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Published on December 20, 2005
GARY
CURTIS CANNON
ATTORNEY
AT LAW
12341
Briardale Way
San
Diego, CA 92128-5212
____________________
Telephone
(858) 391-9083 Facsimile (858) 391-9084
email:
garycurtiscannon@lawyer.com
December
9, 2005
Jeffrey
Riedler
Assistant
Director
Division
of Corporate Finance
United
States Securities and Exchange Commission
Washington,
D.C. 20549
| Re: |
CryoPort,
Inc.
|
Form
10-SB
Filed
October 20, 2005
File
No.
0-51578
Dear
Mr.
Riedler,
As
General Counsel for CryoPort, Inc. (CryoPort), I have been requested by Peter
Berry CryoPort’ s Chief Executive Officer to respond on behalf of the Company to
the SEC comments letter of November 16, 2005 regarding CryoPort’s Form 10-SB
filing. It is CryoPort’s intent to file an Amended Form 10-SB once we have had a
review and acceptance of the Company’s responses. To that end, I have provided
individual responses to the comments below. They should be read in conjunction
not only with the comments letter, but the initial Form 10-SB filing and
the
Form 10-SB/A draft enclosed with this letter. Once the SEC is satisfied with
the
proposed changes and or the responses, the Company will make the electronic
filing. The responses are as follows:
Comment
1:
It
is the
intent of CryoPort to complete the Registration before the 60 days.
Comment
2:
The
following information per SB Regulation 101 (b)(11) has been added as a final
paragraph in the “Manufacturing” section on page 19: “The Company’s
manufacturing process uses non- hazardous cleaning solutions which are provided
and disposed of by an EPA approved supplier. EPA compliance costs for the
Company are therefore negligible.” (See Draft Form 10-SB/A).
The
following information per SB Regulation 101(b)(12) has been added in paragraph
4
under the “Overview” section on page 4: “The Company currently occupies
approximately 8,000
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
2
square
feet of manufacturing and office space in Brea, California and have five
full-time employees
and three full-time and eight part-time consultants.” (See Draft Form
10-SB/A).
Comment
3: In response to SEC comment #3, CryoPort has added additional information
to
the first paragraph in the “Overview” section on page 4, to make a more
straightforward explanation of what a dry cryogenic shipper is. (See Draft
Form
10-SB/A).
Comment
4: In response to comment #4, the Company has added additional information
in
paragraph 2 in the “Overview” section on page 4 to further explain the
differences of reusable and disposable shippers and the current development
status of the disposable shippers. (See Draft Form 10-SB/A).
Comment
5: In response to comment #5, the Company has inserted as the last paragraph
in
the “Overview” section on page 4, the following: “As reported in the Report of
Independent Registered Public Accountant on the Company’s March 31, 2005 and
2004 financial statements, the Company has incurred recurring losses from
operations and has a stockholders’ deficit. These factors, among others raise
substantial doubt about the Company’s ability to continue as a going concern.
See page 26, “Management’s Discussion and Analysis or Plan of Operation” for
further discussion.” (See Draft Form 10-SB/A).
Comment
6: In response to comment #6, the Company has inserted into the second paragraph
under the “History” section on Page 5, the following: “The exchange price was
reached through discussions between CryoPort Systems, Inc.’s board of directors
and stockholders, and G.T.5-Limited’s board of directors and major stockholders,
taking into account supply and demand factors as well as the historical share
prices to non-insiders of each company. The acquisition was a transaction
involving the cashless exchange of shares only.” (See Draft Form
10-SB/A).
Comment
7: The Share Exchange Agreement was provided in the original filing as Exhibit
10.1.1.
Comment
8: In response to comment #8 , the Company has inserted at the end of the
paragraph in the “Smaller,
More Efficient Packaging.”
Section
on Page 9: “CryoPort currently manufactures its reusable shipper with an
approximate liquid nitrogen volume of five liters. The Company’s future intended
products will be a range of shippers with liquid nitrogen capacities from
approximately one to five liters in size.” (See Draft Form
10-SB/A).
