UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECOND AMENDMENT TO
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22952
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: 17,255,740 common; 530 preferred as of March 31, 1999.
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 [ X ]
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
Cryopak Industries Inc.
- -----------------------
Overview of Business
- --------------------
Cryopak Industries Inc. ("Cryopak", the "Company") is in the business of
manufacturing and selling thermal packaging solutions. The Company's Cryomat
product is a patented, flexible, re-useable refrigerant product, which is sold
as a standalone product or as part of a system (both corrugated and styrofoam).
This product is typically an ice replacement. Cryomat is primarily shipped
directly to the customers in response to purchase orders. The principal markets
are seafood shipping, 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 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. Cryopak's current major focus is on the food service and catering
applications for the major airlines in Canada and the United States and the
pharmaceutical industry. The Company has purchased a machine that Northland
Ice-Gel Products Inc. operates which is located in Vancouver, British Columbia.
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 gross royalty is payable to the licensor.
Company History
- ---------------
Cryopak Industries Inc. ("Cryopak", the "Company") 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 and has a fifty percent (50%)
interest in Cryopak (Alberta) Corporation, a dissolved Alberta, Canada
corporation.
On February 28, 1995, the Company signed an agreement in principle to
acquire one hundred percent interest in Rogell Enterprises Ltd. ("Rogell") of
Vancouver, British Columbia, Canada. Rogell is a private corporation formed in
1979 that was originally a picture product supplier and developed into a trade
showroom display center carrying design furniture, accessories, framed
decorative art, limited editions and original imagery. The proposed acquisition
was terminated on July 27, 1995.
This acquisition had required a Cdn$2,000,000 financing package and Cryopak
had entered into an agreement with Discovery Capital Corporation of Vancouver to
arrange this financing via a venture capital corporation, Cryopak Industries
(VCC) Inc., ("VCC"). An Investment Agreement was entered into between the
Company and VCC on March 13, 1995, which was approved by the provincial
government and the Canadian Stock Exchange. The Investment Agreement allowed a
120 day period for fund raising and contemplated five initial closings of
Cdn$100,000 each. Initially, VCC invested $500,000 in common shares of the
Company at prices escalating with each $100,000 raised, starting at Cdn$0.40 per
share and going up to Cdn$0.50, Cdn$0.60, Cdn$0.70 and finally Cdn$0.80 per
share. Each share was accompanied by a non-transferable warrant exercisable at
$0.10 per share premium to the purchase prices and expiring one year from the
issuance date. VCC has 105 shareholders with all being Canadian except for one
being European. The Investment Agreement also provided that VCC would invest in
Cryopak's Class A Preferred Shares at an offering price of $1,000 per share.
Douglas Reid, a member of the Board of Directors of the Company, is the
President of VCC and abstained from voting when the board voted to accept this
Investment Agreement. Of the
<PAGE>
Cdn$2,000,000, $1,100,000 was received and the financing was closed on February
25, 1997. After the proposed acquisition was abandoned, the funds from this
financing were designated for the construction of manufacturing facilities for
Cryopak products and to finance marketing programs. Shareholders own VCC.
John McEwen, President and co-founder of Discovery Capital Corporation, was
appointed to the board of directors on August 17, 1995. The board consisted of
Harry Bygdnes, Robert Leigh Jeffs, and Douglas Reid.
In September 1995, the Company entered into a joint distribution agreement
with Unisource Worldwide, Inc. ("Unisource") to introduce Cryopak's products
regionally to each of ten Unisource divisions throughout the United States and
Canada. Unisource is a large marketer and distributor of paper and imaging
products and supply systems, disposable paper and plastic products, janitorial
supplies and packaging systems and is owned by Alco Standard Corporation, a
distribution company headquartered in Valley Forge, PA, with revenues of US$8
billion in 1994. The focus of this agreement was the marketing of the Company's
ice substitute product targeting food processors, shippers of perishables and
wholesale and retail food distribution companies with Unisource acting as
Cryopak's marketing partner. Under the terms of the agreement, Unisource was to
sell, stock and distribute all Cryopak products used in food processing and
distribution within each Unisource marketing region as distribution rights were
allocated. Internal problems at Unisource and a lack of positive response at the
divisional level impeded the rate of growth within the terms of the distribution
agreement. As a result, promised purchases were not completed and plans for
national distribution with Unisource were abandoned by the fiscal year end of
March 31, 1996. Instead, the Company's management began working with Unisource
regionally by offering educational programs and training in market segments that
demonstrate a high interest in marketing the Cryopak products. The effect was to
focus the Company's marketing efforts towards those distributors that serve
potential customers directly.
On July 14, 1995, the Company also signed an agreement with Cavanaugh
Communications Inc. ("Cavanaugh") of Bryn Mawr, Pennsylvania, to provide
advertising and marketing expertise to fulfill the obligations of the Unisource
agreement. The agency's focus was positioning Cryopak ice substitute as the
preferred refrigerant for packaging, shipping, storing and displaying a wide
variety of foods, beverages and other perishables, targeting food processors,
direct marketers and wholesale and retail food distribution companies. Cavanaugh
is the exclusive advertising and marketing company for Unisource. This contract
was terminated when the Unisource deal was abandoned.
Harley D. Sinclair joined the Company as its Secretary on November 23,
1995. At this time the officers were Harry Bygdnes, Robert Leigh Jeffs, Douglas
Reid, and John McEwen.
On January 1, 1996, the Company extended its Financial Management Agreement
with Strategic Investments Inc. ("Strategic") of Springfield, Ilinois, to
December 1996, rescindable by either party with 30 days' notice. Strategic had
been receiving US$5,000 per month under the terms of the Agreement but this was
amended to $500 per month plus certain out-of-pocket expenses, for the last
twelve months of the agreement. The agreement was not extended after its
termination in December 1996.
During the fiscal year ended March 31, 1996, the Company began working
directly with several pharmaceutical companies in the United States and Canada.
These companies provided Cryopak with existing packaging and protocols used in
present shipping situations by the Company's competitors so that Cryopak could
perform comparison testing. The graphic comparisons of these independent tests
were then submitted to the pharmaceutical companies.
Comparison testing similar to that done in the pharmaceutical industry was
also conducted in the seafood industry. Several large seafood distributors
tested the Company's product Cryomat(TM).
Also during the fiscal year ended March 31, 1996 the Company entered into a
Memorandum of Understanding with SCA Packaging of Sweden, the largest packaging
supplier in Europe, which began distributing the Cryomat(TM) product into EEC
countries in the fall of 1996. Similar agreements were negotiated in Mexico and
Indonesia. These agreements were never finalized.
During the fiscal year ended March 31, 1997, the Company focused on growth
in the pharmaceuticals, seafood, meat and poultry and airline and hotel catering
industries. Cryopak devoted much of its energies during this time to providing
test data in each of these industries which compared Cryopak and its products to
existing refrigerants and conducted onground and inflight testing with several
airlines. The Company also sold small amounts of product to
<PAGE>
companies in Brazil, Chile, Taiwan and Israel during this year. Cryopak
Industries also supplies its refrigerant product to Freshnex. Freshnex sells its
commodities to consumers directly through the Internet. Freshnex is a customer
of Cryopak Industries and there are no agreements between them. Information
regarding Freshnex is available through the Internet to connect commercial
producers and suppliers to retail suppliers by ensuring Freshnex's commodities
are delivered within 24 hours by Federal Express in specially designed packages
using Cryomat.
K. Barry Sparks joined the Board of Directors of the Company on April 25,
1996. The board had the following members: Harry Bygdnes, Robert Leigh Jeffs,
Douglas Reid, and John McEwen.
On April 1, 1997, the Company signed an exclusive distribution agreement
with Seafish Systems Ltd. of New Zealand ("Seafish"). The agreement provided
that Seafish would market, sell and distribute products made by Cryopak in New
Zealand, provide marketing information including levels of interest and
potential sales in the market area and to assist in the development of new
market territories as may be determined over time. In exchange, Seafish
committed to buying twelve containers of products over the following twelve
months, to be distributed in New Zealand, Australia and other markets jointly
agreed between the parties.
James M. Fletcher was appointed to the Board of Directors on August 12,
1997. The board consisted of 6 members: Harry Bygdnes, Robert Leigh Jeffs,
Douglas Reid, John McEwen, K. Barry Sparks, and James Fletcher.
On August 13, 1997, the Company commenced a placement of 250,000 shares at
Cdn$0.50 per share for a total of Cdn$125,000, plus warrants for up to 250,000
additional shares at Cdn$0.60 per share exercisable for up to two years. The
proceeds from this offering, which was approved by the Canadian Stock Exchange,
were used to reduce payables and for working capital. The offering was sold to
two investors: a Canadian individual and a Canadian corporation and was closed
on August 25, 1997 with all shares sold.
The Company began testing its refrigerant systems on all Vancouver to Los
Angeles flights operated by Canadian Airlines on September 10, 1997. This test
was considered as a logistics trial period to determine the most effective
methods for handling the product. The test lasted 60 days. The product worked
but Canadian Airlines did not purchase any product.
The requisite 12% cumulative dividend on Class A Convertible Voting
Preferred Shares, Series I, was declared on September 24, 1997 for the year
ended March 31, 1997. The dividend was paid in common shares totaling 96,908
common shares at a deemed price of Cdn$0.495 per share ($47,969.84 total). Of
these shares, 88,980 were subject to a hold period in British Columbia which
expired March 31, 1998.
On February 2, 1998 K. Barry Sparks resigned from the Board of Directors
for personal reasons and due to other business demands. The board consisted of 5
members: Harry Bygdnes, Robert Leigh Jeffs, Douglas Reid, John McEwen, and James
Fletcher.
The Company began a placement of 777,777 common shares at Cdn$0.45 each for
a total of Cdn$350,000 on February 24, 1998. This offering was approved by the
Vancouver Stock Exchange. The proceeds were used to repay debt. The private
placement was completed with one Canadian shareholder.
On March 27, 1998, the Company agreed to pay a bonus to David Patriquin,
the guarantor on the Company's US$167,285 equipment lease on a Model L-18 Pouch
Machine. Part of the bonus was paid in cash at 1% per month (Cdn$2,392) over a
maximum of 10 months, ceasing immediately if the guarantor was released during
the 10 month period. The remainder was paid in 119,608 non-transferable common
stock warrants, all issued, exercisable for two years at Cdn$0.40 in the first
year and Cdn$0.46 in the second year. The Canadian Stock Exchange approved this
transaction.
The Company entered into an agreement whereby a machine was purchased and
placed in the manufacturing facility of Northland Ice-Gel Inc. Manufacturing,
with this machine, began during the fiscal year ended March 31, 1999. This
facility manufactures product 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. Prior to negotiations to purchase
Northland Ice-Gel, Cryopak lease-purchased the machine to manufacture Cryopak's
patented ice blanket. Northland Ice-Gel operates the machinery for Cryopak. This
replaces entirely the manufacturing previously conducted by Sugar Foods.
<PAGE>
The Company commenced a placement of 1,000,000 shares at Cdn$0.40 per share
for a total of Cdn$400,000 on April 23, 1998. The offering included
non-transferable warrants to purchase up to 1,000,000 additional shares for two
years at Cdn$0.40 per share for the first year and Cdn$0.46 during the second
year. The proceeds from this offering were used to reduce payables and for
unallocated working capital and the offering was closed on June 26, 1998 with
all shares sold. All shares were sold to Canadian and European individuals and
entities.
On November 1, 1998, Cryopak declared the requisite 12% cumulative dividend
on its Class "A" Convertible Voting Preference Shares, Series I, held by VCC on
the record date of March 31, 1998. The Company elected to pay the dividend in
common shares and issued 159,199 common shares at a price of Cdn$0.3995 per
share for a total of Cdn$63,600. The shares were subject to a hold period in
British Columbia which expired after March 31, 1999.
Cryopak finalized a Cdn$3.6 million purchase order from Northwest Airlines
on December 1, 1998 for the refrigerant products of its subsidiary, Cryopak
(Canada) Corporation. This purchase order is for three years. Northwest Airlines
uses the Cryopak product in interior catering and inflight food and beverage
service. Northwest currently is not using the product. First use should occur
during the first half of 2000.
An offering was commenced on February 3, 1999 of 1,280,000 common shares at
Cdn$0.75 per share for net proceeds of Cdn$924,900. The offering was approved by
the Vancouver Stock Exchange and was closed on March 19, 1999 with all shares
sold to European corporations. Finder's fees were paid to two European
corporations.
On February 8, 1999 Cryopak retained the services of European Investor
Services ("EIS") to coordinate investor relations with a growing group of
shareholders across Europe. EIS is an integrated investor relations company
headquartered in London and operating in all major financial centers of Europe
and specializing in the high tech, new media and biotechnology sectors. EIS
represents small and medium North American companies wishing to expand their
European shareholder bases and will provide corporate information to a
developing shareholder base and ensure a flow of information to industry and
financial analysts advising the European financial community as to the progress
and key developments of the Company. The contract is for six months at two
thousand pounds per month, subject to review after three months. Currently, the
contract has been extended to a month to month basis and all parties are
complying with its terms.
Nick Fuller was appointed Vice President of Public Relations of the Company
on February 11, 1999.
John Morgan was appointed President and CEO of Cryopak's subsidiary,
Cryopak Corporation, on March 19, 1999. He was also appointed a director of the
Company at this time. Mr. Morgan's signing incentive was a forgivable
interest-free loan which was used to acquire 125,000 common shares of the
Company at Cdn$0.776 per share, including 125,000 warrants exercisable after six
months' employment. The stock purchase was approved by the Vancouver Stock
Exchange. Also on March 19, 1999, Leigh Jeffs, a long-time member of the Board
of Directors, was appointed Chief Financial Officer of the Company.
On April 1, 1999 the Company retained the services of CCRI Corporation
("CCRI"), a Phoenix, Arizona, based corporation, to provide investor relations
and corporate finance services to the Company, especially in the United States.
CCRI will provide corporate information to a developing shareholder base, as
well as ensure a flow of information to industry and financial analysts advising
the American financial community as to the progress and key developments of the
Company. The initial agreement is for twelve months at US$6,000 per month, plus
$20,000 for preparation and mailing of a Corporate Profile.
Cryopak sold 72,000 shares of its common stock to CCRI at Cdn$0.75 per
share for total proceeds of Cdn$54,000 on April 8, 1999. Each share came with
one warrant exercisable for up to two years at Cdn$1.00 per share. The proceeds
from this offering were used for working capital.
On April 22, 1999 Ross G. Morrison was elected to the Company's Board of
Directors. The board is now comprised of 6 members: Harry Bygdnes, Robert Leigh
Jeffs, Douglas Reid, John McEwen, John Morgan, and Ross Morrison
<PAGE>
Products
- --------
Cryopak markets Cryomat(TM), a refrigerant product that maintains a
temperature range of 32-46 degrees Fahrenheit for longer than conventional
cooling products such as ice, dry ice and gel packs. The product keeps foods
fresh and cold without freezing, unpleasant odor or watery mess. Cryopak can be
handled without risk of burning skin and does not produce carbon dioxide.
Cryomat(TM) was tested and independently evaluated for over twelve months by the
North American airline and food catering industry (eg. Northwest Airlines, Dobbs
Catering, and LSG Sky Chefs) and the results of these tests showed that it
possesses superior temperature control capabilities over competing products,
while meeting or exceeding the HACCP requirements established by the FDA.
The Company has conducted tests comparing the effects of its products with
dry ice and gel packs. The Company's product, Cryopak, was shown to maintain a
temperature within a prescribed range of temperatures for a longer period of
time as per graphs included in exhibits, an attribute which is not generally
available with competing products. Additionally, Cryopak doesn't have the
disadvantage of dry ice which produces carbon dioxide during the sublimation
process thereby displaces oxygen in enclosed environments such as aircrafts. Gel
packs do not provide flexibility and/or coverage of cold for area coverage for
consistent temperature. In the case of ice and dry-ice product, form is the key
to performance criteria; i.e., ice melts so the liquid causes problems in
airplanes and dry-ice sublimates to CO2 causing issues in air quality. Cryopak's
form and flexibility can be key to performance. Copies of several studies which
verify these results are attached hereto as Exhibits 99.3 through 99.8. These
include (i) an outline of considerations in the physics of heat transfer; (ii) a
study from U.B.C. which clearly shows that Cryopak out performs gel paks in
keeping the subject matter at a lower temperature; (iii) a study by Inchcape
that proves that the "blanket" effect of Cryopak allows it to outperform gels on
a pound for pound basis; (iv) a study completed by Abbott Laboratories which
clearly outlines Cryopak's superiority in pharmaceutical shipping, which was a
"blind" test at the client's request; (v) a test completed for SB which
demonstrates Cryopak's superiority to dry ice in that it can deliver the
requested temperature range without risk; and (vi) results of tests completed
with Northwest Airlines to demonstrate the product's superiority for airline
applications. In all situations the transfer of heat from the subject to the
Cryopak is key in that the blanket effect withdraws more heat and delivers a
cooler or colder product.
The Company also has four graphs which support its findings. These graphs
are too detailed to be included in the electronic version of this Form 20-F, but
have been submitted in paper format to the Securities and Exchange Commission. A
description of the contents of each graph is provided below.
(1) Cryomat and Gel Pak Comparison Test. Tested on 4.2 pounds of coolant in
a standard pharmaceutical styrofoam box (outer dimensions 19-1/4 in. x 9-3/4 in.
x 11 in.). The vertical axis represents the temperature in degrees centigrade
(C) and increases at 10 degree intervals from -10 to 50. The horizonal axis
shows the time in hours for a period of 34 hours, starting at 21:42 and marking
off every hour until 7:30 (the first three hours end at the 42 minute mark, then
the graph switches to the 30 minute mark).
The Ambient temperature line starts at 30 degrees C and remains at or
slightly above this temperature until the 13:30 mark, at which time it rises
sharply to approximately 4/5 of the way between 30 and 40 degrees C. The line
hovers near constantly at this mark until just before 19:30, at which time it
jumps up sharply again, this time to approximately 2/3 of the way between 40 and
50 degrees C. The line slopes down sharply, arriving at just above 30 degrees
C just before 23:30 and remaining there for the duration of the test.
The three gel-pak lines all follow approximately the same route. Each
starts approximately half-way between 0 and 10 degrees C and slopes upward,
reaching 10 degrees C at 2:30. The lines then slope more gently, reaching a
point approximately 1/4 of the way between 10 and 20 degrees C at 13:30. The
slope then becomes slightly steeper, arching just above 20 degrees C at 21:30
and then sloping downward again. Two of the three lines taper off at about 3/4
of the way between 10 and 20 degrees C at 1:30, where they remain for the
duration of the test. The third line does not rise up quite as high at the 21:30
mark and then slopes down further - reaching a point about 3/5 of the way
between 10 and 20 degrees C at 0:30 and remaining at that point for the duration
of the test.
The three Cryomat lines also follow approximately the same route and start
about half-way between 0 and 10 degrees C. The three lines drop down sharply,
reaching a point approximately 3/4 of the way between -10 and 0 degrees C at
23:42 and then rising gradually, hitting 0 degrees C at 4:30 and reaching a
point half-way between 0 and 10 degeres C at 15:30. At this point, two of the
lines continue to rise gradually, reaching 10 degrees C at 21:30 and then
continuing up slightly more quickly to reach 20 degrees C at a point
approximately half-way between 2:30 and 3:30 before ending
<PAGE>
up approximately 1/3 of the way between 20 and 30 degrees C at the end of the
test. The third line rises slightly more quickly, reaching 10 degrees C at
approximately 20:30 and 20 degrees C at approximately 1:30 before ending up
about half-way between 20 and 30 degrees at the end of the test.
(2) Cryomat v. Gel Paks Test in Polyfoam 38-I styrofoam box. Test was done
using a test mass of 5 packs diagnostic slides in a box with inner dimensions of
10-3/4 inches by 7-1/2 inches by 10-1/2 inches. The vertical axis of the graph
represents the temperature in degrees Celsius (C) and increases in five degree
intervals from -5 to 50 degrees C. The horizontal axis portrays the time in 1
hour intervals for a period of 45 hours, starting at 12:50 and marking off 50
past each hour through 23:50, when it switches to thirty past the hour.
The ambient temperature line wavers at slightly above 30 degrees C until
the first 6:30 mark, at which time it jumps up to just under 40 degrees C, then
jumps up again to about half-way between 45 and 50 degrees C at the 12:30 mark.
The line drops sharply down to just above 30 degrees C at the 13:30 mark and
stays about 1/4 of the way between 30 and 35 degrees C until the second 5:30
mark at which time it jumps up to almost half-way between 30 and 35 degrees C,
remaining there for the duration of the test.
There are four lines representing gel pak probes. The first one starts
about half-way between -5 and 0 degrees C, immediately drops down to just above
- -5 degrees C, then slowly rises, reaching 0 degrees C at a point between 14:50
and 15:50, 5 degrees C at about 7:30 and a point between 5 and 10 degrees C at
the second 0:30 mark, where it begins to rise more rapidly, ending up just above
15 degrees C at the end of the test at 9:30. The second line starts just above 0
degrees C and immediately drops down to 0 C, then slopes upward, reaching 5
degrees C at about 18:50 and 10 degrees C at about 13:30. This line then
proceeds to rise up a little over 10 degrees C at 14;30 and then drops down just
below that temperature until the second 0:30 mark, where it hits 10 degrees C
again and begins to rise more sharply, ending up just under 15 degrees C at the
end of the test. The third gel pak line begins at 5 degrees C, drops down to
just below this line, and then begins to climb, hitting 10 degrees C at about
20:50, tapering off about 1/5 of the way between 10 and 15 degrees C from about
22:50 to 6:30 and then rising up to just above 15 degrees C at 14:30. At this
point the line slopes down sharply, reaching a low of about halfway between 10
and 15 degrees C at about 20:30 before rsing up again, ending up about 1/3 of
the way between 15 and 20 degrees C at the end of the test. The fourth and final
gel pak line begins at 15 degrees C, drops down immediately to about 1/3 of the
way between 10 and 15 degrees C, then rises up to about 1/3 of the way between
15 and 20 degrees C at about 19:50. The line slopes up very gradually to about
halfway between 15 and 20 degrees C at 6:30 and then climbs sharply, hitting 20
degrees C at just after the 6:30 mark. The line holds steady at about 1/3 of the
way between 20 and 25 degrees C from about 8:30 to about 12:30, at which point
it rises ups sharply, hitting just over 25 degrees C at about 14:30 and then
dropping back down, reaching 20 degrees C again at about 16:30 and about 4/5 of
the way between 15 and 20 degrees C at 20:30. The line starts to climb upward
again at this point, reaching 20 degrees again at 22:30 and ending up at 25
degrees C at the end of the test.
The three Cryomat probe lines all follow approximately the same route. They
start at 5 degrees C and drop down, hitting a point half-way between -5 and 0
degrees C at about 14:50. They then rise slowly, hitting 0 degrees C at about
22:50, where they remain constant until about 8:30. The lines then rise gently
and start to separate, with the first line reaching five degrees C at 23:30, the
second at about 0:30 and the third at just past 1:30. The lines reach 10 degrees
C at 3:30, 4:30, and 5:30 respectively, and all end up just above 15 degrees C
at the conclusion of the test.
(3) Test of 12 in. by 12 in. by 12 in. styromold box comparing 7 pounds of
Cryomat with 6 pounds of Gelpaks. Each box contained 21 pounds of mixed vials in
corrugated boxes (20 ml to 500 ml). The vertical axis represents the temperature
in degrees Celsius (C) at ten degree intervals from 0 to 30 degrees. The
horizontal axis shows the time in hours at two hour intervals for a total of
approximately 66 hours, starting at 14:20, and at 20 past the hour until 22:20,
after which it switches to on the hour. The ambient line starts approximately
1/5 of the way between 20 and 30 degrees C and drops down, reaching 20 degrees C
at just after 0:00 and ending up slightly below 20 degrees C at 10:00. For the
duration of the test, it hovers at about the 20 degree mark.
