10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 5, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of |
(I.R.S. Employer |
(Address of principal executive offices, including zip code)
(
(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: |
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Trading Symbol(s) |
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Name of each exchange on which registered: |
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The |
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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of April 22, 2022 there were
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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ITEM 1. Financial Statements |
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Condensed Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021 |
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5 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
34 |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk |
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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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Cryoport, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
March 31, |
December 31, |
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2022 |
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2021 |
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(unaudited) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Deposits |
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Deferred tax asset |
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Total assets |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable and other accrued expenses |
$ |
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$ |
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Accrued compensation and related expenses |
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Deferred revenue |
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Operating lease liabilities |
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Other liabilities |
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Total current liabilities |
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Convertible senior notes, net of discount of $ |
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Note payable, net of discount of $ |
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Operating lease liabilities, net of current portion |
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Deferred tax liability |
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Other long-term liabilities |
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Contingent consideration |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ Equity: |
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Preferred stock, $ |
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Class A convertible preferred stock — $ |
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— |
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— |
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Class B convertible preferred stock — $ |
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— |
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— |
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Class C convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ |
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$ |
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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, |
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2022 |
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2021 |
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Service revenues |
$ |
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$ |
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Product revenues |
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Total revenues |
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Cost of service revenues |
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Cost of product revenues |
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Total cost of revenues |
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Gross margin |
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Operating costs and expenses: |
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Selling, general and administrative |
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Engineering and development |
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Total operating costs and expenses |
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Loss from operations |
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Other income (expense): |
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Investment income |
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Interest expense |
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( |
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( |
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Other expense, net |
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( |
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( |
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Total other expense, net |
( |
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( |
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Loss before provision for income taxes |
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( |
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( |
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Provision for income taxes |
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( |
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( |
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Net loss |
$ |
( |
$ |
( |
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Paid in kind dividend on Series C convertible preferred stock |
( |
( |
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Net loss attributable to common stockholders |
$ |
( |
$ |
( |
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Net loss per share attributable to common stockholders - basic and diluted |
( |
( |
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Weighted average common shares outstanding – basic and diluted |
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4
Cryoport, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
Three Months Ending March 31, |
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2022 |
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2021 |
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Net loss |
$ |
( |
$ |
( |
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Other comprehensive loss, net of tax: |
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Net unrealized loss on available-for-sale debt securities |
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( |
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( |
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Reclassification of realized loss on available-for-sale debt securities to earnings |
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Foreign currency translation adjustments |
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( |
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( |
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Other comprehensive loss |
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( |
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( |
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Total comprehensive loss |
$ |
( |
$ |
( |
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5
Cryoport, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
Other |
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Class A |
Class B |
Class C |
Comprehensive |
Total |
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Preferred Stock |
Preferred Stock |
Preferred Stock |
Common Stock |
Additional |
Accumulated |
Income |
Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid–In Capital |
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Deficit |
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(Loss) |
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Equity (Deficit) |
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Balance at December 31, 2020 |
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— |
— |
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— |
— |
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( |
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Net loss |
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— |
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— |
— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Other comprehensive loss, net of taxes |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
( |
( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock for board of director compensation |
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— |
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— |
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— |
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— |
— |
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— |
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— |
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— |
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— |
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Cost of Series C preferred stock conversion |
— |
— |
— |
— |
— |
— |
— |
— |
( |
— |
— |
( |
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Issuance of common stock in public offering, net of costs of $ |
— |
— |
— |
— |
— |
— |
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— |
— |
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Conversion of Series C preferred shares to common stock |
— |
— |
— |
— |
( |
( |
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— |
— |
— |
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Paid-in-kind preferred stock dividend, including beneficial conversion feature |
— |
— |
— |
— |
— |
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— |
— |
( |
— |
— |
— |
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Proceeds from exercise of stock options and warrants |
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— |
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— |
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— |
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— |
— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2021 |
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— |
$ |
— |
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— |
$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
$ |
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$ |
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Balance at December 31, 2021 |
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— |
— |
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— |
— |
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( |
( |
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Net loss |
— |
— |
— |
— |
— |
— |
— |
— |
— |
( |
— |
( |
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Other comprehensive loss, net of taxes |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
( |
( |
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Stock-based compensation expense |
— |
— |
— |
— |
— |
— |
— |
— |
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— |
— |
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Paid-in-kind preferred stock dividend |
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— |
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— |
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— |
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— |
— |
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— |
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— |
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( |
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— |
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— |
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— |
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Repurchase of common stock |
— |
— |
— |
— |
— |
— |
( |
— |
— |
( |
— |
( |
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Vesting of restricted stock units |
— |
— |
— |
— |
— |
— |
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— |
— |
— |
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— |
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Proceeds from exercise of stock options and warrants |
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— |
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— |
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— |
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— |
— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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— |
$ |
— |
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— |
$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
$ |
( |
$ |
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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 |
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March 31, |
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2022 |
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2021 |
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Cash Flows From Operating Activities: |
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Net loss |
$ |
( |
$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of debt discount |
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Unrealized loss on investments in equity securities |
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Realized loss on available-for-sale investments |
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Stock-based compensation expense |
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Loss on disposal of property and equipment |
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Provision for bad debt |
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Insurance proceeds for operations |
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— |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
( |
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( |
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Prepaid expenses and other current assets |
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( |
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Deposits |
— |
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Change in operating lease right-of-use assets and lease liabilities |
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Accounts payable and other accrued expenses |
( |
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Accrued compensation and related expenses |
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Deferred revenue |
( |
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Deferred tax liability |
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Net cash provided by (used in) operating activities |
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( |
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Cash Flows From Investing Activities: |
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Purchases of property and equipment |
( |
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( |
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Insurance proceeds for loss of fixed assets |
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— |
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Software development costs |
( |
( |
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Purchases of short-term investments |
( |
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( |
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Sales/maturities of short-term investments |
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Patent and trademark costs |
( |
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( |
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Net cash provided by (used in) investing activities |
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( |
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Cash Flows From Financing Activities: |
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Proceeds from exercise of stock options and warrants |
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Proceeds from public offering, net of $ |
— |
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Repurchase of common stock |
( |
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— |
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Repayment of finance lease liabilities |
( |
( |
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Net cash provided by (used in) financing activities |
( |
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Effect of exchange rates on cash and cash equivalents |
( |
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( |
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Net change in cash and cash equivalents |
( |
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Cash and cash equivalents — beginning of period |
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Cash and cash equivalents — end of period |
$ |
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$ |
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Supplemental Disclosure of Non-Cash Financing Activities: |
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Conversion of Series C Preferred Stock to common stock |
$ |
— |
$ |
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Cost of Series C Preferred stock conversion included in additional paid-in-capital and accounts payable and accrued liabilities |
$ |
— |
$ |
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CRYOPDP goodwill adjustment included in deferred tax liability |
$ |
— |
$ |
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MVE goodwill adjustment included in fixed assets |
$ |
— |
$ |
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Note valuation adjustment included in note payable and goodwill |
$ |
— |
$ |
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Net unrealized loss on available-for-sale securities |
$ |
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$ |
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Reclassification of realized loss on available-for-sale debt securities to earnings |
$ |
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$ |
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Paid-in-kind preferred stock dividend |
$ |
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$ |
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Fixed assets included in accounts payable and accrued liabilities |
$ |
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$ |
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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, 2022 and 2021
(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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021.
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 serves the life sciences industry as a provider of integrated temperature-controlled supply-chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets. Our mission is to support life and health worldwide and we are continuously developing, implementing, and leveraging our supply chain platform, which is designed to deliver comprehensive, unparalleled, highly differentiated temperature-controlled logistics, packaging, storage, cryogenic systems, informatics, and related services for life science products, regenerative medicine, cellular therapies, and treatments that require unique, specialized cold chain management.
On October 1, 2020, the Company completed both the acquisition of MVE Biological Solutions (the “MVE Acquisition”) and the acquisition of CRYOPDP (the “CRYOPDP Acquisition”). In addition, in the second quarter of 2021, the Company completed the acquisitions of Critical Transport Solutions Australia (CTSA) in Australia and F-airGate in Belgium to further enhance CRYOPDP’s existing global temperature-controlled supply chain capabilities in the APAC (Asia-Pacific) and EMEA (Europe, the Middle East, and Africa) regions. These acquisitions are further discussed in Note 4.
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, which includes CRYOPDP. All intercompany accounts and transactions have been eliminated.
8
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
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.
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
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, 2022 were in excess of amounts insured by the FDIC and
9
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, 2022 and December 31, 2021 are net of reserves for doubtful accounts of $
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, 2022 and December 31, 2021, there were
The Company has revenue from foreign customers primarily in the United Kingdom, France, Germany, China and India. During the three months ended March 31, 2022 and 2021, the Company had revenues from foreign customers of approximately $
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 to
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
10
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.
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.
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 with its carrying amount and then recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s 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, 2022.
Intangible Assets
Intangible assets are comprised of patents, trademarks, software development costs and the intangible assets acquired in the Company’s recent acquisitions which include a non-compete agreement, technology, customer relationships, trade name/trademark, agent network, order backlog, developed technology and land use rights. These intangible assets 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 capitalizes costs of obtaining patents and trademarks, which are amortized, using the straight-line method over their estimated useful life of five years once the patent or trademark has been issued.
The Company 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
11
assumptions require significant judgment and actual results may differ from assumed and estimated amounts. There was
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, 2022.
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 Accounting Standards Codification (“ASC”) 740, “Income Taxes”, or ASC 740. As of March 31, 2022 and December 31, 2021, there were
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.
The Company has recorded a net deferred tax liability in jurisdictions where taxable temporary differences associated with indefinite-lived intangible assets do not support the realization of deferred tax assets with finite carryforward periods. In addition, the Company has recorded a net deferred tax liability in jurisdictions where taxable temporary differences exceed deductible temporary differences.
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, 2022 and December 31, 2021 and has recorded only immaterial interest and/or penalties in the consolidated statements of operations for the three months ended March 31, 2022 and 2021. The Company is subject to taxation in the U.S., various state jurisdictions and in various foreign countries. As of March 31, 2022, the Company is no longer subject to U.S. federal examinations for years before 2018 and for California franchise and income tax examinations for years before 2017. 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
On June 29, 2020, the State of California passed Assembly Bill (“AB”) 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
12
suspensions were considered in the preparation of the December 31, 2021 financial statements. On February 9, 2022, the California governor signed Senate Bill (“SB”) 113, which was retroactive to January 1, 2021. SB 113 removed the limitations from AB 85 on net operating loss and tax credit usage for the 2022 tax year. This change in our ability to use the net operating loss deduction and R&D credits in California were considered in the preparation of the March 31, 2022, financial statements.
