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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended August 31, 2022

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to

Commission File Number 001-40767

 

CRYO-CELL INTERNATIONAL, INC.

(Exact name of Registrant as Specified in its Charter)

 

 

Delaware

 

22-3023093

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

700 Brooker Creek Blvd. Oldsmar, FL 34677

 

(Address of Principal Executive Offices) (Zip Code)

 

(813) 749-2100

 

 

(Issuer's phone number, including area code)

(Former name, former address and former fiscal year, if changed since last report).

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value

 

CCEL

 

NYSE American LLC

 

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☒ No ☐ Not Applicable ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of October 17, 2022, 8,519,250 shares of $0.01 par value common stock were outstanding.

 

 


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

PAGE

PART I - FINANCIAL INFORMATION (UNAUDITED)

 

 

 

Item 1. Financial Statements

 

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Income

4

 

 

Consolidated Statements of Cash Flows

5

 

 

Consolidated Statements of Stockholders’ (Deficit) Equity

6

 

 

Notes to Consolidated Financial Statements

7

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

38

 

 

Item 4. Controls and Procedures

38

 

 

PART II - OTHER INFORMATION

39

 

 

Item 1. Legal Proceedings

39

 

 

Item 1A. Risk Factors

39

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

51

 

 

Item 3. Defaults Upon Senior Securities

51

 

 

Item 4. Mine Safety Disclosures

51

 

 

Item 5. Other Information

51

 

 

Item 6. Exhibits

52

 

 

SIGNATURES

53

 

 

 

2


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

 

 

 

 

 

August 31,

 

 

November 30,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,924,696

 

 

$

8,263,088

 

Marketable securities

 

 

38,695

 

 

 

75,412

 

Accounts receivable (net of allowance for

 

 

 

 

 

 

doubtful accounts of $3,326,222 and $3,078,439, respectively)

 

 

5,346,673

 

 

 

5,253,173

 

Prepaid expenses

 

 

644,846

 

 

 

558,413

 

Inventory, current portion

 

 

919,271

 

 

 

921,213

 

Other current assets

 

 

1,266,799

 

 

 

711,208

 

Total current assets

 

 

11,140,980

 

 

 

15,782,507

 

Property and Equipment-net

 

 

15,178,753

 

 

 

3,230,204

 

Other Assets

 

 

 

 

 

 

Investment - Tianhe stock

 

 

308,000

 

 

 

308,000

 

Duke license agreement

 

 

13,931,221

 

 

 

14,651,802

 

Intangible assets, net

 

 

1,487,407

 

 

 

1,559,693

 

Inventory, net of current portion

 

 

9,394,143

 

 

 

9,695,363

 

Goodwill

 

 

1,941,411

 

 

 

1,941,411

 

Deferred tax assets

 

 

12,010,133

 

 

 

12,010,133

 

Operating lease right-of-use asset

 

 

684,668

 

 

 

916,493

 

Deposits and other assets, net

 

 

688,577

 

 

 

566,470

 

Total other assets

 

 

40,445,560

 

 

 

41,649,365

 

Total assets

 

$

66,765,293

 

 

$

60,662,076

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

1,792,650

 

 

$

1,489,774

 

Accrued expenses

 

 

2,185,088

 

 

 

3,057,386

 

Note payable

 

 

154,252

 

 

 

1,898,065

 

Dividend payable

 

 

7,672,728

 

 

 

 

Current portion of operating lease liability

 

 

306,404

 

 

 

312,067

 

Current portion of Duke license agreement liability

 

 

1,966,216

 

 

 

4,957,591

 

Deferred revenue

 

 

9,546,386

 

 

 

9,358,696

 

Total current liabilities

 

 

23,623,724

 

 

 

21,073,579

 

Other Liabilities

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

34,671,785

 

 

 

31,274,214

 

Contingent consideration

 

 

987,140

 

 

 

727,371

 

Note payable, net of current portion and debt issuance costs

 

 

8,609,247

 

 

 

 

Operating lease long-term liability

 

 

383,943

 

 

 

610,989

 

Long-term liability - revenue sharing agreements

 

 

875,000

 

 

 

875,000

 

Total other liabilities

 

 

