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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from ______ to ______.

Commission File Number: 001-34632

GRAPHIC

CRYOPORT, INC.

(Exact Name of Registrant as Specified in its Charter)

Nevada

88-0313393

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

112 Westwood Place, Suite 350

Brentwood, TN 37027

(Address of principal executive offices, including zip code)

(949470-2300

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common Stock, $0.001 par value

 CYRX

The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

 

 

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

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

As of April 23, 2021 there were 45,681,456 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

3

ITEM 1. Financial Statements

3

Condensed Consolidated Balance Sheets at March 31, 2021 (Unaudited) and December 31, 2020

3

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

4

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020

5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

6

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

41

ITEM 4. Controls and Procedures

42

PART II. OTHER INFORMATION

43

ITEM 1. Legal Proceedings

43

ITEM 1A. Risk Factors

43

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

43

ITEM 3. Defaults Upon Senior Securities

43

ITEM 4. Mine Safety Disclosures

43

ITEM 5. Other Information

43

ITEM 6. Exhibits

44

SIGNATURES

45

2

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data)

March 31, 

December 31, 

2021

    

2020

(unaudited)

ASSETS

Current Assets:

  

  

Cash and cash equivalents

$

85,494

$

36,873

Short-term investments

 

267,721

 

56,444

Accounts receivable, net

 

36,504

 

31,377

Inventories

 

11,544

 

10,535

Prepaid expenses and other current assets

 

18,485

 

11,928

Total current assets

 

419,748

 

147,157

Property and equipment, net

 

31,694

30,036

Operating lease right-of-use assets

15,996

14,044

Intangible assets, net

 

209,267

213,908

Goodwill

141,305

145,282

Deposits

 

946

1,184

Other long-term assets

752

794

Total assets

$

819,708

$

552,405

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable and other accrued expenses

$

27,083

$

24,844

Accrued compensation and related expenses

 

8,233

7,441

Deferred revenue

 

495

445

Operating lease liabilities

2,002

2,231

Finance lease liabilities

 

60

59

Total current liabilities

 

37,873

 

35,020

Convertible senior notes, net of discount of $3.5 million and $3.7 million, respectively

 

111,536

 

111,344

Note payable, net of discount of $1.2 million and $0, respectively

3,497

4,912

Operating lease liabilities, net of current portion

14,502

12,261

Finance lease liabilities, net of current portion

92

112

Deferred tax liability

4,626

5,882

Other long-term liabilities

307

176

Total liabilities

 

172,433

 

169,707

Commitments and contingencies

 

  

 

  

Stockholders’ Equity:

 

  

 

  

Preferred stock, $0.001 par value; 2,500,000 shares authorized:

 

  

 

  

Class A convertible preferred stock — $0.001 par value; 800,000 shares authorized; none issued and outstanding

 

 

Class B convertible preferred stock — $0.001 par value; 585,000 shares authorized; none issued and outstanding

 

 

Class C convertible preferred stock, $0.001 par value; 250,000 shares authorized; 200,000 issued and outstanding

4,275

2,844

Common stock, $0.001 par value; 100,000,000 shares authorized; 45,693,692 and 39,837,058 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

45

40

Additional paid-in capital

 

837,615

 

566,451

Accumulated deficit

 

(195,540)

 

(192,013)

Accumulated other comprehensive income

 

880

 

5,376

Total stockholders’ equity

 

647,275

 

382,698

Total liabilities and stockholders’ equity

$

819,708

$

552,405

See accompanying notes to condensed consolidated financial statements.

3

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

    

Service revenues

$

26,765

$

9,774

Product revenues

26,519

Total revenues

53,284

9,774

Cost of service revenues

15,552

4,516

Cost of product revenues

 

13,182

 

Total cost of revenues

28,734

4,516

Gross margin

 

24,550

 

5,258

 

  

 

  

Operating costs and expenses:

 

  

 

  

Selling, general and administrative

 

21,388

 

7,111

Engineering and development

 

4,304

 

1,733

Total operating costs and expenses

 

25,692

 

8,844

 

 

Loss from operations

 

(1,142)

 

(3,586)

Other income (expense):

 

  

 

  

Investment income

398

307

Interest expense

 

(1,210)

 

(2)

Other expense, net

 

(535)

 

(628)

Total other expense, net

(1,347)

 

(323)

Loss before provision for income taxes

 

(2,489)

 

(3,909)

Provision for income taxes

 

(1,038)

 

(33)

Net loss

$

(3,527)

$

(3,942)

Paid-in-kind dividend on Series C convertible preferred stock

(2,196)

Net loss attributable to common stockholders

$

(5,723)

$

(3,942)

Net loss per share attributable to common stockholders – basic and diluted

$

(0.13)

$

(0.11)

Weighted average common shares outstanding – basic and diluted

 

43,804,483

 

37,548,549

See accompanying notes to condensed consolidated financial statements.

