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 February 28, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from to
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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
---------------------------- -------------------
(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 February 28, 1997,
7,151,984 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
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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 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
2
<PAGE>
<TABLE>
<CAPTION>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
FEBRUARY 28, NOVEMBER 30,
1997 1996
(UNAUDITED)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $1,200,415 $1,079,531
Accounts receivable (net of reserve of $2500) 406,297 673,533
Inventory 11,867 13,628
Prepaid expenses 31,369 22,839
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Total Current Assets 1,649,948 1,789,531
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PROPERTY AND EQUIPMENT
Property and equipment, net 2,138,161 2,044,454
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OTHER ASSETS
Intangible assets (net of amortization of 66,460 67,630
$31,701 and $30,531, respectively)
Deposit on equipment and other deposits 250,000 255,971
Investment in unconsolidated affiliate 55,764 50,138
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Total Deposits, Other Assets and Intangible Assets 372,224 373,739
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TOTAL ASSETS $4,160,333 $4,207,724
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</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 28, NOVEMBER 30,
1997 1996
(UNAUDITED)
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 98,263 $ 86,434
Accrued revenue sharing expense 292,708 292,708
Other accrued expenses 132,385 93,823
Income taxes payable 0 37,334
Obligation under capital leases 6,198 8,296
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Total Current Liabilities 529,554 518,595
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OTHER LIABILITIES
Deposits 30,000 30,000
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Total Other Liabilities 30,000 30,000
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STOCKHOLDERS' EQUITY
Preferred stock (500,000 $.01 par value authorized; 0 0
0 issued and outstanding)
Common stock (15,000,000 $.01 par value common shares
authorized; 7,151,984 at Feb 28, 1996 and Nov 30, 1996 71,520 71,520
Additional paid-in capital 6,498,757 6,473,085
Accumulated deficit (2,969,498) (2,885,477)
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Total Stockholders' Equity 3,600,780 3,659,129
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,160,333 $ 4,207,724
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</TABLE>
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
FEBRUARY 28, FEBRUARY 29,
1997 1996
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
Revenue $ 404,800 $ 550,025
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COSTS AND EXPENSES:
Selling, general & administrative expenses 430,780 268,011
Research and development expenses 29,690 2,189
Depreciation and amortization 13,338 5,220
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Total Cost and Expenses 473,808 275,420
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OPERATING PROFIT (LOSS) (69,008) 274,605
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OTHER INCOME AND (EXPENSE):
Interest income 16,931 0
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INCOME (LOSS) BEFORE EQUITY IN NET LOSS OF
UNCONSOLIDATED AFFILIATE AND
PROVISION FOR INCOME TAXES (52,077) 274,605
Provision for income taxes 11,897 0
Equity in net loss of unconsolidated affiliate 20,048 0
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NET INCOME (LOSS) ($ 84,022) $ 274,605
=========== ===========
Net Income (Loss) Per Share ($ 0.01) $ 0.04
=========== ===========
Number of Shares Used In Computation 7,279,836 7,639,576
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
FEBRUARY 28, FEBRUARY 29,
1997 1996
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income(loss) $ (84,022) $ 274,605
Adjustments to reconcile net income (loss)
to cash provided by (used for) operating activities:
Depreciation and amortization 13,338 5,220
Equity in loss of unconsolidated affiliate 20,048 0
Changes in assets and liabilities:
Accounts receivable 267,236 (445,000)
Notes receivable 0 501,951
Inventory 1,761 0
Prepaid expenses (8,530) 0
Accounts payable 11,829 (64,525)
Accrued expenses 38,562 (45,237)
Income taxes payable (37,334) 0
Deposits and other 5,971 (24,627)
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NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 228,859 202,387
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CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchases of property and equipment-net (105,875) (11,531)
Obligations under Capital Lease 0 (3,945)
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NET CASH USED FOR INVESTING ACTIVITIES $(105,875) $ (15,476)
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</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
<PAGE>
<TABLE>
<CAPTION>
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
FEBRUARY 28, FEBRUARY 29,
1997 1996
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt 0 (190,000)
Principal payments under capital leases (2,098) 0
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NET CASH PROVIDED BY FINANCING ACTIVITIES: (2,098) (190,000)
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Increase (decrease) in cash and cash equivalents 120,886 (3,089)
Cash and cash equivalents:
Beginning of year 1,079,531 11,536
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End of period $ 1,200,417 $ 8,447
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -- $ --
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Income taxes $ 49,231 $ --
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</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The accompanying notes to consolidated financial statements are an integral part
of these statements.