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 $
The 2017 Tax Cuts and Jobs Act amended the Internal Revenue Code (“Code”), effective for amounts paid or incurred in tax years beginning after December 31, 2021, to eliminate the immediate expensing of research and experimental expenditures (“R&E”) and to require taxpayers to charge their R&E expenditures and software development costs (collectively, R&E expenditures) to a capital account. Capitalized costs are required to be amortized over five years (15 years for expenditures attributable to foreign research). Additionally, the R&E credit may only be claimed for costs that are eligible to be treated as R&E expenditures under the Code. This change in the treatment of R&E expenditures has been considered in the preparation of the March 31, 2022, financial statements.
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,
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.
13
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. 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 $
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, 2022 and 2021.
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 $
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.
14
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.
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, 2022 and 2021 (in thousands):
Three Months Ended March 31, |
||||||
|
2022 |
|
2021 |
|||
Biopharma/Pharma |
$ |
|
$ |
|
||
Animal Health |
|
|
|
|
||
Reproductive Medicine |
|
|
||||
Total revenues |
$ |
|
$ |
|
||
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, 2022 and 2021, were as follows (in thousands):
Three Months Ended March 31, |
||||||
|
2022 |
|
2021 |
|||
Americas |
$ |
|
$ |
|
||
Europe, the Middle East and Africa (EMEA) |
|
|
|
|
||
Asia Pacific (APAC) |
|
|
|
|
||
Total revenues |
$ |
|
$ |
|
||
15
Cost of Service Revenues
Our cost of service 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.
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 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
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, unvested restricted stock units 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, |
||||||
|
2022 |
|
2021 |
|||
Net loss |
$ |
( |
$ |
( |
||
Paid-in-kind dividend on Series C convertible preferred stock |
|
( |
|
( |
||
Net loss attributable to common shareholders |
$ |
( |
$ |
( |
||
Weighted average common shares outstanding – basic and diluted |
|
|
||||
Basic and diluted net loss per share |
( |
( |
||||
16
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, |
||||
|
2022 |
|
2021 |
|
Stock options |
|
|
|
|
Restricted stock units |
|
|
||
Series C convertible preferred stock |
|
|
||
Conversion of 2026 Senior Notes |
|
— |
||
Conversion of 2025 Senior Notes |
|
|
|
|
|
|
|
||
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 $(
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 July 2021, the FASB issued ASU 2021-05, “Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments.” Under this ASU, lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in Topic 842 and (2) the lessor would have otherwise recognized a day-one loss. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years for all public business entities. We adopted this standard in the first quarter of fiscal 2022, which did not have a material impact on the Company’s consolidated financial statements or disclosures.
In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the Emerging Issues Task Force).” ASU 2021-04 requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. Under the guidance, an issuer determines the accounting for the modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons. ASU 2021-04 is applied prospectively and is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. We adopted this standard in the first quarter of fiscal 2022, which did not have a material impact on the Company’s consolidated financial statements or disclosures.
Accounting Guidance Issued but Not Adopted at March 31, 2022
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation
17
review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities, such as Cryoport, that have not yet adopted the CECL accounting model in ASU 2016-13, the effective date for the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022, including interim periods within those fiscal years). We are currently evaluating the impact of this standard on our consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for public business entities. We are currently evaluating the impact of this standard on our consolidated financial statements.
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 the Company for fiscal years beginning after December 15, 2022, as the Company was a smaller reporting company as of November 15, 2019, the determination date. We are currently evaluating the impact of adopting this guidance.
Note 4. Acquisitions
2021 Acquisitions
In the second quarter of 2021, we completed the acquisitions of Critical Transport Solutions Australia (CTSA) in Australia and F-airGate in Belgium to further enhance our existing global temperature-controlled supply chain capabilities in the APAC and EMEA regions. The combined purchase consideration was $
Note 5. Cash, Cash Equivalents and Short-Term Investments
Cash, cash equivalents and short-term investments consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, |
December 31, |
|||||
|
2022 |
|
2021 |
|||
Cash |
$ |
|
$ |
|
||
Cash equivalents: |
|
|||||
Money market mutual fund |
|
|
|
|||
Total cash and cash equivalents |
|
|
|
|||
Short-term investments: |
|
|||||
U.S. Treasury notes and bills |
|
|
|
|||
Mutual funds |
|
|
|
|||
Corporate debt securities |
|
|
||||
Total short-term investments |
|
|
|
|||
Cash, cash equivalents and short-term investments |
$ |
|
$ |
|
||
18
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, 2022 were as follows (in thousands):
Amortized |
Unrealized |
Unrealized |
||||||||||
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|||||
U.S. Treasury notes |
$ |
|
$ |
— |
$ |
( |
$ |
|
||||
Corporate debt securities |
|
— |
( |
|
||||||||
Total available-for-sale investments |
$ |
|
$ |
— |
$ |
( |
$ |
|
||||
The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of March 31, 2022:
|
Amortized Cost |
|
Fair Value |
|||
Due within one year |
$ |
|
$ |
|
||
Due after one year through five years |
|
|
|
|
||
Due after five years through ten years |
|
|
||||
Total |
$ |
|
$ |
|
||
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at December 31, 2021 were as follows (in thousands):
Unrealized |
Unrealized |
|||||||||||
|
Amortized Cost |
|
Gains |
|
Losses |
|
Fair Value |
|||||
U.S. Treasury notes |
$ |
|
|
$ |
|
$ |
( |
$ |
|
|||
Corporate debt securities |
|
|
— |
|
( |
|
||||||
Total available-for-sale investments |
$ |
|
|
$ |
|
$ |
( |
$ |
|
|||
The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of December 31, 2021:
|
Amortized Cost |
|
Fair Value |
|||
Due within one year |
$ |
|
|
$ |
|
|
Due after one year through five years |
|
|
|
|
|
|
Due after five years through ten years |
|
|
||||
Total |
$ |
|
|
$ |
|
|
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.
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, 2022 and 2021 we had realized losses of $(
19
Equity Investments
We held investments in equity securities with readily determinable fair values of $
Unrealized losses during 2022 and 2021 related to equity securities held at March 31, 2022 and 2021 are as follows (in thousands):
Three Months Ended March 31, |
||||||
|
2022 |
|
2021 |
|||
Net losses recognized during the three months on equity securities |
$ |
( |
$ |
( |
||
Less: net gains (losses) recognized during the year on equity securities sold during the year |
|
— |
— |
|||
Unrealized losses recognized during the three months on equity securities still held at March 31, 2022 and 2021 |
$ |
( |
$ |
( |
||
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.
The fair value of the contingent consideration liability for the
20
The carrying values of our assets that are required to be measured at fair value on a recurring basis as of March 31, 2022 and 2021 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, 2022 |
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
||||
Money market mutual fund |
$ |
|
$ |
— |
$ |
— |
$ |
|
||||
Marketable equity securities: |
|
|
|
|
|
|
|
|
||||
Mutual funds |
|
|
|
— |
|
— |
|
|
||||
Available-for-sale debt securities: |
|
|
|
|
|
|
||||||
U.S. Treasury notes |
|
|
|
|
|
|
||||||
Corporate debt securities |
|
— |
— |
|
||||||||
$ |
|
$ |
— |
$ |
— |
$ |
|
|||||
Fair Value Measurements |
||||||||||||
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|||||
December 31, 2021 |
||||||||||||
Cash equivalents: |
|
|
|
|
|
|
|
|
||||
Money market mutual fund |
$ |
|
$ |
— |
$ |
— |
$ |
|
||||
Marketable equity securities: |
|
|
|
|
|
|
|
|
||||
Mutual funds |
|
|
|
— |
|
— |
|
|
||||
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
||||
U.S. Treasury notes |
|
— |
— |
|
||||||||
Corporate debt securities |
|
|
|
— |
|
— |
|
|
||||
$ |
|
$ |
— |
$ |
— |
$ |
|
|||||
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, 2022.
We carry the Convertible 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. We estimate the fair value of the Convertible Senior Notes 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.
