Q1false0000862692--11-30P1Yone year0000862692ccel:PublicCordBloodBankingMember2023-11-300000862692ccel:EmploymentAgreementsMember2022-12-232022-12-230000862692us-gaap:PatentsMember2024-02-290000862692ccel:ContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMember2024-02-2900008626922023-09-012023-11-300000862692ccel:ContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMember2023-11-300000862692ccel:DukeUniversityMember2024-02-290000862692ccel:PublicCordBloodBankingMember2022-12-012023-02-280000862692ccel:MarketBasedVestingConditionOptionsMember2022-04-082022-04-080000862692us-gaap:TreasuryStockCommonMember2023-11-300000862692ccel:CustomerRelationshipsOneMember2023-11-300000862692us-gaap:SubsequentEventMemberus-gaap:CommonStockMember2024-03-012024-03-310000862692ccel:MarketBasedStockOptionsMemberccel:TwoThousandTwentyTwoEquityIncentivePlanMember2022-12-012023-11-300000862692us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-02-290000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberccel:EmploymentAgreementsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-02-290000862692ccel:EmploymentAgreementsMemberccel:MarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-012024-02-290000862692us-gaap:CommonStockMember2022-12-012023-02-280000862692us-gaap:RevolvingCreditFacilityMember2022-07-180000862692ccel:RangeEightMember2024-02-290000862692ccel:BrandMember2024-02-290000862692us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-11-300000862692ccel:DukeUniversityMemberccel:TwoPointFivePercentOfMarketCapMemberccel:FullyDilutedEquityOwnershipMember2021-02-232021-02-230000862692us-gaap:AdditionalPaidInCapitalMember2022-12-012023-02-280000862692ccel:PrepacytecbMember2022-12-012023-02-280000862692ccel:TermLoanMember2022-12-012023-02-280000862692ccel:EmploymentAgreementsMemberccel:MarketBasedVestingConditionOptionsMember2022-12-232022-12-230000862692us-gaap:PatentsMembersrt:MinimumMember2024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMemberus-gaap:StockOptionMember2023-12-012024-02-290000862692ccel:BrandMember2023-11-300000862692srt:MaximumMemberccel:UmbilicalCordBloodAndCordTissueStemCellServiceAndPrepacytecbMemberccel:DukeUniversityMember2023-12-012024-02-290000862692ccel:DukeUniversityMember2022-12-012023-02-280000862692us-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-04-082022-04-080000862692ccel:ContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-012024-02-290000862692ccel:DukeUniversityMembersrt:MinimumMember2021-02-230000862692us-gaap:OperatingSegmentsMember2022-12-012023-02-280000862692us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberccel:TermLoanMember2022-07-182022-07-180000862692ccel:OptionTwoMember2024-02-290000862692ccel:CoCeoTwoMemberccel:EmploymentAgreementsMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-12-232022-12-230000862692ccel:RangeFiveMember2023-12-012024-02-290000862692ccel:TwoThousandTwelvePlanMemberccel:PerformanceBasedStockOptionsMember2022-12-012023-11-300000862692ccel:TwoThousandSixPlanMemberus-gaap:EmployeeStockOptionMember2024-02-290000862692ccel:TwoThousandTwentyTwoEquityIncentivePlanMember2024-02-290000862692us-gaap:CommonStockMember2023-02-280000862692ccel:TwoThousandTwelvePlanMember2024-02-290000862692ccel:TwoThousandTwelvePlanMember2011-12-010000862692ccel:AllOtherMember2023-11-300000862692ccel:DukeUniversityMember2023-02-230000862692us-gaap:PatentsMember2023-11-300000862692ccel:RangeFiveMember2024-02-290000862692ccel:MarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2022-12-012023-02-280000862692us-gaap:RevolvingCreditFacilityMemberccel:SusserBankCreditAgreementMember2022-07-1800008626922023-12-012024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMemberus-gaap:StockOptionMember2022-12-012023-02-280000862692ccel:ServiceBasedStockOptionsMemberccel:TwoThousandTwentyTwoEquityIncentivePlanMember2022-12-012023-11-300000862692us-gaap:EmployeeStockOptionMember2022-12-012023-02-280000862692ccel:LicensedProductAndLicensedProcessMemberccel:DukeUniversityMember2024-02-290000862692us-gaap:RetainedEarningsMember2022-12-012023-02-280000862692us-gaap:CommonStockMember2022-11-300000862692ccel:RangeTwoMember2024-02-290000862692ccel:LicensedProductAndLicensedProcessMemberccel:DukeUniversityMemberccel:TwoPointFivePercentUponCumulativeNetSalesMemberccel:FullyDilutedEquityOwnershipMember2021-02-232021-02-230000862692us-gaap:RetainedEarningsMember2024-02-2900008626922012-06-060000862692us-gaap:OperatingSegmentsMemberccel:PublicCordBloodBankingMember2022-12-012023-02-2800008626922022-11-300000862692ccel:EmploymentAgreementsMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-12-230000862692ccel:PrepacytecbMember2024-02-2900008626922024-04-150000862692ccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2023-12-012024-02-290000862692us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-11-3000008626922022-12-012023-02-280000862692ccel:RangeFourMember2023-12-012024-02-290000862692ccel:AllOtherMember2024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMember2024-02-290000862692ccel:OptionOneMember2024-02-290000862692ccel:TianheStemCellBiotechnologiesIncMember2023-11-300000862692us-gaap:RetainedEarningsMember2022-11-300000862692ccel:SusserMember2023-12-012024-02-290000862692ccel:SusserMember2024-02-290000862692ccel:RangeThreeMember2024-02-290000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-012024-02-290000862692ccel:CoCeoOneMemberccel:EmploymentAgreementsMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-12-232022-12-230000862692us-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-07-182022-07-180000862692ccel:DukeUniversityMember2022-02-042022-02-040000862692ccel:SusserBankCreditAgreementMemberus-gaap:RevolvingCreditFacilityMember2022-07-182022-07-180000862692ccel:RangeSevenMember2024-02-290000862692us-gaap:EmployeeStockOptionMember2023-12-012024-02-290000862692ccel:PublicBankingMember2023-12-012024-02-290000862692us-gaap:FairValueMeasurementsRecurringMember2024-02-290000862692us-gaap:AdditionalPaidInCapitalMember2024-02-290000862692ccel:DukeUniversityMember2020-12-010000862692us-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-04-080000862692ccel:ResearchAgreementMember2023-02-170000862692ccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2023-11-300000862692us-gaap:OperatingSegmentsMemberccel:PrepacytecbMember2022-12-012023-02-280000862692us-gaap:OperatingSegmentsMember2023-12-012024-02-290000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-11-300000862692ccel:RangeThreeMember2023-12-012024-02-290000862692ccel:TwoThousandTwelvePlanMemberccel:MarketBasedStockOptionsMember2022-12-012023-11-300000862692ccel:CoCeoTwoMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-04-082022-04-080000862692us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:MinimumMember2022-07-182022-07-180000862692ccel:ServiceBasedStockOptionsMemberccel:TwoThousandTwelvePlanMember2023-12-012024-02-290000862692us-gaap:OperatingSegmentsMemberccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2023-12-012024-02-290000862692ccel:RangeOneMember2023-12-012024-02-290000862692us-gaap:RevolvingCreditFacilityMember2022-12-012023-02-280000862692us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-02-290000862692us-gaap:OperatingSegmentsMemberccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2022-12-012023-02-280000862692us-gaap:RevolvingCreditFacilityMember2023-12-012024-02-290000862692ccel:DukeUniversityMember2021-02-280000862692ccel:LicensedProductAndLicensedProcessMemberccel:DukeUniversityMemberccel:TwoPointFivePercentUponCumulativeNetSalesOneMemberccel:FullyDilutedEquityOwnershipMember2021-02-232021-02-230000862692ccel:PrepacytecbMember2023-12-012024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMember2023-12-012024-02-290000862692us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-11-300000862692ccel:MarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-012024-02-290