Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 4, 2023

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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 March 31, 2023

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 other 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 April 21, 2023 there were 45,545,312 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

Condensed Consolidated Balance Sheets at March 31, 2023 (Unaudited) and December 31, 2022

3

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022

4

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022

5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022

6

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

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

38

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

47

ITEM 4. Controls and Procedures

47

PART II. OTHER INFORMATION

48

ITEM 1. Legal Proceedings

48

ITEM 1A. Risk Factors

48

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

48

ITEM 3. Defaults Upon Senior Securities

48

ITEM 4. Mine Safety Disclosures

48

ITEM 5. Other Information

48

ITEM 6. Exhibits

49

SIGNATURES

50

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data)

March 31, 

December 31, 

    

2023

    

2022

(unaudited)

ASSETS

Current Assets:

  

  

Cash and cash equivalents

$

38,538

$

36,595

Short-term investments

 

484,076

 

486,728

Accounts receivable, net

 

45,574

 

43,858

Inventories

 

26,487

 

27,678

Prepaid expenses and other current assets

 

9,959

 

9,317

Total current assets

 

604,634

 

604,176

Property and equipment, net

 

71,259

63,603

Operating lease right-of-use assets

30,270

26,877

Intangible assets, net

 

188,175

191,009

Goodwill

151,616

151,117

Deposits

 

1,218

1,017

Deferred tax assets

937

947

Total assets

$

1,048,109

$

1,038,746

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable and other accrued expenses

$

25,860

$

28,046

Accrued compensation and related expenses

 

10,450

8,458

Deferred revenue

 

1,009

439

Current portion of operating lease liabilities

4,089

3,720

Current portion of finance lease liabilities

 

114

128

Current portion of notes payable

61

60

Total current liabilities

 

41,583

 

40,851

Convertible senior notes, net of discount of $9.5 million and $10.1 million, respectively

407,349

406,708

Notes payable

364

355

Operating lease liabilities, net of current portion

27,841

24,721

Finance lease liabilities, net of current portion

202

216

Deferred tax liabilities

5,110

4,929

Other long-term liabilities

368

451

Contingent consideration

4,774

4,677

Total liabilities

 

487,591

 

482,908

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; 200,000 issued and outstanding

20,275

18,275

Common stock, $0.001 par value; 100,000,000 shares authorized; 48,501,406 and 48,334,280 issued and outstanding at March 31, 2023 and December 31, 2022, respectively

48

48

Additional paid-in capital

 

1,118,172

 

1,114,896

Accumulated deficit

 

(548,406)

 

(542,832)

Accumulated other comprehensive loss

 

(29,571)

 

(34,549)

Total stockholders’ equity

 

560,518

 

555,838

Total liabilities and stockholders’ equity

$

1,048,109

$

1,038,746

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Three Months Ended March 31,

    

2023

    

2022

Service revenues

$

35,836

$

32,910

Product revenues

26,981

19,392

Total revenues

62,817

52,302

Cost of service revenues

19,076

18,718

Cost of product revenues

 

16,669

11,243

Total cost of revenues

35,745

29,961

Gross margin

 

27,072

22,341

 

  

Operating costs and expenses:

 

  

 

  

Selling, general and administrative

 

33,241

26,622

Engineering and development

 

3,876

3,538

Total operating costs and expenses

 

37,117

30,160

 

 

  

Loss from operations

 

(10,045)

(7,819)

Other income (expense):

 

 

  

Investment income

2,467

1,264

Interest expense

 

(1,509)

(1,491)

Other income (expense), net

 

4,005

(5,017)

Total other income (expense), net

4,963

(5,244)

Loss before provision for income taxes

 

(5,082)

(13,063)

Provision for income taxes

 

(492)

(341)

Net loss

$

(5,574)

$

(13,404)

Paid in kind dividend on Series C convertible preferred stock

(2,000)

(2,000)

Net loss attributable to common stockholders

$

(7,574)

$

(15,404)

Net loss per share attributable to common stockholders - basic and diluted

$

(0.16)

$

(0.31)

Weighted average common shares outstanding – basic and diluted

 

48,362,501

49,660,579

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Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

Three Months Ending March 31,

    

2023

    

2022

Net loss

$

(5,574)

$

(13,404)

Other comprehensive income (loss), net of tax:

 

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

 

3,675

(14,065)

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

99

33

Foreign currency translation adjustments

 

1,204

(1,047)

Other comprehensive income (loss)

 

4,978

(15,079)

Total comprehensive loss

$

(596)

$

(28,483)

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Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

