The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2018
(Unaudited)
Note 1
Description of Business, Basis of Presentation and Significant Accounting Policies
Cryo-Cell International, Inc. (the
Company or Cryo-Cell) was incorporated in Delaware on September 11, 1989 and is headquartered in Oldsmar, Florida. The Company is organized in two reportable segments, cellular processing and cryogenic cellular storage, with a
current focus on the collection and preservation of umbilical cord blood stem cells for family use and the manufacture of PrepaCyte CB units, the processing technology used to process umbilical cord blood stem cells. Revenues recognized for the
cellular processing and cryogenic cellular storage represent sales of the umbilical cord blood stem cells program to customers, and income from licensees selling the umbilical cord blood stem cells program to customers outside the United States.
Revenues recognized for the manufacture of PrepaCyte CB units represent sales of the PrepaCyte CB units to customers. The Companys headquarters facility in Oldsmar, Florida handles all aspects of its U.S.-based business operations including
the processing and storage of specimens, including specimens obtained from certain of its licensees customers. The specimens are stored in commercially available cryogenic storage equipment.
The unaudited consolidated financial statements including the Consolidated Balance Sheets as of February 28, 2018, the related
Consolidated Statements of Comprehensive (Loss) Income and Cash Flows for the three months ended February 28, 2018 and February 28, 2017 have been prepared by Cryo-Cell International, Inc. and its subsidiaries pursuant to the rules and
regulations of the Securities and Exchange Commission for interim financial reporting. Certain financial information and note disclosures, which are normally included in annual financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, have been condensed or omitted pursuant to those rules and regulations. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes
thereto included in the Companys November 30, 2017 Annual Report on Form
10-K.
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 for all periods presented have been made. The results of operations for the three months ended February 28, 2018 are not necessarily indicative of the results
expected for any interim period in the future or the entire year ending November 30, 2018.
Revenue Recognition
Revenue Recognition for Arrangements with Multiple Deliverables
For multi-element arrangements, the Company allocates revenue to all deliverables based on their relative selling prices. In such
circumstances, accounting principles establish a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value (VSOE), (ii) third-party
evidence of selling price (TPE), and (iii) best estimate of the selling price (ESP). VSOE generally exists only when the Company sells the deliverable separately and it is the price actually charged by the Company for
that deliverable.
The Company has identified two deliverables generally contained in the arrangements involving the sale of its umbilical
cord blood product. The first deliverable is the processing of a specimen. The second deliverable is either the annual storage of a specimen, the
21-year
storage fee charged for a specimen or the life-time
storage fee charged for a specimen. The Company has allocated revenue
6
between these deliverables using the relative selling price method. The Company has VSOE for its annual storage fees as the Company renews storage fees annually with its customers on a
stand-alone basis. Because the Company has neither VSOE nor TPE for the processing,
21-year
storage and life-time storage deliverables, the allocation of revenue has been based on the Companys ESPs.
Amounts allocated to processing a specimen are recognized at the time the processing of the specimen is complete. Amounts allocated to the storage of a specimen are recognized ratably over the contractual storage period. Any discounts given to the
customer are recognized by applying the relative selling price method whereby after the Company determines the selling price to be allocated to each deliverable (processing and storage), the sum of the prices of the deliverables is then compared to
the arrangement consideration, and any difference is applied to the separate deliverables ratably.
The Companys process for
determining its ESP for deliverables without VSOE or TPE considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable. Key factors considered by the Company in developing the ESPs for its
processing,
21-year
storage and life-time storage fee include the Companys historical pricing practices, as well as expected profit margins.
The Company records revenue from processing and storage of specimens and pursuant to agreements with licensees. The Company recognizes revenue
from processing fees upon completion of processing and recognizes storage fees ratably over the contractual storage period as well as other income from royalties paid by licensees related to long-term storage contracts which the Company has under
license agreements. Contracted storage periods are annual,
twenty-one
years and lifetime. Deferred revenue on the accompanying consolidated balance sheets includes the portion of the annual storage fee, the
twenty-one-year
storage fee and the life-time storage fee that is being recognized over the contractual storage period as well as royalties received from foreign licensees
related to long-term storage contracts in which the Company has future obligations under the license agreement. The Company classifies deferred revenue as current if the Company expects to recognize the related revenue over the next 12 months. The
Company also records revenue within processing and storage fees from shipping and handling billed to customers when earned. Shipping and handling costs that the Company incurs are expensed and included in cost of sales.
The Company records revenue from the sale of the PrepaCyte CB product line upon shipment of the product to the Companys customers.
Accounts Receivable
Accounts receivable
consist of uncollateralized amounts due from clients that have enrolled and processed in the umbilical cord blood stem cell processing and storage programs and amounts due from license affiliates, and sublicensee territories. Accounts receivable are
due within 30 days and are stated at amounts net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering the length of time
accounts receivable are past due, the Companys previous loss history, and the clients current ability to pay its obligations. Therefore, if the financial condition of the Companys clients were to deteriorate beyond the estimates,
the Company may have to increase the allowance for doubtful accounts which could have a negative impact on earnings. The Company
writes-off
accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for doubtful accounts.