000862692ccel:EmmesBiopharmaServicesMember2023-12-012024-02-290000862692ccel:RangeFourMember2024-02-290000862692ccel:PublicBankingMember2023-11-300000862692us-gaap:AdditionalPaidInCapitalMember2023-02-280000862692us-gaap:PatentsMembersrt:MaximumMember2024-02-290000862692us-gaap:AdditionalPaidInCapitalMember2022-11-300000862692us-gaap:TreasuryStockCommonMember2023-02-280000862692ccel:RangeTwoMember2023-12-012024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMember2022-12-012023-02-280000862692ccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2024-02-290000862692ccel:EmmesBiopharmaServicesMemberus-gaap:ResearchAndDevelopmentExpenseMember2023-12-012024-02-290000862692us-gaap:SeriesAPreferredStockMember2023-11-300000862692us-gaap:CustomerRelationshipsMember2024-02-290000862692srt:MaximumMemberccel:DukeUniversityMember2021-02-230000862692ccel:SecondAmendmentToTheLicenseAgreementMember2023-02-170000862692ccel:SusserBankCreditAgreementMemberccel:AmendedAndRestatedPromissoryNotesMember2023-12-012024-02-290000862692us-gaap:AccountsReceivableMember2023-12-012024-02-290000862692ccel:UmbilicalCordBloodAndCordTissueStemCellServiceAndPrepacytecbMemberccel:DukeUniversityMember2023-12-012024-02-290000862692us-gaap:LicensingAgreementsMember2023-11-3000008626922015-04-080000862692ccel:RangeEightMember2023-12-012024-02-290000862692ccel:TermLoanMember2024-02-290000862692ccel:DukeUniversityMember2023-12-012024-02-290000862692ccel:TwoThousandTwentyTwoEquityIncentivePlanMember2022-04-080000862692us-gaap:CommonStockMember2023-12-012024-02-290000862692us-gaap:CommonStockMember2024-02-290000862692ccel:PublicBankingMember2024-02-290000862692ccel:TermLoanMember2023-12-012024-02-290000862692ccel:RangeSevenMember2023-12-012024-02-290000862692ccel:ResearchAgreementMember2023-02-172023-02-1700008626922024-03-012024-02-290000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2024-02-290000862692us-gaap:SeriesAPreferredStockMember2024-02-290000862692us-gaap:AdditionalPaidInCapitalMember2023-11-300000862692ccel:EmmesBiopharmaServicesMemberus-gaap:ResearchAndDevelopmentExpenseMember2022-12-012023-02-280000862692ccel:PublicCordBloodBankingMember2024-02-290000862692ccel:SusserMember2022-12-012023-02-280000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberccel:EmploymentAgreementsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-11-300000862692ccel:TwoThousandTwelvePlanMemberus-gaap:EmployeeStockOptionMember2012-05-012012-05-300000862692ccel:CustomerRelationshipsOneMember2024-02-290000862692us-gaap:OperatingSegmentsMemberccel:PrepacytecbMember2023-12-012024-02-2900008626922005-12-012005-12-310000862692ccel:UmbilicalCordBloodAndCordTissueStemCellServiceMember2022-12-012023-02-280000862692ccel:RangeSixMember2023-12-012024-02-290000862692us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2024-02-290000862692ccel:CelleCorpMember2024-02-220000862692ccel:ProcessingAndStorageFeesMember2022-12-012023-02-280000862692ccel:PrepacytecbMember2023-11-300000862692ccel:TianheStemCellBiotechnologiesIncMember2024-02-290000862692us-gaap:OperatingSegmentsMemberccel:PublicCordBloodBankingMember2023-12-012024-02-290000862692ccel:ChiefInformationOfficerMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-04-082022-04-080000862692ccel:SusserBankCreditAgreementMemberccel:TermLoanMember2022-07-1800008626922023-02-280000862692ccel:DukeUniversityMemberccel:ThirdAnniversaryMember2022-02-040000862692ccel:TwoThousandTwelvePlanMemberccel:ServiceBasedRestrictedSharesMember2023-12-012024-02-290000862692ccel:PerformanceAndMarketBasedVestingConditionOptionsMemberccel:EmploymentAgreementsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-012024-02-290000862692ccel:TwoThousandSixPlanMemberus-gaap:EmployeeStockOptionMember2023-11-300000862692ccel:SusserMember2023-11-300000862692us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-11-300000862692ccel:CoCeoOneMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-04-082022-04-0800008626922017-06-012017-06-010000862692ccel:SusserBankCreditAgreementMemberccel:AmendedAndRestatedPromissoryNotesMember2022-12-012023-02-280000862692ccel:OptionThreeMember2023-12-012024-02-290000862692ccel:EmmesBiopharmaServicesMember2024-02-290000862692ccel:TwoPointFivePercentOfMarketCapTriggerOccursTwentyFourMonthsMemberccel:DukeUniversityMembersrt:MinimumMemberccel:FullyDilutedEquityOwnershipMember2021-02-230000862692us-gaap:RetainedEarningsMember2023-02-280000862692srt:MinimumMember2023-12-012024-02-290000862692us-gaap:TreasuryStockCommonMember2022-12-012023-02-280000862692us-gaap:RetainedEarningsMember2023-12-012024-02-290000862692ccel:DukeUniversityMemberccel:FivePercentUponExecutionMemberccel:FullyDilutedEquityOwnershipMember2021-02-232021-02-230000862692ccel:TwoThousandTwelvePlanMemberccel:ServiceBasedStockOptionsMember2022-12-012023-11-300000862692ccel:SusserAmendmentToCreditAgreementMember2023-03-272023-03-270000862692ccel:FourteenDaysOfFebruaryDateTwoThreeYearTwoZeroTwoOneMemberccel:DukeUniversityMember2021-02-230000862692ccel:LicensedProductAndLicensedProcessMemberccel:DukeUniversityMember2023-12-012024-02-290000862692us-gaap:FairValueMeasurementsRecurringMember2023-11-300000862692ccel:RangeSixMember2024-02-290000862692us-gaap:LicensingAgreementsMember2024-02-290000862692ccel:ProcessingAndStorageFeesMember2023-12-012024-02-290000862692ccel:TwoThousandTwelvePlanMemberccel:MarketBasedStockOptionsMember2023-12-012024-02-2900008626922023-11-300000862692us-gaap:ProductMember2023-12-012024-02-290000862692ccel:EmploymentAgreementsMemberus-gaap:StockOptionMemberccel:MarketBasedVestingConditionOptionsMember2022-12-232022-12-230000862692ccel:MarketBasedStockOptionsMemberccel:TwoThousandTwentyTwoEquityIncentivePlanMember2023-12-012024-02-290000862692srt:MaximumMember2023-12-012024-02-290000862692ccel:ServiceBasedVestingConditionOptionsMember2022-12-012023-11-300000862692us-gaap:CommonStockMember2011-12-012024-02-290000862692us-gaap:TreasuryStockCommonMember2023-12-012024-02-290000862692us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-02-290000862692us-gaap:ProductMember2022-12-012023-02-2800008626922011-12-310000862692ccel:TwoThousandTwelvePlanMemberccel:PerformanceBasedStockOptionsMember2023-12-012024-02-290000862692us-gaap:RetainedEarningsMember2023-11-300000862692us-gaap:InterestRateSwapMemberccel:SusserAmendmentToCreditAgreementMember2023-03-270000862692us-gaap:RevolvingCreditFacilityMemberccel:TermLoanMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:MinimumMember2022-07-182022-07-180000862692ccel:TwoThousandTwelvePlanMemberccel:ServiceBasedRestrictedSharesMember2022-12-012023-11-3000008626922012-02-012012-02-010000862692us-gaap:TreasuryStockCommonMember2022-11-300000862692ccel:PublicCordBloodBankingMember2023-12-012024-02-290000862692ccel:RangeOneMember2024-02-290000862692ccel:PublicBankingMember2022-12-012023-02-2800008626922016-10-060000862692us-gaap:AdditionalPaidInCapitalMember2023-12-012024-02-290000862692ccel:EmploymentAgreementsMemberccel:MarketBasedVestingConditionOptionsMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2022-12-012023-02-280000862692ccel:ServiceBasedVestingConditionOptionsMember2023-11-300000862692ccel:ServiceBasedStockOptionsMemberccel:TwoThousandTwentyTwoEquityIncentivePlanMember2023-12-012024-02-290000862692ccel:DukeUniversityMember2021-02-232021-02-230000862692us-gaap:TreasuryStockCommonMember2024-02-2900008626922024-02-290000862692us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2022-07-182022-07-180000862692us-gaap:CustomerRelationshipsMember2023-11-300000862692ccel:DukeUniversityMemberccel:TwoPointFivePercentOfMarketCapTriggerOccursEighteenMonthsMembersrt:MinimumMemberccel:FullyDilutedEquityOwnershipMember2021-02-230000862692ccel:DukeUniversityMemberccel:SecondAnniversaryMember2021-02-230000862692us-gaap:CommonStockMember2023-11-30ccel:Segmentxbrli:pureccel:Patientsutr:sqftxbrli:sharesiso4217:USDxbrli:sharesccel:Unitiso4217:USD