Class A

Class B

Class C

Other 

Total 

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Additional

Accumulated 

Comprehensive 

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid–In Capital

    

Deficit

    

Loss

    

Equity (Deficit)

Balance at December 31, 2021

 

200,000

10,275

49,616,154

50

1,100,287

(467,541)

(1,243)

641,828

Net loss

 

(13,404)

(13,404)

Other comprehensive loss, net of taxes

 

(15,079)

(15,079)

Stock-based compensation expense

 

4,125

4,125

Paid-in-kind preferred stock dividend

2,000

(2,000)

Repurchase of common stock

(306,300)

(8,349)

(8,349)

Vesting of restricted stock units

58,395

Proceeds from exercise of stock options

 

85,058

313

313

Balance at March 31, 2022

$

$

200,000

$

12,275

49,453,307

$

50

$

1,102,725

$

(489,294)

$

(16,322)

$

609,434

Balance at December 31, 2022

200,000

18,275

48,334,280

48

1,114,896

(542,832)

(34,549)

555,838

Net loss

(5,574)

(5,574)

Other comprehensive loss, net of taxes

4,978

4,978

Stock-based compensation expense

5,184

5,184

Paid-in-kind preferred stock dividend

2,000

(2,000)

Vesting of restricted stock units

156,588

Proceeds from exercise of stock options

10,538

92

92

Balance at March 31, 2023

$

$

200,000

$

20,275

48,501,406

$

48

$

1,118,172

$

(548,406)

$

(29,571)

$

560,518

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Cryoport, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

For the Three Months Ended

March 31, 

    

2023

    

2022

Cash Flows From Operating Activities:

 

  

 

  

Net loss

$

(5,574)

$

(13,404)

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

 

  

Depreciation and amortization

6,404

5,365

Amortization of debt discount

641

643

Non-cash operating lease expense

1,099

896

Unrealized (gain) loss on investments in equity securities

(1,510)

4,908

Realized (gain) loss on available-for-sale investments

86

49

Stock-based compensation expense

5,184

 

4,125

Loss on disposal of property and equipment

77

 

92

Gain on insurance settlement

(2,642)

Change in credit losses

(103)

31

Insurance proceeds for operations

1,212

 

3,000

Change in contingent consideration

46

Changes in operating assets and liabilities:

Accounts receivable

(1,414)

3,340

Inventories

1,239

(7,715)

Prepaid expenses and other current assets

(271)

21

Deposits

(198)

Operating lease liabilities

(1,004)

(891)

Accounts payable and other accrued expenses

(3,276)

(2,107)

Accrued compensation and related expenses

1,962

2,141

Deferred revenue

570

(30)

Net deferred tax liability

246

60

Net cash provided by operating activities

2,774

524

 

  

Cash Flows From Investing Activities:

 

  

Purchases of property and equipment

(9,569)

(4,245)

Insurance proceeds for loss of fixed assets

976

2,000

Software development costs

(463)

(213)

Purchases of short-term investments

(30,354)

Sales/maturities of short-term investments

7,850

36,000

Patent and trademark costs

(177)

(138)

Net cash provided by (used in) investing activities

(1,383)

3,050

 

  

Cash Flows From Financing Activities:

 

  

Proceeds from exercise of stock options

92

313

Repurchase of common stock

(8,349)

Repayment of notes payable

10

Repayment of finance lease liabilities

(31)

(13)

Net cash provided by (used in) financing activities

71

 

(8,049)

Effect of exchange rates on cash and cash equivalents

481

(178)

Net change in cash and cash equivalents

1,943

(4,653)

Cash and cash equivalents — beginning of period

36,595

139,101

Cash and cash equivalents — end of period

$

38,538

$

134,448

 

  

Supplemental Disclosure of Cash Flow Information:

 

  

 

  

Cash paid for interest

$

$

Cash paid for income taxes

$

433

$

32

Supplemental Disclosure of Non-Cash Financing Activities:

Operating lease right-of-use assets and operating lease liabilities

$

4,436

$

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

$

(3,675)

$

14,065

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

$

99

$

33

Paid-in-kind preferred stock dividend, including beneficial conversion feature

$

2,000

$

2,000

Fixed assets included in accounts payable and accrued liabilities

$

707

$

549

See accompanying notes to condensed consolidated financial statements.

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Cryoport, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022

(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 months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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, 2022.

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 serves the life sciences industry as a provider of integrated temperature-controlled supply-chain solutions supporting the biopharma/pharma, animal health, and reproductive medicine markets. Our mission is to support life and health worldwide and we are continuously developing, implementing, and leveraging our supply chain platform, which is designed to deliver comprehensive, unparalleled, highly differentiated temperature-controlled logistics, packaging, storage, cryogenic systems, informatics, and related services for life science products, regenerative medicine, cellular therapies, and treatments that require unique, specialized cold chain management.

