I have received a number of calls and emails over the last several days asking for my opinion on the CryoPort quarterly report. I have been dealing with and preparations for Tropical Storm Fay, which we thought was going to hit us directly as a potential hurricane, so I have not had time to update before now. Thankfully, my area has thus far been spared a majority of the effects of this storm, but say a prayer for those in the Melbourne, Florida area as they have received in excess of 24" (2 FEET!) of rain over the last 2 days and it is still raining.
As to CryoPort's 10Q. Well, unfortunately it is about what I expected. There is a very small buildup of inventory and they spent about $2M of the cash they have brought in during the past year. Now, if there was something to show for that cash, I would feel a little better. However, unless I am just missing something, I don't see assets on the books that indicate to me that those funds were used for much other than covering operations and old debts. I was hoping for an announcement of some type of deal, but it has not materialized to date. It is hard for me to understand the idea of getting ready to roll out the program in any meaningful way, while having virtually no inventory and having actually shipped very few units, but I feel sure they have their reasons.
I will say this about Mr. Berry. Peter has run a pretty tight ship for several years, often times stretching money as far as it could possibly go. That said, I don't think the company is wasting money. On the contrary, he is generally a very good steward of the funds. My biggest area of concern is that since announcing production began in December, CryoPort has only produced around $100k of product. That would be about $15k (dollars) per month or maybe a couple hundred shippers each month. Something doesn't make sense in that scenario. Either they have not been in manufacturing as we were led to believe with company press releases, or the inventory that was supposedly being built up is not being reflected on the books as one might expect. I suspect that the company has only made as many units as the pilot programs required, which is fine, but it does seem strange to think that the roll out is near, yet no inventory has been created.
I will be asking some questions to try to get some answers and will report my findings on this blog in the future. I have heard rumblings from a couple of sources that indicate there may be something coming soon, confirming the comments in the shareholder letter. However, I can not confirm anything at this time as to either who the deals are with and at what level. Hopefully I can get some clarity over the next couple of weeks. Perhaps there will be news in that time frame.
If I have not received confirmation or clarification as to the business developments alluded to by Mr. Berry in the shareholder letter by the end of August, I will request a firm date for the annual shareholders meeting. Last year this was held in October, and I would expect roughly the same this year. I have several large shareholders, plus myself, that are interested in attending this year's meeting and we need appropriate notice to address any scheduling conflicts so that we can attend. If a firm date is not provided, I will politely help provide one by calling for a shareholder's meeting with the proper notice and voting minimums.
I am hopeful that my involvement as anything other than a shareholder and the biggest cheerleader on the street will become a moot point. However, if we happen to fall back into a communications rut, I don't intend to stay on the sidelines.
Wednesday, August 20, 2008
Wednesday, August 13, 2008
CryoPort (OTCBB: CYRX)
Today, CryoPort released a letter to shareholders (click HERE to read) from Mr. Peter Berry. While I am pleased to see that the Company is communicating with its shareholders, I am just not quite sure what the point of this particular letter was supposed to address.
In case you have not read it, the letter rehashed much of the same verbage from several prior press releases. Mr. Berry stated that the Company has made significant progress inroads with CRO's (Contract Research Organizations) and that the company has over $2 million in cash on hand which will be enough to support the CryoPort Express Shipper rollout, including manufacturing and recycling.
My first reaction to the shareholder letter is that there are probably not going to be many positives in the Q1 financials that are expected out later this week and this is an attempt to soften the blow.
My second reaction is that this is a method to buy time with shareholders. I understand that when dealing with large companies like FedEx or a big medical company there will be delays and this requires patience. I get that and I am remaining patient as I have been for a number of years.
These two reactions both get back to the same point: What is the point of the letter?
We know that the CryoPort Express Shipper has been completed since January 2007 ( Read January 8, 2007 Release).
We know that after receiving over $4M in net funding last fall, CryoPort started producing shippers ( Read Dec 6, 2007 Release).
We know that CryoPort is partnered up with FedEx (NYSE: FDX), (Read Dec 19, 2007 Release) so I think we can feel fairly comfortable that the product is legit.
