Pursuant to the Order and Final Judgment dated February 25, 2005, the U.S. District Judge Elizabeth A. Kovachevich approved the Settlement as fair, reasonable and adequate and awarded Plaintiffs' Counsel fees and reimbursement of expenses. The case is closed.
In a press release dated June 29, 2004, the parties all reached an agreement in principle to settle the securities litigation, which is currently being formalized in a Memorandum of Understanding. The settlement remains subject to execution of definitive settlement documents by all parties and approval by the United States District Court for the Middle District of Florida. The proposed settlement, which totals $7 million, includes a payment of $4 million which would be paid by the carrier of CRYO-CELL's former auditors, subject to its applicable deductible. In addition, CRYO-CELL's insurance carrier would pay $3 million on the Company's behalf under its directors' and officers' insurance policy, subject to its applicable deductible of $175,000, of which the majority has been paid. The settlement does not contemplate any admission of wrongdoing by any of the parties.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between May 16, 1999 and May 20, 2003, thereby artificially inflating the price of Cryo-Cell securities. The Complaint alleges that the Company repeatedly recognized revenue in violation of generally accepted accounting principles ("GAAP"), including the Company's own
internal accounting principles; maintained worthless assets on its balance sheets as collectible receivables; and failed to disclose related party transactions.
Specifically, the Complaint alleges that beginning on March 16, 1999, with the filing of its Form 10-K for fiscal year 1998 (for fiscal year ended November 30, 1998), each and every periodic and annual report filed with the SEC contained materially false financial statements, for at least the following reasons: (i) the Company failed to disclose a related party transaction in connection with its revenue-sharing agreement with defendant Nyberg; (ii) the Company failed to timely write-off the value of receivables from two investors in a revenue-sharing agreement related to the Company's anticipated revenues in New Jersey; and (iii) the Company improperly recognized revenue on several transactions in connection with its granting of licenses to third parties to market the Company's services in areas outside the
United States, including area licenses for Europe, the Middle East/Turkey and Mexico.