EXHIBIT
13.1


ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors of


CryoPort,
Inc.





We have
audited the accompanying consolidated balance sheets of CryoPort, Inc. (the
“Company”) as of March 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders' deficit and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of CryoPort, Inc. at March 31,
2009 and 2008, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1 to
the consolidated financial statements, the Company has incurred recurring losses
and negative cash flows from operations since inception and has a working
capital deficit of $3,693,015 and a cash and cash equivalents balance of
$249,758 at March 31, 2009.  Management has estimated that cash on hand,
including cash borrowed under convertible debentures issued in the first quarter
of fiscal 2010, will be sufficient to allow the Company to continue its
operations only into the third quarter of fiscal 2010.  These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1.  The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.





/s/ KMJ
Corbin & Company LLP




Costa
Mesa, California


June 30,
2009




F-1




CRYOPORT,
INC.
  CONSOLIDATED
BALANCE SHEETS





March
      31,ASSETS
            
            2009
            
            
            2008Current
      assets:Cash
      and cash equivalents
            
            $
            249,758
            
            
            $
            2,231,031Restricted
      cash
            
            
            101,053
            
            
            
            203,670Accounts
      receivable, net
            
            
            2,546
            
            
            
            21,411Inventories
            
            
            530,241
            
            
            
            121,952Prepaid
      expenses and other current assets
            
            
            170,399
            
            
            
            153,016Total
      current assets
            
            
            1,053,997
            
            
            
            2,731,080Fixed
      assets, net
            
            
            189,301
            
            
            
            193,852Intangible
      assets, net
            
            
            264,364
            
            
            
            474Deferred
      financing costs, net
            
            
            3,600
            
            
            
            325,769Other
      assets
            
            
            61,294
            
            
            
            209,714$
            1,572,556
            
            
            $
            3,460,889LIABILITIES AND STOCKHOLDERS’
      DEFICITCurrent
      liabilities:Accounts
      payable
            
            $
            218,433
            
            
            $
            234,298Accrued
      expenses
            
            
            90,547
            
            
            
            95,048Accrued
      warranty costs
            
            
            18,743
            
            
            
            29,993Accrued
      salaries and related
            
            
            206,180
            
            
            
            138,103Convertible
      notes payable, net of discount of $13,586 (2009) and $0
    (2008)
            
            
            46,414
            
            
            
            -Current
      portion of convertible debentures  payable and accrued interest,net
      of discount of
              $662,583
      (2009) and $1,039,844 (2008)
            
            
            3,836,385
            
            
            
            902,486Line
      of credit and accrued interest
            
            
            90,310
            
            
            
            115,943Current
      portion of related party notes payable
            
            
            150,000
            
            
            
            150,000Current
      portion of note payable to former officer
            
            
            90,000
            
            
            
            72,000Current
      portion of note payable
            
            
            -
            
            
            
            12,000Total
      current liabilities
            
            
            4,747,012
            
            
            
            1,749,871Related
      party notes and accrued interest payable,net
      of current portion
            
            
            1,533,760
            
            
            
            1,582,084Convertible
      debentures payable, net of current portion of $4,454,424 (2009)and
      $1,936,884 (2008) and
              discount
      of $2,227,205 (2009) and$2,482,513
      (2008)
            
            
            -
            
            
            
            -Note
      payable to former officer and accrued interest, net of current
      portion
            
            
            67,688
            
            
            
            129,115Total
      liabilities
            
            
            6,348,460
            
            
            
            3,461,070Stockholders’
      deficit:Common
      stock, $0.001 par value; 125,000,000 sharesauthorized;
      41,861,941 (2009) and 40,928,225
              (2008)shares
      issued and outstanding
            
            
            41,863
            
            
            
            40,929Additional
      paid-in capital
            
            
            25,816,588
            
            
            
            13,888,094Accumulated
      deficit
            
            
            (30,634,355
            )
            
            
            (13,929,204
            )Total
      stockholders’ deficit
            
            
            (4,775,904
            )
            
            
            (181
            )$
            1,572,556
            
            
            $
            3,460,889





See
Accompanying Notes to Consolidated Financial Statements.


F-2




CRYOPORT,
INC.
  CONSOLIDATED
STATEMENTS OF OPERATIONS







For
      The Years Ended March 31,2009
            
            
            2008Net
      sales
            
            $
            35,124
            
            
            $
            83,564Cost
      of sales
            
            
            546,152
            
            
            
            386,371Gross
      loss
            
            
            (511,028
            )
            
            
            (302,807
            )Operating
      expenses:Selling,
      general and administrative expenses
            
            
            2,387,287
            
            
            
            2,550,778Research
      and development expenses
            
            
            297,378
            
            
            
            166,227Total
      operating expenses
            
            
            2,684,665
            
            
            
            2,717,005Loss
      from operations
            
            
            (3,195,693
            )
            
            
            (3,019,812
            )Other
      income (expense):Interest
      income
            
            
            32,098
            
            
            
            50,076Interest
      expense
            
            
            (2,693,383
            )
            
            
            (1,592,718
            )Loss
      on extinguishment of debt
            
            
            (10,846,573
            )
            
            
            -Total
      other expense, net
            
            
            (13,507,858
            )
            
            
            (1,542,642
            )Loss
      before income taxes
            
            
            (16,703,551
            )
            
            
            (4,562,454
            )Income
      taxes
            
            
            1,600
            
            
            
            1,600Net
      loss
            
            $
            (16,705,151
            )
            
            $
            (4,564,054
            )Net
      loss available to common stockholders per common share:Basic
      and diluted loss per common share
            
            $
            (0.41
            )
            
            $
            (0.12
            )Basic
      and diluted weighted average common shares
    outstanding
            
            
            41,238,185
            
            
            
            39,425,118











See
Accompanying Notes to Consolidated Financial Statements.


F-3




CRYOPORT,
INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT


Common
      Stock
            
            
            Additional
              Paid-in
            
            
            Accumulated
            
            
            Total
              Stockholders'Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            DeficitBalance,
      April 1, 2007
            
            
            34,782,029
            
            
            $
            34,782
            
            
            $
            7,042,536
            
            
            $
            (9,365,150
            )
            
            $
            (2,287,832
            )Issuance
      of common stock for cash, net of issuance costs of $89,635
            
            
            3,652,710
            
            
            
            3,653
            
            
            
            696,213
            
            
            
            -
            
            
            
            699,866Issuance
      of common stock for conversion of convertibledebentures
      including accrued interest
            
            
            1,425,510
            
            
            
            1,426
            
            
            
            602,714
            
            
            
            -
            
            
            
            604,140Issuance
      of common stock to consultants
            
            
            525,000
            
            
            
            525
            
            
            
            501,975
            
            
            
            -
            
            
            
            502,500Exercise
      of stock options and warrants for cash
            
            
            156,250
            
            
            
            156
            
            
            
            107,344
            
            
            
            -
            
            
            
            107,500Cashless
      exercise of warrants
            
            
            386,726
            
            
            
            387
            
            
            
            (387
            )
            
            
            -
            
            
            
            -Fair
      value of stock options and warrants issued to consultants, employees and
      directors
            
            
            -
            
            
            
            -
            
            
            
            1,066,885
            
            
            
            -
            
            
            
            1,066,885Debt
      discount related to convertible debentures
            
            
            -
            
            
            
            -
            
            
            
            3,845,328
            
            
            
            -
            
            
            
            3,845,328Fair
      value of warrants issued to lessor
            
            
            -
            
            
            
            -
            
            
            
            15,486
            
            
            
            -
            
            
            
            15,486Purchase
      of fixed assets with warrants
            
            
            -
            
            
            
            -
            
            
            
            10,000
            
            
            
            -
            
            
            
            10,000Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (4,564,054
            )
            
            
            (4,564,054
            )Balance,
      March 31, 2008
            
            
            40,928,225
            
            
            
            40,929
            
            
            
            13,888,094
            
            
            
            (13,929,204
            )
            
            
            (181
            )Issuance
      of common stock for conversion of convertibledebentures
      including accrued interest
            
            
            38,906
            
            
            
            39
            
            
            
            5,407
            
            
            
            -
            
            
            
            5,446Cancellation
      of common stock issued for debt principal reduction
            
            
            (140,143
            )
            
            
            (140
            )
            
            
            (117,580
            )
            
            
            -
            
            
            
            (117,720
            )Issuance
      of common stock for extinguishment of debt
            
            
            400,000
            
            
            
            400
            
            
            
            163,600
            
            
            
            -
            
            
            
            164,000Change
      in fair value of warrants issued in connectionwith
      debt modifications
            
            
            -
            
            
            
            -
            
            
            
            9,824,686
            
            
            
            -
            
            
            
            9,824,686Issuance
      of common stock to consultants
            
            
            402,238
            
            
            
            402
            
            
            
            248,700
            
            
            
            -
            
            
            
            249,102Exercise
      of stock options and warrants for cash
            
            
            82,693
            
            
            
            83
            
            
            
            3,224
            
            
            
            -
            
            
            
            3,307Cashless
      exercise of warrants
            
            
            150,022
            
            
            
            150
            
            
            
            (150
            )
            
            
            -
            
            
            
            -Debt
      discount related to convertible debentures
            
            
            -
            
            
            
            -
            
            
            
            991,884
            
            
            
            -
            
            
            
            991,884Fair
      value of stock options and warrants issued toconsultants,
      employees and directors
            
            
            -
            
            
            
            -
            
            
            
            808,723
            
            
            
            -
            
            
            
            808,723Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (16,705,151
            )
            
            
            (16,705,151
            )Balance,
      March 31, 2009
            
            
            41,861,941
            
            
            $
            41,863
            
            
            $
            25,816,588
            
            
            $
            (30,634,355
            )
            
            $
            (4,775,904
            )







See
Accompanying Notes to Consolidated Financial Statements.


F-4




CRYOPORT, INC. 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS







For
      The Years Ended March 31,2009
            
            
            2008Cash flows from
      operating activities:Net
    loss
            
            $
            (16,705,151
            )
            
            $
            (4,564,054
            )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation and
      amortization
            
            
            81,984
            
            
            
            41,298Amortization of
      deferred financing costs
            
            
            42,284
            
            
            
            87,706Amortization of debt
      discount
            
            
            2,223,116
            
            
            
            1,214,986Stock issued to
      consultants
            
            
            249,102
            
            
            
            402,500Fair value of
      warrants issued to consultants, employees and directors
            
            
            699,467
            
            
            
            880,765Loss on
      extinguishment of debt
            
            
            10,846,573
            
            
            
            -Interest accrued on
      restricted cash
            
            
            (6,227
            )
            
            
            -Changes in operating
      assets and liabilities:Accounts
      receivable
            
            
            18,865
            
            
            
            (11,239
            )Inventories
            
            
            (408,289
            )
            
            
            24,056Prepaid expenses and
      other assets
            
            
            7,329
            
            
            
            (49,473
            )Accounts
      payable
            
            
            (15,865
            )
            
            
            (72,384
            )Accrued
      expenses
            
            
            (8,101
            )
            
            
            (2,179
            )Accrued warranty
      costs
            
            
            (11,250
            )
            
            
            (25,414
            )Accrued salaries and
      related
            
            
            68,077
            
            
            
            (31,434
            )Accrued
      interest
            
            
            331,616
            
            
            
            284,616Net cash used in
      operating activities
            
            
            (2,586,470
            )
            
            
            (1,820,250
            )Cash flows provided
      by (used in) investing activities:Decrease (increase)
      in restricted cash
            
            
            108,844
            
            
            
            (200,000
            )Purchases of
      intangibles
            
            
            (49,781
            )
            
            
            (474
            )Purchases of fixed
      assets
            
            
            (58,578
            )
            
            
            (182,054
            )Net cash provided by
      (used in) investing activities
            
            
            485
            
            
            
            (382,528
            )Cash flows from
      financing activities:Proceeds from
      borrowings under convertible notes
            
            
            1,122,500
            
            
            
            3,436,551Net proceeds from
      borrowings under line of credit
            
            
            -
            
            
            
            115,500Repayment of
      convertible debt
            
            
            (117,720
            )
            
            
            -Repayment of line of
      credit
            
            
            (25,500
            )
            
            
            -Payment of deferred
      financing costs
            
            
            (191,875
            )
            
            
            -Repayment of note
      payable
            
            
            (12,000
            )
            
            
            (55,000
            )Repayments of
      related party notes payable
            
            
            (120,000
            )
            
            
            (90,000
            )Repayments of note
      payable to officer
            
            
            (54,000
            )
            
            
            (45,000
            )Proceeds from
      issuance of common stock, net
            
            
            -
            
            
            
            699,866Proceeds from
      exercise of options and warrants
            
            
            3,307
            
            
            
            107,500Net cash provided by
      financing activities
            
            
            604,712
            
            
            
            4,169,417Net change in cash
      and cash equivalents
            
            
            (1,981,273
            )
            
            
            1,966,639Cash and cash
      equivalents, beginning of year
            
            
            2,231,031
            
            
            
            264,392Cash and cash
      equivalents, end of year
            
            $
            249,758
            
            
            $
            2,231,031





See
Accompanying Notes to Consolidated Financial Statements.


