right to the payment of the Performance Cash Award arises in accordance
with the “short-term deferral” exception to Section 409A as set forth in Treasury Regulation Section 1.409A-1(b)(4).
ARTICLE 9
STOCK APPRECIATION RIGHTS
9.1 Grant of
Stock Appreciation Rights. Subject to the provisions of Article 5 and this Article 9, Stock Appreciation Rights
(“SARs”) may be granted to Participants at any time and from time to time as shall be determined by the Committee.
SARs may be granted in connection with the grant of an Option, in which case the exercise of SARs will result in the surrender
of the right to purchase the shares under the Option as to which the SARs were exercised. When SARs are granted in connection with
the grant of an Incentive Stock Option, the SARs shall have such terms and conditions as shall be required by Section 422
of the Code. Alternatively, SARs may be granted independently of Options.
9.2 Exercisability
of SARs. SARs granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same for all Participants; provided, however, that no SAR
shall be exercisable later than ten (10) years from the Grant Date.
9.3 Exercise
of SARs. Upon exercise of the SAR or at a fixed date after all or part of the SAR becomes exercisable, the Participant
shall be entitled to receive payment of an amount determined by multiplying (a) the difference, if any, of the Fair Market
Value of a share of Stock on the date of exercise over the price of the SAR fixed by the Committee at the Grant Date, which shall
not be less than the Fair Market Value of a share of Stock at the Grant Date, by (b) the number of shares with respect to
which the SAR is exercised.
9.4 Form and
Timing of Payment. Payment for SARs shall be made in Stock and shall be payable at the time specified in the Award Agreement
for such SARs.
ARTICLE 10
STOCK GRANT AWARDS
Subject to the provisions
of Article 5 and this Article 10, Stock Grant Awards may be granted to Participants at any time and from time to time
as shall be determined by the Committee. A Stock Grant Award grants a Participant the right to receive (or purchase at such price
as determined by the Committee) shares of Stock free of any vesting restrictions. Any purchase price for a Stock Grant Award shall
be payable in cash or other form of consideration acceptable to the Committee. A Stock Grant Award may be granted or sold as described
in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to
such Participant. All Stock Grant Awards will be evidenced by a written Award Agreement.
ARTICLE 11
PERFORMANCE-BASED AWARDS
11.1 Grant of
Performance-Based Awards. Options granted to Covered Employees pursuant to Article 6 and SARs granted to Covered Employees
pursuant to Article 9 should, by their terms, qualify for the “performance-based compensation” exception to the
deduction limitations of Section 162(m) of the Code. The Committee, in the exercise of its complete discretion, also may choose
to qualify some or all of the Restricted Stock Rights or Restricted Stock Awards granted to Covered Employees pursuant to Article 7
and/or some or all of the Performance Shares, Performance Share Units or Performance Cash Awards granted to Covered Employees pursuant
to Article 8 and/or some or all of the Stock Grant Awards granted to Covered Employees pursuant to Article 10 for the
“performance-based compensation” exception to the deduction limitations of Section 162(m) of the Code. If the Committee,
in its discretion, decides that a particular Award to a Covered Employee should qualify as “performance-based compensation,”
the Committee will grant a Performance-Based Award to the Covered Employee and the provisions of this Article 11 shall control
over any contrary provision contained in Articles 7, 8 or 10. If the Committee concludes that a particular Award to a Covered Employee
should not be qualified as “performance-based compensation,” the Committee may grant the Award without satisfying the
requirements of Section 162(m) of the Code and the provisions of this Article 11 shall not apply.
11.2 Applicability.
This Article 11 shall apply only to Awards to those Covered Employees selected by the Committee to receive Performance-Based
Awards. The designation of a Covered Employee as a Participant for any Performance Period shall not in any manner entitle the Participant
to receive a Performance-Based Award for such Performance Period. Moreover, designation of a Covered Employee as a Participant
for a particular Performance Period shall not require designation of such Covered Employee as a Participant for any subsequent
Performance Period.
