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, 2008 and 2007, 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,
2008 and 2007, 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.




As
described in Note 2 to the consolidated financial statements, effective April 1,
2006, the Company changed its method of accounting for share-based compensation
to adopt Statement of Financial Standards No. 123(R), Share-Based
Payment.





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.  These factors
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




KMJ
Corbin & Company LLP


Irvine,
California


June 30,
2008




Page
F-1




CRYOPORT,
INC.
 
 CONSOLIDATED
BALANCE SHEETS







March
      31,ASSETS
              
              2008
              
              
              2007Current
      assets:Cash
      and cash equivalents
              
              $
              2,231,031
              
              
              $
              264,392Restricted
      cash
              
              
              203,670
              
              
              
              -Accounts
      receivable, net
              
              
              21,411
              
              
              
              10,172Inventories
              
              
              121,952
              
              
              
              146,008Prepaid
      expenses and other current assets
              
              
              153,016
              
              
              
              15,320Total
      current assets
              
              
              2,731,080
              
              
              
              435,892Fixed
      assets, net
              
              
              193,852
              
              
              
              38,400Intangible
      assets, net
              
              
              474
              
              
              
              4,696Deferred
      financing costs, net
              
              
              325,769
              
              
              
              4,699Other
      assets
              
              
              209,714
              
              
              
              -$
              3,460,889
              
              
              $
              483,687LIABILITIES
      AND STOCKHOLDERS’ DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              234,298
              
              
              $
              306,682Accrued
      expenses
              
              
              95,048
              
              
              
              97,227Accrued
      warranty costs
              
              
              29,993
              
              
              
              55,407Accrued
      salaries and related
              
              
              138,103
              
              
              
              169,537Convertible
      notes payable and accrued interest, net of discount of $0 (2008)
      and $29,638 (2007)
              
              
              -
              
              
              
              96,435Current
      portion of convertible notes payable and accrued interest, net of
      discount of $1,039,844 (2008) and $0 (2007)
              
              
              902,486
              
              
              
              -Line
      of credit and accrued interest
              
              
              115,943
              
              
              
              -Current
      portion of related party notes payable
              
              
              150,000
              
              
              
              120,000Current
      portion of note payable to officer
              
              
              72,000
              
              
              
              45,000Current
      portion of note payable
              
              
              12,000
              
              
              
              24,000Total
      current liabilities
              
              
              1,749,871
              
              
              
              914,288Related
      party notes and accrued interest payable, net of current
      portion
              
              
              1,582,084
              
              
              
              1,623,841Convertible
      notes payable, net of current portion of $1,936,884 (2008) and $0
      (2007) and
                discount
      of $2,418,513 (2008) and $0 (2007)
              
              
              -
              
              
              
              -Note
      payable to officer, net of current portion
              
              
              129,115
              
              
              
              197,950Note
      payable, net of current portion
              
              
              -
              
              
              
              35,440Total
      liabilities
              
              
              3,461,070
              
              
              
              2,771,519Commitments
      and contingenciesStockholders’
      deficit:Common
      stock, $0.001 par value; 125,000,000 shares authorized; 40,928,225 (2008)
      and 34,782,029 (2007) shares issued and outstanding
              
              
              40,929
              
              
              
              34,782Additional
      paid-in capital
              
              
              13,888,094
              
              
              
              7,042,536Accumulated
      deficit
              
              
              (13,929,204
              )
              
              
              (9,365,150
              )Total
      stockholders’ deficit
              
              
              (181
              )
              
              
              (2,287,832
              )$
              3,460,889
              
              
              $
              483,687







See
Accompanying Notes to Consolidated Financial Statements.
  Page
F-2
  CRYOPORT,
INC.
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
  For
      The Years Ended March 31,2008
                
                
                2007Net
      sales
                
                $
                83,564
                
                
                $
                67,103Cost
      of sales
                
                
                386,371
                
                
                
                176,939Gross
      loss
                
                
                (302,807
                )
                
                
                (109,836
                )Operating
      expenses:Selling,
      general and administrative expenses
                
                
                2,550,778
                
                
                
                1,899,228Research
      and development expenses
                
                
                166,227
                
                
                
                87,857Total
      operating expenses
                
                
                2,717,005
                
                
                
                1,987,085Loss
      from operations
                
                
                (3,019,812
                )
                
                
                (2,096,921
                )Interest
      Income
                
                
                50,076
                
                
                
                -Interest
      expense
                
                
                (1,592,718
                )
                
                
                (227,738
                )Loss
      before income taxes
                
                
                (4,562,454
                )
                
                
                (2,324,659
                )Income
      taxes
                
                
                1,600
                
                
                
                1,600Net
      loss
                
                $
                (4,564,054
                )
                
                $
                (2,326,259
                )Net
      loss available to common stockholders per common share:Basic
      and diluted loss per common share
                
                $
                (0.12
                )
                
                $
                (0.08
                )Basic
      and diluted weighted average common shares outstanding
                
                
                39,425,118
                
                
                
                30,943,154


See
Accompanying Notes to Consolidated Financial Statements.


Page
F-3


CRYOPORT,
INC.
 
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT




Common
      Stock
                
                
                Additional
                  Paid-in
                
                
                Accumulated
                
                
                Total
                  Stockholders'Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                DeficitBalance,
      April 1, 2006
                
                
                30,081,696
                
                
                $
                30,082
                
                
                $
                4,858,773
                
                
                $
                (7,038,891
                )
                
                $
                (2,150,036
                )Issuance
      of common stock for cash, net of issuance costs of
$112,372
                
                
                4,692,000
                
                
                
                4,692
                
                
                
                897,336
                
                
                
                -
                
                
                
                902,028Exercise
      of warrants for cash
                
                
                8,333
                
                
                
                8
                
                
                
                2,492
                
                
                
                -
                
                
                
                2,500Fair
      value of stock options and warrants issued to consultants, employees and
      directors
                
                
                -
                
                
                
                -
                
                
                
                1,177,768
                
                
                
                -
                
                
                
                1,177,768Beneficial
      conversion feature related to issuance of convertible
      debentures
                
                
                -
                
                
                
                -
                
                
                
                106,167
                
                
                
                -
                
                
                
                106,167Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,326,259
                )
                
                
                (2,326,259
                )Balance,
      March 31, 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 convertible debentures 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
                )
                
                
                -
                
                
                
                -Debt
      discount related to convertible debentures
                
                
                -
                
                
                
                -
                
                
                
                3,845,328
                
                
                
                -
                
                
                
                3,845,328Fair
      value of stock options and warrants issued to consultants, employees and
      directors
                
                
                -
                
                
                
                -
                
                
                
                1,066,885
                
                
                
                -
                
                
                
                1,066,885Fair
      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
                )


See
Accompanying Notes to Consolidated Financial Statements.




