UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
|_| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) _____ REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
OF 1934 OR
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number _________________
CRYOPAK INDUSTRIES INC.
-----------------------
(Exact name of Registrant as specified in its charter)
CRYOPAK INDUSTRIES INC.
-----------------------
(Translation of Registrant's name into English)
BRITISH COLUMBIA, CANADA
------------------------
(Jurisdiction of incorporation or organization)
1120-625 HOWE STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2T6
-----------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Name of each exchange on which registered
NONE
Securities registered or to be registered pursuant to Section 12(g) of the Act
Title of Class
COMMON STOCK, NO PAR VALUE
CLASS A PREFERRED STOCK, SERIES 1, NO PAR VALUE
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act
Title of Class
NONE
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report: 18,706,315 common; 530 preferred as of March 31, 2000.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [ ]
Indicate by check mark which financial statement item the registrant has elected
to follow. Item 17 [ X ] Item 18 [ ]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court Yes [ ] No [ ]
<PAGE>
PART I
Item 1. Description of Business
Overview of Business
--------------------
Cryopak Industries Inc. ("Cryopak", the "Company") is in the business of
supplying controlled temperature packing and packaging solutions. The Company's
core Cryomat product is a patented, flexible, reusable refrigerant product, sold
either as a standalone product or as a component of a designed system (both
corrugated and styrofoam). This product can be used as a replacement for ice/dry
ice or in conjunction therewith.
The principal markets for its products are the transportation of
pharmaceuticals, perishables such as fruit and vegetables and seafood products,
medical wraps and retail and general thermal packaging. Over the last five
years, the Company has experienced low but stable sales, largely to the seafood
and special thermal packaging industries. It has suffered recurring operating
losses as the Company has focused on identifying key markets where the
opportunities for significant sales volumes may exist or be created.
Historically, the Company manufactured its product through subcontractors under
a contractual arrangement. On September 14, 2000, the Company acquired all of
the issued and outstanding shares of Northland Custom Packaging Inc., its
principal subcontractor for the manufacture of its product. Accordingly, the
Company now owns and controls its own manufacturing facility. The Company also
acquired Northland Ice Gel Inc., its sister company.
The acquisition of Northland Ice Gel Inc. and its sister company, Northland
Custom Packaging Inc. (the "Northland companies") has, in addition to providing
the Company with its own manufacturing capacity, allowed the Company to expand
its product line to include gel products and to offer custom packaging services.
These products and services are complementary to the company's existing product
line.
The Company relies upon the protection offered by certain patents and
trademarks. The patents are expected to be in effect until 2008. The right to
exploit the patents has been licensed to the Company for an indefinite term, and
is critical to Cryopak's business. A royalty is payable to the licensor.
Company History
---------------
Cryopak Industries Inc. was incorporated in the province of British Columbia,
Canada, on February 13, 1981 as 226896 B.C. Ltd. On March 30, 1981 the Company
changed its name to Consort Energy Corp. The Company changed its name again, to
International Consort Industries Inc., on April 30, 1990 and amended its name to
Cryopak Industries Inc. on November 12, 1993. On January 3, 1996, Cryopak
increased its authorized stock to a total of two hundred million (200,000,000)
shares, consisting of one hundred million (100,000,000) shares of common stock
with no par value and one hundred million (100,000,000) shares of Class A
Preferred Stock, no par value, of which one thousand five hundred (1,500) were
designated Class A Convertible Voting Preference Shares, Series I. Cryopak has
two subsidiaries. Cryopak (Canada) Corporation, a British Columbia, Canada,
corporation, was incorporated on June 6, 1986 as 310302 B.C. Ltd. and changed
its name to Cryopak (Canada) Corporation on September 22, 1987. Cryopak
(International) Inc. is a Barbados corporation incorporated on August 29, 1995,
which is currently inactive. Additionally, Cryopak (Canada) Corporation has a
wholly-owned subsidiary, Cryopak Corporation, a Nevada corporation formed on
March 20, 1987. It had a fifty percent interest in Cryopak (Alberta)
Corporation, which was dissolved 1998.
The Company purchased a machine and placed it in the manufacturing facilities of
the Northland companies. The Company controls the manufacturing process and
instructs Northland as to the timing and quantity of its requirements.
Manufacturing with this machine began during the fiscal year ended March 31,
1999. This facility manufactures products to be delivered to the United States,
Canada and the Pacific Rim. Sugar Foods produced the product from April 1987
until April 1999 under a contractual arrangement. The Company pays to Northland
Custom Packaging Inc. a rate for providing the labor involved in the manufacture
of Cryopak's product. These rates were verbally agreed to by both companies and
are charged on a per piece basis. There is no minimum or maximum amount of
product Northland is required to manufacture. The Company is responsible for the
purchase, delivery, and payment of all raw materials. The equipment can be
removed at the discretion of the Company. This equipment is used solely for the
manufacture of the Company's product and is not to be used by Northland for any
other purposes. Cryopak purchased the machine by lease financing. The
arrangement with Sugar Foods has been terminated.
<PAGE>
Subsequent to its year ended March 31, 2000 and on September 14, 2000, the
Company acquired all the issued and outstanding shares of the Northland
companies. See the section entitled Acquisition of the Northland Companies for
details of the acquisition.
Cryomat consists of reusable sheets of liquid-filled laminate pouches that
provide refrigeration and insulation when frozen. The sheets can be custom cut
to various sizes or into individual cubes for use in a wide range of
applications and has been U.S.D.A approved for use with food products, including
fish, meat and poultry. The Company markets its Cryomat product to the airline,
pharmaceutical and seafood shipping industries and has begun to investigate
marketing the product to the sports/healthcare industry. Additionally, Cryomat
is sold commercially in Canada under the name Cooler Mat.
All of the Company's sales are to third-party customers. Sales to the United
States for the years 1998, 1999, and 2000 are 67%, 90%, and 87% respectively.
International sales are 32%, 7%, and 2% for 1998, 1999, and 2000 with the
majority to one customer, Seafish Systems. Sales within Canada are 0%, 2%, and
10% for 1998, 1999, and 2000.
Three customers accounted for approximately 74%, 71%, and 54% of total sales for
the financial years 1998, 1999, and 2000. They are Dura*Kold Corp., Polyfoam
Packers, and Seafish Systems for 1998 and Dura*Kold Corp., Polyfoam Packers, and
Wyeth-Ayerst Labs for 1999 and 2000.
There is no new product or service being offered.
The Company conducts research and development activities of a minimal nature at
this time but the activities are not separately accounted for nor are there
allocated funds for these activities.
The "perishable" packaging industry is being faced with several pressures, which
have forced corporations within the industry to reevaluate traditional methods
of packing, transporting and storing temperature sensitive goods. These
pressures include the market and customer driven need for higher quality, more
timely and fresher products, a cost driven need to reduce the amount of waste
and spending on less effective products and regulation driven requirements of
new food safety and health standards and the United States' Food and Drug
Administration's ("FDA") regulations for the transport of pharmaceuticals and
general handling and catering of perishable meals for public consumption.
In December 1997, the FDA introduced the HACCP ("Hazard Analysis Critical
Control Point") program, a food handling guideline system endorsed by the FDA
which was put into effect in December 1998. One portion of this program requires
that airline food be stored at temperatures below 41 degrees Fahrenheit. Because
the Company's testing in the airline industry had shown that food stored using
its products remain below this level, this new regulation will have a positive
impact on the Company's sales.
The "perishable" packaging industry must also follow U.S.D.A. regulations in the
United States and Agriculture Canada regulations in Canada. Cryomat has been
U.S.D.A. approved and Agriculture Canada accepted for use with food products,
including fish, meat and poultry.