In October 2020, the Company completed both the acquisition of MVE Biological Solutions (the “MVE Acquisition”) and the acquisition of CRYOPDP (the “CRYOPDP Acquisition”). In the second quarter of 2021, the Company completed the acquisitions of Critical Transport Solutions Australia (CTSA) in Australia and F-airGate in Belgium to further enhance CRYOPDP’s existing global temperature-controlled supply chain capabilities in the APAC (Asia-Pacific) and EMEA (Europe, the Middle East, and Africa) regions. In April 2022, the Company completed the acquisition of Cell&Co BioServices (Cell&Co) in Clermont-Ferrand, France. In July 2022, the Company completed the acquisition of Polar Expres in Madrid, Spain, which provides temperature-controlled logistics solutions dedicated to the life sciences industry, and the acquisition of Cell Matters in Liège, Belgium, which provides cryo-process optimization, cryoprocessing, and cryopreservation solutions to the life sciences industry. These acquisitions are further discussed in Note 4.

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

Note 3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Cryoport, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

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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, 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 provision for credit losses, fair value of short-term investments, valuations and purchase price allocations related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates, including valuation multiples utilized in the market approach used in impairment assessments, estimated fair values of intangible assets and goodwill, intangible asset useful lives and amortization methods, inventory excess and obsolescence reserve, contingent consideration liability, equity-based instruments, tax reserves, and recoverability of the Company’s net deferred tax assets and related valuation allowance.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Future events, including the extent and the duration of the COVID-19 related economic impacts, and their effects cannot be predicted with certainty, and accordingly the Company’s accounting estimates require the exercise of judgment.

Credit Losses

The Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables. The Company considers historical collection rates, the current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable, the Company believes that the carrying value, net of excepted losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments, including its trade receivables.

To determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of customer at the business component level, as the Company determined that risk profile of its customers is consistent based on the type and industry in which they operate, mainly in the life sciences industry. Each business component is analyzed for estimated credit losses individually. In doing so, the Company establishes a historical loss matrix, based on the previous collections of accounts receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available. Further, the Company considers macroeconomic factors and the status of the life sciences industry to estimate if there are current expected credit losses within its trade receivables based on the trends and the Company’s expectation of the future status of such

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economic and industry-specific factors. Also, specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default.

The accounts receivable balance on our consolidated balance sheet as of March 31, 2023 was $45.6 million, net of $1.1 million of allowances. The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected at March 31, 2023:

Balance at January 1, 2023

    

$

1,275

Change in expected credit losses

 

(103)

Write-offs, net of recoveries

(40)

Balance at March 31, 2023

$

1,132

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, note payable, and the Company’s 0.75% Convertible Senior Notes due in 2026 (the “2026 Convertible Senior Notes”) and 3.0% Convertible Senior Notes due in 2025 (the “2025 Convertible Senior Notes” and together with the 2026 Convertible Senior Notes, the “Convertible Senior Notes”). The carrying value for all such instruments, except finance lease liabilities, notes payable and the Convertible Senior Notes, 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 note payable and the Convertible Senior Notes, see Notes 6 and 9.

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 March 31, 2023 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 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 March 31, 2023 and December 31, 2022 are net of provision for credit losses of $1.1 million and $1.3 million, respectively. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. The Company maintains reserves for credit losses and such losses, in the aggregate, historically have not exceeded its estimates.

The Company’s customers are in the biopharma, 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. At March 31, 2023 there was one customer that accounted for 10.4% of net accounts receivable. At December 31, 2022, there was no customers that accounted for more than 10% of net accounts receivable.

The Company has revenue from foreign customers primarily in the United Kingdom, France, Germany, China and India. During the three months ended March 31, 2023 and 2022, the Company had revenues from foreign customers of approximately $29.2 million and $24.4 million, respectively, which constituted approximately 46.5% and 46.7%, respectively, of total revenues. No single customer generated over 10% of revenues during the three months ended March 31, 2023 and 2022.

