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KRIS HUNDLEYThe troubled Clearwater stem cell storage company files revised financial statements for the past two fiscal years.
CLEARWATER - Cryo-Cell International Inc. met one requirement for its continued listing on the Nasdaq Small Cap market late last week when it filed revised financial statements for the past two fiscal years.
The Clearwater company, which stores customers' umbilical cord stem cells for possible future medical use, said revenues were lower and losses were greater than previously reported for the years ended Nov. 30, 2002, and Nov. 30, 2001. The changes had a major effect on shareholders' equity, which was slashed nearly $6-million to $3.6-million.
For 2002, Cryo-Cell reported a net loss of $6-million, or 53 cents a share, on revenues of $6.7-million. In 2001, the company had a net loss of $131,070, or 1 cent a share, on revenues of $4.5-million. The company makes its money from storage fees of $95 a year, as well as from revenue-sharing agreements.
Although it has been delinquent in its financial filings, Cryo-Cell has been given conditional listing with Nasdaq. It must report on the first two quarters of fiscal 2003 by July 15 and for the third quarter by Oct. 15. The company said it expects to meet filing requirements but fall short of Nasdaq's minimum shareholders' equity requirement for the quarter ended May 31 because of continued losses.
Cryo-Cell arrived at its revised annual figures by changing its accounting treatment for payments received under revenue sharing agreements with third parties. Under these agreements, Cryo-Cell received upfront payments in return for long-term royalties on stored specimens from certain states. The company also took charges for impairment of certain assets, including an Italian affiliate that has been liquidated and a European partner that has refused to pay anticipated royalties, citing breach of contract.
Additional charges included $219,000 for a legal settlement in May, when Cryo-Cell signed a confidential agreement to settle sexual harassment charges by its former president and chief operating officer, Wanda Dearth.
Cryo-Cell's lengthy revised filing contained an update on Stem Cell Preservation Technologies Inc., a subsidiary intended to market programs for the collection and preservation of adult stem cells. Cryo-Cell shareholders were told in mid 2001 that they would receive shares in SCPT once it went public. The subsidiary, which is run by Dan Richard, Cryo-Cell's founder and largest shareholder, is reportedly responding to comments from the SEC regarding its initial public offering.
Though Cryo-Cell hired Ernst & Young in March to replace its longtime auditors, that relationship lasted just two months. The revised statement was audited by the company's previous accountants, Weinick Sanders Leventhal & Co. of New York City. Late Monday, the company announced that it had hired Grant Thornton as independent auditors.
Cryo-Cell's financial losses are just the latest of its troubles. The president and chief executive, John Hargiss, left abruptly in April after just over a year, and no permanent replacement has been named. Former and current employees have alleged that the company's proprietary freezer routinely failed, jeopardizing the viability of customers' samples. The company has denied the charges, though in its most recent filing, Cryo-Cell acknowledged that it uses commercially available freezers, as well as its patented system for customer storage.
The company's restated earnings also have led to at least a half-dozen lawsuits filed on behalf of shareholders. Solicitations to join such lawsuits appear regularly on the Yahoo message board for Cryo-Cell's investors.
Revised financials did not dissuade buyers on Monday. Cryo-Cell's stock, which was more than $4 a share a year ago and as low as 73 cents at the end of March, closed Monday at $1.02, up 16 cents.
- Kris Hundley can be reached at hundley@sptimes.com or 727892-2996.