4

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

For the Three Months Ended

March 31, 

    

2021

    

2020

Net loss

$

(3,527)

$

(3,942)

Other comprehensive income (loss), net of tax:

 

  

 

  

Net unrealized gain (loss) on available-for-sale debt securities

 

(768)

 

471

Reclassification of realized (gain) loss on available-for-sale debt securities to earnings

30

(1)

Foreign currency translation adjustments

 

(3,758)

 

(2)

Other comprehensive income (loss)

 

(4,496)

 

468

Total comprehensive loss

$

(8,023)

$

(3,474)

5

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

Other 

Class A

Class B

Class C

Comprehensive 

Total 

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Additional

Accumulated 

Income

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid–In Capital

    

Deficit

    

(Loss)

    

Equity  (Deficit)

Balance at December 31, 2019

 

$

 

$

$

 

37,339,787

$

37

$

285,609

$

(159,320)

$

(45)

$

126,281

Net loss

 

 

 

 

 

 

 

 

 

(3,942)

 

 

(3,942)

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

468

 

468

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,600

 

 

 

1,600

Issuance of common stock for board of director compensation

 

 

 

 

 

 

1,269

 

 

21

 

 

 

21

Proceeds from exercise of common stock options and warrants

 

 

 

 

 

 

589,199

 

1

 

2,877

 

 

 

2,878

Balance at March 31, 2020

$

$

$

37,930,255

$

38

$

290,107

$

(163,262)

$

423

$

127,306

Balance at December 31, 2020

 

 

250,000

2,844

 

39,837,058

40

566,451

(192,013)

5,376

382,698

Net loss

 

 

 

 

 

 

 

 

 

(3,527)

 

 

(3,527)

Other comprehensive loss, net of taxes

(4,496)

(4,496)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,979

 

 

 

2,979

Issuance of common stock for board of director compensation

 

 

 

 

 

 

229

 

 

11

 

 

 

11

Cost of Series C preferred stock conversion

(1,800)

(1,800)

Issuance of common stock in public offering, net of costs of $17.7 million

4,356,059

4

269,821

269,825

Conversion of Series C preferred shares to common stock

(50,000)

(765)

1,312,860

1

764

Paid-in-kind preferred stock dividend, including beneficial conversion feature

2,196

(2,196)

Proceeds from exercise of stock options and warrants

 

 

 

 

 

 

187,486

 

 

1,585

 

 

 

1,585

Balance at March 31, 2021

 

$

 

$

200,000

$

4,275

 

45,693,692

$

45

$

837,615

$

(195,540)

$

880

$

647,275

See accompanying notes to condensed consolidated financial statements.

6

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

For the Three Months Ended

March 31, 

    

2021

    

2020

Cash Flows From Operating Activities:

 

  

 

  

Net loss

$

(3,527)

$

(3,942)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

Depreciation and amortization

 

4,837

 

824

Amortization of debt discount

 

264

 

Unrealized loss (gain) on investments in equity securities

 

263

 

(144)

Realized loss on investments in equity securities

793

Realized loss (gain) on available-for-sale investments

40

(11)

Stock-based compensation expense

 

2,990

 

1,620

Loss on disposal of property and equipment

 

71

 

80

Provision for bad debt

 

63

 

4

Changes in operating assets and liabilities:

Accounts receivable

 

(5,213)

 

955

Inventories

 

(988)

 

9

Prepaid expenses and other current assets

 

(6,545)

 

95

Deposits

 

229

 

(46)

Change in operating lease right-of-use assets and lease liabilities

60

7

Accounts payable and other accrued expenses

 

532

 

65

Accrued compensation and related expenses

 

804

 

768

Deferred revenue

 

49

 

(27)

Deferred tax liability

80

9

Net cash provided by (used in) operating activities

 

(5,991)

 

1,059

 

  

 

Cash Flows From Investing Activities:

 

  

 

Purchases of property and equipment

 

(2,811)

 

(596)

Software development costs

 

(193)

 

Purchases of short-term investments

(215,318)

(16,195)

Sales/maturities of short-term investments

 

3,000

 

16,279

Patent and trademark costs

(48)

(30)

Net cash used in investing activities

 

(215,370)

 

(542)

 

  

 

Cash Flows From Financing Activities:

 

  

 

Proceeds from exercise of stock options and warrants

 

1,586

 

2,878

Proceeds from public offering, net of $17.7 million in offering costs

269,825

Repayment of finance lease liabilities

(18)

(14)

Net cash provided by financing activities

 

271,393

 

2,864

 

 

Effect of exchange rates on cash and cash equivalents

 

(1,411)

 

7

Net change in cash and cash equivalents

48,621

 

3,388

Cash and cash equivalents — beginning of period

 

36,873

 

47,234

Cash and cash equivalents — end of period

$

85,494

$

50,622

Supplemental Disclosure of Non-Cash Financing Activities:

Conversion of Series C Preferred Stock to common stock

$

765

$

Cost of Series C Preferred stock conversion included in additional paid-in-capital and accounts payable and accrued liabilities

$

1,800

$

CRYOPDP goodwill adjustment included in deferred tax liability

$

1,394

$

CRYOPDP goodwill adjustment included in fixed assets

$

71

$

Note valuation adjustment included in note payable and goodwill

$

1,266

$

Net unrealized gain on available-for-sale securities

$

768

$

471

Reclassification of realized gain on available-for-sale debt securities to earnings

$

30

$

Purchase of equipment through capital lease obligations

$

$

203

Fixed assets included in accounts payable and accrued liabilities

$

198

$

608

See accompanying notes to condensed consolidated financial statements.

7

Cryoport, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2021 and 2020

(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”, “Cryoport”, “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 10 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 March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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 year ended December 31, 2020.