Page
F-4


CRYOPORT,
INC.
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 For
The Years Ended March 31, 2008 and 2007


For
      The Years Ended March 31,2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (4,564,054
              )
              
              $
              (2,326,259
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
              
              
              41,298
              
              
              
              23,789Amortization
      of deferred financing costs
              
              
              87,706
              
              
              
              10,901Amortization
      of debt discount
              
              
              1,214,986
              
              
              
              76,529Stock
      issued to consultants
              
              
              402,500
              
              
              
              -Fair
      value of stock options and warrants issued to consultants, employees and
      directors
              
              
              880,765
              
              
              
              1,177,768Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (11,239
              )
              
              
              12,134Inventories
              
              
              24,056
              
              
              
              44,313Prepaid
      expenses and other assets
              
              
              (49,473
              )
              
              
              (6,050
              )Accounts
      payable
              
              
              (72,384
              )
              
              
              83,612Accrued
      expenses
              
              
              (2,179
              )
              
              
              (14,834
              )Accrued
      warranty costs
              
              
              (25,414
              )
              
              
              (4,125
              )Accrued
      salaries and related
              
              
              (31,434
              )
              
              
              120,295Accrued
      interest
              
              
              284,616
              
              
              
              91,668Net
      cash used in operating activities
              
              
              (1,820,250
              )
              
              
              (710,259
              )Cash
      flows used in investing activities:Investment
      in certificate of deposit
              
              
              (200,000
              )
              
              
              -Payment
      of trademark costs
              
              
              (474
              )
              
              
              -Purchases
      of fixed assets
              
              
              (182,054
              )
              
              
              -Net
      cash used in investing activities
              
              
              (382,528
              )
              
              
              -Cash
      flows from financing activities:Proceeds
      from borrowings under notes payable
              
              
              -
              
              
              
              92,700Net
      proceeds from borrowings under line of credit
              
              
              115,500
              
              
              
              -Net
      proceeds from borrowings under convertible notes
              
              
              3,436,551
              
              
              
              120,000Payment
      of deferred financing costs
              
              
              -
              
              
              
              (15,600
              )Repayment
      of note payable
              
              
              (55,000
              )
              
              
              -Repayments
      of related party notes payable
              
              
              (90,000
              )
              
              
              (122,700
              )Repayments
      of note payable to officer
              
              
              (45,000
              )
              
              
              (9,000
              )Proceeds
      from issuance of common stock, net
              
              
              699,866
              
              
              
              902,028Proceeds
      from exercise of options and warrants
              
              
              107,500
              
              
              
              2,500Net
      cash provided by financing activities
              
              
              4,169,417
              
              
              
              969,928Net
      change in cash and cash equivalents
              
              
              1,966,639
              
              
              
              259,669Cash
      and cash equivalents, beginning of year
              
              
              264,392
              
              
              
              4,723Cash
      and cash equivalents, end of year
              
              $
              2,231,031
              
              
              $
              264,392




See
Accompanying Notes to Consolidated Financial Statements.


Page
F-5


CRYOPORT,
INC.
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 For
The Years Ended March 31, 2008 and 2007




Supplemental
      disclosure of cash flow information:Cash
      paid during the year for:Interest
              
              $
              5,620
              
              
              $
              47,729Income
      taxes
              
              $
              1,600
              
              
              $
              1,600Supplemental
      disclosure of non-cash activities:Estimated
      fair value of common stock issued and warrants granted in connection with
      consulting agreement
              
              $
              349,834
              
              
              $
              -Deferred
      financing costs in connection with convertible debt
    financing
              
              $
              408,776
              
              
              $
              -Debt
      discount in connection with convertible debt financing
              
              $
              3,845,328
              
              
              $
              -Conversion
      of debt and accrued interest to common stock
              
              $
              604,140
              
              
              $
              -Value
      of warrants issued to lessor
              
              $
              15,486
              
              
              $
              -Purchase
      of fixed assets with warrants
              
              $
              10,000
              
              
              $
              -Cashless
      exercise of warrants
              
              $
              387
              
              
              $
              -Conversion
      of accrued salaries to note payable
              
              $
              -
              
              
              $
              251,950Beneficial
      conversion feature for convertible notes
              
              $
              -
              
              
              $
              106,167


See
Accompanying Notes to Consolidated Financial Statements.





Page
F-6


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007




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.  Upon completion of a
Share Exchange Agreement, on March 15, 2005 the Company changed its name to
Cryoport, Inc. and acquired all of the issued and outstanding shares of Cryoport
Systems, Inc. in exchange for 24,108,105 shares of its common stock (which
represented approximately 81% of the total issued and outstanding shares of
common stock following the close of the transaction).  Cryoport
Systems, Inc, originally formed in 1999 as a California limited liability
company and reorganized into a California corporation on December 11, 2000,
remains the operating company under Cryoport, Inc.





The
principal focus of the Company is to capitalize on servicing the transportation
needs of the growing global “biotechnology revolution and provide a newly
developed line of one time use dry cryogenic shippers for the transport of
biological materials. These materials include live cell pharmaceutical products;
e.g., cancer vaccines, diagnostic materials, reproductive tissues, infectious
substances and other items that require continuous exposure to cryogenic
temperature (less than -150°C).  The Company
has historically manufactured and sold a line of reusable cryogenic dry
shippers.  These reusable cryogenic dry shippers primarily serve as
the vehicles for the development of the cryogenic technology that support the
development of the one time use dry cryogenic shippers, the CryoPort Express®
One-Way Shipper, but also are essential components of the infrastructure that
supports testing and research activities of the pharmaceutical and biotechnology
industries.  The Company’s mission is to provide cost effective
packaging systems for biological materials requiring, or benefiting from, a
cryogenic temperature environment over an extended period of time.