The Company's Cryomat product has been registered with the U.S. Patent and
Trademark Office as "Thermal Packaging Assembly" and received patent number
4,931,333 on June 5, 1990. The product was also patented in Canada on October
22, 1991 with patent number 1,291,073. The patent expires in Canada on October
22, 2008 and in the United States on June 5, 2007. Both patents are held by D.
Lindley Henry. Lin Henry is a consultant for the company. Because these
expiration dates are so far in the future, the Company feels that the patent
expirations will not make a significant impact upon the Company's business.
The Company's subsidiary Cryopak Corporation has also trademarked the words
"Cryomat" and "Cryopak" with the United States Patent and Trademark Office. The
"Cryomat" trademark is registration number 1,420,052 dated December 9, 1986 and
the "Cryopak" trademark is registration number 1,576,371 registered January 9,
1990. These trademarks expire December 9, 2006 and January 9, 2001,
respectively. Additionally, Cryopak Corporation has trademarked "Super Cool
System" with the Canadian Trademark Office, registration number 441,439 and
registration date March 31, 1995, as well as "Cooler Cube" with registration
number 441,438 and registration date March 31, 1995. The Canadian subsidiary
registered these trademarks.
The Company had two 100% wholly-owned subsidiaries at March 31, 2000:
<PAGE>
Cryopak (Canada) Corporation - is a British Columbia, Canada corporation and was
incorporated on June 6, 1986 as 310302 B.C. Ltd. and changed its name to Cryopak
(Canada) Corporation on September 22, 1987. It has a wholly owned subsidiary,
Cryopak Corporation, a Nevada corporation formed on March 20, 1987.
Additionally, it had a fifty percent (50%) interest in Cryopak (Alberta)
Corporation, an Alberta, Canada corporation formed in November 17, 1992, which
was dissolved in 1998. From inception until 1998, it has been handling all sales
activities up to the point when the Company started manufacturing in Vancouver.
From July 1998 onwards, it has been in charge of all sales to the United States
and worldwide while the Company is responsible for all sales within Canada.
Cryopak (International) Inc. - is a Barbados corporation incorporated on August
29, 1995. It is inactive and there are no activities to date.
Acquisition of the Northland Companies
--------------------------------------
On September 14, 2000, the Company acquired two additional subsidiaries,
Northland Ice Gel Inc. and Northland Custom Packaging Inc.
Northland Ice Gel Inc. - was incorporated on February 9, 1988 under the laws of
the province of British Columbia. Its business is the manufacturing of gel
products.
Northland Custom Packaging Inc. - was incorporated on February 3, 1993 under the
laws of the province of British Columbia. Since 1998, it has carried out the
manufacturing activities of Cryopak under the control of Cryopak. It will
continue this manufacturing activity as well as its own product.
The acquisition has been approved by the Canadian Venture Stock Exchange and was
concluded on the following terms:
- A purchase price of Cdn$2 million, in addition to 666,66 shares of
Cryopak Industries Inc.
- Cryopak agrees to assume up to Cdn$200,000 in debt or, i Northland is
debt-free, to increase the cash portion by Cdn$200,000.
- An additional 500,000 Cryopak shares will be held in escrow. Their
release will be dependent on the Northland companies meeting a target
earnings before interest, tax, depreciation and amortization
("EBITDA") of $3.5 million over five years. If this target is met, all
500,000 shares will be release (100,000 in each year, based on an
annual EBITDA of $700,000).
- An appropriate employment contract has been reached between the
principals, which ensures the cooperation of key leadership.
Northland manufactures hot and cold gel products sold under the private labels
of major consumer brands. It also produces a product known as "Simply Cozy,"
which is distributed through K-Mart and "Equate," which is marketed through
Wal-Mart in Canada. These products immediately expand Cryopak's presence in the
retail-consumer market. Begun as a family business in 1989 with four employees,
Northland now has 30 full-time employees and markets across the United States,
Canada and around the world.
Item 2. Description of Property
Vancouver, British Columbia, Canada V6C2T6. Cryopak leases office space for its
corporate headquarters totaling 2,039 square feet at a rate of Cdn$2,378.83 per
month. The current lease expires on October 31, 2000. The Company is reaching
maximum office capacity and will likely be seeking additional space prior to the
expiry of the existing lease.
With the acquisition of the Northland companies, the Company plans to relocate
its administrative, sales, and executive offices to the Northland offices at
1055 Derwent Way, Delta British Columbia. This relocation is anticipated to take
place in the fourth quarter of the fiscal year ending March 31, 2001. Until that
time, the Company will continue its current premises on a month to month lease.
Additional executive offices will be maintained in Vancouver's downtown
financial district. Northland Ice Gel Inc. leases 26,000 square feet of office
and warehouse space at 1055 Derwent Way, Delta, British Columbia pursuant to a
lease agreement which expires on January 31, 2005. The annual lease payments are
Cdn$132,230 until July 31, 2002 and Cdn$137,693 thereafter.
<PAGE>
Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to any legal
proceedings at this time.
Item 4. Control of Registrant
The Company is not directly or indirectly owned or controlled by any other
corporation or by any foreign government.
The following table sets forth, as at July 31, 2000, the beneficial ownership of
the Company's common stock by each person known by the Company to beneficially
own more than 5% of the Company's common stock outstanding as of such date and
by the officers and directors of the Company as a group. No one person or group
owns more than 10% of the Company's common stock.
<TABLE>
<CAPTION>
Title of Class Identity of Person or Group Amount Owned Percent of Class
-------------- --------------------------- ------------ ----------------
<S> <C> <C> <C>
Common Shares Exceptional Technologies Funds 3 977,777 5.0%
Common Shares Cryopak Industries (VCC) Inc. 1,619,883 8.2%
Common Shares Directors /Officers 1,674,885 8.6%
</TABLE>
The Company does not know of any arrangements the operation of which may at a
subsequent date result in a change in control of the Company.
Item 5. Nature of Trading Market
The Company's common stock trades in Canada on the Canadian Venture Exchange and
in the United States on the OTCBB. Non-Canadian investors are also able to trade
the Company's stock on the Canadian Venture Exchange. As at March 31, 2000, 369
American shareholders comprising of 32.6% of its total outstanding shares, held
stock in the company. The high and low sales prices (in Canadian dollars) for
the Company's common stock on the Canadian Venture Exchange over the past two
fiscal years are as follows:
<TABLE>
<CAPTION>
Fiscal Quarter High Low
-------------- ---- ---
<S> <C> <C>
April - June 2000 $1.00 $0.58
January - March 2000 1.50 0.48
October - December 1999 0.75 0.51
July - September 1999 1.29 0.76
April - June 1999 1.15 0.98
January - March 1999 0.84 0.74
October - December 1998 0.89 0.55
July - September 1998 0.62 0.39
April - June 1998 0.46 0.36
</TABLE>
Item 6. Exchange Controls and Other Limitations Affecting Security Holders
Except as discussed in Item 7 below, the Company is not aware of any Canadian
federal or provincial laws, decrees, or regulations that restrict the export or
import of capital, including foreign exchange controls, or that affect the
remittance of dividends, interest or other payments to non-Canadian holders of
Common Shares. The Company is not aware of any limitations on the right of
non-Canadian owners to hold or vote Common Shares imposed by Canadian federal or
provincial law or by the Company.
The Investment Canada Act (the "Act") governs acquisitions of Canadian business
by a non-Canadian person or entity. The Act provides, among other things, for a
review of an investment in the event of acquisition of control in certain
Canadian businesses in the following circumstances:
1. if the investor is a non-Canadian and is not a resident of a World
Trade Organization ("WTO") country, any direct acquisition having an
asset value exceeding $5,000,000 and any indirect acquisition having
an asset value exceeding $50,000,000;
2. if the investor is a non-Canadian and is a resident of a WTO member,
any direct acquisition having an asset value exceeding $168,000,000
unless the business is involved in uranium production, financial
services, transportation services or a cultural business.
