SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Amendment No. 1)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 2019
(Exact name of registrant as specified in its charter)
(State of other jurisdiction
|(Commission File Number)||
17305 Daimler St., Irvine CA 92614
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (949) 470-2300
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
|¨||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|¨||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|¨||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR.14d-2(b))|
|¨||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol||
Name of each exchange on which
|Common Stock, $0.001 par value||CYRX||The NASDAQ Stock Market LLC|
|Warrants to purchase Common Stock||CYRXW||The NASDAQ Stock Market LLC|
On May 14, 2019, Cryoport, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) reporting that on May 14, 2019, the Company closed its acquisition of CryoGene Partners, a Texas general partnership doing business as Cryogene Labs (“CryoGene”). This Form 8-K/A amends the Original Form 8-K to include the historical audited financial statements of CryoGene and the pro forma condensed combined financial information required by Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Original Form 8-K in reliance on the instructions to such items. Except as provided herein, the disclosures made in the Original From 8-K remain unchanged.
Item 9.01 Financial Statements and Exhibits
|(a)||Financial Statements of Businesses Acquired . The audited financial statements of CryoGene as of and for the years ended December 31, 2018 and 2017 are filed herewith as Exhibit 99.1 and incorporated by reference.|
|(b)||Pro Forma Financial Information . The unaudited pro forma condensed combined financial information of the Company and CryoGene as of and for the year ended December 31, 2018 is filed herewith as Exhibit 99.2 and incorporated by reference.|
|23.1||Consent of KMJ Corbin & Company LLP, Independent Auditor of CryoGene|
|99.1||Audited financial statements of CryoGene as of and for the years ended December 31, 2018 and 2017|
|99.2||Unaudited pro forma condensed combined financial information of the Company and CryoGene as of and for the year ended December 31, 2018|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Date: June 14, 2019||Cryoport Inc.|
|/s/ Robert Stefanovich|
|Chief Financial Officer|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-215776, 333-229395 and 333-230237 on Form S-3 and in Registration Statement Nos. 333-159899, 333-166327, 333-177168, 333-184543, 333-197437, 333-208381 and 333-225387 on Form S-8 of our report dated June 14, 2019, relating to the financial statements of CryoGene Partners, appearing in this Form 8-K/A of Cryoport, Inc.
|/s/ KMJ Corbin & Company LLP|
Costa Mesa, California
June 14, 2019
Years Ended December 31, 2018 and 2017
Table of Contents
|Independent Auditors’ Report||2|
|Statements of Income and Partners’ Capital||4|
|Statements of Cash Flows||5|
|Notes to Financial Statements||6|
Independent Auditors’ Report
To the Partners
We have audited the accompanying balance sheets of CryoGene Partners (the “Company”), which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of income and partners’ capital, and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CryoGene Partners as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
|/s/ KMJ Corbin & Company LLP|
Costa Mesa, California
June 14, 2019
|Accounts receivable, net||614,752||492,362|
|Prepaid expenses and other current assets||19,656||14,539|
|Total current assets||1,157,763||916,662|
|Property and equipment, net||2,679,915||2,154,503|
|LIABILITIES AND PARTNERS’ CAPITAL|
|Accounts payable and other accrued expenses||$||473,495||$||369,050|
|Accrued compensation and related expenses||111,003||91,710|
|Line of credit||181,799||179,643|
|Current portion of capital lease obligations||618,078||514,798|
|Total current liabilities||1,782,007||1,520,770|
|Deferred rent, net of current portion||179,571||194,700|
|Capital lease obligations, net of current portion||720,708||443,691|
|Commitments and contingencies|
|Total liabilities and partners’ capital||$||3,837,678||$||3,071,165|
See accompanying notes to financial statements.