7
Income Taxes
Deferred income 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 income tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The Company has recorded a
valuation allowance of $1,605,000 and $2,316,000 as of February 28, 2018 and November 30, 2017, respectively, as the Company does not believe it is more likely than not that all future income tax benefits will be realized. When
the Company changes its determination as to the amount of deferred income tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact to income tax expense in the period in which such determination is made. The
ultimate realization of the Companys deferred income tax assets depends upon generating sufficient taxable income prior to the expiration of the tax attributes. In assessing the need for a valuation allowance, the Company projects future
levels of taxable income. This assessment requires significant judgment. The Company examines the evidence related to the recent history of losses, the economic conditions in which the Company operates and forecasts and projections to make that
determination.
The Company recorded U.S. income taxes of approximately $3,203,000 and $306,000 during the three months ended
February 28, 2018 and February 28, 2017, respectively. Included in the $3,203,000 tax expense for the three months ended February 28, 2018 is approximately $2,985,000 of expense related to the reduction of the federal tax rate to 21%
as of January 1, 2018 as a result of the Tax Cuts and Jobs Act that was signed into law on December 22, 2017. The decrease in the federal tax rate caused a decrease in the Companys deferred tax asset which resulted in an increase in
the income tax expense.
The Company records foreign income taxes withheld from installment payments of
non-refundable
up-front
license fees and royalty income earned on the processing and storage of cord blood stem cell specimens in geographic areas where the Company has
license agreements. The Company recognized approximately $0 and $0 for the three months ended February 28, 2018 and February 28, 2017, respectively, of foreign income tax expense. Foreign income tax expense is included in income tax
expense in the accompanying consolidated statements of comprehensive (loss) income.
The Company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the
more-likely-than-not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Increases or decreases to the
unrecognized tax benefits could result from managements belief that a position can or cannot be sustained upon examination based on subsequent information or potential lapse of the applicable statute of limitation for certain tax positions.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the three months ended
February 28, 2018 and February 28, 2017, the Company had no provisions for interest or penalties related to uncertain tax positions.
Long-Lived Assets
The Company evaluates
the realizability of its long-lived assets, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment, such as reductions in demand or when significant economic slowdowns are present.
Reviews are performed to determine whether the carrying value of an asset is impaired, based on comparisons to undiscounted expected future cash flows. If this comparison indicates that there is impairment and carrying value is in excess of fair
value, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices or (ii) discounted expected future cash flows utilizing a discount rate. The Company did not note any impairment for the
three months ended February 28, 2018 and February 28, 2017.
8
Stock Compensation
As of February 28, 2017, the Company has two stock-based compensation plans, which are described in Note 7 to the consolidated financial
statements. The Companys stock-based employee compensation plan that became effective December 1, 2011 was approved by the Board of Directors and approved by the stockholders at the 2012 Annual Meeting. The Company recognized
approximately $556,000 and $77,000 for the three months ended February 28, 2018 and February 28, 2017, respectively, of stock-based compensation expense.
The Company recognizes stock-based compensation based on the fair value of the related awards. Under the fair value recognition guidance of
stock-based compensation accounting rules, stock-based compensation expense is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The fair value of
service-based vesting condition and performance-based vesting condition stock option awards is determined using the Black-Scholes valuation model. For stock option awards with only service-based vesting conditions and graded vesting features, the
Company recognizes stock compensation expense based on the graded-vesting method. To value awards with market-based vesting conditions the Company uses a binomial valuation model. The Company recognizes compensation cost for awards with market-based
vesting conditions on a graded-vesting basis over the derived service period calculated by the binomial valuation model. The use of these valuation models involves assumptions that are judgmental and highly sensitive in the determination of
compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, exercise price, and forfeiture rate. Forfeitures are estimated at the time of valuation and reduce expense ratably
over the vesting period.
The estimation of stock awards that will ultimately vest requires judgment and to the extent that actual results
or updated estimates differ from current estimates, such amounts will be recorded as a cumulative adjustment in the period they become known. The Company considered many factors when estimating forfeitures, including the recipient groups and
historical experience. Actual results and future changes in estimates may differ substantially from current estimates.
The Company issues
performance-based equity awards which vest upon the achievement of certain financial performance goals, including revenue and income targets. Determining the appropriate amount to expense based on the anticipated achievement of the stated goals
requires judgment, including forecasting future financial results. The estimate of the timing of the expense recognition is revised periodically based on the probability of achieving the required performance targets and adjustments are made as
appropriate. The cumulative impact of any revision is reflected in the period of the change. If the financial performance goals are not met, the award does not vest, so no compensation cost is recognized and any previously stock-recognized
stock-based compensation expense is reversed.
The Company issues equity awards with market-based vesting conditions which vest upon the
achievement of certain stock price targets. If the awards are forfeited prior to the completion of the derived service period, any recognized compensation is reversed. If the awards are forfeited after the completion of the derived service period,
the compensation cost is not reversed, even if the awards never vest.