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended February 29, 2024

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to

Commission File Number 001-40767

 

CRYO-CELL INTERNATIONAL, INC.

(Exact name of Registrant as Specified in its Charter)

 

 

Delaware

 

22-3023093

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

700 Brooker Creek Blvd. Oldsmar, FL 34677

 

(Address of Principal Executive Offices) (Zip Code)

 

 

Issuer's phone number, including area code: (813) 749-2100

(Former name, former address and former fiscal year, if changed since last report).

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.01 par value

 

CCEL

 

NYSE American LLC

 

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☒ No ☐ Not Applicable ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of April 15, 2024, 8,104,477 shares of $0.01 par value common stock were outstanding.

 

 


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

PAGE

PART I - FINANCIAL INFORMATION (UNAUDITED)

 

 

 

Item 1. Financial Statements

 

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Income

4

 

 

Consolidated Statements of Cash Flows

5

 

 

Consolidated Statements of Stockholders’ Deficit

6

 

 

Notes to Consolidated Financial Statements

7

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

34

 

 

Item 4. Controls and Procedures

34

 

 

PART II - OTHER INFORMATION

36

 

 

Item 1. Legal Proceedings

36

 

 

Item 1A. Risk Factors

36

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

49

 

 

Item 3. Defaults Upon Senior Securities

49

 

 

Item 4. Mine Safety Disclosures

49

 

 

Item 5. Other Information

49

 

 

Item 6. Exhibits

50

 

 

SIGNATURES

51

 

 

 

2


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

(Unaudited)

 

 

 

 

 

 

February 29,

 

 

November 30,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

247,112

 

 

$

406,067

 

Marketable securities

 

 

732,481

 

 

 

574,183

 

Accounts receivable (net of allowance for

 

 

 

 

 

 

doubtful accounts of $3,939,638 and $3,822,300, respectively)

 

 

6,726,893

 

 

 

6,576,240

 

Prepaid expenses

 

 

535,295

 

 

 

615,407

 

Inventory, current portion

 

 

755,160

 

 

 

768,877

 

Swap contract

 

 

76,825

 

 

 

122,113

 

Other current assets

 

 

378,310

 

 

 

389,950

 

Total current assets

 

 

9,452,076

 

 

 

9,452,837

 

Property and Equipment-net

 

 

21,605,273

 

 

 

20,996,883

 

Other Assets

 

 

 

 

 

 

Investment - Tianhe stock

 

 

308,000

 

 

 

308,000

 