11.3 Committee
Discretion with Respect to Performance-Based Awards. With regard to a particular Performance Period, the Committee shall
have full discretion to select the length of the Performance Period, the type of Performance-Based Awards to be issued, the kind
and/or level of the Performance Goal or Goals and whether the Performance Goal or Goals apply to the Company, an Affiliate, or
any division or business unit thereof or the Participant or any group of Participants.
11.4 Establishment
of Performance Goals. The Performance Goals for any Performance-Based Award granted pursuant to this Article 11 shall
be established by the Committee in writing not later than ninety (90) days after the commencement of the Performance Period
for such Award; provided that (a) the outcome must be substantially uncertain at the time the Committee establishes the Performance
Goals; and (b) in no event will the Committee establish the Performance Goals for any Performance-Based Award after twenty-five
percent (25%) of the Performance Period for such Award has elapsed.
11.5 Performance
Evaluation; Adjustment of Goals. At the time that a Performance-Based Award is first issued, the Committee, in the Award
Agreement or in another written document, shall specify whether performance will be evaluated including or excluding the effect
of any of the following events that occur during the Performance Period:
(a) Judgments
entered or settlements reached in litigation;
(b) The
write down of assets;
(c) The
impact of any reorganization or restructuring;
(d) The
impact of changes in tax laws, accounting principles, regulatory actions or other laws affecting reported results;
(e) Extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis
of financial condition and results of operations appearing in the Company’s annual report to stockholders or Annual Report
on Form 10-K, as the case may be, for the applicable year;
(f) The
impact of any mergers, acquisitions, spin-offs or other divestitures; and
(g) Foreign
exchange gains and losses.
The inclusion or exclusion
of these items shall be expressed in a form that satisfies the requirements of Section 162(m) of the Code. The Committee, in its
discretion, also may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance
Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants: (i) in the
event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development; or (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements
of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business
conditions.
11.6 Adjustment
of Performance-Based Awards. The Committee shall have the sole discretion to adjust the determinations of the degree
of attainment of the preestablished Performance Goals. Notwithstanding any provision herein to the contrary, the Committee may
not make any adjustment or take any other action with respect to any Performance-Based Award that will increase the amount
payable under any such Award. The Committee shall retain the sole discretion to adjust Performance-Based Awards downward or to
otherwise reduce the amount payable with respect to any Performance-Based Award.
11.7 Payment
of Performance-Based Awards. Unless otherwise provided in the relevant Award Agreement, a Participant must be an Employee
of the Company or an Affiliate on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore,
a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance
Goals for such Performance Period are achieved.
11.8 Certification
by Committee. Notwithstanding any provisions to the contrary, the payment of a Performance-Based Award shall not
occur until the Committee certifies, in writing, that the pre-established Performance Goals and any other material terms and conditions
precedent to such payment have been satisfied.
11.9 Maximum
Award Payable. In accordance with Section 5.4, the maximum Performance-Based Award payable to any one participant
for a Performance Period is Five Hundred Thousand (500,000) shares of Stock, or if the Performance-Based Award is paid in cash,
the maximum Performance-Based Award will be determined by multiplying Five Hundred Thousand (500,000) by the Fair Market Value
of one share of Stock as of the first day of the Performance Period.
ARTICLE 12
CHANGE IN CONTROL
Notwithstanding any
other provision in the Plan to the contrary, the Committee, in its sole discretion, may determine that upon a Change in Control,
all or any portion of an Award shall automatically become immediately vested and/or exercisable and that the restrictions relating
to such Award shall lapse. If such determination is made by the Committee with respect to a Performance-Based Award, the award
shall vest on a pro-rata basis at the end of the Performance Period based on the level of achievement of the Performance Goals
applicable to such Award, as described in the Award Agreement. All determinations made pursuant to this Article 12 shall be
made in the applicable Award Agreement.
ARTICLE 13
NON-TRANSFERABILITY
13.1 General.
The Committee may, in its sole discretion, determine the right of a Participant to transfer any Award granted under the Plan. Unless
otherwise determined by the Committee, no Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution or pursuant to a domestic relations order
(that would otherwise qualify as a qualified domestic relations order as defined in the Code or Title I of ERISA but for the fact
that the order pertains to an Award) in favor of a spouse or, if applicable, until the termination of any Restricted Period or
Performance Period as determined by the Committee.