The following table presents the estimated fair values and the carrying values (in thousands):
|
March 31, 2022 |
December 31, 2021 |
||||||||||
|
Carrying Value |
|
Fair Value |
|
Carrying Value |
|
Fair Value |
|||||
2026 Senior Notes |
$ |
|
$ |
|
$ |
|
$ |
|
||||
2025 Senior Notes |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Note 7. Inventory
Inventories consist of the following (in thousands):
|
March 31, |
|
December 31, |
|||
2022 |
2021 |
|||||
Raw materials |
$ |
|
$ |
|
||
Work-in-process |
|
|
|
|
||
Finished goods |
|
|
|
|
||
Total |
$ |
|
$ |
|
||
21
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, 2022 and 2021 (in thousands):
March 31, |
||||||
|
2022 |
|
2021 |
|||
Balance at beginning of year |
|
|
|
|
||
Foreign currency adjustment |
|
( |
|
( |
||
Goodwill related to MVE acquisition |
|
— |
|
|
||
Goodwill related to CRYOPDP acquisition |
|
— |
|
( |
||
Goodwill related to CTSA and F-airGate acquisitions |
|
— |
||||
Total |
|
$ |
|
|
$ |
|
Intangible Assets
The following table presents our intangible assets as of March 31, 2022 (in thousands):
Weighted |
|||||||||||
Net |
Average |
||||||||||
Gross |
Accumulated |
Carrying |
Amortization |
||||||||
|
Amount |
|
Amortization |
|
Amount |
|
Period (years) |
||||
Non-compete agreement |
$ |
|
$ |
|
$ |
|
|
||||
Technology |
|
|
|
||||||||
Customer relationships |
|
|
|
||||||||
Trade name/trademark |
|
|
|
||||||||
Agent network |
|
|
|
||||||||
Order backlog |
|
|
— |
||||||||
Land use rights |
|
|
|
||||||||
Patents and trademarks |
|
|
|
||||||||
Total |
$ |
|
$ |
|
$ |
|
|||||
The following table presents our intangible assets as of December 31, 2021 (in thousands):
Weighted |
|||||||||||
Net |
Average |
||||||||||
Gross |
Accumulated |
Carrying |
Amortization |
||||||||
|
Amount |
|
Amortization |
|
Amount |
|
Period (years) |
||||
Non-compete agreement |
$ |
|
$ |
|
$ |
|
|
||||
Technology |
|
|
|
||||||||
Customer relationships |
|
|
|
||||||||
Trade name/trademark |
|
|
|
||||||||
Agent network |
|
|
|
||||||||
Order backlog |
|
|
— |
||||||||
Land use rights |
|
|
|
||||||||
Patents and trademarks |
|
|
|
|
|||||||
Total |
$ |
|
$ |
|
$ |
|
|||||
Amortization expense for intangible assets for the three months ended March 31, 2022 and 2021, was $
22
Expected future amortization of intangible assets as of March 31, 2022 is as follows:
Years Ending December 31, |
|
Amount |
|
Remainder of 2022 |
$ |
|
|
2023 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
Thereafter |
|
|
|
$ |
|
||
Note 9. Convertible Senior Notes
Convertible Senior Notes payable consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):
March 31, |
December 31, |
|||||
|
2022 |
|
2021 |
|||
Principal amount of 2025 Senior Notes |
$ |
|
$ |
|
||
Principal amount of 2026 Senior Notes |
|
|
|
|
||
Less: unamortized debt issuance costs |
( |
( |
||||
Net carrying value of Convertible Senior Notes payable |
$ |
|
$ |
|
||
Interest expense incurred in connection with the Senior Notes consisted of the following for the three months ended March 31, 2022 and 2021 (in thousands):
March 31, |
||||||
|
2022 |
|
2021 |
|||
Coupon interest |
$ |
|
$ |
|
||
Amortization of debt issuance costs |
|
|
||||
Total interest expense on Convertible Senior Notes |
$ |
|
$ |
|
||
The Company’s 2025 Senior Notes and 2026 Senior Notes payable of $
2026 Senior Notes
On November 12, 2021, the Company issued $
Noteholders may convert their 2026 Senior Notes at their option into shares of the Company's common stock in the following circumstances: (1) before the close of business on the business day immediately before September 1, 2026, noteholders have the right to convert their 2026 Senior Notes only upon the occurrence of certain events (e.g., if sale price per share of the Company's common stock exceeds
23
on the Company's common stock; if the Company calls the 2026 Senior Notes for redemption); and (2) from and after September 1, 2026, noteholders may convert their 2026 Senior Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company's election. The 2026 Senior Notes are initially convertible into approximately
The 2026 Senior Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company's option at any time, and from time to time, on or after December 6, 2024 and on or before the 41st scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company's common stock exceeds
The 2026 Senior Notes contain customary terms and events of default. If an event of default involving bankruptcy, insolvency, or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, the 2026 Senior Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other event of default (as defined in the 2026 Indenture) occurs and is continuing, then, the Trustee, by notice to the Company, or holders of at least
The 2026 Senior Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options ("ASC 470-20") and ASC 815-40, Contracts in Entity's Own Equity ("ASC 815-40"). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer's stock and (2) meet the requirements of the equity classification guidance. Based upon the Company's analysis, it was determined the 2026 Senior Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation and recognition as derivatives, and therefore do not need to be separately recognized. Accordingly, the proceeds received from the issuance of the 2026 Senior Notes were recorded as a single liability measured at amortized cost on the consolidated balance sheet.
The Company incurred approximately $
24
2025 Senior Notes
In May 2020, the Company issued $
At any time before the close of business on the scheduled trading day immediately before the maturity date, holders of the 2025 Senior Notes may convert their 2025 Senior Notes at their option into shares of the Company’s common stock. The 2025 Senior Notes were initially convertible into approximately
On or after June 5, 2023, we may redeem the 2025 Senior Notes at our option, in whole and not in part, at a cash redemption price equal to the principal amount of the 2025 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, if:
(1) |
The last reported sale price per share of the Company’s common stock exceeds |
(2) |
A registration statement covering the resale of the shares of the Company’s common stock issuable upon conversion of the Senior Notes is effective and available for use and is expected to remain effective and available during the redemption period as of the date the redemption notice is sent. |
The 2025 Senior Notes contain customary terms and events of default. If an event of default arising out of certain events of bankruptcy, insolvency, or reorganization involving the Company or a significant subsidiary (as set forth in the 2025 Indenture) occurs with respect to the Company, the principal amount of the 2025 Senior Notes and accrued and unpaid interest, if any, will automatically become immediately due and payable. If any other event of default (as defined in the 2025 Indenture) occurs and is continuing, either the Trustee or the holders of at least
The 2025 Senior Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the 2025 Senior Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation and recognition as derivatives,
25
and therefore do not need to be separately recognized. Accordingly, the proceeds received from the issuance of the 2025 Senior Notes were recorded as a single liability measured at amortized cost on the consolidated balance sheet.
The Company incurred approximately $
On November 9, 2021, the Company entered into separate, privately negotiated note purchase agreements with a limited number of holders of its 2025 Senior Notes pursuant to which the Company repurchased approximately $
In connection with the issuance of the 2025 Senior Notes, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) to use its best efforts to file a registration statement for the resale of the 2025 Senior Notes and the shares of the Company’s common stock issuable upon conversion of the 2025 Senior Notes, to cause the registration statement to become effective by January 31, 2021, and to keep the registration statement continuously effective for a specified period of time. In December 2020, the Company filed an automatic shelf registration statement to register the resale of the 2025 Senior Notes and the shares of the Company’s common stock issuable upon conversion of the 2025 Senior Notes. If the Company fails to satisfy certain of its obligations under the Registration Rights Agreement (a “Registration Default”), it will be required to pay additional interest on the 2025 Senior Notes. Such additional interest will accrue at a rate per annum equal to
Note 10. Note Payable
In connection with the acquisition of CRYOPDP, the Company assumed an interest free unsecured note payable of €
Note 11. Leases
The Company has operating and finance leases for corporate offices and certain equipment. These leases have remaining lease terms of
26
The components of lease cost were as follows (in thousands):
Three Months Ended March 31, |
||||||
|
2022 |
|
2021 |
|||
Operating lease cost |
$ |
|
$ |
|
||
Other information related to leases was as follows (in thousands):
Supplemental Cash Flows Information |
Three Months Ended March 31, |
|
|||||
|
2022 |
|
2021 |
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|||||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
|
Right-of-use assets obtained in exchange for lease liabilities (in thousands): |
|
|
|||||
Operating leases |
$ |
|
$ |
|
|||
March 31, |
December 31, |
|
|||
|
2022 |
|
2021 |
|
|
Weighted-Average Remaining Lease Term |
|
|
|||
Operating leases |
|
||||
Weighted-Average Discount Rate |
|
|
|
|
|
Operating leases |
|
Future minimum lease payments under non-cancellable leases that have commenced as of March 31, 2022 were as follows (in thousands):
Years Ending December 31, |
Operating Leases |
||
2022 (excluding the three months ended March 31, 2022) |
$ |
|
|
2023 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
Thereafter |
|
||
Total future minimum lease payments |
|
|
|
Less imputed interest |
|
( |
|
Total |
$ |
|
|
Operating |
|||
Reported as of March 31, 2022 |
|
Leases |
|
Current lease liabilities |
$ |
|
|
Noncurrent lease liabilities |
|
|
|
Total |
$ |
|
|
Note 12. Commitments and Contingencies
MVE Biological Solutions Fire
On January 25, 2022, a fire occurred at the MVE Biological Solutions manufacturing facility located in New Prague, Minnesota. The New Prague facility manufactures aluminum dewars and is one of MVE Biological Solutions’ three global manufacturing facilities. There were no injuries reported and damage was limited to a portion of the facility. As a consequence of the fire damage, the New Prague manufacturing operations were curtailed on an interim basis until the necessary repairs were completed. Production was resumed at the facility during the week of February 14, 2022 and ramped up to full production during the first quarter of 2022. The Company estimates the revenue impact of $
27
Facility and Equipment Leases
We lease various principal facilities which include corporate, global logistics and supply chain centers, biostorage, manufacturing, and research and development facilities under operating leases in the United States, including in Tennessee, California, New Jersey, Texas, and Georgia, and internationally in the Netherlands, Portugal, and France. These lease agreements contain certain scheduled annual rent increases which are accounted for on a straight-line basis. In addition, we lease certain equipment which expires through February 2025 (See Note 11).
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.
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. We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our financial condition, results of operations, and cash flows for a particular period.
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 and equipment leases, the Company has indemnified its lessors for certain claims arising from the use of the facilities and equipment. The duration of the guarantees and indemnities varies and is generally tied to the life of the agreements.
Note 13. Stockholders’ Equity
Authorized Stock
The Company has
Common Stock Issued for Services
During the three months ended March 31, 2021,
Repurchase Program
In March 2022, the Company’s Board of Directors authorized a repurchase program (the “Repurchase Program”) through December 31, 2025, authorizing the repurchase of common stock and/or convertible senior notes in the amount of up to $
28
market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. The Company purchased
November 2021 Registered Direct Placement and Stock Purchase Agreements
Concurrent with the issuance of the 2026 Senior Notes in November 2021, the Company conducted a registered direct placement of
January 2021 Public Offering
On January 25, 2021, the Company completed an underwritten public offering of
Blackstone Private Placement
In connection with the MVE Acquisition, on October 1, 2020 (the “Closing Date”), the Company completed a private placement with an investment vehicle of funds affiliated with The Blackstone Group Inc. (collectively, “Blackstone”), consisting of (i)
The Series C Preferred Stock ranks senior to the shares of the Company’s common stock, with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company (a “Liquidation”). The Series C Preferred Stock has the following rights, preferences and privileges:
Dividend Rights. Holders of the Series C Preferred Stock (the “Holders”) are entitled to dividends at the rate of
Liquidation Preference. Upon a Liquidation, each share of Series C Preferred Stock is entitled to receive an amount per share equal to the greater of (i) $
Conversion Features. The Series C Preferred Stock is convertible at the option of the Holders at any time into shares of common stock at a conversion price of $
29
was
After the second anniversary of the Closing Date, subject to certain conditions, the Company may at its option require conversion of all of the outstanding shares of the Series C Preferred Stock to common stock if, for at least
On the October 1, 2020 issuance date, the effective conversion price per share was less than the fair value of the underlying common stock and, as a result, the Company determined that there was a beneficial conversion feature on that date. Accordingly, the Company recognized the resulting beneficial conversion feature amount of $
Additionally, the Company determined that the nature of the Series C Preferred Stock is more akin to an equity instrument and that the economic characteristics and risks of the embedded conversion options are clearly and closely related to the Series C Preferred Stock. As such, the conversion options were not required to be bifurcated from the host under ASC 815, Derivatives and Hedging.