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 $83,564, incurred a net loss of $4,564,054, and used cash of
$1,820,250 in its operating activities during the year ended March 31,
2008.    These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern.





Page
F-7


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007








NOTE 1 – ORGANIZATION AND
BUSINESS, continued





On
October 1, 2007, the Company received net proceeds of $3,436,551 from the
issuance of convertible debentures (see Note 10).  On May 30, 2008 the
Company received additional net proceeds of $870,625 from an additional
convertible debenture financing (see Note 14).  As a result of
the recent financings, the Company had an aggregate cash and cash equivalents
and restricted cash balance of $2,483,127 as of June 26, 2008 which will be used
to fund the sales and marketing efforts as well as provide the working capital
required for the Company’s launch of the CryoPort Express® One-Way Shipper and
is expected to provide the Company with the means for eventual achievement of
sustained profitable operations and the ability to continue as a going
concern.








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
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.








Page
F-8


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





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”) up to $100,000.  At
March 31, 2008 and 2007, the Company had cash balances of $2,392,350 and
$214,469, 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 4.38% which serves as collateral for borrowings under a line
of credit agreement (see Note 8).  At March 31, 2008, the balance in
the certificate of deposit was $203,670.





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’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, 2008 and 2007 are net of reserves for doubtful accounts
and sales returns of approximately $4,700 and $7,000, respectively. Although the
Company expects to collect amounts due, actual collections may differ from the
estimated amounts.





The
Company has foreign sales primarily in Europe and Canada.  Foreign
sales are primarily under exclusive distribution agreements with international
distributors.  During 2008 and 2007, the Company had foreign sales of
approximately $10,500 and $32,000, respectively, which constituted approximately
13% and 47% of net sales, respectively.




Page
F-9


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





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




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, 2008 and 2007.  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 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.





Page
F-10


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Intangible
Assets





Patents
and Trademarks





Patents
and trademarks are amortized using the straight-line method over their estimated
useful life of five years.





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, 2008 and 2007, 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, 2008 and 2007, the Company capitalized deferred financing costs
of $408,776 and $15,600, respectively, and amortized deferred financing costs of
$87,706 and $10,901 respectively, to interest expense.





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.








Page
F-11


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007








NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





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


2008
              
              
              2007Beginning
      warranty accrual
              
              $
              55,407
              
              
              $
              59,532Increase  in
      accrual (charged to cost of sales)
              
              
              5,625
              
              
              
              4,875Charges
      to accrual (product replacements and warranty expirations)
              
              
              (31,039
              )
              
              
              (9,000
              )Ending
      warranty accrual
              
              $
              29,993
              
              
              $
              55,407
 
  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
consolidated selling, general and administrative expenses.  During
2008 and 2007, the Company expensed approximately $33,000 and $21,000,
respectively, in advertising costs.





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.





Page
F-12


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Stock-Based
Compensation




Adoption
of SFAS 123(R)





On
April 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS
123(R)”) which establishes standards for the accounting of transactions in which
an entity exchanges its equity instruments for goods or services, primarily
focusing on accounting for transactions where an entity obtains employee
services in share-based payment transactions. SFAS No. 123(R) requires a
public entity to measure the cost of employee services received in exchange for
an award of equity instruments, including stock options, based on the grant-date
fair value of the award and to recognize it as compensation expense over the
period the employee is required to provide service in exchange for the award,
usually the vesting period. SFAS 123(R) supersedes the Company’s previous
accounting under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (“APB 25”). In March 2005, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to
SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption
of SFAS 123(R).





The
Company adopted SFAS 123(R) using the modified prospective transition method,
which required the application of the accounting standard as of April 1,
2006, the first day of the Company’s fiscal year 2007. The Company’s
consolidated financial statements as of and for the years ended March 31, 2008
and 2007 reflect the impact of SFAS 123(R).




SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company’s consolidated
statement of operations. Prior to the adoption of SFAS 123(R), the Company
accounted for stock-based awards to employees and directors using the intrinsic
value method in accordance with APB 25 as allowed under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation (“SFAS 123”). Under the intrinsic value method, no
stock-based compensation expense had been recognized in the Company’s
consolidated statements of operations, other than as related to option grants to
employees and consultants below the fair market value of the underlying stock at
the date of grant.




Stock-based
compensation expense recognized in the Company’s consolidated statements of
operations for the years ended March 31, 2008 and 2007 included compensation
expense for share-based payment awards granted prior to, but not yet vested as
of March 31, 2006  based on the grant date fair value estimated in
accordance with the pro forma provisions of SFAS 123 and compensation expense
for the share-based payment awards granted subsequent to March 31, 2006
based on the grant date fair value estimated in accordance with the provisions
of SFAS 123(R).




Page
F-13


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007













NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued




As
stock-based compensation expense recognized in the consolidated statements of
operations for the years ended March 31, 2008 and 2007 are based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures, if
any.  SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. The estimated average forfeiture rate for the years
ended March 31, 2008 and 2007 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, 2008
and 2007. Prior to the adoption of SFAS 123(R) those benefits would have been
reported as operating cash flows had the Company received any tax benefits
related to stock option or warrant exercises.





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, 2008, 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.





Page
F-14


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





March
      31,
            
            March
      31,2008
            
            2007Stock
      options and warrants:Expected
      term
            
            5
      years
            
            5
      yearsExpected
      volatility
            
            228%
      - 293%
            
            233%-282%Risk-free
      interest rate
            
            3.74%
      - 4.75%
            
            4.75%-4.82%Expected
      dividends
            
            N/A
            
            N/A








A summary
of employee and director option and warrant activity for the years ended March
31, 2008 and 2007, is presented below:
  Shares
                
                
                Weighted
      Average Exercise Price
                
                
                Weighted
      Average Remaining Contractual Term (Yrs.)
                
