10-K

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

U.S.

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

☒	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended November 30, 2019

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File Number 000-23386

CRYO-CELL INTERNATIONAL, INC.

(Exact Name of registrant as specified in its charter)


DELAWARE		22-3023093
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

700 Brooker Creek Blvd, Suite 1800, Oldsmar, FL 34677

(Address of principal executive offices) (Zip Code)

(813) 749-2100

Registrant’s telephone number:

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 per value

CCEL

OTCQB

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

Common Stock, par value $0.01 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

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 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant is computed by reference to the price at which the common stock was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter (May 31, 2019) was $30,374,581.

As of February 15, 2020, there were 7,545,613 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS


		Page
	PART I
	FORWARD-LOOKING STATEMENTS	3
ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	12
ITEM 1B.	UNRESOLVED STAFF COMMENTS	12
ITEM 2.	PROPERTIES	12
ITEM 3.	LEGAL PROCEEDINGS	13
ITEM 4.	MINE SAFETY DISCLOSURES	13

	PART II
ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	13
ITEM 6.	SELECTED FINANCIAL DATA	15
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	26
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	67
ITEM 9A.	CONTROLS AND PROCEDURES	67
ITEM 9B.	OTHER INFORMATION	68

	PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	68
ITEM 11.	EXECUTIVE COMPENSATION	71
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	79
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	82
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	82

	PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	84
ITEM 16.	FORM 10-K SUMMARY	85
	SIGNATURES	86

PART I

Forward-Looking Statements

This Form 10-K, press releases and certain information provided periodically in writing or orally by the Company’s officers or its agents may contain statements which constitute “forward-looking statements”. The terms “Cryo-Cell International, Inc.,” “Cryo-Cell,” “Company,” “we,” “our” and “us” refer to Cryo-Cell International, Inc. The words “expect,” “believe,” “goal,” “plan,” “intend,” “estimate” and similar expressions and variations thereof, if used, are intended to specifically identify forward-looking statements. Those statements appear in a number of places in this Form 10-K and in other places, and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, our future performance and operating results, our future operating plans, our liquidity and capital resources; and our legal proceedings. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors.

ITEM 1.

BUSINESS.

Introduction

Cryo-Cell International, Inc. (the “Company” or “Cryo-Cell”) is a Delaware corporation that was incorporated in 1989. The Company is organized in three reportable segments, cellular processing and cryogenic storage, with a current focus on the collection and preservation of umbilical cord blood and tissue stem cells for family use, the manufacture of PrepaCyte^® CB Processing System (“PrepaCyte CB”) units, the processing technology used to process umbilical cord blood stem cells and cellular processing and cryogenic storage of umbilical cord blood stem cells for public use. The Company, in combination with its global affiliates, currently stores nearly 500,000 cord blood and cord tissue specimens worldwide for the exclusive benefit of newborn babies and possibly other members of their families. Founded in 1989, the Company was the world’s first private cord blood bank to separate and store stem cells in 1992. All aspects of its U.S.-based business operations, including the processing and storage of specimens, are handled from its headquarters facility in Oldsmar, Florida. The specimens are stored in commercially available cryogenic storage units at this technologically and operationally advanced facility.

In recent years, utilizing its infrastructure, experience and resources derived from its umbilical cord blood stem cell business, the Company has expanded its research and development activities to develop technologies related to stem cells harvested from sources beyond umbilical cord blood stem cells. During fiscal 2011, the Company introduced the advanced new cord tissue service, which stores a section of the umbilical cord tissue. The Company offers the cord tissue service in combination with the umbilical cord blood service. This service is growing; however, the umbilical cord blood service continues to be the Company’s main focus.

Consistent with its fiduciary duties, the board of directors and management has reviewed and will continue to review strategic options and opportunities for the Company, in order to maximize shareholder value. These options may include, but are not limited to, strategic mergers or acquisitions, investments in other public and/or private companies, repurchases of RSA interests, a deregistration of the Company’s common stock under the Securities Exchange Act of 1934 or a going-private transaction. These options may or may not be related to the Company’s current business. In order to undertake any of the aforementioned activities, the Company may take on substantial debt or equity capital which could increase the risk of investment in the Company.

Cord Blood Stem Cell Processing and Storage Business

Background of Business

Nearly fifty years ago researchers discovered that cells could be cryopreserved at extremely low temperatures and all cellular activity would cease until the specimens were thawed. Historically, cryopreservation was required for organ transplants, blood banking and medical research. Today, cryopreservation of umbilical cord blood stem cells gives individuals the opportunity to potentially take advantage of evolving cellular therapies and other medical technologies.

Hematopoietic stem cells are the building blocks of our blood and immune systems. They form the white blood cells that fight infection, red blood cells that carry oxygen throughout the body and platelets that promote healing. Stem cells are found in bone marrow where they continue to generate cells throughout our lives. Stem cells can be stored in a cryogenic environment, and upon thawing, infused into a patient. They can be returned to the individual from whom they were taken (autologous) or donated to someone else (allogeneic). An individual’s own bone marrow may be used for a transplant if the cancer has not entered the marrow system (metastasized). Otherwise, a marrow donor needs to be identified to provide the needed bone marrow. The availability of a marrow donor or matched stem cell specimen allows physicians to administer larger doses of chemotherapy or radiation in an effort to eradicate the disease. Stem cell therapies and transplants are used for both cancerous and non-cancerous diseases.

