U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended November 30, 2000
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/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
Commission File Number 000-23386
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CRYO-CELL INTERNATIONAL, INC.
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(Name of Small Business Issuer in its charter)
DELAWARE 22-3023093
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3165 MCMULLEN BOOTH ROAD, BLDG. B, CLEARWATER, FL 33761
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (727) 723-0333
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
None NASDAQ
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
Check whether Issuer: (1) has filed all reports required to be filed by section
13 or 15 (d) of the Securities and Exchange Act of 1934 during the past 12
months and (2) has been subject to such filing requirements for the past 90
days.
Yes/ X /No/ /
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form or any amendment to this Form
10-KSB / /
Issuer's Revenues for its most recent fiscal year: $2,109,342.
As of March 5, 2001, the aggregate market value of the voting stock held by non-
affiliates of the Issuer was approximately $44,100,000. The market value of
Common Stock of the Issuer, par value $0.01 per share, was computed by reference
to the average of the closing bid and asked prices of the Issuer's Common Stock
on such date which was March 5, 2001.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes_X__No____.
The number of shares outstanding of the Issuer's Common Stock, par value $0.01
per share, as of March 5, 2001: 10,167,629.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: The information required by Part III
of Form 10-KSB is incorporated by reference to the Issuer's definitive proxy
statement relating to the 2000 Annual Meeting of Shareholders which is expected
to be filed with Securities and Exchange Commission on or about March 30, 2001.
Transitional Small Business Disclosure Format (check one): Yes ____; No X
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FORWARD LOOKING STATEMENTS
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In addition to historical information, this report contains forward-looking
statements within the meanings of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to; those discussed in the section entitled "Management's
Discussion and Analysis or Plan of Operation -- Factors That May Affect Future
Results and Market Price of Stock." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. CRYO-CELL International, Inc. (the
"Company") undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the risk factors described in other documents
the Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-Q filed by the Company in 2000 and
any Current Reports on Form 8-K filed by the Company.
Part I
ITEM 1. DESCRIPTION OF BUSINESS
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Introduction
CRYO-CELL International, Inc. was incorporated on September 11, 1989 in the
state of Delaware. It is engaged in cryogenic cellular storage and the design
and development of cellular storage devices. The Company's current focus is on
the processing and preservation of umbilical cord (U-Cord(TM)) blood stem cells
for autologous/sibling use. The Company believes that it is the fastest growing
commercial firm currently specializing in separated umbilical cord blood stem
cell storage. CRYO-CELL has pioneered several technologies that allow for the
processing and storage of specimens in a cryogenic environment. The Company's
original mission of affordability for U-Cord blood preservation remains in
effect. These technologies include a process for the storage of fractionated
(separated) U-Cord stem cells and the development and patenting of the first
computer controlled, robotically operated cryogenic storage system. Its
headquarters facility in Clearwater, FL handles all aspects of its business
operations including the processing and storage of specimens. Several other
companies involved in commercial cell banking rely on shipping their specimens
elsewhere for processing and storage.
It is the Company's mission to make expectant parents aware of the
potential medical benefits from preserving stem cells and to provide them the
means and processes for collection and storage of these cells. Today, stem cell
transplants are known and accepted treatments for a number of life-threatening
diseases. With continued research in this area of medical technology, other
avenues for their potential use and expansion are being explored. A vast
majority of expectant parents are simply unaware that umbilical cord blood
contains a rich supply of stem cells and that they can be collected, processed
and stored for the potential future use of the newborn and possibly related
family members. A baby's stem cells will remain a perfect match for the baby
throughout its life and have a 1-in-4 chance (or better) of being a perfect
match for a sibling. There is no assurance, however, that a perfect match could
treat certain diseases. Today, it is still common for the cord blood (the blood
remaining in the umbilical cord and placenta) to be discarded at the time of
birth as medical waste. Obviously, the Company believes that no U-Cord specimen
should be discarded when it could possibly save a life.
Given the potential benefits of U-Cord stem cell preservation, the number
of parents of newborns participating in stem cell preservation is still
relatively small compared to the number of births (four million per annum) in
the United States alone. Critical reasons for this low level of market
penetration are the misperception of the high cost of stem cell storage as well
as a general lack of awareness of the benefits of stem cell preservation
programs. However, evolving medical technology could significantly increase the
utilization of the U-Cord blood for transplantation and/or other types of
treatments. A number of competitors in this market have been charging upwards
of $1000 - $1500 for this stem cell preservation plus higher annual fees for
storage than the Company charges. The cost is usually not covered by insurance.
The Company has made this procedure affordable and within financial reach of
most families. The growth and profitability of the Company should come from
increases in stem cell specimen storage volume driven by its marketing
approaches, resulting in an increasing base of
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annual stem cell storage renewal fees.
Background
Nearly fifty years ago researchers discovered that cells could be
cryopreserved at extremely low temperatures and all cellular activity would
cease until the specimens were thawed. Historically, cryopreservation was
required for organ transplants, blood banks and medical research. Today,
cryopreservation of umbilical cord blood stem cells gives expectant parents the
opportunity to potentially take advantage of evolving cellular therapies and
other medical technologies.
Cell Banking
Hematopoeitic stem cells are the building blocks of our blood and immune
systems. They form the white blood cells that fight infection, red blood cells
that carry oxygen throughout the body and platelets that promote healing. Stem
cells are found in bone marrow where they continue to generate cells throughout
our lives. Stem cells can be stored in a cryogenic environment, and upon
thawing, infused into a patient. They can be returned to the individual from
whom they were taken (autologous) or donated to someone else (allogeneic). The
opportunity to use an individual's own bone marrow for a transplant is dependent
upon whether the cancer has entered the marrow system (metastasized).
Otherwise, a marrow donor needs to be identified to provide the needed bone
marrow. The availability of a marrow donor or matched stem cell specimen allows
physicians to administer larger doses of chemotherapy or radiation in an effort
to eradicate the disease. Stem cell therapies and transplants are used for both
cancerous and non-cancerous diseases.
Stem cells are found in umbilical cord blood and placental blood ("cord
blood stem cells") which can be collected and stored after a baby is born.
Recent advances have provided the techniques to separate the stem cells found in
these two sources. Over 2,500-cord blood stem cell transplants have been
performed to date. The Company believes that parents will want to save and
store these cells for potential future use by their child(ren). These stem
cells also have at least a 1 in 4 chance of being compatible for use by a
sibling. Moreover, researchers believe they may be utilized in the future by
parents for treating diseases that currently have no cure as a result of
evolving cellular expansion technologies.
The Company believes that the market for cord blood stem cells is enhanced
by the current focus on reducing prohibitive health care costs. With the
increasing costs of bone marrow matches and transplants, a newborn's U-Cord
cells are stored as a precautionary measure. Medical technology is constantly
evolving which may provide new uses for cryopreserved cord blood stem cells.
CCEL Cellular Storage Systems
During the period since its inception, the Company's research and
development activities have principally involved the design and development of
its cellular storage systems ("CCEL Cellular Storage System") and in securing
patents on these systems.
The Company believes that its long-term cellular storage units can provide
an improved ability to store cells or other material in liquid nitrogen, its
vapors or other media. The units are controlled by a computer system which
robotically inserts vials in pre-selected storage areas inside the chamber.
Additionally, the stored material can be robotically inserted or retrieved by
computer on an individual basis without all of the remaining specimens being
exposed to ambient temperature. The efficient use of storage space and a dual
identification system for inventory control is a competitive advantage for the
Company. The Company is the assignee of all patents on the units.
Other cryopreservation systems are manually operated and can expose the
laboratory technician to liquid nitrogen when inserting or retrieving specimens.
Moreover, the use of these units exposes the remaining stored specimens to
ambient temperature whenever specimens are inserted or retrieved. The Company
has designed and holds patents on a system which makes use of the latest in
computer, robotics and bar code laser scanning identification technologies.
The unit is assembled by an independent manufacturer utilizing the Company's
patented designs.
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In February 1999, the Company was granted a patent on the CCEL III computer
controlled robotically operated cellular storage system, which is designed to be
multi-functional. When completely developed the unit will be able to store more
than 35,000 5ml vials, and many times that number of smaller vials. Because the
CCEL III is multi-functional it is currently being evaluated for various other
uses.
Affiliated Hospitals
On November 30, 1996, the Company signed agreements with OrNda HealthCorp.
Two "one-third" Revenue Sharing Agreements were purchased in which OrNda paid
the Company $666,666. OrNda was acquired by Tenet Healthcare Corporation, which
agreed to be bound by the terms of the OrNda agreements. The agreements were
renegotiated and the Company is now storing Tenet hospital originated specimens
at its headquarters lab in Clearwater, Florida and paying Tenet a proportionate
revenue sharing entitlement.
In June 1998, the Company signed an agreement with Women & Infants Hospital
of Rhode Island. The Company has offered its U-Cord program services for the
potential medical benefit of the approximately 9,000 babies born annually at the
hospital.
Marketing Cellular Storage Services
To increase awareness of its services, the Company has invested in a
variety of marketing programs designed to educate expectant parents and those
medical caregivers to whom they turn to for advice.
The Company markets its preservation services to expectant parents and by
distributing information to obstetricians, pediatricians, Lamaze instructors and
other childbirth educators, certified nurse-midwifes and other related
healthcare professionals. The Company has clinical educators based in several
regions who work with the medical community and with expectant parents to
educate them on cord blood stem cell preservation. The Company also has a
clinical support team of specially trained nurses who are available 24 hours, 7
days a week to educate expectant parents and the medical community on the life-
saving potential of cord blood stem cell preservation. In addition, the Company
exhibits at conferences, trade shows and other media focusing on the expectant
parent market. The Company is realizing an increasing level of interest from its
Web site, www.CRYO-CELL.com.
In January 2000 the Company renewed its agreement with the Lamaze
Publishing Company to sponsor the Lamaze You and Your Baby tutorial tape. The
agreement has been extended for three (3) years and calls for Lamaze to
distribute the videotape to 1.8 million women in their third trimester of
pregnancy. Over 90% of first time mothers and 45% of the pre-natal market avail
themselves of the Lamaze Institute for Family Education proven instruction
programs. The tutorial tape, which is distributed by approximately 9,000
instructors, discusses the importance of cord blood storage and refers viewers
to the full-page ad that the Company has placed in the Lamaze Parents Magazine,
which is distributed to 2.4 million expectant mothers. During 2000, 600,000 You
and Your Baby CD's were distributed through WAL-MART stores for the first time.
The Company also places an ad in Lamaze para Padres, Lamaze Publishing's
magazine for Hispanic mothers-to-be. The Company has exclusivity on the
tutorial tape in the cord blood storage category and first right of refusal for
renewal of the agreement beyond 2003.
In March 2000, the Company became a sponsor of the 2000 ACOG (American
College of Obstetricians and Gynecologists) Meeting CD-ROM. The CD includes a
segment on the Company's U-Cord(TM) program and was distributed to approximately
40,000 ACOG members in November 2000. The Company is the only cord blood
preservation firm featured on the CD-ROM.
