Cryoport, Inc. — Form 10-Q Summary
Business context and reporting period. Cryoport provides reusable cryogenic shipping containers and related logistics, tracking, and monitoring services for temperature-sensitive biological and pharmaceutical materials. This filing covers the three months ended June 30, 2012, the first quarter of fiscal 2013; comparisons are with the three months ended June 30, 2011. The business remained in its commercialization and customer-adoption phase.
Key financial metrics
| Metric | Three months ended June 30, 2012 | Prior-year period / balance comparison |
|---|---|---|
| Revenue | $191,299 | $123,751; up 54.6% |
| Gross loss | $(162,319); gross margin approximately -84.9% | $(230,529); approximately -186.3% |
| Operating expenses | $1,378,224 | $1,729,552 |
| Operating loss | $(1,540,543) | $(1,960,081) |
| Net loss | $(1,545,807); $(0.04) per share | $(2,053,854); $(0.07) per share |
| Cash used in operations | $(1,424,817) | $(1,546,627) |
| Cash and cash equivalents | $2,971,567 at June 30, 2012 | $4,617,535 at March 31, 2012 |
| Working capital | $2,605,401 at June 30, 2012 | $4,024,120 at March 31, 2012 |
| Total liabilities | $1,966,565 at June 30, 2012 | $2,484,079 at March 31, 2012 |
Investing activities used $43,871, primarily for property and equipment; financing activities used $177,280, including $82,800 of convertible-debenture repayments and $78,480 of financing costs. Cash declined by $1,645,968 during the quarter. The October 2007 convertible debentures were repaid during the quarter; $1,466,542 of related-party notes and accrued interest remained at June 30, 2012, including $96,000 classified as current. The company reported no income-tax expense for the quarter.
Changes versus the prior comparable period
- Revenue increased $67,548, attributed primarily to more customers using the service. Foreign sales rose to approximately $81,000, or 42% of revenue, from approximately $22,000, or 17%.
- Gross loss improved by $68,210, but cost of revenue still substantially exceeded revenue because of fixed manufacturing costs and plant underutilization.
- Selling, general and administrative expense fell $359,050, reflecting lower headcount, including sales and marketing, and the CEO’s resignation; the quarter also included a $180,000 severance payment.
- Net loss narrowed by $508,047. Lower interest expense was a significant factor: $24,599 versus $133,311, primarily because of lower debt-discount amortization and convertible-debt interest.
- Weighted-average shares increased to 37,760,628 from 27,690,408, while reported loss per share improved to $0.04 from $0.07.
Outlook, risks, and unusual items
- Going concern: Management stated that recurring losses, the $61.5 million accumulated deficit, and operating cash use raise substantial doubt about the company’s ability to continue as a going concern. Management believed cash on hand and forecast sales could fund planned operations into the fourth quarter of 2013, while also describing runway through the end of fiscal 2013. It cautioned that this depended on sales and cost reductions and that additional financing might be needed; financing availability and terms were not assured.
- Management planned to reduce non-sales-generating expenses and use third parties for certain services. It said sustained profitability was not assured and depended on commercialization, customer adoption, and potential collaborations.
- Customer qualification in the regulated life-sciences sector can take several months or longer. One customer accounted for 16% of quarterly revenue. The company also disclosed supplier concentration exposure, though it said it had identified alternative qualified suppliers and held components sufficient for a four-to-six-week production disruption.
- A consulting and engineering agreement with KLATU Networks provides for additional compensation of at least $2 million plus two times defined “cost of work” if Cryoport terminates without cause or liquidates. Management said it had no intention of terminating without cause.
- Derivative warrant liabilities were $17,999 at June 30, 2012, and their fair-value decrease generated a noncash gain of $19,335. The gain was attributed primarily to a decline in the company’s stock price.
- Management reported no material legal proceedings and concluded disclosure controls were effective as of June 30, 2012; it reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether customer growth and revenue expansion can reduce negative gross margins and cash burn despite continued underutilization.
- The assumptions behind management’s cash-runway estimate, especially sales forecasts, planned cost reductions, and the timing or need for additional financing.
- The terms, maturity schedule, and related-party nature of remaining notes, and the potential KLATU payment obligation under specified events.
- Customer concentration, adoption timelines, and the company’s ability to maintain qualified suppliers and shipping operations.