13.2 Beneficiary
Designation. Notwithstanding Section 13.1, a Participant may, in the manner determined by the Committee, designate
a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s
death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject
to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and
Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary
has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s
will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by
a Participant at any time provided the change or revocation is provided to the Committee.
13.3 Stock Certificates.
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing
shares of Stock pursuant to the exercise of any Award, unless and until the Committee has determined, with advice of counsel, that
the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities
and, if applicable, the requirements of any exchange or quotation system on which the shares of Stock are listed, quoted or traded.
All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with Federal, state, or foreign jurisdiction, securities or other laws, rules and regulations
and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded.
The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the
terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and
representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.
ARTICLE 14
COMPANY DISCRETION
14.1 Employment.
Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment
or service at any time, nor confer upon any Participant any right to continue in the employ or service of the Company.
14.2 Participant.
No Employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant.
14.3 No Rights
to Awards. No Participant, Employee, or other person shall have any claim to be granted any Award pursuant to the Plan,
and neither the Company nor the Committee is obligated to treat Participants, Employees, and other persons uniformly.
ARTICLE 15
SUBSTITUTION OF AWARDS
Any Award may be granted
under this Plan in substitution for Awards held by any individual who is an employee of another corporation who is about to become
an Employee of the Company as the result of a merger, consolidation or reorganization of the corporation with the Company, or the
acquisition by the Company of the assets of the corporation, or the acquisition by the Company of stock of the corporation as the
result of which such corporation becomes an Affiliate or a subsidiary of the Company. The terms and conditions of the Awards so
granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of granting the
Award may deem appropriate to conform, in whole or in part, to the provisions of the Award in substitution for which they are granted.
However, in the event that the Award for which a substitute Award is being granted is an Incentive Stock Option, no variation shall
adversely affect the status of any substitute Award as an Incentive Stock Option under the Code. In addition, in the event that
the award for which a substitute Award is being granted is a Non-Qualified Stock Option or a Stock Appreciation Right that otherwise
satisfies the requirements of the “stock rights exception” to Section 409A of the Code, no variation shall adversely
affect the status of any substitute Award under the stock rights exception to Section 409A of the Code.
ARTICLE 16
AMENDMENT, MODIFICATION, AND TERMINATION
The Board may at any
time, and from time to time, terminate, amend or modify the Plan; provided however, that any such action of the Board shall be
subject to approval of the stockholders to the extent required by law, regulation or any stock exchange rule for any exchange on
which shares of Stock are listed. Notwithstanding the above, to the extent permitted by law, the Board may delegate to the Committee
or the CEO the authority to approve non-substantive amendments to the Plan. No amendment, modification, or termination of the Plan
or any Award under the Plan shall in any manner adversely affect any Award theretofore granted under the Plan without the consent
of the holder thereof (unless such change is required in order to cause the benefits under the Plan to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code and applicable interpretive authority thereunder). Except as provided
in Section 5.3, neither the Board, the CEO nor the Committee may, without the approval of the stockholders: (a) reduce the
purchase price or exercise price of any outstanding Award, including any Option or SAR; (b) increase the number of shares
available under the Plan (other than any adjustment as provided in Section 5.3); (c) grant Options with an exercise price
that is below Fair Market Value on the Grant Date; (d) reprice previously granted Options or SARs; or (e) cancel any
Option or SAR in exchange for cash or any other Award or in exchange for any Option or SAR with an exercise price that is less
than the exercise price of the original Option or SAR. Additional rules relating to amendments to the Plan or any Award Agreement
to assure compliance with Section 409A of the Code as set forth in Section 19.3.
ARTICLE 17
TAX WITHHOLDING
17.1 Tax Withholding.
The Company shall have the power to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, and local withholding tax requirements on any Award under the Plan. To the extent that alternative methods of withholding
are available under applicable tax laws, the Company shall have the power to choose among such methods.