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

Note 2. Nature of the Business

Cryoport is a life sciences services company that is an integral part of the temperature-controlled supply chain supporting the biopharma/pharma, animal health, and reproductive medicine markets. We are redefining logistics for the life sciences industry by providing a unique platform of critical solutions including highly differentiated temperature-controlled supply chain solutions, which include advanced packaging, informatics, specialty logistics services, biostorage services and cryogenic life sciences equipment. Through our products, services and expertise, we enable our clients to ship, store and deliver cellular-based materials and drug products as well as other life sciences commodities in a precise, defined temperature-controlled state.

Cryoport’s advanced platform, comprised of comprehensive and technology-centric systems and solutions are designed to support the global high-volume distribution of commercial biologic and cell-based products and therapies regulated by the United States Food and Drug Administration (FDA) and other international regulatory bodies for distribution in the Americas, EMEA (Europe, the Middle East, and Africa) and APAC (Asia-Pacific) regions. Cryoport’s solutions are also designed to support pre-clinical, clinical trials, Biologics License Applications (BLA), Investigational New Drug Applications (IND), New Drug Applications (NDA) and Commercialized Products with the FDA, as well as global clinical trials and commercialized products initiated in other countries, where strict regulatory compliance and quality assurance is mandated. Our industry standard setting Chain of ComplianceTM solutions, which include vital analytics, such as ‘chain-of-condition’ and ‘chain-of-custody’ information in a single data stream, empower our clients’ continuous vigilance over their respective commodities. In addition, our Chain of ComplianceTM standard ensures full traceability of all equipment used and the processes employed, further supporting each client’s goal of minimizing risk and maximizing success of their respective biologics or other products and therapies as they are introduced into the global markets.

On August 21, 2020, the Company entered into a Securities Purchase Agreement to acquire CRYOPDP, a leading global provider of innovative temperature-controlled logistics solutions to the clinical research, pharmaceutical and cell and gene therapy markets, headquartered in Paris, France. Under the terms of the Securities Purchase Agreement, the Company acquired 100% of the equity interests in Advanced Therapy Logistics and Solutions, a company organized under the laws of France, which is the holding company that owns CRYOPDP (the “CRYOPDP Acquisition”). The purchase price under the Securities Purchase Agreement was €49 million (approximately $58.0 million).

8

On August 24, 2020, the Company entered into a Purchase Agreement with Chart Industries, Inc. (“Chart”) pursuant to which the Company acquired Chart’s MVE Biological Solutions’ cryobiological storage business (the “MVE Acquisition”) for a cash purchase price at closing of $320 million, subject to customary closing working capital and other adjustments. The MVE Acquisition was structured as the acquisition of certain equity interests and assets and the transfer of certain liabilities in connection therewith.

On October 1, 2020, the Company completed both the MVE Acquisition and the CRYOPDP Acquisition.

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

Note 3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Cryoport, Inc. and its wholly-owned subsidiaries, Cryoport Systems, LLC, Cryogene, Inc., MVE Biological Solutions US LLC, and Cryoport Netherlands B.V. and subsidiaries (collectively, the “Company”). All intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

Our cash and cash equivalents represent demand deposits, and money market funds which are readily convertible into cash, have maturities of 90 days or less when purchased and are considered highly liquid and easily tradeable.

Short-Term Investments

Our investments in equity securities consist of mutual funds with readily determinable fair values which are carried at fair value with changes in fair value recognized in earnings.

Investments in debt securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses, net of tax, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity.

Gains and losses are recognized when realized. When we have determined that an other than temporary decline in fair value has occurred, the amount related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method.

Short-term investments are classified as current assets even though maturities may extend beyond one year because they represent investments of cash available for operations.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimated amounts. The Company’s significant estimates include the allowance for doubtful accounts, fair value of short-term investments, valuations and purchase price allocations related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets, estimated fair values of intangible assets and goodwill, intangible asset useful lives and amortization methods, allowance for inventory obsolescence, equity-based instruments, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance.

9

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Future events, including the extent and the duration of the COVID-19 related economic impacts, and their effects cannot be predicted with certainty, and, accordingly the Company’s accounting estimates require the exercise of judgment.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses, finance lease liabilities, note payable, and the Company’s 3.00% convertible senior notes due in 2025 (the “Senior Notes”). The carrying value for all such instruments, except finance lease liabilities, note payable and the Senior Notes, approximates fair value at March 31, 2021 and December 31, 2020 due to their short-term nature. The carrying value of finance lease liabilities approximates fair value because the interest rate approximates market rates available to us for similar obligations with the same maturities. For additional information related to fair value measurements, including the note payable and the Senior Notes, see Notes 9 and 10.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. From time to time, we maintain cash, cash equivalent and short-term investment balances in excess of amounts insured by the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”).  Primarily all of our cash, cash equivalents and short-term investments at March 31, 2021 were in excess of amounts insured by the FDIC and SIPC.  The Company performs ongoing evaluations of these institutions to limit its concentration risk exposure.  We manage such risks in our portfolio by investing in highly liquid, highly-rated instruments, and limit investing in long-term maturity instruments.

Our investment policy requires that purchased instruments in marketable securities may only be in highly-rated instruments, which are primarily U.S. Treasury bills or treasury-backed securities, and also limits our investment in securities of any single issuer.

Customers

The Company grants credit to customers within the U.S. and international customers and does not require collateral. Revenues from international customers are generally secured by advance payments except for established foreign customers. The Company generally requires advance or credit card payments for initial revenues from new customers. The Company’s ability to collect receivables can be affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes to be sufficient. Accounts receivable at March 31, 2021 and December 31, 2020 are net of reserves for doubtful accounts of $1.2 million and $1.1 million, respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not exceeded its estimates.