                
                Aggregate
      Intrinsic ValueOutstanding
      at
                  April 1, 2006
                
                
                2,488,613
                
                
                $
                0.45
                
                
                
                6.45Granted
                
                
                1,258,950
                
                
                $
                0.76
                
                
                
                9.47Exercised
                
                
                –
                
                
                $
                –Forfeited
                
                
                –
                
                
                $
                –Outstanding
      at
                  March 31, 2007
                
                
                3,747,563
                
                
                $
                0.59
                
                
                
                7.46
                
                
                $
                1,503,862Granted
                
                
                887,800
                
                
                $
                0.97
                
                
                
                9.77Exercised
                
                
                (79,200
                )
                
                $
                0.74Forfeited
                
                
                –
                
                
                $
                –Outstanding,
      vested and expected to vest at
                  March 31, 2008
                
                
                4,556,163
                
                
                $
                0.64
                
                
                
                7.10
                
                
                $
                2,505,375Exercisable
      at
                  March 31, 2008
                
                
                4,456,163
                
                
                $
                0.63
                
                
                
                7.05
                
                
                $
                2,493,375
 There
were 887,800 warrants and no stock options granted to employees and directors
during the year ended March 31, 2008 and 1,258,950 warrants and no stock options
granted to employees and directors during the year ended March 31,
2007.  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, 2008 and 2007, the Company recorded total charges of
$742,140 and




Page
F-15


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007




NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





$1,177,768,
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, 2008 and 2007 in the accompanying consolidated statements of
operations.  No employee or director warrants or stock options expired
during the years ended March 31, 2007 and 2008.  The Company issues
new shares from its authorized shares upon exercise of warrants or
options.





In
December 2006, the Company modified the expiration dates of 2,488,613 of its
employee and director stock options by extending their terms by five
years.  In connection with the modification, the Company recorded a
charge of $133,759 at the date of the modification in accordance with the
provisions of SFAS 123(R), which has been included in selling, general and
administrative expenses for the year ended March 31, 2007 in the accompanying
consolidated statements of operations.





As of
March 31, 2008, there was $105,965 of unrecognized compensation cost related to
employee and director stock option compensation arrangements, which is expected
to be recognized over the next two years. The total fair value of shares vested
during the years ended March 31, 2008 and 2007 was $752,140 and $1,044,009
respectively.





Total
intrinsic value of stock options and warrants related to stock based
compensation, which were exercised during the year ended March 31, 2008 was
$30,284.





Income
Taxes





The
Company accounts for income taxes in accordance with 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.








Page
F-16


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





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 47,835,303 for the period ended
March 31, 2008 and 33,941,536 for the period ended March 31, 2007.





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:




2008
              
              
              2007Numerator
      for basic and diluted loss per share:Net
      loss available to common stockholders
              
              $
              (4,564,054
              )
              
              $
              (2,326,259
              )Denominator
      for basic and diluted loss per common share:Weighted
      average common shares outstanding
              
              
              39,425,118
              
              
              
              30,943,154Net
      loss per common share available to common stockholders – basic and
      diluted
              
              $
              (0.12
              )
              
              $
              (0.08
              )


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 straight-line interest method which
approximates the effective amortization method (see Note 10).




Page
F-17


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007










NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





Recent Accounting
Pronouncements





The
Financial Accounting Standards Board (“FASB”) has issued SFAS No. 157, Fair Value Measurements.This
new standard provides guidance for using fair value to measure assets and
liabilities. Under SFAS No. 157, fair value refers to the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting
entity transacts. In this standard, the FASB clarifies the principle that fair
value should be based on the assumptions market participants would use when
pricing the asset or liability. In support of this principle, SFAS No. 157
establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. The fair value hierarchy gives the highest priority
to quoted prices in active markets and the lowest priority to unobservable data,
for example, the reporting entity’s own data. Under the standard, fair value
measurements would be separately disclosed by level within the fair value
hierarchy. The provisions of SFAS No. 157 are effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including any financial statements for an interim period within that fiscal
year. The adoption of this pronouncement is not expected to have a material
effect on the Company’s consolidated financial statements.





In July
2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (“FIN
48”).  FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing the recognition threshold a tax position is
required to meet before being recognized in the financial
statements.  It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.  The Company adopted FIN 48 effective on
April 1, 2007.  The adoption of FIN 48 did not have a material impact
on the Company’s consolidated results of operations and financial
condition.





On
February 15, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of FASB Statement No.
115. SFAS No. 159 permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available to
all entities, including not-for-profit organizations. Most of the provisions in
SFAS No. 159 are elective; however, the amendment to FASB Statement No. 115,
Accounting for Certain
Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. Some requirements apply differently
to entities that do not report net income.  The fair value option
established by SFAS No. 159 permits all entities to choose to measure eligible
items at fair value at specified election dates. A business entity will report
unrealized gains and losses on items for which the fair value




Page
F-18


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007


NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES, continued





option
has been elected in earnings (or another performance indicator if the business
entity does not report earnings) at each subsequent reporting date. SFAS No. 159
is effective as of the beginning of an entity’s first fiscal year that begins
after November 15, 2007.  The adoption of this pronouncement is not
expected to have material effect on the Company’s consolidated financial
statements.




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
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160 requires all
entities to report minority interests in subsidiaries as equity in the financial
statements, and requires that transactions between entities and noncontrolling
interests be treated as equity.  SFAS 160 is effective for the Company as
of the beginning of fiscal year 2009.  The adoption of this pronouncement
is not expected to have a material effect on the Company’s consolidated
financial statements.





NOTE 3 –
INVENTORIES





Inventories
at March 31, 2008 and 2007 consist of the following:


2008
              
              
              2007Raw
      materials
              
              $
              61,342
              
              
              $
              61,142Work
      in process
              
              
              5,827
              
              
              
              42,950Finished
      goods
              
              
              54,783
              
              
              
              41,916$
              121,952
              
              
              $
              146,008
 NOTE 4 – FIXED
ASSETS
 
 Fixed
assets consist of the following at March 31:


2008
              
              
              2007Furniture
      and fixtures
              
              $
              23,253
              
              
              $
              22,982Machinery
      and equipment
              
              
              586,465
              
              
              
              437,501Leasehold
      improvements
              
              
              15,131
              
              
              
              15,611624,84
              
              
              
              476,094Less
      accumulated depreciation and amortization
              
              
              (430,997
              )
              
              
              (437,694
              )$
              193,852
              
              
              $
              38,400
 Depreciation
and amortization expense for fixed assets for the years ended March 31, 2008 and
2007 was $36,602 and $19,120, respectively.