Stem cells are found in umbilical cord blood (“cord blood stem cells”) and can be collected and stored after a baby is born. Over 35,000 cord blood stem cell transplants have been performed to date. The Company believes that parents will want to save and store these cells for potential future use by their family, either for the donor or for another family member. Moreover, researchers believe they may be utilized in the future for treating diseases that currently have no cure.

The Company believes that the market for cord blood stem cell preservation is enhanced by global discussion on stem cell research developments and the current focus on reducing prohibitive health care costs. With the increasing costs of bone marrow matches and transplants, a newborn’s umbilical cord blood cells can be stored as a precautionary measure. Medical technology is constantly evolving which may provide new uses for cryopreserved cord blood stem cells.

Our Cord Blood Stem Cell Storage Services

The Company enters into storage agreements with its clients under which the Company charges a fee for the processing and testing and first year of storage of the umbilical cord blood. Thereafter, the client is charged an annual fee to store the specimen, unless the client has entered into a 18-year pre-paid storage plan or a lifetime pre-paid storage plan.

The Company’s corporate headquarters are located in a nearly 18,000 square-foot state-of-the-art current Good Manufacturing Practice and Good Tissue Practice (cGMP/cGTP)-compliant facility. Food and Drug Administration (“FDA”) 21 CFR Part 1271, effective in May 2005, requires human cellular and tissue-based products to be manufactured in compliance with good tissue practices (cGTPs). The Company’s laboratory processing facility contains a Class 10,000 clean room and Class 100 environments for the processing of cord blood stem cells and other cellular tissues. In addition, the cellular products cryogenic storage area has been designed as a “bunker,” with enhanced provisions for security, building fortification for environmental element protection and back-up systems for operational redundancies. The Company believes that it was the first private bank to process cord blood in a technologically and operationally advanced cGMP/cGTP-compliant facility. The Company’s facility, which also currently houses the Company’s client services, marketing and administrative operations, is designed to accommodate a broad range of events such as client tours and open houses, as well as educational workshops for clinicians and expectant parents.

Competitive Advantages

The Company believes that it provides several key advantages over its competitors, including:

•

The world’s first private cord blood bank, that in combination with its global affiliates, currently stores nearly 500,000 cord blood and cord tissue specimens worldwide,

•

our status as a cGMP- and cGTP-compliant private cord blood bank with International Organization for Standardization (“ISO”) certification, AABB accreditation and FACT (the Foundation for the Accreditation for Cellular Therapy) accreditation,

•

a state-of-the-art laboratory processing facility,

•

utilization of a processing method using superior technology that yields the maximum recovery of healthy stem cells and provides superior red blood depletion over all other methods,

•

a safe, secure and monitored storage environment,

•

since inception, 100% viability rate of the Company’s specimens upon thaw for therapeutic use,

•

a state-of the-art, insulated collection kit that protects cord blood specimens thirty times longer under extreme conditions than competitor’s kits,

•

7 day per week processing capability, and

•

a payment warranty under which the Company agrees to pay $50,000 (effective February 1, 2012 this payment was increased to $75,000 for new clients, effective June 1, 2017 this payment was increased to $100,000 for new clients that choose the premium cord blood processing method, Prepacyte CB) 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.

Cord Tissue

In August 2011, the Company introduced its advanced new cord tissue service, which stores a section of the umbilical cord tissue. Approximately six inches of the cord tissue is procured and transported to the Company’s laboratory for processing, testing and cryopreservation for future potential use. Umbilical cord tissue is a rich source of mesenchymal stem cells (MSCs). MSCs have many unique functions including the ability to inhibit inflammation following tissue damage, to secrete growth factors that aid in tissue repair, and to differentiate into many cell types including neural cells, bone cells, fat cells and cartilage. MSCs are increasingly being researched in regenerative medicine for a wide range of conditions including heart and kidney disease, ALS, wound healing and auto-immune diseases. MSCs from several different tissues are being tested in clinical trials for efficacy. Specifically, cells derived from cord tissue are currently being used in many clinical trials. Disorders being treated include cardiomyopathy, ulcerative colitis, diabetes, anemia, autism and cirrhosis of the liver.

Public Banking

In June 2018, the Company acquired substantially all of the assets (the “Cord Purchase”) of Cord:Use Cord Blood Bank, Inc., a Florida corporation (“Cord:Use”), in accordance with the definitive Asset Purchase Agreement between Cryo-Cell and Cord:Use (the “Purchase Agreement”), including without limitation Cord:Use’s inventory of public cord blood units existing as of the closing date (the “Public Cord Blood Inventory”). The Public Cord Blood Inventory creates a large, ethnically diverse, high quality inventory of available cord blood stem cell units for those in need of life saving therapy. The Company collects cord blood units at hospitals in Florida, Arizona, California and Michigan. The Company’s public inventory is stored in North Carolina, and the cord blood units are sold through the National Marrow Donor Program (“NMDP”) located in Minnesota, who ultimately distributes the cord blood units to transplant centers located in the United States, and around the world.

Marketing

Marketing Approach

It is the Company’s mission to inform expectant parents and their prenatal care providers of the potential medical benefits from preserving stem cells and to provide them the means and processes for collection and storage of these cells. Today, stem cell transplants are known and accepted treatments for approximately 80 diseases, a number of them life-threatening. With continued research in this area of medical technology, other therapeutic uses for cord blood stem cells are being explored. A vast majority of expectant parents are simply unaware that umbilical cord blood contains a rich supply of non-controversial stem cells and that they can be collected, processed and stored for the potential future use of the newborn and possibly related family members. A baby’s stem cells are a perfect match for the baby throughout its life and have a 1-in-4 chance of being a perfect match and a 3-in-4 chance of being an acceptable match for a sibling. There is no assurance, however, that a perfect match means the cells could be used to treat certain diseases of the newborn or a relative. Today, it is still common for the cord blood (the blood remaining in the umbilical cord and placenta) to be discarded at the time of birth as medical waste.