9
Fair Value of Financial Instruments
Management uses a fair value hierarchy, which gives the highest priority to quoted prices in active markets. The fair value of financial
instruments is estimated based on market trading information, where available. Absent published market values for an instrument or other assets, management uses observable market data to arrive at its estimates of fair value. Management believes
that the carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. The Company believes that the fair value of its Revenue
Sharing Agreements (RSA) liability recorded on the balance sheet is between the recorded book value and up to the Companys previous settlement experience, due to the various terms and conditions associated with each RSA.
The Company uses an accounting standard that defines fair value as an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value
are as follows:
|
Level 1
|
Quoted prices in active markets for identical assets or liabilities.
|
|
Level 2
|
Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
|
Level 3
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies
and similar techniques that use significant unobservable inputs.
|
The following table summarizes the financial assets and
liabilities measured at fair value on a recurring basis as of February 28, 2018 and November 30, 2017, respectively, segregated among the appropriate levels within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
February 28,
2018
|
|
|
Fair Value Measurements
at February 28, 2018 Using
|
|
Description
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities
|
|
$
|
62,376
|
|
|
$
|
62,376
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
523,854
|
|
|
|
523,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
586,230
|
|
|
$
|
586,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
November 30,
2017
|
|
|
Fair Value Measurements
at November 30, 2017 Using
|
|
Description
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities
|
|
$
|
96,600
|
|
|
$
|
96,600
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
342,722
|
|
|
|
342,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
439,322
|
|
|
$
|
439,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The following is a description of the valuation techniques used for these items, as well as the
general classification of such items pursuant to the fair value hierarchy:
Trading securities
Fair values for these
investments are based on quoted prices in active markets and are therefore classified within Level 1 of the fair value hierarchy. For trading securities, there was ($34,000) and ($26,600) in unrealized holding losses, respectively, recorded in
other income and expense on the accompanying consolidated statements of comprehensive loss for the three months ended February 28, 2018 and February 28, 2017, respectively.
Available-for-sale
securities
These investments
are classified as available for sale and consist of marketable equity securities that we intend to hold for an indefinite period of time. Investments are stated at fair value and unrealized holding gains and losses are reported as a component of
accumulated other comprehensive income until realized. Realized gains or losses on disposition of investments are computed using the first in, first out (FIFO) method and reported as income or loss in the period of disposition in the accompanying
consolidated statements of comprehensive (loss) income. For
available-for-sale
securities, there was approximately $119,000 and ($7,000) in unrealized holding gains
(losses), net of tax, respectively, reported as comprehensive loss on the accompanying statements of comprehensive (loss) income for the three months ended February 28, 2018 and February 28, 2017, respectively.
Product Warranty and Cryo-Cell Cares
TM
Program
In December 2005, the Company began providing its customers that enrolled after December 2005 a payment warranty under which the Company agrees
to pay $50,000 to its client if the umbilical cord blood product retrieved is used for a stem cell transplant for the donor or an immediate family member and fails to engraft, subject to various restrictions. Effective February 1, 2012, the
Company increased the $50,000 payment warranty to a $75,000 payment warranty to all of its new clients. Additionally, under the Cryo-Cell
Cares
TM
program, the Company was paying $10,000 to the client to offset personal expenses if the umbilical cord blood product is used for bone marrow reconstitution in a myeloblative transplant
procedure. Effective October 13, 2014, the Company no longer offers the Cryo-Cell Cares
TM
program to new clients. The product warranty is available to
clients who enroll under this structure for as long as the specimen is stored with the Company. The Company has not experienced any claims under the warranty program nor has it incurred costs related to these warranties. The Company does not
maintain insurance for this warranty program and therefore maintains reserves to cover any estimated potential liabilities. The Companys reserve balance is based on the $75,000 or $50,000 (as applicable) maximum payment and the $10,000 maximum
expense reimbursement multiplied by formulas to determine the projected number of units requiring a payout. The Company determined the estimated expected usage and engraftment failure rates based on an analysis of the historical usage and failure
rates and the historical usage and failure rates in other private and public cord blood banks based on published data. The Companys estimates of expected usage and engraftment failure could change as a result of changes in actual usage rates
or failure rates and such changes would require an adjustment to the established reserves. The historical usage and failure rates have been very low and a small increase in the number of transplants or engraftment failures could cause a significant
increase in the estimated rates used in determining the Companys reserve. In addition, the reserve will increase as additional umbilical cord blood specimens are stored which are subject to the warranty. As of February 28, 2018 and
November 30, 2017 the Company recorded reserves under these programs in the amounts of approximately $18,000 and $18,000, respectively, which are included in accrued expenses in the accompanying consolidated balance sheets.