Comment
9: In response to comment #9, the Company has inserted at the end of the
first
paragraph in the section “Emphasis
on Decreasing Costs and System Simplification.”
on Page
9 -“The current price of CryoPort’s reusable shippers range from $685 to $1,095.
The price range for the proposed disposable/one way shippers when developed
is
initially expected to range from $50 to $175 per use depending on size.” (See
Draft Form 10-SB/A).
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
3
Comment
10: In response to comment #10, the Company has revised the second paragraph
in
the section “Emphasis
on Decreasing Cost and System Simplification.”
As well
as the third paragraph on page 8 in section “Industry Overview” to clarify the
product’s hold time and provide competitive hold time comparison. (See Draft
Form 10-SB/A).
Comment
11: In response to comment #11, the Company has only one sales and distribution
agent for South America which accounts for 10% of annual sales. This information
has been incorporated in the first paragraph of the section “Sales and
Marketing” on Page 14. The details of the Company’s contract with its South
American sales and distribution agent are confidential. Providing the contract
as an exhibit or exposing the terms of the contract would create difficulties
with other company agents and distributors, as well as customers and other
market competitors. Therefore we are not including a copy of the contract
as an
exhibit.
Comment
12: In response to comment #12, the Company has inserted the requested
information showing the sales breakdown by geographical area in the “Sales and
Marketing” section on page 14. (See Draft Form 10-SB/A).
Comment
13: In response to comment #13, the Company has revised the paragraph in
the
“Competition” section on page 17 to include the following: “Other competitive
factors include the ability of the shipper to retain liquid nitrogen when
placed
in non-upright positions, the overall “leak-proffness” of the package which
determines compliance with shipping regulations and the overall weight and
volume of the package which determine shipping costs.” (See Draft Form
10-SB/A).
Comment
14: In response to comment #14, the Company has revised the paragraph in
the
“Research and Development” section on page 18 to included the following: “The
Company’s principal research and development activities for the years 2004 and
2005 have centered around the investigation of materials of construction
for the
products and packages with the view of identifying those materials that yield
fabrication costs consistent with the concept of disposability. Prototypes
of
one version of a unit dose transport system were developed and preliminary
designs of a second concept were completed. Other research and development
effort was directed toward improvements to the liquid nitrogen retention
system
to render it more reliable in the general shipping environment.” (See Draft Form
10-SB/A).
Comment
15: In response to comment #14, the Company has inserted a paragraph in the
“Manufacturing” section on page 18 as follows: “Primary manufacturers include
Spaulding Composites Company, Peterson Spinning and Stamping, Lydall Industrial
Thermal Solutions, Ludwig, Inc., and Porex Porous Products Group. There are
no
specific agreements with any manufacturer nor are there any long term
commitments to any. It is believed that any of the currently used manufacturers
could be replaced within a short period of time as none have a proprietary
component nor a substantial capital investment specific to the Company’s
products.”
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
4
Comment
16: In response to comment #16, the Company has inserted a chart on page
19 in
the “Proprietary Rights and Licensing” section which includes the requested
information including issuance and expiration dates for patents and trademarks.
Additionally, the Company has inserted information to describe the patents
and
trademarks in more detail as follows: “The technology covered by the above
indicated patents refer to matters specific to the use of liquid nitrogen
dewars
relative to the shipment of biological materials. The concepts include those
of
disposability,
package configuration details, liquid nitrogen retention systems, systems
related to
thermal
performance, systems related to packaging integrity, and matters generally
relevant to the containment of liquid nitrogen. Similarly, the trademarks
mentioned relate to the cryogenic temperature shipping activity.” (See Draft
Form 10-SB/A).
Comments
17 and 18: In response to comments #17 and #18, the Company has consolidated
the
original first four risk factors into a single risk factor and has eliminated
any repetitive text in the “Risk Factors” section on pages 21 and 22. In
addition, the Company has added subheadings to clarify each risk factor
discussed. (See Draft Form 10-SB/A).