Page
F-19


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 5 – INTANGIBLE
ASSETS





Intangible
assets consist of the following at March 31:


2008
              
              
              2007Assets
      subject to amortization:Patents
      and trademarks
              
              $
              46,742
              
              
              $
              46,268Less
      accumulated amortization
              
              
              (46,268
              )
              
              
              (41,572
              )$
              474
              
              
              $
              4,696


Amortization
expense for intangible assets for the years ended March 31, 2008 and 2007 was
$4,696 and $4,669, 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 31,2009
              
              $
              474





NOTE 6 – INCOME
TAXES





The tax
effects of temporary differences that give rise to deferred taxes at
March 31, 2008 and 2007 are as follows:




2008
              
              
              2007Deferred
      tax asset:Net
      operating loss carryforward
              
              $
              4,207,000
              
              
              $
              3,074,000Accrued
      expenses and reserves
              
              
              135,000
              
              
              
              86,000Expenses
      recognized for granting of options and warrants
              
              
              606,000
              
              
              
              552,000Total
      gross deferred tax asset
              
              
              4,948,000
              
              
              
              3,712,000Less
      valuation allowance
              
              
              (4,948,000
              )
              
              
              (3,712,000
              )$
              -
              
              
              $
              -


Page
F-20


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











NOTE 6 – INCOME TAXES,
continued





The
valuation allowance increased during the years ended March 31, 2008 and 2007 by
approximately $1,236,000 and $953,000, respectively.  No current
provision for income taxes for the years ended March 31, 2008 and 2007 is
required, except for minimum state taxes, since the Company incurred taxable
losses during such years.





The
provision for income taxes for fiscal 2008 and 2007 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:


2008
              
              
              2007Computed
      tax benefit at federal statutory rate
              
              $
              (1,549,000
              )
              
              $
              (790,000
              )State
      income tax benefit, net of federal effect
              
              
              1,000
              
              
              
              (136,000
              )Increase
      in valuation allowance
              
              
              1,068,000
              
              
              
              953,000Disallowed
      convertible debenture interest
              
              
              443,000
              
              
              
              -Other
              
              
              38,600
              
              
              
              (25,400
              )$
              1,600
              
              
              $
              1,600
 As of
March 31, 2008, the Company had net operating loss carry forwards of
approximately $10,500,000 and $10,500,000 for federal and state income tax
reporting purposes, respectively, which expire at various dates through 2027 and
2017, respectively.





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, 2008 and
2007.


On April
1, 2007 the Company adopted the provisions of FIN 48. The Company does not
anticipate any significant increases or decreases to its liability for
unrecognized tax benefits within the next twelve month
period.





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 $12,000 per month.  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




Page
F-21


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007







NOTE 7 – COMMITMENTS AND
CONTINGENCIES, continued





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, 2008, the unamortized
balance of the value of the warrants issued to the lessor was
$10,074.





As of
March 31, 2008, future minimum rental payments required under the existing
facility  operating lease are as follows:





Years
      Ending
              March
      31,
            
            Operating
              Lease2009
            
            $   146,0002010
            
            $    63,000





Total
rental expense was approximately $155,000 and $63,000 for the years ended March
31, 2008 and 2007, 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.




Page
F-22


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007










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.  All borrowings under the revolving
line of credit bear variable interest based on prime less 1%  per
annum (totaling ­­­4.25% as of March 31, 2008).  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 Express® One-Way Shipper.  As of March 31, 2008, the
outstanding balance of the Line was $115,943, including accrued interest expense
of $443.  During the year ended March 31, 2008, the Company recorded
interest expense of $1,493 related to the Line.





NOTE 9 – NOTES
PAYABLE





On May
12, 2006, the Company arranged for short-term financing of $175,000, pursuant to
a Loan Agreement and related Secured Promissory Note with Ventana Group,
LLC.  Disbursements to the Company under the Loan Agreement were based
on achievement of milestones reached towards finalizing a long-term equity
financing agreement.  The note was secured by machinery and equipment
owned by the Company.  During the year ended March 31, 2007, the
Company received $80,000 of funds and recorded $47,729 of interest and financing
fees expense pursuant to this Loan Agreement.  Per the terms of the
note, on February 22, 2007 the Company paid the total $47,729 interest and
financing fees and repaid the $80,000 principal balance of the
note.  As of March 31, 2008 and 2007, there were no remaining
outstanding balances due under this note.





The
Company had a non-interest bearing note payable to a third party for $77,304,
which was due in April 2003.  As of March 31, 2008, the remaining
unpaid balance was $12,000.  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, 2008 and 2007, the Company had aggregate principal balances of
$1,249,500 and $1,339,500, 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 $78,243 and $85,595 for the years ended
March 31, 2008 and 2007, respectively.  Accrued interest, which is
included in related party notes payable in the accompanying consolidated balance
sheets, related to these notes amounted




Page
F-23


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007










NOTE 9 – NOTES PAYABLE,
continued





to
$482,584 and $404,341 as of March 31, 2008 and 2007, respectively.  As
of March 31, 2008, the Company had not made the required payments under the
related party notes which were due on January 1, February 1, and March 1,
2008.  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, 2008, May 30, 2008, and June 27, 2008, 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.





In August
2006, Peter Berry, the Company’s Chief Executive Officer, agreed to convert his
deferred salaries to a long-term note payable.  Under the terms of
this note, monthly payments of $3,000 have made to Mr. Berry beginning in
January 2007.  In January 2008, these payments increased to $6,000 and
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 and is being paid on a monthly
basis along with the monthly principal payment beginning in January
2008.  For the year ended March 31, 2008, the Company has recorded
$3,165 of interest expense related to this note. As of March 31, 2008 and 2007,
the total amount of deferred salaries under this arrangement is $201,115 and
$242,950, respectively, of which $129,115 and $197,950, respectively, is
recorded as a long-term liability in the accompanying consolidated balance
sheets.