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Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (“FIFO”) method. Inventories are reviewed periodically for slow-moving or obsolete status. The Company writes down the carrying value of its inventories to reflect situations in which the cost of inventories is not expected to be recovered. Once established, write-downs of inventories are considered permanent adjustments to the cost basis of the obsolete or excess inventories. Raw materials and finished goods include material costs less provisions for obsolete or excess inventories. The Company evaluates the current level of inventories considering historical trends and other factors, such as selling prices and costs of completion, disposal and transportation, and based on the evaluation, records adjustments to reflect inventories at net realizable value. These adjustments are estimates, which could vary significantly from actual results if future economic conditions, customer demand, competition or other relevant factors differ from expectations. These estimates require us to make assessments about future demand for the Company’s products in order to categorize the status of such inventories items as slow-moving, obsolete or in excess-of-need. These estimates are subject to the ongoing accuracy of the Company’s forecasts of market conditions, industry trends, competition and other factors.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets which is generally three to twelve years for computer hardware and software, seven to ten years for freezers, four to ten years for trucks and autos, three to fifteen years for furniture and equipment and over the shorter of the lease term or useful lives of the assets for leasehold improvements. Buildings are depreciated over a useful life ranging from 20 to 45 years. Maintenance and repairs are expensed as incurred.

Betterments, renewals and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized in the consolidated statements of operations.

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, current finance lease liabilities, and long-term finance lease liabilities on our consolidated balance sheets.

Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using our incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company accounts for lease and non-lease components as a single lease component for all its leases.

Business Combinations

Total consideration transferred for acquisitions is allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. This purchase price allocation process requires management to make significant estimates and assumptions primarily with respect to intangible assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

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Goodwill

The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company compares the fair value of the reporting unit with its carrying amount and then recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit. The Company assessed triggering events indicating potential goodwill impairment and after assessment, concluded that there was no impairment during the three months ended March 31, 2023.

Management will continue to monitor the reporting units for changes in the business environment that could impact the recoverability in future periods. The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from the Company’s business activities. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of the Company’s reporting units may include the duration of the COVID-19 global pandemic, its impact on the global economy and in particular, the APAC region; the ongoing war between Russia and Ukraine, as well as new sanctions against Russia, impacting the reporting units’ business activities in the EMEA region; adverse macroeconomic conditions; and fluctuations in foreign currency exchange rates impacting the results of operations and the value of foreign assets and liabilities. While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.

Intangible Assets

Intangible assets are comprised of patents, trademarks, software development costs and the intangible assets acquired in the Company’s recent acquisitions which include a non-compete agreement, technology, customer relationships, trade name/trademark, agent network, order backlog, developed technology and land use rights. These intangible assets are amortized using the straight-line method over the estimated useful lives (see Note 8). The Company uses the following valuation methodologies to value the significant intangible assets acquired: income approach for customer relationships, replacement cost for agent network and software, and relief from royalty for trade name/trademarks and developed technology. The Company capitalizes costs of obtaining patents and trademarks, which are amortized, using the straight-line method over their estimated useful life of five years once the patent or trademark has been issued.

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. During the year ended December 31, 2022, due to macroeconomic factors impacting results of operations, the Company performed an impairment analysis of its amortizable intangible assets. The impairment analysis requires a comparison of undiscounted future cash flows expected to be generated over the useful life of an asset to the carrying value of the asset. Based on the impairment analysis performed, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required. There was no impairment of intangible assets during the three months ended March 31, 2023.

Other Long-lived Assets

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 March 31, 2023.

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Deferred Financing Costs

Deferred financing costs represent costs incurred in connection with the issuance of debt instruments and equity financings. Deferred financing costs related to the issuance of debt are amortized over the term of the financing instrument using the effective interest method and are presented in the consolidated balance sheets as an offset against the related debt. Offering costs from equity financings are netted against the gross proceeds received from the equity financings.

Income Taxes

The Company accounts for income taxes under the provision of Accounting Standards Codification (“ASC”) 740, “Income Taxes”, or ASC 740. As of March 31, 2023 and December 31, 2022, there were no unrecognized tax benefits included in the accompanying consolidated balance sheets that would, if recognized, impact the effective tax rate.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Based on the weight of available evidence, the Company’s management has determined that it is not more likely than not that the U.S. based net deferred tax assets will be realized. Therefore, the Company has recorded a full valuation allowance against its U.S. based net deferred tax assets. With respect to the foreign based deferred tax assets, the Company’s management has reviewed these deferred tax assets on a jurisdictional basis. Based on the weight of each jurisdiction’s evidence available, the Company’s management has made separate determinations for each foreign jurisdiction regarding whether it is more likely than not that a net deferred tax asset within a particular jurisdiction will be realized. The Company has recorded full valuation allowances in jurisdictions where deferred tax assets are not deemed more likely than not to be realized.

