U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File Number
(Exact name of Registrant as Specified in its Charter)
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(State or other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) (Zip Code) |
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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:
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Name of each exchange on which registered |
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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.
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.
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 |
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Accelerated filer |
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Smaller reporting company |
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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 April 21, 2023,
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION (UNAUDITED) |
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Item 1. Financial Statements |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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47 |
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48 |
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2
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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(Unaudited) |
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February 28, |
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November 30, |
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2023 |
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2022 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable (net of allowance for |
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doubtful accounts of $ |
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Prepaid expenses |
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Inventory, current portion |
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Other current assets |
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Total current assets |
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Property and Equipment-net |
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Other Assets |
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Investment - Tianhe stock |
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Duke license agreement |
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Intangible assets, net |
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Inventory, net of current portion |
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Goodwill |
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Deferred tax assets |
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Operating lease right-of-use asset |
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Deposits and other assets, net |
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Total other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Note payable |
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Line of credit |
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Current portion of operating lease liability |
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Current portion of Duke license agreement liability |
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Deferred revenue |
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Total current liabilities |
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Other Liabilities |
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Deferred revenue, net of current portion |
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Contingent consideration |
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Note payable, net of current portion and debt issuance costs |
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Operating lease long-term liability |
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Long-term liability - revenue sharing agreements |
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Total other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 9) |
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Stockholders' Deficit |
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Preferred stock ($ |
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Series A Junior participating preferred stock ($ |
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Common stock ($ |
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Additional paid-in capital |
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Treasury stock, at cost |
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Accumulated deficit |
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Total stockholders' deficit |
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Total liabilities and stockholders' deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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For the Three Months Ended |
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February 28, |
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February 28, |
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2023 |
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2022 |
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Revenue: |
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Processing and storage fees |
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$ |
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$ |
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Public banking revenue |
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Product revenue |
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Total revenue |
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Costs and Expenses: |
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Cost of sales |
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Selling, general and administrative expenses |
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Change in fair value of contingent consideration |
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Research, development and related engineering |
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Depreciation and amortization |
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Total costs and expenses |
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Operating Income |
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Other Income (Expense): |
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Losses on marketable securities |
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Other income |
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Interest expense |
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Total other income (expense) |
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Income before income tax expense |
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Income tax expense |
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Net Income |
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$ |
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$ |
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Net income per common share - basic |
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$ |
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$ |
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Weighted average common shares outstanding - basic |
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Net income per common share - diluted |
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$ |
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$ |
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Weighted average common shares outstanding - diluted |
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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)
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For the Three Months Ended |
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February 28, |
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February 28, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by |
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Depreciation and amortization expense |
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Change in fair value of contingent consideration |
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Losses on marketable securities |
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Compensatory element of stock options |
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Provision for doubtful accounts |
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Amortization of debt issuance costs |
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Amortization of operating lease right-of-use asset |
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Changes in assets and liabilities: |
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Accounts receivable |
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Prepaid expenses |
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Inventory |
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Other current assets |