Since the paid-in-kind dividends are nondiscretionary, the Company measures the beneficial conversion feature of the paid-in-kind dividends on the issuance date of the preferred stock and records such amount when the paid-in-kind dividends are accrued. Accordingly, the associated paid-in-kind dividends for the year ended December 31, 2020 generated a beneficial conversion feature amount of $
Redemption Rights. The Company may redeem the Series C Preferred Stock for cash, as follows:
(1)At any time beginning five years after the Closing Date (but prior to six years after the Closing Date), all of the Series C Preferred Stock at a price equal to
(ii)At any time beginning six years after the Closing Date, all of the Series C Preferred Stock at a price equal to
Upon a “Fundamental Change” (involving a change of control or de-listing of the Company as further described in the Certificate of Designation), each Holder has the right to require the Company to redeem all or any part of the Holder’s Series C Preferred Stock for an amount equal to the Liquidation Preference plus any accrued and unpaid dividends. If the Company does not have sufficient funds legally available to pay the repurchase price, then the Company is required to (a) pay the maximum amount of the repurchase price that can be paid out of funds legally available for payment, and (b) purchase any shares of the Series C Preferred Stock not purchased because of the foregoing limitations at the repurchase price as soon as practicable after the Company is able to make such purchase out of assets legally available for the purchase of such shares. If the Company fails to pay the repurchase price in full when due, then the Company will pay dividends on such shares not repurchased at a rate of
The Company evaluated the Series C Preferred Stock for liability or equity classification under the applicable accounting guidance including ASC 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because the Series C Preferred Stock did not meet the definition of the liability instruments defined thereunder for convertible instruments. Specifically, the convertible preferred shares are not mandatorily redeemable and do not embody an obligation to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets. Additionally, the Company determined that the Series C Preferred Stock would be recorded as permanent equity given that they are not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within control of the Company.
The Company also evaluated the embedded put and call options within the Series C Preferred Stock in accordance with the accounting guidance for derivatives to determine if bifurcation is required. The Company determined that the economic characteristics
30
and risks of the embedded put and call options are not clearly and closely related to the Series C Preferred Stock. Therefore, the Company assessed the put and call options further and determined they did not meet the definition of a derivative under ASC 815.
Under the same analysis, the Company determined that the economic characteristics and risks of the embedded participating dividend feature are considered clearly and closely related to the equity host. Accordingly, the participating dividend feature is not required to be bifurcated under ASC 815. Also, the Company determined that the value of the contingent dividend feature is minimal and insignificant relative to the other components of the Series C Preferred Stock due to the circumstances surrounding the scenarios under which the provision would be triggered.
Voting Rights. Holders of the Series C Preferred Stock are generally entitled to vote with the holders of the shares of common stock on an as-converted basis, subject to certain Nasdaq voting limitations, if applicable. Also, the consent of the Holders of a majority of the outstanding shares of the Series C Preferred Stock is required with respect to (i) amendments to the Company’s organizational documents that have an adverse effect on the Holders of the Series C Preferred Stock, and (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series C Preferred Stock. Holders of the Series C Preferred Stock have the right to nominate for election
Registration Rights. Holders of the Series C Preferred Stock have certain customary registration rights with respect to the Series C Preferred Stock and the shares of common stock into which they are converted, pursuant to the terms of a registration rights agreement. The Company is required to file within 90 days of the Closing Date, and use its commercially reasonable efforts to cause to go effective as promptly as practicable, a registration statement covering the sale or distribution of common stock issued or issuable upon conversion of the Series C Preferred Stock. In December 2020, the Company filed an automatic shelf registration statement to register the resale of the common stock issued or issuable upon conversion of the Series C Preferred Stock.
Blackstone Conversion
On February 5, 2021, the Company received a waiver and conversion notice from Blackstone Freeze Parent L.P. and Blackstone Tactical Opportunities Fund – FD L.P. to convert an aggregate of
Common Stock Reserved for Future Issuance
As of March 31, 2022, approximately
Exercise of stock options |
|
|
Vesting of restricted stock units |
|
|
Conversion of Series C Preferred Stock |
|
|
Conversion of convertible 2026 Senior Notes |
|
|
Conversion of convertible 2025 Senior Notes |
|
|
Total shares of common stock reserved for future issuances |
|
|
Note 14. Stock-Based Compensation
Stock Options
We have five stock incentive plans: the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009 Stock Incentive Plan (the “2009 Plan”), the 2011 Stock Incentive Plan (the “2011 Plan”), the 2015 Omnibus Equity Incentive Plan (the “2015 Plan”), and the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”), (collectively, the “Plans”). The 2002 Plan, the 2009 Plan, the 2011 Plan and the 2015 Plan (the “Prior Plans”) have been superseded by the 2018 Plan. In May 2018, the stockholders approved the 2018 Plan for issuances up to an aggregate of
31
otherwise expired or terminated in accordance with the terms of such awards, but no awards will be made pursuant to the Prior Plans after the effectiveness of the 2018 Plan. As of March 31, 2022, the Company had
During the three months ended March 31, 2022 and 2021, we granted stock options at exercise prices equal to 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:
March 31, |
||||
|
2022 |
|
2021 |
|
Expected life (years) |
||||
Risk-free interest rate |
|
% |
||
Volatility |
|
% |
||
Dividend yield |
|
|||
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 average of the historical volatility and the implied 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 on a straight-line basis over the vesting period. Stock-based compensation expense is recognized only for those awards that ultimately vest.
Total stock-based compensation expense related to all of our share-based payment awards is comprised of the following:
Three Months Ended March 31, |
||||||
|
2022 |
|
2021 |
|||
Cost of revenues |
$ |
|
$ |
|
||
Selling, general and administrative |
|
|
|
|
||
Engineering and development |
|
|
|
|
||
$ |
|
$ |
|
|||
A summary of stock option activity is as follows:
Weighted- |
||||||||||
Weighted- |
Average |
|||||||||
Average |
Remaining |
Aggregate |
||||||||
Number of |
Exercise |
Contractual |
Intrinsic |
|||||||
|
Shares |
|
Price/Share |
|
Term (Years) |
|
Value (1) |
|||
Outstanding — December 31, 2021 |
|
|
$ |
|
|
|
|
|
||
Granted (weighted-average fair value of $ |
|
|
|
|||||||
Exercised |
|
( |
|
|
|
|
|
|||
Forfeited |
|
( |
|
|
|
|
|
|||
Outstanding — March 31, 2022 |
|
|
$ |
|
|
$ |
|
|||
Vested (exercisable) — March 31, 2022 |
|
|
$ |
|
|
$ |
|
|||
Expected to vest after March 31, 2022 (unexercisable) |
|
|
$ |
|
|
$ |
|
|||
| (1) |
Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of our common stock on March 31, 2022, which was $ |
Total intrinsic value of options exercised during the three months ended March 31, 2022 and 2021 was $
As of March 31, 2022, there was unrecognized compensation expense of $
32
Restricted stock units
A summary of our restricted stock unit activity is as follows:
Weighted Average |
|||||
Number of Restricted |
Fair Value per |
||||
Stock Units |
Share |
||||
Outstanding – December 31, 2021 |
|
|
|
$ |
|
Granted |
|
|
|
|
|
Share issuance |
( |
|
|||
Forfeited |
|
( |
|
|
|
Outstanding – March 31, 2022 |
|
|
$ |
|
|
For the three months ended March 31, 2022 and 2021, we recorded stock-based compensation expense on our issued restricted stock units of $
Note 15. Subsequent Event
Acquisition of Cell&Co BioServices
In April 2022, we completed the acquisition of Cell&Co BioServices in Clermont-Ferrand, France with additional operations in Pont-du-Château, France to further enhance our existing global temperature-controlled supply chain capabilities. Cell&Co BioServices is a bioservices business providing biorepository, kitting, and logistics services to the life sciences industry. The purchase consideration was €
Repurchase Program
The Company purchased
33
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In this Quarterly Report on Form 10-Q (this “Quarterly Report”), the terms “Cryoport,” “Company” and similar terms refer to Cryoport, Inc. and its consolidated subsidiaries, unless the context suggest otherwise.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS:
This Quarterly Report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. In some cases, you can identify these statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar words which are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Reference is made in particular to forward-looking statements regarding our expectations about future business plans, new products or services, regulatory approvals, strategies, development timelines, prospective financial performance and opportunities, including potential acquisitions, expectations about future benefits of our acquisitions, including Cryogene Partners, CRYOPDP and MVE Biological Solutions, our ability to successfully integrate those businesses and our plans related thereto; liquidity and capital resources; projected trends in the market in which we operate; anticipated impacts from the coronavirus strain COVID-19 (“COVID-19”) on us, including to our business operations, results of operations, cash flows, and financial position, and our future responses to the COVID-19 pandemic; our expectations relating to current supply chain impacts; our expectations about securing and maintaining strategic relationships with global couriers or large clinical research organizations; our future capital needs and ability to raise capital on favorable terms or at all; results of our research and development efforts; and approval of our patent applications.
Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission (“SEC”), including those contained in this Quarterly Report, in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022 (the “2021 Annual Report”), and those reports filed after the date of this Quarterly Report. Actual results may differ materially from any forward looking statement.
The following management’s discussion and analysis of the Company’s financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated balance sheet as of March 31, 2022 (unaudited) and the consolidated balance sheet as of December 31, 2021 (audited) and the related unaudited condensed consolidated statements of operations, comprehensive loss, and stockholders equity for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021 and the related notes thereto (see Part I, Item 1. Financial Statements), as well as the audited consolidated financial statements of the Company for years ended December 31, 2021 and 2020, included in the Company’s 2021 Annual Report.
Overview
Cryoport is a global leader in serving the life sciences industry as a trusted provider of integrated temperature-controlled supply-chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets. Our mission is to support life and health worldwide and we are continuously developing, implementing, and leveraging our supply chain platform, which is designed to deliver comprehensive, unparalleled, highly differentiated temperature-controlled logistics, packaging, storage, cryogenic systems, informatics, and related services for life science products, regenerative medicine, cellular therapies, and treatments that require unique, specialized cold chain management.
34
Spread across 15 countries and 33 locations worldwide, we serve more than 3,000 customers working in biopharmaceutical, animal husbandry and reproductive medicine companies, universities, research institutions and government agencies. Our platform of solutions together with our global team of more than 850 colleagues delivers a unique combination of innovative supply chain technologies and services through our industry-leading brands, Cryoport Systems, CryoStork®, MVE Biological Solutions, CRYOPDP, and CRYOGENE.