7
<PAGE>
CRYO-CELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENTS
The Consolidated Financial Statements including the Consolidated
Balance Sheet as of February 28, 1997, Consolidated Statements of Operations for
the three months ended February 28, 1997 and Consolidated Statement of Cash
Flows for the three months ended February 28, 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 February
28, 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.
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 cryogenic 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 cord blood
stem cells as its initial entry into the cellular storage market.
A key factor of the Company's business strategy is its Lifespan(SM)
Cellular Storage Program. This program establishes a network of Lifespan(SM)
Centers through partnerships with hospitals and medical centers. Recently, the
Company has succeeded in combining the Lifespan(SM) Cellular Storage Program
with its Revenue Sharing Program. The combined programs entitle the partnering
hospital or medical center to receive a portion of their Lifespan(SM) Center's
annual storage revenue.
The Company gains 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.
The following discussion and analysis of the financial condition and
results of operations of the Company for the quarter February 28, 1997 as
compared to the same period of the prior year.
GENERAL
During the quarter, the Company continued its program of marketing its
Revenue Sharing Agreements. On February 11, 1997, 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. A $400,000 non-refundable deposit was to
be paid to CRYO-CELL in the form of 100,000 shares of a NASDAQ small cap stock
at a market value slightly in excess of $400,000 at the time of the transaction.
The $1.6 million cash balance is due in full by May 31, 1997. 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.
RESULTS OF OPERATIONS
REVENUES. Revenues for the quarter ended February 28, 1997 were $404,800 as
compared to $550,025 in quarter ended February 29 of the prior year. The
decrease reflects a lower level of Revenue Sharing Agreements which were brought
to fruition during the quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses during the quarter ended February 28, 1997 were $430,780
as compared to $268,011 for the quarter ended February 29 of the prior year. The
major reason for the increase was 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.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company had cash and cash equivalents of $1,200,415 as
compared to $8,447 at February 29, 1996. The significant improvement in the
Company's liquidity over the prior year primarily reflects increased profits
from the sale of Revenue Sharing Agreements during this period.
Subsequent to the balance sheet date, 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.
9
<PAGE>
The Company anticipates that cash reserves plus cash flows from operations in
1997 will be sufficient to fund its growth. Cash flows from operations will
depend primarily on the sale of additional revenue sharing agreements. Although
negotiations are underway for Revenue Sharing Agreements involving many millions
of dollars, there can be no assurance as to how soon any such agreement, if any,
will be consummated. Consequently, there can be an uneven pattern in quarterly
revenue.
FORWARD LOOKING STATEMENTS
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." 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 most recent Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q to be filed by the Company in 1997 and
any Current Reports on Form 8-K filed by the Company.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the Company's most recent quarter end, the Company had never been
named as a defendant in any lawsuit.
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 a strategy by the University to
motivate CRYO-CELL to settle the case.
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:
Date of Report Items Reported
March 28, 1997 Item 5. OTHER EVENTS
11
<PAGE>
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: April 15, 1997
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,200,415
<SECURITIES> 0
<RECEIVABLES> 406,297
<ALLOWANCES> 0
<INVENTORY> 11,867
<CURRENT-ASSETS> 1,649,948
<PP&E> 2,258,291
<DEPRECIATION> 120,130
<TOTAL-ASSETS> 4,160,331
<CURRENT-LIABILITIES> 529,554
<BONDS> 0
0
0
<COMMON> 71,520
<OTHER-SE> 3,529,259
<TOTAL-LIABILITY-AND-EQUITY> 4,160,333
<SALES> 404,800
<TOTAL-REVENUES> 404,800
<CGS> 0
<TOTAL-COSTS> 473,808
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (52,077)
<INCOME-TAX> 11,897
<INCOME-CONTINUING> (84,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,022)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