In March 2000, the Company launched its Mother to Mother(TM) Educational
Network program to offer the Company's umbilical cord blood preservation program
to expectant parents. The network is comprised of clients who have stored their
newborn's U-Cord blood stem cells with the Company. These independent
contractors contact expectant parents, OB/GYN's and medical caregivers advising
them of the Company's affordable service.
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The Company's advertisements have appeared in, or are scheduled for
insertion in several national targeted prenatal magazines including American
Baby, Pregnancy, Baby Talk and Fit Pregnancy. Expectant parents have also
received information via emails and newsletter links through BabyCenter.com.
BayNews 9, a CNN affiliate, and NewsChannel 10 have both carried stories about
CRYO-CELL's affordable service.
In January 2001, the Company established the Grandparent's Legacy Program.
Through this program, grandparents can provide the gift of cord blood stem cell
preservation for their grandchildren.
Revenue Sharing Agreements
In addition to revenues generated from sales to customers, the Company
generates revenues from the sales of Revenue Sharing Agreements. Under these
agreements the Company shares its storage revenues with investors who receive
entitlements on storage spaces. These agreements can take considerable time to
negotiate and finalize. Moreover, since such agreements can involve large
infusions of revenues on intermittent bases, diverse swings in quarterly and
annual revenues and earnings may occur.
New Jersey. At November 30, 1999, the Company entered into agreements with two
investors entitling them to on-going shares in a portion of CRYO-CELL's net
storage revenue generated by specimens originating from within the state of New
Jersey for a price of $500,000. Deposits totaling $120,000 have been received
through November 30, 2000 and the remaining $380,000, due in April 2001, is
recorded as a receivable. When the $380,000 is received by the Company the
investors will be entitled to a portion of net storage revenues generated to a
maximum of 33,000 storage spaces.
Arizona. On February 9, 1999, the previous agreements with the Company's
Arizona Revenue Sharing investors were modified and replaced by a Revenue
Sharing Agreement for the state of Florida for a price of $1,000,000. Under the
terms of this agreement the Company credited the investor's previously paid
$450,000 toward the purchase of the Revenue Sharing Agreement. The balance of
$550,000 will be paid through their Revenue Sharing entitlements on their share
of net storage revenues. The Revenue Sharing Agreement applies to net storage
revenues originating from specimens from within the state of Florida. The
Revenue Sharing Agreement entitles the investors to net revenues from a maximum
of 33,000 storage spaces and cancels the investors' obligation to provide the
Company with $675,000 plus accrued interest under the prior Arizona agreement.
Illinois. In 1996, the Company signed agreements with a group of investors
entitling them to an on-going 50% share in the Company's portion of net storage
revenues generated by specimens stored in Chicago's Illinois Masonic Medical
Center. Since the Company will no longer be storing new specimens in Chicago,
the agreements were modified in 1998 to entitle the investors to a 50% share of
the Company's portion of net revenues relating to specimens originating in
Illinois and its contiguous states and stored in Clearwater, Florida for a
maximum of up to 33,000 spaces. The revenue generated by this Single Unit
Revenue Sharing Agreement was $1,000,000.
Bio-Stor. On February 26, 1999, the Company modified all previous agreements
with Bio-Stor International, Inc. The modified agreement entered Bio-Stor into
a Revenue Sharing Agreement for the state of New York. The Company credited
Bio-Stor's $900,000 (previously paid) toward the purchase of 90% of New York.
Bio-Stor received 90% of the 50% share in CRYO-CELL's portion of net storage
revenues generated by the specimens originating from the Company's clients in
the state of New York for up to 33,000 shared spaces. This agreement supersedes
all other agreements between Bio-Stor International, Inc and the Company.
Tenet Healthcare Corporation. On November 30, 1996, the Company signed
agreements with OrNda HealthCorp. Two "one-third" Revenue Sharing Agreements
were purchased in which OrNda paid CRYO-CELL $666,666. OrNda was acquired by
Tenet Healthcare Corporation, which agreed to be bound by the terms of the OrNda
agreements. The agreements were renegotiated and the Company has agreed to
store Tenet originated specimens at its headquarter's lab in Clearwater, Florida
while paying Tenet a proportionate revenue sharing entitlement.
Patents
The Company has been granted several patents with respect to its cellular
storage units. In January 2001, the Company was informed that a patent for a
"method and device for maintaining temperature integrity of
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cryogenically preserved biological samples" has been allowed by the United
States Patent and Trademark Office. In addition, the Company has filed several
additional United States and foreign patents. There can be no assurances,
however, that the pending patent applications will be issued as patents or, if
issued, that the patents will provide the Company with significant protection
against competitors.
Competition
The Company is aware of at least three competing companies in the
marketplace. These companies, Viacord, Cord Blood Registry, Inc. and Corcell,
charge a considerably higher price for their services than does the Company.
The Company believes it will be able to successfully compete due to its
affordable pricing structure and its marketing approach, which includes
agreements with Lamaze Publishing Company, an iVillage Company, for category-
exclusive sponsorship of the Lamaze You and Your Baby tutorial tape, among
others.
Research, Development and Related Engineering
The Company has incurred $275,803 during fiscal 2000, compared to $91,001
during fiscal 1999, on research, development and related engineering expenses.
In fiscal 2000 these expenses are attributed to: 1) to the research agreement
with the University of South Florida at Tampa and the Company's wholly owned
subsidiary CCEL BIO-THERAPIES, Inc. CCEL BIO-THERAPIES and the University are
co-assignees of a filed patent application covering the technology utilizing
cord blood for the treatment of neurological degenerative diseases. The Company
has been granted worldwide marketing rights for any pharmaceutical or therapy
developed as a result of this umbilical cord blood research program; 2) the
design, development and approval of the Company's CCEL III technology; 3) the
design and development of a device for maintaining and monitoring the
temperature of vials during cyrogenic transfer.
Government Regulation
The CCEL Cellular Storage technology is a class II device and falls under
the Food and Drug Administration's (FDA) regulations at 21 C.F.R. (S) 864.9700
("Blood Storage Refrigerator/Freezer"). Devices regulated under 21 C.F.R. (S)
864.9700 have been granted an exemption from the 510(k) notification
requirements. To date, the FDA does not regulate banks that collect and store
cord blood for private or family use.
In June 1998, the Company was granted a license to operate in the state of
New York. The New York Department of Health approved the Company's application
to operate as a comprehensive tissue procurement service, processing and storage
facility. This license allows the Company to offer its cord blood stem cell
storage services to the residents of New York, which represents a market in
excess of 270,000 annual births.
In September 1999, the Company was granted a Blood Bank license to operate
in the state of New Jersey. The Company is now authorized to operate in all 50
states.
The Company has established a Medical & Scientific Advisory Board comprised
of more than 10 researchers, physicians and scientists from various fields such
as oncology, stem cell research, hematology, genetic research, assisted
reproduction and other specialties. Many of the Company's Advisory Board
members are heads of their departments and are committed to cellular storage as
part of new services to improve patient care and save lives.
Management Employees
At March 5, 2001 there are 23 employees on the full-time staff of the
Company. The following are the key members of the Company's management group:
Daniel D. Richard, Chairman of the Board and Chief Executive Officer. Mr.
Richard is the founder of the Company and co-inventor of much of the Company's
technology it currently employs. Mr. Richard has served as Chairman of the Board
since the Company's inception. Prior to founding the Company, Mr. Richard was
the first officer and director of Marrow-Tech, Inc., a publicly traded company
engaged in the field of cellular replication.
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Mr. Richard was also the President of Daniel Richard Consultants, Inc., a
marketing firm which operated in forty-four cities in the U.S. and throughout
the world.
Wanda D. Dearth, President and Chief Operating Officer. Ms Dearth joined the
Company in June 2000. Ms. Dearth joined the Company from kforce.com (formerly
Romac International, Inc.) where she was Business Unit Vice President for the
nurse staffing division. Ms. Dearth has a history of over 15 years placing
physicians and nurses throughout the U.S. She has over 20 years of marketing
and operational experience with the majority of her career specializing in
start-up operations. Ms. Dearth graduated from Miami University of Ohio with a
B. S. in Business Administration. In October 2000, Ms. Dearth was appointed a
member of the Company's Board of Directors.
Gerald F. Maass, Executive Vice President. Mr. Maass joined the Company in
March 1998. Prior to joining the Company Mr. Maass worked for Critikon, a
subsidiary of Johnson & Johnson, where his most recent position was
International Director of Marketing for the Patient Monitoring business. Mr.
Maass' ten-year tenure with Johnson and Johnson included several marketing and
business development roles; he also served on the Critikon management committee.
Prior to Johnson & Johnson, Mr. Maass was with Baxter Healthcare and Control
Data Corporation in marketing, sales management, business development and
business management roles. Mr. Maass began his career with Mayo Clinic in
Rochester, MN and holds a B.S. degree in Medical Technology. In September 1998,
Mr. Maass was appointed a member of the Company's Board of Directors.
Geoffrey J. O'Neill, Ph.D., Laboratory Director. Dr. O'Neill joined the company
in April 1999 and has oversight of the Company's processing laboratory and
storage facility. He has over 25 years experience in human hematopoetic
progenitor cell therapy, including expertise in the processing, cryopreservation
and storage of stem cells, flow cytometry analysis, HLA typing and CD34+ cell
purification. Dr. O'Neill also has expertise in immunohematology and blood
banking. A co-author of many publications, he has an undergraduate degree in
microbiology and a Ph.D. in Immunology.
Jill Taymans, Chief Financial Officer. Ms. Taymans joined the Company in April
1997 serving initially as Controller and was appointed CFO in May 1998. Ms.
Taymans graduated from the University of Maryland in 1991 with a BS in
Accounting. She has worked in the accounting industry for over nine years in
both the public and private sectors. Prior to joining the company she served
for three years as Controller for a telecommunications company in Baltimore,
Maryland.
E. Thomas Deutsch, III, Chief Information Officer. Mr. Deutsch joined the
Company in May 1996 and is a software and process engineer, specializing in
healthcare information systems. He graduated from the University of North
Carolina in Chapel Hill in 1986 with a B. S. degree in Mathematics. Prior to
joining the Company in 1996, Mr. Deutsch worked for Shared Medical Systems in
Malvern, PA, IBM in Atlanta, GA, and HBO and Company in Atlanta, GA. His
responsibilities include developing, implementing and supporting the Company's
communications and information systems, developing, implementing and supporting
the Company's Internet plan and systems engineering for the patented CCEL II
Cellular Storage System.
Additional employees and staff will be hired on an "as needed" basis. The
Company believes its relationship with its employees to be excellent and
therefore does not contemplate any labor disputes.
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CCEL Bio-Therapies, Inc.
In February 2000, the Company, through its wholly owned subsidiary CCEL
BIO-THERAPIES, Inc., entered into a research agreement with the University of
South Florida at Tampa to collaborate on a technology for the potential
treatment of a number of debilitating degenerative diseases. The research
project is being conducted at the University's laboratory facilities. In March
2000, the Company transferred $200,000 to CCEL BIO-THERAPIES, Inc. to meet its
funding commitment under this agreement. CCEL BIO-THERAPIES, Inc. and the
University are co-assignees of a filed patent application covering the
technology utilizing cord blood for the treatment of neurological degenerative
diseases. An application has been made for federal grants (SBIR and STTR
research grants) on behalf of the Company and CCEL BIO-THERAPIES, Inc. If the
grants are approved an additional $100,000 per grant will be received, which
will be used to further research. In addition, the application for a State of
Florida I-4 matching grant has been approved for $100,000, which will also be
used for research. The Company has been granted worldwide marketing rights for
any pharmaceutical or therapy developed as a result of this umbilical cord blood
research program. Under the terms of the agreement, the University will receive
standard royalty payments on any product sales.