17.2 Form of
Payment. To the extent permissible under applicable tax, securities, and other laws, the Company may, in its sole discretion,
permit the Participant to satisfy a tax withholding requirement by (a) using already owned shares that have been held by the
Participant for at least six (6) months; (b) a broker-assisted “cashless” transaction; (c) directing
the Company to apply shares of Stock to which the Participant is entitled pursuant to the Award (including, for this purpose, the
filing of an election under Section 83(b) of the Code), to satisfy the required minimum statutory withholding amount; or (d) personal
check or other cash equivalent acceptable to the Company.
17.3 Tax upon
Disposition of Shares Subject to Section 422 Restrictions. In the event that a Participant shall dispose (whether
by sale, exchange, gift, the use of a qualified domestic relations order (that would otherwise qualify as a qualified domestic
relations order as defined in the Code or Title I of ERISA but for the fact that the order pertains to an Award) in favor of a
spouse, of any shares of Stock of the Company that are deemed to have been purchased by the Participant pursuant to an Incentive
Stock Option and that the Participant acquired within two (2) years of the Grant Date of the related Option or within one (1) year
after the acquisition of such shares of Stock, the Participant will notify the secretary of the Company of such disposition no
later than fifteen (15) days following the date of the disposition. Such notification shall include the date or dates of the
disposition, the number of shares of Stock of which the Participant disposed, and the consideration received, if any, for such
shares of Stock. If the Company so requests, the Participant shall forward to the secretary of the Company any amount requested
by the Company for the purpose of satisfying its liability, if any, to withhold federal, state or local income or earnings tax
or any other applicable tax or assessment (plus interest or penalties thereon, if any, caused by delay in making such payment)
incurred by reason of such disposition.
ARTICLE 18
INDEMNIFICATION
Each person who is
or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken
or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s
approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it
on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which
such person may be entitled under the Company’s articles of incorporation, bylaws, resolution or agreement, as a matter of
law, or otherwise, or any power that the Company may have to indemnify him or hold him harmless.
ARTICLE 19
REQUIREMENTS OF LAW
19.1 Requirements
of Law. The granting of Awards and the issuance of shares and/or cash under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock
paid pursuant to the Plan. If the shares of Stock paid pursuant to the Plan may in certain circumstances be exempt from registration
pursuant to the Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption.
19.2 Governing
Law. The Plan and all agreements into which the Company and any Participant enter pursuant to the Plan shall be construed
in accordance with and governed by the laws of the State of California. The Plan is an unfunded performance-based bonus plan for
a select group of management or highly compensated employees and is not intended to be subject to ERISA.
19.3 Section 409A
of the Code.
(a)
General Compliance. Some of the Awards that may be granted pursuant to the Plan (including, but not necessarily
limited to, Restricted Stock Rights Awards, Performance Share Awards, Performance Share Unit Awards, Performance Cash Awards and
Stock Grant Awards) may be considered to be “non-qualified deferred compensation” subject to Section 409A of the
Code. If an Award is subject to Section 409A of the Code, the Company intends (but cannot and does not guarantee) that the
Award Agreement and this Plan comply fully with and meet all of the requirements of Section 409A of the Code or an exception
thereto and the Award Agreement shall include such provisions, in addition to the provisions of this Plan, as may be necessary
to assure compliance with Section 409A of the Code or an exception thereto. An Award subject to Section 409A of the Code
also shall be administered in good faith compliance with the provisions of Section 409A of the Code as well as applicable
guidance issued by the Internal Revenue Service and the Department of Treasury. To the extent necessary to comply with Section 409A
of the Code, any Award that is subject to Section 409A of the Code may be modified, replaced or terminated in the discretion
of the Committee. Notwithstanding any provision of this Plan or any Award Agreement to the contrary, in the event that the Committee
determines that any Award is or may become subject to Section 409A of the Code, the Company may adopt such amendments to the
Plan and the related Award Agreements, without the consent of the Participant, or adopt other policies and procedures (including
amendments, policies and procedures with retroactive effective dates), or take any other action that the Committee determines to
be necessary or appropriate to either comply with Section 409A of the Code or to exclude or exempt the Plan or any Award from the
requirements of Section 409A of the Code.