NOTE 10 – CONVERTIBLE NOTES
PAYABLE





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, 2008 and 2007, the Company amortized $4,699 and $10,901,
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 and were redeemable by the Company with two days
notice.  The notes 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, 2008, the remaining balance of these
convertible notes and accrued interest was zero. During the years ended March
31, 2008 and 2007, the Company recorded interest expense of $2,784 and $6,073,
respectively, related to these notes.




Page
F-24


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007






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, 2008, the remaining balance of the debt discount was
zero.  During the years ended March 31, 2008 and 2007, the Company
recorded additional interest expense of  $29,638 and $76,529,
respectively, related to the amortization of the debt discount.





On
October 1, 2007, the Company issued to four accredited investors Original Issue
Discount 8% Senior Secured Convertible Debentures (the “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.





In
accordance with the Convertible Debenture Agreement as amended on February 19,
2008, the principal amount under the Debentures is payable to the investors in
24 monthly redemption payments which commenced on March 31, 2008.  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.  On March 31, 2008, the
Company converted principal redemptions totaling $188,308 into 224,176 shares of
registered common stock using the conversion price of $0.84 per
share.





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”).  On January 31, 2008, $100,000 of
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.





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





Page
F-25


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











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.  During the year ended March 31, 2008, the
Company converted accrued interest payments of $94,154 in January 2008 and
$92,821 in March 2008 for a total of $186,975 on the convertible notes into
a total of 222,590 shares of common stock using a conversion rate of $0.84
per share.  As of March 31, 2008, the Company had $5,446 accrued
interest on the convertible notes included in the accompanying consolidated
balance sheet and recorded a total of $192,421 of interest expense related to
the face rate of interest in the accompanying consolidated statement of
operations for the year ended March 31, 2008.





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 “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.





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.  As of March 31, 2008,
the unamortized balance of the debt discount was $3,522,357 of which $1,039,844
represents the current portion and is included in current liabilities in the
accompanying consolidated balance sheet as of March 31, 2008.  During
the year ended March 31, 2008, the Company recorded additional interest expense
of $1,185,348 related to the amortization of the debt discount.





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 exerciseable 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.





Page
F-26


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





The total
financing fees of $1,090,071 related to the Debenture financing transaction have
been allocated to the equity and debt components of the
financing.  The Company has 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) has been recorded as
deferred financing costs on the Company’s consolidated balance sheet as of March
31, 2008.  The deferred financing costs are being amortized by the
Company through the maturity dates of the Debentures under the effective
interest method.  During the year ended March 31, 2008, the Company
recorded additional interest expense of $83,007 related to the amortization of
the deferred financing fees.





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.





On March
31, 2008, the Company issued 224,176 shares of registered common stock for
principal redemptions totaling $188,308 and 110,501 common stock shares for
March 2008 interest payments totaling $92,821 to the holders of the Debentures
using the conversion rate of $0.84.  In April 2008, the Company was
notified by the holders that the qualifying equity conditions had not been fully
satisfied with relation to the conversion of the principal and interest payments
made by the Company on March 31, 2008.  As a result, in April 2008 the
Company rescinded and cancelled 140,143 shares of registered common stock for
principal redemptions totaling $117,720 and submitted the cash payments in the
same amounts to those holders.  Pursuant to a one-time waiver
agreement with one of the Debenture holders, 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.   Also in consideration of a
one-time waiver with the Debenture holders, the full amount of 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 Debenture holders 22,099
additional common stock shares.  As of March 31, 2008, the Company has
recorded additional interest expense for the 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.





Page
F-27


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











NOTE 10 – CONVERTIBLE NOTES
PAYABLE, continued





On April
30, 2008, the Convertible Debenture Agreement was amended to reflect changes to
the monthly redemption of principal and changes to the Warrants issued with the
original Debentures.  Under the definitions of the Amendment, the
monthly principal redemptions were suspended until August 1, 2008 and the
remaining principal due on the Debentures will be paid thereafter on the first
date of each month in equal installments through March 27, 2010, the expiration
date. Further, the Amendment amends the “Exercise Price” of the Warrants issued
under the terms of the Securities Purchase Agreement and related Agreements from
$0.90, $0.92 and $1.60 to $0.60. The number of shares to be purchased under each
of the Warrants was also adjusted under the terms of this Amendment so that the
original dollar amounts to be raised by registrant though the exercise of each
of the Warrants will remain the same. This modification to the warrants related
to the Debentures will be accounted for by the Company pursuant to EITF 96-19
“Debtor’s Accounting for a Modification or Exchange of Debt
Instruments”  and EITF 06-6 "Debtor's Accounting For a Modification or
Exchange of Convertible Debt Instruments" to be included in the Company’s
consolidated financial statements as reported in Form 10-Q for June 30, 2008
(see Note 14).





As of
March 31, 2008, the principal balance of the Debentures totaled $4,419,397 of
which the current portion of $1,936,884 is included in the Company’s current
liabilities in the accompanying consolidated balance sheet for March 31,
2007.





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.





Future
maturities of all notes payable at March 31, 2008 are as follows:





Years
      Ending
              March
      31,
            
            Convertible
              Debentures
            
            
            Note
      Payable
              Officer
            
            
            Related
              Party
      Notes
            
            
            Third
              Party
      Note
            
            
            Total2009
            
            $
            1,936,884
            
            
            $
            72,000
            
            
            $
            150,000
            
            
            $
            12,000
            
            
            $
            2,170,8842010
            
            
            2,482,513
            
            
            
            129,115
            
            
            
            120,000
            
            
            
            -
            
            
            
            2,731,6282011
            
            
            -
            
            
            
            -
            
            
            
            120,000
            
            
            
            -
            
            
            
            120,0002012
            
            
            -
            
            
            
            -
            
            
            
            120,000
            
            
            
            -
            
            
            
            120,0002013
            
            
            -
            
            
            
            -
            
            
            
            120,000
            
            
            
            -
            
            
            
            120,000Thereafter
            
            
            -
            
            
            
            -
            
            
            
            619,500
            
            
            
            -
            
            
            
            619,500$
            4,419,397
            
            
            $
            201,115
            
            
            $
            1,249,500
            
            
            $
            12,000
            
            
            $
            5,882,012











Page
F-28





CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007








NOTE 1 1– 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.