There are three Gel pak probe lines. The first one starts just above the 10
degrees C mark, drops down to just below that mark at about 18:20 and remains at
that temperature until about the 18:00 mark, at which time it slowly rises,
reaching 10 degrees C again at the 6:00 mark and then rising more quickly,
ending up about halfway between 10 and 20 degrees C at the end of the test. The
second line starts about 5/6 of the way between the 0 and 10 degree marks and
stays there constantly until the second 0:00 mark, at which point it starts
rising, hitting 10 degrees C at the second 12:00 mark and ending up 2/5 of the
way between 10 and 20 degrees C. The third probe line starts out 4/5 of the way
between
<PAGE>
0 and 10 degrees C and remains there until the second 0:00 mark, at which point
it begins to rise, reaching 10 degrees C at just past the second 16:00 mark and
ending up about 1/3 of the way between 10 and 20 degrees C.
The three Cryopak lines run almost together. The first two start at the 10
degree mark and drop down gradually, reaching a low point that is approximately
1/10 of the way between the 0 and 10 degree C marks at the first 8:00 time mark.
They then slope upwards and start to separate, with the first one reaching 10
degrees C at about the second 18:00 mark and ending the test about 1/3 of the
way between 10 and 20 degrees C and the second reaching 10 degrees C at about
the second 22:00 mark and ending up about 1/4 of the way between 10 and 20
degrees C. The third probe line starts about halfway between 0 and 10 degrees C,
drops down to a low just above 0 degrees C at the first 0:00 mark and then rises
upward to join the higher of the two other lines, reaching 10 degrees C at about
the second 18:00 mark and ending the test about 1/3 of the way between 10 and 20
degrees C.
(4) Comparison of Cryopak (11 lbs.) with Gelpaks (17 lbs.) in an
endurotherm insulated container. Two corrugated boxes each containing 21-20 ml
bottles of water were single wrapped with 1/8 in. ethafoam and placed in each
E90 container. Temperature probes were placed in one bottle in liquid, one in
center and one at the side. The vertical axis of the graph shows the temperature
in degrees Celsius (C) starting at -2 degrees C and then proceeding in five
degree intervals up to a high of 23 degrees C. The horizontal axis represents
the time in six hour intervals starting at 3:00PM and ending at 3:00AM 132 hours
later. The ambient starts about 4/5 of the way between 18 and 23 degrees C,
drops down to about 1/5 of the way between those two temperatures at the first
3:00 am mark, then back up to 4/5 of the way between 18 and 23 C at the second
3:00 pm mark and repeats approximately this pattern for the duration of the
test.
There are two lines representing gelpak probes. One of them starts 3/5 of
the way between 3 and 8 degrees C where it remains constant and the second
starts 4/5 of the way between these two temperatures and drops down. The two
lines meet at the first 9:00 am mark at a point 3/5 of the way between 3 and 8
degrees C. Both lines stay at this temperature until about the third 3:00 pm
mark, where they begin to rise, reaching 8 degrees C at just before the fourth
3:00 pm mark and 13 degrees C at the sixth 3:00 am mark and ending up halfway
between 13 and 18 degrees C.
There are also two lines for Cryopak probes. Both start slightly above the
8 degree mark and drop sharply, with one reaching 3/5 of the way between -2 and
3 degrees C at the first 3:00 am mark and the second hitting a point 2/5 of the
way between -2 and 3 degrees C at that time. Both lines remain constant for a
significant amount of time. The line that represents the slightly warmer probe
starts to rise at the third 3:00 pm mark, reaching 3 degrees C at the fifth 9:00
pm mark and ending the test slightly above the 8 degree C mark. The second line
stays constant longer, starting to rise at the fourth 3:00 pm mark, reaching 3
degrees C at the last 9:00 am mark and ending up just under the 8 degree C mark.
Cryomat(TM) 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(TM) product to the
airline, pharmaceutical and seafood shipping industries and has begun to
investigate marketing the product to the sports/healthcare industry.
Additionally, Cryomat(TM) 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 1997, 1998, and 1999 are 73%, 67% and 88%
respectively. International sales are 24%, 29% and 7% for 1997, 1998 and 1999
with the majority to one customer, Seafish Systems. Sales within Canada are 3%,
4% and 5% for 1997, 1998 and 1999.
Three customers accounted for approximately 70%, 74% and 71% of total sales
for the financial years 1997, 1998 and 1999. They are Dura*Kold Corp., Polyfoam
Packers, and Seafish Systems for 1997 and 1998 and Dura*Kold Corp., Polyfoam
Packers, and Wyeth-Ayerst Labs for 1999.
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.
<PAGE>
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 have 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(TM)
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(TM) 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. A copy of the Canadian
patent is attached as an exhibit to this registration statement; the United
States patent is available from the U.S. Patent and Trademark Office. 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.
Cryopak (Canada) Corporation
- ----------------------------
Cryopak (Canada) Corporation, ("CCC") 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. CCC has a wholly
owned subsidiary, Cryopak Corporation, a Nevada corporation formed on March 20,
1987. Additionally, CCC 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, CCC has been handling all
sales activities up to the point when the Company started manufacturing in
Vancouver. From July 1998 onwards, CCC 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.
- ----------------------------
Cryopak (International) Inc. is a Barbados corporation incorporated on
August 29, 1995. On March 19, 1996 Cryopak (International) Inc., reached an
agreement in principle with Erik Petersson & Company, Inc. ("EPC") of Miami,
Florida, to secure sales and distribution contracts for the Company's products
outside North America. Under the terms of this agreement, EPC would be paid
Cdn$2,500 per month until contracts with customers were signed, plus five
percent commission on total gross sales generated by EPC and warrants issued to
EPC's principal, Bertil I. Petersson, based upon gross sales. These warrants
were to be issued at a rate of 60,000 warrants for the first US$1,000,000 in
gross sales and 30,000 warrants for every additional US$500,000 in sales to a
maximum of 600,000 warrants. All warrants were exercisable for one year from the
date of issuance. The agreement stipulated a maximum of $10,000,000 gross sales,
which must be generated within five years. EPC has provided Cdn$680,000 in sales
and the Company has not issued any warrants. As part of this agreement, EPC's
principal, Bertil I. Pertersson, was to have been appointed to the Company's
board of directors. However, Cryopak International, Inc. did not ratify the
appointment and Mr. Petersson did not become a director. Cryopak (International)
Inc. has not had any activities to date.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
Cryopak's principal executive offices are located at 1120-625 Howe Street,
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. The Company is finalizing a purchase of Northland
Ice-Gel Inc./Northland Custom Packaging Inc. manufacturers of gel packs and
related products. The Company's manufacturing activities are currently carried
out in that manufacturer's facility under the control of the Company. In
addition, the Company contracts with that company to provide supervision and
labor in the manufacturing activities. There is no written agreement between
Cryopak and Northland Ice-Gel, Inc./Northland Custom Packaging Inc. pertaining
to the use of Northland's property and its manufacture of our product. There is
a Letter of Intent for the proposed acquisition of Northland. This provides
adequate additional office space, product testing facilities, and allow complete
monitoring and direct control of all manufacturing and production functions. The
additional space acquired would be 10,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any legal
proceeding at this time.
ITEM 4. CONTROL OF REGISTRANT
Cryopak is not directly or indirectly owned or controlled by any other
corporation or by any foreign government. The following table sets forth, as of
May 31, 1999, 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. Except as otherwise indicated, all shares are owned
directly.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and address of Amount and Nature Percent of
Title of Class beneficial owner Of Beneficial Ownership Class
- -------------- ---------------- ----------------------- -----
<S> <C> <C> <C>
Common Shares Exceptional Technologies Funds 3 977,777 5.7%
1199 West Hastings St., 5th Fl
Common Shares Cryopak Industries (VCC) Inc. 1,043,722 6.0%
Common Shares Directors/Officers 1,461,241 8.5%
Harry Bygdnes
Robert Leigh Jeffs
Douglas Reid
John McEwen
John Morgan
Ross Morrison
</TABLE>
ITEM 5. NATURE OF TRADING MARKET
The Company's common stock trades in Canada on the Canadian Venture
Exchange. Non-Canadian investors are also able to trade the Company's stock on
this Exchange. As of March 31, 1999, the Company's stock was held by 388
American shareholders, which consisted of 34% of its total outstanding shares.
The high and low sales prices for the Company's common stock on the Canadian
Venture Exchange over the past two fiscal years are as follows:
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter High (Cdn$) Low (Cdn$)
<S> <C> <C>
April - June 1999 $1.15 $0.98
January - March 1999 $0.84 $0.74
October - December 1999 $0.89 $0.55
July - September 1998 $0.62 $0.39
April - June 1998 $0.46 $0.36
January - March 1998 $0.43 $0.36
October - December 1997 $0.42 $0.26
July - September 1997 $0.52 $0.41
April - June 1997 $0.60 $0.45
</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 nonCanadian holders
of Common Shares. The Company is not aware of any limitations on the right of
nonCanadian 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 nonCanadian 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.
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.
<PAGE>
ITEM 8. SELECTED FINANCIAL DATA (STATED IN CANADIAN DOLLARS)
<TABLE>
Year Year Year Year Year
Ended Ended Ended Ended Ended
March 31, March 31, March 31, March 31, March31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Sales or Operating Revenues $1,295,159 $1,161,442 $1,140,242 $965,912 $1,053,456
Income (Loss) from Continuing
Operations ( 912,068) ( 638,553) ( 675,133) (912,390) ( 799,428)
Income (Loss) from Continuing
Operations per common share ( 0.06) ( 0.05) ( 0.06) ( 0.09) ( 0.09)
Total Assets 2,036,700 1,364,297 892,598 969,860 789,332
Long-Term Obligations and
Redeemable Preferred Stock
Capital Leases 249,057 320,015 0 0 0
Redeemable Preferred Stock 0 0 0 0 0
Cash Dividends Declared per
Common Share N/A N/A N/A N/A N/A
</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:
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 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
1999 1998 1997 1996 1995
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Loss for the year, Canadian GAAP $( 912,068) $(638,553) $(675,133) $(912,390) $(799,428)
Amortization of deferred development costs 14,822 14,822 14,822 14,822 14,822
Adjustment for stock based compensation -
Non employees ( 574,868) (123,226) (190,351) (50,573) (9,788)
--------- ---------- --------- -------- -------
Loss for the year, U.S. GAAP (1,472,114) (746,957) (850,662) (948,141) (794,394)
------------ --------- --------- -------- --------
Loss per share, U.S. GAAP $( 0.10) $( 0.06) $( 0.07) $ (0.09) $ (0.09)
------------ --------- ---------- ---------- ----------
</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
<PAGE>
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, 1999, 1998
and 1997, respectively: risk free interest rates of 5.2%, 5.8% and 6.8%;
dividend yields of 0%; volatility factors of the expected market price of the
Company's common stock of 1.23; and a weighted average expected life of the
options of four, one and .65 years.
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
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma loss, U.S. GAAP $( 1,785,577) $( 784,485) $( 875,991)
Pro forma loss per share, U.S. GAAP $( 0.12) $( 0.06) $( 0.07)
------------- -------------- --------------
</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
1999 1998
---- ----
<S> <C> <C>
Assets $ 2,018,172 $ 1,330,947
Share Capital 10,257,319 7,485,544
Deficit ( 9,400,181) (7,987,693)
</TABLE>
As of September 13, 1999, the exchange rate between the United States and
Canada was US$1.00 per Cdn$1.4703. Over the Company's past five fiscal years,
the exchange rate per US$1.00 has varied as follows:
<TABLE>
<CAPTION>
Rate at Average Low High
Fiscal Year Ended Year End Rate Rate Rate
- ----------------- -------- ---- ---- ----
<S> <C> <C> <C> <C>
March 31, 1999 $1.5092 $1.5033 $1.4173 $1.5765
March 31, 1998 $1.4166 $1.4023 $1.3669 $1.4639
March 31, 1997 $1.3843 $1.3609 $1.3306 $1.3843
March 31, 1996 $1.3632 $1.3629 $1.3282 $1.3987
March 31, 1995 $1.3990 $1.3824 $1.3408 $1.4235
</TABLE>
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 Registration
Statement 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.
<PAGE>
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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sales 100% $1,295,159 100% $1,161,442 100% $1,140,242
Cost of sales 57% 746,285 66% 763,018 59% 675,706
Gross Profit 43% 548,874 34% 398,424 41% 464,536
Selling and 113% 1,460,942 89% 1,036,977 100% 1,139,669
administrative costs
Net loss 70% 912,068 55% 638,553 59% 675,113
</TABLE>
Sales have been relatively stable over the last three years, showing only
marginal increases of 11.5% in 1999, 1.8% in 1998, and 18.0% in 1997. 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 57% in 1999, 66% in 1998, and 59% in 1997.
The cost of sales as a percentage of sales has been relatively stable, generally
approximately 57%.
In 1998, the cost of sales was 66%. In order to encourage sales to the
Asian and Australian/New Zealand markets, the Company reduced its selling price
temporarily. This resulted in an increase in cost of sales as a percentage of
sales. Sales efforts to those regions have ceased because of the weakened
currencies there. 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.
Selling and Administrative Costs
- --------------------------------
The Company's selling and administrative costs were 113% in 1999, 89% in
1998, and 100% in 1997. 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
transportation of fresh food and produce, airline in-flight
services, and pharmaceutical industry requiring 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 result in 1999 and
prior
<PAGE>
years has been a large investment in its marketing program and a corresponding
requirement to finance such 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. SmithKline Beecham,
Aradigm, and Caremark are anticipated to place 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.
5. A new sales representative will be added early in the new year,
focused on the e-commerce, Internet-driven grocery 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 totaling $2,392,000 in 1999, $291,890 in 1998, and $586,870 in 1997. The
Company has raised additional equity of $678,166 in the first nine months of the
current fiscal year ending March 31, 2000.
Capital Resources
- -----------------
The Company has financed capital expenditures in 1998 with a capital lease.
Such financing was $368,313 in 1998. At March 31, 1999, the Company had no
specific commitments to make further capital expenditures, nor does it have any
at December 31, 1999.
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 the 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.
Currency Fluctuation Risk
- -------------------------
Approximately 95% 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 counrty 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 fluctuation of up to 10% in
interest rates would not materially affect its financial position or results of
operations.
As at March 31, 1999, the capitalized amount owing under long term lease
contracts was $333,601 with fixed interest until maturity. See Note 10 of
financial statements.
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
Cryopak Industries Inc.
- -----------------------
<TABLE>
<CAPTION>
Arrangements Material
Name Title(s) Term of Office to Appointment
- ---- -------- -------------- --------------
<S> <C> <C> <C>
Harry Bygdnes President, 1981 to Present None
Director 1981 to Present None
Robert Leigh Jeffs CFO, March 1999 to Present None
Director June 1990 to Present None
Harley D. Sinclair Secretary November 1995 to Present None
Ross G. Morrison Director April 1999 to Present None
John F. Morgan Director March 1999 to Present None
John A. McEwen Director August 1995 to Present None
Douglas R. Reid Director June 1990 to Present None
</TABLE>
Cryopak (Canada) Corporation
- ----------------------------
<TABLE>
<CAPTION>
Arrangements Material
Name Title(s) Term of Office to Appointment
<S> <C> <C> <C>
Harry Bygdnes Secretary, 1987 - Present None
Director
Robert Leigh Jeffs President, March 1987 to March 1999 None
Director March 1987 to Present None
John F. Morgan President, March 1999 to Present None
CEO, and March 1999 to Present None
Director March 1999 to Present None
</TABLE>
Cryopak (International) Inc.
- ----------------------------
<TABLE>
<CAPTION>
Arrangements Material
Name Title(s) Term of Office to Appointment
<S> <C> <C> <C>
Harry Bygdnes Director August 1995 to Present None
Robert Leigh Jeffs Director August 1995 to Present None
</TABLE>
All directors have a term of one year. Directors are elected at each annual
meeting of the Company. The terms for President, CFO and Secretary are
indefinite.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERSA
During the Company's last fiscal year ended March 31, 1999, the Company
paid an aggregate of Cdn$151,146 to its officers. 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.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
As of March 31, 1999, the following stock options, all exercisable for
shares of the Company's common stock, were outstanding:
<PAGE>
<TABLE>
<CAPTION>
Group Received Number of Shares Exercise Price Expiration Date
- -------------- ---------------- -------------- ---------------
<S> <C> <C> <C>
Directors 170,000 $0.50 June 13, 1999
390,000 $0.52 August 17, 2000
343,000 $0.50 January 7, 2001
75,000 $0.52 June 19, 1999
200,000 $0.50 September 2, 1999
Officers 100,000 $0.40 June 26, 2000
136,300 $0.82 August 17, 2000
Employees 20,000 $0.52 June 16, 1999
100,000 $0.82 February 11, 2001
750,000* $0.76 March 19, 2004
Directors and Officers 2,164,300
as a group (3 persons)
Total options outstanding 2,284,300
</TABLE>
* These options will vest at a rate of 50,000 at the end of each calendar
quarter commencing March 31, 1999.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Over the past five 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 Cryopak. These advances have included Cdn$56,972
during the fiscal year ended March 31, 1995, Cdn$109,339 during the fiscal year
ended March 31, 1996, Cdn$ 90,668 during the fiscal year ended March 31, 1997,
Cdn$70,572 during the fiscal year ended March 31, 1998 and Cdn$48,868 during the
fiscal year ended March 31, 1999. These amounts were not repaid during the
fiscal year ended March 31, 1995; however, commencing in the fiscal year ended
March 31, 1996 NCK began repaying the advances at a rate of Cdn$2,200 per month,
which amount includes eight percent annual interest. The unsecured cash advances
were paid against royalties, which were less than anticipated.
The Company has also 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 five fiscal years, these fees and royalties have been paid as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Management Fees Royalties
----------------- --------------- ---------
<S> <C> <C>
March 31, 1995 Cdn$210,000 Cdn$17,722
March 31, 1996 Cdn$220,000 Cdn$20,159
March 31, 1997 Cdn$220,000 Cdn$22,934
March 31, 1998 Cdn$220,000 Cdn$26,289
March 31, 1999 Cdn$220,000 Cdn$26,261
</TABLE>
During the fiscal year ended March 31, 1996, the Company paid commissions
to Discovery Capital Corporation, the president and non-controlling shareholder
is John McEwen, who is also a member of Cryopak's board of directors. Mr. McEwen
provides assistance in market research, preparation of documents and planning of
offering of shares under private placements. These commissions were paid in
exchange for sales of the Company's stock as part of the Cdn$2,000,000 venture
capital Investment Agreement entered into between the Company and Discovery
Capital Corporation in March 1995 and totaled Cdn$56,560. The Company paid an
additional Cdn$15,540 in professional fees and Cdn$23,500 in consulting fees to
Discovery Capital Corporation during the fiscal year ended March 31, 1997, also
as a part of the terms of the Investment Agreement.
Other amounts paid to affiliated corporations during the past five fiscal
years include Cdn$10,000 in professional fees paid to a company owned by a
director during the fiscal years ended March 31, 1996 and March 31, 1998 and
professional fees of Cdn$22,200 paid in the fiscal year ended March 31, 1999.
The fees were paid to Reid & Company for advisory services. Douglas R. Reid is
president of Reid & Company. He provides general corporate consulting,
accounting advice and related assistance on financial matters including leases.
The Company had accounts receivable of Cdn$12,446 owed by NCK Holdings Inc.
and Cdn$3,278 by Fulcrum Development Ltd., a company related by Harry Bygdnes
and Leigh Jeff, directors in common, during the fiscal year
<PAGE>
ended March 31, 1997. In the fiscal year ended March 31, 1998 the accounts
receivable were Cdn$7,658 by NCK Holdings Inc. and Cdn$3,278 by Fulcrum
Development Ltd., whose accounts receivable balance was also at Cdn$3,278 during
the fiscal year ended March 31, 1999. The amount owing by Fulcrum Development is
in respect to recoverable office services and costs incurred by the Company on
behalf of Fulcrum Development. The amount owing by NCK Holdings were excess
payments of royalties and are recoverable out of future royalty payments. The
payments made were due to the actual royalty being less than anticipated.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
Common Stock
- ------------
Holders of the Common Stock are entitled to one vote for each share held by
them of record on the books of the Company in all matters to be voted on by the
stockholders. Holders of Common Stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors out of funds legally
available, and in the event of liquidation, dissolution or winding up of the
Company, to share ratably in all assets remaining after payment of liabilities.
Declaration of dividends on Common Stock is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including the
future earnings, capital requirements and financial condition of the Company.
The Company has not declared dividends on its Common Stock in the past and the
management currently anticipates that retained earnings, if any, in the future
will be applied to the expansion and development of the Company rather than the
payment of dividends.
The holders of Common Stock have no preemptive or conversion rights and are
not subject to further calls or assessments by the Company. There are no
redemption or sinking fund provisions applicable to the Common Stock. The Common
Stock currently outstanding is, and the Common Stock offered by the Company
hereby will, when issued, be validly issued, fully paid and nonassessable.
Class A Preferred Stock, Series 1
- ---------------------------------
Holders of the Class A Preferred Stock, Series I, shall be entitled to
receive notice of and attend all meetings of the shareholders of the Company and
shall have the right to vote at any such meetings on the basis of one vote for
each Series 1 Preferred Share held. The consideration for the issue of each
Class A Preferred Share, Series 1, shall be Cdn$1,000.
Each Class A Preferred Share, Series I, carry a 12% annual, cumulative
dividend, payable at the end of the Company's most recent fixed fiscal year end,
at the option of the Company, in either cash or Common Shares, the value of the
Common Shares being calculated on the basis of the Current Trading Price. No
dividends shall be declared or paid on any other class of shares unless and
until all unpaid dividends on the Series 1 Preferred Shares have been paid.
At any time after December 31, 1996, each Class A Preferred Share, Series
I, shall be convertible into Common Shares on the basis of a Common Share price
of Cdn$3.00 each, or at such lower price as may be provided below as follows:
1. Cdn$2.50 at any time after December 31, 1997, provided that the
Current Trading Price shall never have exceeded Cdn$2.99 after
December 31, 1996;
2. Cdn$2.00 at any time after December 31, 1998, provided that the
Current Trading Price shall never have exceeded Cdn$2.99 after
December 31, 1996 or Cdn$2.49 after December 31, 1997;
3. At any time after December 31, 1999, provided that the Current
Trading Price shall never have exceeded Cdn$2.99 after December
31, 1996 or Cdn$2.49 after December 31, 1997 or Cdn$1.99 after
December 31, 1998, at a Common Share Price equal to that price
which represents a 15% discount to the then Current Trading
Price, which Common Share price in no event shall be less than
$0.95.
Any shares not converted prior to May 12, 2000 shall be deemed to have been
converted on May 12, 2000 at the applicable conversion price described above. If
there is a subdivision or consolidation of the Class A Preferred Shares prior to
conversion of the Series I Preferred Shares into Common Shares, then the
applicable conversion formula shall be proportionally adjusted.
<PAGE>
In the event of a dissolution, winding up or other return of capital of the
Company, registered holders of the Class A Preferred Shares, Series I, shall be
entitled to receive the amount paid up on such shares and all unpaid dividends
before any amount shall be paid or any property or asset of the Company is
distributed to the registered holders of any other classes of shares. After
payment to the registered holders of the Series I Preferred Shares of the amount
so payable to them as provided above, they shall not be entitled to share in any
future distribution for the property or assets of the Company.
PART IV
ITEM 17. FINANCIAL STATEMENTS
INDEPENDANT AUDITORS' REPORT
To the Shareholders
Cryopak Industries Inc.
We have audited the consolidated balance sheets of Cryopak industries Inc., as
at March 31, 1999 and 1998 and the consolidated statements of loss and deficit
and changes in financial position for each of the years in the three year period
ended March 31, 1999. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express as
opinion on theses financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance wheather 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 positions of the company as at March 31, 1999
and 1998 and the results of its operations and the changes in its financial
position for each of the years in the three year period ended March 31, 1999 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 11, 1999
COMMENTS BY INDEPENDANT 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
11, 1999 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such events and conditions in the Auitors' Report when
these are adequately disclosed in the financial statements.