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Deposits and other assets, net |
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Accounts payable |
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Accrued expenses |
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Operating lease liability |
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Deferred revenue |
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Net cash from operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Payment of Duke license agreement |
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Purchases of marketable securities |
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Sale of marketable securities |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Treasury stock purchases |
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Repayments of note payable |
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Repayment of line of credit |
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Proceeds from the exercise of stock options |
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Net cash used in financing activities |
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Decrease in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
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$ |
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$ |
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Supplemental investing activities: |
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Construction costs payable |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid during the year for: |
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Interest |
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$ |
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$ |
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Income taxes |
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$ |
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$ |
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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)
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For the Three Months Ended February 28, 2023 |
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Treasury |
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Accumulated |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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(Deficit) Equity |
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Balance at November 30, 2022 |
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$ |
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$ |
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Compensatory element of stock options |
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Treasury stock |
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Net income |
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Balance at February 28, 2023 |
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$ |
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For the Three Months Ended February 28, 2022 |
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Treasury |
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Accumulated |
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Stockholders' |
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Amount |
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Stock |
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Deficit |
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Balance at November 30, 2021 |
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$ |
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$ |
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Exercise of stock options |
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Compensatory element of stock options |
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Treasury stock |
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Net income |
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Balance at February 28, 2022 |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
6
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2023
(Unaudited)
Note 1 - Description of Business, Basis of Presentation and Significant Accounting Policies
Cryo-Cell International, Inc. (“the Company” or “Cryo-Cell”) was incorporated in Delaware on September 11, 1989 and is headquartered in Oldsmar, Florida. The Company is organized in
The unaudited consolidated financial statements including the Consolidated Balance Sheets as of February 28, 2023 and November 30, 2022, the related Consolidated Statements of Income for the three months ended February 28, 2023 and 2022, Cash Flows for the three months ended February 28, 2023 and 2022 and Stockholders’ (Deficit) Equity for the three months ended February 28, 2023 and 2022 have been prepared by Cryo-Cell International, Inc. pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Certain financial information and note disclosures, which are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's November 30, 2022 Annual Report on Form 10-K. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows for all periods presented have been made. The results of operations for the three months ended February 28, 2023 are not necessarily indicative of the results expected for any interim period in the future or the entire year ending November 30, 2023.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. ASC 606 also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Under ASC 606, revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised services are transferred to the customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring services to a customer ("transaction price").
At contract inception, if the contract is determined to be within the scope of ASC 606, the Company evaluates its contracts with customers using the five-step model: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company evaluates its contracts for legal enforceability at contract inception and subsequently throughout the Company’s relationship with its customers. If legal enforceability with regards to the rights and obligations exist for both the Company and the customer, then the Company has an enforceable contract and revenue recognition is permitted subject to the satisfaction of the other criteria. If, at the outset of an arrangement, the Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. The Company only applies the five-step model to contracts when it is probable that collection of the consideration that the Company is entitled to in exchange for the goods or services being transferred to the customer, will occur.
Contract modifications exist when the modification either creates new or changes in the existing enforceable rights and obligations. The Company’s contracts are occasionally modified to account for changes in contract terms and conditions, which the Company refers to as an upgrade or downgrade. An upgrade occurs when a customer wants to pay for additional years of storage. A downgrade occurs when a customer originally entered into a long-term contract (such as twenty-one year or lifetime plan) but would
7
like to change the term to a one-year contract. Upgrade modifications qualify for treatment as a separate contract as the additional services are distinct and the increase in contract price reflects the Company’s stand-alone selling price for the additional services and will be accounted for on a prospective basis. Downgrade modifications do not qualify for treatment as a separate contract as there is no increase in price over the original contract, thus failing the separate contract criteria. As such, the Company separately considers downgrade modifications to determine if these should be accounted for as a termination of the existing contract and creation of a new contract (prospective method) or as part of the existing contract (cumulative catch-up adjustment). ASC 606 requires that an entity account for the contract modification as if it were a termination of the existing contract, and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. As the services after the modification were previously determined to be distinct, the Company concluded that downgrade modifications qualify under this method and will be accounted for on a prospective basis. Although contract modifications do occur, they are infrequent.
Performance Obligations
At contract inception, the Company assesses the goods and services promised in the contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company determined that the following distinct goods and services represent separate performance obligations involving the sale of its umbilical cord blood product:
Processing and storage fees include the Company providing umbilical cord blood and tissue cellular processing and cryogenic cellular storage for private use. Revenues recognized for the cellular processing and cryogenic cellular storage represent sales of the umbilical cord blood stem cells program to customers and income from licensees who are selling the umbilical cord blood stem cells program to customers outside the United States.