F-5




CRYOPORT, INC. 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS







For
      The Years Ended March 31,2009
            
            
            2008Supplemental
      disclosure of cash flow information:Cash paid during the
      year for:Interest
            
            $
            95,360
            
            
            $
            5,620Income
      taxes
            
            $
            800
            
            
            $
            1,600Supplemental
      disclosure of non-cash activities:Estimated for value
      of warrants issued to lessor
            
            $
            -
            
            
            $
            15,486Purchase of fixed
      assets with warrants
            
            $
            -
            
            
            $
            10,000Purchase of
      intangible assets with warrants
            
            $
            232,964
            
            
            $
            -Warrants
      issued as deferred financing costs inconnection
      with convertible debt financing
            
            $
            117,530
            
            
            $
            525,071Debt
      discount in connection with convertibledebt
      financing
            
            $
            1,263,586
            
            
            $
            3,320,257Conversion
      of debt and accrued interestto
      common stock
            
            $
            5,446
            
            
            $
            604,140Cancellation of
      shares issued for debt principal reduction
            
            $
            117,720
            
            
            $
            -Change
      in fair value of warrants issued in connection with debt
      modifications
            
            $
            9,824,686
            
            
            $
            -Fair
      value of shares issued in connection with debt
      modifications
            
            $
            164,000
            
            
            $
            -Cashless exercise of
      warrants
            
            $
            150
            
            
            $
            387Deferred financing
      costs in accrued expenses
            
            $
            3,600
            
            
            $
            -Addition of
      principal due to debt modifications
            
            $
            1,012,232
            
            
            $
            -









See
Accompanying Notes to Consolidated Financial Statements.


F-6




CRYOPORT, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008





NOTE 1 – ORGANIZATION AND
BUSINESS





Organization





CryoPort,
Inc. (the “Company”) was originally incorporated under the name G.T.5-Limited
(“GT5”) on May 25, 1990 as a Nevada Corporation.  On March 15, 2005
CryoPort Systems, Inc., a California corporation founded in 1999 and
incorporated on December 11, 2000, became the primary operating company of GT5
upon completion of a Share Exchange Agreement, whereby GT5 acquired all of the
issued and outstanding shares of CryoPort Systems, Inc. in exchange for
24,108,105 shares of the Company’s common stock representing approximately 81%
of the total issued and outstanding shares of common stock following the close
of the transaction.  In connection with this transaction GT5 changed
its name to Cryoport, Inc. CryoPort Systems, Inc. continues today as the
operating company under CryoPort, Inc.





The
principal focus of the Company is to provide the biotechnology and
pharmaceutical industries with a cost effective frozen shipping solution, the
CryoPort ExpressTM System utilizing the Company’s newly developed product line,
the CryoPort ExpressTM Shippers, for the frozen or cryogenic transport of
biological materials. These biological materials include live cell
pharmaceutical products; e.g., cancer vaccines, diagnostic materials,
reproductive tissues, infectious substances and other items that require
continuous frozen or cryogenic temperatures (less than -150°C).  The Company
has historically designed, manufactured a line of reusable cryogenic dry vapor
shippers. The reusable cryogenic dry shippers primarily served as the vehicles
for the development of the cryogenic technology that supported the development
of the new CryoPort ExpressTM Shipper.. The Company’s primary mission is to
provide reliable and cost effective solutions for the frozen transportation of
biological materials in the life sciences industry.





Going
Concern





The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern.  The
Company has not generated significant revenues from operations and has no
assurance of any future revenues.  The Company generated revenues from
operations of only $35,124, incurred a net loss of $16,705,151 including a
$10,846,573 loss on debt extinguishment and used cash of $2,586,470 in its
operating activities during the year ended March 31,
2009.    In addition, the Company has a working capital
deficit of $3,693,015 and has a cash and cash equivalents balance of $249,758 at
March 31, 2009.  Currently management has projected that cash on hand,
including cash borrowed under the convertible debentures issued in the first
quarter of  fiscal 2010, will be sufficient to allow the Company to
continue its operations only into the third quarter of fiscal 2010 until more
significant




F-7




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  For
The Years Ended March 31, 2009 and 2008
 NOTE 1 – ORGANIZATION AND
BUSINESS, continued





funding
can be secured.  These matters raise substantial doubt about the
Company’s ability to continue as a going concern.





Through
June 22, 2009 the Company had raised net proceeds of $906,630 under the Private
Placement Debentures. (see Note 10 and Note 14).  As a result of this
recent financing, the Company had an aggregate cash and cash equivalents and
restricted cash balance of approximately $689,000 as of June 22, 2009 which will
be used to fund the working capital required for minimal operations including
inventory build as well limited sales efforts to advance the Company’s
commercialization of the CryoPort ExpressTM Shippers until additional capital is
obtained. The Company’s management recognizes that the Company must obtain
additional capital for the achievement of sustained profitable
operations.  Management’s plans include obtaining additional capital
through equity and debt funding sources; however, no assurance can be given that
additional capital, if needed, will be available when required or upon terms
acceptable to the Company or that the Company will be successful in its efforts
to negotiate extension of its existing debt.  The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation





The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of
America.





Principles of
Consolidation





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





Use of
Estimates





The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.  Actual results could differ
from estimated amounts.  The Company’s significant estimates include
the fair value of modified debt, debt discounts, allowances for doubtful
accounts and sales returns, recoverability of long-lived assets, allowances for
inventory obsolescence, accrued warranty costs, valuation of deferred tax
assets, the value of stock options and warrants, and product liability
reserves.




F-8




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Concentrations of Credit
Risk and Customers




Cash




The
Company maintains its cash accounts in financial
institutions.  Accounts at these institutions are insured by the
Federal Deposit Insurance Corporation (“FDIC”).  Effective October 3,
2008, the Emergency Economic Stabilization Act of 2008 raised the FDIC deposit
coverage limits to $250,000 per owner from $100,000 per owner.  At
March 31, 2009 and 2008, the Company had cash balances of $121,042 and
$2,392,350, respectively, which were in excess of the FDIC insurance
limit.  The Company performs ongoing evaluations of these institutions
to limit its concentration risk exposure.





Restricted
cash





The
Company has invested cash in a one year restricted certificate of deposit
bearing interest at 2.32% which serves as collateral for borrowings under a line
of credit agreement (see Note 8).  At March 31, 2009 and 2008, the
balance in the certificate of deposit was $101,053 and $203,670,
respectively.




Customers




The
Company grants credit to customers within the United States of America and to a
limited number of international customers, and does not require
collateral.  Sales to international customers are generally secured by
advance payments except for a limited number of established foreign
customers.  The Company generally requires advance or credit card
payments for initial sales to new customers.  The Company’s ability to
collect receivables is affected by economic fluctuations in the geographic areas
and industries served by the Company.  Reserves for uncollectible
amounts and estimated sales returns are provided based on past experience and a
specific analysis of the accounts which management believes are
sufficient.  Accounts receivable at March 31, 2009 and 2008 are net of
reserves for doubtful accounts and sales returns of approximately $600 and
$4,700, respectively. Although the Company expects to collect amounts due,
actual collections may differ from the estimated amounts.





The
Company has limited foreign sales primarily in Europe, Canada, India and
Australia.  Foreign sales are primarily to a small number of
customers.  During 2009 and 2008, the Company had foreign sales of
approximately $6,500 and $10,500, respectively, which constituted approximately
19% and 13% of net sales, respectively.





The
majority of the Company’s customers are in the biotechnology, pharmaceutical and
life science industries.  Consequently, there is a concentration of
receivables within these industries, which is subject to normal credit
risk.




F-9




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Cash and Cash
Equivalents





The
Company considers highly liquid investments with original maturities of 90 days
or less to be cash equivalents.





Fair Value of Financial
Instruments





The
Company’s financial instruments consist of cash and cash equivalents, restricted
cash, accounts receivable, related party notes payable, note payable to officer,
line of credit, convertible notes payable, accounts payable, accrued expenses
and a note payable to a third party.  The carrying value for all such
instruments, except the related party notes payable, approximates fair value at
March 31, 2009 and 2008.  The difference between the fair value and
recorded values of the related party notes payable is not
significant.





Inventories





Inventories
are stated at the lower of standard cost or current estimated market
value.  Cost is determined using the standard cost method which
approximates the first-in, first-out method.  The Company periodically
reviews its inventories and records a provision for excess and obsolete
inventories based primarily on the Company’s estimated forecast of product
demand and production requirements.  Once established, write-downs of
inventories are considered permanent adjustments to the cost basis of the
obsolete or excess inventories.  Raw materials, work in process and
finished goods include material costs less reserves for obsolete or excess
inventories.





Fixed
Assets





Fixed
assets are stated at cost, net of accumulated depreciation and amortization.
Depreciation and amortization of fixed assets are provided using the
straight-line method over the following useful lives:




Furniture and
      fixtures
            7
    yearsMachinery and
      equipment
            5-7
      yearsLeasehold
      improvements
            Lesser of lease term
      or estimated useful life




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 current operations.





F-10




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Intangible
Assets





Intangible
assets are comprised of patents and trademarks and software development
costs.  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.  The Company capitalizes certain
costs related to software developed for internal use in accordance with AICPA
Statement of Position 98-1, Accounting for Costs of Computer
Software Developed or Obtained for Internal Use.  Software
development costs incurred during the preliminary or maintenance project stages
are expensed as incurred, while costs incurred during the application
development stage are capitalized and amortized using the straight-line method
over the estimated useful life of the software which is five
years.  Capitalized costs include purchased materials and costs of
services including the valuation of warrants issued to consultants using the
Black-Scholes option pricing model.





Long-Lived
Assets





The
Company’s management assesses the recoverability of its long-lived assets upon
the occurrence of a triggering event by determining whether the depreciation and
amortization of long-lived assets over their remaining lives can be recovered
through projected undiscounted future cash flows.  The amount of
long-lived asset impairment, if any, is measured based on fair value and is
charged to operations in the period in which long-lived asset impairment is
determined by management.  At March 31, 2009 and 2008, the Company’s
management believes there is no impairment of its long-lived
assets.  There can be no assurance however, that market conditions
will not change or demand for the Company’s products will continue, which could
result in impairment of its long-lived assets in the future.





Deferred Financing
Costs





Deferred
financing costs represent costs incurred in connection with the issuance of the
convertible notes payable.  Deferred financing costs are being
amortized over the term of the financing instrument on a straight-line basis,
which approximates the effective interest method.  During the years
ended March 31, 2009 and 2008, the Company capitalized deferred financing costs
of $111,273 and $408,776 respectively, and amortized deferred financing costs of
$42,284 and $87,706 respectively, to interest expense.  During the
year ended March 31, 2009, the Company wrote off unamortized deferred financing
costs pursuant to amendments made to convertible notes payable from the
resulting debt modifications (see Note 10).




F-11




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Accrued Warranty
Costs





Estimated
costs of the Company’s standard warranty, included with products at no
additional cost to the customer for a period up to one year, are recorded as
accrued warranty costs at the time of product sale.  Costs related to
servicing the standard warranty are charged to the accrual as
incurred.





The
following represents the activity in the warranty accrual during the years ended
March 31:





2009
            
            
            2008Beginning
      warranty accrual
            
            $
            29,993
            
            
            $
            55,407Increase
      in accrual (charged to cost of sales)
            
            
            750
            
            
            
            5,625Charges
      to accrual (product replacements and warranty expirations)
            
            
            (12,000
            )
            
            
            (31,039
            )Ending
      warranty accrual
            
            $
            18,743
            
            
            $
            29,993





Revenue
Recognition





Revenue
is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101,
Revenue Recognition in
Financial Statements, as revised by SAB 104.  The Company
recognizes revenue when products are shipped to a customer and the risks and
rewards of ownership and title have passed based on the terms of the
sale.  The Company records a provision for sales returns and claims
based upon historical experience.  Actual returns and claims in any
future period may differ from the Company’s estimates.





Accounting for Shipping and
Handling Revenue, Fees and Costs





The
Company classifies amounts billed for shipping and handling as revenue in
accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs. Shipping and handling fees and costs are included in cost
of sales.





Advertising
Costs





The
Company expenses the cost of advertising when incurred as a component of
selling, general and administrative expenses.  During 2009 and 2008,
the Company expensed approximately $61,000 and $33,000, respectively, in
advertising costs.




F-12




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Research and Development
Expenses





The
Company expenses internal research and development costs as
incurred.  Third party research and development costs are expensed
when the contracted work has been performed.





Stock-Based
Compensation





The
Company accounts for share-based payments to employees and directors in
accordance with SFAS No. 123(R), Share-Based Payment, (“SFAS
123(R)”). SFAS 123(R) requires all share-based payments to employees and
directors, including grants of employee stock options and warrants, to be
recognized in the consolidated financial statements based upon their fair
values. The Company uses the Black-Scholes option pricing model to estimate the
grant-date fair value of share-based awards under SFAS 123(R). Fair value is
determined at the date of grant. In accordance with SFAS 123(R), the
consolidated financial statement effect of forfeitures is estimated at the time
of grant and revised, if necessary, if the actual effect differs from those
estimates. The estimated average forfeiture rate for the years ended March 31,
2009 and 2008 was zero as the Company has not had a significant history of
forfeitures and does not expect forfeitures in the future.





SFAS
123(R) requires the cash flows resulting from the tax benefits resulting from
tax deductions in excess of the compensation cost recognized for those options
or warrants to be classified as financing cash flows. Due to the Company’s loss
position, there were no such tax benefits during the years ended March 31, 2009
and 2008.





The
Company accounts for equity issuances to non-employees in accordance with
Emerging Issues Task Force ("EITF") Issue No. 96-18, Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods and Services. All transactions in which goods or services
are the consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument
issued is the earlier of the date on which the third-party performance is
complete or the date on which it is probable that performance will
occur.