11
Recently Issued Accounting Pronouncements
In February 2018, the FASB issued Accounting Standards Update
No. 2018-02
, Income Statement
Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
. This update relates to the impacts of the tax legislation commonly referred to as the Tax Cuts and Jobs Act
(the Act). The guidance permits the reclassification of certain income tax effects of the Act from Other Comprehensive Income to Retained Earnings (stranded tax effects). The guidance also requires certain new disclosures. The guidance
is effective for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. Entities may adopt the guidance using one of two transition methods; retrospective to each period
(or periods) in which the income tax effects of the Act related to the items remaining in Other Comprehensive Income are recognized or at the beginning of the period of adoption. The Company is currently evaluating the impact that the guidance may
have on its Consolidated Financial Statements.
In May 2017, the FASB issued Accounting Standards Update
No. 2017-09,
Compensation Stock Compensation (Topic 718): Scope of Modification Accounting.
This update provides clarity, reduces the diversity in practice, and the cost and complexity when
applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, although
early adoption is permitted. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In January 2017, the FASB issued Accounting Standards Update
No. 2017-04,
Intangibles
Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
. The update removes Step 2 from the goodwill impairment test. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019, although early adoption is permitted. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In December 2016, the FASB issued Accounting Standards Update
No. 2016-18,
Statement of Cash
Flows (Topic 230). Restricted Cash
. This update clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance requires a reconciliation of totals in the statement of cash
flows to the related cash and cash equivalents and restricted cash captions in the balance sheet. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017 with early adoption
permitted. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In August
2016, the FASB issued Accounting Standards Update
No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.
This update addresses eight specific
cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In June 2016, the FASB issued Accounting Standards Update
No. 2016-13,
Financial Instruments
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. This update provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other
commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment
12
methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss
estimates. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that the updated standard will have on our financial
statements.
In May 2016, the FASB issued Accounting Standards Update
No. 2016-12,
Revenue
from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.
This update clarifies the objectives of collectability, sales and other taxes, noncash consideration, contract modifications at transition, completed
contracts at transition and technical correction. The amendments in this update affect the guidance in Accounting Standards Update
No. 2014-09,
Revenue from Contracts with Customers (Topic 606),
which is not yet effective
but will become effective for annual and interim periods beginning after December 15, 2017. The Company has not yet selected a transition method nor has it determined the effect of the standard on its
consolidated financial statements and related disclosures.
In April 2016, the FASB issued Accounting Standards Update
No. 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.
This update clarifies how an entity identifies performance obligations related to
customer contracts as well as help to improve the operability and understanding of the licensing implementation guidance. The amendments in this update affect the guidance in Accounting Standards Update
No. 2014-09,
Revenue from Contracts with Customers (Topic 606),
which is not yet effective
but will become effective for annual and interim periods beginning after December 15, 2017.
The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued Accounting Standards Update
No. 2016-08,
Revenue from Contracts
with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).
This update amends the principal-versus-agent implementation guidance and illustrations in the Boards new revenue standard (ASC 606).
The FASB issued the ASU in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standards principal-versus-agent guidance and (2) applying the
indicators of whether an entity is a principal or an agent in accordance with the revenue standards control principle. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In February 2016, the FASB issued Accounting Standards Update
No. 2016-02,
Leases (Topic
842).
This update requires organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. It also requires new
qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect that the updated standard will have on its consolidated balance sheets and related disclosures.
In January 2016, the FASB issued Accounting Standards Update
No. 2016-01,
Financial
InstrumentsOverall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.
This update requires all equity investments to be measured at fair value with changes
in fair value recognized in net income, requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the
entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, and eliminates the requirement for public entities to disclose
13
the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The new
standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option. The
Company is currently evaluating the impact of the new standard on our financial statements.
In May 2014, the FASB issued Accounting
Standards Update
No. 2014-09
, Revenue from Contracts with Customers (Topic 606).
This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue
to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount,
timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued Accounting Standards Update
No. 2015-14,
Revenue from Contracts with Customers
(Topic 606): Deferral of the Effective Date,
which defers the effective date of the guidance in Accounting Standards Update
No. 2014-09
by one year. This update is now effective for annual and interim
periods beginning after December 15, 2017, which will require us to adopt these provisions in the first quarter of fiscal 2019. Early application is permitted for annual reporting periods beginning after December 15, 2016, including
interim reporting periods within that reporting period. This update permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has it determined the effect
of the standard its consolidated financial statements and related disclosures.
Note 2 Inventory
The components of inventory at February 28, 2018 and November 30, 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
February 28, 2018
|
|
|
November 30, 2017
|
|
Raw materials
|
|
$
|
|
|
|
$
|
|
|
Work-in-process
|
|
|
109,342
|
|
|
|
97,210
|
|
Finished goods
|
|
|
246,377
|
|
|
|
210,854
|
|
Collection kits
|
|
|
26,441
|
|
|
|
14,220
|
|
Inventory reserve
|
|
|
(7,718
|
)
|
|
|
(7,718
|
)
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
374,442
|
|
|
$
|
314,566
|
|
|
|
|
|
|
|
|
|
|
Note 3 Intangible Assets
The Company incurs certain legal and related costs in connection with patent and trademark applications. If a future economic benefit is
anticipated from the resulting patent or trademark or an alternate future use is available to the Company, such costs are capitalized and amortized over the expected life of the patent or trademark. The Companys assessment of future economic
benefit involves considerable management judgment. A different conclusion could result in the reduction of the carrying value of these assets.
