Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 6, 2020

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

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: 001-34632

Graphic

CRYOPORT, INC.

(Exact Name of Registrant as Specified in its Charter)

Nevada

88-0313393

(State or another jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

112 Westwood Place, Suite 350

Brentwood, TN 37027

(Address of principal executive offices , including zip code)

(949470-2300

(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:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common Stock , $0.001 par value

 CYRX

The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

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.   Yes      No  

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).   Yes      No  

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.:

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

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.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of October 30, 2020 there were 39,663,710 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

3

 

 

ITEM 1. Financial Statements

3

 

 

Condensed Consolidated Balance Sheets at September 30, 2020 (Unaudited) and December 31, 2019

3

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

4

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019

5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019

6

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

41

ITEM 4. Controls and Procedures

41

PART II. OTHER INFORMATION

41

ITEM 1. Legal Proceedings

41

ITEM 1A. Risk Factors

42

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

55

ITEM 3. Defaults Upon Senior Securities

55

ITEM 4. Mine Safety Disclosures

55

ITEM 5. Other Information

55

ITEM 6. Exhibits

56

SIGNATURES

57

2

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

September 30, 

December 31, 

2020

    

2019

(unaudited)

ASSETS

Current Assets:

  

  

Cash and cash equivalents

$

161,987,083

$

47,234,770

Short-term investments

 

40,952,522

 

47,060,786

Accounts receivable, net

7,783,502

7,098,191

Inventories

 

476,622

 

473,961

Prepaid expenses and other current assets

 

1,444,303

 

1,096,855

Total current assets

 

212,644,032

 

102,964,563

Property and equipment, net

 

15,178,619

 

11,833,057

Operating lease right-of-use assets

8,113,923

4,460,319

Intangible assets, net

 

4,891,124

 

5,177,578

Goodwill

10,999,722

10,999,722

Deposits

 

535,750

 

437,299

Total assets

$

252,363,170

$

135,872,538

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable and other accrued expenses

$

9,663,211

$

2,498,375

Accrued compensation and related expenses

 

2,554,753

 

1,903,720

Deferred revenue

 

236,975

 

367,867

Operating lease liabilities

666,929

665,901

Finance lease liabilities

 

63,616

 

24,617

Total current liabilities

 

13,185,484

 

5,460,480

Convertible senior notes, net of discount of $3.8 million

111,155,209

Operating lease liabilities, net of current portion

7,814,874

4,101,236

Finance lease liabilities, net of current portion

123,654

8,539

Deferred tax liability

47,943

20,935

Total liabilities

 

132,327,164

 

9,591,190

Commitments and contingencies

 

  

 

  

Stockholders’ Equity:

 

  

 

  

Preferred stock, $0.001 par value; 2,500,000 shares authorized:

 

  

 

  

Class A convertible preferred stock — $0.001 par value; 800,000 shares authorized; none issued and outstanding

 

 

Class B convertible preferred stock — $0.001 par value; 585,000 shares authorized; none issued and outstanding

 

 

Class C convertible preferred stock - $0.001 par value; 250,000 shares authorized; none issued and outstanding

Common stock, $0.001 par value; 100,000,000 shares authorized; 38,983,824 and 37,339,787 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

38,984

37,340

Additional paid-in capital

 

300,273,819

 

285,609,022

Accumulated deficit

 

(180,483,423)

 

(159,319,963)

Accumulated other comprehensive income (loss)

 

206,626

 

(45,051)

Total stockholders’ equity

 

120,036,006

 

126,281,348

Total liabilities and stockholders’ equity

$

252,363,170

$

135,872,538

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Revenues

$

11,172,084

$

9,583,334

$

30,335,165

$

24,699,834

Cost of revenues

 

5,116,831

4,956,277

 

13,894,952

 

12,280,487

Gross margin

 

6,055,253

4,627,057

 

16,440,213

 

12,419,347

 

  

 

  

 

  

Operating costs and expenses:

 

  

 

  

 

  

 

  

General and administrative

 

10,794,110

 

9,376,686

 

20,557,301

 

15,332,326

Sales and marketing

 

3,681,862

 

5,961,593

 

10,056,134

 

11,212,658

Engineering and development

 

2,311,718

 

1,640,528

 

5,990,887

 

2,671,057

Total operating costs and expenses

 

16,787,690

 

16,978,807

 

36,604,322

 

29,216,041

 

 

  

 

 

Loss from operations

 

(10,732,437)

 

(12,351,750)

 

(20,164,109)

 

(16,796,694)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(1,081,542)

 

(248,410)

 

(1,482,249)