Despite the potential benefits of umbilical cord blood stem cell preservation, the number of parents of newborns participating in stem cell preservation is still relatively small compared to the number of births (four million per annum) in the United States. Some reasons for this low level of market penetration are the misperception of the high cost of stem cell storage and a general lack of awareness of the benefits of stem cell preservation programs. However, evolving medical technology could significantly increase the utilization of the umbilical cord blood for transplantation and/or other types of treatments. The Company believes it offers the highest quality, highest value service targeted to a broad base of the market. We intend to maximize our growth potential through our superior quality, value-driven competitive leadership position, product differentiation, an embedded client base, increased public awareness and accelerated market penetration.

Umbilical Cord Blood and Cord Tissue Services

The Company markets its cord blood stem cell preservation services directly to expectant parents and by distributing information through obstetricians, pediatricians, childbirth educators, certified nurse-midwives and other related healthcare professionals. The Company believes that its revenues have been facilitated by a variety of referral sources, resulting from high levels of customer satisfaction. New expectant parent referrals during fiscal 2019 were provided by physicians, midwives and childbirth educators, and by client-to-client referrals and repeat clients storing the stem cells of their additional children.

The Company has a national sales force to increase its marketing activities with its clinical referral sources, including physicians, midwives and hospitals. Promotional activities also include advertisements in clinical journals and telemarketing activities. In addition, the Company exhibits at conferences, trade shows and other meetings attended by medical professionals. Significant portions of client referrals to the Company are from medical caregiver professionals.

To increase awareness among expectant parent audiences, the Company continues to promote its service through internet marketing. Expectant parents have also received information via emails and internet marketing campaigns.

The Company’s client support team advisors are available by telephone to enroll clients and educate both expectant parents and the medical community on the life-saving potential of cord blood stem cell preservation.

The Company continues to use its website, www.cryo-cell.com, to market its services and to provide resource information to expectant parents. The site, which is frequently updated and improved, is divided into areas of interest, including sections for expectant parents, medical caregivers and investors. Expectant parents may request and receive information about the umbilical cord blood and cord tissue service and enroll online. Viewers may read about successful transplants using Cryo-Cell stored cord blood stem cells and access other topical information. Information on our website is not incorporated into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

Competition

Growth in the number of families banking their newborn’s cord blood stem cells has been accompanied by an increasing landscape of competitors. The Company competes against approximately 25 other national private cord blood banks.

Some of these competitors may have access to greater financial resources. Nevertheless, the Company believes it is currently well positioned to compete in the industry. Importantly, the Company believes that some competitors charge more for comparable (or even inferior) quality service. In addition, the Company possesses an industry-recognized AABB accreditation, and believes that it was the first private cord blood bank to process in a cGMP- and cGTP-compliant facility exceeding current FDA requirements. In November 2005, the Company was granted ISO 9001:2008 certification from BSI America’s, Inc., a leading quality management systems registrar. ISO (International Organization for Standardization) standards are internationally recognized as an effective framework for a quality management system. During 2014, the Company was granted FACT (the Foundation for the Accreditation for Cellular Therapy) accreditation. These achievements position Cryo-Cell as an industry quality leader as a cGMP- and cGTP-compliant private cord blood bank with ISO certification, AABB and FACT accreditations.

The Company believes that its longevity and experience; value-based pricing strategy; superior customer service; premier technical and operational expertise; state-of-the-art facilities; innovative marketing programs and its expansive client base will continue to provide a competitive advantage.

Government Regulation

The Company is required to register with the FDA under the Public Health Service Act because of its ongoing cellular storage business and is subject to FDA inspection. This requirement applies to all establishments engaged in the recovery, processing, storage, labeling, packaging, or distribution of any Human Cells, Tissues, and Cellular and Tissue-Based Products (“HCT/Ps”) or the screening or testing of a cell or tissue donor. In addition, with the purchase of the manufacturing rights to the PrepaCyte CB Processing System on June 30, 2015, Cryo-Cell is required to register this product as a Medical Device under the Federal Food, Drug, and Cosmetic Act which is also subject to FDA inspection. At November 30, 2019 and November 30, 2018, the Company was in compliance with these requirements.

The division of FDA which regulates HCT/Ps is the Center for Biologics Evaluation and Research (“CBER”). The section of FDA Code of Federal Regulations (“CFR”) pertaining to cord blood is 21 CFR 1271. Since 2004, the FDA has formulated a “Tissue Action Plan” which consists of these three rules:

As of January 21, 2004, all cord blood banks are required to register with the FDA. Any cord blood bank which has a laboratory should be on the web page of FDA Registered Establishments.

The second rule was published May 20, 2004, and became effective May 25, 2005. It pertains to donor eligibility. This rule requires more screening of donors for communicable diseases.

The final rule establishes FDA standards of current Good Tissue Practice (“GTP”) for laboratories which process HCT/Ps. This rule was published November 19, 2004, became effective May 25, 2005, and is intended to prevent contamination or cross-contamination during the handling of HCT/Ps.

These three FDA rules apply only to cord blood processed on or after the effective date of May 25, 2005. The final rule allows the FDA to inspect cord blood laboratories to determine compliance with the provisions of 21 CFR Part 1271. As part of this oversight authority, the FDA conducts unannounced inspections of cord blood banks.