The Company reviews intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of the future forecasted undiscounted cash flows expected to be generated by the asset per ASC 360,
Property, Plant and Equipment
.
14
Intangible assets were as follows as of February 28, 2018 and November 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful lives
|
|
February 28, 2018
|
|
|
November 30, 2017
|
|
Patents and Domain Names
|
|
10-20 years
|
|
$
|
234,570
|
|
|
$
|
34,570
|
|
Less: Accumulated amortization
|
|
|
|
|
(14,766
|
)
|
|
|
(11,800
|
)
|
License agreement
|
|
10 years
|
|
|
470,000
|
|
|
|
470,000
|
|
Less: Intangible asset impairment
|
|
|
|
|
(185,000
|
)
|
|
|
(185,000
|
)
|
Less: Accumulated amortization
|
|
|
|
|
(99,778
|
)
|
|
|
(91,861
|
)
|
Customer relationships
|
|
15 years
|
|
|
41,000
|
|
|
|
41,000
|
|
Less: Intangible asset impairment
|
|
|
|
|
(26,267
|
)
|
|
|
(26,267
|
)
|
Less: Accumulated amortization
|
|
|
|
|
(4,487
|
)
|
|
|
(4,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Intangible Assets
|
|
$
|
415,272
|
|
|
$
|
226,418
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangibles was approximately $11,000 and $9,000 for the three months ended
February 28, 2018 and February 28, 2017, respectively.
Note 4 Note Payable
On May 20, 2016, the Company entered into a Credit Agreement (Agreement) with Texas Capital Bank, National Association
(TCB) for a term loan of $8.0 million in senior credit facilities. The proceeds of the term loan were used by the Company to fund repurchases of the Companys common stock. Subject to the terms of the Agreement, on May 20,
2016, TCB advanced the Company $100.00. On July 1, 2016, TCB advanced the remaining principal amount of $7,999,900 per a promissory note dated May 20, 2016 between the Company and TCB, at a rate of 3.75% per annum plus LIBOR, payable
monthly with a maturity date of July 2021. On August 26, 2016, the Company entered into a First Amendment to Credit Agreement with TCB. Pursuant to terms of the First Amendment to Credit Agreement, on August 26, 2016, TCB made an
additional advance to the Company in principal amount of $2,133,433 per an Amended and Restated Promissory Note dated August 26, 2016 between the Company and TCB. The additional proceeds of the term loan were used by the Company to fund the
extinguishment of revenue sharing agreements. As of February 28, 2018 and November 30, 2017, principal paid to date is $3,133,000 and $2,633,000, respectively, at a rate of 3.75% per annum plus LIBOR. As of the three months ended
February 28, 2018 and February 28, 2017, the Company paid interest of $93,828 and $102,488 respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.
On May 20, 2016, the Company also entered into a Subordination Agreement with TCB and CrowdOut Capital LLC (CrowdOut) for a
subordinated loan of the principal amount of $650,000, which amount CrowdOut advanced to the Company on May 20, 2016. The proceeds of the subordinated loan were used by the Company to fund repurchases of the Companys common stock. Per a
promissory note dated May 20, 2016 between the Company and CrowdOut, interest at 12% per annum on the principal sum of $650,000 is payable monthly with a maturity date of July 2021, at which time, the principal amount of $650,000 was payable.
On June 5, 2017, the principal sum of $650,000 plus interest of $867 was paid to CrowdOut and the subordinated loan was paid in full. As of the three months ended February 28, 2018 and February 28, 2017, the Company paid interest of
$0 and $19,500, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.
Collateral of the term and subordinated loans includes all money, securities and property of the Company.
15
The Company incurred debt issuance costs related to the term and subordinated loans in the amount
of $378,785 which is recorded as a direct reduction of the carrying amount of the note payable and amortized over the life of the loan. As of the three months ended February 28, 2018 and February 28, 2017, $26,702 and $34,153,
respectively, of the debt issuance costs were amortized and are reflected in interest expense on the accompanying consolidated statements of comprehensive (loss) income.