European Expansion
On April 6, 2000, the Company entered into a renewable agreement with
COLTEC, Ltd. for the exclusive license to market the Company's U-CORD program in
Europe. The marketing rights allow COLTEC, Ltd. to directly market the U-CORD
program, sell revenue sharing agreements or further sub-license the marketing
rights throughout Europe. The Company received $1,400,000 in cash and licensing
fees of 10.5% to 20% of adjusted U-CORD processing and storage revenues to be
generated in Europe, and granted COLTEC, Ltd. a three year option to purchase
100,000 shares of the Company's common stock ($8.00 exercise price) and will
issue up to 100,000 additional options ($12.00 exercise price), as needed, to
facilitate sales of sub-licensing and/or revenue sharing agreements in Europe.
The company recognized $465,000 of the licensing fees in 2000. Subsequent to
the licensing agreement date, COLTEC, Ltd. formed a corporation, CRYO-CELL
Europe, B.V. to engage in the cryogenic cellular storage business under the
agreement. At September 19, 2000 the Company entered into an agreement to
purchase approximately 6% of CRYO-CELL Europe, B.V. In October and November
2000, the Company paid $1,000,000 for 38,760 shares of the capital stock of
CRYO-CELL Europe, B.V. which the Company owned on January 24, 2001.
ITEM 2. DESCRIPTION OF PROPERTY
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The Company entered into a long-term lease in September 1997 for its
corporate headquarters in Clearwater, Florida. The 7,500 square foot facility
contains the Company's executive offices, its conference and training center,
its state-of-the-art laboratory processing and cryogenic storage facility and
its supporting scientific offices.
ITEM 3. LEGAL PROCEEDINGS
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I. In December 1992, CRYO-CELL entered into an exclusive agreement with the
University of Arizona to develop and enhance a commercial (paid for) cord
blood stem cell bank. Prior to this agreement the University of Arizona
had not commenced storing any cord blood specimens. CRYO-CELL provided the
means for the University to obtain approximately 1400 paying clients.
Prior to the termination of the exclusive agreement, which CRYO-CELL
alleges was unwarranted, the University breached its contract with CRYO-
CELL and entered into an Agreement with Cord Blood Registry, Inc. (CBR).
On or about July 11, 1996, CRYO-CELL filed suit in San Francisco Superior
Court against the University of Arizona, Dr. David Harris and Cord Blood
Registry, Inc. The suit claimed breach of contract and other related
business torts. Months later, after settlement discussions were
unproductive, the University of Arizona counter-sued CRYO-CELL for breach
of contract and negligent misrepresentation.
On July 20, 1998, as a result of the evidence, the jury awarded $1,050,000
against Defendant University of Arizona. In addition, an award of $120,000
was granted against the University of Arizona and David Harris,
individually, for misappropriation of trade secrets. The jury voted
unanimously against the
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University and in favor of CRYO-CELL as to the counter claims. The court
rejected three post-trial motions by the University of Arizona including a
request to reduce the award or set aside the verdict.
On or about September 27, 1999 the Company accepted the University's offer
of $800,000 and settled the matter in order to avoid a lengthy and costly
appeals process. On September 30, 1999, the Company received $441,000 from
the University of Arizona. The remaining balance of $359,000 is being held
in escrow, to satisfy a legal lien filed November 4, 1998 by the Company's
previous attorneys, Horwitz and Beam. The Company disputes their position
and has counter sued Horwitz and Beam for malpractice and is seeking
$1,000,000 in compensatory damages and an unspecified amount of punitive
damages deemed appropriate by the court.
II. CRYO-CELL retained the services of Horwitz & Beam, a California law firm,
to handle the above described lawsuit including its allegations against CBR
for interference in a legitimate contract between two parties and unfair
business practices, among other claims. CRYO-CELL believes that Horwitz &
Beam mishandled the CBR aspect of the case and certain aspects of its case
against the University of Arizona by failing to depose CBR defendents on a
timely basis and failing to respond to the University's request for an
exemption from punitive damages (stating they were a public entity), among
others. Without this evidence, the court granted a summary judgment
dismissal in favor of CBR. There is a dispute as to whether Horwitz and
Beam is entitled to the fees of $129,822 they claim is owed by the Company.
On March 8, 1999, the Company, the Company's CEO and Chairman, the
Company's Executive Vice President, and the Company's legal counsel were
named as the defendants in a lawsuit filed in the Superior Court of Orange
County, California by Horwitz & Beam, the attorneys which had represented
CRYO-CELL in its suit against the University of Arizona et al. The
plaintiff alleges breach of contract and seeks payment of $129,822 in
allegedly unpaid fees and costs associated with the University of Arizona
litigation. The plaintiff also asserts claims of misrepresentation. In
reference to these misrepresentation claims, plaintiff has filed a
Statement of Damages, which asserts $1,000,000 in general damages and
$3,500,000 in punitive damages.
Accordingly, on June 14, 1999, the Company filed: (1) an answer denying
all liability; (2) a counterclaim for breach of contract and malpractice,
seeking in excess of $1 million in compensatory damages arising from the
malpractice; (3) a motion to dismiss the individual defendants for lack of
jurisdiction; and (4) a motion to dismiss all punitive damages allegations
against the Company.
On December 17, 1999, Judge Alicemarie H. Stotler of the United States
District Court in the Central District of California, issued an Order in
which she: (1) granted CRYO-CELL International, Inc.'s ("CRYO-CELL") Motion
to Strike Punitive Damages and Dismiss Part of the Complaint; (2) granted
Daniel Richard's, Mark Richard's and Gerald F. Maass' (the "Individual
Defendants") Motion to Dismiss Complaint for Lack of Personal Jurisdiction;
and (3) granted in part and denied in part Horwitz & Beam, Inc.'s ("H&B")
Motion for Order Dismissing Counterclaim and/or Strike Portions Thereof.
The net effect of this order was to reframe the Complaint as a fee dispute,
as opposed to a multi-million dollar claim for fraud against CRYO-CELL and
its corporate officers. By its order, the Court has barred recovery in
this action against the Individual Defendants, and has reduced CRYO-CELL's
exposure from over $3.5 million dollars to $129,822, plus a possible award
of attorneys' fees.
CRYO-CELL has established an escrow in the amount of $359,000 to cover the
disputed legal fees ($129,822) and the 20% recovery of the Judgement
against the University of Arizona and David Harris. The Company has
requested the release of approximately $70,000 from escrow, which is the
excess of 20% of the $800,000 actual settlement amount. The overage is a
result of CRYO-CELL's settlement of the $1,170,000 original jury award.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None.
8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- ------- -----------------------------------------------------
STOCKHOLDER MATTERS
-------------------
In January of 1997, the Company's stock began trading on the NASDAQ Small
Cap market. The Company's common stock traded on the Over-The-Counter market
since January 10, 1991, the date of the Company's initial public offering. The
following table shows, for the calendar periods indicated, the high and low
closing bid quotations for the Company's common stock as reported by the Dow
Jones Retrieval Service. The quotations represent inter-dealer prices without
retail mark-up, markdown or commission and may not represent actual
transactions.
High Low
------- -------
1999
- ----
February 28, 1999 2 5/8 2 15/32
May 31, 1999 2 1 7/8
August 31, 1999 4 23/32 4 7/16
November 30, 1999 7 1/4 5 13/16
2000
- ----
February 29, 2000 7 15/32 7
May 31, 2000 5 3/8 4 15/16
August 31, 2000 4 3/4 4 1/2
November 30, 2000 2 5/16 1 15/16
The Company has not declared any cash dividends on its common stock and
does not expect to do so in the near future.
As of March 5, 2001 the Registrant had 402 shareholders of record, and
management believes there are approximately 1,200 additional beneficial holders
of the Company's common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------- ---------------------------------------------------------
The following discussion and analysis of the financial condition and
results of operations of the Company for the two years ended November 30, 2000,
should be read in conjunction with the financial statements and related notes as
well as other information contained in this Annual Report on Form 10-KSB.
Overview
Fiscal 2000 was a year of strategic positioning and growth for the Company.
Much time and effort was spent building the foundations from which the Company
grew. The primary business highlights include the following:
Additional Management. Daniel D. Richard, founder and Chairman relinquished his
- ----------------------
role as President and COO and remained as CEO. Wanda D. Dearth joined the
Company in June 2000 (see Employee section) as President and Chief Operating
Officer. The Board of Directors was expanded from five to eight members. In
addition, to Ms. Dearths' appointment (October 2000), two outside directors were
added: Mercedes Walton (October 2000) and Ronald Richard (January 2001). All
appointments bring additional strength to both the internal management and Board
level experience.
U-Cord Program Marketing Programs. With the receipts of cash from a private
- ----------------------------------
placement (November 1999, $1,100,00) and the exercise of stock options primarily
during the first six months of fiscal 2000, ($2,500,000), the Company was in a
position to expand its marketing programs. The marketing agreement with Lamaze
Publishing, including the exclusive category sponsorship of the You and Your
Baby video, was extended for three
9
years. The Company established the Mother-to-Mother Educational Network. Field-
based Clinical Educators were added to promote the U-Cord program with
hospitals, physicians, midwives and childbirth educators. Targeted magazine
advertising was expanded to include American Baby and, more recently, Pregnancy,
Baby Talk and Fit Pregnancy. New Internet marketing programs included
initiatives with iVillage.com and BabyCenter.com.
Physician awareness of the Company's affordable U-CORD program was improved
through the sponsorship and distribution of 40,000 ACOG CD-ROMs, attendance at
the national ACOG meeting and through direct mail to physicians and other
clinicians. Physician/midwife referrals now account for more than 25% of client
enrollments. Client referrals currently account for nearly 25% of all new client
enrollments resulting from the Company's cost effective Mother-to-Mother Network
and Refer a Friend programs.
While the Company is currently not profitable, it has enjoyed record sales in
each of the first three months of fiscal 2001 as a result of these new marketing
initiatives.
Infrastructure Expansion. To meet its growth challenges, the Company has
- -------------------------
expanded its Clinical Services department to provide 24-hour, 7days per week
nurse coverage for client support. Laboratory staff has also been expanded to
meet the increasing number of specimens received for processing and cryogenic
storage. Strategic investments in telephone systems, computer systems and
network infrastructure, including e-commerce initiatives, are underway. Each of
these is critical to the Company achieving its 2001 growth plans.
Results of Operations
Sales. For the fiscal year ended November 30, 2000, the Company had revenues of
$2,109,342 compared to $1,700,985 in the prior fiscal year. Fiscal 1999
revenues were comprised of $500,000 for a partial Revenue Sharing Agreement and
$1,200,985 in sales to customers. Therefore, actual processing and storage
revenue from sales to customers increased $908,357 or 76%.