Comment
19: In response to comment #19, the Company has revised its statement in
the
“Risk Factors” section on page 23 relating to if the Company is not able to
compete effectively, to more clearly disclose the Company’s competitive
situation. Harsco Corporation and Chart industries have been included as
the two
significant competitors. (See Draft Form 10-SB/A).
Comment
20: In response to comment #20, the Company, has revised its statement in
the
“Risk Factors” section on page 24 in order to clearly identify the factors
affecting the Company’s ability to attract and retain skilled personnel by
inserting the following: “The ability to attract personnel to the Company’s
vision depends both on the availability of skills and the ability of the
Company
to offer compensation and challenge compatible to career goals of potentially
available individuals. The Company believes that the growth factors in the
target markets are sufficient to attract the interest of well-qualified
candidates for all positions as the need arises. To date, the Company has
not
experienced difficulties in attracting or retaining qualified personnel,
however, there is no guarantee that there will be well-qualified candidates
in
the future to choose from.” (See Draft Form 10-SB/A).
Comment
21: In response to comment #21, the Company has inserted a statement in the
“Risk Factors” section on page 25 relating to if the Company’s needs and ability
to obtain patent and trademark protection, as follows: “The Company is not aware
of any other company that is infringing any of the Company’s patents or
trademarks nor does the Company believe that it is infringing on the patents
or
trademarks of any other person or organization.” See Draft Form
10-SB/A).
Comment
22: In response to comment #22, the Company has inserted a statement in the
“Risk Factors” section on Page 25 relating to if the Company experiences
manufacturing delays or
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
5
interruptions,
as follows: “To date, the Company has not experienced any material delays to the
point that its ability to adequately service customer needs has been
compromised. As the business develops and quantity of production increases,
it
becomes more likely that such problems could arise.” (See Draft Form 10-SB/A).
Comment
23: In response to comment #23, the Company has made no revision to “Risk
Factors” section relating to the Company’s governance by Penny Stock Regulations
on page 24 due to the
fact
that
the last trade and the current asked price for Company common stock, as of
the
date of the Company’s responses, was and is $4.90. This more current trade price
was inserted in the subsequent “Risk Factors” section relating to effect on
stock price from the sale of substantial shares on page 27. (See Draft Form
10-SB/A).
Comment
24: In response to comment #24, the Company, on Page 28, has revised its
statement in the “Liquidity and Capital Resources” - “Total assets” section to
disclose the amount and source of research and development funding to include
the following: “During the last quarter of the Company’s 2005 operations,
funding of $991,875 was raised through a private placement offering of common
stock under regulation D. These funds were raised to allow the Company to
focus
on accelerating the development and launch of its one-way product.” (See Draft
Form 10-SB/A).
Comment
25: In response to comment #25, the Company has inserted information to update
the Company’s current plans to launch the new product in the “Liquidity and
Capital Resources” - “Total assets” section on page 28 as follows: “It is
planned to introduce the single use/one-way products in limited quantities
to
selective customers during the first quarter of calendar year 2006. A broad
launch to the general market will follow after feedback from this introductory
distribution is received and customer demand is further understood. A higher
volume demand is expected to develop as pharmaceutical products requiring
cryogenic protection come to market.” Should the launch time for its one-way
shipper significantly change, the Company will immediately notify the SEC
as to
a change in any launch date.
Comment
26: In response to comment #26, the Company is under a confidentiality agreement
with all its potential vaccine manufacturers. The Company is precluded from
disclosing such information under contract and because the Company feels
that
such information may 1) cause these manufacturers to withdraw from discussions
and 2) remove any competitive advantage the Company may have in its potential
to
be first to market.
Comment
27: In response to comment #27, the Company has revised its submission to
remove
any reference to Section 27A of the Securities Act of 1933, and any reference
to
Section 21E of the Securities Act of 1934. (See Draft Form
10-SB/A).