Intangible assets, net

 

 

972,154

 

 

 

989,121

 

Inventory, net of current portion

 

 

5,223,980

 

 

 

5,260,119

 

Goodwill

 

 

1,941,411

 

 

 

1,941,411

 

Deferred tax assets

 

 

20,492,749

 

 

 

20,492,749

 

Operating lease right-of-use asset

 

 

958,022

 

 

 

1,033,157

 

Deposits and other assets, net

 

 

757,109

 

 

 

746,493

 

Total other assets

 

 

30,653,425

 

 

 

30,771,050

 

Total assets

 

$

61,710,774

 

 

$

61,220,770

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

2,996,658

 

 

$

3,174,584

 

Accrued expenses

 

 

3,916,898

 

 

 

5,170,809

 

Note payable

 

 

168,623

 

 

 

165,641

 

Line of credit

 

 

1,972,728

 

 

 

1,222,728

 

Current portion of operating lease liability

 

 

253,981

 

 

 

225,686

 

Duke license agreement liability

 

 

666,667

 

 

 

1,200,000

 

Deferred revenue

 

 

9,394,821

 

 

 

9,704,553

 

Total current liabilities

 

 

19,370,376

 

 

 

20,864,001

 

Other Liabilities

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

42,603,661

 

 

 

41,186,800

 

Contingent consideration

 

 

39,050

 

 

 

44,226

 

Note payable, net of current portion and debt issuance costs

 

 

8,391,738

 

 

 

8,430,037

 

Operating lease long-term liability

 

 

768,961

 

 

 

851,938

 

Long-term liability - revenue sharing agreements

 

 

875,000

 

 

 

875,000

 

Total other liabilities

 

 

52,678,410

 

 

 

51,388,001

 

Total liabilities

 

 

72,048,786

 

 

 

72,252,002

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Preferred stock ($.01 par value, 500,000 authorized and none issued and outstanding)

 

 

 

 

 

 

Series A Junior participating preferred stock ($.01 par value, 20,000 authorized and none issued and outstanding)

 

 

 

 

 

 

Common stock ($.01 par value, 20,000,000 authorized; 14,849,246 issued and 8,254,977 outstanding as of February 29, 2024 and 14,849,246 issued and 8,286,785 outstanding as of November 30, 2023)

 

 

148,492

 

 

 

148,492

 

Additional paid-in capital

 

 

43,718,498

 

 

 

43,411,143

 

Treasury stock, at cost

 

 

(23,602,061

)

 

 

(23,431,685

)

Accumulated deficit

 

 

(30,602,941

)

 

 

(31,159,182

)

Total stockholders' deficit

 

 

(10,338,012

)

 

 

(11,031,232

)

Total liabilities and stockholders' deficit

 

$

61,710,774

 

 

$

61,220,770

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

February 29,

 

 

February 28,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Processing and storage fees

 

$

7,805,522

 

 

$

7,561,518

 

Public banking revenue

 

 

43,713

 

 

 

230,697

 

Product revenue

 

 

3,000

 

 

 

32,200

 

Total revenue

 

 

7,852,235

 

 

 

7,824,415

 

Costs and Expenses:

 

 

 

 

 

 

Cost of sales

 

 

2,160,468

 

 

 

2,067,364

 

Selling, general and administrative expenses

 

 

4,339,645

 

 

 

3,878,903

 

Change in fair value of contingent consideration

 

 

(5,176

)

 

 

(164,701

)

Research, development and related engineering

 

 

502,889

 

 

 

78,834

 

Depreciation and amortization

 

 

33,186

 

 

 

280,844

 

Total costs and expenses

 

 

7,031,012

 

 

 

6,141,244

 

Operating Income

 

 

821,223

 

 

 

1,683,171

 

Other Income (Expense):

 

 

 

 

 

 

Gains (losses) on marketable securities

 

 

274,971

 

 

 

(3,681

)

Loss on interest rate swap

 

 

(45,288

)

 

 

 

Other income

 

 

63

 

 

 

1,268

 

Interest expense

 

 

(256,459

)

 

 

(466,231

)

Total other income (expense)

 

 

(26,713

)

 

 

(468,644

)

Income before income tax expense

 

 

794,510

 

 

 

1,214,527

 

Income tax expense

 

 

(238,269

)

 

 

(447,715

)

Net income

 

$

556,241

 

 

$

766,812

 

Net income per common share - basic

 

$

0.07

 

 

$

0.09

 

Weighted average common shares outstanding - basic

 

 

8,277,844

 

 

 

8,467,074

 

Net income per common share - diluted

 

$

0.07

 

 

$

0.09

 

Weighted average common shares outstanding - diluted

 

 

8,325,027

 

 

 

8,474,737

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

February 29,

 

 

February 28,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

556,241

 

 

$

766,812

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

86,047

 

 

 

369,950

 

Change in fair value of contingent consideration

 

 

(5,176

)

 

 

(164,701

)

Unrealized (gains) losses on marketable securities

 

 

(274,971

)

 

 

3,681

 

Unrealized loss on interest rate swap contract

 

 

45,288

 

 

 

 

Compensatory element of stock options

 

 

307,355

 

 

 

313,174

 

Provision for doubtful accounts

 

 

288,760

 

 

 

186,904

 

Amortization of debt issuance costs

 

 

5,348

 

 

 

5,444

 

Amortization of operating lease right-of-use asset

 

 

75,135

 

 

 

79,324

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(439,413

)

 

 

(665,419

)

Prepaid expenses

 

 

80,112

 

 

 

(13,587

)

Inventory

 

 

49,856

 

 

 

230,459

 

Other current assets

 

 

11,640

 

 

 

5,796

 

Deposits and other assets, net

 

 

(10,616

)

 

 

(18,339

)

Accounts payable

 

 

(931,007

)

 

 

221,749

 

Accrued expenses

 

 

(1,253,911

)

 

 

(510,907

)

Operating lease liability

 

 

(54,682

)

 

 

(80,048

)

Deferred revenue

 

 

1,107,129

 

 

 

913,634

 

Net cash (used in) from operating activities

 

 

(356,865

)

 

 

1,643,926

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(457,722

)

 

 

(375,600

)

Purchases of marketable securities

 

 

(743,811

)

 

 

(1,017,738

)

Sale of marketable securities

 

 

860,484

 

 

 

191,400

 

Net cash used in investing activities

 

 

(341,049

)

 

 

(1,201,938

)

Cash flows from financing activities:

 

 

 

 

 

 

Treasury stock purchases

 

 

(170,376

)

 

 

(243,201

)

Repayments of note payable

 