/s/ Hay & Watson
Chartered Accountants
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Balance Sheets
March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Current
Cash $ 640,299 $ 3,417
Accounts receivable, net of allowancol for uncollectible
accounts of $74,684 (1998 - $21,155) 360,783 217,677
Inventory (Note 3) 20,608 36,757
Prepaid expenses 14,075 12,196
Due from employees 24,448 32,117
------ ------
1,060,213 421,773
Term deposit - Restricted (Note 4) 125,649 119,609
Investments (Note 5) 75 25,442
Capital Assets (Note 6) 429,652 416,945
Advance to Related Company (Note 7) 48,868 70,572
Intangibles (Note 8) 372,243 429,565
------- -------
$ 2,036,700 $ 1,364,297
LIABILITIES
Current
Accounts payable and accrued liabilities $ 276,966 $ 532,440
Note payable (Note 9) - 350,000
Current portion of capital lease obligation 84,544 80,174
------ ------
361,510 962,614
Capital Lease Obligation (Note 10) 249,057 320,015
Deferred Income Taxes 20,467 20,467
------ ------
631,034 1,303,096
SHAREHOLDERS'EQUITY
Share Capital (Note 11)
Issued and outstanding
Common shares 9,682,451 7,362,318
Class A preferred shares, Series 1 530,000 530,000
Deficit (8,806,785) (7,831,117)
---------- ----------
1,405,666 61,201
$ 2,036,700 $ 1,364,297
APPROVED BY THE BOARD:
/s/Harry Bygdnes
_____________________ Director
/s/ R. Leigh Jeffs
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Loss and Deficit
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Sales $ 1,295,159 $ 1,161,442 $ 1,140,242
Cost of goods sold 746,285 763,018 675,706
------- ------- -------
Gross profit 548,874 398,424 464,536
Operating expenses (Schedule 1) 1,448,456 1,023,556 1,130,823
--------- --------- ---------
Operating loss (899,582) (625,132) (666,287)
-------- -------- --------
Other (Income) Expenses
Filing, listing and transfer agent fees 25,289 20,321 17,006
Other income (12,803) (6,900) (8,160)
------- ------ ------
(12,486) (13,421) (8,846)
Loss before income taxes (912,068) (638,553) (675,133)
-------- -------- --------
Net loss for the year (912,068) (638,553) (675,133)
Dividends (63,600) (47,970) -
------- -------
Net loss for the year attributable to common
Shareholders (975,668) (686,523) (675,133)
Deficit, begining of year (7,831,117) (7,144,594) (6,469,461)
---------- ---------- ----------
Deficit, end of year $(8,806,785) $(7,831,117) $(7,144,594)
----------- ----------- -----------
Loss per share $ 0.07 $ 0.05 $ 0.06
----------- ----------- -----------
Weighted average common shares outstanding 14,937,561 12,597,083 11,691,097
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Loss and Deficit (Con't)
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
SCHEDULE OF DIVIDENDS PAID ON CLASS A PREFERRED SHARES
Year Ended Number of Common Shares Issued Amount
- ---------- ------------------------------ ------
<S> <C> <C>
March 31, 1997 - -
March 31, 1998 96,908 $ 47,970
March 31, 1999 159,199 $ 63,600
</TABLE>
<TABLE>
<CAPTION>
DIVIDENDS -- PREFERRED SHARES (12%)
Price Number of Date Paid
Amount Per Share Shares (Issued)
------ --------- ------ --------
<S> <C> <C> <C> <C>
1. Due as at March 31, 1996 $ 3,924 7,926
2. Due as at March 31, 1997
Issued in year ended
March 31, 1998 44,046 88,982
------ ------
$47,970 $0.495 (a) 96,908 October 24, 1997
======= ======
3. Due as at March 31, 1998
Issued in year ended
March 31, 1999
$530,000 x 12% $63,600 $0.3995 (b) 159,199 November 4, 1998
======= ======= =======
4. Due as at March 31, 1999
-- not issued
(i) outstanding from 1997 $ 439
(ii)due for year ended 3/31/99
$530,000 x 12% 63,600
------
$64,039
=======
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Changes in Financial Position
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Operating Activities
Net loss for the year $ (912,068) $ (638,553) $ (675,133)
Adjustment for:
Depreciation and amortization 114,730 77,783 79,564
Loss from short term investment 25 - -
--
(797,313) (560,770) (595,569)
Changes in non-cash working capital
Proceeds from (repayment of)advances-related - 4,789 (15,815)
Companies
(Increase) decrease in accounts receivable (143,106) (75,603) 3,290
Decrease (increase) in amount due from employees 7,669 8,001 (29,900)
Decrease in inventory 16,149 22 15,404
(Increase) decrease in prepaid expenses (1,879) 3,466 (6,186)
(Decrease) increase in accounts payable (255,474) 156,853 (40,587)
-------- ------- -------
Cash used in operating activities (1,173,954) (463,242) (669,363)
---------- -------- --------
Financing Activities
Issue of shares 2,392,733 291,890 586,870
Share issue costs (72,600)
Shares returned to treasury - (8,000) -
Liabilities settled by issue of company shares - - 56,560
(Repayment of) proceeds from note payable and capital (416,588) 718,313 (5,806)
lease obligation
Payment of dividend (63,600) (47,970) -
------- -------
Cash provided by financing activities 1,839,945 954,233 637,624
--------- ------- -------
Investing Activities
Acquisition of capital assets (44,773) (387,227) (20,811)
Advances from related company 21,704 20,096 18,671
Term deposit - restricted (6,040) (119,609) -
------ --------
Cash used in investing activities (29,109) (486,740) (2,140)
------- -------- ------
Increase (Decrease) in Cash 636,882 4,251 (33,879)
Cash (Bank indebtedness), Beginning of Year 3,417 (834) 33,045
Cash (Bank indebtedness), End of Year $ 640,299 $ 3,417 $ (834)
------------ ------------ ------------
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(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 18.
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.
Measurement Uncertainty
- -----------------------
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 asset ( deferred charges, goodwill and
pre-opening costs). Financial results as determined by actual events could
differ from those estimates
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(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.
Investments
- -----------
Current investments are recorded at the lower of cost and market value.
Long-term investments are recorded at cost unless there has been a loss in value
that is other than a temporary decline, in which case the investment is written
down to fair market value.
Depreciation
- ------------
Capital assets are recorded at cost and are depreciated on the following basis
at the rates indicated:
<TABLE>
<CAPTION>
<S> <C> <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 pervailing 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.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
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.
Financial Instruments
- ---------------------
The fair values of the Company's cash, investments, accounts receivable, amounts
due from employees, advance to related company, accounts payable and accrued
liabilities, bank indebtedness, and capital lease obligation were estimated to
approximate their carrying value.
Revenue Recognition
- -------------------
Sales are recognized upon shipment of products.
3. INVENTORIES
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Raw material $ 5,348 $
-
Finished goods 15,260 36,757
$ 20,608 $ 36,757
</TABLE>
4. TERM DEPOSIT
The term deposit is held by the Canadian Western Bank as security on lease
financing for a machine acquired in 1998 (Note 10).
<TABLE>
<CAPTION>
5. INVESTMENTS
1999 1998
<S> <C> <C>
Marketable securities - market value at March 31, 1999 - $75
(1998 - $200) $ 75 $ 100
Artwork - 25,342
$ 75 $ 25,442
</TABLE>
During the year the Comapny changed its intended use of the Artwork and decided
to keep it as office furnishings. As a result the artwork has been reclassified
to capital assets.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
6. CAPITAL ASSETS
<TABLE>
<CAPTION>
1999
Accumulated Net Book
Cost Depreciation 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>
<TABLE>
<CAPTION>
1998
Accumulated Net Book
Cost Depreciation Value
<S> <C> <C> <C>
Computer Hardware $ 45,852 $ 34,168 $ 11,684
Computer Software 2,544 2,419 125
Furniture and Fixtures 80,967 78,252 2,715
Motor Vehicle under Capital Lease 40,594 23,686 16,908
Machinery under Capital Lease 383,943 - 383,943
Office Equipment 2,099 529 1,570
$ 555,999 $ 139,054 $ 416,945
</TABLE>
ADVANCE TO RELATED COMPANY
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Balance, beginning of year $ 70,572 $ 90,668 $ 109,339
Interest charge for the year 4,696 6,304 7,729
Payments received (26,400) (26,400) (26,400)
Advance to N.C.K. Holdings Inc. $ 48,868 $ 70,572 $ 90,668
</TABLE>
The related company, N.C.K. Holdings Inc., is owned by two directors. The
advance is unsecured and is repayable in monthly installments of $2,200
including interest of 8% per annum. During the year the Company paid management
fees of $220,000 (1998 - $220,000) and royalties of $26,261 (1998 - $26,289) to
N.C.K. Holdings Inc.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
8. INTANGIBLES
<TABLE>
<CAPTION>
1999 1998
Accumulated Net Book Net Book
Cost Depreciation Value Value
<S> <C> <C> <C> <C>
Incorporation Cost $ 3,111 $ - $ 3,111 $ 3,111
Deferred Development Costs 114,017 95,489 18,528 33,350
Patent Licence 566,323 291,497 274,826 308,140
Goodwill 156,155 80,377 75,778 84,964
$ 839,606 $ 467,363 $ 372,243 $ 429,565
</TABLE>
NOTE PAYABLE
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Note payable to a company related by two directors in common, bearing interest
at the rate of 12% per annum, secured by a general security agreement on all the
Coinpany's assets, fully repaid during the year. $ - $ 350,000
</TABLE>
10. CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Capital lease obligation with interest at 10.25%, maturing November 1,
1999 $ 17,990 $ 25,231
Capital lease obligation with interest at 10.6%, maturing July 20, 2002
(Note 4) 302,689 374,958
Capital lease obligation with interest at 17%, maturing October 20,
2001 12,922 -
333,601 400,189
Less: current portion 84,544 80,174
$ 249,057 $ 320,015
</TABLE>
The future minimum lease payments required are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $ 158,775
2001 121,449
2002 118,711
2003 38,293
2004 -
</TABLE>
Included in these amounts is imputed interest of $62,148.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
11. SHARE CAPITAL
<TABLE>
Authorized
<CAPTION>
<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>
The following changes occurred in share capital:
<TABLE>
<CAPTION>
Common shares
Issued and outstanding
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 1 159,199 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 1 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>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
11. Share Capital (Cont'd)
<TABLE>
<CAPTION>
1997
Number of
Shares Amount
<S> <C> <C>
Balance, beginning of year 11,229,065 $6,699,998
Issued during the year
For cash, pursuant to the exercise of stock options 647,255 242,070
For cash, pursuant to the exercise of warrants 116,000 34,800
For cash, pursuant to private placements 150,000 45,000
For settlement of debt 102,836 56,560
1,016,091 378,430
Balance, end of year 12,245,156 $7,078,428
</TABLE>
<TABLE>
Class A preferred shares, Series I
<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>
<TABLE>
<CAPTION>
1997
Number of
Shares Amount
<S> <C> <C>
Balance, beginning of year 265 $ 265,000
issued during the year for cash 265 265,000
Balance, end of year 530 $ 530,000
</TABLE>
Each Class A preferred share Series I 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, 1999
amounted to $64,039.
The Series I preferred shares are convertible into common shares at the rate of
one common share for each $3 of paid up capital or the rate provided below:
(i) $2.00 at any time after December 3 1, 1998, provided that the Current
Trading Price shall never have exceeded $2.99 after December 31, 1996
or $2.49 after December 31, 1997.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial
Statements March 31, 1999 and 1998
(Stated in Canadian Dollars)
11. Share Capital (Cont'd)
(ii) at any time after December 1, 1999, provided that the Current Trading
Price shall never have exceeded $2.99 after December 31, 1996 or $2.49
after December 1, 1997 or $1.99 after December 31, 1998, at a; common
share price equal to that price which represents a 15% discount to the
then Current Trading Price, which common share price in no event shall
be less than $0.95;
But if not so converted prior to May 12, 2000, such Series I preferred shares
shall be deemed to have been converted on May 12, 2000 at the applicable
conversion price described above. The Current Trading Price means the average
trading price of the common shares on a recognized public stock exchange for the
preceding 20 business days.
On March 31, 1999, the following stock options were outstanding:
<TABLE>
<CAPTION>
No. of Shares Exercise Price Expiry Date
<S> <C> <C> <C>
Directors 170,000 $0.50 June 13, 1999
390,000 0.52 August 17, 2000
343,000 0.50 January 7, 2001
75,000 0.52 June 19, 1999
100,000 0.50 September 2, 1999
150,000 0.50 September 2, 1999
Officer 100,000 0.40 June 26, 2000
136,300 0.82 August 17, 2000
Employee 20,000 0.52 June 16, 1999
100,000 0.82 February 11, 2001
*750,000 0.76 March 19, 2004
</TABLE>
* These options will vest at a rate of 50,000 at the end of each calendar
quarter commencing March 31, 1999 and are subject to shareholder approval.
On March 31, 1999, the following share purchase warrants were outstanding:
<TABLE>
<CAPTION>
No. of Warrants Exercise Price Expiry Date
<S> <C> <C>
250,000 $0.60 August 18, 1999
250,000 0.46 April 29, 2000
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
119,608 0.46 March 20, 2000
1,369,608
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
11. Share Capital (Cont'd)
Share purchase warrant transactions for the respective years were as follows:
<TABLE>
<CAPTION>
No. of Warrants
<S> <C>
Balance, August 31, 1996 116,000
Warrants exercised during the year at $0.30 per share (116,000)
Balance, August 31, 1997 -
Issued pursuant to a private placement of common shares
exercisable at $0.60 per share 250,000
Balance, August 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, August 31, 1999 1,369,608
</TABLE>
12. INCOME TAXES
The Company has estimated losses available for utilization against future years'
taxable incomes which, if unused, will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 296,801
2001 1,089,726
2002 658,014
2003 710,475
2004 599,008
2005 649,840
2006 882,657
</TABLE>
13. LEASES
The minimum annual rental commitments for operating leases in effect at March
31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 47,790
2001 27,456
2002 1,627
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
14. RELATED PARTY TRANSACTIONS
Related party transactions not otherwise disclosed in these consolidated
financial statements are as follows:
(a) Professional fees include $22,200 paid to a company owned by a
director of the Company.
(b) As of March 31, 1999, accounts receivable include $28,316 (1998:
$7,658) receivable from N.C.K. Holdings Inc., a company owned by two
directors, and $3,278 (1998: $7,658) receivable from Fulcrum
Developments Ltd., a company related by two directors in common.
15. SUBSEQUENT EVENTS
The following share transactions took place subsequent to the year end:
(a) Issued 72,000 units for gross proceeds of $54,000. Each unit consists
of one common share and one non-transferable share purchase warrant.
Each warrant entitles the holder to purchase one common share at $1.00
on or before May 4, 2001.
(b) Issued 125,000 units to a director of the Company for gross proceeds
of $97,000. The Company provided an interest-free loan, forgivable
under certain conditions, for the purchase of these units. Each unit
consists of one common share and one non-transferable share purchase
warrant. Each warrant entitles the holder to purchase one common share
at $0.776 on or before September 20,1999.
(c) Granted 290,000 stock options to directors and officers of the
Company, exercisable on or before April 21, 2001 at $0.86 per share.
(d) Issued 326,300 common shares for gross proceeds of $175,166 pursuant
to the exercise of stock options.
16. CONTRACTUAL OBLIGATIONS
Pursuant to an agreement dated December 20, 1989 with N.C.K. Holdings Inc., as
part of the consideration for a license, the Company has made a commitment to
issue up to 3,000,000 common shares of its capital (the "performance shares")
based upon certain performance criteria.
The 500,000 shares were issued at a value of $0.30 per share ($150,000), which
was the average 20 day trading period prior to the day of issue. The Company
reflected this value in its share capital issued and a corresponding value was
ascribed to the asset acquired. We understand that there is no difference
between Canadian and U.S. GAAP in the treatment of the shares issued.
It is the intention of the Company to value the shares to be issued at the
trading price at the time the Company becomes obligated to issue them (i.e.,
when the cash flow is attained per the formula). The Company will reflect this
value in its share capital issued and a corresponding value will be ascribed to
the asset acquired. Canadian GAAP would allow the value of the shares to be
recorded at the historical price (i.e., $0.30 per share). Since Canadian GAAP
does not mandate this treatment, the Company has chosen to use the "current"
value of the shares. We understand that there will be no difference therefore
between Canadian and U.S. GAAP in the treatment of the shares to be issued.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
17. CONTINGENT LIABILITIES
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in errors when information using
Year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems fi4lure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties will be fully resolved.
18. 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:
(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) Under U.S. GAAP, non-cash items such as liabilities, dividends and
finder's fee paid by issue of company shares are excluded from. the
statement of changes in financial position. Under Canadian GAAP, the
gross amount of non-cash items are included in the respective
operating, investing, or financing activities as applicable.
(c) 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.
(d) 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.
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
18. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES (Cont'd)
The impact of significant variations to U.S. GAAP on the Consolidated Statements
of Loss are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Loss for the year, Canadian GAAP $( 912,068) $( 638,553) $( 675,133)
Amortization of deferred development costs 14,822 14,822 14,822
Adjustment for stock based compensation -
non employees ( 574,868) ( 123,226) ( 190,351)
(1,472,114) ( 746,957) ( 850,662)
Loss per share, U.S. GAAP $( 0.10) $( 0.06) $( 0.07)
</TABLE>
Supplemental disclosure of pro forma loss and loss per share is as follows:
<TABLE>
<CAPTION>
Year ended March 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma loss, U.S. GAAP $( 1,785,577) $( 784,485) $(875,991)
Pro forma loss per share, U.S. GAAP $( 0.12) $( 0.06) $( 0.07)
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1999 and 1998
(Stated in Canadian Dollars)
18. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES (Cont'd)
The impact of significant variations to U.S. GAAP on the Consolidated Balance
Sheets items are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
1999 1998
---- ----
<S> <C> <C>
Assets $ 2,018,172 $ 1,330,947
Share Capital 10,257,319 7,485,544
Deficit (9,400,181) (7,987,693)
</TABLE>
The impact of significant variations to U.S. GAAP on the Consolidated Statements
of Changes in Financial Position items are as follows:
<TABLE>
<CAPTION>
Year Ended March 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash used in operating activities
- Canadian and US GAAP $( 1,173,954) $( 463,242) $(669,363)
Cash provided by financing activities
- Canadian GAAP 1,839,945 954,233 637,624
Issue of shares (101,000) (47,970) (56,560)
Liabilities settled by issue of company shares - - 56,560
Dividends paid by issue of company' shares 63,600 47,970 -
Finders fee paid by issue of common shares 37,500 - -
Cash provided by financing activities
- US GAAP 1,839,945 954,233 637,624
Cash used in investing activities
- Canadian GAAP and US GAAP $ (29,109) $ (486,740) $ (2,140)
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC. ~
Consolidated Schedules of Operating Expenses
Year Ended March 31
(Stated in Canadian Dollars)
Schedule 1
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Bad debts $ 53,529 $ 29,125 $ 7,245
Commissions 4,144 520 884
Corporate printing, financial and public relations 117,043 85,181 138,150
Depreciation and amortization 72,958 77,783 79,564
Foreign exchange 20,640 10,876 1,355
Interest and bank charges 41,746 15,301 16,549
Interest on capital lease obligation 38,912 2,595 3,434
Management fees 220,000 220,000 220,000
Marketing 201,347 57,944 87,337
Office supplies and stationery 80,250 68,798 58,197
Professional fees 98,867 56,291 74,399
Rent 53,915 52,861 52,459
Royalties 53,328 51,258 44,903
Salaries and benefits 151,146 126,769 117,960
Storage 4,507 10,459 9,899
Telephone 37,790 41,994 50,748
Travel and entertainment 180,770 97,769 155,138
Vehicle 17,564 18,032 12,602
$ 1,448,456 $ 1,023,556 $ 1,130,823
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Schedule of Allowance for Uncollectible Accounts
Year Ended March 31
(Stated in Canadian Dollars)
Schedule 2
<TABLE>
<CAPTION>
<S> <C>
Balance, March 31, 1996 $ 56,026
Accounts receivable written off during the year 37,836
Additional allowance provided 6,720
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
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1998
AND AUDITORS' REPORT
Hay & Watson CHARTERED ACCOUNTANTS
August 06, 1998
Messrs. Harry Bydgnes and Leigh Jeffs
Cryopak Industries Inc.
1125 - 625 Howe Street
Vancouver, B.C. V6C 2T6
Dear Sirs:
During our examination of the consolidated financial statements of Cryopak
Industries Inc. for the year ended March 31, 1998, we reviewed the existing
system of accounting procedures and internal control and such review indicated
certain areas which we believe should be brought to your attention. We have also
recommended certain changes to achieve consistent application of accounting
policies adopted by the company.
1. INVENTORY
During our examination we found that there were only limited records of the
inventory kept at the various locations. The lack of proper records has caused
the company to run out of inventory and to buy back inventory from customers in
order to fill other customers' orders. This causes the company to lose its
profit margin on the sale as well as showing the company at a disadvantage. On
an ongoing basis, sales staff and the receptionist have to call the storage
companies to know if they can fill orders, causing delays and poor customer
relations.
The value of inventory at year-end is essential to the preparation of financial
statements, and deficiencies in that area may result in a qualified audit
report. A proper recording system for inventory is essential and must be updated
periodically. All shipments in and out of the outside warehouses must be
supported by a written confirmation from the warehouses confirming the date of
shipment.
The company's inventory records should be compared with the quantities reported
by the storage companies periodically. A count at year-end must be performed and
reconciled to your record.
The overall responsibility for the inventory needs to be given to a responsible
and knowledgeable staff member. During the course of the audit, we have
discussed the implementation of an adequate temporary system on a computer
spreadsheet with Laila. However the company would benefit from the full
integration of its invoicing and inventory systems with its accounting system.
We are available to further discuss and help with the implementation of such a
system.
2. SAMPLES
During our testing, we also found there is no system to account for samples sent
to customers. Since the company is trying to develop new markets for the
product, the cost for samples may be significant. In order to prevent customers
from getting products without paying, to follow up on new customers and to
maintain better internal control, samples that are given away should be properly
recorded, and periodically reviewed by management. Large shipments of free
samples should be authorized and approved by management. Completed records will
also facilitate the reconciliation of inventory on hand between your records and
the records from the warehouses.
3. EXPENSE ALLOCATION AND TAX PLANNING
Various expenses such as rent, telephone, promotion and advertising, salaries,
office expenses, insurance, and professional fees, are common to Cryopak
Industry, Cryopak Canada, and Cryopak International. Currently, the bulk of
these expenses is carried by Cryopak Industries. However, the operations of the
group are recorded in Cryopak Canada and will eventually result in taxable
income. To ensure that full advantage is taken of all expenses and that no
losses carried forward are lost due to expiry, management should start to review
the allocation of expenses. In addition, we recommend that the tax implications
of U.S. and worldwide operations be reviewed periodically.
4. EXERCISE OF STOCK OPTIONS
During our review of share capital transactions, it was noted that when stock
options are exercised by members of management, cash is not always received
prior to the issue of the shares. It is a contravention of the B.C. Company Act
to issue shares prior to receiving payment in fall.
5. MANAGEMENT FEES
Currently there are no contracts or invoices which indicate what management
remuneration is.. We recommend that management remuneration be properly
documented.
6. PETTY CASH
Currently, no control is in place over the petty cash. The company does not
record the detail of expenditures included in each petty cash disbursement.
Therefore, even though the company keeps all its petty cash receipts, we are
unable to trace the receipts back to the petty cash expenses in the general
ledger.
7. CREDIT CARD EXPENSES
During our tests of expenses, we found that both personal and business credit
cards were used to pay for business expenses and that personal expenses were
charged to the business credit cards as well as personal credit cards. In
addition, some of the credit card payments made by the company and applied to
the personal credit cards were not properly supported by expense reports and
invoices. We recommend that business expenses be paid with business credit cards
only so as to be easily distinguished from the personal expenses. If some
business expenses have to be paid by personal credit card, then those expenses
should be documented on an expense report supported by proper receipts. We also
recommend that personal expenses be charged to personal credit cards only.
<PAGE>
8. SUPPORTING DOCUMENTATION
During the course of the audit, our analyses sometimes proved difficult due to
the lack of supporting documentation such as invoices.
Management should ensure that supporting documentation be obtained and retained
for all company expenditures. The supporting documentation is required to
provide sufficient audit evidence for the audit and for future reference.
We recommend that cheques only be issued when there is adequate supporting
documentation. If invoices are unavailable, then a memo providing details of the
expenditure, approved by management should be used as supporting documentation.
9. YEAR 2000
The Year 2000 date change could have a significant impact on any of the
Company's equipment that operates with some form of micro-processor system. Some
of the computer systems and other systems such as telephone systems may be
susceptible to the Year 2000 issue.