F-13




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Plan
Description





The
Company’s stock option plan provides for grants of incentive stock options and
nonqualified options to employees, directors and consultants of the Company to
purchase the Company’s shares at the fair value, as determined by management and
the board of directors, of such shares on the grant date. The options generally
vest over a five-year period beginning on the grant date and have a ten-year
term. As of March 31, 2009, the Company is authorized to issue up to 5,000,000
shares under this plan and has 2,511,387 shares available for future
issuances.





Summary
of Assumptions and Activity





The fair
value of stock-based awards to employees and directors is calculated using the
Black-Scholes option pricing model, even though this model was developed to
estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which differ significantly from the Company’s stock
options. The Black-Scholes model also requires subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly
affect the calculated values. The expected term of options granted is derived
from historical data on
employee exercises and post-vesting employment termination behavior. The
risk-free rate selected to value any particular grant is based on the U.S
Treasury rate that corresponds to the pricing term of the grant effective as of
the date of the grant. The expected volatility is based on the historical
volatility of the Company’s stock price. These factors could change in the
future, affecting the determination of stock-based compensation expense in
future periods.





The
following table presents the weighted average assumptions used to estimate the
per share fair values of stock warrants granted to employees and directors
during the years ended March 31, 2009 and 2008:





March
      31,
            
            March
      31,2009
            
            2008Stock
      warrants:Expected
      term
            5
      years
            
            5
      yearsExpected
      volatility
            201%
      - 266%
            
            228%-293%Risk-free
      interest rate
            1.52%
      - 3.15%
            
            3.74%-4.75%Expected
      dividends
            N/A
            
            N/A




F-14




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





A summary
of employee and director option and warrant activity for the years ended March
31, 2009 and 2008, is presented below:


Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
              Remaining
      Contractual
              Term
      (Yrs.)
            
            
            Aggregate
              Intrinsic
              ValueOutstanding
      atApril
      1, 2007
            
            
            3,747,563
            
            
            $
            0.
      59
            
            
            
            7.46Granted
            
            
            887,800
            
            
            $
            0.97Exercised
            
            
            (79,200
            )
            
            $
            0.74Forfeited
            
            
            –
            
            
            $
            –Outstanding
      atMarch
      31, 2008
            
            
            4,556,163
            
            
            $
            0.64
            
            
            
            7.10Granted
            
            
            917,400
            
            
            $
            0.76Exercised
            
            
            (232,715
            )
            
            $
            0.04Forfeited
            
            
            (6,978
            )
            
            $
            0.04Outstanding,
      vested, and expected to vest atMarch
      31, 2009
            
            
            5,233,880
            
            
            $
            0.69
            
            
            
            6.82
            
            
            $
            624,724Exercisable
      atMarch
      31, 2009
            
            
            4,683,870
            
            
            $
            0.67
            
            
            
            6.48
            
            
            $
            624,724





There
were 917,400 warrants and no stock options granted to employees and directors
during the year ended March 31, 2009 and 887,800 warrants and no stock options
granted to employees and directors during the year ended March 31,
2008.  In connection with the warrants granted, the modification of
previous options granted, and the vesting of prior options issued, during the
years ended March 31, 2009 and 2008, the Company recorded total charges of
$289,497 and $742,140, respectively, in accordance with the provisions of SFAS
123(R), which have been included in selling, general and administrative expenses
for the years ended March 31, 2009 and 2008 in the accompanying consolidated
statements of operations.  No employee or director warrants or stock
options expired during the years ended March 31, 2009 and 2008.  The
Company issues new shares from its authorized shares upon exercise of warrants
or options.





As of
March 31, 2009 and 2008, there was $287,722 and $105,965, respectively, of
unrecognized compensation cost related to employee and director stock option
compensation arrangements.


F-15




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





The
aggregate intrinsic value for stock options and warrants related to stock based
compensation, which were exercised during the years ended March 31, 2009 and
2008 was $203,102 and $30,284, respectively.





Income
Taxes





The
Company accounts for income taxes in accordance with SFAS No. 109 (“SFAS No.
109”), Accounting for Income
Taxes. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. 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. Under SFAS No. 109, 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. The Company is a subchapter "C"
corporation and files a federal income tax return. The Company files separate
state income tax returns for California and Nevada.





Basic and Diluted Loss Per
Share





The
Company has adopted SFAS No. 128, Earnings Per
Share.





Basic
loss per common share is computed by dividing the net loss available to common
stockholders by the weighted average number of shares outstanding for the
period. Diluted loss per share is computed by dividing net loss by the weighted
average shares outstanding assuming all dilutive potential common shares were
issued. Basic and diluted loss per share are the same as the effect of stock
options and warrants and convertible debt on loss per share are anti-dilutive
and thus not included in the diluted loss per share calculation. The impact
under the treasury stock method of dilutive stock options and warrants and the
if-converted method of convertible debt would have resulted in weighted average
common shares outstanding of 57,565,246 for the year ended March 31, 2009
and 47,835,303 for the year ended March 31, 2008.






F-16




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





The
following is a reconciliation of the numerators and denominators of the basic
and diluted loss per share computations for the years ended March
31:




2009
            
            
            2008Numerator
      for basic and diluted loss per share:Net
      loss available to common stockholders
            
            $
            (16,705,151
            )
            
            $
            (4,564,054
            )Denominator
      for basic and diluted loss percommon
      share:Weighted
      average common shares outstanding
            
            
            41,238,185
            
            
            
            39,425,118Net
      loss per common share available to commonstockholders
      – basic and diluted
            
            $
            (0.41
            )
            
            $
            (0.12
            )





Convertible
Debentures





If the
conversion feature of conventional convertible debt provides for a rate of
conversion that is below market value, this feature is characterized as a
beneficial conversion feature (“BCF”).  A BCF is recorded by the
Company as a debt discount pursuant to EITF Issue No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingency Adjustable
Conversion Ratio,(“EITF 98-05”) and EITF Issue No. 00-27, Application of EITF Issue No. 98-5
to Certain Convertible Instruments(“EITF 00-27”).  In those
circumstances, the convertible debt will be recorded net of the discount related
to the BCF.  The Company amortizes the discount to interest expense
over the life of the debt using the effective interest method which approximates
the straight-line amortization method (see Note 10).





Recent Accounting
Pronouncements





In
September 2006, the FASB issued SFAS No. 157 (“SFAS No. 157”), Fair Value
Measurements.  SFAS No. 157 establishes a framework for
measuring fair value and expands disclosure about fair value
measurements.  Specifically, this standard establishes that fair value
is a market-based measurement, not an entity specific measurement.  As
such, the value measurement should be determined based on assumptions the market
participants would use in pricing an asset or liability.  The expanded
disclosures include disclosure of the inputs used to measure fair value and the
effect of certain of the measurements on earnings for the
period.  SFAS No. 157 was effective for fiscal years beginning after
November 15, 2007.  FASB Staff Position No. FAS 157-2 (“FSP 157-2”),
Effective Date of FASB
Statement No. 157 was issued in




F-17




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





February
2008.  FSP 157-2 delays the effective date of SFAS No. 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value at least once a year, to fiscal years
beginning after November 15, 2008, and for interim periods within those fiscal
years. The adoption of SFAS No. 157 related to financial assets and liabilities
did not have a material effect on the Company’s consolidated financial
statements.  The Company is
currently evaluating the impact, if any, that SFAS No. 157 may have on its
future consolidated financial statements related to non-financial assets and
liabilities.





In
October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active (“FSP No.
157-3”). FSP No. 157-3 clarifies the application of SFAS No. 157 in a market
that is not active, and provides an illustrative example intended to address
certain key application issues. FSP No. 157-3 is effective immediately, and
applies to the Company’s March 31, 2009 financial statements. The Company has
concluded that the application of FSP No. 157-3 did not have a material impact
on its consolidated financial statements as of and for the year ended March 31,
2009.





In June
2008, the Emerging Issues Task Force of the FASB published EITF Issue No. 07-5,
Determining Whether an
Instrument is Indexed to an Entity’s Own Stock (“EITF No. 07-5”) to
address concerns regarding the meaning of “indexed to an entity’s own stock”
contained in FASB Statement 133, Accounting for Derivative
Instruments and Hedging Activities . This related to the determination of
whether a free-standing equity-linked instrument should be classified as equity
or liability. If an instrument is classified as liability, it is valued at fair
value, and this value is re-measured on an ongoing basis, with changes recorded
in earnings in each reporting period. EITF No. 07-5 is effective for years
beginning after December 15, 2008 and earlier adoption is not permitted.
Although EITF No. 07-5 is effective for fiscal years beginning after December
15, 2008, any outstanding instrument at the date of adoption will require a
retrospective application of the accounting through a cumulative effect
adjustment to retained earnings upon adoption. The Company is currently
evaluating the impact of EITF No. 07-5 on its consolidated financial statements,
but it believes that certain factors of its convertible debentures and warrants
that have been previously classified as equity may require liability
treatment.




F-18




CRYOPORT, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS
141(R)”). SFAS 141(R) replaces SFAS No. 141, “Business Combinations”, and
is effective for the Company for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. SFAS 141(R) requires the new acquiring entity to
recognize all assets acquired and liabilities assumed in the transactions,
expense all direct transaction costs and account for the estimated fair value of
contingent consideration.  This standard establishes an acquisition-date
fair value for acquired assets and liabilities and fully discloses to investors
the financial effect the acquisition will have.  The adoption of this
pronouncement is not expected to have a material effect on the Company’s
consolidated financial statements.





In
November 2007, the Emerging Issues Task Force issued EITF Issue 07-01 (“EITF
07-01”),“Accounting for
Collaborative Arrangements”.  EITF 07-01 requires collaborators
to present the results of activities for which they act as the principal on a
gross basis and report any payments received from (made to) other collaborators
based on other applicable generally accepted accounting principles in the United
States (“GAAP”) or, in the absence of other applicable GAAP, based on analogy to
authoritative accounting literature or a reasonable, rational, and consistently
applied accounting policy election. Further, EITF 07-01 clarified that the
determination of whether transactions within a collaborative arrangement are
part of a vendor-customer (or analogous) relationship subject to Issue 01-9,
“Accounting for Consideration Given by a Vendor to a Customer”. EITF 07-01
is effective for fiscal years beginning after December 15, 2008. The
Company does not anticipate that the adoption of this standard will have a
material impact on its financial statements.






F-19




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 3 –
INVENTORIES





Inventories
at March 31, 2009 and 2008 consist of the following:




2009
              
              
              2008Raw
      materials
              
              $
              350,021
              
              
              $
              61,342Work
      in process
              
              
              7,253
              
              
              
              5,827Finished
      goods
              
              
              172,967
              
              
              
              54,783$
              530,241
              
              
              $
              121,952
 NOTE 4 – FIXED
ASSETS





Fixed
assets consist of the following at March 31:







2009
            
            
            2008Furniture and
      fixtures
            
            $
            23,253
            
            
            $
            23,253Machinery and
      equipment
            
            
            640,748
            
            
            
            586,465Leasehold
      improvements
            
            
            19,426
            
            
            
            15,131683,427
            
            
            
            624,849Less
      accumulated depreciation and amortization
            
            
            (494,126
            )
            
            
            (430,997
            )$
            189,301
            
            
            $
            193,852




Depreciation
and amortization expense for fixed assets for the years ended March 31, 2009 and
2008 was $63,129 and $36,602, respectively.




F-20




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 5 – INTANGIBLE
ASSETS





Intangible
assets are comprised of patents and trademarks and software developed for
internal uses.  The gross book values and accumulated amortization as
of  March 31, 2009 and  2008 were as follows:





2009
            
            
            2008Patents
      and trademarks
            
            $
            47,375
            
            
            $
            46,742Software
            
            
            282,112
            
            
            
            -329,487
            
            
            
            46,742Less
      accumulated amortization
            
            
            (65,123
            )
            
            
            (46,268
            )$
            264,364
            
            
            $
            474





Amortization
expense for intangible assets for the years ended March 31, 2009 and 2008 was
$18,855 and $4,696, respectively. All of the Company’s intangible assets are
subject to amortization.





Estimated
future annual amortization expense pursuant to these intangible assets is as
follows:




Years
      Ending March 31,
            
            Patents
      and Trademarks
            
            
            Software
            
            
            Total
              Intangibles2010
            
            $
            660
            
            
            $
            56,400
            
            
            $
            57,0602011
            
            
            392
            
            
            
            56,400
            
            
            
            56,7922012
            
            
            -
            
            
            
            56,400
            
            
            
            56,4002013
            
            
            -
            
            
            
            56,400
            
            
            
            56,4002014
            
            
            -
            
            
            
            37,712
            
            
            
            37,712$
            1,052
            
            
            $
            263,312
            
            
            $
            264,364




F-21




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 6 – INCOME
TAXES





The tax
effects of temporary differences that give rise to deferred taxes at
March 31, 2009 and 2008 are as follows:







2009
            
            
            2008Deferred tax
      asset:Net operating loss
      carryforward
            
            $
            5,031,000
            
            
            $
            4,207,000Accrued expenses and
      reserves
            
            
            178,000
            
            
            
            135,000Expenses
      recognized for granting ofoptions
      and warrants
            
            
            862,000
            
            
            
            606,000Total gross deferred
      tax asset
            
            
            6,071,000
            
            
            
            4,948,000Less valuation
      allowance
            
            
            (6,071,000
            )
            
            
            (4,948,000
            )$
            -
            
            
            $
            -




The
valuation allowance increased during the years ended March 31, 2009 and 2008 by
approximately $1,123,000 and $1,236,000, respectively.  No current
provision for income taxes for the years ended March 31, 2009 and 2008 is
required, except for minimum state taxes, since the Company incurred taxable
losses during such years.