<PAGE>
An indirect acquisition of control by an investor who is a resident of a WTO
country is not reviewable unless the value of the assets of the business located
in Canada represents more than 50% of the asset value of the transaction, or the
business is involved in uranium production, financial services, transportation
services or a cultural business.
The Act provides that a non-Canadian investor can hold up to 1/3 of the issued
and outstanding capital of a Canadian corporation without being deemed a
"control person", and that a non-Canadian investor holding greater than 1/3 but
less than 1/2 of the issued and outstanding capital of a Canadian corporation is
deemed to be a control person subject to a rebuttable presumption to the
contrary (i.e. providing evidence of another control person or control group
holding greater number of shares).
The Act requires notification where a non-Canadian acquires control, directly or
indirectly, of a Canadian business with assets under the thresholds for
reviewable transaction. The notification process consists of filing a
notification within 30 days following the implementation of an investment.
Item 7. Taxation
The Income Tax Act (Canada) provides that interest and/or dividends paid to
persons who are not resident in Canada are subject to taxation in Canada at a
rate of 25% of the amount so paid. The tax is withheld by the payor at the time
of payment. The 25% withholding rate may be reduced where Canada and the country
of residence of the recipient have enacted a treaty with respect to taxes on
income and on capital. The Canada United States Income Tax Convention of 1980
provides that the withholding rate on dividends and interest will be 15% of any
paid. There are no other taxes eligible for persons not resident in Canada.
Item 8. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
March 31, 2000 March 31, 1999 March 31, 1998 March 31, 1997 March 31, 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,592,901 $ 1,295,159 $ 1,161,442 $ 1,140,242 $ 965,912
Income (loss) from
continuing operations (1,349,454) (912,068) (638,553) (675,133) (912,390)
Income (loss) from
continuing operations
per common share (0.07) (0.06) (0.05) (0.06) (0.09)
Total assets 300,839 2,036,700 1,364,297 892,598 969,860
Long-term obligations
and redeemable
preferred stock:
Capital leases 156,320 249,057 320,015 - -
Long-term debt 1,051,412 - - - -
Redeemable - - - - -
preferred stock
Cash dividends N/A N/A N/A N/A N/A
declared per
common share
</TABLE>
The Company prepares its financial statements in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). In addition the
Company provides supplementary description of significant differences between
Canadian GAAP and those in the United States ("U.S. GAAP") as follows:
<PAGE>
A. Under U.S. GAAP development costs are expensed as incurred. Under
Canadian GAAP development costs subject to certain criteria are
deferred and amortized.
B. The Company has elected to follow Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issues to Employees" (APB25) in
accounting for its stock options. Under APB25, because the exercise
price of the Company's options for common shares granted to employees
is not less than the fair market value of the underlying stock on the
date of grant, no compensation expense has been recognized.
C. Under U.S. GAAP, stock based compensation to no employees must be
recorded at the fair market value of the options and warrants granted.
This compensation, determined using a Black-Scholes pricing model, is
expensed over the vesting periods of each option and warrant granted.
The impact of significant variations to U.S. GAAP on the Consolidated Statements
of Loss are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Loss for the year, Canadian GAAP $ (1,328,987) $ (912,068) $ (638,553)
Amortization of deferred development costs 14,822 14,822 14,822
Adjustment for stock based compensation -
non employees (120,169) (574,868) (123,226)
Dividends paid on Class A Preferred Shares (63,600) (63,600) (47,970)
Loss for the year, U.S. GAAP (1,497,934) (1,535,714) (794,927)
Loss per share, U.S. GAAP $ (0.08) $ (0.10) $ (0.06)
</TABLE>
Supplemental disclosure of pro forma loss and loss per share is as follows:
<TABLE>
<CAPTION>
Year ended March 31
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Pro forma loss, U.S. GAAP $ (2,586,084) $ (1,785,577) $ (784,485)
Pro forma loss per share, U.S. GAAP $ (0.14) $ (0.12) $ (0.06)
</TABLE>
The impact of significant variations to U.S. GAAP on the Consolidated Balance
Sheets items are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
2000 1999
---- ----
<S> <C> <C>
Assets $ 3,198,634 $ 2,018,172
Share Capital 10,714,406 10,257,319
Deficit (10,323,246) (9,400,181)
</TABLE>
As of August 31, 2000, the exchange rate between the United States and Canada
was US$1.00 per Cdn$1.4806. Over the Company's past five fiscal years, the
exchange rate per US$1.00 has varied as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Rate at Year End Average Rate Low Rate High Rate
----------------- ---------------- ------------ -------- ---------
<S> <C> <C> <C> <C>
March 31, 2000 $1.4494 $1.4743 $1.4378 $1.5175
March 31, 1999 $1.5092 $1.4023 $1.3669 $1.4639
March 31, 1998 $1.4166 $1.3609 $1.3306 $1.3843
March 31, 1997 $1.3843 $1.3629 $1.3282 $1.3987
March 31, 1996 $1.3632 $1.3824 $1.3408 $1.4235
</TABLE>
<PAGE>
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the financial
statements and notes thereto included with this Form 20-F. Except for the
historical information contained herein, the discussion in this filing contains
certain forward-looking statements that involve risk and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.
The Company's actual results could differ materially from those discussed here.
The Company's operating history makes the prediction of future operating results
difficult or impossible.
General Overview
----------------
The Company's business is the manufacturing and sale of thermal packaging
solutions. The Company's Cryomat product is a patented, flexible, re-usable
refrigerant product, which is sold as a stand-alone product or as part of a
system (both corrugated and Styrofoam). This product is typically an ice
replacement and is shipped directly to the customer in response to purchase
orders. The principal markets were in the transportation of seafood, medical
wraps, and general thermal packaging. Over the last five years, the Company has
experienced low but stable sales, largely to the seafood industry and medical
wraps. It has suffered recurring losses from operations. The Company has focused
on identifying key markets where the opportunity for significant sales volumes
may exist or be created and has established certain key relationships with
several groups that provide broader North American distribution. Currently, the
Company has targeted the pharmaceutical industry, particularly in the
transportation of temperature-sensitive biologicals and pharmaceuticals.
Results of Operations
---------------------
The table below sets out key components of the Company's operating statements,
both numerically and as a percentage of sales, for the last three years.
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sales 100% $ 1,592,901 100% $ 1,295,159 100% $ 1,161,442
Cost of sales 47% 755,312 57% 746,285 66% 763,018
Gross profit 53% 837,589 43% 548,874 34% 398,424
Selling & administrative costs 137% 2,187,043 113% 1,460,942 89% 1,036,977
Net loss 83% $ (1,328,987) 70% $ (912,068) 55% $ (638,553)
</TABLE>
Sales have been increasing steadily over the last three years, showing increases
of 23 % in 2000, 11.5% in 1999, and 1.8% in 1998. Over the prior year, the
Company has been seeking out markets capable of producing large sales volumes
with high gross margins.
Cost of Sales and Gross Margins
-------------------------------
The Company's cost of sales was 47% in 2000, 57% in 1999, and 66% in 1998. The
cost of sales has been steadily decreasing because the cost of manufacturing has
decreased since Northland Custom Packaging Inc. has taken over the manufacturing
process.
Additionally, in order to encourage sales to the Asian and Australian/New
Zealand markets, the Company reduced its selling price temporarily in 1998. This
resulted in an increase in cost of sales as a percentage of sales. Sales efforts
to those regions have ceased because of their weakened currencies. Sales efforts
will resume when more favorable exchange rates occur.
By acquiring its own equipment and exercising greater control over the
manufacturing process, the Company has reduced its cost of production. The
Company expects higher gross margins and correspondingly lower costs of
manufacturing in future years.