 

(40,665

)

 

 

(29,646

)

Repayment of line of credit

 

 

(200,000

)

 

 

(500,000

)

Proceeds from line of credit

 

 

950,000

 

 

 

 

Net cash provided by (used in) financing activities

 

 

538,959

 

 

 

(772,847

)

Decrease in cash and cash equivalents

 

 

(158,955

)

 

 

(330,859

)

Cash and cash equivalents - beginning of period

 

 

406,067

 

 

 

1,703,958

 

Cash and cash equivalents - end of period

 

$

247,112

 

 

$

1,373,099

 

 

 

 

 

 

 

 

Supplemental investing activities:

 

 

 

 

 

 

Construction costs payable

 

$

219,748

 

 

$

536,707

 

Duke license agreement payable

 

$

533,333

 

 

$

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$

443,829

 

 

$

441,336

 

Income taxes

 

$

57,630

 

 

$

33,072

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(Unaudited)

 

 

 

 

For the Three Months Ended February 29, 2024

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Treasury

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

Deficit

 

Balance at November 30, 2023

 

 

14,849,246

 

 

$

148,492

 

 

$

43,411,143

 

 

$

(23,431,685

)

 

$

(31,159,182

)

 

$

(11,031,232

)

Compensatory element of stock options

 

 

 

 

 

 

 

 

307,355

 

 

 

 

 

 

 

 

 

307,355

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

(170,376

)

 

 

 

 

 

(170,376

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

556,241

 

 

 

556,241

 

Balance at February 29, 2024

 

 

14,849,246

 

 

$

148,492

 

 

$

43,718,498

 

 

$

(23,602,061

)

 

$

(30,602,941

)

 

$

(10,338,012

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended February 28, 2023

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Treasury

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

Deficit

 

Balance at November 30, 2022

 

 

14,848,001

 

 

$

148,480

 

 

$

42,597,380

 

 

$

(22,632,649

)

 

$

(21,637,513

)

 

$

(1,524,302

)

Compensatory element of stock options

 

 

 

 

 

 

 

 

313,174

 

 

 

 

 

 

 

 

 

313,174

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

(243,201

)

 

 

 

 

 

(243,201

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

766,812

 

 

 

766,812

 

Balance at February 28, 2023

 

 

14,848,001

 

 

$

148,480

 

 

$

42,910,554

 

 

$

(22,875,850

)

 

$

(20,870,701

)

 

$

(687,517

)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6


 

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

February 29, 2024

(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 three reportable segments: (1) cellular processing and cryogenic cellular storage, with a current focus on the collection and preservation of umbilical cord blood stem cells for family use (2) the manufacture of PrepaCyte CB units, the processing technology used to process umbilical cord blood stem cells and (3) cryogenic storage of umbilical cord blood stem cells for public use. Revenues 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 for the manufacture of PrepaCyte CB units represent sales of the PrepaCyte CB units to customers. Revenue for the cryogenic storage of umbilical cord blood stem cells for public use, stored at Duke University (see below), is generated from the sale of the cord blood units to the National Marrow Donor Program (“NMDP”), which distributes the cord blood units to transplant centers located in the United States and around the world. The Company’s 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 29, 2024 and November 30, 2023, the related Consolidated Statements of Income, Cash Flows and Stockholders' Deficit for the three months ended February 29, 2024 and February 28, 2023 have been prepared by Cryo-Cell International, Inc. 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 Company's November 30, 2023 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 29, 2024 are not necessarily indicative of the results expected for any interim period in the future or the entire year ending November 30, 2024.

On February 22, 2024, the Company formed its wholly owned Delaware subsidiary, Celle Corp. As of February 29, 2024, no shares had been issued to the subsidiary. Celle Corp. was created to hold certain assets of Cryo-Cell not directly associated with the recurring revenue stream from privately banked, umbilical cord blood specimens. The Patent and Technology License Agreement with Duke University and Amendments have been transferred to Celle Corp. and other assets and liabilities are expected to be transferred in the near future.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. ASC 606 also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

Under ASC 606, revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised services are transferred to the customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring services to a customer ("transaction price").

At contract inception, if the contract is determined to be within the scope of ASC 606, the Company evaluates its contracts with customers using the five-step model: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company evaluates its contracts for legal enforceability at contract inception and subsequently throughout the Company’s relationship with its customers. If legal enforceability with regards to the rights and obligations exist for both the Company and the customer, then the Company has an enforceable contract and revenue recognition is permitted subject to the satisfaction of the other criteria. If, at the outset of an arrangement, the Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. The Company only applies the five-step model to contracts when it is probable that collection of the consideration that the Company is entitled to in exchange for the goods or services being transferred to the customer, will occur.

7


 

Contract modifications exist when the modification either creates new or changes in the existing enforceable rights and obligations. The Company’s contracts are occasionally modified to account for changes in contract terms and conditions, which the Company refers to as an upgrade or downgrade. An upgrade occurs when a customer wants to pay for additional years of storage. A downgrade occurs when a customer originally entered into a long-term contract (such as twenty-one year or lifetime plan) but would like to change the term to a one-year contract. Upgrade modifications qualify for treatment as a separate contract as the additional services are distinct and the increase in contract price reflects the Company’s stand-alone selling price for the additional services and will be accounted for on a prospective basis. Downgrade modifications do not qualify for treatment as a separate contract as there is no increase in price over the original contract, thus failing the separate contract criteria. As such, the Company separately considers downgrade modifications to determine if these should be accounted for as a termination of the existing contract and creation of a new contract (prospective method) or as part of the existing contract (cumulative catch-up adjustment). ASC 606 requires that an entity account for the contract modification as if it were a termination of the existing contract, and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. As the services after the modification were previously determined to be distinct, the Company concluded that downgrade modifications qualify under this method and will be accounted for on a prospective basis. Although contract modifications do occur, they are infrequent.

Performance Obligations

At contract inception, the Company assesses the goods and services promised in the contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company determined that the following distinct goods and services represent separate performance obligations involving the sale of its umbilical cord blood product:

Collection and processing services
Storage services
Public cord blood banking
License and royalties
Sale of PrepaCyte CB product
a)
Collection, Processing and Storage Fees

Processing and storage fees include the Company providing umbilical cord blood and tissue cellular processing and cryogenic cellular storage for private use. 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 who are selling the umbilical cord blood stem cells program to customers outside the United States.