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, 2008, the unamortized balance of the value of the shares and warrants issued
to Carpe DM, Inc. was $291,532, and $58,302 has been amortized and included in
selling, general and administrative expenses as outside services expense for the
year ended March 31, 2008.





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
exercises of a total of 465,469 cashless warrants. During fiscal 2007, the
Company issued 8,333 shares of common stock resulting from exercises of warrants
at an average exercise price of $0.30 per share resulting in proceeds of
$2,500.





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.





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.





During
fiscal 2007, 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 4,692,000 shares of common stock at an average price of $0.22 per share
resulting in gross proceeds of $1,014,400 and incurred offering costs
of $112,372 during the year ended March 31, 2007.





Page
F-29


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





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.





No
incentive stock options or non-qualified stock options were granted during the
years ended March 31, 2008 and 2007.  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.  Pursuant to SFAS No. 123, total compensation expense
recognized in the years ended March 31, 2008 and 2007 for options issued to
consultants in prior years was zero and $222,761 (including a $133,759 charge
related to the modification of the option’s expiration dates), respectively.
During the year ended March 31, 2008, 50,000 options were
exercised.  As of March 31, 2008 and 2007, there were 2,438,613
and 2,488,613 options outstanding, respectively, at an average exercise price of
$0.45 per share under the 2002 Plan.  There were no stock options
granted subsequent to March 31, 2008. The Company had 2,511,387 options
available for grant under the 2002 Plan at March 31, 2008.





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 2007 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.





Page
F-30


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007














NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued





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, 2008, the
unamortized balance of the value of the warrants issued to the lessor was
$10,074 and $5,412 has been included in selling, general and administrative
expenses as additional rent expense for the year ended March 31,
2008.





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 assets as
of March 31, 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 (see Note 10).





Also in
connection with the convertible debenture financing transaction, 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.




Page
F-31


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007










NOTE 12 –STOCK OPTIONS AND
WARRANTS, continued





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.  As of March 31, 2008, the unamortized balance of the value
of the shares and warrants issued to Carpe DM, Inc. was $291,532, and $58,302
has been amortized and included in selling, general and administrative expenses
as outside services expense for the year ended March 31, 2008.





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.





During
fiscal 2007, the Company issued a total of 1,258,950 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 $0.76.  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 $955,007 as of the dates of each grant.  The assumptions
used under the Black-Scholes pricing model included: a risk free rate ranging
from 4.75% to 4.82%; volatility ranging from 233% to 282%; an expected exercise
term of 5 years; and no annual dividend rate.  The fair market value
of the warrants has been recorded as consulting and compensation expense and is
included in selling, general and administrative expenses for the year ended
March 31, 2007.





Certain
warrants issued in conjunction with 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 obtained by
the Company.  The surrendered warrants are cancelled by the Company in
connection with this transaction.





Page
F-32


CRYOPORT,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





For
The Years Ended March 31, 2008 and 2007











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, 2008 and 2007:


2008
              
              
              2007Options
                and
                Warrants
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Options
                and
                Warrants
              
              
              Weighted
                Average
                Exercise
                PriceOutstanding,
      beginning of year
              
              
              4,520,021
              
              
              $
              0.58
              
              
              
              3,632,737
              
              
              $
              0.57Issued
              
              
              17,174,802
              
              
              
              0.77
              
              
              
              1,258,950
              
              
              
              0.76Exercised
              
              
              (621,719
              )
              
              
              0.32
              
              
              
              (8,333
              )
              
              
              0.30Expired/forfeited
              
              
              (675,833
              )
              
              
              0.96
              
              
              
              (363,333
              )
              
              
              1.16Outstanding
      at end of year
              
              
              20,397,271
              
              
              $
              0.74
              
              
              
              4,520,021
              
              
              $
              0.58Exercisable
      at end of year
              
              
              20,297,271
              
              
              $
              0.74
              
              
              
              4,520,021
              
              
              $
              0.58Weighted
      average exercise  price of  warrants
      issued
              
              
              
              
              
              $
              0.77
              
              
              
              
              
              
              $
              0.76
 
 The
following table summarizes information about stock options and warrants
outstanding and exercisable at March 31, 2008:


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
              
              
              
              2,508,878
              
              
              
              3.6
              
              
              
              $1.54
              
              
              
              2,408,878
              
              
              
              $1.54$0.80
      - $1.00
              
              
              
              8,684,936
              
              
              
              4.4
              
              
              
              $0.92
              
              
              
              8,684,936
              
              
              
              $0.92$0.50
      - $0.75
              
              
              
              2,126,375
              
              
              
              5.6
              
              
              
              $0.58
              
              
              
              2,126,375
              
              
              
              $0.58$0.04
      - $0.30
              
              
              
              7,077,082
              
              
              
              2.3
              
              
              
              $0.27
              
              
              
              7,077,082
              
              
              
              $0.2720,397,271
              
              
              
              
              
              
              
              
              
              
              
              20,297,271
 
 Page
F-33
 CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 13 – RELATED PARTY
TRANSACTIONS





In August
2006, Peter Berry, the Company’s Chief Executive Officer, agreed to convert his
deferred salaries to a long-term note payable.  Under the terms of
this note, monthly payments of $3,000 have made to Mr. Berry beginning in
January 2007.  In January 2008, these payments increased to $6,000 and
remain at that amount until the loan is fully paid in December
2010.  During the years ended March 31, 2008 and 2007, note payments
totaling $45,000 and $9,000, respectively had been made to Mr. Berry pursuant to
this note.  Interest of 6% per annum on the outstanding principal
balance of the note began accruing on January 1, 2008 and is paid on a monthly
basis along with the monthly principal payment beginning in January
2008.  As of March 31, 2008 and 2007, the total amount of deferred
salaries under this arrangement is $201,115 and $242,950, respectively and is
recorded as a note payable to officer in the accompanying consolidated balance
sheets (see Note 9).