Cost of Sales. For the fiscal year ended November 30, 2000, cost of sales was
$859,357. In 1999 the Company reported cost of sales of $237,741 which was
adjusted by $332,851 as a result of a reversal of expenses previously charged
against several of the Company's Revenue Sharing Agreements that were re-
negotiated during fiscal 1999. Discounting this impact, gross margins remained
relatively constant year-to-year.
Marketing, General and Administrative Expenses. Marketing, general and
administrative expenses during the fiscal year ended November 30, 2000, were
$2,853,776 as compared to $2,321,033 in 1999. This increase reflects, in part,
the expenses of additional executive management, market development, lab
operations support and clinical services expansion associated with the growth of
the Company's cellular storage program and compensation expense resulting from
the issuance of stock options. The Company incurred $315,532 in expenses with
respect to the issuance of its common stock in fiscal 2000.
Research, Development and Related Engineering Expenses. Research, development
and related engineering expenses during the fiscal year ended November 30, 2000,
were $275,803 as compared to $91,001 in 1999. The increase reflects the costs
incurred regarding the Company's third generation cellular storage system and
funding of the research project between the Company's wholly owned subsidiary,
CCEL-Bio-Therapies, Inc, and the University of South Florida at Tampa.
Other Income and (Expense). During fiscal 1999, the Company settled its
litigation with the University of Arizona and recorded other income of $510,178.
During fiscal 2000, the Company recognized $465,000 of the $1,400,000 received
from the sale of the Company's European marketing rights to COLTEC, Ltd.
Material Fourth Quarter 1999 Adjustments. The results for the fourth quarter
ending November 30, 1999, includes the following adjustment: the reversal of
expenses previously charged as an assignment of a proportionate share of
cellular storage unit cost to the related Revenue Sharing Agreement revenue
(cost of sales expense of $332,851).
10
Liquidity and Capital Resources
At November 30, 2000, the Company had cash and cash equivalents of
$2,695,794 as compared to $1,555,190 in 1999. The increase in cash and cash
equivalents was due primarily to the exercise of stock options and the income
received from the sale of the Company's European marketing rights.
Through March 5, 2001, the Company's sources of cash have been from sales
of its U-Cord program to customers, the issuance of common stock from the
exercise of common stock options, the sales of Revenue Sharing Agreements and
the sale of subsidiary stock (prior to 1998). Due to increases in the market
price of the Company's stock, it is anticipated that the Company will be able to
realize cash from the exercises of its previously issued stock option contracts.
At March 5, 2001, the Company is virtually debt-free.
The Company anticipates that its cash reserves and its cash flows from
operations will be sufficient to fund its future growth. Cash flows from
operations will depend primarily on increasing revenues resulting from an
extensive U-CORD cellular storage marketing campaign. The Company's direct
sales of its U-Cord cellular storage program have increased significantly due to
the public awareness created through its activities with Lamaze Publishing, the
Company's Web site and other forms of marketing exposure.
Factors That May Affect Future Results and Market Price of Stock
The Company operates in a rapidly changing environment that involves
numerous risks, some of which are beyond the Company's control. The following
discussion highlights some of the risks the Company faces.
Market Acceptance for Cryopreservation of Stem Cells. The market for
cryopreservation of stem cells has gained increasing support from the medical
community. While the market is still relatively new, the Company believes it
will gain in popularity due, in part, to the increasing medical attention given
to stem cell technology. The Company is relying upon significant market growth
to meet revenue projections.
Possible Need for Additional Capital. The Company currently has in excess of
$2,695,000 in cash and cash equivalents and has sufficient operating capital for
at least the next 12 to 18 months. There can be no assurance that sales will
continue to increase or even maintain current levels. The Company believes there
will be no need to raise additional capital in the next twelve months. There can
be no assurance that such capital, if needed, will be available.
Competitive Environment. In the Company's opinion, the potential medical
benefits for cryopreserved stem cells is likely to attract additional
competitors in the market. The Company believes its storage technology and
marketing edge will still enable it to offer a more affordable service than its
competition and believes it can compete successfully on the bases of volume and
pricing advantage.
Uneven Pattern of Quarterly Operating Results. The Company's revenues in
general, and in particular its Revenue Sharing Agreement revenues, are difficult
to forecast and can vary from quarter to quarter due to various factors,
including the relatively long sales cycles for these Agreements and the size and
timing of the individual Agreement transactions. Notwithstanding the revenues
from Revenue Sharing Agreements, the Company's sales from its U-CordTM program
are increasing significantly and the Company believes it can rely on these
sources of revenues to a greater extent during fiscal year 2001 and beyond.
Management of Growth. The Company anticipates rapid growth and plans to
capitalize on this growth. The Company's future operating results will depend on
management's ability to manage this anticipated growth, hire and retain
qualified employees, properly generate revenues and control expenses. A decline
in the growth rate of revenues without a corresponding reduction in expense
growth could have a material adverse effect on the Company's business, results
of operations, cash flows and financial condition.
Enforcement of the Company's Intellectual Property Rights. The Company relies
on the protections provided under applicable patent, copyright, trademark and
trade secret laws. It also relies on confidentiality agreements and licensing
arrangements to establish and protect its rights on its products and services.
Despite the Company's continuing best efforts to protect these properties, it
may be possible for unauthorized third parties to copy certain
11
portions of the Company's products or to reverse engineer or obtain and use
technology or other information that the Company regards as proprietary. In
addition, the laws of certain countries do not protect the Company's proprietary
rights to the same extent as do the laws of the United States. Accordingly there
can be no assurances that the Company will be able to protect its proprietary
technologies and other intellectual property against unauthorized third party
copying or use.
International Sales. During fiscal 2000, the Company finalized in principal its
European expansion program. The Company is negotiating to expand into
additional international markets and has ongoing discussions in this regard.
Growth in international business will be subject to the risks attendant thereto,
including the general economic conditions in each country, the effects of
varying tax structures, the difficulty in managing an organization operating in
various countries, changes in regulatory requirements, compliance with foreign
laws and regulations and possible longer payment cycles in certain countries.
12
ITEM 7. FINANCIAL STATEMENTS
- ------- --------------------
The financial statements and supplementary data listed in the accompanying
Index to Financial Statements are attached as part of this report.
FINANCIAL STATEMENTS
The following consolidated financial statements of CRYO-CELL International, Inc.
are included in Item 7:
Independent Accountants' Report 14
Consolidated Balance Sheets F1
Consolidated Statements of Operations and Comprehensive Loss F3
Consolidated Statements of Cash Flows F4
Consolidated Statements of Stockholders' Equity F6
Notes to Consolidated Financial Statements F7
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
13
WEINICK SANDERS LEVENTHAL & CO., LLP
1515 Broadway
New York, NY 10036-5788
212-869-333
212-764-3060
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
To the Board of Directors
CRYO-CELL International, Inc.
We have audited the accompanying consolidated balance sheets of Cryo-Cell
International, Inc. and subsidiaries as of November 30, 2000 and 1999, and the
related consolidated statements of operations and comprehensive loss,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cryo-
Cell International, Inc. and subsidiaries as of November 30, 2000 and 1999, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
Weinick Sanders Leventhal & Co., LLP
New York, N.Y.
February 2, 2001
14
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-----------
November 30,
------------
2000 1999
------ ------
Current assets:
Cash and cash equivalents $2,695,794 $1,555,190
Marketable securities 429,428 109,407
Accounts receivable and advances (net of
allowances for doubtful accounts of
$29,000 in 2000 and $15,000 in 1999) 131,573 57,548
Receivable - litigation 69,178 69,178
Receivable - revenue sharing agreement 380,000 450,000
Prepaid expenses and other current assets 174,817 201,156
---------- ----------
Total current assets 3,880,790 2,442,479
---------- ----------
Property and equipment, net of accumulated
depreciation and amortization 3,018,708 2,719,804
---------- ----------
Other assets:
Intangible assets (net of accumulated
amortization of $57,018 in 2000 and
$48,450 in 1999) 108,675 66,095
Marketable securities -- 219,383
Investment in European affiliate 1,000,000 --
Option to purchase a business 100,000 --
Loan receivable 100,000 --
Deposits with vendors and others 29,195 82,681
---------- ----------
Total other assets 1,337,870 368,159
---------- ----------
$8,237,368 $5,530,442
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F1
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
November 30,
------------
2000 1999
------------ -----------
Current liabilities:
Accounts payable $ 92,911 $ 35,689
Accrued expenses and
other current liabilities 182,782 167,189
Current portion of obligations
under capital leases 3,122 7,604
------------ ------------
Total current liabilities 278,815 210,482
------------ ------------
Other liabilities:
Unearned revenues 1,279,683 145,535
Deposits 28,725 124,550
Obligations under capital leases -
net of current portion 14,530 17,652
------------ ------------
Total other liabilities 1,322,938 287,737
------------ ------------
Stockholders' equity:
Preferred stock (500,000, $.01 par value
authorized and unissued) -- --
Common stock (20,000,000, $.01 par value
common shares authorized; 10,135,129 at
2000 and 9,193,155 at 1999 issued and
outstanding) 101,327 91,932
Additional paid-in capital 15,214,215 12,351,688
Additional paid-in capital - stock options 124,010 --
Accumulated other comprehensive income (loss) 26,928 (71,210)
Accumulated deficit (8,830,865) (7,340,187)
------------ ------------
Total stockholders' equity 6,635,615 5,032,223
------------ ------------
$ 8,237,368 $ 5,530,442
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F2
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended
November 30,
-------------------
2000 1999
---- ----
Revenues $ 2,109,342 $ 1,700,985
----------- -----------
Costs and expenses:
Cost of sales 859,357 237,741
Marketing, general and administrative expenses 2,853,776 2,321,089
Research, development and related engineering 275,803 91,001
Depreciation and amortization 281,457 109,098
----------- -----------
Total costs and expenses 4,270,393 2,758,929
----------- -----------
Operating loss (2,161,051) (1,057,944)
----------- -----------
Other income and (expenses):
Interest income 121,835 2,891
Interest expense (2,212) (16,158)
Sale of marketing rights 465,000 --
Gain on sale of marketable securities 85,750 --
Settlement on litigation -- 510,178
----------- -----------
Total other income 670,373 496,911
----------- -----------
Net loss $(1,490,678) $ (561,033)
=========== ===========
Net loss per share - basic and diluted $ (0.15) $ (0.07)
----------- -----------
Number of shares used in computation -
Basic and diluted 9,757,789 8,207,458
=========== ===========
Comprehensive loss:
Net loss:
Other comprehensive income (loss) $(1,490,678) $ (561,033)
Net increase (decrease) in value
of marketable securities 98,138 (390,603)
----------- -----------
Comprehensive loss $(1,392,540) $ (951,636)
=========== ===========
Comprehensive loss per share - basic and diluted $ (0.14) $ (0.12)
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F3
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
November 30,
--------------------------
2000 1999
----------- ----------
Cash flows from operating activities:
Net loss ($1,490,678) ($ 561,033)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 313,488 118,868