<PAGE>
Selling and Administrative Costs
--------------------------------
The Company's selling and administrative costs were 137% of sales in 2000, 113%
in 1999, and 89% in 1998. The costs were high relative to sales. These costs
were related to:
1. the Company's marketing and financing activities;
2. identifying prospective target industry groups such as the
pharmaceutical industry, transportation of fresh food and produce, and
airline in-flight services, all of which require specific thermal
packaging solutions;
3. assisting prospective customers in product testing and developing
implementation strategies; and
4. developing and designing of thermal packaging solutions to meet
prospective customer needs.
The Company is faced with a sales cycle of up to 2-1/2 to 3 years. Accordingly,
the Company must spend considerable amounts of money on its marketing efforts
before realizing significant sales. The Company has invested in its marketing
program and financed these costs through the equity markets. The Company
anticipates that sales will increase in 2001 for the following reasons:
1. Wyeth-Ayerst has approved Cryopak as a key component of their
packaging for all temperature sensitive products.
2. The sales cycle with other pharmaceutical companies is moving through
the completion of testing to the purchase stage. It is anticipated
that the prospective purchasers such as SmithKline Beecham and Aradigm
will place purchase orders.
3. The retail contract signed with I.I.D.A. will result in new sales.
4. Changes to our inside sales department and customer service department
should result in growth for our base business.
Liquidity
---------
The Company has relied upon its ability to raise capital to finance its ongoing
operating losses and capital asset requirements. The Company issued stock and
received funds totaling $717,786 in 2000, $2,392,000 in 1999, and $291,890 in
1998.
During the year ended March 31, 2000, the Company received a partial advance for
an unsecured convertible loan in the amount of Cdn$3,637,500 bearing interest of
10% per annum. The terms are more fully described in Note 10 of the financial
statement for the year ended March 31, 2000. During the year ended March 31,
2000, the total advances received were Cdn$1,455,000. The balance of the funds
totaling Cdn$2,182,500 were received in April and May 2000. Of the total net
proceeds received of Cdn$3,273,750, Cdn$2.2 million was used to finance the
acquisition of the Northland companies. The remaining funds were available for
general corporate purposes.
Capital Resources
-----------------
The Company has financed capital expenditures in 1998 with a capital lease. Such
financing was Cdn$368,313 in 1998. At March 31, 2000, the Company had no
specific commitments to make further capital expenditures.
While there are no capital expenditure requirements currently, the Company
anticipates making further acquisitions as sale volumes increase. To the extent
that such expenditures cannot be financed out of operating cash flow, additional
capital lease financing may be sought.
Item 9A. Quantitative and Qualitative Disclosures About Market Risk
Disclosures About Market Risk
-----------------------------
In the courses of carrying on its business, the Company is subjected to a
variety of business risks, including market risk associated with fluctuation in
interest rates, currency exchange rates as well as the collectibility of
accounts.
Collectibility of Accounts
--------------------------
The Company carefully monitors the collection of all accounts and the granting
of credit. As a result of this policy, the Company has experienced no material
credit losses and does not anticipate future losses to be material. The Company
will continue its close monitoring of credit.
<PAGE>
Currency Fluctuation Risk
-------------------------
Approximately 87% of the Company's sales revenue is in US Dollars and
substantially all of its costs of sales and administrative costs are in Canadian
dollars. Its marketing costs including travel and consulting costs are incurred
in the country of origin. The Company monitors exchange rates but had not taken
action to date to reduce its exposure to significant fluctuations in currency
exchange rates. Management will review its exposure and will take such remedial
steps, as it considers necessary.
Interest Rate Risk
------------------
The Company's interest expenses and income are subject to changes in interest
rates. Management has determined that fluctuations of up to 10% in interest
rates would not materially affect its financial position or results of
operations.
At March 31, 2000, the Company had entered into an unsecured convertible loan
agreement in the amount of $3,637,500 bearing interest at 10% per annum maturing
February 24, 2003. As at March 31, 2000, $1,455,000 has been advanced under the
loan with the balance advanced subsequent to the year end. See to Note 10 in
financial statements.
As at March 31, 2000, the capitalized amount owing under long-term lease
contracts was $266,102 with fixed interest until maturity. See Note 11 of
financial statements.
Item 10. Directors and Officers of Registrant
The table below is a list of all directors and officers of the Company as at
August 31, 2000. All directors have a term of one year. Directors are elected at
each annual general meeting of the Company. The terms for President, CFO and
Secretary are indefinite.
<TABLE>
<CAPTION>
Name Positions Held Term of Office Arrangements
---- -------------- -------------- ------------
<S> <C> <C> <C>
Harry Bygdnes President 1981 to Present None
Director 1981 to Present
Robert Leigh Jeffs CFO March 1999 to Present None
Director June 1990 to Present
Douglas R. Reid Director June 1990 to Present None
John F. Morgan Director March 1999 to Present None
John McEwen Director August 1995 to Present None
Ross Morrison Director April 1999 to Present None
Harley D. Sinclair Secretary November 1995 to Present None
</TABLE>
Item 11. Compensation of Directors and Officers
During the Company's last fiscal year ended March 31, 2000, the Company paid an
aggregate of Cdn$382,000 to its officers. Three directors were paid $370,000 for
management services and one director was paid $12,000 for consulting and
accounting services. The Company's directors do not receive a salary, but are
paid for out-of-pocket expenses incurred as directors of the Company. Both the
Company's officers and its directors have received options for the Company's
common stock at various exercise prices based upon the average trading price for
the ten trading days prior to the grant date. There are no amounts set aside or
accrued during the last fiscal year to provide pension, retirement or similar
benefits for the directors and officers pursuant to any existing plan provided
or contributed to by the Company or its subsidiaries.
<TABLE>
<CAPTION>
Name of Director/Officer Amount Paid Reason
------------------------ ----------- ------
<S> <C> <C>
Harry Bygdnes $110,000 Management fees
R. Leigh Jeffs $110,000 Management fees
John F. Morgan $150,000 Management fees
Douglas R. Reid $ 12,000 Accounting & advisory services
</TABLE>
<PAGE>
Item 12. Options to Purchase Securities from Registrant or Subsidiaries
As of March 31, 2000, the following options, all exercisable for shares of the
Company's common stock, were outstanding:
<TABLE>
<CAPTION>
No. of Shares Exercise Price Expiry Date
------------- --------------------------
<S> <C>
100,000 $ 0.40 June 26, 2000
390,000 0.82 August 17, 2000
343,000 0.64 January 7, 2001
160,000 0.82 February 11, 2001
290,000 0.86 April 21, 2001
250,000 0.75 September 3, 2001
40,000 0.75 September 3, 2003
750,000 0.76 March 19, 2004
732,000 0.57 February 1, 2005
50,000 0.65 February 1, 2005
225,000 0.46 May 13, 2000
135,000 0.46 May 29, 2000
265,000 0.46 June 3, 2000
125,000 0.46 June 17, 2000
72,000 1.00 April 23, 2001
150,000 1.15 June 21, 2001
4,077,000
</TABLE>
The total amount of securities called for by all such options held by directors
and officers of the Company, as a group, is 3,265,000.
Item 13. Interest of Management in Certain Transactions
Over the past three fiscal years, the Company has given unsecured cash advances
to NCK Holdings Inc. ("NCK"), which is owned by Harry Bygdnes and Leigh Jeffs,
directors of the Company. These advances have included Cdn$70,572 during the
fiscal year ended March 31, 1998; Cdn$48,868 during the fiscal year ended March
31, 1999; and $25,433 during the fiscal year ended March 31, 2000. The unsecured
cash advances were paid against royalties, which were less than anticipated. NCK
is currently repaying the loan at a rate of Cdn$2,200 per month which amount
includes eight percent annual interest.