Since
June 2005, the Company has retained the legal services of Gary C. Cannon,
Attorney at Law, for a monthly retainer fee.  Since that same time,
Mr. Cannon has also served as the Company’s Secretary and a member of the
Company’s Board of Directors.  In December 2007, Mr. Cannon’s monthly
retainer for legal services was increased from $6,500 per month to $9,000 per
month.  The total amount paid to Mr. Cannon for retainer fees and
out-of-pocket expenses for the years ended March 31, 2008 and 2007 were $88,248
and $78,500, respectively.  Additionally, during fiscal 2008 Mr.
Cannon was paid board fees totaling $12,650.  During fiscal year 2008
Mr. Cannon was granted a total of 72,800 warrants with an average exercise price
of $0.93 per share, and 117,792 warrants with an average exercise price of $0.76
during fiscal 2007.  All warrants granted to Mr. Cannon were issued
with an exercise price which equaled the fair value of the Company’s shares on
the grant date.





On
October 13, 2006, various shareholders advanced the Company short term, zero
interest loans ranging from $2,700 to $5,000 each, totaling
$12,700.  In December 2006 and January 2007, these loans were paid in
full and have no outstanding balances as of March 31, 2007.





As of
March 31, 2008, the Company had aggregate principal balances of $1,249,500 in
outstanding unsecured indebtedness owed to five related parties including four
former 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 total monthly principal
payments which commenced April 1, 2006 of $2,500, and which increased by $2,500
every six months to a maximum of $10,000.  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 $78,243
and $85,595 for the years ended March 31, 2008 and 2007,
respectively.  Accrued interest, which is included in notes payable in
the accompanying balance sheet, related to these notes amounted to $482,584 and
$404,341 as of





Page
F-34


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 13 – RELATED PARTY
TRANSACTIONS, continued





March 31,
2008 and 2007, respectively.  As of March 31, 2008, the Company had
not made the required payments under the related-party notes which were due on
January 1, February 1, and March 1, 2008.  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, 2008, May 30, 2008, and
June 27, 2008, 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.  No new borrowings have been made by the Company from these
related parties as of June 29, 2008.





NOTE 14 – SUBSEQUENT
EVENTS





On April
30, 2008, the Convertible Debenture Agreement was amended to reflect changes to
the monthly redemption of principal and changes to the Warrants issued with the
original Debentures.  Under the definitions of the Amendment, the
monthly principal redemptions were suspended until August 1, 2008 and the
remaining principal due on the Debentures will be paid thereafter on the first
date of each month in equal installments through March 27, 2010, the expiration
date. Further, the Amendment amends the “Exercise Price” of the Warrants issued
under the terms of the Securities Purchase Agreement and related Agreements from
$0.90, $0.92 and $1.60 to $0.60. The number of shares to be purchased under each
of the Warrants was also adjusted under the terms of this Amendment so that the
original dollar amounts to be raised by registrant though the exercise of each
of the Warrants will remain the same.





Changes
to the exercise prices and number of warrants related to the convertible
debentures were made according to the following schedule:





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




This
modification to the warrants related to the Debentures will be accounted for by
the Company pursuant to EITF 96-19 “Debtor’s Accounting for a Modification or
Exchange of Debt Instruments”  and EITF 06-6 "Debtor's Accounting For
a Modification or Exchange of Convertible Debt Instruments" and included in the
Company’s consolidated financial statements as reported in Form 10-Q for June
30, 2008.




Page
F-35


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007





NOTE 14 – SUBSEQUENT EVENTS,
continued





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
Debentures (“the May Debentures”) 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.





The
principal amount under the May Debentures is payable in 23 monthly payments of
$54,348 beginning January 31, 2009. The Company may elect to make principal
payments in shares of common stock.  The Company may elect to make
principal and interest payment in shares of common stock provided, generally,
that the Company is not in default under the May Debentures and there is then in
effect a registration statement with respect to the shares issuable upon
conversion of the May Debentures or in payment of interest due
thereunder.  If the Company elects to make interest payment 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, holder may convert the May 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”).





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





The May
Debentures rank senior to all current and future indebtedness of the Company,
with the exception of the Debentures that were issued by the Company in October
2007 which rank senior to the May Debentures.   The May
Debentures are 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 Debentures issued in
October 2007.








Page
F-36


CRYOPORT,
INC.
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
The Years Ended March 31, 2008 and 2007











NOTE 14 – SUBSEQUENT EVENTS,
continued





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 Warrants”).





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 Debentures and exercise of the May Warrants within 45 days after the closing
date of the transaction. If the registration statement is not filed within that
time period or is not declared effective within 90 days after the closing date
(120 days in the event of a full review by the Securities and Exchange
Commission), the Company will be required to pay liquidated damages in cash in
an amount equal to 2% of the total subscription amount for every
month that the Company fails to attain a timely filing or effectiveness,
as the case may be, subject to exception as set forth in the registration rights
agreement.





National
Securities Corporation acted as sole placement agent in connection with the
transaction. The Company paid to the placement agent cash in the amount of
$116,875 and issued warrants to purchase 148,810 shares of the Company’s common
stock at $0.84 per share.





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.





In May
2008, Company issued 30,000 shares of restricted common stock in lieu of fees
paid to a consultant.  These shares were issued at a value of $0.91
per share (based on the underlying stock price on the agreement date) for total
cost of $27,300 which will be reported in selling, general and administrative
expenses for the Company in the quarter ended June 30, 2008.




In April
2008, the Company was notified by the Debenture holders that an equity condition
had not been met related to the conversion of the March 31, 2008 principal and
interest payments.  As a result, the Company rescinded and cancelled
140,143 shares of registered common stock for the related March 31, 2008
principal redemptions totaling $117,720 and submitted the cash payments in the
same amounts to those holders.  Pursuant to a one-time waiver
agreement with one of the Debenture holders, 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.   Also in consideration of a
one-time waiver with the Debenture holders, the full amount of 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 Debenture holders 22,099
additional common stock shares.  As of March 31, 2008, the Company has
recorded additional interest expense for the 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.