As of February 28, 2018 and November 30, 2017, the note payable obligation was as follows:
|
|
|
|
|
|
|
|
|
|
|
February 28, 2018
|
|
|
November 30, 2017
|
|
Note payable
|
|
$
|
7,000 ,100
|
|
|
$
|
7,500,100
|
|
Unamortized debt issuance costs
|
|
|
(178,215
|
)
|
|
|
(204,917
|
)
|
|
|
|
|
|
|
|
|
|
Net note payable
|
|
$
|
6,821,885
|
|
|
$
|
7,295,183
|
|
|
|
|
|
|
|
|
|
|
Current portion of note payable
|
|
$
|
2,000,000
|
|
|
$
|
2,000,000
|
|
Long-term note payable, net of debt issuance costs
|
|
|
4,821,885
|
|
|
|
5,295,183
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,821,885
|
|
|
$
|
7,295,183
|
|
|
|
|
|
|
|
|
|
|
Interest expense on the note payable for the three months ended February 28, 2018 and February 28,
2017 was as follows:
|
|
|
|
|
|
|
|
|
|
|
February 28, 2018
|
|
|
February 28, 2017
|
|
Interest expense on notes payable
|
|
$
|
93,827
|
|
|
$
|
121,988
|
|
Debt issuance costs
|
|
|
26,702
|
|
|
|
34,153
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
120,529
|
|
|
$
|
156,141
|
|
|
|
|
|
|
|
|
|
|
Note 5 (Loss) Income per Common Share
Net income (loss) per common share data are based on net income. The following table sets forth the calculation of basic and diluted (loss)
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
February 28, 2018
|
|
|
For the three months ended
February 28, 2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
($
|
2,530,072
|
)
|
|
$
|
486,923
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding-basic
|
|
|
7,105,135
|
|
|
|
6,901,108
|
|
Dilutive common shares issuable upon exercise of stock options
|
|
|
|
|
|
|
536,135
|
|
Weighted-average shares-diluted
|
|
|
7,105,135
|
|
|
|
7,437,243
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
($
|
0.36
|
)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
($
|
0.36
|
)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
16
For the three months ended February 28, 2018, the Company excluded the effect of all
outstanding stock options from the computation of diluted earnings per share, as the effect of potentially dilutive shares from the outstanding stock options would be anti-dilutive. For the three months ended February 28, 2017, the Company
included the effect of all outstanding stock options in the computation of diluted earnings per share, as all of the outstanding stock options were in the money as of February 28, 2017.
Note 6 Stockholders Equity
The Company maintains the 2006 Stock Incentive Plan (the 2006 Plan) under which it has reserved 1,000,000 shares of the
Companys common stock for issuance pursuant to stock options, restricted stock, stock-appreciation rights (commonly referred to as SARs) and stock awards (i.e. performance options to purchase shares and performance units). As of
February 28, 2018 and November 30, 2017, there were 450,000 and 457,250 options issued, but not yet exercised, under the 2006 Plan, respectively. As of February 28, 2018, there were 314,929 shares available for future issuance under
the 2006 Plan.
The Company maintains the 2012 Equity Incentive Plan (the 2012 Plan) which became effective December 1,
2011 as approved by the Board of Directors and approved by the stockholders at the 2012 Annual Meeting on July 10, 2012. The 2012 Plan originally reserved 1,500,000 shares of the Companys common stock for issuance pursuant to stock
options, restricted stock, SARs, and other stock awards (i.e. performance shares and performance units). In May 2012, the Board of Directors approved an amendment to the 2012 Plan to increase the number of shares of the Companys common stock
reserved for issuance to 2,500,000 shares. As of February 28, 2018, there were 569,729 service-based options issued, 129,729 service-based restricted common shares granted, 883,415 performance-based and 116,240 market-based restricted common
shares granted under the 2012 Plan. As of February 28, 2018, there were 800,887 shares available for future issuance under the 2012 Plan. Subsequent to the Companys balance sheet date, the Company received notice that shares of the
Companys common stock issued to certain executive officers pursuant to the Companys 2012 Stock Incentive Plan had purportedly been issued in excess of the shares reserved for issuance under the Plan. The Company has established an
independent committee of the Board of Directors to review this issue.
Service-based vesting condition options
The fair value of each option award is estimated on the date of the grant using the Black-Scholes valuation model that uses the assumptions
noted in the following table. Expected volatility is based on the historical volatility of the Companys stock over the most recent period commensurate with the expected life of the Companys stock options. The Company uses historical data
to estimate option exercise and employee termination within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term of
options granted to employees is calculated, in accordance with the simplified method for plain vanilla stock options allowed under GAAP. Expected dividends are based on the historical trend of the Company not issuing
dividends.
There were no options granted during the three months ended February 28, 2018 and February 28, 2017, respectively.
17
Stock option activity for the three months ended February 28, 2018, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Contractual
Life (Years)
|
|
|
Intrinsic
Value
|
|
Outstanding at November 30, 2017
|
|
|
1,026,979
|
|
|
$
|
2.50
|
|
|
|
4.48
|
|
|
$
|
5,706,107
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,250
|
)
|
|
|
1.80
|
|
|
|
|
|
|
|
7,963
|
|
Expired/forfeited
|
|
|
(6,000
|
)
|
|
|
2.12
|
|
|
|
|
|
|
|
30,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at February 28, 2018
|
|
|
1,019,729
|
|
|
$
|
2.51
|
|
|
|
4.38
|
|
|
$
|
4,744,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at February 28, 2018
|
|
|
999,518
|
|
|
$
|
2.45
|
|
|
|
4.32
|
|
|
$
|
4,707,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value represents the total value of the difference between the Companys closing
stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of
in-the-money
stock options that would have been
received by the option holders had all option holders exercised their options on either February 28, 2018 or February 28, 2017, as applicable. The intrinsic value of the Companys stock options changes based on the closing price of
the Companys stock.