We have known for a while that pilot programs were underway for pharmatceutical firms as of April 2007 (Read Apr 23, 2007 Release). Additionally, CryoPort started shipping stem cells for Celprogen in December 2007 (Read Dec 20, 2007 Release).
We know they were shipping internationally for Quest Diagnostics (NYSE: DGX) (Read Apr 17, 2008 Release).
We know that CryoPort received an additional $1.0625M in follow-on investment back in June 2008 (Read June 10, 2008 Release).
So where does all of this information leave investors? Well, I have a couple of items that I will be trying to answer in the near term. Since the company has received $5.0625 million in funding over the last 12 months, and according to Mr. Berry there is currently over $2 million on hand, what has been accomplished with the other roughly $3 million that has apparently been used? This company has always run on a pretty tight operational budget, so unless something has changed in the spending patterns, there should be something else that is absorbing a fair amount of cost. That should not be too hard to determine because CryoPort started manufacturing the express shippers approximately 9 months ago (see news link above). I expect to see some of that production begin to show up in the quarterly reports. If they are shipping pilot programs and manufacturing units as described in press releases and their regulatory filings, I would also expect to see some initial revenue figures begining to show up on the financial statements.
I get the impression that some investors want to see "big" results in the upcoming financials. Prior to the shareholder letter, I did not expect to see much. After the shareholder letter, I do not expect to see much. What is most important from my perspective is that the Company is moving in the right direction. If CryoPort has $2 million remaining of the money it raised over the past year as Mr. Berry stated, it would indicate that CryoPort has spent approximately $3 million over the last 10 months, translating into a burn rate of approximately $300k per month. Not to get down to specifics without all of the information, but that would leave about 6-8 months of operating capital remaining at the implied rate. Knowing Peter personally, I feel sure that it is being handled appropriately, but I also believe that the owners of the company (both my clients and others) have a right to know how their money is being spent. Since this has not been easy to determine, it will require a little more effort.
I am not sure as to when the Annual Shareholders Meeting will be scheduled (I would expect early fall), but I would hope that management will be prepared to clearly demonstrate to the owners as to how the company is progessing. I believe that being transparent with your investors is a trademark of all successful companies. I would also hope that by the time the meeting arrives there will be some significant developments that will give everyone a positive outlook.
Closing comments from today's press release: "In closing, I would like to thank all of our shareholders for their continued support and look forward to reporting significant sales events in the not too distant future. - Peter Berry"
At this point it is about measuring the performance and to do that we need actual data and hard numbers. Hopefully we will be getting them soon. The only questions remaining are what is "significant sales" and what is "not too distant future"? As soon as these questions are answered, along with some reasonable transparency to allow investors to properly evaluate the merits of this stock, I believe that the market will begin to recognize the extraordinary value that this company has in its future.
In case you have not read it, the letter rehashed much of the same verbage from several prior press releases. Mr. Berry stated that the Company has made significant progress inroads with CRO's (Contract Research Organizations) and that the company has over $2 million in cash on hand which will be enough to support the CryoPort Express Shipper rollout, including manufacturing and recycling.
My first reaction to the shareholder letter is that there are probably not going to be many positives in the Q1 financials that are expected out later this week and this is an attempt to soften the blow.
My second reaction is that this is a method to buy time with shareholders. I understand that when dealing with large companies like FedEx or a big medical company there will be delays and this requires patience. I get that and I am remaining patient as I have been for a number of years.
These two reactions both get back to the same point: What is the point of the letter?
We know that the CryoPort Express Shipper has been completed since January 2007 ( Read January 8, 2007 Release).
We know that after receiving over $4M in net funding last fall, CryoPort started producing shippers ( Read Dec 6, 2007 Release).
We know that CryoPort is partnered up with FedEx (NYSE: FDX), (Read Dec 19, 2007 Release) so I think we can feel fairly comfortable that the product is legit.
We have known for a while that pilot programs were underway for pharmatceutical firms as of April 2007 (Read Apr 23, 2007 Release). Additionally, CryoPort started shipping stem cells for Celprogen in December 2007 (Read Dec 20, 2007 Release).
We know they were shipping internationally for Quest Diagnostics (NYSE: DGX) (Read Apr 17, 2008 Release).