Upon execution of the acquisition of all of the assets of Cord:Use, the Company acquired the cord blood operations which included both public (PHS 351) and private (PHS 361) banks. The Company closed the Cord:Use location and maintains its operations in Oldsmar, FL. The new PHS 351 product is distributed under an IND (10-CBA) maintained by the National Marrow Donor Program (NMDP). The Company has continued the contract with Duke University initiated by Cord:Use to manufacture, test, cryopreserve, store and distribute the public cord blood units. The units are listed on the NMDP Single Point of Access Registry and are available to transplant centers worldwide. The Company is reimbursed via cost recovery for public cord blood units distributed for transplant through the NMDP. The donation of cord blood units in the public cord blood banking program functions under The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the Company adheres to HIPAA rules. The FDA does not require establishments that manufacture drugs (including biological products) and devices that are HCT/Ps for use under an investigational new drug application (IND) (21 CFR Part 312) to register and list their HCT/Ps until the HCT/P is approved through a biologics license application (BLA), new drug application (NDA), or premarket approval application (PMA); or cleared through a premarket notification submission (510(k)).

The PrepaCyte CB (Cord Blood) Processing System is intended for use in cell processing laboratories to process and store total nucleated cells (TNC) from human umbilical cord blood, prior to banking. The device is composed of three integrally-attached processing and storage containers (or a single processing container) with separation media. The system is 510K cleared as a Class II device. The division of the FDA which regulates this product is the Center of Biologics Evaluation and Research (“CBER”). Approval to market the device was determined by the Office of Cellular, Tissue and Gene Therapies. The section of FDA Code of Federal Regulations (“CFR”) pertaining to medical device is 21 CFR 800s. The requirements for compliance to this section include annual registration of the device, listing of devices with the FDA, good manufacturing practice, labeling, and prohibitions against misbranding and adulteration.

Currently, the states of California, Illinois, Maryland, New Jersey and New York require cord blood banks to be registered or licensed. The Company is currently registered or licensed to operate in these states. If the Company identifies other states with licensing requirements or if other states adopt such requirements, the Company would have to obtain licenses or registration to continue providing cord blood services in those states.

Federal and state laws govern the Company’s ability to obtain and, in some cases, to use and disclose data that we may need to conduct certain activities. The HIPAA requires the Department of Health and Human Services to issue a series of regulations establishing standards for the electronic transmission of certain health information. The Company’s private cord blood bank operation is not subject to HIPAA because the Company does not engage in certain electronic transactions related to the reimbursement of healthcare providers and because blood and tissue procurement and banking activities are exempt. However, the healthcare providers that collect umbilical cord blood for the Company’s customers are subject to HIPAA. The identifiable information shared is only what is permitted by HIPAA. In 2009, a portion of the American Recovery and Reinvestment Act of 2009 modified HIPAA under the Health Information Technology for Economic and Clinical Health Act (“HITECH Act”). While the Company is still not subject to HIPAA for the reasons stated above the Company may incur material expenses associated with compliance efforts. In addition, compliance may require management to spend substantial time and effort on compliance measures. If the Company fails to comply with HIPAA, it could suffer criminal and civil penalties. The civil penalties could include monetary penalties ranging from $100 per violation to $1.5 million depending on the level of violation.

The Company is also subject to local, state and federal laws and regulations relating to safe working conditions, laboratory and manufacturing practices and the use and disposal of hazardous or potentially hazardous substances. These laws include the Occupational Safety and Health Act (“OSHA”), cGTPs, cGMPs, Environmental Protection Act and those of the local Department of Health.

OSHA requires all employers to assure safe and healthful working conditions for working men and women through development and implementation of work standards, education, and training. OSHA enforces the standards developed under the Act, applicable to all employers in the U.S. and its territories. cGTPs are laws, enforced by the FDA, that define and govern methods used in the manufacture of Human Cells, Tissues, and cellular and tissue-based Products (HCT/Ps). Current Good Manufacturing Practices (cGMPs) are laws, enforced by the FDA, that define and govern methods used in the manufacture of drugs and finished pharmaceuticals. Both of the latter federal practices, or laws, govern the Company’s products.

The Environmental Protection Agency (EPA) governs the management and proper disposal of products and by-products or waste. These products must be disposed in a manner that does not adversely affect the environment from which it came or where disposed of. The Department of Health on the local level primarily regulates systems and associated equipment employed in recovery activities such as back-up generators; therefore, governing specific internal processes.

Evolving legislation and regulations governing private cord blood banking in various jurisdictions throughout the world may impact the Company’s international licensees.

In addition, as the organization grows and evolves, other legislation and regulations are expected to impact the Company. One such evolution involves activities that may be designated as or involve medical research or cooperative agreements associated with medical research. These types of activities are also governed by the FDA, specifying oversight by an Institutional Review Board (IRB). The IRB is a board or committee that approves the initiation of, and conducts periodic review of, biomedical research involving human subjects. The primary purpose of such review is to assure the protection of the rights and welfare of the human subjects. Governance of biomedical research is codified as laws by Title 21 of the Code of Federal Regulations (CFR) Part 56, and enforced by the FDA. Other medical research associated with clinical trials may require an Investigational New Drug Application (IND). Current Federal law requires that a drug be the subject of an approved marketing application before it is transported or distributed across state lines. Because a sponsor will likely want to ship the investigational drug to clinical investigators in many states, it must seek an exemption from that legal requirement. The IND is the means through which the sponsor technically obtains this exemption from the FDA. This approval would be required in the case of a clinical trial.