We are taking this opportunity to stress the importance of the Year 2000 issue
and the significant operational and financial risk it poses for the Company. We
encourage management to consider the Year 2000 issue as equipment, facilities
and computer software programs are acquired. This should also include taking in
consideration the impact on those systems that may be critical to the business
but may be managed by third parties such as service bureaus.
We have noted improvements during the year in the recording of transactions and
performing accounting routines. The most significant matter which we believe
still needs to be addressed is the recording of and controls over inventory.
We would be pleased to discuss any of these comments and recommendations with
you in greater detail. We would, at this time, like to thank you and your staff
for their assistance and cooperation extended during the audit. Please do not
hesitate to contact this office if we may be of further assistance.
Yours very truly,
Chartered Accountants
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Balance Sheets
March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
Current
Cash $ 3,417 $ -
Accounts receivable 217,677 146,863
Inventory 36,757 36,779
Term deposit - Restricted (Note 3) 119,609 -
Prepaid expenses 12,196 15,662
Due from employees 32,117 40,118
__________ _________
421,773 239,422
Investments (Note 4) 25,442 25,442
Capital Assets (Note 5) 416,945 50,179
Advance to Related Company (Note 6) 70,572 90,668
Intangibles (Note 7) 429,565 486,887
__________ __________
$1,364,297 $ 892,598
LIABILITIES
Current
Bank indebtedness $ - $ 834
Accounts payable and
accrued liabilities 532,440 375,587
Note payable (Note 8) 350,000 -
Current portion of
capital lease obligation 80,174 6,345
__________ __________
962,614 382,766
Capital Lease Obligation (Note 9) 320,015 25,531
Deferred Income Taxes 20,467 20,467 20,467
__________ ___________
1,303,096 428,764
SHAREHOLDERS' EQUITY
Share Capital (Note 10)
Issued and outstanding
Common shares 7,362,318 7,078,428
Class A preferred shares, Series 1 530,000 530,000
Deficit (7,831,117) (7,144,594)
___________ ___________
61,201 463,834
$1,364,297 $ 892,598
</TABLE>
APPROVED BY THE BOARD:
Director
Director
<PAGE>
CRYOPAK INDUSTRIES INC
Consolidated Statements of loss and Deficit
Year Ended March 31
(Stated in Candian Dollars)
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Sales $1,161,442 $1,140,242 $ 965,912
Cost of Sales 763,018 675,706 557,611
Gross Profit 398,424 464,536 408,301
Operating Expenses
(Schedule 1) 938,375 992,673 1,158,036
Operating Loss ( 539,951) ( 528,137) ( 749,735)
Other (Income) Expenses
Filing, listing and
transfer agent fees 20,321 17,006 26,870
Corporate printing, financial
and public relations 85,181 138,150 129,994
Loan payment as guarantor - - -
Other income ( 6,900) ( 8,160) ( 384)
___________ ___________ ___________
98,602 146,996 162,998
Loss before income taxes ( 638,553) ( 675,133) ( 912,390)
Income taxes (recovery) - - ( 343)
Net loss for the year ( 638,553) ( 675,133) ( 912,390)
Dividends ( 47,970) - -
Deficit, beginning of the year (7,144,594) (6,469,461) (5,557,071)
Deficit, end of year $(7,831,117) $(7,144,594) $(6,469,461)
Loss per share $ 0.05 $ 0.06 $ 0.09
Weighted average common
shares outstanding 12,597,083 11,691,097 10,637,948
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Consolidated Statements of Changes in Financial Position
Year Ended March 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash Flow from Operating Activities
Operations
Net loss $( 638,553) $( 675,133) $( 912,390)
Depreciation and amortization 77,783 79,564 72,984
( 560,770) ( 595,569) ( 839,406)
Changes in other operating items
Advance to related companies 4,789 ( 15,815) -
Accounts receivable ( 75,603) 3,290 ( 51,134)
Due from employees 8,001 ( 29,900) ( 10,218)
Intangibles - - ( 3,113)
Inventory 22 15,404 ( 22,270)
Investments - - ( 25,342)
Prepaid expenses 3,466 ( 6,186) ( 5,867)
Accounts payable 156,853 ( 40,587) 69,541
Cash used for operating activities ( 463,242) ( 669,363) (887,809)
Cash Flow from Financing Activities
Issue of shares 291,890 586,870 992,070
Shares returned to treasury ( 8,000) - -
Liabilities settled by issue
of company shares - 56,560 -
Note payable and capital
lease obligation 718,313 ( 5,806) 37,682
Payment of dividend ( 47,970) - -
Cash provided by financing activities 954,233 637,624 1,029,752
Cash Flow from Investing Activities
Acquisition of capital assets ( 387,227) ( 20,811) ( 51,867)
Advances(to)from related company 20,096 18,671 ( 52,367)
Cash used for investing activities ( 367,131) ( 2,140) (104,234)
Increase (Decrease) in cash during year 123,860 ( 33,879) 37,709
Cash (Bank indebtedness),
beginning of year ( 834) 33,045 ( 4,664)
Cash (Bank indebtedness), end of year $ 123,026 $( 834) $ 33,045
Cash is comprised of
Cash (indebtedness) $ 3,417 $( 834) $ 33,045
Tenn deposit 119,609 - -
$ 123,026 $( 834) $ 33,045
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
Notes to Consolidated Financial Statements
March 31, 1998 amd 1997
(Stated in Canadian Dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in Canada and reflect the
following policies:
Basis of Presentation
- ---------------------
These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, CRYOPAK ( International ) Inc., a Barbados
corporation, CRYOPAK ( Canada ) Corporation and its wholly-owned subsidiary
CRYOPAK Corporation, a Nevada corporation, and its proportionate interest (50%)
in a joint venture, CRYOPAK (Alberta) Corporation.
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.
Investments
- -----------
Current investments are recorded at the lower of cost and market value.
Long-term investments are recorded as cost unless there has been a loss in value
that is other than a temporary decline, in which case the investment is written
down to fair market value.
Depreciation
- ------------
Capital assets are recorded at cost.
The Company records depreciation on its capital assets using the straight-line
method over five years, except for motor vehicles where the declining balance
method is used at the rate of 30% per annum.
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
- ----------------
Foreign currency accounts are translated using the temporal method whereby
current assets and current liabilities are translated to Canadian dollars at
year end exchange rates, other assets and liabilities at exchange rates
prevailing at the dates of transactions, and revenue and expenses at the average
rate during the year. Gains and losses from foreign currency translation are
included in the consolidated statements of loss and deficit.
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.
<PAGE>
Financial Instruments
- ---------------------
The fair values of the Company's cash, investments, accounts receivable, amounts
due from employees, advance to related company, accounts payable and accrued
liabilities, bank indebtedness, and capital lease obligation were estimated to
approximate their carrying value.
2. OPERATIONS
These financial statements have been prepared on the assumption that the Company
is a going concern.
The ability of the Company to continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business, is dependent on obtaining the financing necessary
to continue operations and, ultimately, profitable operations.
3. TERM DEPOSIT
The term deposit is held by the Canadian Western Bank as security on lease
financing for a machine acquired during the year (Note 9).
4. INVESTMENTS
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Marketable securities -
market value at March 31,
1998 - $200
1997 - $325 $ 100 $ 100
Artwork 25,342 25,342
________ _______
$25,442 $25,442
</TABLE>
5. CAPITAL ASSETS
<TABLE>
<CAPTION>
1998 1997
Cost Accumulated Net Book Net Book
Depreciation Value Value
<S> <C> <C> <C> <C>
Computer $ 48,396 $ 36,586 $ 11,810 $ 26,607
Furniture
and Fixtures 83,066 78,781 4,285 5,344
Motor Vehicle
under Capital
Lease 40,594 23,687 16,907 18,228
Machinery under
Capital Lease 383,943 - 383,943 -
________ ________ ________ ________
$555,999 $139,054 $416,945 $ 50,179
</TABLE>
6. ADVANCE TO RELATED COMPANY
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Advance to N.C.K. Holdings Inc. $70,572 $90,668
</TABLE>
The related company is owned by two directors. The advance is unsecured and
is repayable in monthly installments of $2,200 including interest of 8% per
annum. During the year the Company paid management fees of $220,000 (1997 -
$220,000) and royalties of $26,289 (1997 - $22,934) to N.C.K. Holdings Inc.
<PAGE>
7. INTANGIBLES
<TABLE>
<CAPTION>
1998 1997
Accumulated NetBook NetBook
Cost Depreciation Value Value
<S> <C> <C> <C> <C>
Incorporation Cost $ 3,111 $ - $ 3,111 $ 3,111
Deferred Development
Costs 114,017 80,667 33,350 48,172
Patent Licence 566,323 258,183 308,140 341,454
Goodwill 156,155 71,191 84,964 94,150
________ ________ ________ ________
$839,606 $410,041 $429,565 $486,887
</TABLE>
8. NOTE PAYABLE
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Note payable to a company related
by two directors in common, bearing
interest at the rate of 12% per annum
repayable April 30, 1998, and
secured by a general security agreement
on all the Company's assets. The loan
was converted to share capital
subsequent to the year end (Note 14(a)).
The interest accrued on the loan was
forgiven. $350,000 -
</TABLE>
9. CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Capital lease obligation with interest
at 10.25%, maturing November 1,
1999 $ 25,231 $ 31,876
Capital lease obligation with interest
at 10.6%, maturing July 20, 2002
(Note 3) 374,958 -
________ ________
400,189 31,876
Less: current portion 80,174 6,345
________ ________
$320,015 $ 25,531
</TABLE>
The future minimum lease payments required are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $117,064
2000 126,487
2001 107,824
2002 107,824
2003 35,941
</TABLE>
Included in these amounts is imputed interest of $94,951.
<PAGE>
10. SHARE CAPITAL
<TABLE>
<CAPTION>
Authorized
<S> <C>
100,000,000 common share's 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>
The following changes occurred in share capital:
<TABLE>
Common shares
Issued and outstanding
<CAPTION>
1998 1997
Number of Number of
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balance, beginning of year 12,245,156 $7,078,428 11,229,065 $6,699,998
Issued during the year
For cash, pursuant to the
exercise of stock options 243,000 118,920 647,255 242,070
For cash, pursuant to the
exercise of warrants - - 116,000 34,800
For cash, pursuant to
private placement 250,000 125,000 150,000 45,000
For settlement of debt - - 102,836 56,560
For payment of dividend
on Class A preferred
shares, Series 1 96,908 47,970 - -
__________ _______ _________ _______
589,908 291,890 1,016,091 378,430
Acquired during the year (20,000) (8,000) - -
Balance, end of year 12,815,064 $7,362,318 12,245,156 $7,078,428
Balance, beginning of year 530 $ 530,000 265 $ 265,000
Issued during the year for cash - - 265 265,000
Balance, end of year 530 530,000 530 530,000
</TABLE>
Each class A preferred share Series I carries a 12%, cumulative dividend payable
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, 1998 amounted to $64,039.
The Series I preferred shares are covertible into common shares at the rate of
one common share for each $3 of paid up capital or the rate provided below:
(i) $2.50 at any time after December 31, 1997, provided that the Current Trading
Price shall never have exceeded $2.99 after December 31, 1996;
(ii) $2.00 at any time after December 31, 1998, provided that the Current
Trading Price shall never exceeded $2.99 after December 31, 1996 or $2.49
after December 31, 1997;
(iii) at any time after December 1, 1999, provided that the Current Trading
Price shall never have exceeded $2.99 after December 31, 1996 or $2.49
after December 1, 1997 or $1.99 after December 31, 1998, at a common share
price equal to that price which represents a 15% discount to the then
Current Trading Price, which common share price in no event shall be less
than $0.95;
But if not so coverted prior to May 12, 2000, such Series I preferred shares
shall be deemed to have been converted on May 12, 2000 at the applicable
conversion price described above. The Current Trading Price means the average
trading price of the common shares on a recognized public stock exchange for the
preceeding 20 business days.
On March 31, 1998, the following stock options were outstanding:
<TABLE>
<CAPTION>
No. Of Shares Exercise Price Expiry Date
<S> <C> <C> <C>
Directors 145,000 $0.50 June 13, 1999
152,500 0.52 June 16, 1999
145,000 0.50 June 13, 1999
77,500 0.52 June 16, 1999
100,000 0.50 September 2, 1999
150,000 0.50 September 2, 1999
Officers 240,000 0.50 April 10, 1999
Employees 20,000 0.52 June 16, 1999
</TABLE>
On March 31, 1998, 250,000 warrants were outstanding. The warrants entitle the
holder to purchase 250,000 common shares at an exercise price of $0.60 per share
and expire August 18, 1998.
<PAGE>
11. INCOME TAXES
The Company has losses available for utilization against future years' taxable
incomes which, if unused, will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 276,415
2000 296,801
2001 1,089,726
2002 658,014
2003 710,475
2004 599,008
2005 649,840
</TABLE>
12. LEASES
The minimum annual rental commitments for operating leases in effect at March
31, 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 47,832
2000 47,832
2001 27,480
2002 1,627
</TABLE>
13. RELATED PARTY TRANSACTIONS
Related party transactions not otherwise disclosed in these consolidated
financial statements are:
(a) Professional fees include $10,000 paid to a company owned by a director of
the Company.
(b) As of March 31, 1998, accounts receivable include $7,658 receivable from
N.C.K. Holdings Inc., a company owned by two directors and $3,278
receivable from Fulcrum Developments Ltd., a company related by two
directors in common.
14. SUBSEQUENT EVENTS
The following share transactions took place subsequent to the year end:
(a) Issued 777,777 common shares for gross proceeds of $350,000 pursuant to the
conversion of debt (Note 8).
(b) Issued 1,000,000 units for gross proceeds of $400,000. Each unit consists
of one common share and one non-transferable share purchase warrant. Each
warrant entitles the holder to purchase one common share at $0.40 on or
before April 23, 1999, or at $0.46 on or before April 23, 2000.
(c) Issued 119,608 warrants to the person acting as guarantor on a capital
lease. Each warrant entitles the holder to purchase one common share at
$0.40 on or before March 20, 1999, or at $0.46 on or before March 20, 2000.
15. CONTRACTUAL OBLIGATIONS
(a) Pursuant to an agreement dated March 20, 1998, which is subject to
regulatory approval, the Company committed to pay a bonus to a third party
for a guarantee of a capital lease. The capital lease is $374,958 (Note 9).
The bonus is payable in monthly installments of $2,392 commencing April 20,
1998 up to a maximum of $23,920 and can be canceled if the Company can
obtain a release of the guarantee. In addition the Company must issue
119,608 share purchase warrants (Note 14(c)). The warrants will expire
within 30 days of the Company obtaining a release of the guarantee.
(b) Pursuant to an agreement dated December 20, 1989 with N.C.K. Holdings Inc.,
as part of the consideration for a licence, the Company has made a
commitment to issue up to 3,000,000 common shares of its capital (the
"performance shares") based upon certain performance criteria.
16. CONTINGENT LIABILITIES
Should sales of racks not meet expectations, the Company is liable for the cost
of the molds, the balance of which was approximately $30,000 at March 31, 1998.
17. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(a) Generally accepted accounting principles ("GAAP") used in the United States
of America differ in certain respects from GAAP used in Canada. A
difference that materially affects these consolidated financial statements
is that United States GAAP require deferred development costs be expensed
as incurred whereas Canadian GAAP allows these expenses to be deferred and
amoritzed. Had the consolidated financial statements been prepared in
accordance with United States GAAP as described above, the following
changes would have been made:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Total assets-Canadian GAAP $1,364,297 $ 892,598 $ 969,860
Deferred Development costs 33,350 48,172 62,994
Total assets-United States GAAP 1,330,947 884,426 906,866
Shareholders' equity-Candaian GAAP 61,201 463,834 495,537
Deferred development costs 33,350 48,172 62,994
Shareholders' equity-United States GAAP 27,851 415,662 432,543
Net loss-Canadian GAAP 638,553 675,133 912,390
Amortization of deferred development costs 14,822 14,822 14,822
Net loss-United States GAAp 623,731 660,311 897,568
</TABLE>
<PAGE>
(b) United States GAAP require non-cash investing and financing activities to be
excluded from the consolidated statements of changes in financial position,
whereas Canadian GAAP require these activities to be included in the
statement. Had the consolidated statement of changes in financial
position been prepared in accordance with U.S. GAAP the following
transactions would have been excluded:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Liabilities settled by issue of company shares $ - $56,560 $ -
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Basic loss per share calculated in accordance
with U.S. GAAP is: $(0.05) $(0.06) $(0.09)
</TABLE>
<PAGE>
Hay & Watson Chartered Accountants
Auditors' Report
To the Shareholders
Cryopak Industries Inc.
We have audited the consolidated balance sheets of Cryopak Industries Inc. as at
March 31, 1998 and 1997 and the consolidated statements of loss and deficit and
of changes in financial position for each of the years in the three year period
ended March 31, 1998. 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 audit.
We conducted our audit 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 positions of the company as at March 31, 1998
and 1997 and the results of its operations and the changes in its cash flows;
for each of the years in the three year period ended March 31, 1998 in
accordance with accounting principles generally accepted in Canada. As required
by the Company Act of British Columbia, we report that, in our opinion, these
principles have been applied on a consistent basis with that of the preceding
year.
Chartered Accountants
Vancouver, BC
June 25, 1998
<PAGE>
Hay & Watson CHARTERED ACCOUNTANTS
26 August 1997
Messrs. Harry Bydgnes and Leigh Jeffs
Cryopak Industries Inc.
1120 - 625 Howe Street
Vancouver, B.C. V6C 2T6
Dear Sirs:
During our examination of the consolidated financial statements of Cryopak
Industries Inc. for the year ended March 31, 1997, we reviewed the existing
system of accounting procedures and internal control and such review indicated
certain areas which we believe should be brought to your attention. We have also
recommended certain changes to achieve consistent application of accounting
policies adopted by the company.
1. INVENTORY
During our examination we found that there were no records of the inventory kept
at the various locations. In addition, no one had arranged for inventory counts
to be done at year-end although previously advised by us to do so. The lack of
proper records has caused the company to run out of inventory and to buy back
inventory from customers in order to fill other customers' orders. This causes
the company to lose its profit margin on the sale as well as showing the company
at a disadvantage. On an ongoing basis, sales staff and the receptionist should
call the storage companies to know if they can fill orders and therefore avoid
delays and poor customer relations.
The value of inventory at year-end is essential to the preparation of financial
statements, and deficiencies in that area may result in a qualified audit
report. A proper recording system for inventory is essential and must be
established immediately. All shipments in and out of the out of the outside
warehouses must be supported by a written confirmation including the date of the
shipment.
The company's inventory records should be compared with the quantities reported
by the storage companies periodically. A count at year-end must be performed and
reconciled to your record.
1822 West 2nd Avenue, Vancouver, B.C. V6J 1H9 e(604) 732-1466 Fax (604) 732-3133
The overall responsibility for the inventory should be assigned to a responsible
and knowledgable staff member. It should not be given to staff with no
accounting training or experience.
During the course of the audit, we have discussed the implementation of an
adequate temporary system on a computer spreadsheet with Laila. However the
company would benefit from the full integration of its invoicing and inventory
systems with its accounting system. We are available to further discuss and help
with the implementation of such a system.
2. EXPENSE ALLOCATION AND TAX PLANNING
Various expenses such as rent, telephone, promotion and advertising, salaries,
office expenses, insurance, and professional fees, are common to Cryopak
Industries Inc., Cryopak (Canada) Corporation and Cryopak (International) Ltd.
Currently, the majority of the expenses are allocated to Cyropak Industries Inc.
However, the operations of the group are recorded in Cyropak (Canada)
Corporation and will eventually result in taxable income. To ensure that full
advantage is taken of all expenses and that no losses carried forward are lost
due to expiry, management should start to review the allocation of expenses. In
addition, we recommend that the tax implications of U.S. and worldwide
operations be reviewed periodically.
3. PRICE LISTING
During our testing of sales invoices, except for the agreement with Unisource,
no official price list for the company's products was kept in the office. As a
result we were unable to trace whether the unit prices on the sales invoices
were accurate. A current price list should be kept in the office to ensure
standard and accurate pricing was given to customers. Special pricing and
discounts should be approved and initialed by an authorized person.
4. EXERCISE OF STOCK OPTIONS
During our review of share capital transactions, it was noted that when stock
options are exercised by members of management cash is not always received prior
to the issue of the shares. It is a contravention of the Company Act of British
Columbia to issue shares prior to receiving payment in full. In addition, stock
options exercised by employees were paid by way of loans advanced to the
employees. These loans were not secured by promissory notes or other such
documents.
5. MANAGEMENT FEES
Currently there are no contracts or invoices which indicate what management
remuneration is. We recommend that management remuneration be properly
documented.
<PAGE>
6. PETTY CASH
Currently, no control is in place over the petty cash. The company does not
record the detail expenditure included in each petty cash disbursement.
Therefor, even though the company keeps all its petty cash receipts, we are
unable to trace the receipts back to the petty cash expenses in the general
ledger.
7. EXPENSES PAID BY CREDIT CARD
During our tests of expenses, we found that both personal and business credit
cards were used to pay for business expenses and that personal expenses were
charged to the business credit cards as well as personal credit cards. In
addition, some of the credit card payments made by the company and applied to
the personal credit card were not properly supported by expense reports and
invoices.
We recommend that business expenses be paid with business credit card only so as
to be easily distinguished from the personal expenses. If some business expenses
have to be paid by personal credit card, then those expenses should be
documented on an expense report supported by proper receipts. We also recommend
that personal expenses be charged to personal credit cards only.
8. GST
In our sales test, we found some invoices to Canadian customers did not include
GST. Therefore, the GST collected and payable are understated, and the company
may be liable for the tax on those sales. GST is applied to all eligible goods
sold to Canadian companies even though invoices are billed in a foreign
currency.
9. SUPPORTING DOCUMENTATION
During the course of the audit, our analyses sometimes proved difficult due to
the lack of supporting documentation (e.g., invoices).
Management should ensure that supporting documentation be obtained and retained
for all company expenditures. The supporting documentation is required to
provide sufficient evidence for the audit and for future references. We
recommend that cheques only be issued when there is adequate supporting
documentation. If invoices are unavailable, then a memo providing details of the
expenditure, approved by management should be used as supporting documentation.
10. SUGAR FOOD CORPORATION INVOICES
It was noted that Sugar Food Corporation is no longer providing a detailed
listing of goods shipped out and billed to customers. They send a monthly
statement which only shows the total purchases and administration fee for the
month. As a result, we are unable to check if the unit cost billed is accurate
and what types of products are being sold.
We strongly recommend that the company require Sugar Food Corporation to report
in the same detailed manner as in the past.
We have noted improvements during the year in the recording of transactions and
performing accounting routines raised by us last year. The most significant
matter which we believe still needs to be addressed is the recording of and
control over inventory.
We would be pleased to discuss any of these comments and recommendations with
you in greater detail. We would like to thank you and your staff for your
assistance and cooperation extended during the audit. Please do not hesitate to
contact us if we may be of further assistance.
Yours very truly,
HAY & WATSON
Bruce S. Hay
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1997
AND AUDITORS' REPORT
CRYOPAK INDUSTRIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,1997 AND 1996
Auditors, Report
Balance Sheets
Consolidated Statements of Loss and Deficit
Consolidated Statements of Changes in Financial Position
Notes to Consolidated Financial Statements
Consolidated Schedules of Operating Expenses
Hay & Watson CHARTERED ACCOUNTANTS
AUDITORS' REPORT
To the Shareholders of
Cryopak Industries Inc.
We have audited the consolidated balance sheets of Cryopak Industries Inc. as at
March 31, 1997 and 1996 and the consolidated statements of loss and deficit and
of changes in financial position for each of the years in the three year period
ended March 31, 1997. 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 audit.
We conducted our audit 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
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1997
and 1996 and the results of its operations and the changes in its cash flows for
each of the years in the three year period ended March 31, 1997 in accordance
with accounting principles generally accepted in Canada, As required by the
Company Act of British Columbia. we report that, in our opinion, these
principles have been applied on a basis consistent with that of the preceding
year.
CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 27, 1997
1822 West 2nd Avenue, Vancouver, B.C. V6J IH9 (604) 732-1466 Fax (604) 732-3133
<PAGE>
Hay & Watson CHARTERED ACCOUNTANTS
COMMENTS BY 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 2 to the financial statements. Our report to the shareholders dated June
27, 1997 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.
CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 27, 1997
1822 West 2nd Avenue, Vancouver, B.C. V6J IH9 (604) 732-1466 Fax (6041 732-3133
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31 (Stated in Canadian Dollars)
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Current
Cash $ - $ 33,045
Accounts receivable 146,863 134,338
Inventory 36,779 52,183
Investments (Notes I and 3) 25,442 25,442
Prepaid expenses 15,662 9,476
Due from employees 40,118 10,218
__________ ____________
264,864 264,702
Capital assets (Notes I and 4) 50,179 51,610
Advance to related company (Note 5) 90,668 109,339
Intangibles (Notes I and 6) 486,887 544,209
__________ ___________
$ 892,598 $ 969,860
LIABILITIES
Current
Bank indebtedness 834 -
Accounts payable and accrued liabilities 375,587 416,174
Current portion of capital lease obligation 6,345 5,874
__________ ___________
$ 382,766 $ 422,048
Capital lease obligation (Note 7) 25,531 31,808
Deferred income taxes 20,467 20,467
___________ ___________
$ 428,764 $ 474,323
SHAREHOLDERS' EQUITY
Share capital (Note 8)
Issued and outstanding
12,245,156 (1996 - 11,229,065)
common shares 7,078,428 6,699,998
530 (1996 - 265) class "A"
preferred shares, Series 1 530,000 265,000
(Deficit) (7,144,594) (6,469,461)
463,834 495,537
__________ _________
$ 892,598 $ 969,860
</TABLE>
APPROVED BY THE BOARD:
DIRECTOR
DIRECTOR
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
YEAR ENDED MARCH 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Sales $1,140,242 $ 965,912 $1,053,456
Cost of sales 675,706 557,611 637,545
Gross profit 464,536 408,301 415,911
Operating expenses, Schedule 1 992,673 1,158,036 1,062,998
Operating (loss) 528,137 749,735 647,087
Other (income) expenses
Filing, listing and transfer
agent fees 17,006 26,870 21,157
Corporate printing, financial
and public relations 138,150 129,994 142,617
Loan payment as guarantor - 6,518 -
Write off of loans payable - - (11,295)
Other income ( 8,160) ( 384) ( 138)
___________ _________ _________
$ 146,996 $162,998 $ 152,341
(Loss) before income taxes ( 675,133) (912,733) (799,428)
Income taxes (recovery) - ( 343) ( 340)
Net (loss) for the year ( 675,133) (912,390) (799,768)
(Deficit), beginning of year (6,469,461) (5,557,071) (4,757,303)
(Deficit), end of year (7,144,594) (6,469,461) (5,557,071)
(Loss) per share ( 0.06) ( 0.09) ( 0.09)
Weighted average common shares
outstanding 11,691,097 10,637,948 9,280,487
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
YEAR ENDED MARCH 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flow from operating activities
Operations
Net (loss) $( 675,133) $( 912,390) $( 799,768)
Depreciation and amortization 79,564 72,984 236,623
Write off of loans payable 11,295
_____________ ____________ ____________
( 595,569) ( 839,406) ( 574,440)
Changes in other operating items
Advances to related companies ( 15,815) - -
Accounts receivable 3,290 ( 51,134) 69,278
Due from employees ( 29,900) ( 10,218) 5,240
Intangibles - ( 3,113) -
Inventory 15,404 ( 22,270) 63,364
Investments - ( 25,342) -
Prepaid expenses ( 6,186) ( 5,867) -
Accounts payable ( 40,587) 69,541 89,492
Cash used for operating activities (669,363,887) ( 887,809) (347,066)
Cash flow from financing activities
Issue of shares 586,870 992,070 315,260
Liabilities settled by issue of company
shares 56,560 - 34,000
Loans payable and capital lease obligation ( 5,806) 37,682 -
Cash provided by financing activities 637,624 1,029,752 349,260
Cash flow from investing activities
Acquisition of capital assets ( 20,811) ( 51,867) ( 14,287)
Advances (to) from related company 189,671 ( 52,367) 5,587
Cash used for investing activities ( 2,140) ( 104,234) ( 8,700)
Increase (decrease) in cash during the year ( 33,879) 37,709 ( 6,506)
Cash (bank indebtedness), beginning of the year33,045 ( 4,664) 1,842
Cash (bank indebtedness), end of year $( 834) $ 33,045 $(4,664)
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1998
(Stated in Canadian Dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada and reflect the following policies:
Basis of Presentation
- ---------------------
These consolidated financial statements include the accounts of the Company an
and its wholly-owned subsidiaries, Cryopak (International) Inc., a Barbados
corporation, Cryopak F(Mada) Corporation and its wholly-owned subsidiary Cryopak
Corporation, a Nevada corporation, and its proportionate interest (50%) in a
joint venture, Cryopak (Alberta) Corporation.
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.
Investments
- -----------
Investments are recorded at the lower of cost and market value.
Depreciation
- ------------
Capital assets are recorded at cost.
The Company records depreciation on its capital assets using the straight-line
method over five years, except for motor vehicles where the declining balance
method is used at the rate of 30% per anum.
Patent Licence
- --------------
The patent4icence 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
- ----------------
Foreign currency accounts are translated using the temporal method whereby
current assets and current liabilities are translated to Canadian dollars at
year end exchange rates, other assets and liabilities at exchange rates
prevailing at the dates of transactions, and revenue and expenses at the average
rate during the year. Gains and losses from foreign currency translation are
included in the consolidated statement of loss and deficit.
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.
CRYOPAK INDUSTRIES INC.
<PAGE>
2. OPERATIONS
These financial statements have been prepared on the assumption that the Company
is a going concern.
The ability of the Company to continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business, is dependent on obtaining the financing necessary
to continue operations and, ultimately, profitable operations.
3. INVESTMENTS
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Marketable securities -
market value at March 31,
1997 - $325
1996 - $475 $ 100 $ 100
Artwork 25,342 25,342
________ ________
$25,442 $25,442
</TABLE>
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
1997 1996
Accumulated Net Book Net Book
Cost Depreciation Value Value
<S> <C> <C> <C> <C>
Computer $ 45,617 $ 19,010 $ 26,607 $ 14,137
Furniture and fixtures 82,562 77,218 5,344 2,968
Motor vehicle under
capital lease 40,594 22,366 18,228 34,505
________ ________ ________ ________
$168,773 $118,594 $ 50,179 $ 51,610
</TABLE>
5. ADVANCE TO RELATED COMPANY
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Advance to N.C.K. Holdings Inc. $ 90,668 $109,339
</TABLE>
The related company is owned by two directors. The advance is unsecured, and is
repayable in monthly installments of $2,200 including interest of 8% per annum.
During the year the Company paid management fees of $220,000 (1996 - $220,000)
and royalties of $22,934 (1996 - $20,159) to N.C.K. Holdings Inc.
6. INTANGIBLES
<TABLE>
<CAPTION>
1997 1996
Accumulated Net Book Net Book
Cost Amortization Value Value
<S> <C> <C> <C> <C>
Incorporation costs $ 3,111 $ - $ 3,111 $ 3,111
Deferred development costs 114,017 65,845 48,172 62,994
Patent licence 566,323 224,869 341,454 374,768
Goodwill 156,155 62,005 94,150 103,336
________ ________ _________ ________
$839,606 $352,719 $486,887 $544,209
</TABLE>
7. CAPITAL LEASE OBLIGATION
<TABLE>
<CAPTION>
<S> <C> <C>
Capital lease payable,
with interest of 10.25%,
due November 1, 1999 $31,876 $37,682
Less: current portion 6,345 5,874
_______ _______
$25,531 $31,808
</TABLE>
The future minimum lease payments required are $37,143 payable as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 9,240
1999 9,240
2000 18,663
</TABLE>
Included in these amounts is imputed interest of $5,267.
<PAGE>
8. 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>
The following changes occurred in share capital:
<TABLE>
Common shares
Issued and outstanding
<CAPTION>
1997 1996 1995
Number Number Number
of of of
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning
year 11,229,065 $6,699,998 9,677,542 $5,972,928 8,966,542 $5,623,668
Issued during the year
For cash 913,255 321,870 1,551,523 727,070 661,000 315,260
For settlement
of debt 102,836 56,560 - - 50,000 34,000
_________ _______ _________ ________ _______ _______
1,016,091 378,430 1,551,523 727,070 711,000 349,260
Balance, end
of year 12,245,156 $7,078,42 11,229,065 $6,699,998 9,677,542 $5,972,928
</TABLE>
Class A preferred shares, Series I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance, beginning of year 265 $265,000 - $ -
Issued during the year for cash 265 265,000 265 265,000
Balance, end of year 530 $530,000 265 $ 265,000
</TABLE>
<PAGE>
Each class "A" preferred share Series I carries a 12%, cumulative dividend
payable 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, 1997 amounted to
$48,048.
The Series I preferred shares are convertible into common shares at the rate of
one common share for each $3.00 of paid up capital or the rate provided below:
(1) $2.50 at any time after December 31, 1997, provided that the Current Trading
Price shall never have exceeded $2.99 after December 31, 1996;
(ii) $2.00 at any time after December 31, 1998, provided that the Current
Trading Price shall never have exceeded $2.99 after December 31, 1996 or $2.49
after December 31, 1997.
(iii) at any time after December 31, 1999, provided that the Current Trading
Price shall never have exceeded $2.99 after December 31, 1996 or $2.49 after
Decemb~r 31, 1997 or $1.99 after December 31, 1998, at a common share price
equal to that price which represents a 15% discount to the then Current Trading
Price, which common share price in no event shall be less than $0.95;
but if not so converted prior to May 12, 2000, such Series I preferred shares
shall be deemed to have been converted on May 12, 2000 at the applicable
conversion price described above. The Current Trading Price means the average
trading price of the common shares on a recognized public stock exchange for the
preceding 20 business days.
On March 31, 1997, the following stock options were outstanding:
<TABLE>
<CAPTION>
Number of Exercise Expiry
Shares Price Date
<S> <C> <C> <C>
Directors 38,000 $0.44 November 7,1997
490,000 0.50 June 13, 1999
75,000 0.45 May 27,1997
96,909 0.55 August 22, 1997
100,000 0.42 April 26,1998
Officers 35,000 0.44 November 7,1997
Employees 20,000 0.45 May 27, 1997
80,000 0.40 January 12,1999
</TABLE>
9. INCOME TAXES
The Company has losses available for utilization against future years' taxable
incomes which, if unused, will expire as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 274,933
1999 276,415
2000 296,801
2001 1,089,726
2002 658,014
2003 710,475
2004 599,008
</TABLE>
10. LEASES
The minimum annual rental commitments for operating leases in effect at March
31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $17,570
1999 10,570
2000 10,570
2001 1,627
2002 1,627
</TABLE>
11. RELATED PARTY TRANSACTIONS
Related party transactions not otherwise disclosed in these consolidated
financial statements are:
(a) Professional and consulting fees include $15,540 and $23,500, respectively,
paid to Discovery Capital Corporation, the president and non-controlling
shareholder of which is a director of the Company. As of March 31, 1997, $14,142
was payable to Discovery Capital Corporation.
(b) As of March 31, 1997, accounts receivable include $12,446 receivable from
N.C.K. Holdings Inc., a company owned by two directors, and $3,278 receivable
from Fulcrum Developments. Ltd., a company related by two directors in common.
12. SUBSEQUENT EVENTS
The following events occurred subsequent to the year end:
(a) The following common shares were issued pursuant to the exercise by
directors of share purchase options:
<TABLE>
<CAPTION>
Date of exercise Number of Exercise Total
Shares Price Proceeds
<S> <C> <C> <C>
April 30, 1997 38,000 $0.44 $ 16,720
June 16, 1997 60,000 0.50 30,000
</TABLE>
<PAGE>
(b) The following share options were issued after the end of the year:
<TABLE>
<CAPTION>
Number of Exercise Expiry
Shares Price Date
<S> <C> <C> <C>
Employee 240,000 $0.50 April 10, 1999
Directors (1) 230,000 0.52 June 16, 1999
Employee (1) 20,000 0.52 June 16, 1999
</TABLE>
(1) subject to regulatory approval
13. CONTRACTUAL OBLIGATIONS
Pursuant to an agreement dated December 20, 1989 with N.C.K. Holdings Inc., as
part of the consideration for a licence, the Company has made a commitment to
issue up to 3,000,000 common shares of its capital (the "performance shares")
based upon certain performance criteria.
The issue of the shares is subject to regulatory approval which to date has not
been sought.
14. CONTINGENT LIABILITIES
(a) Should sales of racks not meet expectations, the Company is liable for the
cost of the moulds, the balance of which was approximately $30,000 at March 31,
1997.
(b) A company has filed a complaint against the Company in respect of the use of
a registered trademark. The outcome of the claim is not determinable.
<PAGE>
15. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Generally accepted accounting principles ("GAAP") used in the United States of
America differ in certain respects from GAAP used in Canada. A difference that
materially affects these consolidated financial statements is that United States
GAAP require deferred development costs be expensed as incurred whereas Canadian
GAAP allows these expenses to be deferred and amortized. Had the consolidated
financial statements been prepared in accordance with United States GAAP as
described above, the following changes would hive been made:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Total Assets - Canadian GAAP $892,598 $969,860 $789,332
Deferred development costs ( 48,172) ( 62,994) ( 77,816)
Total Assets - United States GAAP $844,426 $906,866 $711,516
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Shareholders' equity -
Canadian GAAP $463,834 $495,537 $415,857
Deferred development costs ( 48,172) ( 62,994) ( 77,816)
Shareholders' equity -
United States GAAP $415,662 $432,543 $338,041
1997 1996 1995
Net Loss - Canadian GAAP $675,133) (912,390) (799,768)
Amortization of deferred
development costs 14,822 14,822 187,045
Net Loss - United States GAAP $(660,311) $(897,568)$(612,723)
</TABLE>
(b) United States GAAP require non-cash investing and financing activities to
be excluded from the Consolidated Statements of Changes in Financial Position,
whereas Canadian GAAP require these activities to be included in the Statement.
Had the Consolidated Statement of Changes - in Financial Position been prepared
in accordance with U.S.GAAP the following transactions would have been excluded:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Liabilities settled by issue of company shares $56,560 $ - $34,000
</TABLE>
(c) Basic loss per share calculated in accordance with U.S. GAAP is:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
0.06 0.09 0.07
</TABLE>
<PAGE>
CRYOPAK INDUSTRIES INC.
CONSOLIDATED SCHEDULES OF OPERATING EXPENSES
YEAR ENDED MARCH 31
(Stated in Canadian Dollars)
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Bad debts 7,245 $ 32,668 $ 28,731
Commissions 884 3,681 9,110
Depreciation and amortization 79,564 72,984 236,623
Foreign exchange 1,355 2,867 33,228
Interest and bank charges 16,549 11,435 16,178
Interest on capital lease
obligation 3,434 1,156 -
Management fees and commissions 220,000 220,000 210,000
Marketing 87,337 173,157 46,222
Office supplies and stationery 58,197 54,587 49,781
Professional fees 74,399 155,698 75,088
Rent 52,459 48,576 47,838
Royalties 44,903 30,239 26,584
Salaries and benefits 117,960 122,610 146,677
Storage 9,899 8,362 16,751
Telephone 50,748 41,899 46,662
Travel 155,138 167,284 64,460
Vehicle 12,602 10,833 9,065
________ __________ __________
$992,673 $1,158,036 $1,062,998
</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 1 Private Placement Memorandum*
Exhibit 3
Exhibit 3.1 Articles of Incorporation - Cryopak Industries Inc.*
Exhibit 3.2 Articles of Amendment*
Exhibit 3.3 Articles of Incorporation - B.C., Ltd.*
Exhibit 3.4 Articles of Incorporation - Consort Energy Corp.*
Exhibit 10
Exhibit 10.1 Consulting Agreement*
Exhibit 10.2 Client Agreement*
Exhibit 10.3 Lease Agreement*
Exhibit 10.4 Letter of Intent for purchase of Northland
Exhibit 23
Exhibit 23.1 Consent of Independent Auditor
Exhibit 27 Financial Data Schedule
Exhibit 99
Exhibit 99.1 Patent*
Exhibit 99.2 Certificate of Name Change*
Exhibit 99.3 Discussion of Physics of the Product
Exhibit 99.4 University of British Columbia Evaluation
Exhibit 99.5 Inchcape Testing Evaluation
Exhibit 99.6 Abbott Labs Evaluation
Exhibit 99.7 SmithKline Beecham Evaluation
Exhibit 99.8 Northwest Airlines Evaluation
* signifies exhibit previously submitted
<PAGE>
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
This offering statement has been signed by the following persons in the
capacities and on the dates indicated.
/s Harry Bygdnes 3/24/00
- ---------------- -------
Harry Bygdnes, Director Date
/s/ Robert Leigh Jeffs 3/24/00
- ---------------------- -------
Robert Leigh Jeffs, Director Date
/s/ Douglas R. Reid 3/24/00
- ------------------- -------
Douglas R. Reid, Director Date
/s/ Ross G. Morrison 3/24/00
- -------------------- -------
Ross G. Morrison, Director Date
/s/ John F. Morgan 3/24/00
- ------------------ -------
John F. Morgan, Director Date
/s/ John A. McEwen 3/24/00
- ------------------ -------
John A. McEwen, Director Date
<PAGE>
AGREEMENT IN PRINCIPLE
CRYOPAK INDUSTRIES INC.
Suite 1120-625 Howe Street
Vancouver, B.C. V6C 2T6
September 15, 1999
Charn and Lisa Rai
913 Henley Street
New Westminster, B.C.
V3M 4B9
Dear Mr. and Mrs. Rai:
RE: PURCHASE OF NORTHLAND ICE-GEL INC. AND NORTHLAND CUSTOM PACKAGING INC.
(COLLECTIVELY ("NORTHLAND")
This is to inform you that we have reached an agreement in principle in respect
of our purchase from you of your 100% equity interest in Northland. The basic
terms are as follows:
1. You will sell your 100% equity interest to us.
2. We will pay $2,000,000 in cash to you and assume up to $200,000 of
Northland debt; but if the debt is less than $200,000 we will pay in cash
the corresponding amount to you.
3. We will issue 667,000 common shares to you at a deemed value of $0.75 per
share.
4. We will also issue 500,000 performance escrow shares to you at a deemed
value of $0.75 per share, such shares to be released from escrow at the
rate of 100,000 shares per year based upon Northland achieving a minimum
$700,000 EBITDA per year.
5. Northland will enter into a 5 year employment contract with Mr. Rai. He
will receive an annual salary of $100,000 and a bonus at the end of year 1
eaqual to 25% of EBITDA above $700,000. The bonus structure in years 2-5 is
to be negotiated at the beginning of year 2 and will be subject to mutual
agreement. He will maintain his club membership and leased car. We will
grant incentive stock options to him in respect of 250,000 common shares,
which will vest at the rate of 50,000 per year.
6. Northland will also enter into a 5 year employment contract with Raj Gill.
He will receive an annual salary of $60,000 and will also receive a bonus
to be determined. He will maintain his club membership and leased car. We
will grant incentive stock options to him in respect of 100,000 common
shares, which will vest at the rate of 20,000 per year.
<PAGE>
2
7. This agreement in principle is to be replaced as quickly as reasonably
possible with a binding formal purchase agreement. We will pay a $50,000
deposit to you on the signing of the purchase agreement. This deposit will
be non-refundable in the event that we are at fault for failing to close
this purchase.
8. The purchase agreement will be subject to satisfactory due diligence by us
and to the approval of the Vancouver Stock Exchange. It will also be
subject to us obtaining a valuation of Northland for a minimum of
$3,000,000 in a form acceptable to the Vancouver Stock Exchange.
9. The purchase agreement will clarify your respective ownership interests in
Northland as well as the allocation of the aforesaid cash and shares.
Kindly confirm that the foregoing accurately reflects the terms of our agreement
in principle by signing where indicated below. We will then immediately initiate
the process of drafting the formal purchase agreement.
Yours truly
Cryopak Industries, Inc.
Per: /s/ Harry Bygdnes
-----------------
Harry Bygdnes, President
Confirmed as of the above date:
/s/ Charn Rai
- -------------
Charn Rai
/s/ Lisa Rai
- ------------
Lisa Rai
HAY & WATSON
CHARTERED PUBLIC ACCOUNTANT
January 18, 1999
CONSENT OF INDEPENDENT AUDITOR
As the independent auditor for Cryopak Industries, Incorporated, I hereby
consent to the incorporation by reference in this Form 20F Statement and any
amendments thereto of my report, relating to the financial statements and
financial statement schedules of Cyropak Industries, Incorporated for the years
ended Narch 31, 1999, 1998 and 1997 included on Form 20F and amendments. Reports
are dated June 11, 1999 for the year ended March 31, 1998.
I further consent to the incorporation of my review report and financial
statements by reference in the Form 20F and amendments thereto. These statements
cover the period for March 31, 1999 and 1998 (report date of June 11, 1999).
/s/ Hay & Watson
----------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 640,299 3,417
<SECURITIES> 75 25,442
<RECEIVABLES> 360,783 217,677
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 429,652 416,945
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,036,700 1,364,297
<CURRENT-LIABILITIES> 276,966 532,440
<BONDS> 0 0
0 0
530,000 530,000
<COMMON> 9,682,451 7,362,318
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 2,036,700 1,364,297
<SALES> 1,295,159 1,161,442
<TOTAL-REVENUES> 0 0
<CGS> 746,285 763,018
<TOTAL-COSTS> (782,539) (539,951)
<OTHER-EXPENSES> 129,529 98,602
<LOSS-PROVISION> (912,068) (638,553)
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (912,068) (638,553)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
CRYOMAT THE "ULTIMATE" REFRIGERANT
FOR SHIPPING PERISHABLE PRODUCTS
To understand the problems related to the shipping of any type of perishable
product one must have a basic understanding of what we are trying to accomplish.
Ideally we want to ship our products at a predetermined cold temperature and
maintain that temperature consistently throughout the product for the duration
of the transit time.
The three major factors in achieving this are as follows:
1) Insulation quality of shipping containers 2) Refrigerant or "amount
of cold" initiated into the container 3) Effective distribution of
refrigerant within container
Please read the following brief description of basic physics as they apply to
shipping of perishables.
Temperature Control in Perishable Goods Shipping Containers
Of primary concern in delivering perishables of optimum quality to distant
markets is the maintenance of near freezing temperature in the container.
Once the product has been prechilled to near freezing the challenge is to
prevent heat from re-entering the product.
Heat can be transferred by three primary mechanisms:
1) Radiation
2) Convection
3) Conduction
1. Radiation Energy
- --------------------
Is transmitted as electro magnetic waves which causes heating as they are
absorbed. The heat from a campfire or from sunlight is primarily radiant energy
which is absorbed by your body as heat. A mirrored surface has the ability of
reflecting radiant energy. A dark colored container will absorb. more radiant
energy than will a light colored container. Foil placed as a liner inside a
container will prevent radiant energy from entering the container, but will
allow the cardboard, styrofoam etc. to absorb the radiant energy and convert it
to conducted heat which will then pass through the foil barrier into the
product. Foil should be placed as closed to the outside of the container as
possible.
[DIAGRAMS DELETED]
<PAGE>
2. Convection Heat
- -------------------
Transfer is caused by air movement across the surface of a material. Warmer air
passing across a cooled product will warm the product faster than if there were
no air movement. Containers should therefore be shrouded or stored in areas of
minimum air movement. Convection can also occur within a shipping container.
Cold air is heavier than warm air therefore uneven refrigerant placement (ie.
Gel Packs) can create internal air movement to create convection current which
will transfer a warmth from the container to the product. This can create
localized warm spots in the product.
3. Conduction of Heat Energy
- ------------------------------
The rate of conduction of heat through a material is determined by the density
and thickness of the material. All materials conduct heat at different rates
which are measured as the "K" value of that material:
K = BTU x inches
------------
hr. x ft2 x F
BTU = British Thermal Unit
Or, the amount of heat that passes through one square foot, I inch thick, of a
material in one hour for every degree (F ) temperature difference between both
sides of the material.
Therefore, to keep a product cool in a container we should select a container
(or insert) that has a low "K" value and is as thick as possible. Insulation is
more commonly rated by its "R" value which is the reciprocal of K. Higher "R"
values offer more insulation.
R = 1
--
K
If a shipping container is silvered to reflect heat waves and internal voids
(air spaces) are kept to a minimum to prevent convection heat gain, then the
primary reason for heat gain during shipping will be through conduction.