 

(921,048)

Other income, net

 

367,093

 

133,499

 

536,691

 

344,412

Loss before provision for income taxes

 

(11,446,886)

 

(12,466,661)

 

(21,109,667)

 

(17,373,330)

Benefit (provision) for income taxes

 

29,065

 

(1,886)

 

(53,793)

 

(10,610)

Net loss

$

(11,417,821)

$

(12,468,547)

$

(21,163,460)

$

(17,383,940)

Net loss per share – basic and diluted

$

(0.29)

$

(0.35)

$

(0.55)

$

(0.54)

Weighted average shares outstanding – basic and diluted

 

39,144,916

 

35,674,162

 

38,211,327

 

32,449,940

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

Net loss

$

(11,417,821)

$

(12,468,547)

$

(21,163,460)

$

(17,383,940)

Other comprehensive income (loss), net of tax:

 

  

 

  

 

  

 

  

Net unrealized gain (loss) on available-for-sale debt securities

 

(105,020)

 

(55,891)

 

250,643

 

(16,382)

Reclassification of realized (gain) loss on available-for-sale debt securities to earnings

27,669

(29,067)

(18,800)

(21,809)

Foreign currency translation adjustments

 

23,773

 

(19,348)

 

19,834

 

(30,964)

Other comprehensive income (loss)

 

(53,578)

 

(104,306)

 

251,677

 

(69,155)

Total comprehensive loss

$

(11,471,399)

$

(12,572,853)

$

(20,911,783)

$

(17,453,095)

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

Accumulated 

Class A

Class B

Class C

Additional

Other 

Total 

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Paid–In 

Accumulated 

Comprehensive 

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity  (Deficit)

Balance at June 30, 2019

 

$

 

$

$

 

35,485,570

$

35,486

$

254,580,262

$

(145,903,877)

$

38,304

$

108,750,175

Net loss

 

 

 

 

 

 

 

 

 

(12,468,547)

 

 

(12,468,547)

Other comprehensive loss, net of taxes

 

 

 

 

 

 

 

 

 

 

(104,306)

 

(104,306)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,925,108

 

 

 

1,925,108

Accelerated stock-based compensation expense

10,789,774

10,789,774

Issuance of common stock for board of director compensation

 

 

 

 

 

 

1,249

 

1

 

20,665

 

 

 

20,666

Proceeds from exercise of stock options and warrants

 

 

 

 

 

 

356,713

 

357

 

1,415,895

 

 

 

1,416,252

Balance at September 30, 2019

$

$

$

35,843,532

$

35,844

$

268,731,704

$

(158,372,424)

$

(66,002)

$

110,329,122

Balance at June 30, 2020

 

$

 

$

$

 

38,565,193

$

38,565

$

295,423,521

$

(169,065,602)

$

260,204

$

126,656,688

Net loss

 

 

 

 

 

 

 

 

 

(11,417,821)

 

 

(11,417,821)

Other comprehensive loss, net of taxes

(53,578)

(53,578)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,412,005

 

 

 

2,412,005

Issuance of common stock for board of director compensation

 

 

 

 

 

 

432

 

1

 

20,666

 

 

 

20,667

Proceeds from exercise of stock options and warrants

 

 

 

 

 

 

418,199

 

418

 

2,417,627

 

 

 

2,418,045

Balance at September 30, 2020

 

 

 

38,983,824

$

38,984

$

300,273,819

$

(180,483,423)

$

206,626

$

120,036,006

Balance at December 30, 2018

 

$

 

$

$

 

30,319,038

$

30,319

$

179,501,577

$

(140,988,484)

$

3,153

$

38,546,565

Net loss

 

 

 

 

 

 

 

 

 

(17,383,940)

 

 

(17,383,940)

Other comprehensive loss, net of taxes

 

 

 

 

 

 

 

 

 

 

(69,155)

 

(69,155)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,280,931

 

 

 

5,280,931

Accelerated stock-based compensation expense

10,789,774

10,789,774

Proceeds from public offering, net of costs of $106,300

4,312,500

4,313

68,806,405

68,810,718

Issuance of common stock for board of director compensation

 

 

 

 

 

 

4,488

 

5

 

70,329

 

 

 

70,334

Proceeds from exercise of stock options and warrants

 

 

 

 

 

 

1,207,506

 

1,207

 

4,282,688

 

 

 

4,283,895

Balance at September 30, 2019

 

$

 

$

$

 

35,843,532

$

35,844

$

268,731,704

$

(158,372,424)

$

(66,002)

$

110,329,122

 

  

 

  

 

  