Statements of Income and Partners’ Capital
|Years Ended December 31,|
|Cost of revenues||1,912,309||1,537,334|
|Operating costs and expenses:|
|General and administrative||959,031||812,821|
|Sales and marketing||76,051||69,727|
|Total operating expenses||1,035,082||882,548|
|Income from operations||938,532||954,206|
|Other income (expense):|
|Total other expense, net||(119,144||)||(86,847||)|
|Partners’ capital – beginning of year||$||912,004||$||464,609|
|Partners’ capital – end of year||$||1,155,392||$||912,004|
See accompanying notes to financial statements.
Statements of Cash Flows
|Years Ended December 31,|
|Cash Flows From Operating Activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||733,117||545,336|
|Provision for bad debt||14,601||—|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other current assets||(5,117||)||5,631|
|Accounts payable and other accrued expenses||(124,682||)||61,502|
|Accrued compensation and related expenses||19,293||26,710|
|Net cash provided by operating activities||1,342,668||1,319,880|
|Cash Flows From Investing Activities:|
|Purchases of property and equipment||(69,152||)||(89,483||)|
|Net cash used in investing activities||(69,152||)||(89,483||)|
|Cash Flows From Financing Activities:|
|Proceeds from note payable||169,654||—|
|Repayments of note payable||(162,830||)||(66,621||)|
|Net borrowings (repayments) on revolving line of credit||2,156||(72,937||)|
|Repayments of capital lease obligations||(592,902||)||(637,601||)|
|Net cash used in financing activities||(1,159,922||)||(1,197,123||)|
|Net change in cash||113,594||33,274|
|Cash — beginning of year||409,761||376,487|
|Cash — end of year||$||523,355||$||409,761|
|Supplemental Disclosure of Cash Flow Information:|
|Cash paid for interest||$||116,887||$||100,137|
|Cash paid for income taxes||$||—||$||—|
|Supplemental Disclosure of Non-Cash Investing and Financing Activities:|
|Leasehold improvements paid by tenant allowance||$||—||$||135,180|
|Purchases of equipment through capital lease obligations||$||973,198||$||541,904|
|Purchases of equipment included in accounts payable and other accrued expenses||$||216,179||$||74,471|
See accompanying notes to financial statements
Notes to Financial Statements
Note 1. Nature of the Business
CryoGene Partners (“the Company”), dba Cryogene Labs, is a Houston, Texas-based provider of comprehensive temperature-controlled sample management solutions to the life sciences industry, including specimen storage, sample processing, collection, and retrieval. The spectrum of temperature-controlled solutions provided by the Company ranges from ambient, or controlled room temperature (20°C to 25°C), refrigerated (2°C to 8°C), to frozen and cryogenic (below 0°C to as low as −150°C).
The Company was formed in 2003 and is a Texas general partnership.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of Estimates
The preparation of the 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 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 and recoverability of long-lived assets.
Concentrations of Credit Risk
The Company maintains its cash accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) with basic deposit insurance coverage limits up to $250,000 per owner. At December 31, 2018, the Company had cash balances of approximately $274,000 which exceeded the FDIC insurance limit. The Company performs ongoing evaluations of these institutions to limit its concentration risk exposure.
The Company grants credit to customers within the U.S. and does not require collateral. Reserves for uncollectible amounts are provided based on past experience and a specific analysis of the accounts, which management believes is sufficient. Accounts receivable at December 31, 2018 and 2017 are net of reserves for doubtful accounts of $14,600 and $0, respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. The Company maintains reserves for bad debt and such losses, in the aggregate, historically have not exceeded its estimates.
The majority of the Company’s customers are in the medical research, biotechnology and life science industries. Consequently, there is a concentration of accounts receivable within these industries, which is subject to normal credit risk. As of December 31, 2018, one customer accounted for 90.0% of net accounts receivable. As of December 31, 2017, two customers accounted for 47.9% and 49.4%, respectively, of net accounts receivable. There were no other customers that owed us more than 10% of net accounts receivable at December 31, 2018 and 2017.
There was one customer that accounted for 80% and 81% of revenues, respectively, during the years ended December 31, 2018 and 2017. No other single customer generated over 10% of revenues during the years ended December 31, 2018 and 2017.