The
provision for income taxes for fiscal 2009 and 2008 was $1,600 and $1,600,
respectively, and differs from the amount computed by applying the U.S. Federal
income tax rate of 34% to loss before income taxes as a result of the
following:







2009
            
            
            2008Computed
      tax benefit at federal statutory rate
            
            $
            (5,679,000
            )
            
            $
            (1,549,000
            )State income tax
      benefit, net of federal effect
            
            
            1,000
            
            
            
            1,000Non deducible
      extinguishment of debt
            
            
            3,688,000
            
            
            
            -Increase in
      valuation allowance, net of federal effect
            
            
            955,000
            
            
            
            1,068,000Disallowed
      convertible debenture interest
            
            
            770,000
            
            
            
            443,000Other
            
            
            266,600
            
            
            
            38,600$
            1,600
            
            
            $
            1,600






F-22




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008





NOTE 6 – INCOME TAXES,
continued





As of
March 31, 2009, the Company had net operating loss carry forwards of
approximately $12,600,000 and $12,600,000 for federal and state income tax
reporting purposes, respectively, which expire at various dates through
2028.





The
utilization of the net operating loss carry forwards might be limited due to
restrictions imposed under federal and state laws upon a change in ownership.
The amount of the limitation, if any, has not been determined at this time. A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. As a result of
the Company’s continued losses and uncertainties surrounding the realization of
the net operating loss carry forwards, the Company has recorded valuation
allowances equal to the net deferred tax asset amounts as of March 31, 2009 and
2008.





NOTE 7 – COMMITMENTS AND
CONTINGENCIES





Operating
Leases





On July
2, 2007, the Company entered into a new lease agreement for a building with
approximately 11,881 square feet of manufacturing and office space. The lease
agreement is for a period of two years with renewal options for three, one-year
periods, beginning September 1, 2007.  The lease requires base lease
payments of approximately $13,000 per month plus operating
expenses.  In connection with the lease agreement, the Company issued
10,000 warrants to the lessor at an exercise price of $1.55 per share for a
period of two years, valued at $15,486 as calculated using the Black-Scholes
option pricing model.  The assumptions used under the Black-Scholes
pricing model included: a risk free rate of 4.75%; volatility of 293%; an
expected exercise term of 5 years; and no annual dividend rate. The Company has
capitalized and is amortizing the value of the warrants over the life of the
lease and the remaining unamortized value of the warrants has been recorded in
other long-term assets. As of March 31, 2009 and 2008, the unamortized balance
of the value of the warrants issued to the lessor was $2,970 and $10,074,
respectively.




F-23




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 7 – COMMITMENTS AND
CONTINGENCIES





As of
March 31, 2009, future minimum rental payments required under the existing
facility operating lease are as follows:





Years
      Ending
              March
      31,
            
            Operating
              Lease2010
            
            $
            65,000





Total
rental expense was approximately $183,000 and $155,000 for the years ended March
31, 2009 and 2008, respectively.





Litigation





The
Company becomes a party to product litigation in the normal course of
business.  The Company accrues for open claims based on its historical
experience and available insurance coverage. In the opinion of management, there
are no legal matters involving the Company that would have a material adverse
effect on the Company’s consolidated financial condition or results of
operations.





Indemnities and
Guarantees





The
Company has made certain indemnities and guarantees, under which it may be
required to make payments to a guaranteed or indemnified party, in relation to
certain actions or transactions.  The Company indemnifies its
directors, officers, employees and agents, as permitted under the laws of the
States of California and Nevada.  In connection with its facility
lease, the Company has indemnified its lessor for certain claims arising from
the use of the facility.  The duration of the guarantees and
indemnities varies, and is generally tied to the life of the agreement. These
guarantees and indemnities do not provide for any limitation of the maximum
potential future payments the Company could be obligated to
make.  Historically, the Company has not been obligated nor incurred
any payments for these obligations and, therefore, no liabilities have been
recorded for these indemnities and guarantees in the accompanying consolidated
balance sheets.





F-24




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 8 – LINE OF
CREDIT





On
November 5, 2007, the Company secured financing for a $200,000 one-year
revolving line of credit (the “Line”) secured by a $200,000 Certificate of
Deposit with Bank of the West. On November 6, 2008, the Company secured a
one-year renewal of the Line for a reduced amount of $100,000 which is secured
by a $100,000 Certificate of Deposit with Bank of the West. All borrowings under
the revolving line of credit bear variable interest based on the prime rate
plus 1% per annum (totaling 4.25% as of March 31, 2009). The Company
utilizes the funds advanced from the Line for capital equipment purchases to
support the launch of the Company’s newly developed product, the CryoPort
ExpressTM One-Way Shipper. As of March 31, 2009 and 2008, the outstanding balance
of the Line was $90,310 and $115,943, respectively, including accrued interest
of $334 and $443, respectively.  During the years ended March 31, 2009
and 2008, the Company made payments against the Line of $25,500 and zero
respectively, and recorded interest expense of $3,099 and $1,493, respectively,
related to the Line.  No funds were drawn against the Line during the
year ended March 31, 2009 and $120,000 was drawn against the Line during the
year ended March 31, 2008.





NOTE 9 – NOTES
PAYABLE





The
Company had a non-interest bearing note payable to a third party for $77,304,
which was due in April 2003.  The Company made the final payments on
the note of $5,000 in April 2008 and $7,000 in May 2008.  As of March
31, 2009 and 2008, the remaining unpaid balance was zero and $12,000,
respectively.





As of
March 31, 2009 and 2008, the Company had aggregate principal balances of
$1,129,500 and $1,249,500, respectively, in outstanding unsecured indebtedness
owed to five related parties, including four former members of the board of
directors, representing working capital advances made to the Company from
February 2001 through March 2005.  These notes bear interest at the
rate of 6% per annum and provide for aggregate monthly principal payments which
commenced April 1, 2006 of $2,500, and which increased by an aggregate of $2,500
every six months to the current maximum aggregate payment of $10,000 per month.
Any remaining unpaid principal and accrued interest is due at maturity on
various dates through March 1, 2015.





Related-party
interest expense under these notes was $71,676 and $78,243 for the years ended
March 31, 2009 and 2008, respectively.  Accrued interest related
to these notes, which is included in related party notes payable in the
accompanying consolidated balance sheets, amounted to $554,260 and $482,584 as
of March 31, 2009 and 2008, respectively.  As of March 31, 2009, the
Company had not made the required payments under the related party notes which
were due on January 1, February 1, and March 1, 2009.  However,
pursuant to the note agreements, the Company has a 120-day grace period to pay
missed payments before the notes are in default.  On April 29, 2009,
May 30, 2009, and June 26, 2009, the Company paid the January 1, February 1 and
March 1 payments respectively, due on these related party
notes.  Management expects to continue to pay all payments due prior
to the expiration of the 120-day grace periods.




F-25




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 9 – NOTES PAYABLE,
continued





In August
2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008.  As of March 31, 2009 and 2008, the
total amount of deferred salaries and accrued interest under this arrangement
was $157,688 and $201,115, respectively, of which $67,688 and $129,115,
respectively is recorded as a long-term liability in the accompanying
consolidated balance sheets.  Interest expense related to this note
was $10,573 and $3,165, respectively for the years ended March 31, 2009 and
2008.  Accrued interest related to this note payable amounted to
$13,738 and $3,165 at March 31, 2009 and 2008, respectively, and is included in
the note payable to officer in the accompanying consolidated balance sheets. In
January 2009, Mr. Berry agreed to defer the monthly payments of the note due
from January 31, 2009 through June 30, 2009. As of March 31, 2009 these unpaid
payments totaled $18,000 and are included in the current liability portion of
the note payable in the accompanying consolidated balance sheet.  Mr.
Berry resigned his position as Chief Executive Officer in February 2009, however
remains a director on the Board and continues to work as a consultant for the
Company.





NOTE 10 – CONVERTIBLE NOTES
PAYABLE





October 2006
Debentures





In
October 2006, the Company entered into an Agency Agreement with a broker to
raise capital in a private placement offering of convertible debentures under
Regulation D.   From February 2006 through January 2007, the
Company received a total of $120,000 under this private placement offering of
convertible debenture debt.  Related to the issuance of the
convertible debentures, the Company paid commissions to the broker totaling
$15,600 which were capitalized as deferred financing costs. During the years
ended March 31, 2009 and 2008, the Company amortized zero and $4,699,
respectively, of these deferred financing costs to interest
expense.





Per the
terms of the convertible debenture agreements, the notes had a term of 180 days
from issuance, bore interest at 15% per annum and were convertible into shares
of the Company’s common stock at a ratio of 6.67 shares for every dollar of debt
converted.  The proceeds of the convertible notes were used in the
ongoing operations of the Company.  During the year ended March 31,
2008, the Company converted the full $120,000 of principal balances and $8,857
of accrued interest relating to these convertible debentures into 859,697 shares
of common stock at a conversion price of $0.15 per share.  As of March
31, 2009 and 2008, the balance of these convertible notes and accrued interest
was zero. During the years ended March 31, 2009 and 2008, the Company recorded
interest expense of zero and $2,784, respectively, related to these
notes.




F-26




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





In
connection with the issuance of the convertible debt, the Company recorded a
debt discount totaling $106,167 related to the beneficial conversion feature of
the notes.  The Company amortized the debt discount using the
effective interest method through the maturity dates of the notes.  As
of March 31, 2009 and 2008, the remaining balance of the debt discount was
zero.  During the years ended March 31, 2009 and 2008, the Company
recorded additional interest expense of zero and $29,638, respectively, related
to the amortization of the debt discount.





October 2007
Debentures





On
October 1, 2007, the Company issued to BridgePointe Master Fund, Ltd. and the
Enable Funds (the “October 2007 Debenture Holders”), Original Issue Discount 8%
Senior Secured Convertible Debentures (the “October 2007 Debentures”) having a
principal face amount of $4,707,705 and generating gross proceeds of $4,001,551.
 After accounting for commissions, legal and other fees, the net proceeds
to the Company totaled $3,436,551.





Original
Terms, as amended in February 2008:





In
accordance with the Convertible Debenture Agreement as amended on February 19,
2008, the principal amount under the October 2007 Debentures is payable to the
investors in 24 monthly redemption payments which commenced on March 31,
2008.  The principal payments have subsequently been adjusted
according to the terms of the January Amendment discussed in further detail
below.  The Company may elect to make principal redemptions in shares
of common stock.   If the Company elects to make principal
redemptions in common stock, the conversion rate will be the lesser of (a) the
Conversion Price (as defined below), or (b) 85% of the lesser of (i) the average
of the volume weighted average price for the ten consecutive trading days ending
immediately prior to the applicable date a principal redemption is due or (ii)
the average of such price for the ten consecutive trading days ending
immediately prior to the date the applicable shares are issued and delivered if
such delivery is after the principal redemption due date.





At any
time, holders may convert the Debentures into shares of common stock at a fixed
conversion price of $0.84, subject to adjustment in the event the Company issues
common stock (or securities convertible into or exercisable for common stock) at
a price below the conversion price as such price may be in effect at various
times (the “Conversion Price”).  During fiscal 2009 the conversion
price was subsequently reset to $0.51 as a result of the January Amendment
discussed in further detail below.





Quarterly
interest payments for these convertible debentures are payable in cash and
commenced on January 1, 2008.  The Company may elect to make interest
payments in shares of common stock provided, generally, that it is not in
default under the Debentures and it has met certain equity conditions prior to
the due date of the interest payments.  If the Company elects to make
interest payments in common stock, the conversion rate will be the lesser of (a)
the Conversion





F-27




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





Price (as
defined below), or (b) 85% of the lesser of (i) the average of the volume
weighted average price for the ten consecutive trading days ending immediately
prior to the applicable date an interest payment is due or (ii) the average of
such price for the ten consecutive trading days ending immediately prior to the
date the applicable shares are issued and delivered if such delivery is after
the interest payment date.





In
connection with the Debenture financing transaction, the Company issued to the
investors five-year warrants to purchase 5,604,411 shares of common stock at
$0.92 per share and two-year warrants to purchase 1,401,103 shares of common
stock at $0.90 per share and warrants to purchase 1,401,103 shares of common
stock at $1.60 per share (collectively, the “October 2007
Warrants”).  The value attributed to these warrants as calculated
using the Black-Scholes option pricing model was $7,838,791 on the date of
issuance. The valuation of the October 2007 Warrants have been affected by the
debt restructurings as the result of subsequent amendments to the October 2007
Debentures as discussed further below.





Under
EITF 00-27, the value of the warrants issued to the investors is calculated
relative to the total amount of the debt offering.  The relative fair
value of the warrants issued to the investors was determined to be $2,941,267,
or 62.5% of the total offering.  The relative fair value of the
warrants, along with the effective beneficial conversion feature of the debt
($3,557,761) and the face value discount given to the investors ($706,154),
totaled in excess of the face amount of the Debentures.  As such, the
Company recorded a debt discount equal to the face value of the Debentures of
$4,707,705.  The debt discount is being amortized by the Company
through the maturity dates of the Debentures.  The debt discount has
been affected by the debt restructurings as a result of subsequent amendments to
the October 2007 Debentures discussed in further detail below.