The Company has recorded a net deferred tax liability in jurisdictions where taxable temporary differences associated with indefinite-lived intangible assets do not support the realization of deferred tax assets with finite carryforward periods. In addition, the Company has recorded a net deferred tax liability in jurisdictions where taxable temporary differences exceed deductible temporary differences.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company has immaterial accruals for interest or penalties on its consolidated balance sheets at March 31, 2023 and December 31, 2022 and has recorded only immaterial interest and/or penalties in the consolidated statements of operations for the three months ended March 31, 2023 and 2022. The Company is subject to taxation in the U.S., various state jurisdictions and in various foreign countries. As of March 31, 2023, the Company is no longer subject to U.S. federal examinations for years before 2019 and for California franchise and income tax examinations for years before 2018. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward and make adjustments up to the amount of the net operating loss carry forward amount. The Company is not currently under examination by U.S. federal or state jurisdictions. Our foreign subsidiaries are generally subject to examination three years following the year in which the tax obligation originated. The years subject to audit may be extended if the entity substantially understates corporate income tax. The Company’s subsidiary in India is currently under examination by the Indian tax authorities for 2012-2013, 2013-2014 and 2015-2016 tax periods. Other than India, the Company does not have any foreign subsidiaries currently under audit by their local taxing authorities.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022, which imposes a 1% excise tax on publicly traded U.S. corporations for the fair market value of any stock repurchased during the tax year that exceeds $1.0 million, with certain specific exceptions. The excise tax is effective for transactions occurring in taxable years after December 31, 2022.

On March 11, 2021, the United States enacted the American Rescue Plan (“ARP”). The ARP includes provisions extending certain Coronavirus Aid, Relief and Economic Security Act (CARES Act) provisions, repeals a worldwide interest allocation election, modifies the $1 million executive compensation limitation for years after 2026 and extends the employee retention credit. The Company will continue to evaluate the impact of the ARP and its impact on our financial statements.

Revenue Recognition

Revenues are recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue recognition is evaluated through the following five steps:

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(i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

Performance Obligations

At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when our performance obligation has been met. The Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the asset, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

For arrangements under which the Company provides biological specimen storage services and logistics support and management to the customer, the Company satisfies its performance obligations as those services are performed whereby the customer simultaneously receives and consumes the benefits of such services under the agreement.

Revenue generated from short-term logistics and engineering consulting services provided to customers is recognized when the Company satisfies the contractually defined performance obligations. When a contract includes multiple performance obligations, the contract price is allocated among the performance obligations based upon the stand-alone selling prices. Approved contract modifications are accounted for as either a separate contract or as part of the existing contract depending on the nature of the modification.

Our performance obligations on our orders and under the terms of agreements with customers are generally satisfied within one year from a given reporting date and, therefore, we omit disclosure of the transaction price allocated to remaining performance obligations on open orders.

Shipping and handling activities related to contracts with customers are accounted for as costs to fulfill our promise to transfer the associated products pursuant to the accounting policy election allowed under Topic 606 and are not considered a separate performance obligation to our customers. Accordingly, the Company records amounts billed for shipping and handling as a component of revenue. Shipping and handling fees and costs are included in cost of revenues in the accompanying consolidated statements of operations.

Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental agencies.

Significant Payment Terms

Pursuant to the Company’s contracts with its customers, amounts billed for services or products delivered by the Company are generally due and payable in full within 15 to 60 days from the date of the invoice (except for any amounts disputed by the customer in good faith). Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.

Variable Consideration

When a contract includes variable consideration, the Company evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained. Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available. Variable consideration estimates are updated at each reporting date. Revenues are recorded net of variable consideration, such as discounts and allowances.

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Warranties

The Company provides product warranties with varying terms and durations for some of its products. The Company estimates product warranty costs and accrues for these costs as products are sold with a charge to cost of sales. Factors considered in estimating warranty costs include historical and projected warranty claims, historical and projected cost-per-claim, and knowledge of specific product issues that are outside of typical experience. Warranty accruals are evaluated and adjusted as necessary based on actual claims experience and changes in future claim and cost estimates.

Product warranty accrued liabilities totaled $0.7 million at March 31, 2023 and December 31, 2022, respectively, and are included in other long-term liabilities, accounts payable and other accrued expenses. Warranty expense was not material for the three months ended March 31, 2023 and 2022.

Incremental Direct Costs

Incremental direct costs are expensed when incurred when the amortization period of the asset that would have been recognized is one year or less; otherwise, incremental contract costs are recognized as an asset and amortized over time as promised goods and services are transferred to a customer. Incremental direct costs were not material for the three months ended March 31, 2023 and 2022.