Property and Equipment
Property and equipment are recorded at cost. Computers and software are depreciated using the straight-line method over their estimated useful lives of three years. Machinery and equipment, and furniture and fixtures are depreciated using the straight-line method over their estimated useful lives of five years, and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. Equipment acquired under capital leases is amortized over the estimated useful life of the assets and included in depreciation and amortization expense.
Betterments, renewals and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred.
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 December 31, 2018.
The Company is a general partnership. As a partnership, all federal and state taxable income and expense are passed through to each partner. Accordingly, no federal or state income taxes have been provided for in the accompanying financial statements.
The Company provides biostorage space to its customers and charges a fee in exchange for the use of its freezers.
The Company recognizes revenue for such services when it is realized or realizable and earned. Revenue is considered realized and earned when all of the following revenue recognition criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) services have been rendered; (iii) the fee is fixed and determinable; and (iv) collectability is probable.
The Company recognizes revenue for the use of the biostorage space over the period of usage, provided all other revenue recognition criteria have been met. Payments due or received from customers prior to rendering the associated biostorage services are recorded as deferred revenue.
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 have no assets or liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2018 and 2017.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 supersedes the revenue recognition requirements in FASB Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Codification.
The core principle of ASU 2014-09 is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, has created the possibility that more judgment and estimates may be required within the revenue recognition process than required under existing U.S. generally accepted accounting principles. The standard is effective for nonpublic entities for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, using either a full retrospective approach or a modified retrospective approach. The Company has not yet evaluated the impact this ASU will have on its financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases”, which provides for a comprehensive change to lease accounting. The new standard requires that a lessee recognize a lease obligation liability and a right-to-use asset for virtually all leases of property, plant and equipment, subsequently amortized over the lease term. The new standard is effective for fiscal years beginning after December 15, 2019, with a modified retrospective transition. The Company has not yet evaluated the impact this ASU will have on its financial statements.
Note 3. Property and Equipment
Property and equipment consist of the following:
|Furniture and fixtures||43,673||43,673|
|Machinery and equipment||6,157,901||5,115,484|
|Computers and software||257,836||257,836|
|Less: accumulated depreciation||(5,505,933||)||(4,772,816||)|
Total depreciation and amortization expense related to property and equipment amounted to $733,100 and $545,300 for the years ended December 31, 2018 and 2017, respectively.
The Company leases equipment under capitalized lease obligations with a total cost of $2.2 million and accumulated amortization of $953,900 million as of December 31, 2018.
The Company leases equipment under capitalized lease obligations with a total cost of $1.8 million and accumulated amortization of $509,300 as of December 31, 2017.
Note 4. Accrued Compensation and Related Expenses
Accrued compensation and related expenses consist of the following:
|Accrued salaries and wages||$||38,952||$||30,594|
|Accrued 401(k) profit sharing plan||72,051||61,116|
Note 5. Revolving Line of Credit
The Company has a revolving line of credit with PlainsCapital Bank (formerly The Bank of River Oaks) which provides for borrowings up to $500,000. The line of credit accrues interest at the prime rate plus 0.25% (5.75% at December 31, 2018) and is secured by the Company’s accounts receivable and certain property and equipment. The revolving line of credit matures February 2020; however, all principal and accrued interest were paid in full in May 2019 (See Note 9). Accrued interest of $2,300 is included in accounts payable and other accrued expenses in the accompanying balance sheet at December 31, 2018.
Note 6. Note Payable
On January 14, 2015, the Company entered into a commercial loan agreement with PlainsCapital Bank for $300,000 at an interest rate of prime plus 1.5% (7% at December 31, 2018) which is payable in monthly principal and interest installments of $6,200. The note matures in January 2020; however, all principal and accrued interest were paid in full in May 2019 (See Note 9).
Note 7. Commitments and Contingencies
Facility and Equipment Leases
We lease a total of 21,476 square feet of corporate and logistics facilities in Houston, Texas in two adjacent buildings under operating leases expiring in January 2024. The aggregate initial base rent is approximately $22,000 per month. The lease agreements contain certain scheduled annual rent increases which are accounted for on a straight-line basis. In addition, we have certain equipment leases which expire through March 2022.