Financing
fees of $565,000, including placement agent fees of $440,000 and legal and other
fees of $125,000, were paid in cash from the gross proceeds of the
Debentures.  Joseph Stevens and Company (“Joseph Stevens”) acted as
sole placement agent in connection with the Debenture financing
transaction.  Also in connection with the Debenture financing
transaction, the Company issued Joseph Stevens three-year warrants to purchase
560,364 shares of the Company’s common stock exercisable at $0.84 per
share.  The value of the warrants issued to Joseph Stevens as
calculated using the Black-Scholes option pricing model was
$525,071.





The total
financing fees of $1,090,071 related to the Debenture financing transaction were
allocated to the equity and debt components of the financing.  The
Company recorded 62.5% of the financing fees ($681,294) as costs related to the
issuance of the equity instruments, and as such has netted those amounts against
additional paid-in capital as of the date of the financing.  The
remaining 37.5% ($408,777) was recorded as deferred financing costs on the
Company’s consolidated balance sheet as of March 31, 2008, and amortized by the
Company through the maturity dates of the Debentures under the effective
interest method.  The deferred financing fees were affected by the
debt restructure as a result of the April 2008 Amendment discussed in further
detail below.




F-28




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





In
connection with the Debentures, the Company also entered into a registration
rights agreement with the investors that requires the Company to register the
shares issuable upon conversion of the principal amounts of the Debentures and
exercise of the Warrants.  Pursuant to the registration rights
agreement, on November 9, 2007 the Company filed a Registration Statement on
Form SB-2.  On January 25, 2008, the registration statement, as
amended, became effective with the Securities and Exchange
Commission.  Per the terms of the registration rights agreement,
following the effective date of the registration statement, the Company may
force conversion of the Debentures if the market price of the common stock is at
least $2.52 for 30 consecutive days.  The Company may also prepay the
Debentures in cash at 120% of the then outstanding principal
balance.





The
Debentures rank senior to all of the Company’s current and future indebtedness
and are secured by substantially all of the Company’s assets.





April
2008 Amendment:





On April
30, 2008, the October 2007 Convertible Debenture Agreement was amended to
reflect changes to the monthly redemption of principal and changes to the
October 2007 Warrants issued with the original October 2007
Debentures.  Under the terms of the April 30, 2008 Amendment (the
“April Amendment”), the monthly principal redemptions were suspended until
August 1, 2008 and the remaining principal due on the October 2007 Debentures
were to be paid thereafter on the first date of each month in equal installments
through March 27, 2010, the expiration date. Further, the April Amendment
changed the exercise price of the October 2007 Warrants issued under the terms
of the Securities Purchase Agreement and related Agreements from $0.90, $0.92
and $1.60 to $0.60 each. The number of shares to be purchased under each of the
October 2007 Warrants was also adjusted under the terms of the April Amendment
so that the original dollar amounts to be raised by the Company through the
exercise of each of the October 2007 Warrants remained the same.  As a
result, the number of shares to be purchased under the October 2007 Warrants
increased by 6,024,743 from 8,406,617 to 14,431,360.





The April
Amendment to the October 2007 Debentures has been accounted for by the Company
as an extinguishment of debt in accordance with EITF Issue No. 96-19 (“EITF
Issue No. 96-19”), Debtor’s
Accounting for a Modification or Exchange of Debt Instruments, and
EITF Issue No. 06-6 (“EITF Issue No. 06-6”), Debtor's Accounting For a
Modification or Exchange of Convertible Debt Instruments.  The
Company determined that the net present value of the cash flows under the terms
of the April Amendment was more than 10 percent different from the present value
of the remaining cash flows under the terms of the original October 2007
Debentures agreement.  Due to the substantial difference, the Company
determined an extinguishment of debt had occurred with the April
Amendment.  Accordingly, the Company




F-29




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





recorded
the amended October 2007 Debentures at their fair value of $1,805,668 at the
date of extinguishment.  The difference between the fair value of the
amended October 2007 Debentures and the carrying value of the original October
2007 Debentures at the date of debt extinguishment amounting to $732,400 was
recorded as part of the loss on debt extinguishment for the year ended March 31,
2009.





As a
result of the April Amendment, unamortized deferred financing costs of $312,197
arising from the original issuance of the October 2007 Debentures were written
off and were included in the loss on debt extinguishment for the year ended
March 31, 2009.  There were no debt issuance costs incurred in
connection with the April Amendment.





A debt
discount of $2,643,192 was recorded in connection with the debt extinguishment
from April Amendment to the October 2007 Debentures.  The debt
discount was amortized monthly based on the maturity dates of the October 2007
Debentures until affected by the August 2008 Amendment discussed in further
detail below.





The
increase in value of the October 2007 Warrants arising from the change in
conversion price and the additional number of warrants issued of $5,858,344 has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.





The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the October 2007 Debentures from the April Amendment discussed above totaled
$6,902,941 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.





August
2008 Amendment:





On August
29, 2008, the Company entered into an “Amendment to Debentures, Agreement and
Waiver” (the “August Amendment”) with October 2007 Debenture Holders, to amend
the October 2007 Convertible Debenture. The August Amendment waived quarterly
interest payments that would otherwise have been due on October 1, 2008 and
January 1, 2009 and defers the monthly redemption dates from July 31, 2008
through November 30, 2008  to commence upon December 31, 2008, and
terminating upon full redemption of the October 2007 Debentures. In
consideration for entering into the August Amendment, the outstanding principal
amount of the October 2007 Debentures was increased to an amount equal to 115%
of the sum of (i) the outstanding principal amount of as of August 29, 2008, the
date of the August Amendment, plus (ii) an amount equal to the additional amount
of interest that would have accrued on the October 2007 Debenture from July 1,
2008 through December 31, 2008. There were no changes to the warrants related to
the October 2007 Debentures as a result of the August
Amendment.  Based on the terms of the August Amendment, the principal
balances of the October 2007 Debentures increased by $866,202 to
$5,285,599.




F-30




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





The
August Amendment to the October 2007 Debentures has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6.  The Company determined that the net present
value of the cash flows under the terms of the August Amendment was more than 10
percent different from the present value of the remaining cash flows under the
terms of the October 2007 Debentures agreement as previously amended in April
2008.  Due to the substantial difference, the Company determined an
extinguishment of debt had occurred with the August
Amendment.  Accordingly, the Company recorded
the amended October 2007 Debentures at their fair value of $2,203,086 at the
date of extinguishment.  The difference between the fair value of the
amended October 2007 Debentures and the carrying value of the original October
2007 Debentures at the date of debt extinguishment amounting to $91,728 was
recorded as an offset against the loss on debt extinguishment for the year
ended March 31, 2009.





A debt
discount of $3,082,511 was recorded in connection with the debt extinguishment
from August Amendment to the October 2007 Debentures which includes $117,851
related to the interest that would have accrued from September to December
2008.  This portion of the debt discount was amortized through
December 2008, while the remaining $2,964,660 of the debt discount is being
amortized monthly based on the maturity dates of the October 2007 Debentures
until affected by the January 2009 Amendment discussed in further detail
below.





January
2009 Amendment:





Effective
January 27, 2009, the October 2007 and May 2008 Convertible Debenture Agreements
(see below) were amended to reflect changes to the monthly redemptions of
principal, the quarterly payments of interest and changes to the October 2007
and May 2008 Warrants related to the original October 2007 and May 2008
Debentures.  Under the terms of the January 27, 2009 Amendment (the
“January Amendment”), the “Conversion Price” of the debentures was reset from
$0.84 to $0.51, monthly principal redemptions were deferred until August 1, 2009
and the remaining principal due on each of the debentures will be paid
thereafter on the first date of each month in twelve equal installments through
July 1, 2010, the amended maturity date.  During the deferral period
interest payments due from January 1, 2009 through July 1, 2009 may be paid
monthly by the Company in common stock shares at a conversion rate of $0.40
given that it has met certain equity conditions prior to the due date of the
interest payments.  If the equity conditions are not met, the Company
may add the monthly interest payment to the principal balance of the
debenture.




F-31




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
  NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





Further,
the January Amendment reset the “Exercise Price” of the October 2007 and May
2008 Warrants issued in connection with the October 2007 and May 2008 Debentures
Agreements and related agreements from the then current exercise prices of
$0.60, $0.92 and $1.35 to $0.60 and extended the expiration dates of the October
2007 warrants to January 1, 2014. The number of shares to be purchased under the
October 2007 and May 2008 warrants were proportionately increased under the
terms of the amendments so that the original dollar amounts to be raised by
registrant though the exercise of each of the warrants and the proportional
number of warrants issued to each Debenture Holder remained the
same.   As a result, the number of common stock shares to be
purchased under the October 2007 Warrants increased by 2,851,897 to
17,283,257.





Under the
terms of the January Amendment, in February 2009, the Company issued a total of
320,800 restricted common shares valued at $131,528 to the October 2007
Debenture Holders.





The
January Amendment to the October 2007 Debentures has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6.  The Company determined that the net present
value of the cash flows under the terms of the January Amendment was more than
10 percent different from the present value of the remaining cash flows under
the terms of the original October 2007 Debentures agreement.  Due to
the substantial difference, the Company determined an extinguishment of debt had
occurred with the January Amendment.  Accordingly, the Company
recorded the amended October 2007 Debentures at their fair value of $2,733,557
as of January 27, 2009, the date of extinguishment.  The decrease in
the fair value of the amended October 2007 Debentures from the carrying value of
the amended October 2007 Debentures at the date of debt extinguishment amounting
to $367,557 was recorded as an offset to the total loss on debt extinguishment.
A new debt discount of $2,552,042 was recorded in connection with the debt
extinguishment from the January Amendment to the October 2007
Debentures.  The debt discount is being amortized through the July 1,
2010 amended maturity dates of the October 2007 Debentures.





The
increase in value of the October 2007 Warrants arising from the change in
conversion price and the additional number of warrants issued of $2,874,314 has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.  In addition the fair value of the 320,800
shares issued to the October 2007 Debenture holders totaled $131,528 and has
been accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.





The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the October 2007 Debentures from the January Amendment discussed above totaled
$2,638,285 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.




F-32




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
  NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





Principal
and interest:





On
January 31, 2008, $100,000 of the October 2007 Debentures was converted by an
investor.  Using the conversion rate of $0.84 per share per the terms
of the Debenture, 119,047 shares of registered common stock were issued to the
investor.





On March
31, 2008, the Company converted principal redemptions totaling $188,308 into
224,176 shares of registered common stock and interest payments of $92,821 into
110,501 shares of common stock using the conversion rate of
$0.84.





In April
2008, the Company rescinded and cancelled 140,143 shares of registered common
stock for principal redemptions of the October 2007 Debentures totaling $117,720
and submitted the cash payments in the same amounts to those
holders.  Pursuant to a one-time waiver of certain equity conditions,
the remaining $70,588 of the March 31 principal redemption was adjusted to
reflect a one-time conversion rate of $0.70 and, in April 2008 the Company
issued the holder 16,807 additional registered shares in
consideration.   In addition, the March 31, 2008 interest
payments were adjusted to reflect a one-time conversion price of $0.70 and in
April 2008 the Company issued the October 2007 Debenture holders 22,099
additional common stock shares.  The additional interest expense for
the October 2007 Debentures of $5,446 related to the one-time conversion rate
adjustments of the March 31, 2008 principal and interest payments from $0.84 to
$0.70 was included in accrued interest for the October 2007 Debentures as of
March 31, 2008.





On March
1, 2009 the Company increased the principal balances of the October 2007
Debentures by $70,474, the amount of the accrued interest due as of that date,
as a result of the equity condition constraints for the conversion of interest
payments pursuant to the January Amendment.





As of
March 31, 2009 and 2008, the principal balance of the October 2007 Debentures
totaled $5,356,073 and $4,419,397, respectively, of which the current portion of
$3,570,720 and $1,936,884 is included in the Company’s current liabilities in
the accompanying consolidated balance sheets as of March 31, 2009 and 2008,
respectively.  As of March 31, 2009 and 2008, the Company had $35,707
and $5,446, respectively of accrued interest related to the October 2007
Debentures included in the accompanying consolidated balance sheets and recorded
a total of $253,495 and $192,421, respectively, of interest expense related to
the face rate of interest in the accompanying consolidated statements of
operations for the years ended March 31, 2009 and 2008.  During the
years ended March 31, 2009 and 2008, the Company converted accrued interest
payments of $5,446 and $186,975, respectively on the convertible notes into
38,906 and 222,590 shares of common stock, respectively, using a conversion rate
of $0.84 per share.




F-33




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





Changes
to the principal balances of the October 2007 Debentures during the years ended
March 31, 2009 and 2008 are shown below:







PrincipalOctober
      2007
            
            
            $
            4,707,705January
      2008
            Principal
      Conversion
            
            
            (100,000
            )March
      2008
            Principal Payment -
      Shares
            
            
            (188,308
            )Balance at March 31,
      2008
            
            
            4,419,937August
      2008
            August
      Amendment
            
            
            866,202March
      2009
            Accrued
      Interest
            
            
            70,474Balance at March 31,
      2009
            
            $
            5,356,073





As of
March 31, 2009 and 2008, the unamortized balance of the debt discount related to
the October 2007 Debentures was $2,251,802 and $3,522,356,
respectively.  During the years ended March 31, 2009 and 2008 the
Company recorded additional interest expense of $1,804,716 and $1,185,348
respectively, related to the amortization of the debt discount associated with
the October 2007 Debentures.