Cryoport’s advanced supply chain 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) and New Drug Applications (NDA) with the FDA, as well as global clinical trials initiated in other countries, where strict regulatory compliance and quality assurance is mandated. Over the last several years, we have grown to become a leader in supporting the clinical trials and commercial launches of cell and gene therapies globally. As of March 31, 2022, we supported 609 clinical trials and nine (9) commercial therapies, including KYMRIAH by Novartis, YESCARTA and TECARTUS by Gilead/Kite, and BREYANZI and ABECMA by Bristol-Myers Squibb. A total of eleven (11) Cryoport-supported Biologic License Applications (BLAs) or Marketing Authorization Applications (MAAs) were filed in fiscal year 2021, based on internal information and forecasts from the Alliance for Regenerative Medicine, of which two (2) were filed during the fourth quarter of 2021. During the first quarter Gilead’s Yescarta® was approved by the FDA as a second line treatment for relapsed/refractory large B-cell lymphoma, Bristol Myers’ Breyanzi® received approval in the EU for the third line treatment of relapsed/refractory large B-cell lymphoma, and Legend/Janssen received approval for Carvykti™ in the EU for a fifth line treatment of multiple myeloma. A total of two (2) Cryoport supported Biologic License Applications (BLAs) or Marketing Authorization Applications (MAAs) were filed in first quarter 2022. During the remainder of 2022, we anticipate up to an additional fifteen (15) filings, three (3) new therapy approvals, and an additional five (5) label or geographic expansion approvals. Also, we are now forecasting a combined total of twenty (20) BLA or MAA filings in 2023. Those therapies that receive commercial approval will provide opportunities to become significant revenue drivers for us in the future as the majority of them will require temperature-controlled storage, comprehensive temperature-controlled supply chain support and other services at commercial scale, and we expect that many will select us as their critical supply chain solution as a result of our work in connection with their respective clinical trials and track record in the market.
Cryoport’s advanced supply chain platform also supports the animal health market and the human reproductive market. The animal health market is mainly composed of supporting animal husbandry, as well as companion and recreation animal health. The human reproductive market is largely composed of In-Vitro Fertilization (IVF) support for patients and clinics.
Our industry standard setting Chain of Compliance® 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 Compliance® standard ensures full traceability of the equipment used and the processes employed during storage, fulfillment, and distribution, further supporting each client’s goal of minimizing risk and maximizing success of their respective new biologics or other products and therapies as they are introduced into the global markets.
As part of our services, our platform of technologies provides the ability for Cryoport personnel, and our clients, to monitor conditions of the internal physical environment, geographic location and other specified critical variables for each shipment or sample in near real time. In accordance with client requirements, information is recorded and archived for each shipment or sample for scientific, quality assurance and regulatory purposes in a secure cloud-based system that can be accessed by authorized personnel globally. This information provides an audit trail that can verify the in-shipment or sample condition in which the life sciences commodity, material, product, vaccine, or therapy was shipped and/or stored.
One of the key important features of our supply chain solutions platform is our suite of sophisticated, cloud-based, logistics management platforms, which are branded as the Cryoportal® Logistics Management Platform (the “Cryoportal®”), and CRYOPDP UnITy platform, both of which are supported by an integrated control tower. These platforms support the management of shipments through a single interface, which includes order entry, document preparation, customs documentation, courier management, near real-time shipment tracking and monitoring, issue resolution, and regulatory compliance requirements. In addition, they provide unique and incisive information dashboards and validation documentation for every shipment through data collected by the SmartPak ™ Condition Monitoring System(s) (the “SmartPak™”). The Cryoportal® can record and retain a fully documented history of all Cryoport Express® and ELITE™ Shippers, including chain-of-custody, chain-of-condition, chain-of-identity, and Chain of Compliance™ information for each shipment, which is used to ensure that the stability of shipped biologic commodities are maintained throughout the shipping cycle. At the client’s option, recorded information is archived, allowing the client to meet exacting requirements necessary for scientific work
35
and/or proof of regulatory compliance during the logistics process. CRYOPDP’s UnITy transportation management platform contains various modules that include tracking, order management, and asset management, all of which report up to a main control tower to ensure full supply chain visibility and supporting analytics.
Cryoport’s MVE Biological Solutions systems are an important part of our global supply chain platform. MVE Biological Solutions is the leading global manufacturer of temperature-controlled storage and distribution equipment and systems. MVE has set the standard for the manufacture of cryogenic systems including vacuum insulated products and cryogenic freezer and shipper solutions used for storage and/or distribution of critical biological material for more than 50 years. MVE Biological Solutions’ equipment is used extensively throughout the life sciences industry and is the trusted solution within the regenerative medicine space for the storage and distribution of cell and gene therapies. Moreover, Cryoport Systems in conjunction with MVE Biological Solutions are developing a new platform of ultra-low temperature smart packaging for cell and gene therapy distribution through a new purpose built Cryoport ELITE™ product line. The first two products in the Cryoport ELITE™ line to launch will be the Cryosphere™, which is a first of its kind gravitationally stabilized cryogenic shipper aimed at supporting of cell therapies and a novel ELITE™-80°C shipper, which, is purpose built for the support of gene therapy distribution and upstream viral vector products. Both these products are being launched to complement our current Cryoport Express® and CRYOPDP Temperature Controlled Packaging Solutions.
Our advanced technologies and dedicated personnel allow us to continue to expand our services footprint with a growing suite of services, products and competencies supporting the life sciences industry, which currently include information technology, primary and secondary packaging, analytics, logistics distribution, laboratory relocation, biostorage services, embedded logistics support and validation services (e.g., for shipping lanes and packaging) and consulting services. A sample of our client facing, supply-chain solutions include the following service platforms:
| ● | Industry leading temperature-controlled packaging and data management at all temperatures via MVE, Cryoport Systems and CRYOPDP |
| ● | Logistics planning, management, and transportation of critical materials globally via Cryoport Systems and CRYOPDP |
| ● | cGMP storage and distribution (equipment and services) of life science materials via CRYOGENE, MVE and Cryoport Systems |
| ● | Kitting, labelling, drug return and return therapy destruction via Cryoport Systems |
| ● | Consulting services in support of custom primary and secondary packaging, as well as packaging validation and testing services via Cryoport Systems |
These service platforms have been designed to effectively support, for example, the following use cases:
| ● | Cell-based Autologous Immunotherapy (Personalized Medicine) Solutions, designed for therapies in which our Cryoport ELITE™, Cryoport Express®, and CRYOPDP Solutions serve as an enabling technology for the safe and efficient storage and transportation of leukapheresis or apheresis blood products as well as the manufactured autologous cellular-based immunotherapies. This is accomplished by providing a comprehensive logistics solution for the verified chain-of-condition, chain-of-custody, chain-of-identity, and Chain of Compliance® transport from, (a) the collection of the patient’s blood or cells at a point-of-care setting, to (b) a central processing facility where they are manufactured into a personalized medicine, to (c) the safe, cryogenically preserved delivery of these often irreplaceable cells to a point-of-care treatment facility for infusion into the patient. The Advanced Therapy Shippers™ and Cryoport ELITE™ Shippers are designed specifically for this market. If required, Cryoport Express® Shippers can also serve as a temporary freezer/repository supporting the efficient distribution of the personalized medicine to the patient when and where the medical provider needs it, without the expense and inconvenience of on-sight, cryopreservation storage freezers. |
| ● | Allogeneic Therapy Solutions, designed for allogeneic therapies in which our Cryoport ELITE™, Express®, and CRYOPDP Solutions serve as enabling technologies for the safe and efficient storage and transportation of healthy donor blood products as well as the manufactured allogeneic therapies by providing a comprehensive logistic solutions for the verified chain-of-condition, chain-of-custody, chain-of-identity, and Chain of Compliance® transport from, (a) the blood collection center, to (b) the manufacturing facility for the allogeneic therapy, to (c) a storage and fulfillment facility, or (d) to a point-of-care treatment facility for infusion into the patient. This is another market where the Cryoport Systems’ Advanced Therapy Shipper™ and Cryoport ELITE™ shippers will play a role. |
36
| ● | Gene Therapy Solutions, designed for gene therapies in which our Cryoport ELITE™ solution has been purpose designed to be a best-in-class platform for the safe and efficient transportation of gene therapy products at -80°C by providing comprehensive packaging, logistics, and storage solutions for the verified chain-of-condition, chain-of-custody, chain-of-identity, and Chain of Compliance® transport from (a) the manufacturing facility for the gene therapy, to (b) a storage and fulfillment facility, or (c) to a point-of-care treatment facility for infusion into the patient. |
| ● | Direct-to-Patient Solutions, designed for therapies and/or programs that require distribution to a residential or community care setting. Our CRYOPDP unit has developed specific processes and services in support of Direct-to-Patient requirements that include regulatory, security, accessibility, good distribution practices (GDP), and confidentiality considerations. |
| ● | Consulting Services, provides our clients an opportunity to leverage our in-house talent and knowledge to design custom logistics plans, perform lane assessment, lane and carrier validation; design custom packaging and validation, permitting clinical trial logistics design; commercial launch planning; systems integration; and end user training. Additionally, our Consulting Services team has developed a “Packaging Center of Excellence” in support of the advanced therapies space. |
Cryoport’s mission is to enable the life sciences to save and improve lives around the world by providing certainty throughout the supply chain – one patient, one therapy, one product at a time. Our people, innovative solutions, and industry leading technologies have been designed to exceed current standards to deliver certainty and de-risk the process across the entire supply chain for the life sciences.
The Markets We Serve
Cryoport serves the life sciences industry as a trusted provider of integrated temperature-controlled supply-chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets.
Biopharma/Pharma. In the biopharma/pharma market, we are focused on supporting the saving of lives. From clinical research and development to clinical research organizations, to clinical trials for cell and gene therapies, to the storage and delivery of life-saving commercial cell and gene therapies, to the customers of biopharmaceutical and biotechnology organizations, to crucial points of care, we strive to address fundamental-to-advanced temperature-controlled storage, transport, packaging, fulfillment, and information challenges. Cell and gene therapies have become a rapidly growing area of biological drug development, with over $22.7 billion in funding raised in 2021 and 1,171 industry-sponsored, global clinical trials underway as of the end of 2021, as reported by the Alliance for Regenerative Medicine in their 2021 Report. These therapeutic approaches have certain supply chain challenges that we believe our solutions are well tailored to address.
| ● | Cell Therapies. As per the Alliance for Regenerative Medicine, Cell therapy is “the administration of viable, often purified cells into a patient’s body to grow, replace, or repair damaged tissue for the treatment of a disease. A variety of different types of cells can be used in cell therapy, including hematopoietic (blood-forming) stem cells, skeletal muscle stem cells, neural stem cells, mesenchymal stem cells (adult stem cells that differentiate into structures as connective tissues, blood, lymphatics, bone, and cartilage), lymphocytes, dendritic cells, and pancreatic islet cells. Cell therapies may be autologous, meaning that the patient receives cells from their own body, or they may be allogeneic, meaning the patient receives cells from a donor. Allogeneic cell therapies are often referred to as “off-the-shelf” therapies, as they are derived from a donor who is not the patient, enabling advance preparation and available to the patient immediately at the time of need.” |
Cryoport has been focused on the cell and gene therapy market and we have successfully established ourselves as a premier provider of supply chain solutions and now support 609 clinical trials and several commercial programs in the space. Our solutions have been developed to specifically support this space and offer the highest level of temperature control and visibility within the market. Additionally, Cryoport has developed its Chain of Compliance™ platform that has been specifically developed to support irreplaceable clinical and commercial therapies and of which many of the critical requirements are featured in the recently released ISO 21973 guidance issued by the International Organization for Standardization (ISO) which specifically outlines General Requirement for Transportation of Cells for Therapeutic Use.
| ● | Gene Therapies. As per the Alliance for Regenerative Medicine, “Gene therapy seeks to modify or introduce genes into a patient’s body with the goal of durably treating, preventing, or potentially even curing disease, including several types of cancer, viral diseases, and inherited disorders.” These therapies often cost more than $1,000,000 per patient and are irreplaceable. Significant funding has been committed to this space with more than $10.2 billion in funding in 2021 as |
37
| reported by the Alliance for Regenerative Medicine in their 2021 Report. Cryoport has developed its ELITE™ -80°C shipper line to support this space as a best-in-class product. |
Animal Health. In the animal health market, we provide support for animal reproduction, which primarily involves the production of protein for sustaining life. We also support medicine for the health of recreational and companion animals. Animal disease prevention and control rely on the safe transport and storage of vaccines and other biological materials around the world. Our temperature-controlled supply chain solutions are designed to help avoid costly delays through nonstop monitoring and complete fleet management from and to the origin and destination points as well as provide cryobiological storage equipment.