 

  

  

 

  

 

 

 

 

 

 

  

Balance at December 31, 2019

 

$

 

$

$

 

37,339,787

$

37,340

$

285,609,022

$

(159,319,963)

$

(45,051)

$

126,281,348

Net loss

 

 

 

 

 

 

 

 

 

(21,163,460)

 

 

(21,163,460)

Other comprehensive income, net of taxes

251,677

251,677

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,292,546

 

 

 

6,292,546

Issuance of common stock for board of director compensation

 

 

 

 

 

 

2,400

 

2

 

61,998

 

 

 

62,000

Proceeds from exercise of stock options and warrants

 

 

 

 

 

 

1,641,637

 

1,642

 

8,310,253

 

 

 

8,311,895

Balance at September 30, 2020

 

 

 

38,983,824

$

38,984

$

300,273,819

$

(180,483,423)

$

206,626

$

120,036,006

See accompanying notes to condensed consolidated financial statements.

6

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

For the Nine Months Ended

September 30, 

    

2020

    

2019

Cash Flows From Operating Activities:

 

  

 

  

 

  

 

  

Net loss

$

(21,163,460)

$

(17,383,940)

 

  

 

  

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization

 

2,499,087

 

1,590,171

Amortization of debt discount

 

247,604

 

46,790

Unrealized (gain)/loss on investments in equity securities

 

(437,762)

 

87,850

Realized loss on investments in equity securities

804,772

Realized gain on available-for-sale investments

(9,952)

(62,484)

Stock-based compensation expense

 

6,354,546

 

5,351,265

Accelerated stock-based compensation expense

10,789,774

Loss on disposal of property and equipment

213,892

158,872

Provision for bad debt

 

63,979

 

42,085

Changes in operating assets and liabilities:

Accounts receivable

 

(749,290)

 

(3,995,609)

Inventories

 

(2,661)

 

(130,406)

Prepaid expenses and other current assets

 

151,519

 

(203,736)

Deposits

 

(98,451)

 

(55,849)

Change in operating lease right-of-use assets and lease liabilities

61,062

(9,538)

Accounts payable and other accrued expenses

 

6,365,123

 

1,268,267

Accrued compensation and related expenses

 

651,033

 

304,676

Deferred revenue

 

(130,892)

 

136,931

Deferred tax liability

27,008

Net cash used in operating activities

 

(5,152,843)

 

(2,064,881)

 

  

 

  

Cash Flows From Investing Activities:

 

  

 

  

Purchases of property and equipment

 

(5,118,803)

 

(4,188,943)

Purchases of short-term investments

 

(136,293,195)

 

(43,044,925)

Sales/maturities of short-term investments

142,276,244

3,995,000

Cash paid for acquisition

(20,429,651)

Patent and trademark costs

 

(116,296)

 

(48,470)

Net cash provided by (used in) investing activities

 

747,950

 

(63,716,989)

 

  

 

  

Cash Flows From Financing Activities:

 

  

 

  

Proceeds from June 2019 public offering, net of offering costs

68,810,718

Proceeds from exercise of stock options and warrants

 

8,311,895

 

4,283,895

Proceeds from issuance of convertible senior notes

115,000,000

Payment of deferred financing costs

 

(4,118,495)

 

(19,748)

Repayment of finance lease liabilities

(51,711)

(17,261)

Net cash provided by financing activities

 

119,141,689

 

73,057,604

 

  

 

  

Effect of exchange rates on cash and cash equivalents

 

15,517

 

(17,705)

Net change in cash and cash equivalents

 

114,752,313

 

7,258,029

Cash and cash equivalents — beginning of period

 

47,234,770

 

37,327,125

Cash and cash equivalents — end of period

$

161,987,083

$

44,585,154

 

  

 

  

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

  

 

  

Net unrealized gain/(loss) on available-for-sale securities

$

250,643

$

(16,382)

Reclassification of realized gain on available-for-sale debt securities to earnings

$

18,800

$

21,809

Financing costs included in accounts payable and accrued liabilities

$

472,867

$

Fixed assets included in accounts payable and accrued liabilities

$

326,846

$

158,239

Purchase of equipment through finance lease obligations

$

204,516

$

See accompanying notes to condensed consolidated financial statements.

7

Table of Contents

Cryoport, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2020 and 2019

(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 and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. 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, 2019.

