U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended May 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from _________ to ____________
Commission File Number 0-23386
CRYO-CELL INTERNATIONAL, INC.
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(Exact name of Small Business Issuer as Specified in its Charter)
DELAWARE 22-3023093
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(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
604 PACKARD COURT, SAFETY HARBOR, FLORIDA 34695
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(Address of Principal Executive Offices) (Zip Code)
Issuer's phone number, including area code: (813) 938-3114
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(Former name, former address and former fiscal year, if changed since last
report).
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date. As of May 31, 1997, 7,162,447
shares of $0.01 par value common stock were outstanding.
Transitional Small Business Disclosure Format (check one).
Yes [ ] No [X]
<PAGE>
CRYO-CELL INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
<PAGE>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
MAY 31, NOVEMBER 30,
1997 1996
----------- -------------
CURRENT ASSETS
Cash and cash equivalents $1,311,538 $1,079,531
Marketable securities 300,000 0
Accounts receivable
(net of reserve of $2500) 40,405 673,533
Inventory 10,729 13,628
Prepaid expenses 24,792 22,839
---------- ----------
Total Current Assets 1,687,464 1,789,531
---------- ----------
PROPERTY AND EQUIPMENT
Property and equipment, net 2,277,193 2,044,454
---------- ----------
OTHER ASSETS
Intangible assets (net of 65,290 67,630
amortization of$32,871 and
$30,531, respectively)
Deposits 286,642 255,971
Investment in unconsolidated affiliate 74,986 50,138
---------- ----------
Total Deposits, Other Assets
and Intangible 426,918 373,739
---------- ----------
TOTAL ASSETS $4,391,575 $4,207,724
========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
MAY 31, NOVEMBER 30,
1997 1996
----------- -------------
CURRENT LIABILITIES
Accounts payable $ 165,491 $ 86,434
Other accrued expenses 67,321 93,823
Income taxes payable 0 37,334
Obligation under capital leases 6,198 8,296
----------- -----------
Total Current Liabilities 239,010 225,887
----------- -----------
OTHER LIABILITIES
Deposits 30,000 30,000
Accrued revenue sharing expense 292,708 292,708
----------- -----------
Total Other Liabilities 322,708 322,708
STOCKHOLDERS' EQUITY
Preferred stock (500,000 $.01 par
value authorized; 0 issued and
outstanding) 0 0
Common stock (15,000,000 $.01 par
value common shares authorized;
7,162,447 at May 31, 1997 and
7,151,984 at Nov 30, 1996 77,024 71,520
Additional paid-in capital 7,140,375 6,473,085
Unrealized holding gain or (loss) (100,000) 0
Accumulated deficit (3,287,542) (2,885,477)
----------- -----------
Total Stockholders' Equity 3,829,857 3,659,129
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,391,575 $ 4,207,724
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
<TABLE>
<CAPTION>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 5,350 $ 1,449,975 $ 410,150 $ 2,000,000
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Selling, general & administrative 409,360 501,113 852,037 769,125
Research and development expenses 20,464 0 50,154 2,189
Depreciation and amortization 13,338 21,526 26,676 26,746
----------- ----------- ----------- -----------
Total Cost and Expenses 443,162 522,639 928,867 798,060
----------- ----------- ----------- -----------
OPERATING PROFIT (LOSS) (437,812) 927,336 (518,717) 1,201,940
----------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSE):
Interest Income/Other Income 13,803 812 30,734 812
Gain on sale of unconsolidated
affiliate's stock 162,250 150,000 162,250 150,000
----------- ----------- ----------- -----------
Total Other Income 176,053 150,812 192,984 150,812
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY
IN NET LOSS OF UNCONSOLIDATED
AFFILIATE (261,759) 1,078,148 (325,733) 1,352,752
Equity in net loss of unconsolidated
affiliate 56,284 165,328 76,332 165,328
----------- ----------- ----------- -----------
NET INCOME (LOSS) ($ 318,043) $ 912,820 ($ 402,065) $ 1,187,424
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE ($ 0.04) $ 0.13 ($ 0.06) $ 0.17
=========== =========== =========== ===========
Number of Shares Used In Computation 7,156,866 7,097,603 7,154,452 7,090,461
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
MAY 31, MAY 31,
1997 1996
(UNAUDITED) (UNAUDITED)
------------- -------------
Net cash provided by (used for)
operating activities 249,058 692,113
Net cash used for investing activities $ (587,746) $ 490,192
Net cash provided by financing activities 570,696 (288,000)
----------- -----------
Increase (decrease) in cash and
cash equivalents 232,008 894,305
Cash and cash equivalents:
Beginning of year 1,079,531 11,536
----------- -----------
End of period $ 1,311,539 $ 905,841
=========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE>
CRYO-CELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
(UNAUDITED)
NOTE 1 FINANCIAL STATEMENTS
The Consolidated Financial Statements including the Consolidated Balance
Sheet as of May 31, 1997, Consolidated Statements of Operations for the six
months ended May 31, 1997 and Consolidated Statement of Cash Flows for the six
months ended May 31, 1997 have been prepared by the Company, without audit. In
the opinion of Management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash flows at May 31, 1997 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's November 30, 1996 Annual
Report on Form 10-KSB.
