Cryo-Cell International, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended November 30, 2020; comparison is fiscal 2019. The filing discusses fourth-quarter inventory impairment but does not present a separate Q4 income statement. Cryo-Cell provides private cord blood and tissue processing and storage, PrepaCyte CB products, and public cord blood banking.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $31.15 million | $31.82 million |
| Operating income | $7.66 million | $5.06 million |
| Net income | $3.62 million | $2.29 million |
| Basic / diluted EPS | $0.48 / $0.45 | $0.29 / $0.27 |
| Operating cash flow | $8.47 million | $6.29 million |
| Cash and cash equivalents at year-end | $10.36 million | $6.54 million |
- Revenue declined 2%. Processing and storage fees were $29.55 million, down 1%; public banking revenue rose to $727,000 from $652,000; PrepaCyte product revenue rose to $244,000 from $172,000; and licensee income fell to $630,000 from $1.00 million.
- Cost of sales fell 4% to $9.66 million and SG&A fell 4% to $14.29 million. Calculated operating margin was approximately 24.6% versus 15.9%; net margin was approximately 11.6% versus 7.2%.
- Cash increased by $3.82 million. Operating cash flow was supplemented by $807,000 from liquidating marketable securities; financing uses included $3.10 million of debt repayment and $1.90 million to terminate an RSA.
- At year-end, net note payable was $5.94 million, including $3.10 million current and $2.84 million long-term. Scheduled principal payments were $3.10 million in 2021 and $2.91 million in 2022. The Company reported no line of credit.
- Current assets were $18.56 million and current liabilities $16.41 million. Total liabilities of $48.87 million exceeded total assets of $46.20 million; stockholders’ deficit was $2.67 million.
Material changes and unusual items
- Net income increased despite lower revenue, reflecting lower operating expenses and a favorable $1.94 million noncash change in the fair value of Cord:Use contingent consideration. The liability declined to $1.51 million from $3.50 million; actual earnout payments may differ materially from the estimate.
- Public inventory impairment was $1.28 million, recognized in Q4 FY2020, compared with $2.33 million in FY2019. The charges reflected sales trends and estimated inventory recoverability. Public banking reported an operating loss of $2.33 million, though smaller than the prior-year $2.98 million loss.
- The Company paid $1.94 million to terminate the Illinois-area revenue-sharing agreement and resolve related claims, recognizing a $1.07 million loss on extinguishment. The related lawsuit was dismissed with prejudice. Other RSA obligations remain and have no definitive term; FY2020 RSA interest expense was $1.15 million.
- COVID-19-related changes in consumer buying patterns reduced new-client sales. Recurring storage revenue increased 8%, but the number of new domestic specimens processed fell 10%.
Outlook, commitments, risks and governance
- Management expected cash, marketable securities and operating cash flows to cover known needs for at least 12 months, and anticipated approximately $500,000 in discretionary capital expenditures over the next 12 months. It cautioned that weaker revenue or higher expenses could require spending reductions or financing.
- After year-end, on February 23, 2021, Cryo-Cell entered an exclusive license agreement with Duke University. The agreement requires a $12 million license fee, with $500,000 credited from option and extension payments; the remaining payments are $4.5 million shortly after signing, $5 million on the first anniversary and $2 million on the second anniversary. It also provides for 7%–12.5% sales royalties, escalating minimum annual royalties, a potential $2 million clinical-trial milestone, and specified equity issuances totaling up to 17.5% at stated triggers. The filing describes an anticipated clinic but provides no financial forecast for the program.
- Management cited continued COVID-19 uncertainty, potential further declines in new-client sales, public inventory recoverability, collection risk on receivables, variability in the contingent earnout, and regulatory requirements. The Company had approximately 6,000 public cord blood units in inventory.
- The Company reported compliance with applicable FDA requirements at year-end. Its auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls and internal controls were effective. The auditor did not attest to internal control effectiveness.
- The filing reports no cash dividends and no declared plan to pay them in the immediate future. Management also said it continues to review strategic alternatives, which could involve substantial debt or equity financing.
Investor verification priorities
- Confirm the Duke agreement’s cash-payment schedule, future minimum royalties, equity dilution triggers and funding plan against post-year-end disclosures.
- Track new-client volumes and COVID-related demand recovery, alongside recurring storage revenue.
- Assess the assumptions behind public inventory valuations, impairment charges and expected unit sales.
- Reconcile debt principal maturities and liquidity after the Duke commitment, capital spending and remaining RSA payments.
- Monitor LifeCell royalty receivable collection: the filing states $1.1 million remained unpaid at November 30, 2020, despite the agreement’s $10 million lifetime royalty cap having been reached.