Example
If a box contains 40 pounds of fish at 32 degrees F then the amount of heat
energy (Q) necessary to warm the fish l0 degrees to 42 degrees F is
Q = MCT
= 40 lbs x 1 BTU (42- 32) degrees F
---------------------------------
degrees F x lbs.
= 400 BTU
M = Mass of Fish
C = 1 BTU/degree F * l lb.
T = temp. change
<PAGE>
This means that 400 BTU's of heat must enter the container to effect an overall
temperature increase of 10,DF. The shipper must know how long this transfer will
take under typical shipping conditions. Assuming an average ambient (outside)
air temperature at 76 F the time required for this transfer can be estimated as
follows:
T = Q
----
KADT
T = Time (hours) Q = Heat
Energy (BTU) K = A constant
of conductance A = Surface
area of box(ft2)
DT = (76 degrees F - 36
degrees F) = 40 degrees F
For simplification T is averaged at 36 degrees F, the difference between initial
and final temperature. If the fish box is made of 3/4" styrofoam:
K = I /R x W = 1/ 3.6 x 3/4" = .37
and has an outside dimension of V x 2' (area l0 ft squared) then
T = 400 BTU = 2.7 hours
--------------
.37 K x l0ft2 x 40 degrees
Our brief study of basic physics has shown us that a 3/4" styrofoarn fish box
containing prechilled salmon alone will only maintain a temperature below 420F
for a time of approximately three hours if the outside temperature is 760F. For
most shippers this is not adequate.
How do we physically increase the time life of the product in the container?
1) Double the thickness of the container. This would effectively double the time
for heat transfer. In general, this solution is not economical!
2) We can add cold to the box thereby delaying the temperature in the
containers.
There are three basic methods of increasing cold in the container:
A) adding ice
B) adding gel packs
C) using Cryomat!!
A. ICE
Although ice is considered desirable historically it is now being banned by many
of the airlines throughout the world. Ice is messy and is a constant problem due
to leakage and product saturation.
B. GEL PACKS
Although Gel Packs undoubtedly add a certain amount of "cold" to the shipping
container their weight to surface area of contact is extremely poor. 1 1/2 lbs
of Gel Pack covers approximately 1/4 square feet. Gel Packs provide cold "spots"
in the container but temperature variations of up to 100F can be found
throughout the product. Convection warming will occur due to these temperature
differences. Warming will occur due to these temperature differences. Conduction
heat loss occurs more readily where product contacts container. This leads to
uneven cooling (or warming) of the packaged product.
<PAGE>
C. CRYOMAT
Cryomat provides an ice blanket which is flexible after frozen. Cryomat provides
point contact over a wide area (1 lb. of Cryomat covers approximately I square
foot) for maximum cooling Cryomat can be wrapped around the product thereby
creating a thermal blanket between the product and the container wall. In this
case the product will be kept at a constant 32 - 340F until all of the Cryomat
has melted. This is particularly important since differential temperature could
cause rapid bacterial growth.
Now that we have introduced the basic principles involved in shipping
perishables we will show why Cryomat is proving to be the ultimate product for
shipping perishables.
Example #1
Cryomat can wrap around (Gel Paks can't)
[DIAGRAM] Some protection but localized contact and convection
causes local warm spots. Temperature differential of
6 - 10 degrees can occur in product.
Heat gain through container immediate to product.
[DIAGRAM] No convection - equal cooling
Product will stay cool evenly until layer has melted.
Cryomat acts as a total heat barrier until completely
melted.
Area Contact is Important for Uniform Cooling Effect
5 lbs. of Gel Pak contacts approximately 1 ft2 of product each about the same
total BTU's
5 lbs of Cryomat contact approximately 5ft2 of product
<PAGE>
Example #2
Cryomat can be layered (Gel Paks can't)
[DIAGRAM] - No convection
- Even cooling
- Layering confines cold
Cryopak can be cut into strips as belly icers for seafood shipping.
Cryomat can be layered over entire pallets making it ideal for berry shippers.
[DIAGRAM] - Product inside
- Cryomat surrounding it outside
- Heat shielding pallet cover on top
Cryomat stays in place and does not end up in one comer of the shipping
container.
Subject: Initial tests of the performance of Cryopak mat refrigerant in
insulated shipping boxes (April 1987)
Submitted to: Mr. Leigh Jeffs, Cryopak Corporation, #1120-625
Howe Street, Vancouver, B.C.
Submitted by: I.J. Britt, P.Eng. and G.F. Morello, B.Sc., Department of Food
Science, University of British Columbia. #2482357 Main Mail, Vancouver, B.C.
Objective: This study was initiated to perform initial experiments to determine
the effectiveness of two packing configurations of Cryopak matting refrigerant
in 50 pound insulated salmon shipping boxes and compare it to an equivalent mass
of gel-pack refrigerant.
Test Procedures: Two experiments were performed using Cryopak mat (1 lb mat with
6ml pillows) and one using gel-packs. Two packing configurations were used for
the Cryopak mat, 7.5 lb of mat in 3 layers at the top of the box and 7.5 lb in a
single layer completely lining the inside surface of the box. The gelpack, five
1.5 lb bricks, was placed in the four corners and the centre at the top of the
box. The corrugated paperboard box was approximately 18 X 29 X 8 inches and
lined with 0.25 inch thick R-15 insulation. A plastic tote liner was placed
inside the box prior to packing.
Temperatures were measured using copper/constantan thermocouples (type TT-T-24,
Omega Engineering Inc., Stamford, CT) with fused sensing junctions and
calibrated against a Kaye Icepoint ,Reference (Kaye Instruments Inc., Bedford,
XA). Temperature measurements were recorded on a Kaye Ramp II Scanner/Processor
data logger and stored on digital tape (Columbia Data Products Inc., Columbia,
MD) for subsequent computer analyses.
Six thermocouples were attached to the outer surfaces of the box and 11 were
attached to the surfaces of the fish as shown in figure I and 2. In each
experiment 14 dressed. whole spring salmon weighing a total of approximately 50
lb were used. The fish were chilled in a brine slush to lower their temperature
to a target of 28 degrees F, then placed in the test box with tail sections
overlapping and heads orientated towards the ends of the box. The ice packs were
frozen for a minimum of 24 hours in a minus 15 degree F walk-in freezer pricr to
being placed in the box. After closing, the box was exposed on all surfaces in a
room exhibiting relatively constant temperature histories. The experiments were
terminated after the surface temperature of the fish exceeded 42 degrees F.
<PAGE>
Test Results: Two criteria were chosen to evaluate the treatments: 1) the time
until the mean temperature of the fish, as sensed by the thermocouples attached
to their surface, exceeded 40 degrees F. and 2) the time until one of those
temperatures exceeded 40 degrees F. The results together with the ambient
temperature are presented in Table 1. An analysis of variance of the results of
each experiment was performed to substantiate whether there was a statistically
significant difference amongst the treatments. Data recorded at 470, 480 and 490
minutes were pooled for each treatment and compared, Treatment 3, the box lined
with Cryopak mat, was significantly (p<0.05) different from Treatment 1, Cryopak
mat on top of the product, and Treatment 2, gel-pack on top of the product,
Treatments 1 and 2 were not significantly different (p<0.05). These results
indicate that the best results were achieved by lining the box with Cryopak mat.
<TABLE>
Table 1: Summary of Experimental Results of Fish Surface Temperatures
---------------------------------------------------------------------
<CAPTION>
Treatment Time Until Mean Time Until One Mean Ambient
Temperature >40F Temperature >40F Temperature
(min) (min) (degrees F)
- --------- ----- ----- -----------
<S> <C> <C> <C>
Cryopak on 880 350 71.5
top
Gel-pak on 860 250 71.3
top
Cryopak 1170 950 73.6
</TABLE>
A divided listing of the experimental results showing the individual temperature
readings and the mean and standard deviation of the readings at each time step
are appended. Ore thermocouple on the fish surface malfunctioned and was deleted
from the analyses. Thermocouple Number 7 in the output cf surface temperatures
was a measurement of the ambient temperature.
<PAGE>
oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo
o x9 x1 x7 o
o o
o o
o x3 x 5, 6 x 4 o
o o
o o
o x 10 x 2, 8 o
oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo
Plan View
---------
oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo
o x6 o
o x3 x 9, 10 x8 x7 x4 o
o o
o x 1, 2 o
o x5 o
oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo
Front Elevation
---------------
Figure 2: Location of thermocouples on the surfaces of the fish.
<PAGE>
CRYOPAK UBC TEST RESULTS
Fish Surface Temperatures
M 55
e
a 50 G
n G
45 G
T G C
e 40 C
m G C
p 35 C G C
e C C C C
r 30 G
a
t 25
u
r -------------------------------------------------------------
e 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
C Cryopak
G Gel-Pak
<PAGE>
Inchcape Testing Services Telephone (604) 520-3321
Warnock Hersey
211 Schoolhouse Street, Coquitlam, B.C. V3K 4X9 Canada Fax (604) 524-9186
Report of: Product Evaluation
At: Coquitlam Laboratory Date: Aug. 23/95
Project: 488-5011 Report No. 1/95
Reported to: Cryopak Corporation Order No.: L04506
1120-625 Howe Street
Vancouver, BC Page: 1 of 3
V6C Z176 Attention: Mr. Don Easterbrook
INTRODUCTION
At the request of Cryopak Corporation, Inchcape Testing Services/Warnock Hersey
has conducted a temperature study on salmon packaged in styrofoam boxes for
overseas shipment. Five separate tests were conducted for a period of up to 48
hours with constant temperature monitoring.
The purpose of the study was to determine the optimum combination of cooling
packs, placement aud number of cooling packs and ambient temperature to keep the
packages under 55 degrees F. Parameters set by Cryopak were: 55 degrees F or 48
hours, whichever came first.
Each scenario utilized six thermocouples in the centre of each face of the
styrofoam box. The the thermocouples were placed on the internal surface of each
face.
Note:Thermocouple #6 was placed at the bottom of each box and represents the
temperature of the fish.
The five test scenarios were as follows.
Test #1
Ambient temperature: 73.4 degrees F
Test condition: 1 Cryomat on top of fish
Test # 2
Ambient temperature: 73.4 degrees F
Test condition: 2 Cryomat on top of fish
Test #3
Ambient temperature: 73.4 degrees F
Test condition: 2 Cryomats on top of fish, 1 Cryomat on
bottom
<PAGE>
Cryopak Corporation Aug. 23/95
Report No. 1/95 Page 2 of 3
INTRODUCTION - Continued
Test # 4
Ambient temperature: 73.4 degrees F
Test condition: 1 Crypack at each end of fish
Test # 5
Ambient temperature: 50 degrees F
Test condition. 2 Cryomats on top of fish
PRODUCT TESTED
Cryomat Thermal Ice Blanket - 16.5 inch x 8.5 inch
Solution consists of: Neutral PH distilled and/or deiodized water and other
materials certified by the USFDA and Canadian Agriculture accepted as food grade
chemicals.
Typical Gelpacks.
SUMMARY/CONCLUSION
Test #3 was found to be the optimum combination as shown on the corresponding
graph. The time taken to reach 55 degrees F was 30 hours.
Test #5 was conducted at an ambient temperature of 50 degrees F and therefore
would not realistically be expected to reach 55 degrees F. After 24 hours the
temperature of the fish was 40 degrees F, which is a rise of 3 degrees F from
test initiation.
One of the gelpacks of Test #4 was still partially frozen after 48 hours
although thermocouple #6 had attained a temperature of 60 degrees F.
<PAGE>
Cryopak Corporation Aug. 23/95
Report No. 1/95 Page 3 of 3
TEST RESULTS
Test #1 22 hours - results extrapolated from graph
Test #2 23 hours
Test #3 30 hours
Test #4 14 hours
Test #5 Temperature after 24 hours was 40 degrees F
WARNOCK HERSEY PROFESSIONAL SERVICES LTD.
Tested by: /s/ Michael Hayton
------------------
Michael Hayton
Technologist
Materials Testing Division
Reviewed by: /s/ Geri Nishio
---------------
Geri Nishio
Technologist
Materials Testing Division
GN/gr
<PAGE>
TEST 1
1 Cryomat on top of Fish
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
Graph depicts range of temperatures at 20 degree intervals from 0 to 80 degrees
F and times in 5 hour intervals from 0 to 25 hours for ambient and for following
parts of box: lid, back, front, left side, right side, and bottom. Ambient marks
are fairly constant line about two-thirds of the way between the 60 degree F and
80 degree F marks. Back of box marks start about 3/4 of the way between 20 and
40 degrees, drop down slightly at the second mark and then curve upward, first
gradually to about 40 degrees F at the 5 hour mark and ending up about 3/4 of
the way to 60 degrees F at the 20 hour mark. Front of box marks start slightly
above 40 degrees F and slops upward to about 3/4 of the way to 60 degrees F at
20 hours. Left side of box marks start slightly below 40 degrees F and stay
fairly constant for the first five hours, then slope upwards (first gradually,
then slightly more steeply), ending at about 50 degrees F at 20 hours. Right
side of box marks start about 1/3 of the way between 40 and 60 degrees F and
stay fairly constant for the first five hours, then jump up to about 50 degrees
F suddenly and slope gradually upwards, ending at just above 60 degrees F at 20
hours. Bottom of the box marks start about 4/5 of the way between 20 and 40
degrees F and curve very gradually to just above 40 degrees F at the 15 hour
mark, then more dramatically, ending up about half-way between 40 and 60 degrees
F at the 20 hour mark.
<PAGE>
TEST 2
2 Cryomat on top of Fish
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
Graph depicts range of temperatures at 20 degree intervals from 0 to 80 degrees
F and times in 5 hour intervals from 0 to 25 hours for ambient and for following
parts of box: lid, back, front, left side, right side, and bottom. Ambient marks
are slighly wavering but mostly constant line about two-thirds of the way
between the 60 degree F and 80 degree F marks. Lid of box marks start at about
30 degrees F, jump up to about 3/4 of the way between 20 and 40 degrees F just
before the five hour mark, climb slowly up to about 40 degrees F just after the
10 hour mark, curve sharply up to about 1/3 of the way between 40 and 60 degrees
F at about half-way between 10 and 15 hours and then curve more slowly up to
about 3/4 of the way between 40 and 60 degrees F at just before the 25 hour
mark. Back of box marks start at just above 40 degrees F and curve slowly up to
about 1/3 of the way between 40 and 60 degrees F at the 10 hour mark, then curve
more steeply, ending up 3/4 of the way between 40 and 60 degrees F at just
before the 25 hour mark. The front of box marks start at the 40 degree mark and
stay there until just past the 5 hour mark, then climb up slowly; reaching a
point just under 3/4 of the way between 40 and 60 degrees F at just before the
25 hour mark. The marks for the left and right sides of the box both start just
above 20 degrees F and almost immediately climb up to about half way between the
20 and 40 degree F marks, where they remain constant until just after the 10
hour point, at which time the left side marks climb steadily until they reach a
point about 4/5 of the way between the 40 and 60 degree F marks at just before
25 hours, while the right side marks stay half way between 20 and 40 degrees F
until just before the 15 hour point, at which time they curve sharply up and
rejoin the left side marks, ending at a point about 4/5 of the way between the
40 and 60 degree F marks at just before 25 hours. The bottom of the box marks
start just above 40 degrees F and drop sharply down to about 2/3 of the way
between 20 and 40 degrees F at just before the 5 hour mark, then climb gradually
upward, ending at about half way between 40 and 60 degrees F at just before the
25 hour mark.
<PAGE>
TEST 3
2 Cryomat on top of Fish, 1 Cryomat on Bottom
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
Graph depicts range of temperatures at 20 degree intervals from 0 to 80 degrees
F and times in 10 hour intervals from 0 to 40 hours for ambient and for
following parts of box: lid, back, front, left side, right side, and bottom.
Ambient marks are wavering more dramatically than in the previous tests, but are
still a mostly constant line about two-thirds of the way between the 60 degree F
and 80 degree F marks. Lid of box marks start about 1/4 of the way between the
20 and 40 degree F marks, immediately climbs to about half way between these two
marks, where they remain until just over 1/3 of the way between the 0 and 10
hour marks, then jumps slightly to just above the previous marks and remains
there until half way between 10 and 20 hours before climbing sharply to about
1/4 of the way between 40 and 60 degrees F at the 20 hour mark and ending about
2/3 of the way between these two marks at 30 hours. Back of box marks start just
above the half way mark between 20 and 40 degrees F, immediately make a slight
dip and then curve gradually upward, arriving at the 40 degrees F mark about 3/4
of the way between 10 and 20 hours, where it joins the back of box marks and
ends up 2/3 of the way between 40 and 60 degrees F at the 30 hour mark. Left
side marks start about half way between 20 and 40 degrees F and curve sharply
upwards, reaching 40 degrees F about 1/4 of the way between 0 and 10 hours, then
taper off to a slow climb, ending up about 1/4 of the way between 60 and 80
degrees F at 30 hours. Right side marks start approximately 1/4 of the way
between 20 and 40 degrees F and immediately start to curve sharply upwards,
before tapering off at just above half way between 20 and 40 degrees F at half
way between 0 and 10 hours, then rising very gradually to just above this point
at the 10 hour mark, then very steeply, ending up at 60 degrees F at the 30 hour
mark. Bottom marks start just under half-way between 20 and 40 degrees F, then
jump to just over half-way between these two temperatures at about half way
between 0 and 10 hours, remaining there until about 2/3 of the way between 10
and 20 hours, at which point they climb sharply up to end 2/3 of the way between
40 and 60 degrees at the 30 hour mark.
<PAGE>
TEST 4
1 Gel Pack at each End of Box
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
Graph depicts range of temperatures at 20 degree intervals from 0 to 80 degrees
F and times in 10 hour intervals from 0 to 30 hours for ambient and for
following parts of box: lid, back, front, left side, right side, and bottom.
Ambient marks are a mostly constant line about two-thirds of the way between the
60 degree F and 80 degree F marks. Lid marks start about half way between 40 and
60 degrees F and rise constantly but very gradually, ending just under 60
degrees F at about 3/4 of the way between 20 and 30 hours. Back of box marks
start about 2/3 of the way between 40 and 60 degrees F and rise even more
gradually merging into the lid marks about half way between 10 and 20 hours and
ending just under 60 degrees F at about 3/4 of the way between 20 and 30 hours.
Front of box marks start just above those for the lid and merge into them almost
immediately, following the same path to the end of the lid marks. Left side
marks start just under the 40 degree F mark and rise immediately to just above
the 40 degree mark, where they remain constant until just after 20 hours, at
which point they rise sharply, ending about 3/4 of the way between 40 and 60
degrees F at about 3/4 of the way between 20 and 30 hours. Right side marks
start slightly above 20 degrees F and climb sharply up to about 3/4 of the way
between 20 and 40 degrees F at about 1/4 of the way between 0 and 10 hours,
remaining constantly at this temperature until the end just before 30 hours.
Bottom of box marks start just above 20 degrees F, jump up to about 3/4 of the
way between 20 and 40 degrees F about 1/4 of the way between 0 and 10 hours, and
remain their constantly until the end of the test at about 3/4 of the way
between 20 and 30 hours.
<PAGE>
TEST 5
2 Cryomats on Top of Fish at 50 F Ambient
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
Graph depicts range of temperatures at 5 degree intervals from 30 to 55 degrees
F and times in 10 hour intervals from 0 to 30 hours for ambient and for
following parts of box: lid, back, front, left side, right side, and bottom.
Ambient temperature varies wildly but systematically: starting about 1/4 of the
way between 45 and 50 degrees F, jumps up to 2/3 of the way between these two
temperatures, then back down to the 45 degree F mark, then back up to 4/5 of the
way to 50 degrees, then back down to about 1/4 of the way between 45 and 50
degrees, then back up a little closer to 50, then dropping all the way down to
40 degrees F just past the half way mark between 0 and 10 hours, with this
pattern repeating again in a series of six small jump/plunge combinations before
another large plunge down to 40 degrees F just before the 20 hour mark and then
four more jumps and plunges before the test end about 3/4 of the way between 20
and 30 hours. Lid of box starts half way between 30 and 35 degrees F and climbs
almost immediately to 35 degrees F, where it stays near constant (just wavering
slightly up and down) until about 2/3 of the way between 10 and 20 hours, at
which time it climbs suddenly up til it reaches about half way between 40 and 45
degrees F at test end. Back of box starts just below 40 degrees, climbs
immediately to just above this mark and then back to just above where it
started, repeating this pattern of climbing to just above previous high and
dropping down to just above previous low consistently until it ends about 2/3 of
the way between 40 and 45 degrees at test end. Front of box marks start about
2/3 of the way between 35 and 40 degrees and stay there constantly, with just a
slight waver, until about 2/3 of the way between 10 and 20 hours, at which time
they climb gradually to about 1/3 of the way between 40 and 45 degrees at test
end. Left side, right side, and bottom box marks are all clustered together,
starting out half-way between 35 and 40 degrees F, curving downward to about 1/3
of the way between those two temperatures, where they remain constant but
wavering until about the 20 hour mark, then climb slowly, with the left side and
bottom ending up about 2/3 of the way between 35 and 40 degrees and the right
side climbing slightly more steeply and ending up just above the 40 degree mark
at test end.
CRYOPAK CORP. TESTING LABORATORIES TEST RESULTS
DATED AUGUST 12, 1996.
CLIENT - XXX
PURPOSE OF TEST - The test was conducted to compare equal weights of Cryomat and
Gel Paks in a Polyfoam 38-I Styrofoam box with outer corrugated container. I.D.
of box was 10 3/4 in. X 71/2in. X 101/2in. Test was conducted using
pharmaceutical standard protocol of varying ambient temperature during test
period.
EQUIPMENT - Individual boxes were placed in a heat controlled environment
utilizing a Fuji Electric PYZ series ramp-to setpoint controller with PID
control maximizing process stability. Electric element heating coils were
controlled by this system yielding an average temperature ranges with +- 1
degree C. accuracy. (AMBIENT) A Lakewood UL-16 Ultra Logger was used to record
product temperature, and ambient temperature via eight temperature recording
probes. The probes were placed within the product sample as illustrated in Fig
___.
AMIBENT AIR TEMPERATURE - The temperature protocol maintained during the testing
period was as follows:
30 deg. C. for 18 hours.
38 deg. C. for next 6 hours.
47 deg. C. for next 2 hours.
30 deg. C. for next 16 hours.
37 deg. C. for next 3 hours.*
* The test was discontinued at this point since both test containers had reached
16 deg. C at this time and were considered well outside of the acceptable range
for temperature sensitive pharmaceuticals.
<PAGE>
PACKAGING TECHNIQUE
Container #1
3.3 kg. of Cryomat was placed in the shipping container in such a way as to
totally surround the inner box of product mass. Cryomat was placed (double layer
down both sides and both ends) A triple layer of Cryomat was placed on the
bottom and the top of test mass inner container. Temperature probes ( Cryomat
#1, Cryomat #2, and Cryomat #3) were placed directly into the product mass
within the inner box as illustrated in Fig.----
Container #2
3.3 kg. of Gel Paks were placed in container as used in actual pharmaceutical
shipping situation (2) 1/2 kg. and (1) 1 kg. Gel paks were placed down one side
of inner container. (3) 1/2 kg. Gel paks were placed on top of inner container.
Inner container was butted up to outer container on three sides and bottom.
(i.e. no direct contact with Gel Paks) Temperature probes (Gel Pak # 1, Gel Pak
#2, and Gel Pak #3) were placed directly into the product as shown in Fig. ---,
The Probe Gel Pak #4 was placed just inside of the inner container as far from
the Gel Paks as possible.
OBSERVATIONS- The Graphic representation of the test clearly demonstrates the
superiority of Cryomat. throughout the duration of the test. The probe
recordings were consistent for all three probes and a temperature below 5 deg.
C. was maintained for 35 hours. The critical upper range of 8 deg. C. was not
reached by any probe for a forty hour period.
A wide separation indicating a significant temperature variance was observed
with the Gel Pak temperature probes. The Gel Pak #3 probe exceeded the upper
critical limit within six hours. The Gel Pak k probe exceeded the upper critical
limit within 19 hours and the single Gel Pak #1 probe exceeded the upper
critical limit in 36 hours. This clearly demonstrates that a large temperature
gradient exists through the product mass when using the Gel Paks. For the most
part the product mass temperature is outside of the critical temperature range
with this packaging configuration.