Gain on sale of marketable securities (85,750) --
Issuance of common stock and common options
for interest and services rendered 315,532 710,719
Increase in allowance for doubtful accounts 14,000
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Accounts receivable (88,025) (9,906)
Receivable - revenue sharing agreement 70,000 (450,000)
Receivable - litigation -- (69,178)
Prepaid expenses and other current assets 26,339 (113,388)
Deposits 53,486 50,494
Accounts payable 57,222 (257,470)
Accrued expenses and other current liabilities 15,593 (124,596)
Unearned revenue and deposits 1,038,323 177,497
----------- ----------
Total adjustments 1,730,208 33,040
----------- ----------
Net cash provided by (used in) operating activities 239,530 (527,993)
----------- ----------
Cash flows from investing activities:
Option to purchase a business (100,000) --
Investment in European affiliate (1,000,000) --
Loan receivable (100,000) --
Purchases of securities (2,500) --
Purchases of property and equipment (510,422) (422,814)
Payments for intangible assets -- (37,643)
----------- ----------
Net cash used in investing activities (1,712,922) (460,457)
----------- ----------
Cash flows from financing activities:
Proceeds from the sale of marketable securities 2,621,600 2,614,927
Proceeds (repayment) of short-term borrowings -- (565,000)
Repayment of capital leases (7,604) (5,983)
----------- ----------
Net cash provided by financing activities 2,613,996 2,043,944
----------- -----------
Increase in cash and cash equivalents 1,140,604 1,055,494
Cash and cash equivalents at beginning of year 1,555,190 499,696
----------- -----------
Cash and cash equivalents at end of year $ 2,695,794 $ 1,555,190
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-4
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended
November 30,
---------------------
2000 1999
--------- ---------
Supplemental Disclosures of Cash Flow Information:
Cash payments for the year for:
Interest $ 2,212 $ 2,921
========= =========
Supplemental Schedules of Non-Cash Investing
and Financing Activities:
Common stock and common stock options issued in
satisfaction of liabilities for:
Convertible notes $ -- $ 530,000
========= =========
Property assets $ 90,772 $ --
========= =========
Legal services $ 99,390 $ 454,808
========= =========
Other services $ 188,762 $ 243,805
========= =========
Compensation $ 55,804 $ --
========= =========
Intangible assets received for
marketable securities $ 25,750 $ --
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F-5
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Additional Paid-in
Common Stock Paid-In Capital Accumulated
-----------------------------
Shares Amount Capital Stock Options Deficit
----------- ----------- ----------- ------------- -----------
Balance, December 1, 1998 7,654,598 $ 76,546 $ 8,651,428 $ -- ($6,779,154)
Issuances of shares 780,000 7,800 2,205,627 -- --
Shares issued upon exercise
of options 216,000 2,160 249,340 -- --
Shares issued for services rendered 233,700 2,337 696,276 -- --
Shares issued for conversion
of debt and interest 308,857 3,089 549,017 -- --
Net decrease in value of
marketable securities -- -- -- -- --
Net loss -- -- -- -- (561,033)
----------- ----------- ---------- ------------- -----------
Balance, November 30, 1999 9,193,155 91,932 12,351,688 -- (7,340,187)
Issuance of shares 5,000 50 20,950 -- --
Shares issued upon exercise
of options 879,250 8,793 2,531,410 -- --
Shares issued for services rendered 27,484 275 163,867 -- --
Shares issued for compensation 10,550 105 55,700 -- --
Shares issued for property assets 17,190 172 90,600 -- --
Options issued for services rendered -- -- -- 124,010 --
Net increase in value of
marketable securities -- -- -- -- --
Net loss -- -- -- -- (1,490,678)
----------- ----------- ---------- ------------- -----------
Balance, November 30, 2000 10,132,629 $ 101,327 $15,214,215 $ 124,010 ($8,830,865)
----------- ----------- ---------- ------------- -----------
Accumulated
Other Stock Total
Comprehensive Subscription Stockholders'
Income (Loss) Receivable Equity
------------- ------------ -------------
Balance, December 1, 1998 $ 319,393 ($ 150,000) $ 2,118,213
Issuances of shares -- 150,000 2,363,427
Shares issued upon exercise
of options -- -- 251,500
Shares issued for services rendered -- -- 698,613
Shares issued for conversion
of debt and interest -- -- 552,106
Net decrease in value of
marketable securities (390,603) -- (390,603)
Net loss -- -- (561,033)
------------- ----------- -------------
Balance, November 30, 1999 (71,210) -- 5,032,223
Issuance of shares -- -- 21,000
Shares issued upon exercise
of options -- -- 2,540,203
Shares issued for services rendered -- -- 164,142
Shares issued for compensation -- -- 55,805
Shares issued for property assets -- -- 90,772
Options issued for services rendered -- -- 124,010
Net increase in value of
marketable securities 98,138 -- 98,138
Net loss -- -- (1,490,678)
------------- ----------- --------------
Balance, November 30, 2000 $ 26,928 $ -- $ 6,635,615
============= =========== ==============
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
F6
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Description of Business:
The Company was incorporated in Delaware on September 11, 1989.
The Company is engaged in cellular storage and the design and
development of cellular storage devices used in its storage programs.
The revenues recognized to date have been a combination of sales of
its U-Cord program to customers and the sale of Revenue Sharing
Agreements to investors. During 2000 the Company's primary focus has
been the further development of the cellular storage of umbilical cord
blood stem cells (U-Cord Program) in its Clearwater, Florida
laboratory and the continued development of the CCEL III Cellular
Storage Unit.
The Company formed its wholly owned Delaware subsidiaries,
Safti-Cell, Incorporated, CCEL Immune System Technologies, Inc., CCEL
Expansion Technologies, Inc. and CCEL Bio-Therapies, Inc., in 1993 and
Stem Cell Preservation, Inc. in 2000. As of November 30, 2000, no
shares have been issued for any of these subsidiaries.
In September 1998 the Company acquired Medical Marketing Network,
Inc., (MMN) a New York corporation, as part of a marketing agreement.
This corporation has not had any financial activity since its
inception and none of the consideration paid in conjunction with the
agreement was assigned to the purchase of MMN. The accompanying
consolidated financial statements as at November 30, 2000 and 1999 and
for the years then ended include the accounts of the Company and all
of its wholly owned subsidiaries all of which are inactive with the
exception of CCEL Bio-Therapies, Inc. and Stem Cell Preservation, Inc.
All intercompany transactions have been eliminated in the
consolidation.
(b) Revenue Recognition:
The Company recognizes revenue from cellular storage ratably
over the contractual storage period and from processing fees upon the
completion of processing.
Revenue is recognized when the Company enters into a Revenue
Sharing Agreement and the payment pursuant to the agreement has been
satisfactorily assured.
In fiscal 1999, $500,000 was recognized as revenue from the
sale of a partial State Revenue Sharing Agreement. The remainder of
the revenue was generated from the processing and storage of the
U-Cord specimens. In fiscal 2000, $465,000 was recognized from the
sale of the European marketing rights of the Company's U-Cord program
to COLTEC, Ltd. and has received $1,400,000 for a renewable licensing
agreement, with respect to this transaction (See Note 7).
F7
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(c) Concentrations of Credit Risks:
Financial instruments that potentially subject the Company to
concentrations of credit risk are principally cash and cash equivalent
accounts in financial institutions, which often exceed the Federal
Depository Insurance limit. The Company places its cash with high
quality financial institutions and believes it is not exposed to any
significant credit risk.
CRYO-CELL depends on one company for the manufacture of its
CCEL II cellular storage unit and several companies are manufacturing
the CCEL III cellular storage unit. However, the Company believes that
alternative manufacturing sources are available.
(d) Basis of Presentation:
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America.
(e) Use of Estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the amounts and disclosures reported in the financial
statements and accompanying notes. Accordingly, actual results could
differ from those estimates.
(f) Reclassifications:
Reclassifications have been made to the prior year's
Consolidated Financial Statements to conform to the fiscal 2000
presentation.
(g) Cash and Cash Equivalents:
Cash and equivalents consist of highly liquid investments with
a maturity date at acquisition of three months or less.
(h) Marketable Securities:
The Company accounts for marketable securities in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." All of the
Company's marketable securities are classified as available-for-sale
as of the balance sheet date and are stated at fair value, with
unrealized gains and losses recorded as a component of stockholders'
equity (See Note 3).
F8
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(i) Receivables:
In fiscal 2000, receivables consist of the balance due from the
sale of a partial State Revenue Sharing Agreement (See Note 13), the
overage held in escrow regarding the legal settlement with the
University of Arizona (See Notes 15 and 16) and amounts due from
clients that have enrolled in the U-Cord processing and storage
program.
(j) Property and Equipment:
Property and equipment are stated at cost. Depreciation is
provided by the straight-line method over the estimated useful lives
of the related assets. Leasehold improvements are amortized over the
shorter of the respective life of the lease or the estimated useful
lives of the improvements.
Upon the sale or retirement of depreciable assets, the cost and
related accumulated depreciation will be removed from the accounts and
the resulting profit or loss will be reflected in income. Expenditures
for maintenance, repairs and minor betterments are charged to income
as incurred.
Estimated useful lives are as follows:
Machinery and equipment 5 -10 years
Furniture and fixtures 5 - 7 years
Condominium 27.5 years
(k) Intangible Assets:
Costs incurred in connection with filing patent and trademark
applications are capitalized. Patents and trademarks granted are
amortized on a straight-line basis over estimated useful lives of 10
and 3 years, respectively. Abandoned patents are expensed in the year
of abandonment.
(l) Long-Lived Assets:
In fiscal 1997, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of " ("SFAS
121"). Long-lived assets and identifiable intangibles to be held and
used are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Impairment is measured by comparing the carrying value of
the long-lived asset to the estimated undiscounted future cash flows
expected to result from uses of the assets and their eventual
disposition. At November 30, 2000 and 1999, the carrying values of the
Company's other assets and liabilities approximated their estimated
fair values.
(m) Research, Development Costs and Related Engineering Costs:
Research, development and related engineering costs are
expensed as incurred.
F9
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(n) Cost of Sales:
Cost of sales represents the associated expenses resulting from the
processing, testing and storage of the U-Cord specimens. In fiscal
1999 an adjustment was made to cost of sales reversing the previous
assignment of a proportionate share of the value of the equipment
associated with the Revenue Sharing Agreements. This adjustment was
made because the Revenue Sharing Agreements were renegotiated (See
Note 13). Equipment costs related to Revenue Sharing Agreements are
expensed in the period in which the sale is recorded.
(o) Loss per Common Share:
In 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128") which requires the disclosure of basic and diluted earnings per
common share for all periods presented. Basic and diluted earnings per
share are calculated based on the weighted average number of common
shares outstanding during the period. Diluted earnings per share also
give effect to the dilutive effect of stock options and warrants
(calculated based on the treasury stock method). The Company does not
present diluted earnings per share, as the effect of potentially
dilutive shares from stock is antidilutive. As a result, adoption of
SFAS 128 has not affected the basic and diluted losses per common
share reported in any period.
(p) Employees Stock Plans:
The Company accounts for its stock options in accordance with
the provisions of the Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees." In accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company
continues to apply the provisions of APB No. 25 for purposes of
determining net income and has adopted the pro forma disclosure
requirement of SFAS No. 123 effective December 1, 1996.