The Company’s customers are in the biopharma, pharmaceutical, animal health, reproductive medicine and other life science industries. Consequently, there is a concentration of accounts receivable within these industries, which is subject to normal credit risk. At March 31, 2021, there was one customer that accounted for 10.5% of net accounts receivable. At December 31, 2020, there were no customers that accounted for more than 10% of net accounts receivable. There were no other single customers that owed us more than 10% of net accounts receivable at March 31, 2021 and December 31, 2020.

The Company has revenue from foreign customers primarily in United Kingdom, Switzerland, France, Netherlands, Singapore, China and India. During the three months ended March 31, 2021 and 2020, the Company had revenues from foreign customers of approximately $25.5 million and $2.1 million, respectively, which constituted approximately 48.0% and 21.4%, respectively, of total revenues. There was one customer that accounted for 12.5% of revenues during the three months ended March 31, 2021. There were three customers that accounted for 17.9%, 16.7% and 10.8% of revenues during the three months ended March 31, 2020, respectively. No other single customer generated over 10% of revenues during the three months ended March 31, 2021 and 2020.

10

Inventories

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

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.  We compute depreciation using the straight-line method over the estimated useful lives of the assets which is generally three to twelve years for computer hardware and software, seven to ten years for freezers, four to ten years for trucks and autos, three to fifteen years for furniture and equipment and over the shorter of the lease term or useful live of the assets for leasehold improvements. Buildings are depreciated over a useful life ranging from 20 to 45 years. Maintenance and repairs are expensed as incurred.

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

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, current finance lease liabilities, and long-term finance lease liabilities on our consolidated balance sheets.

Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using our incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company accounts for lease and non-lease components as a single lease component for all its leases.

Business Combinations

Total consideration transferred for acquisitions is allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions primarily with respect to intangible assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

11

Goodwill

The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company compares the fair value of the reporting unit’s with its carrying amount and then recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value up to the total amount of goodwill allocated to the reporting unit. The Company assessed  triggering events indicating potential goodwill impairment, including the effects of the COVID-19 pandemic, and after assessment, concluded that there was no impairment during the three months ended March 31, 2021.

Intangible Assets

Intangible assets are comprised of patents, trademarks, software development costs and the intangible assets acquired in the MVE, CRYOPDP and Cryogene acquisitions which include a non-compete agreement, technology, customer relationships, trade name/trademark, agent network, order backlog, developed technology and land use rights. The Company capitalizes costs of obtaining patents and trademarks, which are amortized, using the straight-line method over their estimated useful life of five years once the patent or trademark has been issued. The non-compete agreement, technology, customer relationships, trade name/trademark, agent network, order backlog, developed technology and land use rights, acquired in the MVE, CRYOPDP and Cryogene acquisitions are amortized using the straight-line method over the estimated useful lives (see Note 8). The Company uses the following valuation methodologies to value the significant intangible assets acquired: income approach for customer relationships, replacement cost for agent network and software, and relief from royalty for trade name/trademarks and developed technology.

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset's carrying amount may not be recoverable. Such circumstances could include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. There was no impairment of intangible assets during the three months ended March 31, 2021.

Other 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, 2021.

Deferred Financing Costs

Deferred financing costs represent costs incurred in connection with the issuance of debt instruments and equity financings. Deferred financing costs related to the issuance of debt are amortized over the term of the financing instrument using the effective interest method and are presented in the consolidated balance sheets as an offset against the related debt. Offering costs from equity financings are netted against the gross proceeds received from the equity financings.

Income Taxes

The Company accounts for income taxes under the provision of ASC 740, “Income Taxes”, or ASC 740. As of March 31, 2021 and December 31, 2020, there were no material unrecognized tax benefits included in the accompanying consolidated balance sheets that would, if recognized, affect the effective tax rate.

12

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 not more likely than not that the U.S. based net deferred tax assets will be realized. Therefore, the Company has recorded a full valuation allowance against its U.S. based net deferred tax assets. With respect to the foreign based deferred tax assets, the Company's management has reviewed these deferred tax assets on a jurisdictional basis. Based on the weight of each jurisdiction's evidence available, the Company's management has made separate determinations for each foreign jurisdiction regarding whether it is more likely than not that a net deferred tax asset within a particular jurisdiction will be realized. The Company has recorded full valuation allowances in jurisdictions where deferred tax assets are not deemed more likely than not to be realized.

Additionally, the Company maintains a deferred tax liability related to indefinite-lived assets that have been netted against deferred tax assets that also allow for indefinite carryforward periods subject to limitations.  The remaining taxable temporary difference cannot serve as a source for future taxable income to realize federal net operating losses, due to the fact that post-2017 federal net operating losses are only eligible to offset 80% of income in a given year or in the case of state net operating losses, the state net operating losses will expire prior to the reversal of the taxable temporary difference.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company has immaterial accruals for interest or penalties on its consolidated balance sheets at March 31, 2021 and December 31, 2020 and has recorded only immaterial interest and/or penalties in the consolidated statements of operations for the three months ended March 31, 2021 and 2020. The Company is subject to taxation in the U.S., various state jurisdictions and in various foreign countries. As of March 31, 2021, the Company is no longer subject to U.S. federal examinations for years before 2017 and for California franchise and income tax examinations for years before 2016. 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. Our foreign subsidiaries are generally subject to examination three years following the year in which the tax obligation originated.  The years subject to audit may be extended if the entity substantially understates corporate income tax. The Company's subsidiary in India is currently under examination by the Indian tax authorities for 2012-2013, 2013-2014 and 2015-2016 tax periods. Other than India, the Company does not have any foreign subsidiaries currently under audit by their local taxing authorities.