Contract Assets

Typically, we invoice the customer and recognize revenue once we have satisfied our performance obligation. Accordingly, our contract assets comprise accounts receivable, which are recognized when payment is unconditional and only the passage of time is required before payment is due. Generally, we do not have material amounts of other contract assets since revenue is recognized as control of goods is transferred or as services are performed.

Contract Liabilities (Deferred Revenue)

Contract liabilities are recorded when cash payments are received in advance of the Company’s performance. Deferred revenue was $1.0 million and $0.4 million at March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023 and 2022, the Company recognized revenues of $0.4 million and $0.3 million, respectively, from the related contract liabilities outstanding as the services were performed.

Nature of Goods and Services

The Company provides Cryoport Express® Shippers to its customers and charges a fee in exchange for the use of the Cryoport Express® Shipper under long-term master service agreements with customers. The Company’s arrangements convey to the customers the right to use the Cryoport Express® Shippers over a period of time. The Company retains title to the Cryoport Express® Shippers and provides its customers the use of the Cryoport Express® Shipper for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the Cryoport Express® Shipper is returned to the Company.

The Company recognizes revenue for the use of the Cryoport Express® Shippers at the time of the delivery of the Cryoport Express® Shipper to the end user of the enclosed materials, and at the time that collectability is probable.

The Company also provides vacuum insulated aluminum dewars and cryogenic freezers systems to its customers. Revenue is recognized when the Company satisfies performance obligations by transferring the equipment to a customer, and at the time that collectability is probable.

The Company also provides global temperature-controlled logistics services, support and management. Revenue is recognized for these services as services are rendered and at the time that collectability is probable.

The Company also provides comprehensive and integrated temperature-controlled biostorage solutions to customers in the life sciences industry and charges a fee under long-term master service agreements with customers. These services include (1) biological specimen cryopreservation storage and maintenance, (2) archiving, monitoring, tracking, receipt and delivery of samples, (3) transport of frozen biological specimens to and from customer locations, and (4) management of incoming and outgoing biological specimens. The Company recognizes revenue for its biostorage solutions as services are rendered over time and at the time that collectability is probable.

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The Company also provides short-term logistics and engineering consulting services to some customers, with fees tied to the completion of contractually defined services. We recognize revenue from these services over time as the customer simultaneously receives and consumes the benefit of these services as they are performed.

A significant portion of our revenues are covered under long-term agreements. We have determined that individual Statements of Work or Scope of Work (“SOW”), whose terms and conditions taken with a Master Services Agreement (“MSA”), create the Topic 606 contracts which are generally short-term in nature (e.g., 15-day shipping cycle) for the Cryoport Express® solutions and up to 12 months for biostorage solutions. Our agreements (including SOWs) generally do not have multiple performance obligations and, therefore, do not require an allocation of a single price amongst multiple goods or services. Prices under these agreements are generally fixed.

Revenue Disaggregation

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as one reportable segment and one reporting unit. As a result, the financial information disclosed herein represents all of the material financial information related to the Company. When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. We consider sales disaggregated by end-market to depict how the nature, amount, timing and uncertainty of revenues and cash flows are impacted by changes in economic factors. The following table disaggregates our revenues by major markets for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended

March 31, 

    

2023

    

2022

Biopharma/Pharma

$

51,122

$

43,011

Animal Health

 

8,863

6,794

Reproductive Medicine

2,832

2,497

Total revenues

$

62,817

$

52,302

Given that the Company’s revenues are generated in different geographic regions, factors such as regulatory and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows. Our geographical revenues, by origin, for the three months ended March 31, 2023 and 2022, were as follows (in thousands):

Three Months Ended

March 31, 

    

2023

    

2022

Americas

$

33,617

$

27,878

Europe, the Middle East and Africa (EMEA)

 

18,159

16,187

Asia Pacific (APAC)

 

11,041

8,237

Total revenues

$

62,817

$

52,302

Cost of Service Revenues

Our cost of service revenues is primarily comprised of freight charges, payroll and associated expenses related to our global logistics and supply chain centers, depreciation expenses of our Cryoport Express® Shippers and supplies and consumables used for our solutions.

Cost of Product Revenues

Our cost of product revenues is primarily comprised of materials, direct and indirect labor, inbound freight charges, purchasing and receiving, inspection, and distribution and warehousing of inventory. In addition, shop supplies, facility maintenance costs and depreciation expense for assets used in the manufacturing process are included in cost of product revenues.

Engineering and Development Expenses

Expenditures relating to engineering and development are expensed in the period incurred to engineering and development expense in the statement of operations.

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Acquisition Costs

Acquisition costs consist of legal, accounting, third-party valuations, and other due diligence costs related to our acquisitions.