As of
March 31, 2009 and 2008, the unamortized balance of the deferred financing fees
related to the October 2007 Debentures was zero and $325,769,
respectively.  During the years ended March 31, 2009 and 2008 the
Company recorded additional interest expense of $13,572 and $83,007
respectively, related to the amortization of the deferred financing fees
associated with the October 2007 Debentures.  In connection with the
April Amendment described above, the unamortized balance of the deferred
financing costs was written off.





Changes
to the exercise prices and number of warrants related to the October 2007
Debentures as a result of the April and January Amendments were made according
to the following schedule:




5
      Year
              Warrants
            2
      Year
              Warrants
            2
      Year
              Warrants
            CombinedAs
      Originally Issued:No.
      of warrants
            5,604,411
            1,401,103
            1,401,103
            8,406,617Exercise
      price
            $0.92
            $0.90
            $1.60As
      Modified April Amendment:No.
      of warrants
            8,593,430
            2,101,655
            3,736,275
            14,431,360Exercise
      price
            $0.60
            $0.60
            $0.60As
      Modified January Amendment:No.
      of warrants
            17,283,257
            -
            -
            17,283,257Exercise
      price
            $0.60
            -
            -




F-34




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





May 2008
Debenture





On June
9, 2008, the Company completed the transactions contemplated under a certain
Securities Purchase Agreement with an accredited investor providing for the
issuance of the Company’s Original Issue Discount 8% Secured Convertible
Debenture (the “May 2008 Debenture”) having a principal face amount of
$1,250,000.  The Company realized gross proceeds of $1,062,500 after
giving effect to a 15% discount.  After accounting for commissions and
legal and other fees, the net proceeds to the Company totaled
$870,625.





Original
terms:





Under the
original terms, the principal amount under the May 2008 Debenture was payable in
23 monthly payments of $54,348 beginning January 31, 2009.  Interest
payments are payable in cash quarterly commencing on January 1, 2009. The
principal and interest payments have been affected by the debt restructures as a
result of the January Amendment discussed in further detail
below.  The Company may elect to make principal and interest payments
in shares of common stock provided, generally, that the Company is not in
default under the May 2008 Debenture, it has met certain equity conditions prior
to the due dates and there is then in effect a registration statement with
respect to the shares issuable upon conversion of the May 2008
Debenture.  If the Company elects to make principal or interest
payments in common stock, the conversion rate will be the lesser of (a) the
Conversion Price (as defined below), or (b) 85% of the lesser of (i) the average
of the volume weighted average price for the ten consecutive trading days ending
immediately prior to the applicable date an interest payment is due or (ii) the
average of such price for the ten consecutive trading days ending immediately
prior to the date the applicable shares are issued and delivered if such
delivery is after the interest payment date.





At any
time, the holder may convert the May 2008 Debenture into shares of common stock
at a fixed conversion price of $0.84, subject to adjustment in the event the
Company issues common stock (or securities convertible into or exercisable for
common stock) at a price below the conversion price as such price may be in
effect at various times (the “Conversion Price”). During fiscal 2009, the
conversion price was subsequently reset to $0.51 as a result of the January
Amendment discussed in further detail below.





Following
the effective date of the registration statement described below, the Company
may force conversion of the May 2008 Debenture if the market price of the common
stock is at least $2.52 for 30 consecutive days. The Company may also prepay the
May 2008 Debenture in cash at 120% of the then outstanding principal
balance.





F-35




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





The May
2008 Debenture ranks senior to all current and future indebtedness of the
Company, with the exception of the October 2007 Debentures that were issued by
the Company which rank senior to the May 2008 Debenture.  The May 2008
Debenture is secured by substantially all of the assets of the
Company.  As part of the transaction, the Company entered into a
waiver and subordination agreement with the holders of the October 2007
Debentures.





In
connection with the financing transaction, the Company issued to the investor
five-year warrants to purchase 1,488,095 shares of the Company’s common stock at
$0.92 per share and five-year warrants to purchase 1,488,095 shares of common
stock at $1.35 per share (collectively, the “May 2008 Warrants”).





Under
EITF Issue No. 00-27, the value of the May 2008 Warrants issued to the investor
was calculated relative to the total amount of the debt offering. The relative
fair value of the May 2008 Warrants issued to the investors was determined to be
$815,471, or 65.2% of the total offering. The relative fair value of the May
2008 Warrants, along with the effective beneficial conversion feature of the
debt ($434,529) and the face value discount given to the investors ($187,500),
totaled in excess of the face amount of the May 2008 Debenture. As such, the
Company recorded a debt discount equal to the face value of the May 2008
Debenture of $1,250,000. The debt discount is being amortized by the Company to
interest expense through the maturity date of the May 2008 Debenture. The debt
discount has been affected by the debt restructures as a result of the January
Amendment discussed in further detail below.





The
Company also entered into a registration rights agreement with the investors
that requires the Company to register the shares issuable upon conversion of the
May 2008 Debenture and exercise of the May 2008 Warrants within 45 days after
the closing date of the transaction. Pursuant to the registration rights
agreement, on July 14, 2008 the Company filed a Registration Statement on Form
S-1, which became effective with the Securities and Exchange Commission on
August 28, 2008. As a result of a timely filing, The Company was not
subject to any liquidated damages as described in the registration rights
agreement.





Financing
fees of $191,875 including placement agent fees of $116,875 and legal and other
fees of $75,000 were paid in cash from the gross proceeds of the May 2008
Debenture.  National Securities Corporation (“National Securities”)
acted as sole placement agent in connection with the financing transaction.
Also, in connection with the financing transaction, the Company issued National
Securities five-year warrants to purchase 148,810 shares of the Company’s common
stock exercisable at $0.84 per share. The value of the warrants issued to
National Securities as calculated using the Black-Scholes option pricing model
was $117,530.




F-36




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





The total
financing fees of $309,405 related to the financing transaction have been
allocated to the equity and debt components of the financing. The Company has
recorded 65.2% of the financing fees ($201,732) as costs related to the issuance
of the equity instruments, and as such has netted those amounts against
additional paid-in capital as of the date of the financing. The remaining 34.8%
($107,673) were recorded as deferred financing fees. The deferred financing fees
have been amortized by the Company through the maturity date of the May 2008
Debenture on a straight-line basis which approximates the effective interest
method. The deferred financing fees have been affected by the debt restructures
as a result of the January Amendment discussed in further detail
below.





All
securities were issued pursuant to an exemption from registration in reliance on
Regulation D promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), and based on the investors’ representations that they are
“accredited” as defined in Rule 501 under the Securities Act.





January
2009 Amendment:





Effective
January 27, 2009 the October 2007 and May 2008 Convertible Debenture Agreements
were amended to reflect changes to the monthly redemptions of principal, the
quarterly payments of interest and changes to the October 2007 and May 2008
Warrants related to the original October 2007 and May 2008
Debentures.  Under the terms of the January 27, 2009 Amendment (the
“January Amendment”), the “Conversion Price” of the debentures was reset from
$0.84 to $0.51, monthly principal redemptions were deferred until August 1, 2009
and the remaining principal due on each of the debentures will be paid
thereafter on the first date of each month in twelve equal installments through
July 1, 2010, the amended maturity date.  During the deferral period
interest payments due from January 1, 2009 through July 1, 2009 may be paid
monthly by the Company in common stock shares at a conversion rate of $0.40
given that it has met certain equity conditions prior to the due date of the
interest payments.  If the equity conditions are not met, the Company
may add the monthly interest payment to the principal balance of the
debenture.







F-37




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





Further,
the January Amendment reset the “Exercise Price” of the October 2007 and May
2008 Warrants issued in connection with the October 2007 and May 2008 Debentures
Agreements and related agreements from the then current exercise prices of
$0.60, $0.92 and $1.35 to $0.60 and extended the expiration dates of the October
2007 warrants to January 1, 2014. The number of shares to be purchased under the
October 2007 and May 2008 warrants were proportionately increased under the
terms of the amendments so that the original dollar amounts to be raised by
registrant though the exercise of each of the warrants and the proportional
number of warrants issued to each Debenture Holder remained the
same.   As a result, the number of Common stock shares to be
purchased under the May 2008 Warrants increased by 2,653,770 to
5,629,960.





Under the
terms of the January Amendment, in February 2009, the Company issued a total of
79,200 restricted common shares valued at $32,472 to the May 2008 Debenture
Holder.





The
January Amendment to the May 2008 Debenture has been accounted for by the
Company as an extinguishment of debt in accordance with EITF Issue No. 96-19 and
EITF Issue No. 06-6.  The Company determined that the net present
value of the cash flows under the terms of the January Amendment was more than
10 percent different from the present value of the remaining cash flows under
the terms of the original May 2008 Debenture agreement.  Due to the
substantial difference, the Company determined an extinguishment of debt had
occurred with the January Amendment.  Accordingly, the Company
recorded the amended May 2008 Debenture at its fair value of $526,950 as of
January 27, 2009, the date of extinguishment.  The increase in the
fair value of the amended May 2008 Debentures from the carrying value of the
original May 2008 Debentures at the date of debt extinguishment amounted to
$193,614 and was recorded as a loss on debt extinguishment for the year ended
March 31, 2009. A new debt discount of $723,050 was recorded in connection with
the debt extinguishment from January Amendment to the May 2008
Debenture.  The debt discount is being amortized through the July 1,
2010 amended maturity date of the May 2008 Debenture.





The
increase in value of the May 2008 Warrants arising from the change in conversion
price and the additional number of warrants issued of $1,092,028 has been
accounted for as a payment to the debt holders in connection with the debt
extinguishment and included in the loss on debt extinguishment for the year
ended March 31, 2009.  In addition the fair value of the 79,200 shares
issued to the May 2008 Debenture holder totaled $32,472 and has been accounted
for as a payment to the debt holders in connection with the debt extinguishment
and included in the loss on debt extinguishment for the year ended March 31,
2009.






F-38




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





As a
result of the January Amendment, unamortized deferred financing costs of $78,961
arising from the original issuance of the May 2008 Debentures were written off
and were included in the loss on debt extinguishment for the year ended March
31, 2009.  There were no debt issuance costs incurred in connection
with the January Amendment.





The total
loss on extinguishment of debt recorded by the Company as a result of changes to
the May 2008 Debenture from the January Amendment discussed above totaled
$1,397,075 which is included in the loss on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended March 31,
2009.





Principal
and interest:





On March
1, 2009 the Company increased the principal balances of the May 2008 Debenture
by $75,556, the amount of the accrued interest due as of that date, as a result
of the equity condition constraints for the conversion of interest payments
pursuant to the January Amendment.





As of
March 31, 2009, the principal balance of the May 2008 Debenture totaled
$1,325,556, of which the current portion of $883,704 is included in the
Company’s current liabilities in the accompanying consolidated balance sheet at
March 31, 2009.





Changes
to the principal balance of the May 2008 Debenture during the year ended March
31, 2009 are shown below:




PrincipalMay
      2008
              
              
              $
              1,250,000March
      2009
              Accrued
      Interest
              
              
              75,556Balance at March 31,
      2009
              
              $
              1,325,556


For the
year ended March 31, 2009, the Company recorded interest expense of $84,393
related to the face rate of interest, of which $8,837 is included in
accrued interest  in the accompanying consolidated balance sheet at
March 31, 2009.





During
the year ended March 31, 2009, the Company recorded additional interest expense
of $418,400 related to the amortization of the debt discount. As of March 31,
2009, the unamortized balance of the debt discount was $637,986.





During
the year ended March 31, 2009, the Company recorded additional interest expense
of $28,712 related to the amortization of the deferred financing fees on the May
2008 Debenture. In connection with the January Amendment described above,
the unamortized balance of the deferred financing costs was written off. As of
March 31, 2009, the unamortized balance of the deferred financing fees was
zero.




F-39




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 10 - CONVERTIBLE NOTES
PAYABLE, continued





Changes
to the exercise prices and number of warrants related to the May 2008 Debenture
as a result of the January Amendment were made according to the following
schedule:





5
      Year
              Warrants
            5
      Year
              Warrants
            CombinedAs
      Originally Issued:No.
      of warrants
            1,488,095
            1,488,095
            2,976,190Exercise
      price
            $0.92
            $1.35As
      Modified January Amendment:No.
      of warrants
            5,629,960
            
            5,629,960Exercise
      price
            $0.60





Private Placement
Debentures





In March
2009 the Company entered into an Agency Agreement with a broker to raise capital
in a private placement offering of one-year convertible debentures under
Regulation D (the “Private Placement Debentures”).   From March
through June 2009, the Company intends to raise up to a maximum of
$1,500,000 under this private placement offering of convertible debenture
debt.  On March 31, 2009, the Company had received initial gross
proceeds of $60,000 under this private placement offering of convertible
debentures.  Related to the issuance of the convertible debentures,
the Company accrued for commissions to the broker totaling $3,600 which have
been capitalized as deferred financing costs. The deferred financing costs will
be amortized to interest expense by the Company through the maturity dates of
the debentures on a straight-line basis which approximates the effective
interest method.





The
Company may elect to make principal redemptions on the maturity dates of the
debentures in shares of common stock at a fixed conversion price of $0.51. At
any time, holders may convert the debentures into shares of common stock at the
fixed conversion price of $0.51. The conversion price is subject to adjustment
in the event the Company issues the next equity financing of at least $2,500,000
at a price below $0.51.