In December of 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12 Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The Board issued this Update as part of its Simplification Initiative to improve areas of U.S. GAAP and reduce cost and complexity while maintaining usefulness. The main provision that impacts the company is the removal of the exception to the incremental approach of intra-period tax allocation when there is a loss from continuing operations and income or gain from other items (for example, discontinued operations and other comprehensive income). ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 31, 2020. Different components of the guidance require retrospective, modified retrospective or prospective adoption. The Company elected to early adopt ASU 2019-12 on January 1, 2020, and the adoption of the standard did not have a material impact to our consolidated financial statements.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. At March 31, 2021, the Company has not recorded any income tax provision/(benefit) resulting from the CARES Act mainly due the Company’s history of net operating losses generated and the maintenance of a full valuation allowance against its net deferred tax assets.  

On June 29, 2020, the State of California passed Assembly Bill 85 which suspends the California net operating loss deduction for the 2020-2022 tax years and the R&D credit usage for the same period (for credit usages in excess of $5 million). These suspensions were considered in preparation of the March 31, 2021 and December 31, 2020 financial statements.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”).  The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders. The Company will continue to evaluate the impact of the CAA and its impact on our financial statements in 2021 and beyond.

13

On March 11, 2021, the United States enacted the American Rescue Plan (“ARP”). The ARP includes provisions extending certain CARES Act provisions, repeals a worldwide interest allocation election, modifies the $1 million executive compensation limitation for years after 2026 and extends the employee retention credit. The Company will continue to evaluate the impact of the ARP and its impact on our financial statements in 2021 and beyond.

Revenue Recognition

Revenues are recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

Performance Obligations

At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when our performance obligation has been met. The Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the asset, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

For arrangements under which the Company provides biological specimen storage services and logistics support and management to the customer, the Company satisfies its performance obligations as those services are performed whereby the customer simultaneously receives and consumes the benefits of such services under the agreement.

Revenue generated from short-term logistics and engineering consulting services provided to customers is recognized when the Company satisfies the contractually defined performance obligations. When a contract includes multiple performance obligations, the contract price is allocated among the performance obligations based upon the stand-alone selling prices. Approved contract modifications are accounted for as either a separate contract or as part of the existing contract depending on the nature of the modification.

Our performance obligations on our orders and under the terms of agreements with customers are generally satisfied within one year from a given reporting date and, therefore, we omit disclosure of the transaction price allocated to remaining performance obligations on open orders.

Shipping and handling activities related to contracts with customers are accounted for as costs to fulfill our promise to transfer the associated products pursuant to the accounting policy election allowed under Topic 606 and are not considered a separate performance obligation to our customers. Accordingly, the Company records amounts billed for shipping and handling as a component of revenue. Shipping and handling fees and costs are included in cost of revenues in the accompanying condensed consolidated statements of operations.

Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental agencies.

Significant Payment Terms

Pursuant to the Company’s contracts with its customers, amounts billed for services or products delivered by the Company are generally due and payable in full within 15  to 60 days from the date of the invoice (except for any amounts disputed by the customer in good faith). Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.

Variable Consideration

When a contract includes variable consideration, the Company evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained. Variable consideration is estimated at the most likely amount that is expected to be earned.

14

Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available. Variable consideration estimates are updated at each reporting date. Revenues are recorded net of variable consideration, such as discounts and allowances.

Warranties

The Company provides product warranties with varying terms and durations for some of its products. The Company estimates product warranty costs and accrues for these costs as products are sold with a charge to cost of sales. Factors considered in estimating warranty costs include historical and projected warranty claims, historical and projected cost-per-claim, and knowledge of specific product issues that are outside of typical experience. Warranty accruals are evaluated and adjusted as necessary based on actual claims experience and changes in future claim and cost estimates.

Product warranty accrued liabilities totaled $0.2 million and $0.2 million at March 31, 2021 and December 31, 2020, respectively, and are included in accounts payable and other accrued expenses. Warranty expense was not material for the three months ended March 31, 2021 and 2020.

Incremental Direct Costs

Incremental direct costs are expensed when incurred when the amortization period of the asset that would have been recognized is one year or less; otherwise, incremental contract costs are recognized as an asset and amortized over time as promised goods and services are transferred to a customer. Incremental direct costs were not material for the three months ended March 31, 2021 and 2020.

The Company expenses incremental direct costs of obtaining a contract (sales commissions) when incurred because the amortization period is generally 12 months or less. The Company does not incur costs to fulfill a customer contract that meet the requirements for capitalization.

Contract Assets

Typically, we invoice the customer and recognize revenue once we have satisfied our performance obligation. Accordingly, our contract assets comprise accounts receivable, which are recognized when payment is unconditional and only the passage of time is required before payment is due. Generally, we do not have material amounts of other contract assets since revenue is recognized as control of goods is transferred or as services are performed.

