Cryoport, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended March 31, 2016. Although the request metadata says “2015 Q4,” this is an annual report covering FY2016, with FY2015 comparative figures.
Business context
Cryoport provides cryogenic logistics services to the life sciences industry, combining reusable liquid-nitrogen dry-vapor shippers, its Cryoportal logistics software, shipment monitoring and logistics support. Customers include biopharmaceutical, reproductive medicine and animal-health organizations. The company reported that one customer represented 14.0% of FY2016 revenue; customer concentration disclosures for FY2015 are inconsistent within the filing.
Financial performance and liquidity
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $5.882 million | $3.935 million |
| Gross profit; gross margin | $1.890 million; 32.1% | $1.169 million; 29.7% |
| Operating loss | $8.741 million | $5.593 million |
| Net loss | $9.820 million | $7.027 million |
| Net loss attributable to common stockholders | $15.057 million | $12.197 million |
| Net loss per common share, basic and diluted | $2.05 | $2.44 |
| Cash used in operating activities | $6.306 million | $4.128 million |
| Cash and cash equivalents at year-end | $2.793 million | $1.405 million |
| Working capital | $1.958 million | $(0.835) million |
| Total assets; total liabilities | $5.824 million; $2.728 million | $2.607 million; $3.023 million |
Revenue grew 49.5%, principally from more customers and shipments. Biopharmaceutical revenue rose 76.7% to $3.685 million and reproductive-medicine revenue rose 43.6% to $1.328 million; animal-health revenue fell 6.1% to $0.869 million. Management attributed improved gross margin to higher revenue, lower freight costs as a share of revenue and lower fixed manufacturing costs.
Operating expenses increased: general and administrative expense rose 69.4% to $5.925 million, sales and marketing rose 42.7% to $4.156 million, and research and development rose 56.1% to $0.550 million. Net cash from financing was $8.812 million, including $5.938 million of net public-offering proceeds and $3.897 million from preferred-stock issuance; investing activities used $1.119 million. The company reported approximately $0.947 million of related-party notes payable, net of discounts, at year-end; the filing also describes $0.966 million of aggregate principal owed to related parties and scheduled repayment terms.
Material changes and unusual items
- Gross margin improved by about 2.4 percentage points, but operating loss increased as the company expanded sales, marketing and administrative efforts.
- FY2016 common-stockholder loss includes a $4.474 million preferred-stock beneficial-conversion charge and $0.763 million of undeclared cumulative preferred dividends. These items contributed to the difference between net loss and loss attributable to common stockholders.
- In January 2016, outstanding Class A and Class B preferred shares were mandatorily exchanged for approximately 4.977 million common shares and 4.977 million warrants. The July 2015 public offering issued 2.091 million common shares and warrants and generated approximately $6.8 million gross proceeds.
- Stock-based compensation was a significant non-cash expense; the cash-flow reconciliation reports $2.884 million for FY2016. Cash used in operations increased year over year despite revenue growth.
Outlook, risks and contingencies
The independent auditor’s report and management identify substantial doubt about Cryoport’s ability to continue as a going concern, citing recurring losses, negative operating cash flows and limited cash. Management estimated that year-end cash, subsequent financing proceeds and expected service revenue would fund planned operations through the third quarter of FY2017. It stated that additional capital would be required thereafter; financing availability and timing are not assured. The company reported $3.7 million of cash as of June 13, 2016.
After year-end, Cryoport raised $2.5 million gross through an April 2016 warrant tender and exercise, issuing 2,020,597 shares, and $1.3 million gross through a June 2016 rights offering, issuing 841,873 shares. The company also described post-year-end expansion initiatives and partnerships, including logistics consulting, biostorage, laboratory relocation and Worthington Industries; these were not FY2016 operating results.
Key risks include the need for further financing and potential shareholder dilution; long customer adoption cycles; uncertainty that FedEx, DHL and UPS relationships will generate material sales (they have no minimum-use requirements); dependence on key customers, third-party carriers, suppliers and software development; regulatory and product-liability exposure; and competition from better-resourced businesses. Management reported effective disclosure controls and internal control over financial reporting as of March 31, 2016, with no material weaknesses identified; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Near-term cash runway, operating cash burn and the amount and terms of any additional financing needed to continue operations.
- Customer concentration: the filing gives FY2015 customer revenue concentration as 15.7% in one section and 22.7% in the financial-statement notes; verify the correct figure and the customer’s current contribution.
- Related-party debt balances, repayment schedule and the post-year-end status of notes extended to July 2016.
- Whether revenue growth and improved gross margin can outpace rising operating expenses and produce sustainable profitability.
- Potential dilution from outstanding warrants, options and equity-plan awards, and whether strategic distribution agreements are translating into shipment volume and cash flow.