Reproductive Medicine. In the human reproductive medicine market, we are focused on the support of the creation of human life. This is primarily accomplished by supporting In Vitro Fertilization, or IVF, and related technologies along with clinical networks globally. Through our CryoStork® services, we transport reproductive materials through dedicated medical transport services to help ensure that IVF materials are on the next flight out to their destination. IVF materials also receive one-on-one handling and individualized attention during the entire logistics process. In addition, we also provide cryobiological storage equipment to fertility clinics around the world.
Impact of COVID-19
In late 2019, a novel strain of coronavirus that causes coronavirus disease (COVID-19) was reported to have surfaced in Wuhan, China, which has since spread globally. More recently, new variants of COVID-19, such as the Omicron variant and its subvariants, which are significantly more contagious than previous strains, have emerged. The spread of these new strains is causing many government authorities and businesses to reimplement prior restrictions, or impose new restrictions, in an effort to lessen the spread of COVID-19 and its variants. There continues to be significant uncertainty related to the ultimate duration and impact that this global pandemic will have on future results of our operations. Further, virus containment efforts as a result of governmental actions or policies or other initiatives have led to the disruption in the global supply chain and as a result, we have experienced difficulties sourcing materials and equipment and may incur additional direct costs to provide our solutions in the future. See “Risk Factors—Risk Related to Our Business—We depend on the availability of certain component products used in our solutions; delays or increased costs in the procurement of components manufactured by third parties could adversely affect our business operations, financial performance and results of operations, and we may experience customer dissatisfaction and harm to our reputation” in Part I, Item 1A of our 2021 Annual Report for additional information.
We continue to monitor the evolving situation caused by the COVID-19 pandemic, and we may take further actions required by governmental authorities or that we determine are prudent to support the well-being of our employees, customers, suppliers, business partners and others. The degree to which COVID-19 impacts our business operations, financial performance and results of operations will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to, the duration and spread of the COVID-19 outbreak and its variants; its severity; the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus), and the potential hesitancy to utilize them; and how quickly and to what extent normal economic and operating conditions can resume. See “Risk Factors—Risk Related to Our Business—The global pandemic caused by COVID-19 has already and may continue to adversely affect our business operations, financial performance and results of operations, the extent of which is uncertain and difficult to predict” and the other risk factors discussed in Part I, Item 1A of the 2021 Annual Report for additional information.
MVE Biological Solutions Fire
On January 25, 2022, a fire occurred at the MVE Biological Solutions manufacturing facility located in New Prague, Minnesota (“New Prague Fire”). The New Prague facility manufactures aluminum dewars and is one of MVE Biological Solutions’ three global manufacturing facilities. There were no injuries reported and damage was limited to a portion of the facility. As a consequence of the fire damage, the New Prague manufacturing operations were curtailed on an interim basis until the necessary repairs were completed. Production was resumed at the facility during the week of February 14, 2022 and ramped up to full production during the first quarter of 2022. The Company estimates the revenue impact of $9.4 million to be limited to the first quarter. Furthermore, the Company expects its insurance to cover the costs to restore and re-open the facility, as well as related business interruption losses.
Russian Invasion of Ukraine
On February 24, 2022, Russian forces launched significant military actions against Ukraine, and sustained conflict and disruption in the region is likely. Additionally, the U.S. and foreign government bodies in jurisdictions in which we operate have
38
implemented targeted sanctions and export control measures and have announced potential additional sanctions and export control measures, which have and could in the future result in, among other things, severe or complete restrictions on exports to and other commerce and business dealings involving Russia, certain regions of Ukraine, and/or particular entities and individuals. The impact of these government measures, as well as any further retaliatory actions taken by Russia and the U.S. and foreign government bodies, is currently unknown. Potential impacts related to the conflict could include additional unilateral or multilateral export control and sanctions measures, market disruptions, including significant volatility in commodity prices, credit and capital markets, supply chain and logistics disruptions, adverse global economic conditions resulting from escalating geopolitical tensions and the exclusion of Russian financial institutions from the global banking system, volatility and fluctuations in foreign currency exchange rates and interest rates, inflationary pressures on raw materials and heightened cybersecurity threats, which could adversely impact our business, financial condition or results of operations, in particular, CRYOPDP’s business activities in Russia, as well as our other European business operations. Currently, we do not believe that this has materially impacted our operations,
Results of Operations
Three months ended March 31, 2022 compared to three months ended March 31, 2021:
The following table summarizes certain information derived from our condensed consolidated statements of operations (in thousands):
Three Months Ended March 31, |
|
|||||||||||
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|
||||
($ in 000’s) |
||||||||||||
Service revenues |
|
$ |
32,910 |
$ |
26,765 |
$ |
6,145 |
|
23.0 |
% |
||
Product revenues |
|
19,392 |
|
26,519 |
|
(7,127) |
|
(26.9) |
% |
|||
Total revenues |
|
52,302 |
|
53,284 |
|
(982) |
|
(1.8) |
% |
|||
Cost of service revenues |
(18,718) |
(15,552) |
(3,166) |
20.4 |
% |
|||||||
Cost of product revenues |
(11,243) |
(13,182) |
1,939 |
(14.7) |
% |
|||||||
Total cost of revenues |
(29,961) |
(28,734) |
(1,227) |
4.3 |
% |
|||||||
Gross margin |
|
22,341 |
|
24,550 |
|
(2,209) |
|
(9.0) |
% |
|||
Selling, general and administrative |
|
(26,622) |
|
(21,388) |
|
(5,234) |
|
24.5 |
% |
|||
Engineering and development |
|
(3,538) |
|
(4,304) |
|
766 |
|
(17.8) |
% |
|||
Investment income |
1,264 |
398 |
866 |
217.2 |
% |
|||||||
Interest expense |
|
(1,491) |
|
(1,210) |
|
(281) |
|
23.2 |
% |
|||
Other expense, net |
(5,017) |
(535) |
(4,482) |
(837.5) |
% |
|||||||
Provision for income taxes |
|
(341) |
|
(1,038) |
|
697 |
|
(67.1) |
% |
|||
Net loss |
$ |
(13,404) |
$ |
(3,527) |
$ |
(9,877) |
|
280.0 |
% |
|||
Paid-in-kind dividend on Series C convertible preferred stock |
(2,000) |
(2,196) |
196 |
(8.9) |
% |
|||||||
Net loss attributatble to common stockholders |
$ |
(15,404) |
$ |
(5,723) |
$ |
(9,681) |
|
169.1 |
% |
|||
Total revenues by market (in thousands):
Three Months Ended March 31, |
||||||||||||
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
|||||
Biopharma/Pharma |
$ |
43,011 |
$ |
42,393 |
$ |
618 |
1.5 |
% |
||||
Animal health |
6,794 |
8,997 |
(2,203) |
(24.5) |
% |
|||||||
Reproductive medicine |
2,497 |
1,894 |
603 |
31.8 |
% |
|||||||
Total revenues |
$ |
52,302 |
$ |
53,284 |
$ |
(982) |
(1.8) |
% |
||||
Revenues. Revenues decreased by $1.0 million, or 1.8%, from $53.3 million to $52.3 million for three months ended March 31, 2022, as compared to the same period in 2021. This decrease was a result of the New Prague Fire that has negatively impacted the first quarter of 2022 by approximately $9.4 million. The New Prague facility manufactures aluminum dewars and is one of MVE Biological Solutions' three global manufacturing facilities. The decline in revenue during the quarter was partially offset by the continuing robust demand for Cryoport’s logistics solutions, particularly in the biopharma/pharma and reproductive medicine markets.
39
Service revenues increased by $6.1 million, or 23.0%, from $26.8 million to $32.9 million for the three months ended March 31, 2022, as compared to the same period in 2021. This increase was driven by strong customer demand for our supply chain solutions provided by Cryoport Systems, CRYOPDP, and CRYOGENE.
Product revenues decreased $7.1 million, or 26.9%, from $26.5 million to $19.4 million for the three months ended March 31, 2022, as a result of the New Prague Fire that led to approximately $9.4 million in revenue loss for the quarter. Product revenues consists primarily of revenue from our portfolio of cryogenic stainless-steel freezers, aluminum dewars and related ancillary equipment used in the storage and transport of life sciences commodities, which includes the rapidly growing Cell and Gene Therapy market through a global network of distributors and direct client relationships.
Revenues by market
Revenue from the biopharma/pharma market increased $0.6 million, or 1.5%, from $42.4 million to $43.0 million for the three months ended March 31, 2022, as compared to the same period in 2021. This increase was driven by revenue growth from the support of global clinical trials and commercially launched therapies as well as general demand for our logistics and biostorage services, partially offset by the impact of the New Prague Fire of approximately $6.7 million. We now support 609 clinical trials, of which 477 trials are in the Americas, 99 are in EMEA and 33 are in APAC, compared to 543 clinical trials supported as of March 31, 2021 (429 in the Americas, 86 in EMEA and 28 in APAC). The number of Phase III clinical trials supported increased to 81 trials as of March 31, 2022, of which 57 are in the Americas, 22 are in EMEA, and 2 are in APAC. This compares to 69 Phase III trials (49 in the Americas, 19 in EMEA and 1 in APAC) supported as of March 31, 2021. The activity in the clinical trial space, particularly in the Cell and Gene Therapy market is expected to drive future revenue growth as these clinical trials advance and resulting therapies are commercialized on a global basis.