(q) Recently Issued Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and its
components in a complete set of general purpose financial statements;
and SFAS No. 131, "Disclosure About Segments of an Enterprise and
Related Information," which establishes annual and interim reporting
standards for a Company's business segments and related disclosures
about it's products, services, geographic areas and major customers.
Both SFAS No. 130 and SFAS No. 131 are effective for fiscal years
beginning after December 31, 1997. The Company believes that the
adoption of the new standard will not have a material effect on the
financial statements.
In February 1998, the Financial Accounting Standards Board
issued SFAS No. 132 Employers Disclosures About Pensions and Other
Post Retirement Benefits, which revises employers' disclosures about
pension and other post retirement benefit plans, requires additional
information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates
certain disclosures that are no longer deemed useful. The statement is
effective for fiscal years beginning after December 15, 1997. The
Company believes that the adoptions of this standard will not have a
material effect on the financial results of the Company.
F10
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(q) Recently Issued Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for
hedging activities. The statement requires companies to recognize all
derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value,
gains or losses, depends on the intended use of the derivative and its
resulting designation. The statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Adoption of
this standard will not impact the financial results of the Company.
NOTE 2 - PROPERTY AND EQUIPMENT
The major classes of property and equipment are as follows:
November 30,
--------------------------
2000 1999
---------- ----------
Condominium $ 85,000 $ -
Furniture and equipment 819,222 534,660
Cellular storage units 1,171,240 325,000
Leasehold improvements 157,837 147,009
Equipment 1,287,973 1,952,582
---------- ----------
3,521,272 2,959,251
Less: Accumulated depreciation
and amortization 502,564 239,447
---------- ----------
$3,018,708 $2,719,804
========== ==========
NOTE 3 - MARKETABLE SECURITIES.
(a) Return on Investment Corporation:
In August 2000 Return on Investment Corporation (ROI) merged
into Net/Tech International, Inc. (NTTI). ROI exchanged one share of
common stock for twenty shares of NTTI common stock.
In November 1998 the Company's ownership percentage in NTTI
decreased to less than 20% of the outstanding shares of NTTI. In
previous years, the Company accounted for its investment in NTTI using
the equity method but as of the date upon which its ownership
percentage fell below 20% the Company used the guidance in SFAS 115
Accounting for Certain Investment in Debt and Equity Securities, as
described above, to account for the investment. Since NTTI stock was
thinly traded and subject to considerable price fluctuation, if the
Company were to attempt to sell large blocks of shares, it was
unlikely
F11
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MARKETABLE SECURITIES. (Continued)
(a) Return on Investment Corporation:
that the Company would be able to obtain the exchange market value as
listed. This security was therefore subject to considerable market
risk as well as subject to certain trading restrictions that limit the
number of shares that can be sold during a 90-day period.
The Company recognized losses under the equity method for the
NTTI investment during 1998 reducing the cost basis of the stock to
$0. The proceeds from the sale and realized gains on the sale of the
stock during 1998 were both $515,574. The unrealized gain has been
recorded as a component of stockholders' equity in the amount of
$326,928 and $292,850 to reflect the fair market value of the
investment as of November 30, 2000 and 1999, respectively.
(b) Other Securities:
In 1997 the Company acquired 100,000 shares of an equity
security in payment for the sale of a Revenue Sharing Agreement. The
original cost as determined by the trading price on the date of
acquisition was $400,000. The fair value of this security as of
November 30, 2000 and 1999 was $100,000 and $35,940 respectively and
the unrealized holding loss on this security was $300,000 and $364,060
as of November 30, 2000 and 1999, respectively.
NOTE 4 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.
Accrued expenses and other current liabilities are comprised of
the following:
November 30,
-------------------
2000 1999
------ ------
Consultants and patent costs $ 41,356 $ 41,399
Legal and accounting 47,125 42,605
Payroll and payroll taxes 48,117 31,431
General expenses 46,183 51,754
-------- ---------
$182,781 $ 167,189
======== =========
NOTE 5 - PATENTS.
The Company has patented technology on cryogenic preservation
units and has received patents for additional functions of the
cryogenic unit, for an additional unit which incorporates a
multi-chambered design, and for a process for controlled
freezing/thawing. The Company has been granted patents in several
countries. During fiscal 2000, the Company was assigned the patent
rights to the HygieneGuard System and a loan receivable of $60,000,
which was subsequently collected. Under the terms of the agreement,
the Company sold 250,000 shares of Net Tech International, Inc. shares
back to that company (See Note 3).
F12
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LEASES.
The Company leases a building under an operating lease for its
storage, laboratory and general office facilities. The lease, expiring
in 2004, includes provisions for escalations and related costs. Rent
charged to operations was $143,589 and $136,303 in 2000 and 1999,
respectively.
The Company leased an apartment under an annual renewable
operating lease for $700 per month, which expired at October 31, 2000
and was not renewed.
The Company leases a liquid nitrogen storage tank under an
operating lease, which expires in 2002. The lease payments are $695
per month.
The future minimum rental payments under these operating
leases, as of November 30, 2000, are as follows:
Years Ended
November 30,
------------
2001 $145,471
2002 151,515
2003 149,534
2004 129,216
--------
Total future minimum
rental payments $575,736
========
The Company is obligated under capital leases that expire at
various dates during the next four years. The following is a summary
of assets under capital leases as of November 30, 2000 and 1999, which
are included in the accompanying consolidated financial statements
under the caption of property and equipment:
November 30,
------------------
2000 1999
------ ------
Leasehold improvements $12,909 $ 12,909
Laboratory equipment 30,282 30,282
-------- --------
43,191 43,191
Less: Accumulated depreciation 11,991 7,119
-------- --------
$ 31,200 $ 36,072
======== ========
Assets under capital leases are depreciated over estimated
useful lives of seven to ten years. Related depreciation expense
totaled $4,872 and $4,317 for the years ended November 30, 2000 and
1999, respectively.
F13
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LEASES. (Continued)
The future minimum lease payments under capital these leases
are computed as follows:
Years Ended
November 30,
------------
2001 $ 8,563
2002 7,683
2003 1,406
-------
Total future minimum
lease payments $17,652
=======
NOTE 7 - COMMITMENTS AND CONTINGENCIES.
In June 1998, the Company entered into an agreement, with World
Medical Match, a non-profit corporation, whose mission includes
assisting the poor with funds to provide them access to medical
matching opportunities. The agreement states that World Medical Match
agrees to grant the Company $50,000 for the purpose of paying for 200
U-CordTM stem cell collection kits and the first year of cryogenic
storage for the benefit of indigent expectant parents. Upon execution
of the agreement the Company was granted, and received, $25,000, which
is classified as a deposit on the balance sheet. The Company is
currently working with local medical practices, hospitals, and other
medical industry organizations to implement this project.
As part of a September 1998 agreement between a consultant and
the Company, CRYO-CELL committed to issue 200,000 shares of the
Company's restricted common stock in exchange for marketing services
to be provided by the consultant and his team of sub-contractors. The
original contract was for a five-year period, which provided for the
issuance of 10,000 shares of stock upon the signing of the agreement,
40,000 shares upon the implementation of the marketing program and
increments of 50,000 shares to be issued at various times during the
contract period. In November 1999 the agreement was renegotiated with
the 60,000 common shares previously issued to the consultant
representing payment in full.
In January 2000 the Company extended its marketing agreement
with Lamaze Publishing Company to sponsor the Lamaze You and Your Baby
tutorial tape and full page advertisements in the Lamaze Parent
Magazine at a cost of $213,362. In July 1999, the Company was informed
that Lamaze Publishing Company was acquired by iVillage, Inc., a
leading online women's network. The Company's agreements with Lamaze
will remain in tact, including the exclusivity provisions as the only
cord blood preservation company on the Lamaze You and Your Baby
educational videotape through the year 2003.
On April 6, 2000, the Company entered into a renewable
agreement with COLTEC, Ltd. for the exclusive license to market the
Company's U-CORD program in Europe. The marketing rights allow COLTEC,
Ltd. to directly market the U-CORD program, sell revenue sharing
agreements or further sub-license the marketing rights throughout
Europe. The Company received $1,400,000 in cash and licensing fees of
10.5% to 20% of adjusted U-CORD processing and storage revenues to be
generated in Europe, and granted COLTEC, Ltd. a three year option to
purchase 100,000 shares of the Company's common stock ($8.00 exercise
price) and will issue up to 100,000 additional
F14
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES. (Continued)
options ($12.00 exercise price) as needed, to facilitate sales of
sub-licensing and/or revenue sharing agreements in Europe. The
Company recognized $465,000 of the licensing fees in 2000.
Subsequent to the licensing agreement date, COLTEC, Ltd. formed a
corporation, CRYO-CELL Europe, B.V. to engage in the cryogenic
cellular storage business under the agreement. On September 19,
2000, the Company entered into an agreement to purchase
approximately 6% of CRYO-CELL Europe, B.V. In October and November
2000, the Company paid $1,000,000 for 38,760 shares of the capital
stock of CRYO-CELL Europe, B.V. which the Company owned on January
24, 2001.
NOTE 8 - CONVERTIBLE NOTES.
On November 30, 1998, the Company borrowed $530,000 on eleven
convertible promissory notes. The notes had a term of six months at
which time the principal plus interest, at 8% per year, was due. The
promissory notes contained a conversion provision to the Company's
restricted common stock at $2.00 per share. In February 1999, the
loan agreements were converted into 302,857 shares of the Company's
common stock at a price of $1.75 per share. The loan holders agreed
to forego payment of $10,106 in accrued interest, which was credited
to additional paid in capital.
In October 1998, the Company entered into a convertible note
agreement borrowing $10,000 from an investor. The note had a term of
one year at which time the principal plus interest, at 20% per year,
was due. The noteholder had the option to be paid in full for
interest plus principal or to convert to the Company's common stock
at $2.00 per share. In October 1999, the noteholder converted the
note and accrued interest into 6,000 shares of the Company's
restricted common stock.
NOTE 9 - INCOME TAXES.
The Company has no provisions for current or deferred taxes
for the years ended November 30, 2000 and 1999.
Under the asset and liability method of SFAS No. 109
"Accounting for Income Taxes", deferred tax assets and liabilities
are recognized for the estimated future tax consequences
attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be recovered or settled.
F15
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES. (Continued)
As of November 2000 and 1999 the tax effects of temporary
differences that give rise to the deferred tax assets are as follows:
November 30,
-------------------------
2000 1999
---------- ----------
Deferred tax assets:
Net operating loss carryforwards $2,098,666 $1,767,924
Tax over book basis in
unconsolidated affiliate 297,042 338,837
Valuation reserves 50,448 60,280
Depreciation and other (42,469) 6,744
---------- ----------
2,403,687 2,173,785
Less: Valuation allowance 2,403,687 2,173,785
---------- ----------
$ - $ -
========== ==========
The Company has unused net operating losses available for
carryforward to offset future federal taxable income of $85,643 which
expires by the year 2006, $294,557 which expires by the year 2008,
$536,253 which expires by the year 2009, $295,551 which expires by the
year 2010, $1,008,833 which expires by the year ended 2011, $1,783,543
which expires by the year 2012, $577,175 which expires by the year
2013, and $1,248,073 which expires by the year 2014. The total of the
foregoing net operating loss carryforwards is $5,829,628. The Tax
Reform Act of 1986 contains provisions that limit the utilization of
net operating losses if there has been an "ownership change". Such an
"ownership change" as described in Section 382 of the Internal Revenue
code may limit the Company's utilization of its net operating loss
carryforwards.