The Company has paid management fees and royalties to NCK. The management fees
were paid in exchange for management services and the royalties were in exchange
for the rights to the patent for the Cryomat product. Over the past three fiscal
years, these fees and royalties have been paid as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Management Fees Royalties
----------------- --------------- ---------
<S> <C> <C> <C> <C>
March 31, 2000 $ 220,000 $ 33,552
March 31, 1999 220,000 26,261
March 31, 1998 220,000 26,289
</TABLE>
PART III
Item 15. Defaults Upon Senior Securities
Neither the Company nor its subsidiaries have defaulted in the payment of
principal, interest, sinking or purchase fund installment, or any other material
defaults. There is no material arrearage in the payment of dividends to any
class of preferred stock.
<PAGE>
Item 16. Changes in Securities and Changes in Security for Registered Securities
The Company has not modified the rights of the holders of any class of
registered securities. There have not been any issuance or modification of any
other class of securities that would limit or qualify the rights of the holders
of a registered security.
PART IV
Item 17. Financial Statements
FORM 61
QUARTERLY REPORT
Incorporated as part of: |X| Schedule A
|X|| | Schedules B & C
(place X in appropriate category)
ISSUER DETAILS:
NAME OF ISSUER: CRYOPAK INDUSTRIES INC.
ISSUER ADDRESS: Suite 1120, 625 Howe Street
Vancouver, British Columbia
V6C 2T6
CONTACT PERSON: Laila Yee
CONTACT'S POSITION: Office Manager
CONTACT TELEPHONE NUMBER: (604) 685-3616
FOR QUARTER ENDED: March 31, 2000
DATE OF REPORT: July 31, 2000
CERTIFICATE
THE SCHEDULES REQUIRED TO COMPLETE THIS QUARTERLY REPORT ARE ATTACHED AND THE
DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY
OF ITS QUARTERLY REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT.
PLEASE NOTE THIS FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF
SCHEDULE "A" AND SCHEDULES "B" AND "C".
R. LEIGH JEFFS /s/ R. Leigh Jeffs 2000/08/01
-------------- ------------------ ----------
NAME OF DIRECTOR SIGN (TYPED) DATE SIGNED (YY/MM/DD)
DOUGLAS R. REID /s/ Douglas R. Reid 2000/08/01
--------------- ------------------- ----------
NAME OF DIRECTOR SIGN (TYPED) DATE SIGNED (YY/MM/DD)
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Financial Statements
Year Ended March 31, 2000
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Cryopak Industries Inc.
We have audited the consolidated balance sheets of Cryopak Industries Inc. as at
March 31, 2000 and 1999 and the consolidated statements of loss and deficit and
cash flow for each of the years in the three year period ended March 31, 2000.
These consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 2000
and 1999 and the results of its operations and its cash flows for each of the
years in the three year period ended March 31, 2000 in accordance with
accounting principles generally accepted in Canada. As required by the Company
Act (British Columbia), we report that, in our opinion, these principles have
been applied on a consistent basis.
/s/ Hay & Watson
----------------
Chartered Accountants
Vancouver, BC
June 9, 2000
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS ON
CANADA-U.S. REPORTING DIFFERENCES
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the shareholders dated June 9,
2000 is expressed in accordance with Canadian reporting standards which do not
permit a reference to such events and conditions in the Auditors' Report when
these are adequately disclosed in the financial statements.
/s/ Hay & Watson
----------------
Chartered Accountants
Vancouver, BC
June 9, 2000
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Balance Sheets
March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current
Cash $ 1,361,876 $ 640,299
Accounts receivable, net of allowance for uncollectible
accounts of $56,416 (1999 - $74,684) 384,556 332,467
Inventory (Note 3) 169,044 20,608
Prepaid expenses 20,882 14,075
Due from employees 24,000 24,448
1,960,358 1,031,897
Term deposit - Restricted (Note 5) 132,074 125,649
Investments (Note 6) 75 75
Capital Assets (Note7) 407,255 429,652
Advances to Related Company (Note 8) 193,656 77,184
Intangibles (Note 9) 314,921 372,243
$ 3,008,339 $ 2,036,700
LIABILITIES
Current
Accounts payable and accrued liabilities $ 556,372 $ 276,966
Current portion of capital lease obligation 109,782 84,544
666,154 361,510
Convertible loan (Note 10) 1,051,412 -
Capital lease obligation (Note 11) 156,320 249,057
Deferred income taxes - 20,467
1,873,886 631,034
COMMITMENTS (Notes 14 & 12(d))
SHAREHOLDERS' EQUITY
Share Capital (Note 12)
Issued and outstanding
Common shares 10,400,237 9,682,451
Class A preferred shares, Series I 530,000 530,000
Equity component of convertible loan (Note 10) 403,588 -
Deficit (10,199,372) ( 8,806,785)
1,134,453 1,405,666
$ 3,008,339 $ 2,036,700
</TABLE>
APPROVED BY THE BOARD:
/s/ R. Leigh Jeffs
------------------
Director
/s/ Douglas R. Reid
-------------------
Director
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Loss and Deficit
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Sales $ 1,592,901 $ 1,295,159 $ 1,161,442
Cost of goods sold 755,312 746,285 763,018
Gross profit 837,589 548,874 398,424
Operating expenses (Schedule 1) 2,194,683 1,448,456 1,023,556
Operating loss (1,357,094) (899,582) (625,132)
Other (Income) Expenses
Filing, listing and transfer agent fees 23,678 25,289 20,321
Other income (31,318) (12,803) (6,900)
7,640 (12,486) (13,421)
Loss before income taxes (1,349,454) (912,068) (638,553)
Income tax recovery 20,467
Net loss for the year (1,328,987) (912,068) (638,553)
Dividends paid on Class A Preferred Shares (63,600) (63,600) (47,970)
Net loss for the year attributable to common
shareholders (1,392,587) (975,668) (686,523)
Deficit, beginning of year (8,806,785) (7,831,117) (7,144,594)
Deficit, end of year $ (10,199,372) $ (8,806,785) $ (7,831,117)
Loss per share $ 0.08 $ 0.07 $ 0.05
Weighted average common shares outstanding 18,077,873 14,937,561 12,597,083
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Cash Flow
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Cash received from customers $ 1,552,436 $ 1,119,182 $ 1,064,372
Cash received from employees 448 7,669 8,001
Interest paid (42,550) (80,658) (17,896)
Interest received 16,896 12,828 6,900
Payments to suppliers and employees (2,618,371) (2,187,028) (1,501,429)
Payments for filing fees (23,678) (25,289) (20,321)
Cash used in operating activities (1,114,819) (1,153,296) (460,373)
Financing Activities
Issue of shares for cash 654,186 2,291,633 243,920
Share issue costs - (35,100) -
Shares returned to treasury - - (8,000)
(Repayment of) proceeds from note payable and capital
lease obligation (67,499) (416,588) 718,313
Proceeds from convertible loan 1,455,000 -
Bank overdraft (834)
Cash provided by financing activities 2,041,687 1,839,945 953,399
Investing Activities
Acquisition of capital assets (82,394) (44,773) (387,227)
Advances to(from) related company (116,472) 1,046 17,227
Term deposit - restricted (6,425) (6,040) (119,609)
Cash used in investing activities (205,291) (49,767) (489,609)
Increase in Cash 721,577 636,882 3,417
Cash, Beginning of Year 640,299 3,417 -
Cash, End of Year $ 1,361,876 $ 640,299 $ 3,417
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
1. GOING-CONCERN
These financial statements are prepared on the basis of accounting
principles applicable to a going concern, which assumes the Company will
continue in operation for the foreseeable future and be able to realize its
assets and satisfy liabilities in the normal course of business. The
ability of the Company to continue as a going concern is primarily
dependent upon its ability to continue to obtain the financing necessary to
continue operations and, ultimately, profitable operations. Management is
of the opinion sufficient working capital will be obtained from injections
of capital and from operations to meet the Company's liabilities and
commitments as they become due.