For the three months ended February 28, 2018, the Company issued 1,250 common shares to an option holder
who exercised options for $2,250.
For the three months ended February 28, 2017, the Company issued 19,281 common shares to option
holders who exercised options for $33,496.
Significant option groups exercisable at February 28, 2018 and related price and
contractual life information are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
Weighted
Average
Exercise Price
|
|
Range of Exercise Prices
|
|
Outstanding
|
|
|
Contractual
Life
(Years)
|
|
|
|
Outstanding
|
|
|
$1.01 to $2.00
|
|
|
422,500
|
|
|
|
3.69
|
|
|
$
|
1.73
|
|
|
|
422,500
|
|
|
$
|
1.73
|
|
$2.01 to $3.00
|
|
|
345,000
|
|
|
|
2.54
|
|
|
$
|
2.69
|
|
|
|
345,000
|
|
|
$
|
2.69
|
|
$3.01 to $4.00
|
|
|
227,229
|
|
|
|
7.92
|
|
|
$
|
3.18
|
|
|
|
218,896
|
|
|
$
|
3.18
|
|
$6.01 to $7.00
|
|
|
25,000
|
|
|
|
9.09
|
|
|
$
|
6.95
|
|
|
|
13,122
|
|
|
$
|
7.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,019,729
|
|
|
|
4.38
|
|
|
$
|
2.51
|
|
|
|
999,518
|
|
|
$
|
2.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the status of the Companys
non-vested
options as of
February 28, 2018, and changes during the three months ended February 28, 2018, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Options
|
|
|
Fair Value
|
|
Non-vested
at November 30, 2017
|
|
|
39,168
|
|
|
$
|
2.41
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(18,957
|
)
|
|
|
2.22
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
at February 28, 2018
|
|
|
20,211
|
|
|
$
|
2.59
|
|
|
|
|
|
|
|
|
|
|
18
As of February 28, 2018 there was approximately $32,000 of total unrecognized compensation
cost related to
non-vested
service related share-based compensation arrangements granted under the 2006 Plan and the 2012 Plan. The cost is expected to be recognized over a weighted-average period of .59 years
as of February 28, 2018. The total fair value of shares vested during the three months ended February 28, 2018 was approximately $42,000.
Performance and market-based vesting condition options
There were no performance-based or market-based vesting condition options granted during the three months ended February 28, 2018 and
February 28, 2017.
Restricted common shares
As of April 15, 2016, the Company entered into Amended and Restated Employment Agreements (Employment Agreements) with each of the
Companys Co-CEOs. The Employment Agreements provide for the grant of shares of the Companys common stock based on certain performance measures being attained by each of the Companys Co-CEOs during fiscal year 2016 and fiscal year
2017. The Employment Agreements state if David Portnoy and Mark Portnoy are employed by the Company on November 30, 2016 and November 30, 2017, then no later than February 28, 2017 and February 28, 2018, respectively, the Company will grant up to
186,487 and 162,163 shares of common stock for each fiscal year. Based upon the performance measures being attained as of November 30, 2016, the Company granted 183,145 and 159,257 shares of common stock to David Portnoy and Mark Portnoy,
respectively. There was $0 of total unrecognized compensation cost as of February 28, 2018 and February 28, 2017. Based upon the performance measures attained as of November 30, 2017, the Company granted a total of 121,801 and 105,915 shares of
common stock to David Portnoy and Mark Portnoy, respectively. The fair value of the shares granted was approximately $1,200,000. There was $496,000 remaining to be recognized and is reflected as selling, general and administrative expense in the
accompanying consolidated statements of comprehensive (loss) income as of February 28, 2018.
As of April 18, 2016, the Company entered
into a second Amendment Agreement (the Amendment), with the Companys CIO Oleg Mikulinsky effective December 1, 2015, amending certain terms of the Amendment Agreement dated May 1, 2013 and Mikulinsky Employment Agreement dated
March 5, 2012. The Amendment provides for the grant of shares of the Companys common stock based on certain performance measures being attained by the Company during fiscal year 2016 and fiscal year 2017. The Amendment states if Executive is
employed by the Company on November 30, 2016 and November 30, 2017, then no later than February 28, 2017 and February 28, 2018, respectively, the Company will grant Executive up to 20,000 shares of restricted stock based on performance as set forth
in the Amendment per each fiscal year Based upon performance measures being attained as of November 30, 2016, the Company granted 19,620 shares of common stock to Oleg Mikulinksy. There was $0 of total unrecognized compensation cost as of February
28, 2018 and February 28, 2017. Based upon performance measures being attained as of November 30, 2017, the Company will grant a total of 11,396 shares of common stock to Oleg Mikulinksy. The fair value of the shares to be granted is approximately
$80,000. There was $40,000 remaining to be recognized and is reflected as selling, general and administrative expense in the accompanying consolidated statements of comprehensive (loss) income as of February 28, 2018.