A reconciliation of income tax benefits with the amount of tax
computed by applying the federal statutory rate to pretax income
follows:
For the Years Ended November 30,
--------------------------------
2000 % 1999 %
------ ------ ------ -----
Loss before income tax benefit ($1,490,678) ($ 561,033)
----------- ----------
Tax expense at statutory rate ($506,831) (34.00) ($190,751) (34.00)
State taxes (29,814) (2.00) (11,371) (2.00)
Increase in valuation allowance 450,950 30.25 200,715 35.70
Other 85,695 5.75 1,227 0.30
----------- ------ ---------- ------
Total income taxes $ - - ($180) -
=========== ====== ========== ======
F16
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCKHOLDERS' EQUITY.
(a) Common Stock and Stock Options:
During 1999, the Company received $2,213,427 in cash proceeds
and $150,000 from subscription from the sales of 780,000 shares of its
common stock through private placements. The Company also issued
216,000 common shares to option holders who exercised these options in
1999 for $251,500. During 2000, the Company received $21,000 in cash
proceeds from the sales of 5,000 shares of its common stock through
private placements. The Company also issued 879,250 common shares to
option holders who exercised these options in 2000 for $2,540,203.
In fiscal 1999, holders of $540,000, plus interest, in
convertible notes elected to convert their notes into 308,857 shares
of the Company's common stock in full satisfaction of the
indebtedness.
(a) Common Stock and Stock Options:
The Company made payments for compensation, consulting,
property assets and professional legal services rendered through the
issuance of the Company's common stock. Legal fees of $99,390 and
$531,012 were satisfied by the issuance of 19,000 and 151,700 common
shares in 2000 and 1999, respectively. Consulting fees of $64,752 and
$167,601 were paid by the issuance of 8,484 and 82,000 common shares
in 2000 and 1999, respectively. During 2000, compensation in the
amount of $55,804 was paid through the issuance of 10,550 common
shares. The Company purchased property assets through the issuance of
17,190 common shares for $90,772 during 2000.
In 2000, the Company incurred $124,010 in consulting expenses
based on the amortized portion of options issued to purchase 471,980
shares of the Company's common stock. These options expire through
2003.
(b) Employee Incentive Stock Option Plan:
In 2000 the Company adopted an Employee Incentive Stock Option
Plan, and has reserved 1,500,000 shares of the Company's common stock
for issuance under the Plan. Employee options under the Plan have a
term of five years from the date of grant and vesting begins one year
from the date of grant. The options are exercisable for a period of 90
days after termination.
F17
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCKHOLDERS' EQUITY. (Continued)
(c) Stock Option Activity and Discussion:
Stock option activity for the two years ended November 30, 2000,
was as follows:
Weighted
Average
Number Exercise
of Shares Price
--------- --------
Outstanding and exercisable
at December 1, 1998 1,529,000 $4.04
Granted 1,071,000 3.16
Exercised (216,000) 1.16
Terminated (143,000) 3.13
---------- ------
Outstanding and exercisable
at November 30, 1999 2,241,000 3.94
Granted 1,231,500 6.43
Exercised (823,000) 2.92
Terminated (245,500) 3.81
---------- ------
Outstanding and exercisable
at November 30, 2000 2,404,000 $4.96
========== ======
Significant option groups outstanding at November 30, 2000 and
related price and life information follows:
Weighted Average
Weighted Average Remaining
Range of Exercise Price Outstanding Exercise price Contractual Life
----------------------- ----------- ---------------- ----------------
$1.00 to $ 2.00 110,250 $ 2.00 1.5
$2.01 to $ 3.00 552,500 $ 2.74 2.2
$3.01 to $ 4.00 231,250 $ 3.96 1.1
$4.01 to $ 5.99 741,500 $ 4.81 3.2
$6.00 to $ 7.00 355,500 $ 6.30 3.2
$7.01 to $ 8.00 213,000 $ 8.00 3.0
$8.01 to $ 9.00 100,000 $ 9.00 3.7
$9.01 to $10.00 100,000 $10.00 3.7
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its stock options. Accordingly,
compensation expense is recognized for the amount of the excess of the
market price over the exercise price on the date of the grant. Had the
compensation expense been determined based upon the fair value at the grant
date consistent with the alternative fair value accounting provided for
under SFAS No.123, "Accounting for Stock-Based Compensation," the Company's
net loss and net loss per share would have been $2,340,717 and $.23 for the
year ended November 30, 2000, and the
F-18
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCKHOLDERS' EQUITY. (Continued)
(c) Stock Option Activity and Discussion: (Continued)
net loss and net loss per share for the year ended November 30, 1999
would have been $4,683,463 and $.41 respectively. The weighted average
fair value at the date of grant for options granted during the years
ended November 30, 2000 and 1999 was $2.68 and $1.00 per option,
respectively. The Black-Scholes option-pricing model was developed for
use in estimating the fair value of traded options that are fully
transferable. The Company's options have the characteristics
significantly different from those of traded options. In addition,
option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Since the
Company's stock issued upon exercise of the options for Non-Employee's
is restricted stock, a reduction of 30% of the trading price of the
stock at the date of grant has been applied to account for this
restriction. Other variables used to determine the fair value of the
options for fiscal 2000 and 1999 were as follows:
For the Years Ended
November 30,
-------------------
2000 1999
------ ------
Weighted average values:
Expected dividends 0% 0%
Expected volatility 109%-119% 114%
Risk free interest rate 4.78%-4.90% 6.70%
Expected life 2-4 years 1.9 years
Weighted average grant date fair values are shown below for
options granted in 2000 and 1999.
Weighted Average Weighted Aveage
Fair Value/Share Exercise PriceShare
---------------- -------------------
2000
----
Stock price - exercise price $ - $ -
Stock price /greater than/ exercise price $4.52 $5.00
Stock price /less than/ exercise price $2.17 $6.48
1999
----
Stock price - exercise price $ - $ -
Stock price /greater than/ exercise price $2.38 $2.05
Stock price /less than/ exercise price $ .36 $ .36
The pro forma effect on net income is not representative of the
pro forma effect on net income in future periods because it does not
take into consideration pro forma compensation expense related to
grants made in prior periods.
F-19
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - 401(k) PLAN.
In January 1997, the Company adopted a 401(k)-retirement plan,
which allows eligible employees to allocate up to 15% of their salary
to such plan. The Company does not make any matching contributions to
this plan.
NOTE 12 - AGREEMENTS.
(a) Arizona:
On February 9, 1999, the previous agreements with the Company's
Arizona Revenue Sharing investors were modified and replaced by a
Revenue Sharing Agreement for the state of Florida for a price of
$1,000,000. Under the terms of this agreement the Company credited the
investors' previously paid $450,000 toward the purchase of the Revenue
Sharing Agreement. The balance of $550,000 will be paid through their
Revenue Sharing entitlements to their share of net storage revenues.
The Revenue Sharing Agreement applies to net storage revenues
originating from specimens from within the state of Florida. The
Revenue Sharing Agreement entitles the investors to net revenues from
a maximum of 33,000 storage spaces and cancels the investor's
obligation to provide the Company with $675,000 plus accrued interest
under the prior Arizona agreement.
(b) Illinois:
In 1996, the Company signed agreements with a group of
investors entitling them to an on-going 50% share in the Company's
portion of net storage revenues generated by specimens stored in the
Illinois Masonic Medical Center. Since the Company will no longer be
storing new specimens in Chicago, the agreements were modified in 1998
to entitle the investors to a 50% share of the Company's portion of
net revenues relating to specimens originating in Illinois and its
contiguous states and stored in Clearwater, Florida for a maximum of
up to 33,000 spaces. The revenue generated by this Single Unit Revenue
Sharing Agreement was $1,000,000.
(c) Bio-Stor International, Inc.:
On February 26, 1999, the Company modified all previous
agreements with Bio-Stor International, Inc. The modified agreement
enters Bio-Stor into a Revenue Sharing Agreement for the state of New
York. The Company will credit Bio-Stor's $900,000 (previously paid)
toward the purchase of 90% of its 50% share in CRYO-CELL's portion of
net storage revenues generated by the specimens originating from the
Company's clients in the state of New York for up to 33,000 shared
spaces. This agreement supersedes all other agreements between
Bio-Stor International, Inc and the Company.
(d) Tenet HealthSystem Hospitals, Inc.:
On November 30, 1996, the Company signed agreements with OrNda
HealthCorp. Two "one-third" Revenue Sharing Agreements were purchased
in which OrNda paid the Company $666,666. OrNda was acquired by Tenet
Healthcare Corporation, which agreed to be bound by the terms of the
OrNda agreements. The agreements were renegotiated and the Company
will store all Tenet originated specimens at its headquarter's lab in
Clearwater, Florida while paying Tenet a revenue sharing entitlement.
F20
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - AGREEMENTS. (Continued)
(e) New Jersey:
On November 30, 1999, the Company entered into agreements with
two investors entitling them to on-going shares in a portion of
CRYO-CELL's net storage revenue generated by specimens originating
from within the state of New Jersey. Deposits totaling $50,000 were
received upon signing of the agreements and the remaining $450,000,
was originally due in May 2000. In May 2000 the original due date for
the remaining balance was extended to April 2001. As of November 30,
2000 the remaining balance due is $380,000. Upon receipt of the
balance due the investors will be entitled to a portion of net storage
revenues generated to a maximum of 33,000 storage spaces.
(f) Saggi Capital:
In November 1998, the Company entered into an investor
relations agreement with Saggi Capital Corporation. Saggi Capital
agreed to provide various business consulting and investor relations
services for the Company. Per the agreement the Company registered
200,000 options to purchase the Company's common stock at an exercise
price of $1.00 per share. These options have been exercised and common
stock has been issued to Saggi. The Company did not recognize an
expense on the issuance of these options since the Company's common
stock was trading below the exercise price on the date of grant. In
January 2000, the Company renewed its contract with Saggi Capital. The
Company has terminated this agreement effective January 2001.
(g) Women & Infants' Hospital of Rhode Island:
In June 1998, the Company signed an agreement with Women &
Infants' Hospital of Rhode Island ("hospital") for the establishment
of a commercial placental/umbilical cord blood bank at their
Providence, Rhode Island medical facility. The hospital will be
offering its stem cell banking services to parents of approximately
9,000 babies who are born each year at this facility. Under the terms
of the agreement the hospital will provide the space and utilities,
liquid nitrogen supply, technician, etc. CRYO-CELL will be responsible
for the billing activities. The storage revenues will be divided 75%
to the Company and 25% to the hospital, while the hospital is entitled
to 100% of the processing revenue. Additionally, if processing revenue
is insufficient to cover the fixed costs of the cord blood bank,
CRYO-CELL will be responsible to pay the shortfall. In order to cover
the possible shortfall the hospital required $50,000 to be placed in
escrow. The $50,000 is classified as cash on the balance sheet.