Per the
terms of the convertible debenture agreements, the notes have a term of one year
from issuance and are redeemable by the Company with two days
notice.  The notes bear interest at 8% per annum and are convertible
into shares of the Company’s common stock at a conversion rate of
$0.51.  As of March 31, 2009 the balance of these convertible notes
was $60,000 and accrued interest was zero.





In
connection with the financing transaction, the Company issued to the investors
five-year warrants (the “Private Placement Warrants”) to purchase 23,529 shares
of the Company’s common stock at $0.51 per share. The exercise price of the
warrants is subject to adjustment in the event the Company issues the next
equity financing of at least $2,500,000 at a price below $0.51.




F-40




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





Under
EITF Issue No. 00-27, the value of the Private Placement Warrants issued to the
investor was calculated relative to the total amount of the debt offering. The
relative fair value of the Private Placement Warrants issued to the investors
was determined to be $9,146, or 15.2% of the total offering. The relative fair
value of the Private Placement Warrants, along with the effective beneficial
conversion feature of the debt of $4,440 were recorded as a total debt discount
of $13,586 as of March 31, 2009 which is reported in the accompanying
consolidated balance sheet. The Company will amortize the debt discount using
the effective interest method through the maturity dates of the
notes.





As of
June 22, 2009 the Company had received additional gross proceeds of $906,500
under this private placement of convertible debentures. (See Note
14)





Future
Maturities





Future
maturities of all notes payable at March 31, 2009 are as follows:





Years
      Ending
              March
      31,
            
            Oct.
      2007
              May
      2008
              Convertible
              Debentures
            
            
            Note
      Payable
              Officer
            
            
            Related
              Party
      Notes
            
            
            Private
              Placement
              Conv.
      Debt.
            
            
            Total2010
            
            $
            4,454,424
            
            
            $
            90,000
            
            
            $
            150,000
            
            
            $
            60,000
            
            
            $
            4,754,4242011
            
            
            2,227,205
            
            
            
            53,950
            
            
            
            120,000
            
            
            
            -
            
            
            
            2,401,1552012
            
            
            -
            
            
            
            -
            
            
            
            104,000
            
            
            
            -
            
            
            
            104,0002013
            
            
            -
            
            
            
            -
            
            
            
            96,000
            
            
            
            -
            
            
            
            96,0002014
            
            
            -
            
            
            
            -
            
            
            
            96,000
            
            
            
            -
            
            
            
            96,000Thereafter
            
            
            -
            
            
            
            -
            
            
            
            563,500
            
            
            
            -
            
            
            
            563,500$
            6,681,629
            
            
            $
            143,950
            
            
            $
            1,129,500
            
            
            $
            60,000
            
            
            $
            8,015,079





NOTE 11– COMMON
STOCK





In April
2007, the Company issued 375,000 shares of restricted common stock in lieu of
fees paid to a consultant.  These shares were issued at a value of
$1.02 per share (based on the underlying stock price on the agreement date after
a fifteen percent deduction as the shares are restricted) for a total cost of
$382,500 which has been included in selling, general and administrative expenses
for the year ended March 31, 2008.





During
fiscal 2008, the Company entered into Agency Agreements with a broker to raise
funds in private placement offerings of common stock under Regulation
D.  In connection with these private placement offerings, the Company
sold 3,652,710 shares of common stock at an average price of $0.22 per share
resulting in gross proceeds of $789,501 and incurred offering costs of
$89,635.




F-41




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 11– COMMON STOCK,
continued





During
fiscal 2008, the Company issued 156,250 shares of common stock resulting from
exercises of stock options and warrants at an average price of $0.69 per share
for proceeds of $107,500 and issued 386,726 shares of common stock from the
cashless exercises of a total of 465,469 warrants.





In
October 2007, the Company engaged the firm of Carpe DM, Inc. to perform the
services as the Company’s investor relations and public relations representative
for a monthly fee of $7,500 per month.  Pursuant to the terms of this
36 month consulting agreement, the Company issued 150,000 S-8 registered shares
at $0.80 per share and a total value of $120,000, and 250,000 fully vested and
non-forfeitable warrants at an exercise price of $1.50 per share for a period of
two and one-half years, valued at $229,834 as calculated using the Black-Scholes
option pricing model.  On November 13, 2007, the Company filed the
Form S-8 as required by this agreement with the Securities and Exchange
Commission. The Company recorded the combined value of $349,834 of the shares
and warrants issued as prepaid expense which is being amortized over the life of
the services agreement.  As of March 31, 2009 and 2008, the
unamortized balance of the value of the shares and warrants issued to Carpe DM,
Inc. was $174,928 and $291,532, respectively, and $116,604 and $58,302,
respectively has been amortized and included in selling, general and
administrative expenses as outside services expense for the years ended March
31, 2009 and 2008.





On
October 16, 2007, the shareholders approved an increase in the total number of
voting common shares authorized to be issued to 125,000,000 shares.





On
January 31, 2008, $100,000 of the October 2007 Debentures was converted by an
investor.  Using the conversion rate of $0.84 per share per the terms
of the Debenture, 119,047 shares of registered common stock were issued to the
investor.





On March
31, 2008, the Company converted principal redemptions totaling $188,308 into
224,176 shares of registered common stock and interest payments of $92,821 into
110,501 shares of common stock using the conversion rate of
$0.84.





In April
2008, the Company rescinded and cancelled 140,143 shares of registered common
stock for principal redemptions of the October 2007 Debentures totaling $117,720
and submitted the cash payments in the same amounts to those
holders.  Pursuant to a one-time waiver of certain equity conditions,
the remaining $70,588 of the March 31 principal redemption was adjusted to
reflect a one-time conversion rate of $0.70 and, in April 2008 the Company
issued the holder 16,807 additional registered shares in
consideration.   In addition, the March 31, 2008 interest
payments were adjusted to reflect a one-time conversion price of $0.70 and in
April 2008 the Company issued the October 2007 Debenture holders 22,099
additional common stock shares.  The additional interest expense for
the October 2007 Debentures of $5,446 related to the one-time conversion rate
adjustments of the March 31, 2008 principal and interest payments from $0.84 to
$0.70 was included in accrued interest for the October 2007 Debentures as of
March 31, 2008 (see Note 10).




F-42




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 11– COMMON STOCK,
continued





During
fiscal 2009, the Company issued 244,722 shares of restricted common stock in
lieu of fees paid to various consultants for services
performed.  These shares were issued at an average price of $0.69
(based on the underlying stock prices on the dates of issuances) for a total
cost of $168,769 which has been included in selling, general and administrative
expenses for the year ended March 31, 2009.





During
fiscal 2009, the Company issued 82,693 shares of common stock resulting from
exercises of stock options and warrants at an average price of $0.04 per share
for proceeds of $3,307 and issued 150,022 shares of common stock from the
cashless exercises of a total of 157,000 stock options.





Under the
terms of the January Amendment, in February 2009, the Company issued a total of
400,000 restricted common stock shares to the October 2007 and May 2008
Debenture Holders.  The total fair value of the shares issues totaled
$164,000 and has been included in the loss on extinguishment of debt for the
year ended March 31, 2009.





In March
2009, the Company issued 157,516 S-8 registered shares of common stock in lieu
of fees paid for services performed by consultants.  On March 28,
2009, the Company filed the Form S-8 with the Securities and Exchange
Commission. These shares were issued at a value of $0.51 per share for a total
cost of $80,333 which has been included in selling, general and administrative
expenses for the year ended March 31, 2009 (see Note 10).





NOTE 12 – STOCK OPTIONS AND
WARRANTS





Effective
October 1, 2002, the Company adopted the 2002 Stock Option Plan (the “2002
Plan”). The stockholders of the Company approved the 2002 Plan on October 1,
2002.  Under the 2002 Plan, incentive stock options and nonqualified
options may be granted to officers, employees and consultants of the Company for
the purchase of up to 5,000,000 shares of the Company’s common stock. The
exercise price per share under the incentive stock option plan shall not be less
than 100% of the fair market value per share on the date of grant. The exercise
price per share under the non-qualified stock option plan shall not be less than
85% of the fair market value per share on the date of grant. Expiration dates
for the grants may not exceed 10 years from the date of grant. The 2002
Plan terminates on October 1, 2012.








F-43




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued





No
incentive stock options or non-qualified stock options were granted during the
years ended March 31, 2009 and 2008.  All options granted have an
exercise price equal to the fair market value at the date of grant, vest upon
grant or agreed upon vesting schedules and expire five years from the date of
grant.  Total compensation expense recognized in the years ended March
31, 2009 and 2008 for options issued to consultants in prior years was zero.
During the years ended March 31, 2009 and 2008, 239,693 and 50,000,
respectively, options were exercised.  As of March 31, 2009 and
2008, there were 2,198,920 and 2,438,613 options outstanding, respectively, at
an average exercise price of $0.49 and $0.45 per share, respectively, under the
2002 Plan.  There were no stock options granted subsequent to
March 31, 2009. The Company had 2,511,387 options available for grant under
the 2002 Plan at March 31, 2009.





From time
to time, the Company issues warrants pursuant to various consulting agreements
and other compensatory arrangements.





During
the year ended March 31, 2008, the Company issued a total of 6,261,375 warrants
to purchase shares of the Company’s common stock at an average price of $0.42
per share to 79 individual investors in connection with funds raised in private
placement offerings.  The warrants were issued with exercise periods
of 18 months originating from the related investment dates.  The
expiration dates ranged from December 2008 to October 2009.





In July
2007, the Company issued warrants to purchase a total of 699,438 shares of the
Company’s common stock at an average exercise price of $0.29 per share to a
broker in connection with funds raised in previous private placement
offerings.   These warrants have 5 year terms beginning from the
dates of the placement offerings and the expiration dates range from March 2011
to March 2012.





On July
2, 2007, in connection with the facility lease agreement, the Company issued
10,000 warrants to the lessor, at an exercise price of $1.55 per share for a
period of two years, valued at $15,486 as calculated using the Black-Scholes
option pricing model.  The Company is amortizing the value of the
warrants over the life of the lease and the remaining unamortized value of the
warrants has been recorded in other long term assets. As of March 31, 2009 and
2008, the unamortized balance of the value of the warrants issued to the lessor
was $2,970 and $10,074, respectively and $7,104 and $5,412, respectively, has
been included in selling, general and administrative expenses as additional rent
expense for the years ended March 31, 2009 and 2008.






F-44




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008
 NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued





On July
30, 2007, in connection with the purchase of manufacturing equipment, the
Company issued 79,208 warrants to the seller at an exercise price of $1.01 per
share, with a five year term.  The Company has determined the fair
value of the issued warrants, based on the Black-Scholes pricing model, to be
$79,926 as of the date of grant of which $10,000 has been recorded as fixed
a ssets in
the accompanying consolidated balance sheets as of March 31, 2009 and 2008
(which approximates the fair market value of the equipment acquired) and $69,926
has been recorded as consulting expense and is included in selling, general and
administrative expenses for services performed by the seller for the year ended
March 31, 2008.





On August
21, 2007, in connection with the extension of payment terms of outstanding
amounts owed, the Company issued 20,000 warrants to First Capital Investors,
LLC, at an exercise price of $0.75 per share with a term of two
years.  The Company has determined the fair value of the issued
warrants, based on the Black-Scholes pricing model, to be $14,984 as of the date
of grant which has been recorded as consulting and compensation expense and is
included in selling, general and administrative expenses for the year ended
March 31, 2008.





On
October 1, 2007, in connection with the convertible debenture financing
transaction, the Company issued to the investors five-year warrants to purchase
5,604,411 shares of common stock at $0.92 per share and two-year warrants to
purchase 1,401,103 shares of common stock at $0.90 per share and 1,401,103
shares of common stock at $1.60 per share.  These warrants were
subsequently increased to a total of 17,283,257, the exercise prices reset to
$0.60 and expiration dates extended to January 1, 2014 as a result of the April
2008 and January 2009 Amendments (see Note 10).





Also in
connection with the convertible debenture financing transaction, in October
2007, the Company issued Joseph Stevens and Company three year warrants to
purchase 560,364 shares of the Company’s common stock at $0.84 per share (see
Note 10).





In
October 2007, the Company engaged the firm of Carpe DM, Inc. to perform the
services as the Company’s investor relations and public relations representative
for a monthly fee of $7,500 per month.  Pursuant to the terms of this
36 month consulting agreement, the Company issued 150,000 S-8 registered shares
at $0.80 per share and a total value of $120,000, and 250,000 fully vested and
non forfeitable warrants at an exercise price of $1.50 per share for a period of
two and one-half years, valued at $229,834 as calculated using the Black-Scholes
option pricing model.  The Company has recorded the combined value of
$349,834 of the shares and warrants issued as prepaid expense which is being
amortized over the life of the services agreement (see Note 11).




F-45




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008





NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued




exercise
prices of these warrants are equal to the fair values of the Company’s shares as
of the dates of each grant.  The Company has determined the aggregate
fair value of the issued warrants, based on the Black-Scholes pricing model, to
be approximately $990,480 as of the dates of each grant.  The
assumptions used under the Black-Scholes pricing model included: a risk free
rate ranging from 1.52% to 3.15%; volatility ranging from 201% to 266%; an
expected exercise term of 5 years; and no annual dividend rate.  Of
total fair market value of $751,325 for warrants issued and vested during fiscal
2009, $232,964 was recorded as a portion of the capitalized software development
costs and $518,361 has been recorded as consulting and compensation expense and
is included in selling, general and administrative expenses for the year ended
March 31, 2009.  As of March 31, 2009 and 2008 the Company had
$287,722 and $105,965, respectively, related to unvested warrants which will be
recognized as selling, general and administrative expenses in future periods as
the warrants become vested.  In addition, during fiscal 2009 the
Company recognized $57,398 of compensation expense related to the vesting of
warrants issued in prior years which is included in general and administrative
expenses for the year ended March 31, 2009.