At December 31, 2018, future minimum lease payments are as follows:
|Years Ending December 31,||
|Total minimum lease payments||$||1,574,056||1,502,703|
|Amount representing interest||(163,917||)|
|Present value of future minimum capital lease obligations||1,338,786|
Rent expense for the years ended December 31, 2018 and 2017 was $398,000 and $273,700, respectively.
The Company may become a party to litigation in the normal course of business. However, the Company is not currently involved in any litigation or disputes.
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 indemnities include certain agreements with its officers and partners, under which the Company may be required to indemnify such persons for liabilities arising out of their employment or ownership relationship.
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 balance sheets.
Note 8. 401(k) Profit Sharing Plan
The Company established an employee profit sharing plan under Section 401(k) of the Internal Revenue Code, for employees meeting certain eligibility requirements. Under the plan, qualified employees may elect to contribute up to the maximum amount allowed by the Internal Revenue Code and the Company will make a matching contribution up to 6% of the participants eligible compensation which vest based on years of vesting service. The Company’s contributions under the plan were $72,000 and $61,100 for the years ended December 31, 2018 and 2017, respectively.
Note 9. Subsequent Events
On May 14, 2019, Cryogene, Inc., a Texas corporation (“Buyer”) and a wholly owned subsidiary of Cryoport, Inc., a Nevada corporation, and the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). The closing of the transaction contemplated in the Asset Purchase Agreement occurred simultaneously with the execution of the Asset Purchase Agreement on May 14, 2019.
Pursuant to the terms and subject to the conditions of the Asset Purchase Agreement, Buyer acquired substantially all of the assets of the Company, including, without limitation, tangible personal property, intellectual property assets, inventory, and certain contracts related to the Company’s temperature-controlled biostorage and biobanking solutions business located in Houston, Texas (the foregoing, the “Purchased Assets”), and assumed certain related liabilities.
The aggregate purchase price for the Purchased Assets is $20.5 million in cash, subject to adjustment as described in the Asset Purchase Agreement (the “Total Consideration”), $1 million of which is being deposited into an escrow account to serve as an escrow fund for any indemnifiable losses of Buyer under the Asset Purchase Agreement.
In connection with the acquisition transaction, the Company repaid all outstanding obligations under its revolving line of credit and note payable arrangements with PlainsCapital Bank, and all capital lease obligations were repaid in full.
The Company has evaluated subsequent events and transactions through June 14, 2019, which is the date these financial statements were available to be issued. There were no other significant subsequent events identified.
Cryoport Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Financial Information
On May 14, 2019, Cryogene, Inc., a Texas corporation and a wholly owned subsidiary of Cryoport, Inc., a Nevada corporation (the “Company”), and CryoGene Partners, a Texas general partnership doing business as Cryogene Labs (“CryoGene”), entered into an Asset Purchase Agreement. The closing of the transaction contemplated in the Asset Purchase Agreement occurred simultaneously with the execution of the Asset Purchase Agreement on May 14, 2019. The Company paid consideration of $20.5 million in cash at closing. This amount is subject to a post-closing adjustment related to prepaid expenses and deferred revenue, as defined in the Asset Purchase Agreement.
The following unaudited pro forma condensed combined financial statements are based on the Company’s historical consolidated financial statements and CryoGene’s historical financial statements, as adjusted to give effect to the Company’s acquisition of CryoGene. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 gives effect to the transaction as if it had occurred on January 1, 2018. The unaudited pro forma condensed combined balance sheet as of December 31, 2018 gives effect to the transaction as if it had occurred on December 31, 2018.
The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read together with the pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements should be read together with the Company’s historical consolidated financial statements which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the historical financial statements of CryoGene for the year ended December 31, 2018 which are included herein.