Subsidiaries and Joint Ventures

Since its inception, Cryo-Cell has entered into a number of business activities through subsidiaries and joint ventures, including the following activities and those described under “International” below. The Company continues to evaluate and pursue, certain opportunities for global expansion, on a selective basis, in which operational synergies and economic potential align with Cryo-Cell’s strategic direction.

Saneron CCEL Therapeutics, Inc. (“Saneron”). Saneron is the owner and/or exclusive licensee of certain technology developed by and/or in collaboration with the University of South Florida and the University of Minnesota. The technology covers various patents, patent applications and trade secrets for the therapeutic use of umbilical cord blood stem cells (U-CORD-CELL^®) and Sertoli cells (SERT-CELL^™). As of November 30, 2019, and November 30, 2018, the Company had an ownership interest of approximately 33% in Saneron which is accounted for under the equity method. As of November 30, 2019, and November 30, 2018, the net Saneron investment, which represents underlying goodwill, is reflected on the consolidated balance sheets at $0.

Revenue Sharing Agreements (“RSAs”)

The Company entered into RSAs prior to 2002 with various third and related parties. The Company’s RSAs provide that in exchange for a non-refundable up-front payment, the Company would share for the duration of the RSA a percentage of its future revenue derived from the annual storage fees related to a certain number of specimens that originated from specific geographical areas. The RSAs have no definitive term or termination provisions. The sharing applies to the storage fees collected for all specified specimens in the area covered by the RSA up to the number covered in the RSA. When the number of specimens is filled, any additional specimens stored in that area are not subject to the RSA. As there are empty spaces resulting from attrition, the Company agrees to fill them as soon as possible. The Company reflects these up-front payments as long-term liabilities on the accompanying consolidated financial statements. The Company does not intend to enter into additional RSAs.

In the future, the Company could reverse the liability relating to the RSAs up-front payments over an appropriate period of time, based on the Company’s expectations of the total amount of payments it expects to pay to the other party under the particular RSA. However, the RSAs do not establish a finite term or time frame over which to estimate the total payments and the Company had not previously estimated and has concluded that it is not currently practicable to estimate the projected cash flows under the RSAs. At present, the Company intends to defer the reversal of the liability, until such time as these amounts can be determined. During the periods when the Company defers the reversal of the liability, the quarterly payments made during these periods are treated as interest expense, which is recognized as the payments become due. In future periods, if a portion of the liability can be de-recognized based on the effective interest method, the payments will be allocated between interest and amortization of the liability. As cash is paid out to the other party during any period, the liability would be de-recognized based on the portion of the total anticipated payouts made during the period, using the effective interest method. That is, a portion of the payment would be recorded as interest expense, and the remainder would be treated as repayment of principal, which would reduce the liability.

Florida. On February 9, 1999, the previous Arizona RSAs were modified and replaced by an RSA for the state of Florida for a price of $1,000,000. The RSA applies to net storage revenues originating from specimens from within the state of Florida less a deduction for billing and collection fees. The RSA entitles the investors to revenues of up to a maximum of 33,000 storage spaces.

Illinois. In 1996, the Company entered into an RSA with a group of investors entitling them to an on-going 50% share of the Company’s 75% share of the annual storage fees (“net storage revenues”) less a deduction for 50% of billing and collection expenses generated by specimens stored in the Illinois Masonic Medical Center for a price of $1,000,000. The RSAs were modified in 1998 to broaden the covered specimens to those originating in Illinois and its contiguous states and stored in Oldsmar, Florida for a maximum of up to 33,000 storage spaces.

Texas. On May 31, 2001, the Company entered into an RSA with Red Rock Partners, an Arizona general partnership, entitling them to on-going shares in a portion of the Company’s net storage revenue generated by specimens originating from within the State of Texas for a price of $750,000. The investors are entitled to a 37.5% share of net storage revenues less a deduction for billing and collection fees for specimens originating in the State of Texas to a maximum of 33,000 storage spaces. During fiscal 2008, Red Rock assigned 50% of their interest in the agreement to SCC Investments, Inc., an Arizona corporation. Subsequent to November 30, 2009, SCC Investments, Inc. assigned its interest to SCF Holdings, LLC, an Arizona limited liability company.

The Company made total payments to all RSA holders of $832,587 and $671,245 for the fiscal years ended November 30, 2019 and 2018, respectively. The Company recorded an RSA accrual of $909,765 and $798,292 as of November 30, 2019 and 2018, respectively, related to interest owed to the RSA holders, which is included in accrued expenses. The Company also recorded interest expense of $944,060 and $848,024 for the fiscal years ended November 30, 2019 and 2018, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive income (loss).

International

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 Company’s 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 $1,000,000 cap on the amount of royalties due to the Company per year and a $10,000,000 cap on the amount of royalties due to the Company for the term of the License and Royalty Agreement. The cap(s) are calculated based on Lifecell’s fiscal year end, March 31^st. As of the end of the Company’s fiscal years ended November 30, 2019 and November 30, 2018, Lifecell had reached the $1,000,000 cap. Since inception of the License and Royalty Agreement, the Company has recorded $9,300,000 in royalty income due under the terms of the License and Royalty Agreement, of which, Lifecell has paid the Company $8,400,000 as of November 30, 2019. The balance of $900,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets.