Stock-Based Compensation

Under our stockholder approved stock-based compensation plan, we have granted incentive stock options, non-qualified stock options and restricted stock units that vest over four years. Incentive and non-qualified stock options expire from seven to ten years from date of grant. The Company accounts for stock-based payments in accordance with stock-based payment accounting guidance which requires all stock-based payments to be recognized based upon their fair values. The fair value of stock options is estimated at the grant date using the Black-Scholes Option Pricing Model (“Black-Scholes”) and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value using Black-Scholes is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and expected term. The Company accounts for forfeitures of unvested awards as they occur.

The grant date fair value per share for restricted stock units is based upon the closing market price of our common stock on the award grant date.

The Company’s stock-based compensation plans are discussed further in Note 14.

Basic and Diluted Net Loss Per Share

We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss position, basic and diluted weighted average common shares are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, unvested restricted stock units and shares associated with the conversion of the Convertible Senior Notes and convertible preferred stock outstanding during the periods.

The following shows the amounts used in computing net loss per share (in thousands except per share data):

Three Months Ended March 31,

    

2023

    

2022

Net loss

$

(5,574)

$

(13,404)

Paid-in-kind dividend on Series C convertible preferred stock

(2,000)

(2,000)

Net loss attributable to common shareholders

$

(7,574)

$

(15,404)

Weighted average common shares outstanding - basic and diluted

48,362,501

49,660,579

Net loss per share attributable to common stockholders - basic and diluted

$

(0.16)

$

(0.31)

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive:

Three Months Ended March 31, 

    

2023

    

2022

Stock options

3,438,314

4,699,476

Restricted stock units

665,110

693,887

Series C convertible preferred stock

5,721,177

5,497,939

Convertible Senior Notes

4,022,734

4,022,734

13,847,335

14,914,036

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Foreign Currency Transactions

Management has determined that the functional currency of its subsidiaries is the local currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the period-end exchange rates. Income and expenses are translated at an average exchange rate for the period and the resulting translation gain (loss) adjustments are accumulated as a separate component of stockholders’ equity. The translation gain (loss) adjustment totaled $1.2 million, and $(1.1) million for the three months ended March 31, 2023 and 2022, respectively. Foreign currency gains and losses from transactions denominated in other than respective local currencies are included in earnings.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs in connection with the purchase of goods and services. Supplier finance programs may also be referred to as reverse factoring, payables finance, or structured payables arrangements. The amendments in ASU 2022-04 require a buyer that uses supplier finance programs to disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for all entities for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods with those fiscal years, except for the requirement to disclose roll-forward information, which is effective prospectively for fiscal years beginning after December 15, 2023. We adopted ASU 2022-04 on January 1, 2023. The adoption of this standard did not have an impact on the Company’s consolidated financial statements or disclosures as the Company currently does not have supplier finance programs.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities, such as Cryoport, that have not yet adopted the CECL accounting model in ASU 2016-13, the effective date for the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022, including interim periods within those fiscal years). We adopted ASU 2022-02 on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for public business entities. We adopted ASU 2021-08 on January 1, 2023. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables. In addition, new disclosures are required. The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company was a smaller reporting company as of November 15, 2019, the determination date. We adopted ASU 2016-13 on January 1, 2023. Based on the composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures. Specifically, the Company’s estimate of expected credit losses as of March 31, 2023, using its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

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Accounting Guidance Issued but Not Adopted at March 31, 2023

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which amends the guidance in Topic 820, Fair Value Measurement, to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, the ASU introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years for public business entities. We are currently evaluating the impact of this standard on our consolidated financial statements.

Note 4. Acquisitions

2022 Acquisitions

In April 2022, we completed the acquisition of Cell&Co BioServices in Clermont-Ferrand, France with additional operations in Pont-du-Château, France to further enhance our existing global temperature-controlled supply chain capabilities. Cell&Co BioServices is a bioservices business providing biorepository, kitting, and logistics services to the life sciences industry. The purchase consideration was €5.7 million ($6.2 million), comprised of upfront consideration of €3.2 million ($3.5 million) in cash, 15,152 shares of the Company’s common stock with a fair value of $0.4 million, and an earn-out provision with a fair value of €2.0 million ($2.2 million) based on achieving annual EBITDA targets through 2025, as defined in the share purchase agreement. Of the purchase consideration, $2.7 million was allocated to goodwill and $3.4 million to identifiable intangible assets. The valuation of the intangible assets, contingent consideration liability and opening balance sheet are preliminary estimates subject to change as we complete our procedures. The acquired goodwill and intangible assets are not deductible for tax purposes.