Comment
28: In response to comment #28, the Company, on Page 31, has revised its
statement
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
6
in
the
“Liquidity and Capital Reserves” section describing the Company’s indebtedness
to disclose more clearly the history of the $67,440 note payable to Falk,
Shaff
& Ziebell, LLP, representing an earlier conversion of accounts payable.
Since the original note expired December 31, 2002 and the terms have been
significantly revised through verbal agreement by the Company and the lender,
the Company is not including a copy of the expired note as an exhibit. All
other
notes were previously included as exhibits to the original 10-SB filing.
In
addition the Company has inserted a table on page 31, listing the lender,
principal interest rate, and maturity date of all the notes discussed in
footnote #8 to the financial statements. (See Draft Form 10-SB/A).
Comment
29: In response to comment #29, the Company has inserted a paragraph in the
“Liquidity
and Capital Reserves” section on page 32 to provide a thorough discussion of
cash flows in compliance with Section IV.B.1. of Financial Reporting Release
72.
(See Draft Form 10-SB/A).
Comment
30: In response to comment #30, the Company has revised each of the “Critical
Accounting Policies” on pages 33 and 34 to provide more clear description of the
costs which are subject to estimates and the factors considered by the Company
when determining those estimates in compliance with Section V. of Financial
Reporting Release 72. (See Draft Form 10-SB/A).
Comment
31: In response to comment #31, the Company, on Pages 34 through 36, has
revised
its statements in the sections “Results of Operations - Year Ended March 31,
2005” and “Results of Operations - Three Months Ended June 30, 2005” on pages
34, 35 and 36, to quantify those factors to explain material fluctuations
in
Company revenues, costs and expenses as required by Financial Reporting
Codification Section 501.04. (See Draft Form 10-SB/A).
Comment
32: In response to comment #32, the Company, has clearly identified the
positions held by Peter Berry and Dee S. Kelly during the past five years
including the approximate dates during which they held those positions, in
their
respective bios on Page 39 in the “Background of Directors and Officers” section
as requested. (See Draft Form 10-SB/A).
Comment
33: In response to comment #33, the Company has restated its footnote (4)
on
Page 41, in order to provide the current status of Mr. Berry’s bonus for 2005 as
follows: “It is estimated that this bonus amount will be approximately $100,000
and is still pending final board approval.” (See Draft Form
10-SB/A).
Comment
34: In response to comment #34, the Company has revised its paragraph 2 of
“Certain
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
7
Relationships
and Related Transactions” on Page 44 to include the individual amounts owed to
Patrick Mullens and Jeffrey Dell. (See Draft Form 10-SB/A).
Comment
35: In response to comment #35, the Company has revised its paragraph 2 of
“Certain Relationships and Related Transactions” on Page 44 to include the
individual amounts owed to Mark Grossman, David Petreccia and Raymond Takahashi.
(See Draft Form 10-SB/A).
Comment
36: In response to comment #36, the Company, has inserted a table on page
48 in
the section “Recent Sales of Unregistered Securities” in order to provide more
specific dates for the sales that took place during fiscal years 2005 and
2004
in compliance with Regulation S-B Section 701(b). (See Draft Form 10-SB/A).
Comment
37: In response to comment #37, the Company has inserted the following: “All
securities sold by the Company were sold to individuals, trusts or others
as
accredited investors as defined under Regulation D under the Securities Act,
as
amended.” in the first paragraph of “Recent Sales of Unregistered Securities” on
Page 47 to disclose the class of investors who purchased the Company’s
securities in all the transactions described in this section. (See Draft
Form
10-SB/A).
Comment
38: In response to comment #38 and bullet points 1,2,3,5, and 6,, the Company
has thoroughly analyzed the share price value when considering the share
value
for each of the calculations described in these bullet points. Though the
stock
had a listed trading price between approximately $5.50 and $6.50 after the
merger, the Company determined that $5.50 to $6.50 was not representative
of the
actual fair value for the following reasons: 1) due to the restrictive status
of
the majority of the Company’s shares the Company float was less than 10% of the
outstanding issued shares; 2) the Company’s common stock was so thinly traded,
that any major sale could not be supported at this time, and the price was
expected to drop upon such an occurrence. In fact, that is what has recently
occurred, when the stock price dropped down to between $4.00 and $4.90 over
the
last few weeks.
