Cryoport, Inc. — FY2013 Form 10-K Summary
Reporting period: Fiscal year ended March 31, 2013. Although the request specifies “2012 Q4,” this filing reports FY2013 and includes unaudited quarterly results, including the quarter ended March 31, 2013. Unless stated otherwise, amounts below are U.S. dollars.
Business context
Cryoport provides cold-chain shipping logistics to biotechnology and life-sciences customers. Its offering combines reusable liquid-nitrogen dry-vapor shippers, a cloud-based logistics platform (Cryoportal), shipment monitoring and logistics support. The company reported that its shippers maintain temperatures below −150°C for more than 10 days. In FY2013, it broadened its approach from a core shipper solution to tailored customer-managed, integrated-logistics and distribution-partner offerings.
Key commercial developments included a renewed FedEx agreement effective January 1, 2013 through December 31, 2015, and a December 2012 engagement to manage frozen vaccine shipments for Zoetis. The FedEx arrangement is non-exclusive and has no minimum shipment commitment. The company reported operations in the U.S., Europe and Asia; the U.S. accounted for 58.2% of FY2013 revenue.
Financial performance and position
| Metric | FY2013 / March 31, 2013 | FY2012 / March 31, 2012 |
|---|---|---|
| Revenue | $1.101 million | $556,000 |
| Cost of revenue | $1.588 million | $1.392 million |
| Gross loss / gross margin | $487,000 / approximately −44% | $837,000 / approximately −151% |
| Operating expenses | $5.837 million | $6.598 million |
| Operating loss | $6.324 million | $7.435 million |
| Net loss | $6.382 million | $7.833 million |
| Basic and diluted loss per share | $0.17 | $0.27 |
| Net cash used in operating activities | $4.785 million | $6.780 million |
| Cash and cash equivalents | $563,000 | $4.618 million |
| Working capital | Deficit of $1.539 million | $4.024 million |
| Total assets | $1.756 million | $6.214 million |
| Total liabilities | $3.819 million | $2.484 million |
Revenue nearly doubled, driven by more customers and higher shipment volumes, but cost of revenue remained above revenue because of freight, operating-center costs and underutilized capacity. SG&A declined by about $694,000, and R&D declined by about $66,000. Lower interest expense also contributed to the smaller net loss. FY2013 diluted loss per share improved partly because weighted-average shares increased to 37.8 million from 29.0 million.
At year-end, current liabilities were $2.497 million. They included $1.304 million of convertible debentures and accrued interest; related-party notes and accrued interest totaled $1.418 million, of which $96,000 was current and $1.322 million long-term. Contractual obligations totaled $3.156 million, including $1.305 million of bridge notes due within one year. The filing reports no revolver balance; the prior line of credit had been terminated.
For the quarter ended March 31, 2013, revenue was $368,000 and net loss was $1.717 million, compared with revenue of $177,000 and net loss of $1.669 million in the same quarter of FY2012.
Material changes, outlook and risks
- Liquidity and going concern: The auditor’s report and management disclosures state that recurring losses and negative operating cash flows raise substantial doubt about the company’s ability to continue as a going concern. Management estimated year-end cash would fund planned operations only into the second quarter of FY2014 and said further financing was necessary. The filing reports cash of $146,057 as of June 17, 2013.
- Subsequent financing: FY2013 fourth-quarter bridge notes had $1.2945 million principal, initially accruing interest at 15% and then 5%, and were due December 31, 2013. The company later issued another $608,751 of notes; total principal was $1.903 million as of June 17, 2013. May 2013 option exercises generated $100,000 gross proceeds. The notes are convertible into securities issued in a qualifying equity transaction under amended terms. Additional equity or debt financing was being pursued, with no assurance it would be available on acceptable terms.
- Commercial execution: Management emphasized that customer qualification and adoption can take months or longer, and that future growth depends on customer uptake, increasing shipment volumes, scaling operations and strategic distribution relationships. Existing FedEx and DHL arrangements do not guarantee material revenue growth.
- Operating and financial risks: Risks include continued losses, limited cash, dependence on additional capital, potential dilution, intense competition, reliance on third-party manufacturers and software developers, regulation of biological-material shipping, product or service failures, cybersecurity disruption and the possibility that insurance will not cover claims.
- Potential dilution: As of March 31, 2013, approximately 36.7 million common-stock warrants were outstanding. The filing also reports significant options and potential future equity awards. Separately, the company cited up to 44.7 million shares issuable or reserved as of June 17, 2013, subject to the stated categories and terms.
- Unusual contractual exposure: Under its KLATU consulting agreement, if Cryoport terminates without cause or liquidates, KLATU may be entitled to additional compensation of at least $2 million plus twice the defined “cost of work.” Management said it had no intention of terminating without cause. The filing reports no material pending legal proceeding known to management.
- No quantified guidance: The filing provides no specific revenue, earnings or cash-flow forecast. Management described cost-containment efforts and plans to secure funding, but noted uncertainty around customer adoption and profitability.
Investor facts to verify
- Cash position, operating cash burn and runway, including any financing completed after the June 17, 2013 balance disclosure.
- Terms, maturity, interest and conversion treatment of bridge notes, and the company’s ability to repay or refinance them.
- Revenue growth and gross-margin progress, including whether higher shipment volume improves utilization and unit economics.
- Actual shipment volumes and revenue contribution from FedEx, DHL and the Zoetis engagement; none of the disclosed arrangements guarantees minimum volume.
- Fully diluted share count and the terms, exercise prices and potential dilution from outstanding warrants, options and future equity issuance.
- Potential KLATU payment exposure and any relevant developments in customer, supplier, regulatory or legal contingencies.