The Company recognizes revenue from processing fees at the point in time of the successful completion of processing and recognizes storage fees over time, which is 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 life-time. The life-time storage plan is based on a life expectancy of 81 years, which is the current estimate by the Center for Disease Control for United States women’s life expectancy and concluded that additional data analysis would result in an immaterial difference in revenue. Deferred revenue on the accompanying consolidated balance sheets includes the portion of the annual, the twenty-one-year and the life-time storage fees that are being recognized over the contractual storage period as well as royalties received from foreign licensees relating to long-term storage contracts for 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 from the balance sheet date.

Significant financing component

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. For all plans being annual, twenty-one years and lifetime, the storage fee is billed at the beginning of the storage period (prepaid plans). The Company also offers payment plans (including a stated service fee) for customers to pay over time for a period of one to twenty-four plus months. The one-time plan

8


 

includes the collection kit, processing and testing, return medical courier service and twenty-one years of pre-paid storage fees. The life-time plan includes the collection kit, processing and testing, return medical courier service and pre-paid storage fees for the life of the customer. The Company concluded that a significant financing component is not present within either the prepaid or overtime payment plans. The Company has determined that the twenty-one year and life-time prepayment options do not include a significant financing component as the payment terms were structured primarily for reasons other than the provision of financing and to maximize profitability.

The Company has determined that the majority of plans that are paid over time are paid in less than a year. When considered over a twenty-four-month payment plan, the difference between the cash selling price and the consideration paid is nominal. As such, the Company believes that its payment plans do not include significant financing components as they are not significant in the aggregate when considered in the context of all contracts entered into nor significant at the individual contract level.

The Company elected to apply the practical expedient where the Company does not need to assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less.

As of February 29, 2024, the total aggregate transaction price allocated to the unsatisfied performance obligations was recorded as deferred revenue amounting to $51,998,482, which will be recognized ratably on a straight-line basis over the contractual period of which $9,394,821, will be recognized over the next twelve months.

Variable consideration

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. Effective June 1, 2017, the Company increased the payment warranty to $100,000 to all new clients who choose the premium processing method, PrepaCyte CB. Additionally, under the Cryo-Cell CaresTM program, the Company will pay $10,000 to the client to offset personal expenses if the umbilical cord blood product is used for bone marrow reconstitution in a myeloablative transplant procedure. The product warranty and the Cryo-Cell Cares program are available to clients who enroll under this structure for as long as the specimen is stored with the Company. In the processing and storage agreements, the Company provides limited rights which are offered to customers automatically upon contract execution. The Company has determined that the payment warranty represents variable consideration payable to the customer.

Based on the Company’s historical experience to date, the Company has determined the payment warranty to be fully constrained under the most likely amount method. Consequently, the transaction price does not currently reflect any expectation of service level credits. At the end of each reporting period, the Company will update the estimated transaction price related to the payment warranty including updating its assessment of whether an estimate of variable consideration is constrained to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

Allocation of transaction price

As the Company’s processing and storage agreements contain multiple performance obligations, ASC 606 requires an allocation of the transaction price based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. The Company has selected an adjusted market assessment approach to estimate the stand-alone selling prices of the processing services and storage services and concluded that the published list price is the price that a customer in that market would be willing to pay for those goods or services. The Company also considered the fact that all customers are charged the list prices current at the time of their enrollment where the Company has separately stated list prices for processing and storage.

Costs to Obtain a Contract

The Company capitalizes commissions that are incremental in obtaining customer contracts and the costs incurred to fulfill a customer contract if those costs are not within the scope of another topic within the accounting literature and meet the specified criteria. These costs are deferred in other current or long-term assets and are expensed to selling, general and administrative expenses as the Company satisfies the performance obligations by transferring the service to the customer. These assets will be periodically assessed for impairment. As a practical expedient, the Company elected to recognize the incremental costs of obtaining its annual contracts as an expense when incurred, as the amortization period of the asset recognized would have been one year.

The Company has determined that payments under the Company’s refer-a-friend program (“RAF program”) are incremental costs of obtaining a contract as they provide an incentive for existing customers to refer new customers to the Company and is referred to as commission. The amount paid under the RAF program (either through issuance of credits to customers or check payments) which

9


 

exceeds the typical commission payment to a sales representative is recorded as a reduction to revenue under ASC 606. During the three months ended February 29, 2024, the Company recorded $11,052 in commission payments to customers under the RAF program as a reduction to revenue. During the three months ended February 28, 2023, the Company recorded $10,432 in commission payments to customers under the RAF program as a reduction to revenue. For the three months ended February 29, 2024, the Company capitalized additional contract acquisition costs of $30,179, net of amortization. For the three months ended February 28, 2023, the Company capitalized additional contract acquisition costs of $26,436, net of amortization expense.

b)
Public banking revenue

The Company sells cord blood units to the National Marrow Donor program ("NMDP") which distributes the cord blood units to transplant centers located in the United States and around the world. Control is transferred at the point in time when the shipment has occurred, at which time, the Company records revenue.

c)
Licensee and royalty income

Licensee and royalty income consist of royalty income earned on the processing and storage of cord blood stem cell specimens by an affiliate where the Company has a License and Royalty Agreement. The Company records revenue from processing and storage of specimens and pursuant to agreements with licensees. The Company records the royalty revenue in same period that the related processing and storage is being completed by the affiliate.

d)
Product Revenue

The Company records revenue from the sale of the PrepaCyte CB product line upon shipment of the product to the Company’s customers.

e)
Shipping and handling

The Company elected to apply the practical expedient to account for shipping and handling activities performed after the control of a good has been transferred to the customer as a fulfillment cost. Shipping and handling costs that the Company incurs are therefore expensed and included in cost of sales.

Disaggregation of Revenue

The revenue as reflected in the statements of income is disaggregated by products and services.

The following table provides information about assets and liabilities from contracts with customers:

 

 

 

February 29, 2024

 

 

November 30, 2023

 

Contract assets (sales commissions)

 

$

716,621

 

 

$

695,695

 

Accounts receivable

 

$

6,726,893

 

 

$

6,576,240

 

Short-term contract liabilities (deferred revenue)

 

$

9,394,821

 

 

$

9,704,553

 

Long-term contract liabilities (deferred revenue)

 

$

42,603,661

 

 

$

41,186,800

 

The Company, in general, requires the customer to pay for processing and storage services at the time of processing. Contract assets include deferred contract acquisition costs, which will be amortized along with the associated revenue. Contract liabilities include payments received in advance of performance under the contract and are realized with the associated revenue recognized under the contract. Accounts receivable consists of amounts due from clients that have enrolled and processed in the umbilical cord blood stem cell processing and storage programs related to renewals of annual plans and amounts due from license affiliates, and sublicensee territories. The Company did not have asset impairment charges related to contract assets in the three months ended February 29, 2024 and February 28, 2023.