NOTE 2 INVESTMENT IN UNCONSOLIDATED AFFILIATE, SALE OF STOCK
In May, 1997, the Company received $163,996 from the sale of 55,000 shares
of Net/Tech International common stock. This sale brought the Company's
remaining holdings of Net/Tech stock to 1,982,929 shares. Under the equity
method of accounting, these shares are valued on Cryo-Cell's balance sheet at
$74,986 as of May 31, 1997. (If these same shares were valued at the closing
market price of Net/Tech's stock on May 31, 1997, the market capitalization of
Cryo-Cell's holdings would be $5,576,988. Net/Tech's stock trades on the
NASD Electronic Bulletin Board (Symbol N T T I)).
NOTE 3 STOCKHOLDERS EQUITY
In May, 1997, the Company received $540,000 from the sale of options (at $1
for each optioned share) to purchase 540,000 shares of its common stock at $6.00
per share. These options are valid for a period of five years. Exercise of these
options can result in a cash infusion to the Company of between $2,280,000 and
$3,780,000 depending on the price of the stock at the time of exercise (which
includes the original $540,000 option purchase price). Stock issued will be
subject to Rule 144 restrictions.
NOTE 4 REVENUE SHARING AGREEMENTS
SACHEM CORPORATE FINANCE, LTD.
In the prior quarter, the Company signed an agreement for the sale of two
Single Unit Revenue Sharing Agreements for $2,000,000 to an associate firm of
Sachem Corporate Finance, Ltd. The agreement covers revenue sharing in two units
to be located in CRYO-CELL LifespanSM sites in the U.S. Revenue of $400,000 was
recognized in the prior quarter reflecting a non-refundable deposit paid to
CRYO-CELL in the form of 100,000 shares of a NASDAQ small cap stock.
The $1.6 million cash balance was due in full by May 31, 1997. It was not
received and the due date has been extended by the company. The revenue sharing
negotiations with Sachem have been expanded to cover five countries in South
America and any revenues received would be in addition to the
7
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$1.6 million. These South American countries include Brazil, Argentina, Chile,
Paraguay, and Uruguay. The Company believes the $1.6 million will be received in
the current fiscal year as well as some revenues for South America. The
consummation of any South American agreement is contingent upon Sachem paying
the Company the $1.6 million due pursuant to the prior agreement.
Upon receipt of the entire $2,000,000 on a timely basis, CRYO-CELL has
granted Sachem the right to purchase an additional three Single Unit Revenue
Sharing Agreements for $3,000,000. These must be outside the U.S. and could
include Australia, where CRYO-CELL has recently received a patent for its
cellular storage technology.
After the full $2,000,000 payment has been made, Sachem, which is
headquartered in London, England, will be granted a 10% management equity
position in CRYO-CELL's planned European operation.
8
<PAGE>
CRYO-CELL INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
CRYO-CELL International, Inc., ("the Company"), a Delaware corporation
incorporated in 1989, is engaged in cellular storage and the design and
development of storage devices for use in its cellular storage programs. While
the Company's patented cellular storage unit is capable of multi-faceted
storage, the company has targeted the cryopreservation of umbilical/placental
cord blood stem cells as its initial entry into the cellular storage market.
Additionally, the Company is currently investigating several opportunities for
other types of cellular storage.
A key factor of the Company's business strategy is its LifespanSM Cellular
Storage Program. This program establishes a network of LifespanSM Centers
through partnerships with hospitals and medical centers. Under this program, the
stem cells are stored at the participating hospital. Recently, the Company has
succeeded in combining the LifespanSM Cellular Storage Program with its Revenue
Sharing Program. The combined programs entitle the partnering hospital or
medical center to receive an additional portion of their LifespanSM center's
annual storage revenue.