During
fiscal 2008, the Company issued a total of 887,800 warrants to various board
members, advisory board members, employees, and ongoing consultants to purchase
shares of the Company’s common stock. The weighted average exercise price of
these warrants is $0.97.  The exercise prices of these warrants are
equal to the fair values of the Company’s shares as of the dates of each
grant.  The Company has determined the aggregate fair value of the
issued warrants, based on the Black-Scholes pricing model, to be approximately
$858,105 as of the dates of each grant.  The assumptions used under
the Black-Scholes pricing model included: a risk free rate ranging from 3.74% to
4.75%; volatility ranging from 229% to 293%; an expected exercise term of 5
years; and no annual dividend rate.  Of this total fair market value
of warrants, $742,140 has been recorded as consulting and compensation expense
and is included in selling, general and administrative expenses for the year
ended March 31, 2008 and $105,965 relates to unvested warrants which will be
recognized as the warrants become vested.





On May
27, 2008, in connection with the convertible debenture financing transaction,
the Company issued to the investors five-year warrants to purchase 1,488,095
shares of common stock at $0.92 per share and 1,488,095 shares of common stock
at $1.35 per share.  These warrants were subsequently increased to a
total of 5,629,960, the exercise prices reset to $0.60 and expiration dates
extended to January 1, 2014 as a result of the April 2008 and January 2009
Amendments (see Note 10).





Certain
warrants issued in conjunction with compensation and fundraising activities
contain a cashless exercise provision.  Under the provision, the
holder of the warrant surrenders those warrants whose fair market value is
sufficient to affect the exercise of the entire warrant quantity. The warrant
holder then is issued shares based on the remaining net warrant and no proceeds
are




F-46




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued





The
following represents a summary of all stock option and warrant activity for the
years ended March 31, 2009 and 2008:




2009
              
              
              2008Options
                and
                Warrants
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Options
      and
                Warrants
              
              
              Weighted
                Average
                Exercise
                PriceOutstanding,
      beginning of year
              
              
              20,397,271
              
              
              $
              0.74
              
              
              
              4,520,021
              
              
              $
              0.58Issued
              
              
              16,519,340
              
              
              
              0.62
              
              
              
              17,174,802
              
              
              
              0.77Exercised
              
              
              (232,715
              )
              
              
              0.04
              
              
              
              (621,719
              )
              
              
              0.32Expired/forfeited
              
              
              (47,603
              )
              
              
              2.50
              
              
              
              (675,833
              )
              
              
              0.96Outstanding at end
      of year
              
              
              36,636,293
              
              
              $
              0.59
              
              
              
              20,397,271
              
              
              $
              0.74Exercisable at end
      of year
              
              
              36,086,293
              
              
              $
              0.59
              
              
              
              20,297,271
              
              
              $
              0.74Weighted
      average fair value ofwarrants
      issued
              
              
              
              
              
              $
              0.70
              
              
              
              
              
              
              $
              1.12


The
following table summarizes information about stock options and warrants
outstanding and exercisable at March 31, 2009:








Warrants and Options
              Outstanding
            
            
            Warrants and Options
              ExercisableExercise
      Price
            
            
            Number of
              Options and
              Warrants
              Outstanding
              And
      Exercisable
            
            
            Weighted
                Average
                Remaining
                Contractual
              Life
    –Years
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Number
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price$
            1.05 -
    $3.50
            
            
            
            1,098,950
            
            
            
            5.6
            
            
            $
            1.42
            
            
            
            1,048,950
            
            
            $
            1.44$
            0.80 -
    $1.00
            
            
            
            3,319,132
            
            
            
            6.2
            
            
            $
            0.90
            
            
            
            2,819,132
            
            
            $
            0.91$
            0.50 -
    $0.75
            
            
            
            25,380,822
            
            
            
            5.8
            
            
            $
            0.60
            
            
            
            25,380,822
            
            
            $
            0.60$
            0.04 -
    $0.30
            
            
            
            6,837,389
            
            
            
            1.2
            
            
            $
            0.28
            
            
            
            6,837,389
            
            
            $
            0.2836,636,293
            
            
            
            
            
            
            
            
            
            
            
            36,086,293






F-47




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008




NOTE 13 – RELATED PARTY
TRANSACTIONS





In August
2006, Peter Berry, the Company’s former Chief Executive Officer, agreed to
convert his deferred salaries to a long-term note payable. Under the terms of
this note, the Company began to make monthly payments of $3,000 to Mr. Berry in
January 2007. In January 2008, these monthly payments increased to $6,000 and
will remain at that amount until the loan is fully paid in December 2010.
Interest of 6% per annum on the outstanding principal balance of the note began
to accrue on January 1, 2008.  As of March 31, 2009 and 2008, the
total amount of deferred salaries and accrued interest under this arrangement
was $157,688 and $201,115, respectively, of which $67,688 and $129,115,
respectively is recorded as a long-term liability in the accompanying
consolidated balance sheets.  Interest expense related to this note
was $10,573 and $3,165, respectively for the years ended March 31, 2009 and
2008.  Accrued interest related to this note payable amounted to
$13,738 and $3,165 at March 31, 2009 and 2008, respectively, and is included in
the note payable to officer in the accompanying consolidated balance sheets. In
January 2009, Mr. Berry agreed to deferred the monthly payments of the note due
from January 31, 2009 through June 30, 2009. As of March 1, 2009 these unpaid
payments totaled $18,000 and are included in the current liability portion of
the note payable in the accompanying consolidated balance sheet. (see Note
9).  Mr. Berry resigned his position as Chief Executive Officer in
February 2009, however remains a director on the Board and continues to work as
a consultant for the Company.





Since
June 2005, the Company has retained the legal services of Gary C. Cannon,
Attorney at Law, for a monthly retainer fee.  From June 2005 to May
2009, Mr. Cannon also served as the Company’s Secretary and a member of the
Company’s Board of Directors.  Mr. Cannon continues to serve as
Corporate Legal Counsel for the Company and serves as a member of the Advisory
Board. In December 2007, Mr. Cannon’s monthly retainer for legal services was
increased from $6,500 per month to $9,000 per month.  During the years
ended March 31, 2009 and 2008, the total amount expensed by the Company for
retainer fees and out of pocket expenses was $108,050 and $88,248,
respectively.  From October 2008 through March 31, 2009 Mr. Cannon
agreed to defer a portion of his monthly payments and as of March 31, 2009 a
total of $15,000 had been deferred is included in accounts payable in the
accompanying consolidated balance sheet.  Additionally, during the
years ended March 31, 2009 and 2008, The Company expensed board fees for Mr.
Cannon totaling $24,000 and $12,650, respectively and at March 31, 2009 $15,000
of deferred board fees was included in accrued expenses.  During
fiscal year 2009 Mr. Cannon was granted a total of 95,150 warrants with an
average exercise price of $0.67 per share, and 72,800 warrants with an average
exercise price of $0.93 during fiscal 2008. All warrants granted to Mr. Cannon
were issued with an exercise price of greater than or equal to the fair value of
the Company’s shares on the grant date.







F-48




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 13 – RELATED PARTY
TRANSACTIONS, continued





As of
March 31, 2009 and 2008, the Company had aggregate principal balances of
$1,129,500 and $1,249,500, respectively, in outstanding unsecured indebtedness
owed to five related parties, including four former members of the board of
directors, representing working capital advances made to the Company from
February 2001 through March 2005.  These notes bear interest at the
rate of 6% per annum and provide for aggregate monthly principal payments which
commenced April 1, 2006 of $2,500, and which increased by an aggregate of $2,500
every six months to the current maximum aggregate payment of $10,000 per month.
Any remaining unpaid principal and accrued interest is due at maturity on
various dates through March 1, 2015.





Related-party
interest expense under these notes was $71,646 and $78,243 for the years ended
March 31, 2009 and 2008, respectively.  Accrued interest, which is
included in related party notes payable in the accompanying consolidated balance
sheets, related to these notes amounted to $554,260 and $482,584 as of March 31,
2009 and 2008, respectively.  As of March 31, 2009, the Company had
not made the required payments under the related party notes which were due on
January 1, February 1, and March 1, 2009.  However, pursuant to the
note agreements, the Company has a 120-day grace period to pay missed payments
before the notes are in default.  On April 29, 2009, May 30, 2009, and
June 26, 2009, the Company paid the January 1, February 1 and March 1 payments
respectively, due on these related party notes.  Management expects to
continue to pay all payments due prior to the expiration of the 120-day grace
periods.





NOTE 14 – SUBSEQUENT
EVENTS





In March
2009 the Company entered into an Agency Agreement with a broker to raise capital
in a private placement offering of one-year convertible debentures under
Regulation D (the “Private Placement Debentures”).   From March
through June 2009, the Company intends to raise up to a maximum of
$1,500,000 under this private placement offering of convertible debenture
debt.  On March 31, 2009, the Company had received initial gross
proceeds of $60,000 under this private placement offering of convertible
debentures. Through June 22, 2009 the Company had raised an additional $904,500
under the Private Placement Debentures.  Related to the issuance of
the convertible debentures, the Company paid additional commissions to the
broker totaling $54,270 which will be capitalized as deferred financing costs.
The deferred financing costs will be amortized to interest expense by the
Company through the maturity dates of the debentures on a straight-line basis
which approximates the effective interest method.





The
Company may elect to make principal redemptions on the maturity dates of the
debentures in shares of common stock at a fixed conversion price of $0.51. At
any time, holders may convert the debentures into shares of common stock at the
fixed conversion price of $0.51. The conversion price is subject to adjustment
in the event the Company issues the next equity financing of at least $2,500,000
at a price below $0.51.




F-49




CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008


NOTE 14 – SUBSEQUENT EVENTS,
continued





Per the
terms of the convertible debenture agreements, the notes have a term of one year
from issuance and are redeemable by the Company with two days
notice.  The notes bear interest at 8% per annum and are convertible
into shares of the Company’s common stock at a conversion rate of
$0.51.  As of June 22, 2009 the total gross proceeds raised in
connection with these Private Placement Debentures was $964,500.





In
connection with the financing transaction, since March 31, 2009, the Company has
issued to the investors additional five-year warrants (the “Private Placement
Warrants”) to purchase 354,714 shares of the Company’s common stock at $0.51 per
share. The exercise price of the warrants is subject to adjustment in the event
the Company issues the next equity financing of at least $2,500,000 at a price
below $0.51.  As of June 22, 2009 the Company had issued a total of
378,243 Private Placement Warrants in connection with these Private Placement
Debentures.





The
Company will calculate the value of the Private Placement Warrants relative to
the total amount of the debt offering which will be recorded as a debt discount
and amortized as interest expense using the effective interest method through
the maturity dates of the notes.





In April
2009, the Company issued 64,000 shares of unrestricted common stock in lieu of
fees paid to a consultant pursuant to the Company’s Form S-8 filed on April 13,
2009.  These shares were issued at a value of $0.51 per share for a
total cost of $32,640 which will be reported in selling, general and
administrative expenses for the Company in the quarter ending June 30,
2009.





In June
2009, the Company issued 145,425 shares of unrestricted common stock in lieu of
fees paid to various consultants pursuant to the Company’s Form S-8 filed on
June 11, 2009.  These shares were issued at a value of $0.51 per share
for a total cost of $74,167 which will be reported in selling, general and
administrative and research and development expenses for the Company in the
quarter ending June 30, 2009.





On April
1, 2009, the Company issued 111,360 common stock shares to the October 2007 and
May 2008 Debenture holders for total payments of $44,544 interest accrued as of
March 31, 2009 using the conversion rate of $0.40.  Through June 22,
2009 an additional 222,720 common stock shares have been issued using the
conversion rate of $0.40 for the payment of $89,088 of accrued interest on the
October 2007 and May 2008 Convertible Debentures.





In May
2009 the October 2007 Convertible Debenture holders redeemed principal balances
totaling $713,000 in exchange for 1,398,039 common stock shares using the
conversion rate of $0.51.





In May
2009, the Company issued 110,345 shares of common stock from exercises of a
total of 119,000 cashless stock options.




F-50


CRYOPORT, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2009 and 2008





NOTE 14 – SUBSEQUENT EVENTS,
continued





In April
2009, the Company issued a total of 200,000 warrants in lieu of payment to
consultants to purchase shares of the Company’s common stock at an average
exercise price of $0.51 per share.  The exercise prices of these
warrants are greater than or equal to the fair values of the Company’s shares as
of the dates of each grant.  The fair market value of the warrants
based on the Black-Scholes pricing model will be recorded as consulting and
compensation expense and included in selling, general and administrative
expenses in the quarter ending June 30, 2009.





During
the period April through June 2009, the Company issued a total of 209,800
warrants to various board members, advisory board members, employees, and
ongoing consultants as part of a previously approved and ongoing compensation
plan to purchase shares of the Company’s common stock at an average exercise
price of $0.56 per share.  The exercise prices of these warrants are
greater than or equal to the fair values of the Company’s shares as of the dates
of each grant.  The fair market value of the warrants based on the
Black-Scholes pricing model will be recorded as consulting and compensation
expense and included in selling, general and administrative expenses in the
quarter ending June 30, 2009.










F-51