19
Note 7 License Agreements
The Company enters into two types of licensing agreements and in both types, the Company earns revenue on the initial license fees. Under the
technology agreements, the Company earns processing and storage royalties from the affiliates that process in their own facility. Under the marketing agreements, the Company earns processing and storage revenues from affiliates that store specimens
in the Companys facility in Oldsmar, Florida.
Technology Agreements
The Company has entered into a definitive License and Royalty Agreement with LifeCell International Private Limited, formerly Asia Cryo-Cell
Private Limited, (LifeCell) to establish and market its umbilical cord blood and menstrual stem cell programs in India.
Per
the License and Royalty Agreement with Lifecell, there is a $1 Million cap on the amount of royalty due to the Company per year and a $10 Million cap on the amount of royalties due to the Company for the term of the License and Royalty Agreement.
Since inception of the License and Royalty Agreement, the Company has recorded $6,100,000 in royalty income due under the terms of the License and Royalty Agreement, of which, Lifecell has paid the Company $5,900,000 as of February 28, 2018.
The balance of $200,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets.
Marketing Agreements
The Company has definitive license agreements to market the Companys umbilical cord blood stem cell programs in Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, Panama and Pakistan.
For the three months ended February 28, 2018 and February 28, 2017, the
Company recognized $0 and $0, respectively, for initial license fees and processing and storage royalties.
Note 8 Legal Proceedings
On December 3, 2015, a complaint styled
Gary T. Brotherson, M.D., et al. v. Cryo-Cell International, Inc.,
Case No.
15-007461-CI,
Circuit Court, Sixth Judicial Circuit, Pinellas County, Florida, was served on the Company, naming it as defendant and alleging, among other things, that the
Company breached certain agreements with plaintiffs and seeking damages in excess of $15,000, the jurisdictional amount of the court in which the action is pending. On January 12, 2016, the Company served its answer, affirmative defenses, and
counterclaim against the plaintiffs. The Company believes the plaintiffs claims are without merit and it intends to contest the action vigorously. At this time, it is not possible for the Company to estimate the loss or the range of possible
loss in the event of an unfavorable outcome, as the ultimate resolution of the complaint is uncertain at this time. No amounts have been accrued as of February 28, 2018.
20
In addition, from time to time the Company is subject to proceedings, lawsuits, contract disputes
and other claims in the normal course of its business. The Company believes that the ultimate resolution of current matters should not have a material adverse effect on the Companys business, consolidated financial position or results of
operations. It is possible, however, that there could be an unfavorable ultimate outcome for or resolution which could be material to the Companys results of operations for a particular quarterly reporting period. Litigation is inherently
uncertain and there can be no assurance that the Company will prevail. The Company does not include an estimate of legal fees and other related defense costs in its estimate of loss contingencies.
Note 9 Share Repurchase Plan
In December 2011, the Companys Board of Directors authorized management at its discretion to repurchase up to one million (1,000,000)
shares of the Companys outstanding common stock. On June 6, 2012, the Board of Directors of the Company increased the number of shares of the Companys outstanding common stock that management is authorized to repurchase to up to
three million (3,000,000). On April 8, 2015, the Board of Directors of the Company increased the number of shares of the Companys outstanding common stock that management is authorized to repurchase to up to six million (6,000,000)
shares. On October 6, 2016, the Board of Directors of the Company increased the number of shares of the Companys outstanding common stock that management is authorized to repurchase to up to eight million (8,000,000) shares. The
repurchases must be effectuated through open market purchases, privately negotiated block trades, unsolicited negotiated transactions, and/or pursuant to any trading plan that may be adopted in accordance with Rule
10b5-1
of the Securities and Exchange Commission or in such other manner as will comply with the provisions of the Securities Exchange Act of 1934.
On June 30, 2015, the Company commenced a partial tender offer to purchase up to 750,000 shares of its common stock, at a price of $3.25
per share. The maximum number of shares proposed to be purchased in the tender offer represented 7.76% of Cryo-Cells outstanding common shares (including shares of unvested restricted stock) as of June 30, 2015. On June 29, 2015, the
last trading day prior to the commencement of the tender offer, the last sale price of Cryo-Cells shares reported on the OTCBB was $2.29 per share. The tender offer expired on July 28, 2015.
As of February 28, 2018, the Company had repurchased an aggregate of 5,801,086 shares of the Companys common stock at an average
price of $3.37 per share through open market and privately negotiated transactions. The Company purchased 0 and 19,729 shares of the Companys common stock during the first quarters of fiscal 2018 and 2017, respectively, at an average price of
$0 per share and $4.50 per share, respectively.
The repurchased shares will be held as treasury stock at cost and have been removed from
common shares outstanding as of February 28, 2018 and November 30, 2017. As of February 28, 2018 and November 30, 2017, 5,801,086 and 5,801,086 shares, respectively, were held as treasury stock.
Subsequent to the balance sheet date, the Company has not repurchased any additional shares of the Companys common stock.
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