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 Inc. (“Cryoport”, “we”, or “our”) is a life sciences services company that is an integral part of the temperature-controlled supply chain supporting the biopharma, reproductive medicine and animal health markets. We are redefining logistics for the life sciences industry by providing a unique platform of critical solutions including highly differentiated temperature-controlled supply chain solutions, which include advanced packaging, informatics, specialty logistics services and biostorage services. Through our products, services and unparalleled expertise, we enable our clients to ship, store and deliver cellular-based materials and drug products as well as other life sciences commodities in a precise, defined temperature-controlled state.

Cryoport’s advanced 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), New Drug Applications (NDA) and Commercialized Products with the FDA, as well as global clinical trials and commercialized products initiated in other countries, where strict regulatory compliance and quality assurance is mandated. Our industry standard setting Chain of ComplianceTM 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 ComplianceTM standard ensures full traceability of all equipment used and the processes employed, further supporting each client’s goal of minimizing risk and maximizing success of their respective biologics or other products and therapies as they are introduced into the global markets.

On May 14, 2019, the Company acquired substantially all of the assets of Cryogene Partners, a Texas general partnership doing business as Cryogene Labs (“Cryogene”).  Cryogene operates a temperature-controlled biostorage solutions business in Houston, Texas.  As a result of the Cryogene acquisition, the Company operates in two reportable segments: Global Logistics Solutions and Global Bioservices. See Note 6 for segment information.

The Company is a Nevada corporation and its common stock is traded on the NASDAQ Capital Market exchange under the ticker symbol “CYRX.”

8

Table of Contents

2020 Business Combinations

On August 21, 2020, the Company entered into a Securities Purchase Agreement to acquire CRYOPDP, a leading global provider of innovative temperature-controlled logistics solutions to the clinical research, pharmaceutical and cell and gene therapy markets, headquartered in Paris, France. Under the terms of the Securities Purchase Agreement, the Company has agreed to acquire 100% of the equity interests in Advanced Therapy Logistics and Solutions, a company organized under the laws of France, which is the holding company that owns CRYOPDP (the “CRYOPDP Acquisition”). The base purchase price under the Securities Purchase Agreement is €49 million and is subject to a cash, net debt, working capital and other adjustments.

On August 24, 2020, the Company entered into a Purchase Agreement with Chart Industries, Inc. (“Chart”) pursuant to which the Company has agreed to acquire Chart’s MVE cryobiological storage business (the “MVE Acquisition”) for a cash purchase price at closing of $320 million, subject to customary closing working capital and other adjustments. The MVE Acquisition is structured as the acquisition of certain equity interests and assets and the transfer of certain liabilities in connection therewith.

On October 1, 2020, the Company completed both the MVE Acquisition and the CRYOPDP Acquisition, which are further discussed in Note 13.

Note 3. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Cryoport, Inc. and its wholly owned subsidiaries, Cryoport Systems, LLC., Cryoport Netherlands B.V., Cryoport UK Limited and Cryogene, Inc. (collectively, the “Company”). All intercompany accounts and transactions have been eliminated.

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 90 days or less when purchased and are considered highly liquid and easily tradeable.

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, fair value of assets acquired and liabilities assumed in business combinations, recoverability of goodwill and long-lived assets, allowance for inventory obsolescence, deferred taxes and their accompanying valuations, and valuation of equity-based instruments.

9

Table of Contents

The full extent to which the COVID-19 pandemic has and will directly or indirectly impact our business, results of operations and financial condition, including revenues, expenses, reserves and allowances, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

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 and the convertible senior notes. The carrying value for all such instruments, except finance lease liabilities and the convertible senior notes, approximates fair value at September 30, 2020 and December 31, 2019 due to their short-term nature. The carrying value of finance lease liabilities approximates fair value because the interest rate approximates market rates available to us for similar obligations with the same maturities.  For additional information related to fair value measurements, including the convertible senior notes, see Note 5.

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 September 30, 2020 were in excess of amounts insured by the FDIC and 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 to a limited number of 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 September 30, 2020 and December 31, 2019 are net of reserves for doubtful accounts of $200,000 and $140,000, 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 Company’s customers are in the biotechnology, 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. As of September 30, 2020, there was one customer that accounted for 31.5%, of net accounts receivable. As of December 31, 2019, there were two customers that accounted for 31.0% and 20.7%, respectively, of net accounts receivable. There were no other single customers that owed us more than 10% of net accounts receivable at September 30, 2020 and December 31, 2019.

The Company has a global reach and therefore has revenue from non-United States customers primarily in Europe. During the nine months ended September 30, 2020 and 2019, the Company had revenues from foreign customers of approximately $6.5 million and $3.3 million, respectively, which constituted approximately 21.4% and 13.3%, respectively, of total revenues. There were three customers that accounted for 16.0%,