The Company recognizes revenue from processing fees at the point in time of the successful completion of processing and recognizes storage fees over time, which is ratably over the contractual storage period as well as other income from royalties paid by licensees related to long-term storage contracts which the Company has under license agreements. Contracted storage periods are ,
Significant financing component
When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. For all plans being annual, twenty-one years and lifetime, the storage fee is billed at the beginning of the storage period (prepaid plans). The Company also offers payment plans (including a stated service fee) for customers to pay over time for a period of one to twenty-four plus months. The one-time plan includes the collection kit, processing and testing, return medical courier service and twenty-one years of pre-paid storage fees. The life-time plan includes the collection kit, processing and testing, return medical courier service and pre-paid storage fees for the life of the customer. The Company concluded that a significant financing component is not present within either the prepaid or overtime payment plans. The Company has determined that the twenty-one year and life-time prepayment options do not include a significant
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financing component as the payment terms were structured primarily for reasons other than the provision of financing and to maximize profitability.
The Company has determined that the majority of plans that are paid over time are paid in less than a year. When considered over a twenty-four-month payment plan, the difference between the cash selling price and the consideration paid is nominal. As such, the Company believes that its payment plans do not include significant financing components as they are not significant in the aggregate when considered in the context of all contracts entered into nor significant at the individual contract level.
The Company elected to apply the practical expedient where the Company does not need to assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less.
As of February 28, 2023, the total aggregate transaction price allocated to the unsatisfied performance obligations was recorded as deferred revenue amounting to $
Variable consideration
In December 2005, the Company began providing its customers that enrolled after December 2005 a payment warranty under which the Company agrees to pay $
Based on the Company’s historical experience to date, the Company has determined the payment warranty to be fully constrained under the most likely amount method. Consequently, the transaction price does not currently reflect any expectation of service level credits. At the end of each reporting period, the Company will update the estimated transaction price related to the payment warranty including updating its assessment of whether an estimate of variable consideration is constrained to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.
Allocation of transaction price
As the Company’s processing and storage agreements contain multiple performance obligations, ASC 606 requires an allocation of the transaction price based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. The Company has selected an adjusted market assessment approach to estimate the stand-alone selling prices of the processing services and storage services and concluded that the published list price is the price that a customer in that market would be willing to pay for those goods or services. The Company also considered the fact that all customers are charged the list prices current at the time of their enrollment where the Company has separately stated list prices for processing and storage.
Costs to Obtain a Contract
The Company capitalizes commissions that are incremental in obtaining customer contracts and the costs incurred to fulfill a customer contract if those costs are not within the scope of another topic within the accounting literature and meet the specified criteria. These costs are deferred in other current or long-term assets and are expensed to selling, general and administrative expenses as the Company satisfies the performance obligations by transferring the service to the customer. These assets will be periodically assessed for impairment. As a practical expedient, the Company elected to recognize the incremental costs of obtaining its annual contracts as an expense when incurred, as the amortization period of the asset recognized would have been
The Company has determined that payments under the Company’s refer-a-friend program (“RAF program”) are incremental costs of obtaining a contract as they provide an incentive for existing customers to refer new customers to the Company and is referred to as commission. The amount paid under the RAF program (either through issuance of credits to customers or check payments) which exceeds the typical commission payment to a sales representative is recorded as a reduction to revenue under ASC 606. During the three months ended February 28, 2023, the Company recorded $
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additional contract acquisition costs of $
The Company sells and provides units not likely to be of therapeutic use for research to qualified organizations and companies operating under Institutional Review Board approval. Control is transferred at the point in time when the shipment has occurred, at which time, the Company records revenue.
Licensee and royalty income consist of royalty income earned on the processing and storage of cord blood stem cell specimens by an affiliate where the Company has a License and Royalty Agreement. The Company records revenue from processing and storage of specimens and pursuant to agreements with licensees. The Company records the royalty revenue in same period that the related processing and storage is being completed by the affiliate.
The Company records revenue from the sale of the PrepaCyte CB product line upon shipment of the product to the Company’s customers.
The Company elected to apply the practical expedient to account for shipping and handling activities performed after the control of a good has been transferred to the customer as a fulfillment cost. Shipping and handling costs that the Company incurs are therefore expensed and included in cost of sales.
Disaggregation of Revenue
The revenue as reflected in the statements of income is disaggregated by products and services.
The following table provides information about assets and liabilities from contracts with customers:
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February 28, 2023 |
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November 30, 2022 |
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Contract assets (sales commissions) |
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$ |
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