Cryo-Cell International, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended November 30, 2023; comparisons are with the year ended November 30, 2022. The company provides family cord blood and tissue processing and storage, sells PrepaCyte CB processing products, and operates a public cord blood bank. It reports more than 235,000 specimens stored worldwide.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $31.34 million | $30.34 million |
| Gross profit / gross margin | $22.90 million / 73.1% | $21.54 million / 71.0% |
| Operating income (loss) / margin | ($12.30 million) / (39.3%) | $4.02 million / 13.3% |
| Net income (loss) / diluted EPS | ($9.52 million) / ($1.14) | $2.77 million / $0.33 |
| Cash from operating activities | $8.92 million | $8.57 million |
- Revenue increased 3%. Processing and storage fees rose 3%, reflecting 5% growth in recurring annual storage revenue, partly offset by an 8% decline in new domestic specimens processed. Product revenue fell to $66,456; public banking revenue was $481,148.
- Cost of sales declined 4% to $8.44 million. SG&A increased 10% to $17.12 million, and research and development expense rose to $1.17 million from $0.38 million.
- The annual loss included $13.11 million of impairment of the Duke license assets and $3.74 million of public inventory impairment. The Duke license was fully impaired after a Phase 2/3 knee osteoarthritis trial showed no benefit for any tested cell source versus standard care. A $3.84 million income tax benefit partly offset the pretax loss.
- At year-end, cash and cash equivalents were $406,067 and marketable securities were $574,183, versus cash of $1.70 million and securities of $17,620 in 2022. Current assets were $9.45 million and current liabilities $20.86 million. The resulting current ratio was approximately 0.45.
- Debt included $8.60 million of net term debt and a $1.22 million revolver balance, approximately $9.82 million combined. The term loan matures in 2032; the revolving facility matures in 2025. The term loan and revolver rates were 8.57% and 6.96%, respectively, at year-end. The credit agreement requires leverage and debt-service coverage ratios.
- Deferred revenue was $50.89 million, including $9.70 million classified as current, principally reflecting customer payments received for storage services to be provided in the future. Total liabilities exceeded assets, leaving stockholders’ deficit of $11.03 million.
Material changes, outlook, and risks
- Cash from operations remained positive, but investing outflows of $8.14 million and financing outflows of $2.07 million reduced cash by $1.30 million. Investing included $6.84 million for property and equipment and $0.80 million for the Duke license agreement. Construction in process was $6.71 million.
- Management anticipates about $5 million of discretionary capital expenditures over the next 12 months. It estimates that more than $50 million may be required over five years for the clinic, clinical trials, manufacturing capabilities, facility development, software, and related obligations. Management states available cash, marketable securities, operating cash flow, and external capital are expected to cover known needs for at least 12 months; it also cites a 12-to-18-month operating funding estimate. Funding plans include cash flows, the revolver, and potential additional debt or equity. Lower revenue, higher costs, or unavailable financing could require spending reductions or deferrals.
- The company plans to open the Cryo-Cell Institute for Cellular Therapies and begin infusions during fiscal 2024, subject to regulatory permissions and operational readiness. In February 2024, it submitted a Phase 3 cerebral palsy trial protocol under a transferred IND and requested RMAT designation; the filing does not report that designation as granted. The planned trial is estimated to cost $20 million; the Emmes contract fees are $6.35 million over a performance period extending to April 2028.
- Other major risks include uncertain clinical outcomes and regulatory approvals, competition and demand for private cord banking, execution and profitability of new businesses, storage-system continuity, financing needs, variable-rate debt, and cybersecurity and intellectual-property risks. The filing reports compliance with stated FDA registration requirements as of year-end.
- A putative class lawsuit concerning advertising claims was compelled to arbitration; the plaintiff subsequently dropped class allegations and is pursuing individual claims. Damages are unspecified. The company intends to contest the matter and believes it should not materially affect results, while acknowledging an adverse outcome could do so.
- Management concluded disclosure controls and internal control over financial reporting were not effective at year-end because of a material weakness in identifying and applying accounting treatment for non-routine transactions. Remediation was underway. The auditor issued an unqualified opinion on the financial statements but did not provide an internal-control audit opinion.
Key investor verification points
- Track recurring storage-fee growth and new specimen volume, and determine whether revenue growth can offset higher SG&A and expansion costs.
- Review the public-bank inventory impairment assumptions and future unit sales, and assess whether further write-downs or contingent earnout changes are possible.
- Assess financing requirements, available revolver capacity, debt covenant compliance, and the timing and cost of facility build-out and clinical programs.
- Follow regulatory and trial milestones for the cerebral palsy program, the requested RMAT designation, and the planned clinic opening; verify whether these plans proceed as scheduled.
- Monitor remediation of the material weakness and subsequent filings for any control improvements or accounting changes.
- Follow the arbitration outcome and any related legal costs or loss-contingency updates.