The Gel Pak #4 probe indicates the actual temperature of the product at a point
most distant from the Gel Pak location. THE PRODUCT TEMPERATURE AT THIS POINT
WAS NEVER WITHIN THE REQUIRED CRITICAL TEMPERATURE RANGE.
<PAGE>
Further observations of the graphs indicates the protective nature of the
Cryomat packaging with a rapid increase in outside (ambient) air temperature.
When the ambient air temperature was increased to 38 deg. C and then to 47 deg.
C. The temperature within the Gel Pak configuration increased immediately while
the "wrap around" configuration with the Cryomat protected the product against
these increases. This is indicated by the "humps" appearing on all the Gel Pak
probe curves during temperature increase. On the other hand, the Cryomat probe
curves showed very little fluctuation during the temperature increase.
CONCLUSIONS- It can be concluded that Cryomat offers superior refrigerant
properties when compared to the Gel Pak, The "wrap around" ability of Cryomat
assures a uniform transfer of heat from the product over an extended period of
time. The characteristic uniformity of the Cryomat curves in Chart I indicate
that amount of Cryomat used could be reduced to achieve required results
depending on the time required under actual shipping conditions.
The separation of the Gel Pak curves in Chart ! indicate a considerable
temperature differential across the product mass. This differential is evident
throughout the entire test period.
The "protective" nature of Cryomat under conditions of temperature spiking will
be important to the shipper of perishable products since the likelihood of
product heating in unpredictable temperature extremes is minimized.
SmithKline Beecham
Pharma
Facsimile Cover Sheet
To: Don Easterbrook
Company: Cryopak
Phone:
Fax: 604-685-9170
From: Kate Ford
SB, Canada
Phone: 905-829-2030
Fax: 905-829-6060
Date: 29-Apr-97
Pages: 17
Comments:
Here's the proposed information booklet (except for the "Recommendations"
section which I have to compose still). I changed some of the previous sections
for clarity so let me know if it still makes sense. I decided not to include all
of the cost graphs since really only the Vancouver to Rixensart data is
relevant.
Give me a call to discuss any changes you recommend.
Regards,
Kate
SmithKline Beecham Pharma Inc.
2030 Bristol Circle, Oakville, Ontario, Canada L6H5V2
<PAGE>
Section 1: Product Information
- ------------------------------
Cryopak offers significant advantages for maintaining critical temperature
ranges over conventional coolant products.
The patented Cryopak product consists of sheets of liquid-filled, laminated
pouches that can be custom cut to various sizes or into individual Cubes for use
in a wide range of applications (see figure 1). The product is flexible, durable
and provides uniform cooling while minimizing the weight of the shipment.
Cryopak is accepted to be packed in direct contact with all temperature
sensitive goods (including food products) by the USDA, FDA and Agriculture
Canada.
The product is available as a an ice substitute for refrigeration or as a
dry-ice substitute for frozen shipments. This document will refer only to its
application as a reusable alternative to dry ice.
Advantages of this product over conventional dry ice shipments include:
-- Safety
- dry-ice transforms from a solid to gaseous carbon dioxide thus
is considered as a dangerous good for air transport and is
subject to government regulations
- Cryopak does not have to be declared as a 'dangerous goods' for
the courier thus increasing the safety of the shipment and
decreasing the paperwork required.
-- Convenience
- dry-ice has to be ordered from a supplier each time a shipment
is made. There is often a surcharge for delivery since it is a
'dangerous goods'.
- Cryopak can be conveniently stored at the hospital or clinic
and placed in the freezer overnight before use
-- Cost
- transportation costs can he reduced through weight and
packaging reduction. The product can be reused, thus further
reducing shipment costs.
The following pages outline specific analysis performed for SmithKline Beecham
for the shipping of frozen diagnostic specimens.
<PAGE>
Figure 1: Cryopak Product Formats
a) Cryomat sheets
[Photograph of Cryomat sheets omitted from electronic filing]
b) Cryopak singles
[Photograph of Cryomat singles omitted from electronic filing]
<PAGE>
SECTION II: PACKAGING VALIDATION
Three tests were conducted to validate the use of Cryopak product in the
shipping of frozen diagnostics specimens: a 'dry run' from Vancouver to Belgium,
and two simulated heat spikes under laboratory conditions.
A) Dry-Run (Vancouver to Rixensart to Toronto to Phoenix):
- ----------------------------------------------------------
Purpose of Test:
- ----------------
A mock shipment was sent from Vancouver (on Canada's west coast) to Rixensart
(SB Biologicals lab in Belgium) to demonstrate the ability of the Cryopak
product to remain frozen under normal courier and customs clearance procedures.
The package was returned from Rixensart to Toronto for confirmation of the
results. The package was then sent from Toronto to Phoenix for further testing
at ISC (Insulated Shipping Containers, Inc.)
Materials:
- ----------
Standard supplied used in SB Biologicals clinical trials were employed for the
'dry-run' with the exception that the tuves contained water not sera and Cryomat
was substituted for dry-ice:
-- 3 standard SB Styrofoarn sera racks -- 60 Sarstedt sera tubes
(containing 1-2 ml of water)
-- Styrofoam box (dimensions 19.5 x 12.5 x 12.5 inches; 13/4 inch
thickness) -- 25 lbs Cryornat L.T.- ( 12 mL size, custom cut sheets) --
TempTale 3 Dry Ice Probe Monitor
Procedures:
- -----------
1) The loaded racks and frozen Cryomat L.T. were placed within the Styrofoarn
container as illustrated in figure 2. The TernpTale 3 main logging unit was
placed on the exterior of the Styrofoarn container and the probe lead was then
placed into one vial within the sera rack.
2) The container was then shipped via Federal Express courier to Rixensart,
Belgium.
<PAGE>
CRYOPAK
CORPORATION
Cryopak "Dry Specimen Run" March 5-13,1997 for
SMITHKLINE BEECHAM PHARMA INC.
Test Details:
1. EPS container
ID: 19.5" x 12.5" x 12.5"
[Diagram of top view of
package deleted for electronic filing] 2. 4 Styrofoam Test Tube Holders, each
containing 20 x 5 ml. vials, each
containing 1-2 ml. water
[Diagram of side view of 3. Product wrapped in frozen
package deleted for electronic filing] Cryomat 12 ml. L.T.
4. Total weight of Cryomat: 25 lbs.
5. Total shipping weight 28.8 lbs.
Test No: 301062
Start Date: Mar 5,1997
Start Time: 14:11 PST
Log Interval: 15 min.
Test Criteria: <0C
<PAGE>
3) Once received at the Rixensart lab, the container was opened for observation
and the product was placed into the freezer. The materials sat in the freezer
over a weekend period of 66 hours.
4) The materials were brought out of the freezer and reassembled in the same
manner as illustrated in figure 2. The package was forwarded via Federal Express
to Toronto, Canada.
5) Once delivered to the SB office, the container was opened up for observation.
The probe was left at room temperature overnight while the Cryomat L.T. and
materials were stored in a -70 C freezer.
6) The Cryomat L.T. and materials were brought out of the freezer and
reassembled in the same manner as in step 1, inserting the probe lead into one
of the vials.
7) The container was forwarded via Federal Express to Phoenix, Arizona, USA.
8) Once delivered at Phoenix, the container was opened for observation and then
all the materials were placed into a freezer until we started the 2 heat spike
tests outlined further in this report.
<PAGE>
Observations:
The tracking information provided by the courier (table 1) was correlated to the
internal temperature of the package as monitored throughout the journey (figure
3).
<TABLE>
<CAPTION>
Table 1: Pick-up and delivery times by Federal Express
Location Date Time Comments
- -------- ---- ---- --------
<S> <C> <C> <C>
Vancouver 5/Mar/97 12:30 pm product packaged
15:02 pm pick up by FedEx
16:29 pm outbound scan
Memphis 6/Mar/97 2:39 am inbound scan
4:31 am outbound scan
Brussels 7/Mar/97 7:35 am inbound scan
8:06 am outbound scan
Rixensart 7/Mar/97 11:21 am received by SB
Location Date Time Comments
Rixensart 10/Mar/97 12:30 pm product packaged
13:01 pm pick up by FedEx
Brussels 15:12 pm outbound scan
Toronto 11/Mar/97 7:35 am inbound scan
Mississauga 9:35 am inbound scan
Oakville 11/Mar/97 11:36 am received at SB
Location Date Time Comments
Oakville 12/Mar/97 13:05 pm product packaged
15:01 pm pick up by FedEx
Mississauga 20:00 pm. outbound scan
Memphis 23:55 pm inbound scan
13/Mar/97 4:01 am outbound scan
Phoenix 6:28 am inbound scan
8:23 am outbound scan
13/Mar/97 9:41 am received by ISC
</TABLE>
<PAGE>
CRYOPAK
CORPORATION
Cryopak "Dry Run Specimen" March 5-13, 1000 for
SMITHKLINE BEECHAM PHARMA INC.
Using 25 lbs. Cryomat 12ml L.T.
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
The vertical axis starts at negative forty-five degrees celsius (C) and proceeds
at five degree intervals up to 25 degrees C; the horizontal axis commences at 0
hours and proceeds in three hour increments for an eight day period. Labels
underneath this axis indicate that the first 40 hours represent the Vancouver,
Canada, to Risensart, Belgium leg of the trip, the next 66 hours represent the
time in the freezer in Belgium, the next 33 hours consist of the transit from
Belgium to Toronto, Canada, followed by a section representing the time at room
temperature in Toronto and then in the freezer there, and finally a 26 hour
section for the Toronto to Phoenix, Arizona trip. The graph line starts at about
1/3 of the way between - 10 and - 15 degrees C and almost immediately drops down
to - 25 degrees C before curving up slowly to 1/3 of the way between -10 degrees
C at the end of the transit to Belgium. At this point, the graph spikes up to 0
degrees C very abruptly and then goes immediately down to just below the -25
degrees C mark, where it wavers between 2/3 and 3/4 of the way between -30 and
- -25 degrees C for the duration of the time in the freezer in Belgium. At the
start of the trip to Toronto the graph line spikes up suddenly to just below -10
degrees C, then curves suddenly down to about half way between -20 and -15
degrees C before climbing gradually up to -10 degrees C at the end of the trip
to Toronto. It then shoots up immediately to 20 degrees C at the beginning of
the room temperature period, during which time it curves gradually down to just
above 15 degrees C and then climbs slowly back up to 20 degrees C. At the
beginning of the freezer section it immediately shoots down to just below -40
degrees C, then curves slowly upward during the trip to Phoenix, ending up about
half way between -15 and -10 degrees C.
<PAGE>
COST COMPARISON
The cost for the shipment from Vancouver to Rixensart using Cryomat LT was
compared to the estimated cost for the same shipment using 35 lbs (16 kg) of
dry-ice. Figures 4 and 5 illustrate the cost comparison and the cumulative
savings for 10 shipments. A savings of $29.90 was estimated for the first
shipment due to reduced freight charges with $73.65 saved for each subsequent
shipment due primarily to the recycling of the Cryopak product.
CONCLUSIONS:
The Cryomat maintained a temperature below -8.0 degrees C between each point of
departure and delivery to the recipient. The product appears to assure a uniform
transfer of heat over the extended period of time required for air
transportation and to clear customs.
Although the cost per pound is greater for the Cryornat versus dry ice, there
are freight savings due to the reduced weight of coolant required. If the
Cryomat is roused for gubsequent shipments, the savings are cumulative and
eventually the product pays for itself.
Subsequent testing was done to determine the effect of shipments during higher
ambient temperatures (see figures 6-9).
<PAGE>
CRYOPAK
CORPORATION
Cryopak / Dry Ice Cost Comparison
Date: March 5, 1997
Client: S.K.B."Dry Specimen Run" Vancouver - Rixensart
Referencing Insulated Container: Test#301062
Length (in) Width (in) Height (in)
Outside 22.75 15.75 15.75
Inside 19.50 12.50 12.50
Container Cubic Measure (cu. ft.) 3.27
Dimensional Package Weight (lbs) 34.00 @ cu. in./lb. 166
Actual Packaging Weight (lbs) 2.6
Product Weight (lbs) 1.20
Dry Ice Weight (lbs) 35.00
Dry Ice Cost ($/lb) $1.01
Cryomat Weight (lbs) 25.00
Ctyomat Cost ($/lb) $1.75
Freight Rate ($/lb) $3.83
Cryomat / Dry Ice Cost Comparison for 10 Shipments
Using 35.00 lbs of Dry Ice per shipment reusing 25.00 lbs of Cryomat Rounded up
total shipping weight for: Dry Ice 39.00 lbs.
Cryomat 29.00 lbs.
<TABLE>
<CAPTION>
Shipment Dry lce Cost + Cryomat Cost + Cryomat Savings Per
Number Freight Cost Freight Cost Savings Shipment
<S> <C> <C> <C> <C>
0 $0 $0 $0 $0
1 $184.72 $154.82 $29.90 $29.90
2 $369.44 $265.89 $103.55 $73.65
3 $554.16 $376,96 $177.20 $73.65
4 $738.88 $488.03 $250.95 $73.65
5 $923.60 $599.10 $324.50 $73.65
6 $1,108.32 $710.17 $398.15 $73.65
7 $1,293.04 $821.24 $471.80 $73.65
8 $1,477.76 $932.31 $545.45 $73.65
9 $1,662.48 $1,043.38 $619.10 $73.65
10 $1,947.20 $1.154.45 $692.75 $73.65
</TABLE>
<PAGE>
CRYOPAK
CORPORATION
CRYOPAK/DRY ICE COST COMPARISON
Shipping 1 box for 10 shipments
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000
x
$1,800 x
x x
$1,600 x x
x x x
$1,400 x x x
x x x x
$1,200 x x x x
x x x x x y
$1,000 x x x x y x y
x x x x y x y x y
$800 x x x y x y x y x y
x x x y x y x y x y x y z
$600 x x y x y x y x y x y z x y z
x x y x y x y x y z x y z x y z x y z
$400 x x y x y x y z x y z x y z x y z x y z
x x y x y x y x y z x y z x y z x y z x y z
x y x y x y z x y z x y z x y z x y z x y z x y z
$200 x x y x y x y z x y z x y z x y z x y z x y z x y z
x y x y x y x y z x y z x y z x y z x y z x y z x y z
x y x y z x y z x y z x y z x y z x y z x y z x y z x y z
$0 x y z x y z x y z x y z x y z x y z x y z x y z x y z x y z
1 2 3 4 5 6 7 8 9 10
</TABLE>
x = dry ice cost + freight cost
y = Cryomat cost + freight cost
z = Cryomat savings
<PAGE>
B) SIMULATED HEAT SPIKE - TEST 0326974A (CRYOMAT LOW TEMPERATURE):
Purpose:
- --------
To simulate the performance of Cryomat LT in maintaining sub-zero centigrade
temperatures under extreme ambient temperatures for more than 48 hours.
Materials:
- ----------
The same supplies as in the 'dry run' were used:
3 standard SB Styrofoam. sera racks
60 Sarstedt sera tubes (containing 1-2 ml of water)
Styrofoam box (dimensions 19.5 x 12.5 x 12.5 inches; 13/4 inch
thickness) 25 lbs Cryomat L.T.- ( 12 mL size, custom cut sheets)
In addition, an environmental chamber, fluke data logger and type-T thermal
couples were used.
Procedures:
- -----------
The procedure was carried out on our behalf by ISC (Insulated Shipping
Containers Inc.). The sera tubes, racks, probes and CryomAt were assembled in
the Styrofoam container as per figure 6. The package, was then subject to
ambient profiling of 22'C for 18 hours followed by VC for 6 hours. This was
repeated for a total of 72 hours.
Observations:
- -------------
The results of the temperature cycling are illustrated in figure 7. CTyomat LT
(25 lbs) maintained a temperature below O*C for 52.5 hours
Conclusions:
- ------------
The heat spike simulation mimics a 'worst case' scenario for shipping the
package.
For example the package could be subjected to:
-room temperature for 18 hours before pick-up by the courier
- then transported by ground to the airport for 6 hours in a
non-refrigerated truck (in a 35'C heat wave) - then transported for 18
hours at room temperature due to delays at the airport or in customs -
then transported by ground to the destination ( at 350C) - the package
is then received and stored at room temperature before freezing
Although this scenario is very unlikely, it is reassuring to know that the
contents of the package would still remain less than 0 degrees C under such
stringent conditions.
<PAGE>
TEST WORKSHEET
[DIAGRAM OF TOP OF PACKAGE WITH Notes:
PROBE POSITIONS INDICATED HAS Cryopak SmithKline Freeze Test
BEEN DELETED FROM EDGARIZED 1. EPS container ID: 19.5" x 12.5" x 12.5"
VERSION] 4 Styrofoam Test Tube Holders
2. Each Holder contains 20 x 5mL fill vials
3. Product frozen at -30 degrees C
4. Product encapsulated in frozen
Cryomat 12mL L.T.
5. Cryomat 12mL L.T. frozen at -30 C
6. Total weight of Cryomat: 25 lbs.
Test No: 0326974A
[DIAGRAM OF SIDE VIEW Start Date/Time: 3/26/97 3:22
OF PACKAGE WITH PROBE Gel Initial Temp: -28.6 C
POSITIONS INDICATED HAS BEEN Performed by: JOW
DELETED FROM EDGARIZED Verified by: MG
VERSION] Datalogger: Omega
Log Interval: 30 minutes
Temp. Criteria: > 0 degrees C
Test Type: Design
Chamber No.: 2
Job No. 561
Total Weight: 28.8 lbs.
Test Observations ISC - Insulated Shipping Ambient Conditions
Containers, Inc.
N.B. L.T. Cryomat 12 mL Customer: SKB/Cryopak 22 degrees C for 18 hours
Low Temperature Product Drawn by: M. Gorton 35 degrees C for 6 hours
Drawing No. Cryo561a Repeat for 96 hours
<PAGE>
CRYOPAK
CORPORATION
Cryopak Heat Spike Laboratory Test 0326974A for
SMITHKLINE BEECHAM PHARMA INC.
Using 25 Lbs. Cryomat 12mL L.T.
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
The vertical axis starts at negative fifty degrees celsius (C) and proceeds at
ten degree intervals up to 40 degrees C; the horizontal axis commences at 0
hours and proceeds in two hour increments for 72 hours. The Ambient temperature
line has a note attached to it that it is a programmed cycle of 22 C for 18
hours and 35 C for 6 hours and the graph line represents this pattern. The lines
for the three probes follow very similar routes - all start about half way
between -10 and -20 degrees C, jump down almost immediately to just above -30
degrees C, then curve slowly upward; reaching 0 degrees C at about 52 hours. At
this point, two of the probe lines jump up to halfway between 0 and 10 degrees C
at the 54 hour mark and then slope upwards, ending halfway between 10 and 20
degrees C at 72 hours. The third probe line continues at 0 degrees C until about
59 hours, then jumps up quickly in a 1 hour period to just over halfway between
0 and 10 degrees C before sloping upwards and ending halfway between 10 and 20
degrees C at 72 hours.
<PAGE>
C) SIMULATED HEAT SPIKE - TEST 04109873A (CRYOPAK L.T. SINGLES):
Purpose:
- --------
To simulate the performance of Cryopak LT singles in maintaining sub-zero
centigrade temperatures under extreme ambient temperatures for more than 48
hours.
Materials:
- ----------
as per previous test but using 25 lbs of Cryopak singles (vs. Cryomat)
Methods:
- --------
The procedure was carried out on our behalf by ISC (Insulated Shipping
Containers Inc.). The sera tubes, racks, probes and Cryopak singles were
assembled in the styrofoam container as per figure 8. The package was then
subject to ambient profiling of 22 degrees C for 18 hours followed by 35 degrees
C for 6 hours. This was repeated for a total of 72 hours.
Observations:
- -------------
The results of the temperature cycling are illustrated in figure 9. Cryopak LT
singles (25 lbs) maintained a temperature below 0 degrees C for greater than or
equal to 56.5 hours (range: 56.5 to 71.5 hours depending on positioning of the
probe).
Conclusions:
- ------------
The Cryopak singles were equally as efficient at maintaining a sub-zero
temperature during extreme ambient temperatures as was the Cryomat format.
<PAGE>
TEST WORKSHEET
[DIAGRAM OF TOP OF PACKAGE WITH Notes:
PROBE POSITIONS INDICATED HAS Cryopak SmithKline Freeze Test
BEEN DELETED FROM EDGARIZED 1. EPS container ID: 19.5" x 12.5" x 12.5"
VERSION] 4 Styrofoam Test Tube Holders
2. Each Holder contains 20 x 5mL fill vials
3. Product frozen at -30 degrees C
4. Product encapsulated in frozen
Cryomat 12mL L.T. Singles
5. Cryomat 12mL L.T. Singles frozen at
-30 C
6. Total weight of Cryomat: 25 lbs.
Test No: 0410973A
[DIAGRAM OF SIDE VIEW Start Date/Time: 4/10/97 4:00
OF PACKAGE WITH PROBE Gel Initial Temp: -33.2 C
POSITIONS INDICATED HAS BEEN Performed by: MG
DELETED FROM EDGARIZED Verified by: MG
VERSION] Datalogger: Fluke 1
Log Interval: 30 minutes
Temp. Criteria: > 0 degrees C
Test Type: Design
Chamber No.: 2
Job No. 561
Total Weight: 28.8 lbs.
Test Observations ISC - Insulated Shipping Ambient Conditions
Containers, Inc.
N.B. L.T. Cryomat 12 mL Customer: SKB/Cryopak 22 degrees C for 18 hours
Low Temperature Product Drawn by: M. Gorton 35 degrees C for 6 hours
Drawing No. Cryo561a Repeat for 96 hours
<PAGE>
CRYOPAK
CORPORATION
Cryopak Heat Spike Laboratory Test 0410973A
for SMITHKLINE BEECHAM PHARMA INC.
Using 25 Lbs. Cryomat 12mL L.T. Singles
The actual graph is too complex to be electronically reproduced, but has been
submitted in paper format to the Securities and Exchange Commission.
The vertical axis starts at negative fifty degrees celsius (C) and proceeds at
ten degree intervals up to 40 degrees C; the horizontal axis commences at 0
hours and proceeds in two hour increments for 72 hours. The Ambient temperature
line has a note attached to it that it is a programmed cycle of 22 C for 18
hours and 35 C for 6 hours and the graph line represents this pattern. The lines
for the three probes follow very similar routes. All three start at just below
- -20 degrees C and jump immediately down to between -40 and -50 degrees C, with
one line slightly below the other two. All three lines curve upwards, each a few
degrees apart from each other, with one reaching -10 degrees C at 26 hours and
the other two reaching that temperature at 28 hours. The three lines continue to
slope very slowly upward so that one line is half way between -10 and 0 degrees
C at 44 hours and the other two are 1/3 of the way between those two degrees at
that time. The higher probe line reaches 0 degrees C at 56.5 hours, where it
remains constant until just before 66 hours, then climbs up suddenly to just
under 10 degrees C at the 72 hour mark. The second line separates from the third
one just after the 52 hour mark and reaches 0 degrees C at between 58 and 60
hours, remaining there until just after 70 hours and then climbing suddenly to
just over halfway between 0 and 10 degrees C at the 72 hour mark. The third line
hits 0 degrees C at the 64 hour mark and remains their constantly until just
before 72 hours, when it jumps up to approximately 1/3 of the way between 0 and
10 degrees C.
CRYOPAK
CORPORATION
CRYOMAT ONBOARD EVALUATION
Prepared for
NORTHWEST AIRLINES
TEST DATES
January 27, 1998 NW #7 - B-747-200 SEA-NRT
January 29, 1998 NW #8 - B-747-200 NRT-SEA
REPORT DATE February 5, 1998
TABLE OF CONTENTS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1. Location U7 Probe inserted 1" into entree on #2 glide of carrier . . . . . 4
2. Location 2-9 Probe inserted 2" into milk on #6 glide of cart . . . . . . . 5
3. Location 2-21 Probe inserted 1" into fruit on #6 glide of cart . . . . . . 6
4. Location 3-33A Probe inserted 1" into dessert on #6 glide of cart . . . . 7
5. Location 3-16 Probe inserted 1" into crew entree on #2 glide of carrier . 8
6. Location 3-21A Probe inserted 1" into noodles on #6 glide of cart . . . . . 9
7. Location 4-7 Probe inserted into white wine bottle on #4 glide of cart . . 10
8. Location 4-7 Probe inserted into beer can in plastic tub in bottom of cart 11
Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A Wholly Owned Subsidiary of Cryopak Industries, Inc.