The following table details the processing and storage royalties earned for the technology agreements for fiscal years 2019 and 2018. The initial license fees and processing and storage royalties are reflected in licensee income in the accompanying consolidated statements of comprehensive income (loss).


	For the fiscal years ended November 30,
	2019						2018
	License Fee		Process and		Total		License Fee		Process and		Total
			Storage Royalties						Storage Royalties

India	$	—	$	1,000,000	$	1,000,000	$	—	$	1,000,000	$	1,000,000

Total	$	—	$	1,000,000	$	1,000,000	$	—	$	1,000,000	$	1,000,000

Marketing Agreements

The Company has definitive license agreements to market the Company’s umbilical cord blood stem cell programs in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Pakistan.

Employees

At November 30, 2019, the Company had 87 full-time employees and 10 part-time employees on the staff of the Company. Additional employees and staff will be hired on an “as needed” basis. The Company believes its relationship with its employees is good. None of our employees are members of any labor union, and we are not a party to any collective bargaining agreement.

ITEM 1A.

RISK FACTORS.

Not applicable.

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.

PROPERTIES.

The Company entered into a ten-year lease in April 2004 for its 17,600-square foot cGMP/cGTP compliant corporate headquarters in Oldsmar, Florida. The lease effectively commenced during October 2004, and the Company moved into this facility in November 2004. This facility contains the Company’s executive offices, its conference and training center, its laboratory processing and cryogenic storage facility and its scientific offices. In July 2018, the Company extended the main lease through December 31, 2021 for the 17,600 square foot space.

The Company entered into a one-year lease in November 2013 for an additional 800 square feet of office space in Miami, Florida for annual rent of approximately $38,000. The lease commenced during December 2013. In December 2016, the Company extended the lease through December 31, 2019.

Rent charged to operations was $322,984 and $312,307 for the fiscal years ended November 30, 2019 and 2018, respectively, and is included in cost of sales and selling, general and administrative expenses in the consolidated statements of comprehensive income (loss).

The future minimum rental payments under the operating lease are as follows:


Fiscal Year Ending November 30,	Rent
2020	$	228,148
2021	$	224,928
2022	$	18,744

ITEM 3.

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 November 30, 2019.

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 Company’s business, consolidated financial position or results of operations. It is possible, however, that there could be an unfavorable ultimate outcome or resolution which could be material to the Company’s 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.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company’s common stock is quoted on the OTC Pink Marketplace under the symbol “CCEL”. The following table shows, for the fiscal quarters indicated, the high and low closing bid quotations for the Company’s common stock as reported by Yahoo Finance. The quotations represent inter-dealer prices without retail mark-up, markdown or commission and may not necessarily represent actual transactions.


Quarter Ended	Low Closing Bid		High Closing Bid
February 28, 2018		7.16		9.95
May 31, 2018		7.20		7.56
August 31, 2018		7.49		9.30
November 30, 2018		6.03		8.37
February 28, 2019		6.67		7.99
May 31, 2019		6.40		8.04
August 31, 2019		7.45		8.23
November 30, 2019		7.08		8.90

The Company has not declared any cash dividends on its common stock and has no plans to do so in the immediate future.

As of November 30, 2019, the Company had 170 shareholders of record, and management believes there are approximately 1,500 additional beneficial holders of the Company’s common stock.

The following table sets forth as of November 30, 2019, the Company’s equity compensation plans approved by shareholders. At such date the Company had no equity compensation plans that had not been approved by shareholders.


Equity Compensation plans approved by stockholders	Number of securities to be issued upon exercise of outstanding options, warrants, rights and issued restricted shares		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Cryo-Cell International, Inc. 2006 Stock Incentive Plan		325,000	$	2.74		—
Cryo-Cell International, Inc. 2012 Stock Incentive Plan		763,274	$	3.54		667,479
Total		1,088,274	$	3.30		667,479

As discussed in further detail in the 2019 Proxy Statement, on or about March 26, 2018, the Company received a letter from counsel for a purported stockholder. Among other things, the letter identified equity awards allegedly made in violation of the 2012 Plan. The Board formed a committee of directors (the “Demand Review Committee”) to (among other things) conduct an investigation of the allegations in that letter. After completing its investigation, the Demand Review Committee determined that 1,129,247 restricted stock performance based awards were granted in violation of the 2012 Plan and the Delaware General Corporation Law (“DGCL”). The Demand Review Committee also determined that 70,270, 75,000 and 77,500 stock option awards were granted in violation of the 2012 Plan, the 2006 Plan, the 2000 Stock Incentive Plan, respectively, as amended (the “2000 Plan”) and the DGCL. Annex II attached to the 2019 Proxy Statement describes each of these awards and the applicable Plan that the awards were purportedly granted under, and Annexes I and II of the 2019 Proxy Statement describe each defective award and defective stock issuance identified by the Demand Review Committee (the “Defective Awards and Issuances”).

Based on the recommendation of the Demand Review Committee, the Board of Directors approved that 776,798 restricted stock performance based awards be ratified that were in violation of the 2012 Plan and that 352,449 restricted stock performance based awards be surrendered for cash in the amount of $1,436,244 that were in violation of the 2012 Plan. The Board of Directors also approved the recommendation that 45,000 stock option awards not be ratified and 177,770 stock options be ratified under the 2012 Plan, the 2006 Plan and the 2000 Stock Incentive Plan. The proposed treatment of each award and issuance is listed on Annexes I and II in the manner identified in the column entitled “Recommended Disposition” in each of those Annexes and recommended to the Company’s stockholders that such awards and issuances be ratified as proposed by the Recommended Dispositions.