In these instances, the Company will gain significant marketing support from
each partnered hospital or medical center as they educate their patients on the
potential life-saving benefits of umbilical cord blood stem cell storage. Since
the hospital or medical center, under the Revenue Sharing Program, has now
invested its own funds in the program, the Company believes this combined effort
has the potential to accelerate the storage of cellular specimens.
On March 18, 1997, the Company entered into a seven year lease on a new,
free-standing headquarters building containing 7,500 square feet. The new
facility will include a complete state-of-the-art laboratory for the processing
and cryopreservation of multi-faceted cellular specimens, as well as executive
offices and training facilities. Construction is expected to be completed in
late summer 1997. This will enable the Company to offer its partnering hospitals
the ability to benefit without having to invest in the cost of a building and
operating a lab. In addition, it will give the Company the additional profit
source from processing the umbilical stem cells to prepare them for storage.
The following is a discussion and analysis of the financial condition and
results of operations of the Company for the quarter May 31, 1997 as compared to
the same period of the prior year as well as the year-to-date period compared to
the same period of the prior year.
GENERAL
During the quarter, the Company continued to expand its LifespanSM Cellular
Storage Program. On March 12, 1997, the Company signed an agreement for the
State of New Jersey with St. Peter's Medical Center in New Brunswick. This
program establishes a processing and storage facility as a means of supporting
the cryopreservation of umbilical cord blood (U-cordTM) stem cells for the
possible future medical benefit of newborn babies and their siblings. The state
of New Jersey has approximately 120,000 births annually.
As noted earlier, the Company is continuing expanded discussions with Sachem
Corporate Finance, Ltd., and believes that $1.6 million will be received in the
current fiscal year (see Note 4 in the Notes to Consolidated Financial
Statements).
Since Revenue Sharing Agreements can take considerable time to negotiate and
come to fruition and since such agreements can be involve significant amounts,
there can be wide swings in revenue and earnings from quarter to quarter.
9
<PAGE>
INVESTMENT IN UNCONSOLIDATED AFFILIATE
During this quarter, Net/Tech International, a CRYO-CELL affiliate,
announced the successful testing of its Hygiene Guard Hand Washing Monitoring
System. In May 1997, Net/Tech International unveiled its technology at the
National Restaurant Show in Chicago. As a result of this activity Net/Tech
has received hundreds of inquiries and/or indications of interest.
Actual face to face meetings have been held with several major international
firms. Net/Tech International announced agreements have been signed for beta
testing of the hygiene guard at the Tropicana Casino and Resort in Atlantic City
and the William Beaumont Army Medical Center in El Paso, Texas. (See Note 2 of
the Notes to Consolidated Financial Statements for Cryo-Cell holdings).
RESULTS OF OPERATIONS
REVENUES. Revenues for the quarter ended May 31, 1997 were $5,350 as compared to
$1,449,975 in quarter ended February 29 of the prior year. Revenues for the six
months ended May 31, 1997 were $410,150 as compared to $2,000,000 for the same
period of the prior year. The decrease in both comparisons reflects a lower
level of Revenue Sharing Agreements which were brought to fruition during the
current year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative costs year-to-date were $852,037 compared to $769,125 for the
period of the prior year. The increase reflects the expanded staffing needs as
the Company services new centers coming on stream as well as its own planned
storage site. These included a laboratory director, national director of program
development, a client services director and several other key administrative
personnel. These were partially offset by lower consulting costs. Selling,
general and administrative expenses during the quarter ended May 31, 1997 were
$409,360 as compared to $501,113 for the quarter ended May 31 of the prior year.
The reduction reflects the lower level of consulting costs partially offset by
the increased staffing and related costs described for the year to date period.
GAIN ON SALE OF UNCONSOLIDATED AFFILIATE STOCK. In May, 1997, the Company
realized a gain of $162,250 from the sale of 55,000 shares of Net/Tech
International common stock. This sale brought the Company's remaining holdings
of Net/Tech stock to 1,982,929 shares.
NET LOSS. The Company's net loss for the quarter ended May 31, 1997 was $318,043
as compared to net income of $912,820 during the same period of the prior year.
For the six months ended May 31, 1997, the Company's had a net loss of $402,065
as compared to net income of $1,187,424 for the same period of the prior year.
The change from a profit to a loss in both comparison periods reflects the lower
level of Revenue Sharing Agreements brought to fruition during the current
periods.