Contract Liabilities (Deferred Revenue)

Contract liabilities are recorded when cash payments are received in advance of the Company’s performance. Deferred revenue was $0.5 million and $0.3 million at March 31, 2021 and 2020, respectively.  During the three months ended March 31, 2021, the Company recognized revenues of $0.2 million from the related contact liabilities outstanding as the services were performed.

Nature of Goods and Services

The Company provides Cryoport Express® Shippers to its customers and charges a fee in exchange for the use of the Cryoport Express® Shipper under long-term master service agreements with customers. The Company’s arrangements convey to the customers the right to use the Cryoport Express® Shippers over a period of time. The Company retains title to the Cryoport Express® Shippers and provides its customers the use of the Cryoport Express® Shipper for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the Cryoport Express® Shipper is returned to the Company.

The Company recognizes revenue for the use of the Cryoport Express® Shippers at the time of the delivery of the Cryoport Express® Shipper to the end user of the enclosed materials, and at the time that collectability is probable.

The Company also provides vacuum insulated aluminum dewars and cryogenic freezers systems to its customers. Revenue is recognized when the Company satisfies performance obligations by transferring the equipment to a customer, and at the time that collectability is probable.

15

The Company also provides global temperature-controlled logistics services, support and management. Revenue is recognized for these services as services are rendered and at the time that collectability is probable.

The Company also provides comprehensive and integrated temperature-controlled biostorage solutions to customers in the life sciences industry and charges a fee under long-term master service agreements with customers. These services include (1) biological specimen cryopreservation storage and maintenance, (2) archiving, monitoring, tracking, receipt and delivery of samples, (3) transport of frozen biological specimens to and from customer locations, and (4) management of incoming and outgoing biological specimens. The Company recognizes revenue for its biostorage solutions as services are rendered over time and at the time that collectability is probable.

The Company also provides short-term logistics and engineering consulting services to some customers, with fees tied to the completion of contractually defined services. We recognize revenue from these services over time as the customer simultaneously receives and consumes the benefit of these services as they are performed.

A significant portion of our revenues are covered under long-term agreements. We have determined that individual Statements of Work or Scope of Work (“SOW”), whose terms and conditions taken with a Master Services Agreement (“MSA”), create the Topic 606 contracts which are generally short-term in nature (e.g., 15-day shipping cycle) for the Cryoport Express® solutions and up to 12 months for biostorage solutions. Our agreements (including SOWs) generally do not have multiple performance obligations and, therefore, do not require an allocation of a single price amongst multiple goods or services.  Prices under these agreements are generally fixed.

Revenue Disaggregation

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as one reportable segment and one reporting unit. As a result, the financial information disclosed herein represents all of the material financial information related to the Company. When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. We consider sales disaggregated by end-market to depict how the nature, amount, timing and uncertainty of revenues and cash flows are impacted by changes in economic factors. The following table disaggregates our revenues by major markets for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31, 

    

2021

    

2020

Biopharma/Pharma

$

42,393

$

8,786

Animal Health

 

8,997

 

225

Reproductive Medicine

1,894

763

Total revenues

$

53,284

$

9,774

Given that the Company’s revenues are generated in different geographic regions, factors such as regulatory and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows. Our geographical revenues, by origin, for the three months ended March 31, 2021 and 2020, were as follows (in thousands):

Three Months Ended March 31, 

    

2021

    

2020

Americas

$

27,734

$

7,685

Europe, the Middle East and Africa (EMEA)

 

14,208

 

1,932

Asia Pacific (APAC)

 

11,342

 

157

Total revenues

$

53,284

$

9,774

Cost of Services Revenues

Our cost of services revenues is primarily comprised of freight charges, payroll and associated expenses related to our global logistics and supply chain centers, depreciation expenses of our Cryoport Express® Shippers and supplies and consumables used for our solutions.

16

Cost of Product Revenues

Our cost of product revenues is primarily comprised of materials, direct and indirect labor, inbound freight charges, purchasing and receiving, inspection, and distribution and warehousing of inventory. In addition, shop supplies, facility maintenance costs and depreciation expense for assets used in the manufacturing process are included in cost of product revenues.

Engineering and Development Expenses

Expenditures relating to engineering and development are expensed in the period incurred to engineering and development expense in the statement of operations.

Acquisition Costs

Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs related to our MVE Biological Solutions and CRYOPDP acquisitions.

Stock-Based Compensation

Under our stockholder approved stock-based compensation plan, we have granted incentive stock options, non-qualified stock options and restricted stock units that vest over four years.  Incentive and non-qualified stock options expire from seven to ten years from date of grant. The Company accounts for stock-based payments in accordance with stock-based payment accounting guidance which requires all stock-based payments to be recognized based upon their fair values. The fair value of stock options is estimated at the grant date using the Black-Scholes Option Pricing Model (“Black-Scholes”) and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period.  The determination of fair value using Black-Scholes is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and expected term. The Company accounts for forfeitures of unvested awards as they occur.

The grant date fair value per share for restricted stock units is based upon the closing market price of our common stock on the award grant date.

The Company’s stock-based compensation plans are discussed further in Note 14.

Basic and Diluted Net Loss Per Share

We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss position, basic and diluted weighted average common 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 the Senior Notes and convertible preferred stock outstanding during the periods.