Cryoport Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2018
|Historical||Pro Forma||Pro Forma|
|Cash and cash equivalents||$||37,327,125||$||523,355||$||(20,479,285||)||(a)||$||16,847,840|
|Accounts receivable, net of allowances||3,543,666||614,752||(614,752||)||(b)||3,543,666|
|Other current assets||752,269||19,656||—||771,925|
|Total current assets||51,774,542||1,157,763||(21,617,392||)||31,314,913|
|Property and equipment, net||4,357,498||2,679,915||1,577,425||(c)||8,614,838|
|Intangible assets, net||137,220||—||5,280,000||(d)||5,417,220|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accounts payable and accrued expenses||$||1,709,397||$||473,495||$||(473,495||)||(b)||$||1,709,397|
|Accrued compensation and related expenses||1,262,478||111,003||(111,003||)||(b)||1,262,478|
|Revolving line of credit||—||181,799||(181,799||)||(b)||—|
|Capital lease obligations||23,191||618,078||(618,078||)||(b)||23,191|
|Total current liabilities||3,061,381||1,782,007||(1,491,636||)||3,351,752|
|Convertible notes, net||14,711,580||—||—||14,711,580|
|Deferred rent liability, net||267,415||179,571||(179,571||)||(b)||267,415|
|Capital lease obligations, net||33,156||720,708||(720,708||)||(b)||33,156|
|Common stock, $0.001 par value; 100,000,000 shares authorized||30,319||—||—||30,319|
|Additional paid-in capital||179,501,577||—||—||179,501,577|
|Accumulated other comprehensive income||3,153||—||—||3,153|
|Retained earnings (accumulated deficit)||(140,988,484||)||1,155,392||(1,405,392||)||(f)||(141,238,484||)|
|Total stockholders’ equity||38,546,565||1,155,392||(1,405,392||)||38,296,565|
|Total liabilities and stockholders’ equity||$||56,620,097||$||3,837,678||$||(3,797,307||)||$||56,660,468|
See accompanying notes to the unaudited pro forma condensed combined financial information
Cryoport Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 2018
|Historical||Pro Forma||Pro Forma|
|Cost of product sales||9,386,188||1,912,309||23,000||(g)||11,321,497|
|General and administrative||9,798,793||959,031||(55,081||)||(h)||11,239,743|
|Sales and marketing||7,245,644||76,051||—||7,321,695|
|Engineering and development||1,840,443||—||—||1,840,443|
|Total operating expenses||18,884,880||1,035,082||481,919||20,401,881|
|Income (loss) from operations||(8,644,615||)||938,532||(504,919||)||(8,211,002||)|
|Warrant repricing expense||(899,410||)||—||—||(899,410||)|
|Total other income (expense), net||(891,032||)||(119,144||)||119,144||(891,032||)|
|Income (loss) before provision for income taxes||(9,535,647||)||819,388||(385,775||)||(9,102,034||)|
|Provision for income taxes||(19,954||)||—||(23,063||)||(k)||(43,017||)|
|Net income (loss)||$||(9,555,601||)||$||819,388||$||(408,838||)||$||(9,145,051||)|
|Net loss per share – basic and diluted||$||(0.34||)||$||(0.32||)|
|Weighted average common shares outstanding – basic and diluted||28,210,648||28,210,648|
See accompanying notes to the unaudited pro forma condensed combined financial information
Cryoport Inc. and Subsidiaries
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
|1.||Basis of Presentation|
The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.
The business combination was accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, “Business Combinations”. As the acquirer for accounting purposes, the Company has estimated the fair value of CryoGene’s assets acquired and liabilities assumed and conformed the accounting policies of CryoGene to its own accounting policies.