45,527,115

 

 

 

35,404,183

 

Total liabilities

 

 

69,150,839

 

 

 

56,477,762

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' (Deficit) Equity

 

 

 

 

 

 

Preferred stock ($.01 par value, 500,000 authorized and none issued and
   outstanding)

 

 

 

 

 

 

Series A Junior participating preferred stock ($.01 par value, 20,000
   authorized and
none issued and outstanding)

 

 

 

 

 

 

Common stock ($.01 par value, 20,000,000 authorized; 14,848,001 issued
   and
8,525,255 outstanding as of August 31, 2022 and 14,665,772
   issued and
8,551,816 outstanding as of November 30, 2021)

 

 

148,480

 

 

 

146,658

 

Additional paid-in capital

 

 

42,446,476

 

 

 

41,586,583

 

Treasury stock, at cost

 

 

(22,505,167

)

 

 

(20,812,734

)

Accumulated deficit

 

 

(22,475,335

)

 

 

(16,736,193

)

Total stockholders' (deficit) equity

 

 

(2,385,546

)

 

 

4,184,314

 

Total liabilities and stockholders' (deficit) equity

 

$

66,765,293

 

 

$

60,662,076

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Processing and storage fees

 

 

$

7,522,134

 

 

$

7,326,516

 

 

$

22,159,702

 

 

$

21,224,033

 

Public banking revenue

 

 

 

137,825

 

 

 

158,936

 

 

 

337,405

 

 

 

289,231

 

Product revenue

 

 

 

21,000

 

 

 

18,200

 

 

 

75,600

 

 

 

56,200

 

Total revenue

 

 

 

7,680,959

 

 

 

7,503,652

 

 

 

22,572,707

 

 

 

21,569,464

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

2,348,755

 

 

 

2,458,938

 

 

 

6,653,497

 

 

 

6,693,806

 

Selling, general and administrative expenses

 

 

 

3,603,411

 

 

 

3,493,794

 

 

 

10,891,951

 

 

 

10,075,502

 

Change in fair value of contingent consideration

 

 

 

412,307

 

 

 

(324,904

)

 

 

259,769

 

 

 

(604,109

)

Research, development and related engineering

 

 

 

80,272

 

 

 

10,004

 

 

 

308,388

 

 

 

19,431

 

Depreciation and amortization

 

 

 

281,903

 

 

 

269,482

 

 

 

839,995

 

 

 

558,167

 

Total costs and expenses

 

 

 

6,726,648

 

 

 

5,907,314

 

 

 

18,953,600

 

 

 

16,742,797

 

Operating Income

 

 

 

954,311

 

 

 

1,596,338

 

 

 

3,619,107

 

 

 

4,826,667

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

(Losses) gains on marketable securities

 

 

 

(11,627

)

 

 

736

 

 

 

(38,457

)

 

 

(14,352

)

Gain on interest rate swap

 

 

 

62,835

 

 

 

 

 

 

62,835

 

 

 

 

Other income

 

 

 

796

 

 

 

25

 

 

 

923

 

 

 

75

 

Interest expense

 

 

 

(365,349

)

 

 

(335,870

)

 

 

(947,968

)

 

 

(957,479

)

Total other expense

 

 

 

(313,345

)

 

 

(335,109

)

 

 

(922,667

)

 

 

(971,756

)

Income before income tax expense

 

 

 

640,966

 

 

 

1,261,229

 

 

 

2,696,440

 

 

 

3,854,911

 

Income tax expense

 

 

 

(174,146

)

 

 

(404,735

)

 

 

(762,854

)

 

 

(1,134,198

)

Net Income

 

 

$

466,820

 

 

$

856,494

 

 

$

1,933,586

 

 

$

2,720,713

 

Net income per common share - basic

 

 

$

0.06

 

 

$

0.10

 

 

$

0.23

 

 

$

0.34

 

Weighted average common shares outstanding - basic

 

 

 

8,390,335

 

 

 

8,452,374

 

 

 

8,449,277

 

 

 

7,996,278

 

Net income per common share - diluted

 

 

$

0.06

 

 

$

0.10

 

 

$

0.23

 

 

$

0.33

 