The following shows the amounts used in computing net loss per share (in thousands except per share data):

Three Months Ended March 31, 

    

2021

    

2020

Net loss

$

(3,527)

$

(3,942)

Paid-in-kind dividend on Series C convertible preferred stock

 

(2,196)

 

Net loss attributable to common shareholders

$

(5,723)

$

(3,942)

Weighted average common shares outstanding - basic and diluted

43,804,483

37,548,549

Basic and diluted net loss per share

$

(0.13)

$

(0.11)

17

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

Three Months Ended March 31, 

    

2021

    

2020

Stock options

6,149,186

 

3,867,924

Warrants

 

502,632

Restricted stock units

304,157

Series C convertible preferred stock

5,283,411

Convertible senior notes

4,810,002

 

16,546,756

 

4,370,556

Foreign Currency Transactions

Management has determined that the functional currency of its subsidiaries is the local currency.  Assets and liabilities of the Netherlands and United Kingdom subsidiaries are translated into U.S. dollars at the period-end exchange rates.  Income and expenses are translated at an average exchange rate for the period and the resulting translation gain (loss) adjustments are accumulated as a separate component of stockholders’ equity.  The translation gain (loss) adjustment totaled $(3.8) million and $0 for the three months ended March 31, 2021 and 2020, respectively. Foreign currency gains and losses from transactions denominated in other than respective local currencies are included in earnings.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements.

Reclassification

Prior year amounts in sales and marketing expense have been reclassified to selling, general and administrative expense to conform to the current period presentation, which reflects how the Company tracks operating costs. These reclassifications had no effect on the previously reported net loss.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Similarly, equity-classified convertible preferred stock instruments will be accounted for as single units of account in equity unless the conversion feature needs to be bifurcated under Topic 815. The new guidance also made amendments to the earnings per share guidance in Topic 260, Earnings Per Share, for convertible instruments, the most significant impact of which is requiring the use of the if- converted method for diluted earnings per share calculation. Further, ASU 2020-06 made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective approach. Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and the accounting for measuring certain purchased options and forward contracts to acquire investments. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this guidance did not have an impact on the Company’s consolidated financial statements or disclosures.

18

Accounting Guidance Issued but Not Adopted at March 31, 2021

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." This ASU replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables. In addition, new disclosures are required. The ASU, as subsequently amended, is effective for fiscal years beginning after December 15, 2022 for smaller reporting companies, as defined by the SEC. As a smaller reporting company, we are currently evaluating the impact of adopting this guidance.

Note 4. Acquisitions

2020 Acquisitions – CRYOPDP and MVE

CRYOPDP Acquisition

On October 1, 2020, the Company completed its acquisition of CRYOPDP for a cash consideration of €48.3 million (approximately $57.0 million, the “CRYOPDP Acquisition”). This acquisition was funded with existing cash on hand. CRYOPDP, based in France, is a leading global provider of innovative temperature-controlled logistics solutions to the clinical research, pharmaceutical and cell and gene therapy markets. CRYOPDP conducts its business activities in the Americas, EMEA and APAC. As a result of the CRYOPDP Acquisition, the Company has extended its solutions to include broader temperature-controlled logistics and specialty courier services and has significantly expanded its global network through CRYOPDP’s 22 facilities in 12 countries.

The final purchase price for the CRYOPDP Acquisition was $56.7 million, after receiving $0.3 million net working capital settlement from the sellers during the three months ended March 31, 2021. As of October 1, 2020, the Company recorded net assets acquired of $57.0 million, including goodwill of $25.5 million. Through March 31, 2021, the Company recorded measurement period adjustments of $2.9 million, mainly comprised of $1.3 million fair value on the note payable and $1.5 million deferred tax adjustments, resulting in adjusted goodwill of $22.6 million and adjusted net assets acquired of $56.7 million. The purchase price allocation for the assets acquired and liabilities assumed remains open due to the finalization of the purchase price allocation during the measurement process.

MVE Acquisition

On October 1, 2020, the Company completed its acquisition of Chart Industries, Inc.’s MVE cryobiological storage business (the “MVE Acquisition”) for a cash consideration of $317.5 million, subject to customary closing working capital and other adjustments. The Company financed a portion of the closing cash payment of the MVE Acquisition with the net proceeds of the Blackstone Private Placement, as further discussed in Note 13. MVE is a global leader in manufactured vacuum insulated products and cryogenic freezer systems for the life sciences industry. MVE has manufacturing and distribution operations in the Americas, EMEA and APAC. As a result of the MVE Acquisition, the Company has extended its integrated logistics solutions to provide a broad range of cryogenic dewars and freezers to the life sciences industry.

As of October 1, 2020, the Company recorded net assets acquired of $317.5 million, including goodwill of $106.2 million. Through March 31, 2021, the Company did not record any material measurement period adjustments. The purchase price allocation for the assets acquired and liabilities assumed remains open due to the finalization of the purchase price allocation during the measurement process.