Suite 1120-625 Howe Street, Vancouver, British Columbia, Canada V6C 2T6
Phone (604) 685-5143 Fax (604) 685-9710 Web Site http://www.cryopak.com
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
INTRODUCTION
PURPOSE This onboard evaluation was conducted to assess the effectiveness
of using Cryomat reusable ice substitute in current catering and
onboard procedures. The onboard handling and evaluation was
performed by Northwest Airlines. A Cryopak representative was
onboard for consultation.
PROCEDURE The setup for these tests started in the flight kitchen, where
the galley carts and carriers were prepared according to standard
packing and provisioning specifications.
Eight temperature recording probes were activated and inserted
into samples of milk, beer, wine, fruit, crew meals, and entrees
in identical positions in each flight. A ninth probe recorded
ambient air temperature around the carts and carriers during
dispatch and was placed on the main cabin galley counter for the
duration of each flight.
Northwest Flight 7 SEA-NRT January 27, 1998 used Cryomat reusable
ice substitute as a replacement for Dry Ice in all classes of
service where the equipment required a cooling agent to maintain
safe and pleasing temperatures.
Northwest Flight 8 NRT-SEA January 29, 1998 used Dry Ice
according to the standard procedure.
The carts and carriers were dispatched and delivered to the
aircraft galleys. In the galleys the equipment and onboard flight
attendant procedures for all classes of service remained the
same.
The doors of the equipment were opened for service on average 1
hour after departure and were closed 1 to 1-1/2 hours later.
Throughout the flight they were also reopened and closed for
other service times.
Crew members and a Cryopak representative performed hourly visual
evaluations of the Cryomat and recorded their findings on a
special evaluation form prepared by Cryopak for Northwest
Airlines Inc.
The temperature probe data was converted into eight charts,
comparing Cryomat and Dry Ice performance for each of the eight
probe positions. These were assembled together with the Onboard
Evaluation Forms in this report.
EQUIPMENT Nine Temptale 3 temperature monitor probes were used to record
temperatures.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION U7 - Probe inserted 1" into entree on #2 glide of carrier.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location U7
Using 1-2 lb. sheet (17.75" x 16.5") of Cryomat 12 ml
And 3 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location U7
Using 2- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The entree probe for NW7 starts out at 44 F, jumps up to 46 degrees F
after 1 hour, and then drops down to about 42 F a 1/2 hour later. The
temperature then rises slowly back up to reach 44 F after 3 hours, then spikes
quickly up to 56 F a quarter hour later and then back down to 44 degrees at the
3-1/2 hour mark. The line then drops raggedly down to about 42 F at the 5 hour
mark, where it remains until the 9-1/2 hours mark. At this point, the
temperature slowly rises, ending up at about 48 F at the end of the test.
The NW8 dry ice probe starts at 42 F, drops down to 36 F after 1/2
hour, and then slowly climbs, hitting 63 F at the 2-3/4 hour mark. At this point
it drops slightly, reaching 57 F at the 4-1/4 mark, and then spikes again, up to
67 F at the 4-1/2 hour mark. The temperature hovers within a couple degrees of
64F until the 5-1/2 hour mark, at which point it rises up to reach 72 F at the 6
hour mark. The temperature then settles back down to 70F at the 6-1/4 mark and
remains approximately this temperature for the duration of the trip.
OBSERVATIONS CRYOMAT: The entre was adequately pre-chilled and the Cryomat was
effective in maintaining this temperature for the duration of the
flight.
DRY ICE: The entree was adequately pre-chilled and further cooled
during delivery but warmed significantly early in the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 2-9 - Probe inserted 2" into milk on #6 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 2-9
3 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 2-9
Using 6- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The milk probe on NW7 starts out and 51 F and slopes downward, reaching
42 degrees F at the 3-3/4 hour mark and then rising up immediately to 43 F until
just before the 5-1/2 hour mark. The temperature then drops down to reach 32 F
at the 5-1/2 hour mark and stays at or near that temperature until the 10-1/2
hour mark. At this point, it climbs sharply up to reach 52 F at the 10- 1/4 hour
mark and 54 degrees at the 11 hour mark. The line then climbs up slowly, ending
up at 58 F at the test end.
On NW8, the dry ice probe temperature begins at 43 F, drops down to 40
F after 1/2 hour and then slowly climbs, reaching 44 F at the1-1/2 hour mark.
The line remains constant at this temperature for 1/2 hour, then starts to
climb, reaching 52 F just past the 2-1/2 hour mark and 54 F at the 3-1/2 hour
mark. It then slopes back down to 52 F at the 4 hour mark and then climbs upward
steadily until the test end, at which point it is just under the 66 F mark.
OBSERVATIONS CRYOMAT: The milk was not adequately pre-chilled. The Cryomat was
effective in bringing down and maintaining the temperature for
most of the flight. Note: The drop to 32 F was most likely from
the probe being disturbed and contacting the side of the milk
carton which was in contact with the Cryomat.
DRY ICE: The milk was adequately pre-chilled but warmed
significantly early in the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 2-21 - Probe inserted 1" into fruit on #6 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 2-21
Using12 - 1 lb. sheets (each 10" x 13.75") of
Cryomat 14 ml January 29, 1998 NW#8 747-200
NRT-SEA Location 2-21
Using 6- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The fruit probe in the NW7 test starts at approximately 63 F and drops
down to approximately 57 F after the first hour, then slopes more slowly down to
58 F at about the 2-1/2 hour mark, where it stays until just before the 6-1/2
hour mark. At this point, the line slopes up a bit, reaching about 57 F at the
8-1/2 hour mark and staying there until approximately the 10-3/4 hour mark. The
temperature then slopes downward, reaching 56 F at the 10-1/2 hour mark and
wavering at about that temperature for the duration of the test.
The probe in the dry ice on NW8 started slightly above 44 F, dropped
down to 42 F at the 1-1/2 hour mark, dipped down to 41 F and back to 42 F in the
next half-hour, and then continued climbing steadily, ending up just above 58 F
at the test end, at approximately the 10-3/4 hour mark.
OBSERVATIONS: CRYOMAT: The fruit was not adequately pre-chilled. The Cryomat
was effective in bringing down and maintaining the temperature
for the duration of the flight.
DRY ICE: The fruit was adequately pre-chilled but warmed
significantly during the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 3-33A - Probe inserted 1" into dessert on #6 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 3-33A
12 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 3-33A
Using 6- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The probe placed in the dessert on NW7 registered an initial
temperature of 64 F and then sloped downward, reaching 54 F just after the 3-1/2
hour mark, then spiking up quickly to 56 F and back down to 54 F at the 4 hour
mark. The line continues to slope downward to 53 F at the 5 hour mark, where it
remains until about the 6-1/4 mark. At this point, the temperature spikes back
up, hitting 56 F at the 6-1/2 hour mark and then sloping back down to 44 F at
the 7 hour mark. The line curves back upwards next, reaching 64 F at the 10-1/2
hour mark and leveling off just above 64 F for the duration of the test.
The dry ice probe in the dessert on NW8 starts out at 45 F, drops down
to 44 F at the first 1/2 hour and then slopes down to about 35 F at the 1-3/4
mark. The line then begins to climb, reaching 48 F at the 3-1/2 hour mark and 64
F just past the 5 hour mark, at which point the curve becomes less steep,
reaching 70 F at the 9 hour mark and remaining constant just above 70 F for the
remainder of the test.
OBSERVATIONS: CRYOMAT: The dessert was not adequately pre-chilled. The Cryomat
was effective in lowering and maintaining the temperature for the
duration of the flight.
DRY ICE: The dessert was adequately pre-chilled and further
cooled during delivery but warmed significantly early in the
flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 3-16 - Probe inserted 1" into crew entree on #6 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 3-16
4 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 3-16
Using 2 - 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The NW7 probe temperature begins at 41 F and curves downward, reaching
a point between 38 and 39 F at the 2 hour mark and then slopes upward, reaching
44 F at the 5-1/2 hour mark and approximately 59 F at the test end at the 9-1/2
hour mark.
The probe in the dry ice test on NW8 starts at a temperature of 43 F,
drops down to approximately 39 F at the 1/4 hour mark, back up to 42 F at the
1/2 hour mark, and then back downward to reach 34 F at a point between 1-1/4 and
1-1/2 hours. The line then darts up to reach 35 F just before the 1-3/4 mark and
then back down to about 33 F at just after the 1-3/4 mark, where it remains
until the 2 hour mark. The temperature then begins to rise, reaching just above
45 F just after the 2-1/4 hour mark and remaining there until the 2-1/2 hour
mark. The line then curves upward further, reaching 64 F just before the 5-1/2
hour mark and then staggering upward more slowly, reaching 70 F just before the
8 hour mark and ending up at about 73 F at test end.
OBSERVATIONS: CRYOMAT: The entree was adequately pre-chilled and the Cryomat
was effective in maintaining this temperature for most of the
flight.
DRY ICE: The entree was adequately pre-chilled and further cooled
to the freezing point during delivery but warmed significantly
early in the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 3-21A - Probe inserted 1" into noodles on #6 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 3-21A
12 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 3-21A
Using 6- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
On NW7, the probe registers an initial temperature of 47 F and then
drops downward, reaching 46 F at the 1 hour mark and approximately 45-1/2 F at
the 2 hour mark, where it remains until about the 3-1/2 hour mark. The line then
slopes gently upward, reaching 48 F at the 6-1/2 hour mark and about 53 F at the
12-1/2 hour mark, then dropping down to 51 F at the 13 hour mark and spiking
back up to 52 F at the test end.
The dry ice probe on NW8 begins at 43 F and drops down to 32 F at the
1-3/4 hour mark. From there, it climbs upward, reaching 46 F at the 4 hour mark
and ending the test at about 53 F.
OBSERVATIONS: CRYOMAT: The entree was adequately pre-chilled and the Cryomat
was effective in maintaining this temperature for the duration of
the flight.
DRY ICE: The entree was adequately pre-chilled and further cooled
to below freezing during delivery but warmed significantly early
in the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 4-7 - Probe inserted into white wine bottle on #4 glide of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 4-7 Wine
6 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 4-7 Wine
Using 4- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The NW 7 probe begins at 49 F and drops slowly down to reach 42 F at
the 3-1/2 hour mark. The temperature remains at approximately this point until
the 4-1/2 hour mark, when it dips down to about 43-1/2 F and then back up to
about 43 F at the 4-3/4 hour mark. From here, the line curves down to reach a
low of 38 F at the 6-1/4 hour mark, where it remains constant until just past
the 7 hour point, at which time it rises slowly upward to 48 F at the 12-1/2
hour mark and then jumps up to just below 50 F at the test end.
The dry ice probe on NW8 starts at 47 F and drops down to a low of just
under 42 F at about the 1-1/2 hour mark, then climbs up to reach about 47 F at
approximately the 3-3/4 hour point. The temperature then drops back down to just
under 46 F at the 3-1/2 hour point. The line then climbs up to reach about 53 F
at the 4-1/4 mark and then back down to 50 F just before the 4-1/2 hour point.
The temperature then climbs back up to about 53 F at the 4-3/4 point and drops
down again to 52 F at the 5 hour mark, remaining at or slightly below this
temperature until the 6 hour mark. At that time, the line drops down to reach 50
F at the 6-1/2 hour mark, where it remains for 1/2 hour, then climbs upward,
reaching 53 F at the 10-1/4 mark. The temperature then dips quickly down to 52 F
and the back up to just above 54 F at the test end just before the 10-1/2 hour
mark.
OBSERVATIONS: CRYOMAT: The white wine was adequately pre-chilled and the
Cryomat was effective in further cooling and maintaining this
temperature for the duration of the flight.
DRY ICE: The white wine was adequately pre-chilled and further
cooled during delivery but warmed significantly early in flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
1. LOCATION 4-7 - Probe inserted into beer can in plastic tub in bottom of cart.
Northwest Airlines Cryomat and Dry Ice Onboard Evaluation
Jan. 27, 1998 NW#7 747-200 SEA-NRT Location 4-7 Beer
6 - 1 lb. sheets (each 10" x 13.75") of Cryomat 14 ml
January 29, 1998 NW#8 747-200 NRT-SEA Location 4-7 Beer
Using 4- 1 lb. blocks of Dry Ice
This graph is too detailed to be included in the electronic version of
this Form 20-F, but has been submitted in paper format to the Securities and
Exchange Commission. A description of the contents of the graph is provided
below.
The vertical axis shows the temperature in degrees Fahrenheit (F) from
32 to 92, while the horizontal axis represents the time in hours from 0 to 13
hours, marked off at one hour intervals. The ambient temperature for NW7 starts
at 65 F, drops down to about 58 F after 1/2 hour and then rises raggedly up to
80 F after 3-1/2 hours. At this point it drops down, reaching 68 degrees after
5-1/4 hours, and then climbs up again to almost 88 degrees after 6-1/2 hours.
The ambient temperature then drops down to 72 degrees F after 7-1/2 hours,
spikes up to about 77 F at the 7-3/4 mark, and the slopes down to 72 degrees at
the 10 hour mark, where it remains for the remainder of the trip.
The ambient temperature for NW8 starts just above 72 F, drops down to
68 F after 1 hour, and then rises raggedly up to just above 80 F at the 3 hour
mark. At this point it drops down, reaching 70 F at about the 4 hour mark and
remaining constant at this mark for the remainder of the trip.
The beer probe on NW7 registers an initial temperature of 48 F and then
drops down to just above 44 F at the 2 hour mark and 43 F at the 3-1/2 hour
mark, where it remains near constant until the hour point. At this time the
temperature drops further, reaching 42 F at the 9-1/2 hour mark and remaining
there until just before the 12 hour mark, at which time it rises slightly to
about 43 F at the end of the test.
On NW8, the dry ice beer probe begins at 60 F and drops down to reach
just above 56 F at the 1-1/2 hour mark. The temperature then climbs upward to
reach 60 F at the 3 hour point. The line remains at approximately this point for
a half hour, then climbs again, reaching 66 F at the 4-1/2 hour mark, where it
remains waveringly until just before the 6 hour mark. The temperature then
spikes upward suddenly to just above 68 F at the 6 hour mark, then back down to
about 67 F. From this point, it climbs slowly upward to 74 F at the 9-3/4 mark.
Within the next quarter hour, the temperature spikes up to about 77 F, down to
about 72-1/2 F and then back up to 76 F, before dropping down to 64 F the 10
hour mark and to 61 F at the 10-1/4 mark. The line next spikes upward again to
about 73 F at the 10-1/2 hour mark and then back down to about 70 F for the
remainder of the test.
OBSERVATIONS: CRYOMAT: The beer was adequately re-chilled and the Cryomat was
effective in maintaining this temperature for the duration of the
flight.
DRY ICE: The beer was not adequately pre-chilled and warmed
significantly early in the flight.
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
EVALUATIONS
CRYOMAT ONBOARD EVALUATIONS
NORTHWEST AIRLINES FIRST CLASS SERVICE
FLIGHT: NW #7 DATE: Jan 27, 98 CITY PAIR: SEA-NRT GALLEY DEL TIME: 11:00 AM
Time of Check Page 1 of 4
12:15PST 1st VISUAL CHECK - when galley boarded
1) State of Product Frozen Slushy X Not Frozen
--- --- ---
2) Did Product Move During Transportation? Yes No X
--- ---
If yes, describe issues (if any):
13:15PST 2ND VISUAL CHECK - 1 hour after galley boarded
1) State of Product Frozen Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
14:15PST 3RD VISUAL CHECK - 2 hour after galley boarded
1) State of Product Frozen Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments: Slushy around the edges. Okay in center.
-----------------------------------------
19:55PST 4TH VISUAL CHECK - 3 hour after galley boarded
1) State of Product Frozen Slushy Not Frozen X
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments: Cool (Note if layering 3 or more).
----------------------------------
Slightly slushy.
----------------
23:00PST 5TH VISUAL CHECK - prior to landing - If 4th check more than 30 min
prior
1) State of Product Frozen Slushy Not Frozen X
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
OTHER QUESTIONS:
1) Were Beer/Wine pre-chilled in the kitchen before boarding? Yes X No
-- --
2) Did FA's experience any difficulty in handling the product? Yes No X
-- --
If Yes, describe:
3) Did the packaging get "hung up" inside the carts? Yes X No X
-- --
If Yes, describe: Too wide for trays
------------------
4) Did any of the cells leak? Yes No X How Many?
-- -- ---
5) Did the product leak into any of the beverage containers? Yes No X
-- --
Please submit additional FA or Customer comments on the separate
overall comment sheet.
Onboard Evaluator: Alice Herdman
------------- -------------
signed printed
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
EVALUATIONS
CRYOMAT ONBOARD EVALUATIONS
NORTHWEST AIRLINES FIRST CLASS SERVICE
FLIGHT: NW #7 DATE: Jan 27, 98 CITY PAIR: SEA-NRT GALLEY DEL TIME: 11:00 AM
Time of Check Page 1 of 4
12:15PST 1st VISUAL CHECK - when galley boarded
1) State of Product Frozen X Slushy Not Frozen
--- --- ---
2) Did Product Move During Transportation? Yes No X
--- ---
If yes, describe issues (if any):
13:15PST 2ND VISUAL CHECK - 1 hour after galley boarded
1) State of Product Frozen X Slushy Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
14:15PST 3RD VISUAL CHECK - 2 hour after galley boarded
1) State of Product Frozen X Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments: Slushy around the edges. Okay in center.
-----------------------------------------
19:55PST 4TH VISUAL CHECK - 3 hour after galley boarded
1) State of Product Frozen X Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes No
--- ---
Additional comments:
23:00PST 5TH VISUAL CHECK - prior to landing - If 4th check more than 30 min
prior
1) State of Product Frozen Slushy X Not Frozen X
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
OTHER QUESTIONS:
1) Were Beer/Wine pre-chilled in the kitchen before boarding? Yes X No
-- --
2) Did FA's experience any difficulty in handling the product? Yes No X
-- --
If Yes, describe:
3) Did the packaging get "hung up" inside the carts? Yes No X
-- --
If Yes, describe:
4) Did any of the cells leak? Yes No X How Many?
-- -- ---
5) Did the product leak into any of the beverage containers? Yes No X
-- --
Please submit additional FA or Customer comments on the separate overall
comment sheet.
Onboard Evaluator: Judy Bergh-Burkhard
------------------- -------------------
signed printed
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
EVALUATIONS
CRYOMAT ONBOARD EVALUATIONS
NORTHWEST AIRLINES FIRST CLASS SERVICE
FLIGHT: NW #7 DATE: Jan 27, 98 CITY PAIR: SEA-NRT GALLEY DEL TIME: 11:00 AM
Time of Check Page 1 of 4
12:30PST 1st VISUAL CHECK - when galley boarded
1) State of Product Frozen X Slushy X Not Frozen
--- --- ---
2) Did Product Move During Transportation? Yes No X
--- ---
If yes, describe issues (if any):
13:30PST 2ND VISUAL CHECK - 1 hour after galley boarded
1) State of Product Frozen Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
15:30PST 3RD VISUAL CHECK - 2 hour after galley boarded
1) State of Product Frozen Slushy X Not Frozen
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
18:30PST 4TH VISUAL CHECK - 3 hour after galley boarded
1) State of Product Frozen Slushy X Not Frozen X
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
23:00PST 5TH VISUAL CHECK - prior to landing - If 4th check more than 30 min
prior
1) State of Product Frozen Slushy X Not Frozen X
--- --- ---
2) If "Not Frozen," is Product Cold to the Touch? Yes X No
--- ---
Additional comments:
OTHER QUESTIONS:
1) Were Beer/Wine pre-chilled in the kitchen before boarding? Yes No X
-- --
2) Did FA's experience any difficulty in handling the product? Yes No X
-- --
If Yes, describe:
3) Did the packaging get "hung up" inside the carts? Yes No X
-- --
If Yes, describe:
4) Did any of the cells leak? Yes No X How Many?
-- -- ---
5) Did the product leak into any of the beverage containers? Yes No X
-- --
Please submit additional FA or Customer comments on the separate
overall comment sheet.
Onboard Evaluator: Melissa Pang Stenoien
------------------- ---------------------
signed printed
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
CRYOMAT ONBOARD EVALUATIONS
NORTHWEST AIRLINES OVERALL COMMENTS
FLIGHT: NW #7 DATE: Jan 27, 98 CITY PAIR: SEA-NRT GALLEY DEL TIME: 11:00 AM
Flight Attendant/Customer Comments
I liked being able to handle ice without burning hands and that ice itself was
not frozen into a block with Cryomat. I like the product. I think it will be
wonderful on all domestic flights, however on long haul oversea flights, I think
the product along with a small amount of dry ice would work in keeping the 2nd
service colder.
Cryomat to Dry Ice Comparisons
How would you compare the use of Cryomat to Dry Ice in actual onboard
conditions?
1) Ease of handling: The ease of handling Cryomat is great.
--------------------------------------
2) Consistent cooling of product that is being chilled for service: Defrosts
quite fast. Only stay cool enough to chill when 3 or more packs were used.
3) General safety issues: Ease of handling.
-----------------
4) Other Suggest keeping some packed together and added to second service, space
permitting.
Onboard evaluator: Alice Herdman
------------- -------------
signed printed
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
CRYOMAT ONBOARD EVALUATIONS
NORTHWEST AIRLINES OVERALL COMMENTS
FLIGHT: NW #7 DATE: Jan 27, 98 CITY PAIR: SEA-NRT GALLEY DEL TIME: 11:00 AM
Flight Attendant/Customer Comments
1) Line the beer tub w/Cryomat along the bottom and sides, and place already
cold beer horizontal in tub, and fold Cryomat doubled over on top (See Video).
This also leaves room in the tub for milk and wine.
2) Multi use. Good for chilling customers food and medicine and good for medical
use.
3) White wine should be moved to beer drawer - especially domestic flights were
white/red wine and liquor.
Cryomat to Dry Ice Comparisons
How would you compare the use of Cryomat to Dry Ice in actual onboard
conditions?
1) Ease of handling: Easier to handle than dry ice.
2) Consistent cooling of product that is being chilled for service: Very good,
beer and white wine will not freeze as with dry ice.
3) General safety issues: Won't burn hands when handled. Does not produce CO2
like dry ice.
4) Other The only drawback would be storage to reuse Cryomat. Dry ice evaporates
so storage is not an issue.
Onboard evaluator: Linda Hill
------------- ----------
signed printed
<PAGE>
CRYOPAK CORPORATION Cryomat Onboard Evaluation
for NORTHWEST AIRLINES January 27-29, 1998
CONCLUSIONS
In this series of onboard tests Cryomat was used exclusively for
the cooling of items in all classes of service on Flight #7
excluding ice cream where Dry Ice was used. For onboard test
purposes the amount of Cryomat used was calculated and based on
current equipment and provisioning guidelines set by Northwest
Airlines.
In all probe locations the Cryomat significantly reduced the
temperature of the items being chilled. This occurred throughout
a kitchen to service time of several hours, the exposure to warm
cabin air, and in some cases the lack of adequate pre-chilling of
items. The Cryomat was extremely effective in providing required
cold items' temperatures for the duration of Flight #7.
It was noted that locations 2-9, 2-21 and 3-33A were not
adequately pre-chilled at the kitchen but the Cryomat did not
bring down the items' temperature and maintained a temperature
hold as required. It is recommended that if the items and
equipment are not pre-chilled to standards, Cryomat should be
doubled up.
ONBOARD EVALUATIONS
These consisted of visual inspections, food and beverage sampling
throughout both flights, and flight attendant comments.
The visual inspections noted whether the Cryomat was frozen,
slushy or not frozen. It should be noted that Cryomat maintains a
temperature of 32 degrees F until completely melted. As long as
there is some "slush" in the capsules they are maintaining 32
degrees F.
COMMENTS FROM FLIGHT ATTENDANTS
- Much easier to handle without burning hands
- Multi-use product: good for chilling customers' food, medicine
and good for medicinal use, i.e. ice pak - Does not produce CO2 -
Effective and easy to handle - Unlike Dry Ice, Cryomat is odor
free and will not taint food products
Special thanks to all the crew members on both Flights 7 and 8.
----------------------------------
Don Easterbrook
Project Manager
<PAGE>