These consolidated financial statements do not give effect to adjustments
that would be necessary should the Company not be able to continue as a
going concern and therefore be required to realize its assets and liquidate
its liabilities in other than the normal course of business and at amounts
different from those recorded in these consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cryopak Industries Inc. (the "Company"), incorporated under the laws of
British Columbia, is in the business of the manufacturing and sale of
thermal packaging solutions. The Company produces a patented, flexible,
re-usable refrigerant product.
The Company prepares its accounts in accordance with accounting principles
generally accepted in Canada. A reconciliation of amounts presented in
accordance with United States accounting principles is detailed in Note 20.
The following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements:
Basis of Consolidation
----------------------
These consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Cryopak (International) Inc. (inactive),
a Barbados corporation, Cryopak (Canada) Corporation and its wholly-owned
subsidiary Cryopak Corporation, a Nevada corporation.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Significant areas requiring the use of
management estimates relate to the determination or impairment of
intangible assets (deferred costs, goodwill and patent license). Financial
results as determined by actual events could differ from those estimates.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Inventories
-----------
Inventories are valued at the lower of cost or net realizable value. Cost
is determined by the first-in first-out (FIFO) method of valuation.
Amortization
------------
Capital assets are recorded at cost less accumulated amortization.
Amortization has been provided over the estimated useful lives of the
assets using the following methods:
<TABLE>
<CAPTION>
<S> <C>
Computer Hardware 3 years straight-line
Computer Software 2 years straight-line
Furniture & Fixture, Office Equipment 5 years straight-line
Machinery 5 years straight-line
Motor Vehicle 30% declining balance
</TABLE>
Patent Licence
--------------
The patent licence is recorded at cost and is amortized on a straight-line
basis over seventeen years.
Deferred Development Costs
--------------------------
The deferred development costs are recorded at cost and are amortized on a
straight-line basis over ten years.
Foreign Currency Translation
----------------------------
Monetary items denominated in foreign currencies are translated into
Canadian dollars using exchange rates in effect at the balance sheet date.
All other assets and liabilities are translated at rates prevailing when
the asset was acquired or liabilities incurred. Income and expense items
are translated at the exchange rates in effect on the date of the
transaction. Resulting exchange gains and losses are included in the
determination of loss for the year.
Goodwill
--------
The excess of cost of the purchase of a subsidiary company over the fair
value of assets acquired (disclosed in these consolidated financial
statements as goodwill) is amortized on a straight-line basis over
seventeen years.
Income Taxes
------------
The Company uses the deferral method of income tax allocation in accounting
for income taxes.
Financial Instruments
---------------------
The fair values of the financial instruments approximate their carrying
value except as otherwise disclosed in the financial statements.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Revenue Recognition
-------------------
Sales are recognized upon shipment of products.
Stock Based Compensation
------------------------
The Company grants stock options to executive officers and directors,
employees and consultants pursuant to a stock option plan as described in
Note 12. No compensation is recognized for this plan when common shares or
stock options are issued. Any consideration received on exercise of stock
options or the purchase of stock is credited to share capital.
Loss Per Common Share
---------------------
Loss per common share has been calculated using the weighted average number
of common shares outstanding during the period. Fully diluted loss per
share has not been presented as the outstanding options and warrants are
anti-dilutive.
3. INVENTORIES
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Raw material $ 22,509 $ 5,348
Finished goods 146,535 15,260
$ 169,044 $ 20,608
</TABLE>
4. SHARE PURCHASE LOAN
During the year the Company provided a loan to the President of a
subsidiary company for the purpose of purchasing Company shares. The loan
is part of a compensation arrangement and is non-interest bearing. The loan
is forgiveable when the President sells the shares he purchased or six
months after his termination. The loan has been recorded as a reduction of
share capital (Note 12(a)).
5. TERM DEPOSIT - Restricted
The term deposit plus interest earned, is held by a bank as security on
lease financing for a machine acquired in 1998. The deposit bears interest
at 5.6% per annum and matures March 23, 2001 (Note 11).
6. INVESTMENTS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Marketable securities - market value $375 (1999 - $75 ) $ 75 $ 75
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
7. CAPITAL ASSETS
<TABLE>
<CAPTION>
2000
Accumulated Net Book Value
Cost Amortization Value
---- ------------ -----
<S> <C> <C> <C>
Artwork $ 25,342 $ - $ 25,342
Computer Hardware 47,773 28,208 19,565
Computer Software 3,872 1,391 2,480
Furniture and Fixtures 6,747 4,640 2,107
Motor Vehicle under Capital Lease 40,594 32,310 8,285
Machinery under Capital Lease 431,176 122,973 308,203
Machinery 33,927 7,081 26,846
Office Equipment 17,299 2,872 14,427
$ 606,730 $ 199,475 $ 407,255
</TABLE>
<TABLE>
<CAPTION>
1999
Accumulated Net Book
Cost Amortization Value
---- ------------ -----
<S> <C> <C> <C>
Artwork $ 25,342 $ - $ 25,342
Computer Hardware 36,698 27,478 9,220
Computer Software 2,215 1,084 1,131
Furniture and Fixtures 59,696 56,907 2,789
Motor Vehicle under Capital Lease 40,594 28,759 11,835
Machinery under Capital Lease 399,279 39,928 359,351
Machinery 18,445 1,844 16,601
Office Equipment 4,113 730 3,383
$ 586,382 $ 156,730 $ 429,652
</TABLE>
8. ADVANCES TO RELATED COMPANY
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Interest bearing advances
Balance, beginning of year $ 48,868 $ 70,572 $ 90,668
Interest charge for the year 2,965 4,696 6,304
Payments received (26,400) (26,400) (26,400)
Balance, end of year 25,433 48,868 70,572
Non-interest bearing advances
Balance, beginning of year 28,316 7,658 -
Advances on royalties 139,907 20,658 7,658
Balance, end of year 168,223 28,316 7,658
Total $ 193,656 $ 77,184 $ 78,230
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
8. ADVANCES TO RELATED COMPANY (Cont'd)
The related company, N.C.K. Holdings Inc., is owned by two directors of the
Company. The advances are unsecured with a portion bearing interest at 8%
per annum, repayable in monthly installments of $2,200. The non-interest
bearing advances do not have any repayment terms and represent advances on
royalty payments which were anticipated to be due in the year. Royalties
due and paid in the year amounted to $33,552 (1999 - $26,261).
9. INTANGIBLES
<TABLE>
<CAPTION>
2000 1999
Accumulated Net Book Net Book
Cost Amortization Value Value
---- ------------ ----- -----
<S> <C> <C> <C> <C>
Incorporation Cost $ 3,111 $ - $ 3,111 $ 3,111
Deferred Development Costs 114,017 110,312 3,705 18,528
Patent Licence 566,323 324,811 241,512 274,826
Goodwill 156,155 89,562 66,593 75,778
$ 839,606 $ 524,685 $ 314,921 $ 372,243
</TABLE>
10. CONVERTIBLE LOAN
The loan is a partial advance of an unsecured convertible loan of
$3,637,500 the balance of which was advanced subsequent to the year end.
The loan bears interest at a rate of 10% per annum, maturing February 24,
2003.
The principal of the loan is convertible into units (one common share and
one half share purchase warrant) at the rate of $1.25 per unit in the first
year; $2.00 per unit in the second year and $3.00 per unit in the third
year, with the provision that no more than one third of the principal may
be converted during each of the periods.
Since the provisions of the loan provide for the holders to convert into
units, the loan is presented with shareholders equity net of the debt
component.
The Company has calculated the debt component as the present value of the
required interest payments discounted at a rate approximating the interest
rate that would have been applicable to non-convertible debt at the time
the loan was received.