The following table presents changes in the Company’s contract assets and liabilities during the three months ended February 29, 2024:

 

 

 

Balance at
December 1,
2023

 

 

Additions

 

 

Deductions

 

 

Balance at
February 29,
2024

 

Contract assets (sales commissions)

 

$

695,695

 

 

$

30,179

 

 

$

(9,253

)

 

$

716,621

 

Accounts receivable

 

$

6,576,240

 

 

$

10,250,022

 

 

$

(10,099,369

)

 

$

6,726,893

 

Contract liabilities (deferred revenue)

 

$

50,891,353

 

 

$

5,297,596

 

 

$

(4,190,467

)

 

$

51,998,482

 

 

10


 

 

The following table presents changes in the Company’s contract assets and liabilities during the three months ended February 28, 2023:

 

 

 

Balance at
December 1,
2022

 

 

Additions

 

 

Deductions

 

 

Balance at
February 28,
2023

 

Contract assets (sales commissions)

 

$

615,628

 

 

$

26,436

 

 

$

(8,098

)

 

$

633,966

 

Accounts receivable

 

$

6,043,941

 

 

$

10,373,235

 

 

$

(9,894,720

)

 

$

6,522,456

 

Contract liabilities (deferred revenue)

 

$

45,586,386

 

 

$

6,404,429

 

 

$

(5,490,795

)

 

$

46,500,020

 

 

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 Company’s previous loss history, and the client’s current ability to pay its obligations. Therefore, if the financial condition of the Company’s 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.

Inventories

 

As part of the Cord:Use Purchase Agreement, the Company has an agreement with Duke University (“Duke”) expiring on January 31, 2025 for Duke to receive, process, and store cord blood units for the Public Cord Blood Bank (“Duke Services”). As of February 29, 2024, the Company had approximately 6,000 cord blood units in inventory. These units are valued at the lower of cost or net realizable value. Costs include the cost of collecting, transporting, processing and storing the unit. Costs charged by Duke for their Duke Services are based on a monthly fixed fee for processing and storing 36 blood units per year. The Company computes the cost per unit for these Duke Services and capitalizes the unit cost on all blood units shipped and stored in a year at Duke. If the Company ships and stores less than 36 blood units with Duke in a one-year period, a portion of these fixed costs are expensed and included in facility operating costs. Certain costs of collection incurred, such as the cost of collection staff and transportation costs incurred to ship Public Bank units from hospitals to the stem cell laboratory are allocated to banked units based on an average cost method. The change in the number of expected units to be sold could have a significant impact on the estimated net realizable value of banked units which could have a material effect on the value of the inventory. Costs incurred related to cord blood units that cannot be sold are expensed in the period incurred and are included in facility operating costs in the accompanying statements of operations. The Company records a reserve against inventory for units which have been processed and frozen but may not ultimately become distributable (see Note 3).

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 records a valuation allowance when it is “more likely than not” that all of the future income tax benefits will not 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 Company’s 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 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 management’s 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.

11


 

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the three months ended February 29, 2024 and February 28, 2023, 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 29, 2024 and February 28, 2023.

 

Goodwill

Goodwill represents the excess of the purchase price of the assets acquired from Cord:Use over the estimated fair value of the net tangible, intangible and identifiable assets acquired. The annual assessment of the reporting unit is performed as of September 1st, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. The Company first performs a qualitative assessment to test goodwill for impairment and concludes if it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the qualitative assessment concludes that it is not more likely than not that the fair value is less than the carrying value, the two-step goodwill impairment test is not required. If the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than the carrying value, then the two-step goodwill impairment test is required. Step one of the impairment assessment compares the fair value of the reporting unit to its carrying value and if the fair value exceeds its carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, the implied fair value of goodwill is compared to the carrying value of goodwill. If the implied fair value exceeds the carrying value then goodwill is not impaired; otherwise, an impairment loss would be recorded by the amount the carrying value exceeds the implied fair value.

Leases

At the inception of a lease arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as a right-of-use (ROU) assets and as short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company believes it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

Stock Compensation

As of February 29, 2024, the Company has three stock-based compensation plans, which are described in Note 7 to the unaudited consolidated financial statements: the 2006 plan, 2012 plan and the 2022 Plan. The 2006 and 2012 Plans will remain in effect as long as any awards under the Plans are outstanding; however, no further awards may be granted under either plan. The 2022 Plan became effective April 8, 2022 as approved by the Board of Directors and approved by the stockholders at the 2022 Annual Meeting. The Company recognized approximately $307,000 and $313,000 for the three months ended February 29, 2024 and February 28, 2023 respectively, of stock 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

12


 

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.

 

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 Company’s 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.

 

13


 

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of February 29, 2024 and November 30, 2023, respectively, segregated among the appropriate levels within the fair value hierarchy:

 

 

 

Fair Value at

 

 

Fair Value Measurements at February 29, 2024 Using

 

Description

 

February 29,
2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

732,481

 

 

$

732,481

 

 

$

 

 

$

 

Interest rate swap

 

$

76,825

 

 

$

 

 

$

76,825

 

 

$

 

Total

 

$

809,306

 

 

$

732,481

 

 

$

76,825

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

39,050

 

 

$

 

 

$

 

 

$

39,050

 

Total

 

$

39,050

 

 

$

 

 

$

 

 

$

39,050

 

 

Contingent Consideration:

 

 

 

Beginning Balance as of November 30, 2023

 

$

44,226

 

Subtractions – Cord:Use earnout payment

 

 

 

Fair value adjustment as of February 29, 2024

 

 

(5,176

)

Ending balance as of February 29, 2024

 

$

39,050

 

 

 

 

 

Fair Value at

 

 

Fair Value Measurements at November 30, 2023 Using

 

Description

 

November 30,
2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

574,183

 

 

$

574,183

 

 

$

 

 

$

 

Interest rate swap

 

$

122,113

 

 

$

 

 

$

122,113

 

 

$

 

Total

 

$

696,296

 

 

$

574,183

 

 

$

122,113

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

44,226

 

 

$

 

 

$

 

 

$

44,226

 

Total

 

$

44,226

 

 

$

 

 

$

 

 

$

44,226

 

 

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:

 

Marketable securities - Equity securities with readily determinable fair values are measured at fair value with the changes in fair value recognized through net income. There was approximately $275,000 and ($4,000) in unrealized holding gains and losses, respectively, recorded in other income and expense on the accompanying consolidated statements of income for the three months ended February 29, 2024 and February 28, 2023, respectively.