LIQUIDITY AND CAPITAL RESOURCES
In May, 1997, the Company received $540,000 from the sale of options to
purchase its common stock at $6.00 per share (see Note 3 in the Notes to
Consolidated Financial Statements)
At May 31, 1997, the Company had cash and cash equivalents of $1,311,538 as
compared to $1,079,531 at November 30, 1996, the end of the Company's last
fiscal year. Financing activities during the six month period ended May 31, 1997
contributed cash of $570,696. Operating activities during the same period
contributed $249,058. (This included payment in full from OrNda of their
outstanding receivable of $666,667 from the prior year end. The Company has
since been notified that Tenet HealthSystem, which acquired OrNda, is honoring
that Revenue Sharing Agreement. This was partially offset by the net loss for
the period.) Investing activities during the same six month period consumed
$587,746 (primarily securities received in a revenue sharing agreement as well
as equipment purchases).
As noted above, on March 18, 1997, the Company entered into a seven year
lease on a new, free-standing headquarters building containing 7,500 square
feet. The new facility will include a complete state-of-the-art laboratory for
the processing and cryopreservation of multi-faceted cellular specimens, as
10
<PAGE>
well as executive offices and training facilities. Construction is expected to
be completed in late summer 1997.
The company has received a letter of commitment from NationsBank of
Clearwater for a $1,000,000 line of credit. The terms of the one year line of
credit include a 1% placement fee ($10,000) and one point above prime interest
rate. Management believes that the availability of the line of credit is useful,
however, the cash position is sufficient at present so that it is not known if,
or when, there may be a need to draw against the line. The Company has not yet
finalized the transaction.
The Company anticipates that cash reserves plus cash flows from operations
and financing activities will be sufficient to fund its operations and growth
during its current fiscal year. Cash requirements for the next fiscal year could
be met through the sale of Revenue Sharing Agreements which are currently being
negotiated.
FORWARD LOOKING STATEMENTS
Statements wherein the terms "believes", "intends", or "expects" are used
are intended to reflect "forward looking statements" of the Company. The
information contained herein is subject to various risks, uncertainties and
other factors that could cause actual results to differ materially from the
results anticipated in such forward looking statements or paragraphs. 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 most recent Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K filed by the Company.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July, 1996, CRYO-CELL filed a lawsuit in the Superior Court of California
claiming that the University of Arizona and other defendants had breached their
contract, misappropriated trade secrets and other allegations. The University
filed a motion attempting to get the Lawsuit dismissed in California which the
Court disallowed. CRYO-CELL believes its suit has merit and the allegations can
be proven.
On March 28, 1997, subsequent to the Company's most recent quarter end, and
approximately eight months after CRYO-CELL filed its suit, the Company was
informed that the University of Arizona has filed a cross claim to the CRYO-CELL
lawsuit stating that CRYO-CELL had breached the contract and had intentionally
misled the University. CRYO-CELL believes there is no merit to these allegations
and that the belated cross claim is part of the strategy by the University to
motivate CRYO-CELL to settle the case.
The litigation is proceeding.
ITEM 6. 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(2)
27 Financial Data Schedule (EDGAR version only)
-------------------
(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-K for the year ended November 30, 1994.
(b) Reports on Form 8-K filed since the Company's last report are as
follows:
There were no reports on Form 8-K since the Company's last report.
12
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SIGNATURES
Pursuant to the requirements 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.
/s/ DANIEL D. RICHARD
---------------------
Daniel D. Richard
Chief Executive Officer
/s/ BRIAN K. BURKE
---------------------
Brian K. Burke
Chief Financial Officer,
Secretary and Treasurer
Date: July 15, 1997
13
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 1,311,538
<SECURITIES> 300,000
<RECEIVABLES> 40,405
<ALLOWANCES> 0
<INVENTORY> 10,729
<CURRENT-ASSETS> 1,687,464
<PP&E> 2,409,490
<DEPRECIATION> 165,169
<TOTAL-ASSETS> 4,391,575
<CURRENT-LIABILITIES> 239,010
<BONDS> 0
0
0
<COMMON> 77,024
<OTHER-SE> 3,752,833
<TOTAL-LIABILITY-AND-EQUITY> 4,391,575
<SALES> 410,150
<TOTAL-REVENUES> 603,134
<CGS> 0
<TOTAL-COSTS> 928,867
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (402,065)
<INCOME-TAX> 0
<INCOME-CONTINUING> (402,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (402,065)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