In July 2022, the Company completed the acquisition of Polar Expres based in Madrid, Spain, which provides temperature-controlled logistics solutions dedicated to the life sciences industry. Polar Expres operates logistics centers in Madrid and Barcelona supporting the rapidly growing life science market. This acquisition further expands CRYOPDP’s footprint which enhances our existing global temperature-controlled supply chain capabilities and provides us with additional growth opportunities in the EMEA region. The purchase consideration was €2.8 million ($2.8 million), comprised of cash consideration of €1.4 million ($1.4 million) and an earn-out provision with a fair value of €1.4 million ($1.4 million) based on achieving 2024 and 2026 EBITDA targets as defined in the share purchase agreement. Of the purchase consideration, $1.7 million was allocated to goodwill and $1.0 million to identifiable intangible assets. The valuation of the intangible assets, contingent consideration liability and opening balance sheet are preliminary estimates subject to change as we complete our procedures. The acquired goodwill and intangible assets are not deductible for tax purposes.

In July 2022, the Company also completed the acquisition of Cell Matters based in Liège, Belgium, which provides cryo-process optimization, cryoprocessing, and cryopreservation solutions to the life sciences industry. The purchase consideration was €3.9 million ($4.0 million). The purchase consideration, including the reimbursement of financial indebtedness at the closing date, in the amount of €4.7 million ($4.7 million) in aggregate was allocated to goodwill. The value of this acquisition is assigned to Cell Matters’ assembled workforce which has significant expertise in cryo-process optimization and cryopreservation. This expertise is tied to Cryoport Systems’ new initiative to establish standardized, integrated apheresis collection, processing, biostorage, and distribution solutions for cellular therapies branded as IntegriCell(TM) to provide consistent, high-quality cellular starting material for use in the manufacture of life-saving cellular therapies. Through March 31, 2023, the Company recorded a measurement period adjustment of $0.1 million comprised of a refund from the sellers following payments made from Cell Matters to the sellers between the locked box date and the closing date, in accordance with the locked box mechanism as defined in the share purchase agreement. The valuation of the opening balance sheet is a preliminary estimate subject to change as we complete our procedures. The acquired goodwill is not deductible for tax purposes.

2021 Acquisitions

In the second quarter of 2021, we completed the acquisitions of Critical Transport Solutions Australia (CTSA) in Australia and F-airGate in Belgium to further enhance our existing global temperature-controlled supply chain capabilities in the APAC and EMEA regions. The combined purchase consideration was $6.8 million, of which $2.7 million was allocated to goodwill and $2.8 million to identifiable intangible assets. The combined purchase consideration also included a contingent consideration liability of $0.7 million. The acquisitions include earnout provisions subject to achieving future EBITDA targets through 2025 and certain employment requirements, as defined in the share purchase agreements. The goodwill amount represents synergies related to our existing logistics

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management services. Through June 30, 2022, the Company recorded combined measurement period adjustments of $0.8 million, mainly comprised of deferred tax adjustments. The acquired goodwill and intangible assets are not deductible for tax purposes.

Note 5. Cash, Cash Equivalents and Short-Term Investments

Cash, cash equivalents and short-term investments consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 

December 31, 

    

2023

    

2022

Cash

$

36,000

$

34,752

Cash equivalents:

 

Money market mutual fund

 

2,538

1,843

Total cash and cash equivalents

 

38,538

36,595

Short-term investments:

 

U.S. Treasury notes and bills

 

190,833

190,718

Mutual funds

 

101,287

99,777

Corporate debt securities

191,956

196,233

Total short-term investments

 

484,076

486,728

Cash, cash equivalents and short-term investments

$

522,614

$

523,323

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at March 31, 2023 were as follows (in thousands):

Amortized

Unrealized

Unrealized

    

Cost

    

Gains

    

Losses

    

Fair Value

U.S. Treasury notes

$

188,726

$

2,108

$

(1)

$

190,833

Corporate debt securities

190,389

1,790

(223)

191,956

Total available-for-sale investments

$

379,115

$

3,898

$

(224)

$

382,789

The following table summarizes the fair value of available-for-sale investments based on stated contractual maturities as of March 31, 2023:

    

Amortized Cost

    

Fair Value

Due within one year

$

142,192

$

143,467

Due after one year through five years

 

236,923

239,322

Due after five years through ten years

Total

$

379,115

$

382,789

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by type of security at December 31, 2022 were as follows (in thousands):

Amortized

Unrealized 

Unrealized 

    

Cost

    

Gains

    

Losses

    

Fair Value