19

Note 5. Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 

December 31, 

    

2021

    

2020

Cash

$

23,913

$

25,053

Cash equivalents:

 

Money market mutual fund

 

61,581

11,820

Total cash and cash equivalents

 

85,494

36,873

Short-term investments:

 

U.S. Treasury notes and bills

 

234,578

23,309

Mutual funds

 

33,143

33,135

Total short-term investments

 

267,721

56,444

Cash, cash equivalents and short-term investments

$

353,215

$

93,317

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at March 31, 2021 were as follows (in thousands):

    

Amortized

    

Unrealized

    

Unrealized

    

Cost

Gains

Losses

Fair Value

U.S. Treasury notes

$

235,185

$

128

$

(735)

$

234,578

Total available-for-sale investments

$

235,185

$

128

$

(735)

$

234,578

The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of March 31, 2021:

    

Amortized Cost

    

Fair Value

Due within one year

$

41,030

$

41,058

Due between one and two years

 

194,155

 

193,520

Total

$

235,185

$

234,578

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at December 31, 2020 were as follows (in thousands):

    

    

Unrealized 

    

Unrealized 

    

Amortized Cost

Gains

Losses

Fair Value

U.S. Treasury notes

$

23,179

 

$

173

 

$

(43)

$

23,309

Total available-for-sale investments

$

23,179

 

$

173

$

(43)

$

23,309

The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of December 31, 2020:

    

Amortized Cost

    

Fair Value

Due within one year

$

14,084

 

$

14,111

Due between one and two years

 

9,095

 

 

9,198

Total

$

23,179

 

$

23,309

The primary objective of our investment portfolio is to enhance overall returns in an efficient manner while maintaining safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

20

We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below our cost basis, as well as adverse conditions related specifically to the security such as any changes to the credit rating of the security and the intent to sell or whether we will more likely than not be required to sell the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could change in the future based on new developments or changes in assumptions related to that particular security.

During the three months ended March 31, 2021, we had realized gains of $40,000 on available-for-sale investments.

Equity Investments

We held investments in equity securities with readily determinable fair values of $33.1 million at March 31, 2021. These investments consist of mutual funds that invest primarily in tax-free municipal bonds and treasury inflation protected securities.

Unrealized gains (losses) during 2021 and 2020 related to equity securities held at March 31, 2021 and 2020 are as follows (in thousands):

    

2021

2020

Net losses recognized during the three months on equity securities

    

$

(263)

$

(649)

Less: net gains (losses) recognized during the year on equity securities sold during the year

 

   

(793)

Unrealized gains (losses) recognized during the three months on equity securities still held at March 31, 2021 and 2020

$

(263)

$

144

Note 6. Fair Value Measurements

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

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

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

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

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

We 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.

21

The carrying values of our assets that are required to be measured at fair value on a recurring basis as of March 31, 2021 and 2020 approximate fair value because of our ability to immediately convert these instruments into cash with minimal expected change in value which are classified in the table below in one of the three categories of the fair value hierarchy described above (in thousands):

    

Fair Value Measurements

    

Level 1

    

Level 2

    

Level 3

    

Total

March 31, 2021

 

  

 

  

 

  

 

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market mutual fund

$

61,581

$

$

$

61,581

Marketable equity securities:

 

  

 

  

 

  

 

  

Mutual funds

 

33,143

 

 

 

33,143

Available-for-sale debt securities:

 

 

  

 

  

 

U.S. Treasury notes

 

234,578

 

 

 

234,578

$

329,302

$

$

$

329,302

Fair Value Measurements 

 

Level 1

 

Level 2

 

Level 3

 

Total

December 31, 2020

    

  

    

  

    

  

    

  

Cash equivalents:

 

  

 

  

 

  

 

  

Money market mutual fund

$

11,820

$

$

$

11,820

Marketable equity securities:

 

  

 

  

 

  

 

  

Mutual funds

 

33,135

 

 

 

33,135

Available-for-sale debt securities:

 

  

 

  

 

  

 

  

U.S. Treasury notes

 

23,309

 

 

 

23,309

$

68,264

$

$

$

68,264

Our equity securities and available-for-sale debt securities, including U.S. treasury notes and U.S. treasury bills are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

We did not have any financial liabilities measured at fair value on a recurring basis as of March 31, 2021.

We carry the Senior Notes (see Note 9) at face value less the unamortized discount and issuance costs on our consolidated balance sheets and present fair value for disclosure purposes only. As of March 31, 2021, the estimated fair value of the Notes was $108.8 million and was determined using the net present value of the payments, discounted at an interest rate that is consistent with market and risk-adjusted interest rates, which is a Level 2 input.

Note 7. Inventory

Inventories consist of the following (in thousands):

    

March 31,

    

December 31,

2021

2020

Raw materials

$

8,318

$

7,544

Work-in-process

 

307

 

227

Finished goods

 

2,919

 

2,764

$

11,544

$

10,535

The inventory balance at December 31, 2020 includes an $0.8 million step up in inventory related to the acquisition of MVE.

22

Note 8. Goodwill and Intangible Assets

Goodwill

The following table represents the changes in the carrying value of goodwill for the three months ended March 31, 2021 and 2020 (in thousands):

    

March 31,

2021

    

2020

Balance at beginning of year

 

145,282

 

11,000

Foreign currency adjustment

 

(1,405)

 

Goodwill related to MVE acquisition

 

18

 

Goodwill related to CRYOPDP acquisition

 

(2,590)

 

Total

 

$

141,305

 

$

11,000

Intangible Assets

The following table presents our intangible assets as of March 31, 2021 (in thousands):

Weighted

Net

Average

Gross

Accumulated

Carrying

Amortization

    

Amount

    

Amortization

    

Amount

    

Period (years)

Non-compete agreement

$

390

$

143

$

247

 

3

Technology

34,438

2,576

31,862

11

Customer relationships

128,640

5,218

123,422

14

Cryogene trade name/trademark

480

59

421

13

CRYOPDP agent network

8,597