 

Interest rate swap - The fair value is based on prevailing market data and derived from proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions. There was $45,288 and $0 loss on interest rate swap recorded on the accompanying statements of income for the three months ended February 29, 2024 and February 28, 2023, respectively.

 

Contingent consideration - The contingent consideration is the earnout that Cord:Use is entitled to from the Company’s sale of the Public Cord Blood Inventory from and after closing. The estimated fair value of the contingent earnout was determined using a Monte Carlo analysis examining the frequency and mean value of the resulting earnout payments. The resulting value captures the risk associated with the form of the payout structure. The risk-neutral method is applied, resulting in a value that captures the risk associated with the form of the payout structure and the projection risk. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liability.

Product Warranty and Cryo-Cell CaresTM Program

 

14


 

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. Effective June 1, 2017, the Company increased the payment warranty to $100,000 to all new clients who choose the premium processing method, PrepaCyte CB. 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.

As discussed above, the Company has determined that the payment warranty represents variable consideration payable to the customer. In accordance with ASC 606, the Company has concluded the payment warranty be fully constrained under the most likely amount method; therefore, the transaction price does not reflect any expectation of service level credits at February 29, 2024 and November 30, 2023. At the end of each reporting period, the Company shall update the estimated transaction price related to the payment guarantee including updating its assessment of whether an estimate of variable consideration is constrained to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance requires a modified retrospective transition method and early adoption is permitted. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for smaller reporting companies until periods beginning after December 15, 2022. The Company adopted ASU 2016-13 as of December 1, 2023 with no material impact to its consolidated financial statements.

 

 

Note 2 Segment Reporting

The Company is organized in three reportable segments:

1.
The cellular processing and cryogenic storage of umbilical cord blood and cord tissue stem cells for family use. Revenue is generated from the initial processing and testing fees and the annual storage fees charged each year for storage (the “Umbilical cord blood and cord tissue stem cell service”).
2.
The manufacture of PrepaCyte® CB units, the processing technology used to process umbilical cord blood stem cells. Revenue is generated from the sales of the PrepaCyte® CB units (the “PrepaCyte®-CB”).
3.
The cellular processing and cryogenic storage of umbilical cord blood stem cells for public use. Revenue is generated from the sale of the cord blood units to the National Marrow Donor Program (“NMDP”), which distributes the cord blood units to transplant centers located in the United States, and around the world.

15


 

The following table shows, by segment: net revenue, cost of sales, depreciation and amortization, operating profit, and interest expense for the three months ended February 29, 2024 and February 28, 2023:

 

 

 

For the three months ended

 

 

 

February 29, 2024

 

 

February 28, 2023

 

Net revenue:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell service

 

$

7,805,522

 

 

$

7,561,518

 

PrepaCyte CB

 

 

3,000

 

 

 

32,200

 

Public cord blood banking

 

 

43,713

 

 

 

230,697

 

Total net revenue

 

$

7,852,235

 

 

$

7,824,415

 

Cost of sales:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell service

 

$

1,884,566

 

 

$

1,687,250

 

PrepaCyte CB

 

 

25,483

 

 

 

17,122

 

Public cord blood banking

 

 

250,419

 

 

 

362,992

 

Total cost of sales

 

$

2,160,468

 

 

$

2,067,364

 

Operating profit:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell service

 

$

1,057,719

 

 

$

1,807,693

 

PrepaCyte CB

 

 

(29,428

)

 

 

8,133

 

Public cord blood banking

 

 

(207,068

)

 

 

(132,655

)

Total operating profit

 

$

821,223

 

 

$

1,683,171

 

Depreciation and amortization:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell service

 

$

25,879

 

 

$

273,539

 

PrepaCyte CB

 

 

6,945

 

 

 

6,945

 

Public cord blood banking

 

 

362

 

 

 

360

 

Total depreciation and amortization

 

$

33,186

 

 

$

280,844

 

Interest expense:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell service

 

$

256,459

 

 

$

466,231

 

PrepaCyte CB

 

 

 

 

 

 

Public cord blood banking

 

 

 

 

 

 

Total interest expense

 

$

256,459

 

 

$

466,231

 

 

The following table shows the assets by segment as of February 29, 2024 and November 30, 2023:

 

 

As of

 

 

As of

 

 

 

February 29, 2024

 

 

November 30, 2023

 

Assets:

 

 

 

 

 

 

Umbilical cord blood and cord tissue stem cell
   service

 

$

56,017,726

 

 

$

55,471,149

 

PrepaCyte CB

 

 

125,757

 

 

 

148,040

 

Public cord blood banking

 

 

5,567,291

 

 

 

5,601,581

 

Total assets

 

$

61,710,774

 

 

$

61,220,770

 

 

 

Note 3 – Inventory

Inventory is comprised of public cord blood banking specimens, collection kits, finished goods, work-in-process and raw materials. Collection kits are used in the collection and processing of umbilical cord blood and cord tissue stem cells, finished goods include products purchased or assumed for resale and for the use in the Company’s processing and storage service. Inventory in the

16


 

Public Cord Blood Bank includes finished goods that are specimens that are available for resale. The Company considers Public Cord Blood Inventory in the Public Cord Blood Bank that has not completed all testing to determine viability to be work in process.

The components of inventory at February 29, 2024 and November 30, 2023 are as follows:

 

 

 

As of
February 29, 2024

 

 

As of
November 30, 2023

 

Raw materials

 

$

 

 

$

 

Work-in-process

 

 

331,417

 

 

 

341,692

 

Work-in-process – Public Bank

 

 

 

 

 

 

Finished goods

 

 

38,397

 

 

 

48,045

 

Finished goods – Public Bank

 

 

5,562,305

 

 

 

5,599,238

 

Collection kits

 

 

54,739

 

 

 

47,739

 

Inventory reserve

 

 

(7,718

)

 

 

(7,718

)

Total inventory

 

$

5,979,140

 

 

$

6,028,996

 

 

 

Note 4 – 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 Company’s assessment of future economic benefit involves considerable management judgment. A different conclusion could result in the reduction of the carrying value of these assets.

Intangible assets were as follows as of February 29, 2024 and November 30, 2023:

 

 

 

Useful lives

 

February 29, 2024

 

 

November 30, 2023

 

Patents

 

10-20 years

 

$

697,744

 

 

$

697,744

 

Less: Intangible asset impairment

 

 

 

$

(377,810

)

 

$

(377,810

)

Less: Accumulated amortization

 

 

 

 

(163,340

)

 

 

(160,434

)

License agreement

 

10 years