We know that CryoPort received an additional $1.0625M in follow-on investment back in June 2008 (Read June 10, 2008 Release).
So where does all of this information leave investors? Well, I have a couple of items that I will be trying to answer in the near term. Since the company has received $5.0625 million in funding over the last 12 months, and according to Mr. Berry there is currently over $2 million on hand, what has been accomplished with the other roughly $3 million that has apparently been used? This company has always run on a pretty tight operational budget, so unless something has changed in the spending patterns, there should be something else that is absorbing a fair amount of cost. That should not be too hard to determine because CryoPort started manufacturing the express shippers approximately 9 months ago (see news link above). I expect to see some of that production begin to show up in the quarterly reports. If they are shipping pilot programs and manufacturing units as described in press releases and their regulatory filings, I would also expect to see some initial revenue figures begining to show up on the financial statements.
I get the impression that some investors want to see "big" results in the upcoming financials. Prior to the shareholder letter, I did not expect to see much. After the shareholder letter, I do not expect to see much. What is most important from my perspective is that the Company is moving in the right direction. If CryoPort has $2 million remaining of the money it raised over the past year as Mr. Berry stated, it would indicate that CryoPort has spent approximately $3 million over the last 10 months, translating into a burn rate of approximately $300k per month. Not to get down to specifics without all of the information, but that would leave about 6-8 months of operating capital remaining at the implied rate. Knowing Peter personally, I feel sure that it is being handled appropriately, but I also believe that the owners of the company (both my clients and others) have a right to know how their money is being spent. Since this has not been easy to determine, it will require a little more effort.
I am not sure as to when the Annual Shareholders Meeting will be scheduled (I would expect early fall), but I would hope that management will be prepared to clearly demonstrate to the owners as to how the company is progessing. I believe that being transparent with your investors is a trademark of all successful companies. I would also hope that by the time the meeting arrives there will be some significant developments that will give everyone a positive outlook.
Closing comments from today's press release: "In closing, I would like to thank all of our shareholders for their continued support and look forward to reporting significant sales events in the not too distant future. - Peter Berry"
At this point it is about measuring the performance and to do that we need actual data and hard numbers. Hopefully we will be getting them soon. The only questions remaining are what is "significant sales" and what is "not too distant future"? As soon as these questions are answered, along with some reasonable transparency to allow investors to properly evaluate the merits of this stock, I believe that the market will begin to recognize the extraordinary value that this company has in its future.
Tuesday, August 5, 2008
Multi-company update
This will just be a short update on various companies.
Phantom Fiber (OTCBB: PHFB) - Phantom Fiber is moving ahead nicely and it is somewhat perplexing as to why the stock doesn't get more support in the open market. In many cases, small/micro cap stocks are overvalued in the marketplace due to so much of the price of the stock being tied up in "potential". In my opinion, Phantom Fiber is one of the most UNDERVALUED small caps that I have come across. For example, the total float on Phantom Fiber is around 20M and they have a stock price of $0.18 with a resulting market cap of around $3.6 million. The recent deals that they have announced will result in more income over the next 12-18 months than their entire current market capitalization. My personal opinion is that the stock should be priced over $1 per share, at a minimum, but I am currently running numbers to come to my own valuation. I'll let you know when I have a better handle of the "current" value and where I think it could go.
Gateway Int'l Holdings - They filed an amended Form 10 last month. I presume that it was amended to address comments from the SEC (this is standard procedure). I have not heard anything from the company, but did notice that at a couple of brokerage firms they are now quoting an old price again, so that tells me that something is at least moving through the system. If I hear any updates, I'll pass on what I can.
CryoPort, Inc. (OTCBB: CYRX) - I am just waiting for Q1 financials. We have seen a little bit of support in the stock over the last week or two, which is a positive sign. Ludlow Capital has a very basic write-up on CryoPort and recently increased their price target to $1.50. The price target on the stock represents a nice percentage increase, but does not reflect the value in this company. If CryoPort announces that they have signed a significant deal, it will be very interesting to see the stock react. My biggest concern is that because the stock is not on a lot of radar screens, a big deal on paper will not be a "big deal" in the market. If we can get some eyes on the stock before significant news is out there, it will give positive news more impact when it materializes. Hopefully there is good news coming down the line either concurrent or before quarterly results are released.