In
response to comment #38, bullet point 4, the estimate of the fair value of
the
shares provided as settlement to the former employee, which occurred in August
of 2004, was based on the current offering price of the limited private
placement offering which the Company was offering at that time to it’s current
shareholders. Further, the plaintiff was a current shareholder eligible for
the
limited offering and accepted the offer. (See Draft Form 10-SB/A).
Comment
39: In response to comment #39, the Company has revised its statement in
the
section,
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
8
“Fair
Value of Financial Instruments” on page F-8 of the March 31, 2005 Financial
Statements to include the following sentence: “The difference between the fair
value and recorded values of the related party notes payable is insignificant.”
The Company prepared a detailed analysis comparing the 6% interest rate of
the
notes with the historical prime, prime +1 and prime -1 rates during the periods
since the funds were originally loaned to the Company. Based on this analysis
it
was determined that the differences were insignificant. In addition, each
of the
lenders were agreeable to the 6% interest rate. (See Draft Form
10-SB/A).
Comment
40: In response to comment #40, the Company, corrected its statement in the
“Accrued Warranty Costs” section on Page F-10 to read as follows: “Costs related
to servicing the standard warranty are charged to the accrual as incurred.” This
statement more accurately describes the recording of warranty cost of the
Company which was already set forth in the warranty accrual activity table
below
the comment on page F-10., (See Draft Form 10-SB/A).
Comment
41: In response to comment #41, prior to the Company moving to its current
facility
in
Brea,
CA, the Brea landlord had been experiencing difficulty identifying a tenant.
The
building had remained empty for approximately 3 years based on the poor
condition of the building caused by the previous tenant. Therefore, based
on a
verbal agreement between the landlord and the Company, it was agreed that
the
Company not enter into a long-term lease agreement until an undetermined
future
agreed to date. For this arrangement, the Company agreed to and did incur
expenditures including capitalized leasehold improvements of $7,900 plus
other
miscellaneous costs which fell below the capitalization policy threshold.
In
November of 2004, the Company verbally agreed to start paying rent of $4,000
per
month on a month to month basis, representing the Company’s usage of slightly
over half the available floor space. Subsequently, a written, two year lease
was
entered into, effective on April 1, 2005, at a monthly lease payment amount
of
$7,500, representing the Company’s now total occupancy of the building space.
(See Draft Form 10-SB/A).
Comment
42: In response to comment #42, the Company has changed the statement in
Note 9
on Page F-19 as follows: “In connection with the reverse acquisition (see Note
1), the Company issued 1,000,000 shares to a majority stockholder in exchange
for the stockholder’s surrender of 1,354,891 shares of CryoPort Systems’ common
stock held by the stockholder.”, omitting the word pending to specifically
reflect that the share exchange was part of the reverse merger which occurred
in
March, 2005. (See Note 9 and Note 1 of Draft Form 10-SB/A).
Comment
43: In response to comment #43, the Company has revised the statement in
Note 10
on Page F-20 as follows: “All options granted have an exercise price equal to
the fair market value at the date of grant, vest upon grant or agreed upon
vesting schedules and expire five years from the date of grant.” to reflect that
not all options vest upon grant. Some options vest upon grant while others
have
future monthly or annual vesting dates.
Jeffrey
Riedler, Assistant Director
United
States Security and Exchange Commission
December
9, 2005
Page
9
Should
you wish to discuss our responses and the Draft Form 10-SB/A, please contact
me
immediately so we can respond and file the Form 10-SB/A before the 60 days
run
on December 19th.
Sincerely,
/s/
Gary
Curtis Cannon December
9, 2005
Gary
Curtis Cannon
Attorney
at Law
GCC/dc
Cc:
CryoPort, Inc.
Corbin
& Company, LLP