The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
|2.||Preliminary Purchase Price Allocation|
The Company has performed a preliminary valuation analysis of the fair value of CryoGene’s assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date:
|Total purchase consideration paid||$||20,229,285|
|Purchase price allocation:|
|Other current assets||19,656|
|Property and equipment, net||4,257,340|
|Total identifiable net assets||9,266,625|
|Net assets acquired||$||20,229,285|
The preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and statement of operations. Due to the recent completion of the acquisition, the determination of the purchase price and the allocation of the purchase price used in the pro forma condensed combined financial information are based upon preliminary estimates, which are subject to change during the measurement period (up to one year from the acquisition date) as we finalize the valuations of assets acquired and liabilities assumed, including but not limited to, other current assets, intangible assets, deferred revenue and the residual amount allocated to goodwill. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments.
|3.||Pro Forma Adjustments|
The pro forma adjustments included in the pro forma condensed combined information are as follows:
|(a)||Represents the purchase consideration funded by existing cash, the purchase price adjustment based on the purchase price allocation as of the acquisition date as shown in Note 2, and the payment of estimated transaction costs. The following table summarizes the adjustments to this account:|
|Purchase price adjustment (1)||270,715|
|Purchase consideration paid||(20,229,285||)|
|Estimated transaction costs||(250,000||)|
|Pro forma adjustment to cash||$||(20,479,285||)|
(1) The purchase price adjustment represents the excess of deferred revenue over other current assets which include prepaid expenses.
|(b)||To record the exclusion of assets not acquired or liabilities not assumed in the acquisition.|
|(c)||Represents the adjustment in carrying value of CryoGene’s property and equipment from its recorded net book value to its preliminary estimated fair value. The estimated fair value is expected to be depreciated or amortized based on management’s estimates of the period over which the assets will be utilized to benefit the operations of the Company. The preliminary amounts assigned to property and equipment are as follows:|
Useful Life (1)
|Furniture and fixtures||5||43,673||(36,873||)||6,800|
|Machinery and equipment||8 - 15||6,157,901||(2,834,911||)||3,322,990|
|Computers and software||3||257,836||(252,176||)(2)||5,660|
|(1)||Represents the preliminary estimated useful life of assets acquired.|
|(2)||Excludes amounts related to software which were reflected as an acquired intangible asset.|
The final determination of the fair value of the property and equipment, as well as estimated useful lives, remains subject to change. The finalization may have a material impact on the valuation of property and equipment and the purchase price allocation, which is expected to be finalized subsequent to the closing of the transaction but within the measurement period.
To estimate the fair value of CryoGene’s property and equipment, the Company hired a third-party appraiser.
|(d)||Represents the preliminary estimated fair value of the intangible assets recognized upon the acquisition of CryoGene.|
As part of the preliminary valuation analysis, the Company identified intangible assets, including customer relationships, trade name/trademark, non-complete agreements and technology.
The following table summarizes the preliminary fair value of intangible assets acquired at the date of acquisition and their estimated useful lives and amortization expense based on their respective useful lives:
|(e)||Represents goodwill recorded with the acquisition of $11.0 million as shown in Note 2.|
|(f)||Represents the elimination of CryoGene’s historical partners’ capital and the estimated transaction costs. Details are listed below:|
|Elimination of CryoGene’s historical partners’ capital as of December 31, 2018||$||(1,155,392||)|
|Transaction costs paid in connection with the acquisition||(250,000||)|
|Pro forma adjustment to accumulated deficit||$||(1,405,392||)|
|(g)||In conjunction with the acquisition accounting, the Company engaged a third party to appraise the fair value of the property and equipment. Pro forma depreciation has been estimated on a preliminary basis as follows:|
|Estimated depreciation expense for acquired property and equipment||$||756,100|
|Less: historical CryoGene depreciation expense||(733,100||)|
|Total pro forma adjustment to depreciation expense||$||23,000|
|(h)||Represents the elimination of $55,081 of acquisition related transaction costs that were incurred by the Company during the year ended December 31, 2018.|
|(i)||Represents the amortization of intangible assets acquired upon acquisition of CryoGene. Please refer to adjustment (d) for details.|
|(j)||Represents the elimination of interest expense related to CryoGene’s revolving line of credit, note payable, and capital lease obligations, which were not assumed in the acquisition.|
|(k)||Represents the income tax effect for unaudited pro forma combined statement of operations adjustments related to the transaction using statutory rates, less any applicable valuation allowances for the year ended December 31, 2018.|