<TABLE>
<CAPTION>
<S> <C>
Debt component $ 1,051,412
Equity component 403,588
Total $ 1,455,000
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
11. CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Capital lease obligation with interest at 10.25%, maturing May 1, 2001 $ 10,094 $ 17,990
Capital lease obligation with interest at 10.6%, maturing July 20, 2002 (Note 5)
222,612 302,689
Capital lease obligation with interest at 17%, maturing Oct. 20, 2001 8,551 12,922
Capital lease obligation with interest at 16%, maturing Aug. 1, 2002 17,524 -
Capital lease obligation with interest at 20%, maturing Sept. 1, 2002 7,321 -
266,102 333,601
Less: current portion 109,782 84,544
$ 156,320 $ 249,057
</TABLE>
The future minimum lease payments required to maturity are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $ 135,338
2002 126,007
2003 41,369
</TABLE>
Included in these amounts is imputed interest of $36,612.
12. SHARE CAPITAL
<TABLE>
<CAPTION>
Authorized
<S> <C>
100,000,000 common shares without par value
100,000,000 Class A preferred shares without par value, of which 1,500 are designated Class A convertible voting preferred
shares, Series I
</TABLE>
(a) The following changes occurred in share capital:
Common shares
Issued and outstanding
<TABLE>
<CAPTION>
2000
Number of Shares Amount
<S> <C> <C>
Balance, beginning of year 17,255,740 $ 9,682,451
Issued during the year
For cash, pursuant to the exercise of stock options 476,300 250,166
For cash, pursuant to the exercise of warrants 544,608 297,020
For cash, pursuant to private placements 347,000 301,000
For payment of dividend on Class A preferred shares, Series I 82,667 63,600
1,450,575 911,786
18,706,315 $ 10,594,237
Deduct share purchase loan (Note 4) (194,000)
Balance, end of year 18,706,315 10,400,237
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
12. SHARE CAPITAL (Cont'd)
<TABLE>
<CAPTION>
1999
Number of Shares Amount
---------------- ------
<S> <C> <C>
Balance, beginning of year 12,815,064 $ 7,362,318
Issued during the year
For cash, pursuant to the exercise of stock options 1,173,700 581,633
For cash, pursuant to private placements 3,057,777 1,710,000
For finder's fee 50,000 37,500
For payment of dividend on Class A preferred shares, Series I 159,199 63,600
Share issue costs - (72,600)
4,440,676 2,320,133
Balance, end of year 17,255,740 $ 9,682,451
</TABLE>
<TABLE>
<CAPTION>
1998
Number of Shares Amount
---------------- ------
<S> <C> <C>
Balance, beginning of year 12,245,156 $ 7,078,428
Issued during the year
For cash, pursuant to the exercise of stock options 243,000 118,920
For cash, pursuant to private placements 250,000 125,000
For payment of dividend on Class A preferred shares, Series I 96,908 47,970
589,908 291,890
Acquired during the year (20,000) (8,000)
Balance, end of year 12,815,064 $ 7,362,318
</TABLE>
<TABLE>
Class A preferred shares, Series I
Issued and outstanding
<CAPTION>
2000
Number of Shares Amount
---------------- ------
<S> <C> <C>
Balance, beginning and end of year 530 $ 530,000
</TABLE>
<TABLE>
<CAPTION>
1999
Number of Shares Amount
---------------- ------
<S> <C> <C>
Balance, beginning and end of year 530 $ 530,000
</TABLE>
<TABLE>
<CAPTION>
1998
Number of Shares Amount
---------------- ------
<S> <C> <C>
Balance, beginning and end of year 530 $ 530,000
</TABLE>
Each Class A preferred share Series I is voting and carries a 12%,
cumulative dividend payable at $120 per share at the company's fiscal year
end, in either cash or common shares at the option of the Company.
Dividends in arrears at March 31, 2000 amounted to $64,039.
The Series I preferred shares were converted into 557,894 common shares
subsequent to year end at $0.95 each.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
12. SHARE CAPITAL (Cont'd)
Dividends Paid on Class A Preferred Shares
<TABLE>
<CAPTION>
Number of Common
Shares Issued Amount
------------- ------
<S> <C> <C>
1998 96,908 $ 47,970
1999 159,199 63,600
2000 82,667 63,600
</TABLE>
The fair value of the shares issued as dividends was determined each year
by reference to the average trading price of the common shares for twenty
business days prior to the company's year end.
(b) Share Incentive Plan
The Company has established a 1999 Share Incentive Plan, subject to
shareholder approval, whereby the Company may grant options to officers,
directors, employees and consultants. The exercise price of the options is
determined by the Board but generally will be at least equal to the market
price of the common shares and the term may not exceed ten years. Options
granted are also subject to certain vesting provisions.
Stock option transactions for the respective periods and the number of
share options outstanding are summarized as follows:
<TABLE>
<CAPTION>
Number of Optioned Weighted Average
Common Shares Exercise Price
------------- --------------
<S> <C> <C>
Balance, March 31, 1998 1,030,000 $ 0.50
Options granted 2,718,000 0.66
Options exercised (1,173,700) 0.55
Options cancelled (240,000) 0.50
Balance, March 31, 1999 2,334,300 0.69
Options granted 1,362,000 0.67
Options exercised (476,300) 0.53
Options cancelled (40,000) 0.82
Options expired (75,000) 0.52
Balance, March 31, 2000 3,105,000 0.71
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
12. SHARE CAPITAL (Cont'd)
In addition to the following stock options outstanding as at March 31, 2000
there are 480,800 common shares reserved for future allocation:
<TABLE>
<CAPTION>
No. of Shares Exercise Price Expiry Date
------------- --------------------------
<S> <C>
100,000 $ 0.40 June 26, 2000
390,000 0.82 August 17, 2000
343,000 0.64 January 7, 2001
160,000 0.82 February 11, 2001
290,000 0.86 April 21, 2001
250,000 0.75 September 3, 2001
40,000 0.75 September 3, 2003
750,000 0.76 March 19, 2004
732,000 0.57 February 1, 2005
50,000 0.65 February 1, 2005
3,105,000
</TABLE>
(c) On March 31, 2000, the following share purchase warrants were
outstanding:
<TABLE>
<CAPTION>
No. of Warrants Exercise Price Expiry Date
--------------- --------------------------
<S> <C>
225,000 $ 0.46 May 13, 2000
135,000 0.46 May 29, 2000
265,000 0.46 June 3, 2000
125,000 0.46 June 17, 2000
72,000 1.00 April 23, 2001
150,000 1.15 June 21, 2001
972,000
</TABLE>
Share purchase warrant transactions for the respective years were as
follows:
<TABLE>
<CAPTION>
No. of Warrants
---------------
<S> <C>
Balance, March 31, 1997 -
Issued pursuant to a private placement of common shares
exercisable at $0.60 per share 250,000
Balance, March 31, 1998 250,000
Issued pursuant to a loan guarantee exercisable at $0.40 - $0.46 per share 119,608
Issued pursuant to a private placement of common shares
exercisable at $0.40 - $0.46 per share 1,000,000
Balance, March 31, 1999 1,369,608
Issued pursuant to a private placement of common shares exercisable at
$1.15 per share 150,000
Issued pursuant to an employment contract exercisable at $0.776 per share 125,000
Issued pursuant to a private placement of common shares exercisable at
$1.00 per share 72,000
Warrants exercised during the year at $0.46 per share (369,608)
Warrants exercised during the year at $0.60 per share (50,000)
Warrants exercised during the year at $0.776 per share (125,000)
Warrants expired during the year (200,000)
Balance, March 31, 2000 972,000
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
12. SHARE CAPITAL (Cont'd)
(d) Commitment
Pursuant to an agreement dated December 20, 1989 with N.C.K. Holdings
Inc., for the acquisition of a license for the use of patents, the
Company issued 500,000 common shares at a value of $0.30 each
($150,000). The Company is further obligated under the terms of the
agreement to issue an additional 3,000,000 common shares based upon
certain cumulative cash flow of its subsidiary, Cryopak Canada and its
subsidiary.