Weighted average common shares outstanding - diluted

 

 

 

8,404,485

 

 

 

8,692,331

 

 

 

8,475,661

 

 

 

8,217,454

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Nine Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

1,933,586

 

 

$

2,720,713

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,129,804

 

 

 

711,905

 

Change in fair value of contingent consideration

 

 

259,769

 

 

 

(604,109

)

Losses on marketable securities

 

 

38,457

 

 

 

14,352

 

Compensatory element of stock options

 

 

310,441

 

 

 

233,869

 

Provision for doubtful accounts

 

 

634,405

 

 

 

271,460

 

Amortization of debt issuance costs

 

 

10,368

 

 

 

47,462

 

Amortization of operating lease right-of-use asset

 

 

231,825

 

 

 

211,434

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(727,905

)

 

 

602,187

 

Prepaid expenses

 

 

(86,433

)

 

 

98,618

 

Inventory

 

 

303,162

 

 

 

301,489

 

Other current assets

 

 

(555,591

)

 

 

(104,999

)

Deposits and other assets, net

 

 

(122,107

)

 

 

(24,716

)

Accounts payable

 

 

302,876

 

 

 

41,728

 

Accrued expenses

 

 

(872,298

)

 

 

(1,393,462

)

Operating lease liability

 

 

(232,709

)

 

 

(206,729

)

Deferred revenue

 

 

3,585,261

 

 

 

3,337,417

 

Net cash from operating activities

 

 

6,142,911

 

 

 

6,258,619

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(12,193,470

)

 

 

(1,554,004

)

Payment of Duke license agreement

 

 

(5,000,000

)

 

 

(5,106,224

)

Purchases of marketable securities

 

 

(1,142,212

)

 

 

 

Sale of marketable securities

 

 

1,140,472

 

 

 

 

Net cash from investing activities

 

 

(17,195,210

)

 

 

(6,660,228

)

Cash flows from financing activities:

 

 

 

 

 

 

Treasury stock purchases

 

 

(1,692,433

)

 

 

 

Repayments of note payable

 

 

(1,908,433

)

 

 

(3,325,000

)

Proceeds from the exercise of stock options

 

 

551,274

 

 

 

1,066,290

 

Proceeds from note payable

 

 

8,960,000

 

 

 

 

Issuance costs associated with the proceeds from the note payable

 

 

(196,501

)

 

 

 

Net cash from financing activities

 

 

5,713,907

 

 

 

(2,258,710

)

Decrease in cash and cash equivalents

 

 

(5,338,392

)

 

 

(2,660,319

)

Cash and cash equivalents - beginning of period

 

 

8,263,088

 

 

 

10,361,125

 

Cash and cash equivalents - end of period

 

$

2,924,696

 

 

$

7,700,806

 

 

 

 

 

 

 

 

Supplemental non-cash operating activities:

 

 

 

 

 

 

Lease liability arising from right-of-use asset

 

$

 

 

$

904,691

 

Patent option agreement credit to purchase of patents and licenses

 

$

 

 

$

500,000

 

Liabilities incurred for the purchase of patents and licenses

 

$

 

 

$

11,258,083

 

Supplemental financing activities:

 

 

 

 

 

 

Dividends declared but not yet paid

 

$

7,672,728

 

 

$

 

Stock issued for the purchase of patents and licenses

 

$

 

 

$

3,585,172

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$

776,517

 

 

$

516,000

 

Income taxes

 

$

1,377,133

 

 

$

1,901,025

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(Unaudited)

 

 

 

 

For the Three Months Ended August 31, 2022

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Treasury

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

(Deficit) Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at May 31, 2022

 

 

14,675,772

 

 

$

146,758

 

 

$

41,767,841

 

 

$

(22,238,189

)

 

$

(15,269,427

)

 

$

4,406,983

 

Exercise of stock options

 

 

172,229

 

 

 

1,722

 

 

 

517,552

 

 

 

 

 

 

 

 

 

519,274

 

Compensatory element of stock options

 

 

 

 

 

 

 

 

161,083

 

 

 

 

 

 

 

 

 

161,083

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

(266,978

)

 

 

 

 

 

(266,978

)

Dividends declared ($0.90 per share)