(h) Other Agreements:
On November 5, 1998 an agreement previously entered into by the
Company with a private investor was revised. Per the terms of the
original agreement, the investor had purchased 10% of a Revenue
Sharing Agreement in the state of New Jersey. The new agreement has
transferred the $100,000 investment to the state of New York. Under
the revised agreement the investor will receive 10% of the 50% share
in CRYO-CELL's portion of net storage revenues generated by the
specimens originating from the Company's clients in the state of New
York for up to 33,000 spaces.
F21
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - RECEIVABLE-LITIGATION.
On or about September 27, 1999 the Company accepted the
University of Arizona's offer of $800,000 to settle its litigation. In
September 1999, the Company received $441,000 from the University of
Arizona leaving a balance of $359,000 that is being held in escrow to
satisfy a legal lien filed November 4, 1998 by the Company's previous
attorneys, Horwitz and Beam. The Company reduced the award to $510,178
and recognized this as gain on litigation. This reduction includes a
20% contingency fee ($160,000) to the Company's previous attorneys and
$129,822 in contested legal fees that the Company feels are not due
and owing under the contract (See Note 14). When the $289,822 is
netted against the $359,000 held in escrow the result is a receivable
balance of $69,178. The Company has requested the release of the
$69,178 from escrow, which is the excess of 20% of the $800,000 actual
settlement amount. The overage is a result of the Company's settlement
of the $1,170,000 original jury award.
NOTE 14 - LEGAL PROCEEDINGS.
On or about July 11, 1996, CRYO-CELL filed suit in San
Francisco Superior Court against the University of Arizona, Dr. David
Harris and Cord Blood Registry, Inc. (CBR). The suit claimed breach of
contract and other related business torts. After settlement
discussions were unproductive, the University of Arizona counter-sued
CRYO-CELL for breach of contract and negligent misrepresentation on
March 27, 1997.
On July 20, 1998, as a result of the evidence, the jury awarded
$1,050,000 against Defendant University of Arizona. In addition, an
award of $120,000 was granted against the University of Arizona and
David Harris, individually, for misappropriation of trade secrets. The
court rejected three post-trial motions by the University of Arizona
including a request to reduce the award or set aside the verdict.
On or about September 27, 1999 the Company accepted the
University's offer of $800,000 and settled the matter. On September
30, 1999, the Company received $441,000 from the University of
Arizona. The remaining balance of $359,000 is being held in escrow, to
satisfy a legal lien filed November 4, 1998 by the Company's previous
attorneys, Horwitz and Beam. The Company disputes their position and
has countersued Horwitz and Beam for malpractice and is seeking
$1,000,000 in compensatory damages and an unspecified amount of
punitive damages deemed appropriate by the court. CRYO-CELL retained
the services of Horwitz & Beam, a California law firm, to handle the
above described lawsuit including its allegations against CBR for
interference in a legitimate contract between two parties and unfair
business practices, among other claims. The court granted a summary
judgment dismissal in favor of CBR. CRYO-CELL believes that Horwitz &
Beam mishandled the CBR aspect of the case and certain aspects of its
case against the University of Arizona. There is a dispute concerning
the amount of fees owed by the Company to Horwitz & Beam.
On March 8, 1999, the Company, the Company's CEO and Chairman,
the Company's Executive Vice President, and the Company's legal
counsel were named as the defendants in a lawsuit filed in the
Superior Court of Orange County, California by Horwitz & Beam, the
attorneys which had represented CRYO-CELL in its suit against the
University of Arizona et al. The plaintiff alleges breach of contract
and seeks payment of $129,822 in allegedly unpaid fees and costs
associated with the University of Arizona litigation. The plaintiff
also asserts claims of misrepresentation. In reference to these
misrepresentation claims, plaintiff has filed a Statement of Damages,
which asserts $1,000,000 in general damages and $3,500,000 in punitive
damages.
F22
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - LEGAL PROCEEDINGS. (Continued)
The Company believes there is no merit to the suit and that
none of the claimed $129,822 in fees is due and owing under the
contract. The Company believes that Horwitz & Beam brought this action
and improperly sought punitive damages for the purpose of interfering
with the Company's efforts to raise and maintain additional capital.
Accordingly, on June 14, 1999, the Company filed: (1) an answer
denying all liability; (2) a counterclaim for breach of contract and
malpractice, seeking in excess of $1 million in compensatory damages
arising from the malpractice; (3) a motion to dismiss the individual
defendants for lack of jurisdiction; and (4) a motion to dismiss all
punitive damages allegations against the Company.
On December 17, 1999, Judge Alicemarie H. Stotler of the United
States District Court in the Central District of California, issued an
Order in which she: (1) granted CRYO-CELL International, Inc.'s
("CRYO-CELL") Motion to Strike Punitive Damages and Dismiss Part of
the Complaint; (2) granted Daniel Richard's, Mark Richard's and Gerald
F. Maass' (the "Individual Defendants") Motion to Dismiss Complaint
for Lack of Personal Jurisdiction; and (3) granted in part and denied
in part Horwitz & Beam, Inc.'s ("H&B") Motion for Order Dismissing
Counterclaim and/or Strike Portions Thereof. As discussed in more
detail below, the net effect of this order was to reframe the
Complaint as a fee dispute, as opposed to a multi-million dollar claim
for fraud against CRYO-CELL and its corporate officers. By its order,
the Court has barred recovery in this action against the Individual
Defendants, and has reduced CRYO-CELL's exposure from over $3.5
million dollars to $129,822, plus a possible award of attorneys' fees.
By granting CRYO-CELL's Motion to Strike Punitive Damages and
Dismiss Part of the Complaint, the Court dismissed H&B's Fourth Claim
for Relief for intentional misrepresentation, i.e., fraud, against
CRYO-CELL and the Individual Defendants. The Court held that the
promises purportedly made to H&B concerning the opening of an
"escrow," even if not ultimately fulfilled, were not fraudulent. In
fact, the Court said that "although the Individual Defendants clearly
made representations that an 'escrow' would be established, their not
having done so, in light of uncertainties of the future course of
litigation and their misgivings of plaintiff's performance, suggests
nothing more than a negotiation of payment terms."
The Court granted CRYO-CELL's Motion to Strike Punitive Damages
Claims with respect to H&B's Fifth Claim for Relief because such
damages are not available in connection with negligence claims. Having
dismissed the Fourth Claim for Relief for Fraud, H&B's motion to
strike the punitive damages claimed in connection therewith was
rendered moot
F23
CRYO-CELL INTERNATIONAL, INC. AND SUSBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---- ----------- ----------- ----------- -----------
Net loss ($ 352,356) ($ 325,617) ($ 260,499) ($ 552,206)
=========== =========== ============ ============
Loss per share ($ 0.04) ($ 0.03) ($ 0.03) ($ 0.05)
=========== =========== ============ ============
Shares used in
computation 9,294,435 9,895,148 10,072,120 10,118,015
=========== =========== ============ ============
1999 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---- ----------- ----------- ----------- -----------
Net loss ($ 433,511) ($ 57,923) ($ 343,377) $ 273,778
=========== =========== ============ ============
Loss per share ($ 0.06) ($ 0.01) ($ 0.04) $ 0.03
=========== =========== ============ ============
Shares used in
computation 7,855,687 8,549,460 8,728,129 8,837,468
=========== =========== ============ ============
F24
Part III
Documents incorporated by reference: The information required by Part
III of Form 10-KSB is incorporated by reference to the Issuer's definitive proxy
statement relating to the 2000 Annual Meeting of Shareholders which is expected
to be filed with Securities and Exchange Commission on or about March 30, 2001.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- -------- --------------------------------
(a) Exhibits
3.1 Certificate of Incorporation (1)
3.11 Amendment to Certificate of Incorporation
3.2 By-Laws (1)
3.21 Board Minutes to Amendment of By-Laws
10.11 Agreement with InstaCool of North America, Inc.
(2)
10.12 Agreement with the University of Arizona (2)
10.13 Agreement with Illinois Masonic Medical Center (4)
10.14 Agreement with Bio-Stor (4)
10.15 Agreement with Gamida-MedEquip (4)
10.16 Agreement with ORNDA HealthCorp (Tenet
HealthSystem Hospitals, Inc.) (4)
10.17 Convertible Note from Net/Tech International, Inc.
Dated November 30, 1995 (3)
10.18 Amended Agreement with Bio-Stor (5)
10.19 Agreement with Dublind Partners, Inc.
10.20 Agreement with Medical Marketing Network, Inc.
21 List of Subsidiaries (3)
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 33-34360).
(2) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1994.
(3) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1995.
(4) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1996.
(5) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1997.
(6) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1998.
(7) Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended November 30, 1999.
(b) Reports on Form 8-K.
(1) Form 8-K filed September 12, 1997 - Resignation of William
C. Hardy as President, Chief Operating Officer and member
of the Board. Resignation of Leonard Green from the Board
of Directors.
(2) Form 8-K filed November 18, 1997 - Company filed a
multi-count lawsuit in the United States District Court,
Northern District of New York claiming that Stainless
Design Corporation of Saugerties, New York breached its
contract.
(3) Form 8-K filed February 16, 2000 - The judge issued an
order in which she (1) granted the Company's motion to
strike punitive damages and dismiss part of the complaint,
(2) granted Daniel Richard's, Mark Richard's and Gerald
Maass' motion to dismiss complaint for lack of personal
jurisdiction, and (3) granted in part and denied in part
Horwitz & Beam, Inc.'s motion for order dismissing
counterclaim and/or strike portions thereof.
Supplemental Information to be furnished with reports filed
pursuant to Section 15(d).
(c) No annual reports or proxy material have been sent to security
holders for the current fiscal year. Copies of any such
report or proxy material so furnished to security holders
subsequent to the filing of the annual report on this form
will be furnished to the Commission when sent to security
holders.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CRYO-CELL INTERNATIONAL, INC.
By: /s/ Daniel D. Richard
-----------------------------
Daniel D. Richard, Chief Executive Officer
Dated: March 5 , 2001
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons in the capacities indicated:
NAME TITLE
/s/ Daniel D. Richard Chief Executive Officer and
- -----------------------------
Daniel D. Richard Chairman of the Board
(Principal Executive Officer)
/s/ Wanda D. Dearth President and Chief Operating Officer
- -----------------------------
Wanda D. Dearth Director
/s/ Gerald F. Maass Executive Vice President
- -----------------------------
Gerald F. Maass Director
/s/ Jill M. Taymans Chief Financial Officer
- -----------------------------
Jill M. Taymans
/s/ Edward W. Modzelewski Director
- -----------------------------
Edward W. Modzelewski
/s/ Frederick C.S. Wilhelm Director
- -----------------------------
Frederick C.S. Wilhelm
/s/ Junior Winokur Director
- -----------------------------
Junior Winokur
/s/ Mercedes Walton Director
- -----------------------------
Mercedes Walton
/s/ Ronald Richard Director
- -----------------------------
Ronald Richard
EXHIBITS DESCRIPTION PAGES
- -------- ----------- -----
3.11 Amendment to Certificate of Incorporation
27 Financial Data Schedule