(b) Delay
for Specified Employees. If, at the time of a Participant’s Separation from Service, the Company has any Stock which
is publicly traded on an established securities market or otherwise, and if the Participant is considered to be a Specified Employee,
to the extent any payment for any Award is subject to the requirements of Section 409A of the Code and is payable upon the
Participant’s Separation from Service, such payment shall not commence prior to the first business day following the date
which is six (6) months after the Participant’s Separation from Service (or if earlier than the end of the six (6) month
period, the date of the Participant’s death). Any amounts that would have been distributed during such six (6) month
period will be distributed on the day following the expiration of the six (6) month period.
(c) Prohibition
on Acceleration or Deferral. Under no circumstances may the time or schedule of any payment for any Award that is subject
to the requirements of Section 409A of the Code be accelerated or subject to further deferral except as otherwise permitted
or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. If the Company fails to
make any payment pursuant to the payment provisions applicable to an Award that is subject to Section 409A of the Code, either
intentionally or unintentionally, within the time period specified in such provisions, but the payment is made within the same
calendar year, such payment will be treated as made within the time period specified in the provisions. In addition, in the event
of a dispute with respect to any payment, such payment may be delayed in accordance with the regulations and other guidance issued
pursuant to Section 409A of the Code.
19.4 Securities
Law Compliance. With respect to any Participant who is, on the relevant date, obligated to file reports pursuant to Section 16
of the Exchange Act, transactions pursuant to this Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors pursuant to the Exchange Act. Notwithstanding any other provision of the Plan, the Committee may impose such
conditions on the exercise of any Award as may be required to satisfy the requirements of Rule 16b-3 or its successors pursuant
to the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be void to
the extent permitted by law and voidable as deemed advisable by the Committee.
19.5 Restrictions.
The Committee shall impose such restrictions on any Awards under the Plan as it may deem advisable, including without limitation,
restrictions under applicable federal securities law, under the requirements of any stock exchange upon which the Stock is then
listed and under any blue sky or state securities laws applicable to such Awards.
ARTICLE 20
GENERAL PROVISIONS
20.1 Funding.
The Company shall not be required to segregate any of its assets to ensure the payment of any Award under the Plan. Neither the
Participant nor any other persons shall have any interest in any fund or in any specific asset or assets of the Company or any
other entity by reason of any Award, except to the extent expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general creditors of the Company.
20.2 No Stockholders
Rights. No Award gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock
are in fact issued to such person in connection with such Award.
20.3 Titles
and Headings. The titles and headings of the Articles in the Plan are for convenience of reference only and, in the event
of any conflict, the text of the Plan, rather than such titles or headings, shall control.
20.4 Successors
and Assigns. The Plan shall be binding upon and inure to the benefit of the successors and permitted assigns of the Company,
including without limitation, whether by way of merger, consolidation, operation of law, assignment, purchase, or other acquisition
of substantially all of the assets or business of the Company, and any and all such successors and assigns shall absolutely and
unconditionally assume all of the Company’s obligations under the Plan.
20.5 Survival
of Provisions. The rights, remedies, agreements, obligations and covenants contained in or made pursuant to this
Plan, any agreement and any notices or agreements made in connection with this Plan shall survive the execution and delivery of
such notices and agreements and the delivery and receipt of such shares of Stock if required by Section 13.3, shall remain
in full force and effect.
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CryoPort, Inc. |
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By: |
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/s/ Robert S. Stefanovich |
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August 29, 2014 |
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Name: |
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Robert S. Stefanovich |
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Date |
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Title: |
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Chief Financial Officer |
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We consent to the incorporation in
this Post Effective Amendment No. 2 to the Registration Statement on Form S-1 of our report dated June 25, 2014 (which
includes an explanatory paragraph regarding Cryoport, Inc’s ability to continue as a going concern), relating to the
consolidated financial statements of Cryoport, Inc. as of March 31, 2014 and 2013 and for the years then ended, appearing in
the Prospectus, which is part of this registration statement.
We also consent to the use of our name
under the caption “Experts.”
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/s/ KMJ Corbin & Company LLP |
| Costa Mesa, California |
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| September 5, 2014 |
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