Our revenue from the animal health market decreased $2.2 million, or 24.5%, from $9.0 million to $6.8 million for the three months ended March 31, 2022, as compared to the same period in 2021. This decrease was due to the New Prague Fire which impacted the revenue for the animal health market by approximately $2.4 million. This New Prague manufacturing facility has ramped back up to full production by the end of March 2022.
Revenues in the reproductive medicine market increased $0.6 million, or 31.8%, from 1.9 million to $2.5 million for the three months ended March 31, 2022, as compared to the same period in 2021. This increase was driven by strong demand for our CryoStork® logistics solution and cryogenic shippers, partially offset by the impact of the New Prague Fire of approximately $0.3 million.
Gross margin and cost of revenues. Gross margin for the three months ended March 31, 2022 was 42.7% of total revenues, as compared to 46.1% of total revenues for the three months ended March 31, 2021. The decrease was primarily a result of increased costs due to global supply chain constraints. Cost of total revenues increased $1.2 million to $30.0 million for the three months ended March 31, 2022, as compared to $28.7 million in the same period in 2021.
Gross margin for our service revenues was 43.1% of service revenues, as compared to 41.9% of service revenues for the three months ended March 31, 2021. Our cost of 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.
Gross margin for our product revenues was 42.0% of product revenues, as compared to 50.3% of product revenues for the three months ended March 31, 2021. The decrease was a result of increased costs as a result of global supply chain constraints. Product revenues, related cost of revenues and resulting gross margins were primarily driven by our MVE Biological Solutions business. Our cost of product revenues were 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 were included in cost of product revenues.
Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our products and services and costs required to support our marketing efforts including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.
For the first quarter of 2022, SG&A expenses increased by $5.2 million, or 24.5% as compared to the first quarter of 2021. This increase is driven by the further build out of our competencies and infrastructure to support the continuing scaling of our business and demand for Cryoport’s systems and solutions, such as the two new global supply chain centers in Houston, Texas and Morris Plains,
40
New Jersey for which grand openings are scheduled in June 2022. Wages and associated employee costs increased $2.9 million from $8.5 million in 2021 to $11.4 million in 2022. Stock compensation expense increased by $0.7 million, facility costs and other overhead allocations increased by $0.5 million, which includes start-up costs related to our expansions in Houston, Texas and Morris Plains, New Jersey and a $0.2 million increase in travel and lodgings compared to the same period in the prior year. Intangible asset amortization expense is included in SG&A and consists of charges related to the amortization of intangible assets associated with the acquisitions of CRYOPDP and MVE Biological Solutions in 2020 and Cryogene in 2019, in which we acquired definite-lived intangible assets. Intangible asset amortization expense increased by $0.2 million, from $3.6 million in 2021, to $3.8 million in 2022. These increases were partially offset by a decrease in public company related expenses (including legal, audit and internal control audit fees) of $0.2 million.
Engineering and development expenses. Engineering and development expenses decreased $0.8 million, or 17.8%, for three months ended March 31, 2022, as compared to the same period in 2021. The decrease was primarily due to a decrease of $1.3 million in consulting, prototype and development costs which was partially offset by an increase of $0.3 million in wages and associated employee costs to add software development and engineering resources. We continually strive to improve and expand the features of our Cryoport Express® Solutions and portfolio of services and suite of temperature-controlled products. Our primary developments are directed towards facilitating the safe, reliable and efficient transport and storage of life science commodities through innovative and technology-based solutions. This includes significantly enhancing our Cryoportal® Logistics Management Platform and related technology solutions as well as developments to expand our Cryoport Express® and Cryoport ELITE™ shipper fleet, such as the Cryosphere™ shipper, a cryogenic dry-vapor shipper utilizing patent pending technology that passively stabilizes the payload through an internal gravitational sphere, thereby further mitigating transport risks. In addition, engineering and development efforts are also focused on MVE Biological Solutions’ portfolio of advanced cryogenic stainless-steel freezers, aluminum dewars and related ancillary equipment used in the storage and transport of life sciences commodities. We supplement our internal engineering and development resources with subject matter experts and consultants to enhance our capabilities and shorten development cycles.
Investment Income. Investment income increased by $0.9 million, for the three months ended March 31, 2022, as compared to the prior year as a result of higher average invested cash balances offset by lower interest rates on such invested cash balances.
Interest expense. Interest expense increased by $0.3 million, from $1.2 million to $1.5 million for the three months ended March 31, 2022, as compared to the prior year due to interest on the convertible senior notes and amortization of the related debt discount.
Other expense, net. The increase in other expense, net for the three months ended March 31, 2022, as compared to the prior year is primarily due to unrealized losses of $4.9 million on short-term investments and foreign currency fluctuations.
Provision for income taxes. The provision for income taxes decreased $0.7 million for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, resulting in effective tax rates of negative 2.6% and negative 41.7%, respectively. The decrease in tax expense and effective tax rate for the three months ended March 31, 2022, as compared to the prior year is due to lower taxable foreign earnings and an increase in our domestic losses which resulted in no additional tax benefit. The negative effective tax rate of 2.6% for the three months ended March 31, 2022, differed from the U.S. federal statutory rate of 21% primarily due to changes in the valuation allowance that we maintain against our deferred tax assets, income earned by certain foreign subsidiaries being taxed at different rates than the U.S. federal statuary rate, and excess tax benefits associated with share-based compensation.
Paid-in-kind dividend on Series C convertible preferred stock. The paid-in-kind dividend relates to the private placement of Series C Preferred Stock with Blackstone.
Non-GAAP Financial Measures
We provide adjusted EBITDA, a non-GAAP financial measure, as a supplemental measure to U.S. GAAP measures regarding our operating performance. Adjusted EBITDA is defined as net loss adjusted for interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, acquisition and integration costs, investment income, unrealized loss on investments, and charges or gains resulting from non-recurring events. Adjusted EBITDA is not calculated in accordance with U.S. GAAP, is not based on any comprehensive set of accounting rules or principles and may be different from non-GAAP financial measures presented by other companies. Non-GAAP financial measures, including adjusted EBITDA, should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.
41
Management believes adjusted EBITDA provides a useful measure of our operating results, a meaningful comparison with historical results and with the results of other companies, and insight into our ongoing operating performance. Further, management and our board of directors utilize adjusted EBITDA to gain a better understanding of our comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Management believes adjusted EBITDA, when read in conjunction with our U.S. GAAP financials, is useful to investors because it provides a basis for meaningful period-to-period comparisons of our ongoing operating results, including results of operations, against investor and analyst financial models, identifying trends in our underlying business and performing related trend analyses, and it provides a better understanding of how management plans and measures our underlying business.
Cryoport, Inc. and Subsidiaries
Adjusted EBITDA Reconciliation
(Unaudited, in thousands)
|
Three Months Ended |
|||||
March 31, |
||||||
|
2022 |
|
2021 |
|||
GAAP net loss |
$ |
(13,404) |
$ |
(3,527) |
||
Non-GAAP adjustments to net loss: |
|
|
|
|
||
Depreciation and amortization expense |
|
5,365 |
|
4,837 |
||
Acquisition and integration costs |
|
257 |
|
828 |
||
Investment income |
|
(1,264) |
|
(398) |
||
Unrealized loss on investments |
4,908 |
263 |
||||
Interest expense, net |
|
1,491 |
|
1,210 |
||
Stock-based compensation expense |
|
4,125 |
|
2,990 |
||
Income taxes |
|
341 |
|
1,038 |
||
Adjusted EBITDA |
$ |
1,819 |
$ |
7,241 |
||
Liquidity and Capital Resources
As of March 31, 2022, the Company had cash and cash equivalents of $134.4 million, $465.1 million in short-term investments and had working capital of $621.3 million. Historically, we have financed our operations primarily through sales of equity securities and debt instruments.
For the three months ended March 31, 2022, our operating activities provided cash of $0.5 million, reflecting the net loss of $13.4 million offset by non-cash expenses of $15.2 million primarily comprised of $5.4 million of depreciation and amortization, $4.1 million of stock-based compensation, $4.9 million of unrealized losses on our equity securities as well as $0.6 million of amortization of debt discount. Also contributing to the cash impact of our net operating loss, excluding non-cash items, was insurance proceeds of $3.0 million for operations related to the fire at our New Prague, Minnesota manufacturing plant in January 2022, an increase in inventory of $7.7 million primarily due to MVE Biological Solutions proactively securing inventory to avoid supply chain delays and cost increases (of which, $2.1 million relates to the disposal of inventory due to the fire), and an increase in accrued compensation of $2.1 million. These increases were partially offset by a decrease in accounts receivable of $3.3 million and a decrease in accounts payable and accrued expenses of $2.1 million.
Net cash provided by investing activities of $3.1 million during the three months ended March 31, 2022 was primarily due to the $30.4 million purchase of short-term investments, and $4.2 million for the capitalization of software development costs for our Cryoportal® Logistics Management Platform, and additional purchases of Cryoport Express® Shippers, Smart Pak IITM Condition Monitoring Systems, freezers and computer equipment. These uses of cash were partially offset by the maturity of short-term investments of $36.0 million and $2.0 million of insurance proceeds for the loss of fixed assets in connection with the fire at our New Prague, Minnesota manufacturing plant.
Net cash used in financing activities totaled $8.0 million during the three months ended March 31, 2022, primarily as a result of $8.3 million used to repurchase 306,300 shares of our common stock under the Repurchase program which was partially offset by $0.3 million proceeds from the exercise of stock options and warrants.
The Company’s management believes that, based on its current plans and assumptions, the current cash and cash equivalents on hand, short-term investments, together with projected cash flows, will satisfy our operational and capital requirements for at least the
42
next twelve months. The Company’s management recognizes that the Company may need to obtain additional capital to fund its operations and potential acquisitions until sustained profitable operations are achieved. Additional funding plans may include obtaining additional capital through equity and/or debt funding sources. No assurance can be given that additional capital, if needed, will be available when required or upon terms acceptable to the Company.
Repurchase Program
On March 11, 2022, the Company announced that its board of directors authorized a repurchase program (the “Repurchase Program”) through December 31, 2025, authorizing the repurchase of common stock and/or convertible senior notes in the amount of up to $100.0 million from time to time on the open market or otherwise, in such quantities, at such prices, and in such manner as determined by the Company’s management at its discretion. The size and timing of any repurchase will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. The Company purchased 306,300 shares of its common stock under the Repurchase Program during the three months ended March 31, 2022, at an average price of $27.24 per share, for an aggregate purchase price of $8.3 million. These shares were returned to the status of authorized but unissued shares of common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing when interest rates are declining and declining when interest rates are increasing. We invest our excess cash in high investment grade money market funds and investment grade short to intermediate-term fixed income securities. Fixed income securities may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses if forced to sell securities that have declined in market value due to changes in interest rates. As of March 31, 2022, the estimated fair value of the Senior Notes was $328.2 million. For additional information about the Senior Notes, see Note 9 in our accompanying consolidated financial statements.