On November 21, 2019, the Company held its Annual Meeting of Stockholders. At the 2019 Annual Meeting, the Company’s stockholders considered various matters presented to them, including the ratification of certain equity-based awards and stock issuances made pursuant to the Company’s incentive Plans, as well as the approval of certain amendments to those incentive Plans. All such matters presented to the stockholders were duly approved by the stockholders at the 2019 Annual Meeting. Accordingly, all references contained herein to the number of options or shares of common stock granted under the Company’s incentive Plans, the value thereof, and the number of securities that remain available for future issuance under the Company’s 2012 Plan for all periods presented in this Annual Report on Form 10-K have been calculated and are being presented after taking into account the ratification and surrender of the Defective Awards and Issuances in accordance with the Recommended Disposition, as further described in the 2019 Proxy Statement.

Under the DGCL, any claim that the defective corporate acts, or the shares of stock or awards, listed as having been purportedly issued or granted on Annexes I and II, are void or voidable due to the failures of authorization listed on Annex III, or that the Delaware Court of Chancery should declare in its discretion that the ratification not be effective or be effective only on certain conditions, must be brought within 120 days from the date of the 2019 Annual Meeting, which was on November 21, 2019.

ITEM 6.

SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the financial condition and results of operations of the Company for the two years ended November 30, 2019, should be read in conjunction with the consolidated financial statements and related notes as well as other information contained in this Annual Report on Form 10-K. This section of the Form 10-K contains forward-looking statements that involve substantial risks and uncertainties, such as statements about our plans, objectives, expectations and intentions. We use words such as “expect”, “anticipate”, “plan”, “believe”, “seek”, “estimate”, “intend”, “future” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K.

Overview

The Company is engaged in cellular processing and cryogenic storage, with a current focus on the collection and preservation of umbilical cord blood stem cells for family use. The Company’s principal sources of revenues are service fees for cord blood processing and preservation for new customers and recurring annual storage fees. Effective April 2016, the Company offers two pricing models, a standard plan and premium plan. The Company charges fees of $1,675 for the standard plan and $2,025 for the premium plan to new clients for the collection kit, processing, testing and return medical courier service, with discounts in the case of multiple children from the same family and in other circumstances. The Company charges an annual storage fee of $175 for new clients that enroll in the standard and premium plans; storage fees for existing customers depend on the contracts with such customers. The Company continues to offer a one-time payment plan for 18 years of storage and a life-time payment plan, pursuant to which the client is charged $4,650 for the standard plan and $5,000 for the premium plan and approximately $5,800 for the standard plan and approximately $6,100 for the premium plan, respectively, less discounts in the case of multiple children from the same family and in other circumstances. The one-time plan includes the collection kit, processing and testing, return medical courier service and 18 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 client. The Company also receives other income from licensing fees and royalties from global affiliates.

On June 11, 2018, Cryo-Cell completed its acquisition of substantially all of the assets (the “Cord Purchase”) of Cord:Use Cord Blood Bank, Inc., a Florida corporation (“Cord:Use”), in accordance with the definitive Asset Purchase Agreement between Cryo-Cell and Cord:Use (the “Purchase Agreement”), including without limitation Cord:Use’s inventory of public cord blood units existing as of the closing date (the “Public Cord Blood Inventory”) and Cord:Use’s shares of common stock of Tianhe Stem Cell Biotechnologies, Inc., an Illinois corporation (the “Tianhe Capital Stock”). Cord:Use was in the business of public and private cord blood and tissue, collection, processing, storage and banking. The aggregate consideration payable at closing under the Purchase Agreement was $14,000,000, with $10,500,000 paid in cash and the balance paid through the delivery to Seller of 465,426 shares of Cryo-Cell’s common stock, par value $0.01 per share (“Common Stock”), at $7.52 per share. In addition, Cryo-Cell assumed certain limited liabilities incurred by Cord:Use in connection with its business that were unpaid as of the closing date and that directly relate to the services to be provided after closing by Cryo-Cell. Cryo-Cell also assumed certain of Cord:Use’s contracts and the obligations arising therefrom after the closing. Additionally, Cord:Use is entitled to an earnout from Cryo-Cell’s sale of the Public Cord Blood Inventory from and after closing. Each calendar year after the closing, Cryo-Cell is required to pay to Cord:Use 75% of all gross revenues, net of any returns, received from the sale of public cord blood inventory in excess of $500,000. Such payments are to be made quarterly, within 30 days of the end of the last month of each calendar quarter, until the public cord blood inventory is exhausted. In addition, each calendar year after closing, until the public cord blood inventory is exhausted, for every $500,000 of retained gross revenues, net of any returns, received and retained by Cryo-Cell in excess of the initial $500,000 retained by Cryo-Cell during such year, Cryo-Cell is to deliver $200,000 worth of Cryo-Cell Common stock to Cord:Use, up to an aggregate value of $5,000,000. Cord:Use is also entitled to a portion of the gross profits generated, or deemed to have been generated, by Cryo-Cell from its ownership of the Tianhe Capital Stock.