Redux (OTC: RDXH) / Naturade (OTCBB: NRDCQ) - Not sure how this one is going to play out exactly just yet. There is still a bit of negotiating on both sides. My thoughts are currently that instead of all of the assets of Redux going over to Naturade, it is more likely just to be the business divisions that have a Nutritional & Supplements connection. Once the details are worked out, I'll post them here and also on www.firstcapitalinvestors.com.
DISCLOSURE: As to my interest in the above companies, they are as follows:
Phantom Fiber is a current client that is contracted with FCI and I have also made a personal private equity investment into the stock and on my advisory side I have a number of clients who have invested as well.
Gateway Int'l Holdings - They were a client until 12/31/07. I currently hold a large position of stock, both personally and with my client base on the advisory side.
CryoPort - They were former client that I helped bring public in March 2005 and worked with until August 2007. Currently I am an investor both personally as well as through my advisory clients. I am in contact with a large number of the outstanding shares who along with me, are waiting to see the Q1 Report to assess progress of the company.
Redux/Naturade - Both companies are current FCI clients to whom I provide consulting services. I am a large shareholder, both personally and through my advisory clients.
Phantom Fiber (OTCBB: PHFB) - Phantom Fiber is moving ahead nicely and it is somewhat perplexing as to why the stock doesn't get more support in the open market. In many cases, small/micro cap stocks are overvalued in the marketplace due to so much of the price of the stock being tied up in "potential". In my opinion, Phantom Fiber is one of the most UNDERVALUED small caps that I have come across. For example, the total float on Phantom Fiber is around 20M and they have a stock price of $0.18 with a resulting market cap of around $3.6 million. The recent deals that they have announced will result in more income over the next 12-18 months than their entire current market capitalization. My personal opinion is that the stock should be priced over $1 per share, at a minimum, but I am currently running numbers to come to my own valuation. I'll let you know when I have a better handle of the "current" value and where I think it could go.
Gateway Int'l Holdings - They filed an amended Form 10 last month. I presume that it was amended to address comments from the SEC (this is standard procedure). I have not heard anything from the company, but did notice that at a couple of brokerage firms they are now quoting an old price again, so that tells me that something is at least moving through the system. If I hear any updates, I'll pass on what I can.
CryoPort, Inc. (OTCBB: CYRX) - I am just waiting for Q1 financials. We have seen a little bit of support in the stock over the last week or two, which is a positive sign. Ludlow Capital has a very basic write-up on CryoPort and recently increased their price target to $1.50. The price target on the stock represents a nice percentage increase, but does not reflect the value in this company. If CryoPort announces that they have signed a significant deal, it will be very interesting to see the stock react. My biggest concern is that because the stock is not on a lot of radar screens, a big deal on paper will not be a "big deal" in the market. If we can get some eyes on the stock before significant news is out there, it will give positive news more impact when it materializes. Hopefully there is good news coming down the line either concurrent or before quarterly results are released.
Redux (OTC: RDXH) / Naturade (OTCBB: NRDCQ) - Not sure how this one is going to play out exactly just yet. There is still a bit of negotiating on both sides. My thoughts are currently that instead of all of the assets of Redux going over to Naturade, it is more likely just to be the business divisions that have a Nutritional & Supplements connection. Once the details are worked out, I'll post them here and also on www.firstcapitalinvestors.com.
DISCLOSURE: As to my interest in the above companies, they are as follows:
Phantom Fiber is a current client that is contracted with FCI and I have also made a personal private equity investment into the stock and on my advisory side I have a number of clients who have invested as well.
Gateway Int'l Holdings - They were a client until 12/31/07. I currently hold a large position of stock, both personally and with my client base on the advisory side.
CryoPort - They were former client that I helped bring public in March 2005 and worked with until August 2007. Currently I am an investor both personally as well as through my advisory clients. I am in contact with a large number of the outstanding shares who along with me, are waiting to see the Q1 Report to assess progress of the company.
Redux/Naturade - Both companies are current FCI clients to whom I provide consulting services. I am a large shareholder, both personally and through my advisory clients.
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