Foreign Exchange Risk
We operate in the United States and other foreign countries, which creates exposure to foreign currency exchange fluctuations. Net sales and related expenses generated from our international business are primarily denominated in the functional currencies of the corresponding subsidiaries and primarily include Euros, British Pounds, Chinese Yuan, and Indian Rupee.
We have foreign exchange risk related to foreign-denominated cash and cash equivalents. Based on the balance as of March 31, 2022, of $20.2 million, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in declines of $1.0 million, $2.0 million and $4.0 million, respectively, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders’ equity.
We have foreign exchange risk related to our long-term intercompany balances denominated in Euros. Based on the long-term intercompany balances as of March 31, 2022, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of $3.9 million, $7.8 million, and $15.9 million respectively, reported as accumulated other comprehensive income (loss) and included as a separate component of stockholders' equity.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
43
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we are at times subject to various legal proceedings and disputes, including product liability claims. We currently are not aware of any such legal proceedings or claim that we believe will have, individually or in the aggregate, a material adverse effect on our business, operating results or cash flows. It is our practice to accrue for open claims based on our historical experience and available insurance coverage.
ITEM 1A. |
RISK FACTORS |
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors described in Part I, Item 1A, Risk Factors, in the 2021 Annual report and the risk factors described below, which could materially and adversely affect our business, financial condition and results of operations. These risk factors do not identify all of the risks that we face. Our business, financial condition and results of operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial.
Risks Related to Our Business
As an increasingly global business, we are exposed to economic, political, and other risks in different countries which could materially reduce our sales, profitability or cash flows, or materially increase our liabilities.
Since we manufacture and sell our products worldwide, our business is subject to risks associated with doing business internationally. Our future results could be harmed by a variety of factors, including:
| ● | changes in foreign currency exchange rates, exchange controls and currency restrictions; |
| ● | changes in a specific country’s or region’s political, social or economic conditions; |
| ● | political, economic and social instability, including acts of war, such as the recent Russian invasion of Ukraine, as well as continued and any new sanctions against Russia, as further described below; |
| ● | outbreak of disease or illness, such as COVID-19, in any of the countries in which we sell our products or in which we or our suppliers operate; |
| ● | tariffs, other trade protection measures, and import or export licensing requirements; |
| ● | potentially negative consequences from changes in U.S. and international tax laws; |
| ● | difficulty in staffing and managing geographically widespread operations; |
| ● | requirements relating to withholding taxes on remittances and other payments by subsidiaries; |
44
| ● | restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions; |
| ● | restrictions on our ability to repatriate dividends from our foreign subsidiaries; |
| ● | difficulty in collecting international accounts receivable; |
| ● | difficulty in enforcement of contractual obligations under non-U.S. law; |
| ● | transportation delays or interruptions; and |
| ● | changes in regulatory requirements including as it relates to protection of our intellectual property. |
On February 24, 2022, Russian forces launched significant military actions against Ukraine, and sustained conflict and disruption in the region is likely. Additionally, the U.S. and foreign government bodies in jurisdictions in which we operate have implemented targeted sanctions and export control measures and have announced potential additional sanctions and export control measures, which have and could in the future result in, among other things, severe or complete restrictions on exports to and other commerce and business dealings involving Russia, certain regions of Ukraine, and/or particular entities and individuals. The impact of these government measures, as well as any further retaliatory actions taken by Russia and the U.S. and foreign government bodies, is currently unknown. Potential impacts related to the conflict could include additional unilateral or multilateral export control and sanctions measures, market disruptions, including significant volatility in commodity prices, credit and capital markets, supply chain and logistics disruptions, adverse global economic conditions resulting from escalating geopolitical tensions and the exclusion of Russian financial institutions from the global banking system, volatility and fluctuations in foreign currency exchange rates and interest rates, inflationary pressures on raw materials and heightened cybersecurity threats, which could adversely impact our business, financial condition or results of operations, in particular, CRYOPDP’s business activities in Russia, as well as our other European business operations.
The functional currency for most of our foreign operations is the applicable local currency. As a result, fluctuations in foreign currency exchange rates affect the results of our operations and the value of our foreign assets and liabilities, which in turn may adversely affect results of operations and cash flows and the comparability of period-to-period results of operations. Changes in foreign currency exchange rates may also affect the relative prices at which we and foreign competitors sell products in the same market. Foreign governmental policies and actions regarding currency valuation could result in actions by the United States and other countries to offset the effects of such fluctuations. Given the unpredictability and volatility of foreign currency exchange rates, ongoing or unusual volatility may adversely impact our business and financial conditions.
Risks Related to Our Technology and Intellectual Property
We rely upon certain critical information systems, including our Cryoportal® software platform, for the operation of our business and the failure of any critical information system could adversely impact our reputation and future revenues and we may be required to increase our spending on data and system security.
We rely upon certain critical information systems, including 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. In addition, the provision of service to our customers and the operation of our networks and systems involve the storage and transmission of significant amounts of proprietary information and sensitive or confidential data, including personal information of customers, employees and others. Our technology infrastructure and critical information systems are subject to damage or interruption from a number of potential sources, including unauthorized intrusions, cyberattacks, software viruses or other malware, natural disasters, power failures, employee error or malfeasances and other events. Despite our best efforts, no cybersecurity or emergency recovery process is failsafe, and if our safeguards fail or our technology infrastructure or critical information systems are compromised, the safety and efficiency of our operations could be materially harmed, our reputation could suffer, and we could face additional costs, liabilities, costly legal challenges.
Cyberattacks, data incidents and breaches in the security of our information systems and networks and of the electronic and confidential information in our possession could materially adversely impact our business, financial condition and results of operations, in addition to our reputation and relationships with our employees, customers, suppliers and business partners.
As part of our normal business activities, we collect and store or have access to certain proprietary confidential, and personal information, including information about our employees, customers, suppliers and business partners, which may be entitled to protection under a number of regulatory regimes. The protection and security of our network systems and our own information, as well as information relating to our employees, customers, suppliers, business partners and others, is vitally important to us. Any failure of us to maintain the security of our network systems and the proprietary, confidential, and personal data in our possession, including via the
45
penetration of our network security and the misappropriation of proprietary, confidential and personal information, could result in costly investigations and remediation, business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in our employees’, customers’, suppliers’ and business partners’ confidence in us and other competitive disadvantages, and thus could have a material adverse effect on our business, financial condition and results of operations.
The frequency, intensity, and sophistication of cyberattacks and data security incidents has significantly increased in recent years and is constant. As with many other businesses, we are continually subject to cyberattacks and the risk of data security incidents. Due to the increased risk of these types of attacks and incidents, we have implemented information technology and data security tools, measures, and processes designed to protect our networks systems, services, and the personal, confidential or proprietary information in our possession, and to ensure an effective response to any cyberattack or data security incident. We also have privacy and data security policies in place that are designed to detect, prevent, and/or mitigate cyberattacks and data security incidents. Whether or not these policies, tools, and measures are ultimately successful, the expenditures could have an adverse impact on our financial condition and results of operations, and divert management’s attention from pursuing our strategic objectives. As newer technologies evolve, we could be exposed to increased risks from cyberattacks, data security events, and data breaches, including those from human error, negligence or mismanagement or from illegal or fraudulent acts.
Although we take the security of our network systems and information seriously, there can be no assurance that the security measures we employ will effectively prevent unauthorized persons from obtaining unauthorized access to our systems and information due to the evolving nature and intensity of cyberattacks and threats to data security, in light of new and sophisticated tools and methods used by criminals and cyberterrorists to penetrate and compromise systems, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineering and forgery, which make it increasingly challenging to anticipate, harder to detect, and more difficult to adequately mitigate these risks. We do not have cyber security insurance, and we may incur significant costs in the event of a successful cyber incident against us or in responding to and recovering from a cyber incident. Additionally, the cost and operational consequences of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly intense, complex and sophisticated global cyber threats.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sale of Unregistered Securities
There were no unregistered sales of equity securities during the quarter ended March 31, 2022.
Issuer Purchases of Equity Securities
Maximum |
||||||||||
Number (or |
||||||||||
Total Number of |
Approximate |
|||||||||
Shares (or Units) |
Dollar Value) of |
|||||||||
Purchased as |
Shares (or Units) |
|||||||||
Part of Publicly |
that May Yet Be |
|||||||||
Total Number of |
Average Price |
Announced |
Purchased |
|||||||
Shares (or Units) |
Paid per Share |
Plans or |
Under the Plans |
|||||||
Period |
|
Purchased(1) |
|
(or Unit) |
|
Programs(2) |
|
or Programs |
||
January 1, 2021 through January 31, 2022 |
|
— |
$ |
— |
|
— |
$ |
— |
||
February 1, 2021 through February 28, 2022 |
|
— |
$ |
— |
|
— |
$ |
— |
||
March 1, 2021 through March 31, 2022 |
|
306,300 |
$ |
27.24 |
|
306,300 |
$ |
91,650,800 |
||
Total |
|
306,300 |
|
|
306,300 |
|
|
|||
| (1) | These shares were returned to the status of authorized but unissued shares of common stock. |
| (2) | On March 11, 2022, the Company announced that its board of directors authorized the Repurchase Program through December 31, 2025, authorizing the repurchase of common stock and/or convertible senior notes in the amount of up to $100.0 million from time to time on the open market or otherwise, in such quantities, at such prices, and in such manner as determined by the Company’s management at its discretion. The size and timing of any repurchase will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal requirements. |
46
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
ITEM 5. OTHER INFORMATION
None
47
ITEM 6. EXHIBITS
Exhibit |
|
|
Index |
|
|
10.1 |
||
10.2 |
||
31.1+ |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2+ |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1+ |
|
|
|
|
|
101.INS+ |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH+ |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL+ |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF+ |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB+ |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE+ |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104+ |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
+ Filed or furnished herewith.
48
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Cryoport, Inc. |
||
Dated: May 5,2022 |
||
|
|
|
|
By: |
/s/ Jerrell W. Shelton |
|
|
Jerrell W. Shelton |
|
|
President and Chief Executive Officer |
|
|
|
Dated: May 5,2022 |
|
|
|
|
|
|
By: |
/s/ Robert S. Stefanovich |
|
|
Robert S. Stefanovich |
|
|
Chief Financial Officer |
49