To date, the cash flow criteria of the agreement has not been attained
and therefore no additional shares have been issued. The license will
expire in 2025 at which time the obligation to issue any unissued
additional shares will cease.
13. INCOME TAXES
The Company has non-capital losses available for utilization against future
years' taxable incomes which, if unused, will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 350,000
2002 475,000
2003 745,844
2004 670,856
2005 529,806
2006 837,837
2007 1,193,487
</TABLE>
The potential income tax benefits relating to these losses have not been
recognized in the accounts as their realization is not reasonably assured.
14. LEASES
The minimum annual rental commitments for operating leases in effect at
March 31, 2000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 58,247
2002 43,708
2003 38,753
2004 13,062
</TABLE>
15. RELATED PARTY TRANSACTIONS
Related party transactions not otherwise disclosed in these consolidated
financial statements are as follows:
Professional fees include $12,000 paid to a company owned by a director of
the Company.
As of March 31, 2000, accounts receivable include $3,278 (1999: $3,278)
receivable from Fulcrum Developments Ltd., a company related by two
directors in common.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
16. CASH FLOW STATEMENT AND COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current year. In addition the Company has
adopted the new recommendations of the Canadian Institute of Chartered
Accountants for cash flow statements and has restated the comparative
periods to conform to this revised standard.
17. SUBSEQUENT EVENTS
Subsequent to the year end the Company;
(a) Issued 295,000 common shares for gross proceeds of $135,700 pursuant
to the exercise of 295,000 warrants at a price of $0.46 each. The
balance of 455,000 warrants at an exercise price of $0.46 expired.
(b) Issued 50,000 common shares for gross proceeds of $28,500 pursuant to
the exercise of stock options.
(c) The balance of the convertible loan in the amount of $2,182,500 was
advanced subsequent to year end. Note 10.
(d) Issued 557,894 common shares for conversion of 530,000 Series I
preferred shares at a deemed price of $0.95 each.
18. MAJOR CUSTOMER
Revenues from one customer represent approximately $267,000 (1999 -
$320,000) of the Company's total revenues.
19. GEOGRAPHIC INFORMATION
Customer revenues by destination were:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Canada $ 168,065 $ 31,625 $ -
United States 1,389,192 1,172,972 782,330
New Zealand 25,280 84,520 353,426
Other foreign countries 10,364 6,042 25,686
Total $ 1,592,901 $ 1,295,159 $ 1,161,442
</TABLE>
All capital assets are in Canada.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
20. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES
The Company prepares the consolidated financial statements in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP").
In addition the Company provides supplementary description of significant
differences between Canadian GAAP and those in the United States ("U.S.
GAAP") as follows:
Under U.S. GAAP development costs are expensed as incurred. Under Canadian
GAAP development costs subject to certain criteria are deferred and
amortized.
The Company has elected to follow Accounting Principles Board Opinion No.
25 "Accounting for Stock Issues to Employees" (APB25) in accounting for its
stock options. Under APB25, because the exercise price of the Company's
options for common shares granted to employees is not less than the fair
market value of the underlying stock on the date of grant, no compensation
expense has been recognized.
Under U.S. GAAP, stock based compensation to non-employees must be recorded
at the fair market value of the options and warrants granted. This
compensation, determined using a Black-Scholes pricing model, is expensed
over the vesting periods of each option and warrant granted.
The impact of significant variations to U.S. GAAP on the Consolidated
Statements of Loss are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Loss for the year, Canadian GAAP $ (1,328,987) $ (912,068) $ (638,553)
Amortization of deferred development costs 14,822 14,822 14,822
Adjustment for stock based compensation -
non employees (120,169) (574,868) (123,226)
Dividends paid on Class A Preferred Shares (63,600) (63,600) (47,970)
Loss for the year, U.S. GAAP (1,497,934) (1,535,714) (794,927)
Loss per share, U.S. GAAP $ (0.08) $ (0.10) $ (0.06)
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standard No. 123 "Accounting
for Stock Based Compensation" (SFA123), which also requires that the
information be determined as if the Company has accounted for its employee
stock options granted in fiscal periods beginning subsequent to December
1994 under the fair value method of that statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes
pricing model with the following weighted average assumptions for the years
ended March 31, 2000, 1999 and 1998, respectively: risk free interest rates
of 5.5%, 5.2% and 5.8%; dividend yields of 0%; volatility factors of the
expected market price of the Company's common stock of 1.57; and a weighted
average expected life of the options of three, four and one years.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Stated in Canadian Dollars)
20. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES (Cont'd)
The Black-Scholes options valuation model was developed for use in
estimating the fair value of trade options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because of the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
Supplemental disclosure of pro forma loss and loss per share is as follows:
<TABLE>
<CAPTION>
Year ended March 31
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Pro forma loss, U.S. GAAP $ (2,586,084) $ (1,785,577) $ (784,485)
Pro forma loss per share, U.S. GAAP $ (0.14) $ (0.12) $ (0.06)
</TABLE>
The impact of significant variations to U.S. GAAP on the Consolidated
Balance Sheets items are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
2000 1999
---- ----
<S> <C> <C>
Assets $ 3,198,634 $ 2,018,172
Share Capital 10,714,406 10,257,319
Deficit (10,323,246) (9,400,181)
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Schedules of Operating Expenses
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
Schedule 1
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Amortization $ 73,831 $ 72,958 $ 77,783
Bad debts (11,624) 53,529 29,125
Commissions 2,098 4,144 520
Corporate printing, financial and public relations 451,549 117,043 85,181
Foreign exchange 24,436 20,640 10,876
Interest and bank charges 8,648 41,746 15,301
Interest on capital lease obligation 33,902 38,912 2,595
Management fees 349,500 220,000 220,000
Marketing 264,501 201,347 57,944
Office supplies and stationery 102,399 80,250 68,798
Professional fees 227,339 98,867 56,291
Rent 61,330 53,915 52,861
Repair and maintenance 37,391 - -
Royalties 60,035 53,328 51,258
Salaries and benefits 181,959 151,146 126,769
Storage 4,581 4,507 10,459
Telephone 41,109 37,790 41,994
Travel and entertainment 252,859 180,770 97,769
Vehicle 28,840 17,564 18,032
$ 2,194,683 $ 1,448,456 $ 1,023,556
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Schedule of Allowance for Uncollectible Accounts
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
Schedule 2
<CAPTION>
<S> <C>
Balance, March 31, 1997 $ 24,910
Accounts receivable written off during the year (24,910)
Additional allowance provided 21,155
Balance March 31, 1998 21,155
Additional allowance provided 53,529
Balance, March 31, 1999 $ 74,684
Accounts received during the year (19,038)
Additional allowance provided 770
Balance, March 31, 2000 $ 56,416
</TABLE>
<PAGE>
Item 18. Financial Statements
The Registrant has chosen to file Financial Statements under Item 17 above.
Item 19. Financial Statements and Exhibits
EXHIBIT INDEX
Exhibit 2.1 Acquisition Agreement with Northland Custom
Packaging Inc.
Exhibit 2.2 Acquisition Agreement with Northland Ice Gel
Exhibit 2.3 Financial Statements for Northland Custom
Packaging Inc.
Exhibit 2.4 Financial Statements for Northland Ice Gel
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement annual
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CRYOPAK INDUSTRIES INC.
/s/ Harry Bygdnes
-----------------
Harry Bygdnes, President
10/16/00
--------
Date