During the fiscal year ended November 30, 2019, the Company’s total revenue increased 9% as compared to fiscal 2018. The Company reported net income of approximately $2,291,000, or $0.29 per basic common share and $0.27 per diluted share for fiscal 2019 compared to a net loss of approximately ($855,000), or ($0.11) per basic and diluted common share for fiscal 2018. Net income for the twelve months ended November 30, 2019 principally resulted from a 9% increase in total revenues and a 5% decrease in selling, general and administrative expenses, which were offset by a 18% increase in cost of sales. Also included in the net income for the twelve months ended November 30, 2019 was an impairment charge of $2,332,763. Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge was recognized during the second quarter of fiscal 2019 to reduce inventory from cost to net realizable value. Included in the net loss for the twelve months ended November 30, 2018 was approximately $3,078,100 of income tax 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 Company’s deferred tax asset which resulted in an increase in the income tax expense.

As of November 30, 2019, the Company had cash and cash equivalents of $6,541,037. The Company’s cash increased by approximately $501,000 during fiscal 2019. Cash provided by operations was approximately $6,323,000 which was offset by approximately $662,000 that was used for the purchase of property and equipment, approximately $4,100,000 used to repay the note payable and approximately $992,000 to repurchase the Company’s common stock. 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 Company’s 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.

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 proceeds of the term loan were used by the Company to fund the extinguishment of some of the revenue sharing agreements.

On June 11, 2018, the Company entered into a Second Amendment to Credit Agreement with TCB. Pursuant to the terms of the Second Amendment to Credit Agreement, TCB made an additional advance to the Company in principal amount of $9,000,000 per an Amended and Restated Promissory Note dated June 11, 2018 between the Company and TCB in the principal amount of $15,500,000. The proceeds were used to finance a portion of the purchase price of the Cord:Use purchase. See Note 5.

Results of Operations

Revenue. For the fiscal year ended November 30, 2019, the Company had revenue of $31,816,571 compared to $29,218,490 for the fiscal year ended November 30, 2018. The 9% increase in revenue was primarily attributable to an 8% increase in processing and storage fees.

Processing and Storage Fees. For the fiscal year ended November 30, 2019, processing and storage fees were $29,991,972 compared to $27,817,872 for the fiscal year ended November 30, 2018. The increase in processing and storage fee revenue was primarily attributable to a 12% increase in recurring annual storage fee revenue. The Company had a 7% increase in the number of new domestic cord blood specimens processed year-over-year. Also, the Company’s cord tissue service continues to increase year-over-year.

Product Revenue. For the twelve months ended November 30, 2019, revenue from the product sales was $172,395 compared to $104,323 for the twelve months ended November 30, 2018.

Public Cord Blood Banking Revenue. On June 11, 2018, the Company entered into an Asset Purchase Agreement as described in Note 2. For the twelve months ended November 30, 2019, revenue from the public cord blood banking sales was $652,204 compared to $296,295 for the twelve months ended November 30, 2018.

Licensee Income. For the fiscal year ended November 30, 2019, licensee income was $1,000,000 as compared to $1,000,000 for fiscal 2018. Licensee income for the twelve months ended November 30, 2019 and November 30, 2018 consists of royalty income earned on the processing and storage of cord blood stem cell specimens in India where the Company has a definitive License and Royalty Agreement.

2019 and November 30, 2018, Lifecell had reached the $1,000,000 cap. Since inception of the License and Royalty Agreement, the Company has recorded $9,300,000 in royalty income due under the terms of the License and Royalty Agreement, of which, Lifecell has paid the Company $8,400,000 as of November 30, 2019. The balance of $900,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets.

Cost of Sales. For the fiscal year ended November 30, 2019, cost of sales was $10,036,175, as compared to $8,539,662 for the fiscal year ended November 30, 2018, representing an 18% increase. Cost of sales includes wages and supplies associated with process enhancements to the existing production procedures and quality systems in the processing of cord blood specimens at the Company’s facility in Oldsmar, Florida and depreciation expense of $195,073 for the year ended November 30, 2019 compared to $137,062 for the 2018 period. Also, included in Cost of Sales is $249,847 and $169,396 related to the costs associated with production of the PrepaCyte CB processing and storage system for the twelve months ended November 30, 2019 and November 30, 2018, respectively. Also included in Cost of Sales is $1,295,864 and $626,057 for the twelve months ended November 30, 2019 and November 30, 2018, respectively, related to the public banking due to the Purchase Agreement with Cord:Use. The increase in cost of sales for the twelve months ended November 30, 2019 versus November 30, 2018 is due to the increased costs due to the public cord blood bank and the increased costs associated with the 7% increase in the number of new domestic cord blood specimens processed in fiscal year 2019 versus fiscal year 2018.

Selling, General and Administrative Expenses. Selling, general and administrative expenses during the fiscal year ended November 30, 2019 were $14,891,462 as compared to $15,632,696 for the fiscal year ended November 30, 2018 representing a 5% decrease. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees. The decrease in selling, general and administrative expenses is in part due to costs in fiscal 2018 associated with the Purchase Agreement with CordUse. As of the twelve months ended November 30, 2019 and November 30, 2018, $0 and $580,000, respectively, of selling, general and administrative expenses are associated with the CordUse purchase. These expenses were non-recurring expenses related to the acquisition of CordUse. Also for the twelve months ended November 30, 2019, bonuses decreased approximately $657,000. Bonuses are calculated per the criteria set forth in the employment agreements.

Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the fiscal year ended November 30, 2019, were $30,145 as compared to $91,845 in 2018.

Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the fiscal year ended November 30, 2019 was $206,238 compared to $180,264 for fiscal 2018.

Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the fiscal year ended November 30, 2019 was $742,918 compared to $415,280 for fiscal 2018. 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, described above. The contingent consideration was remeasured to fair value as of November 30, 2019. 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.

Impairment of Public Inventory. The impairment of public inventory for the twelve months ended November 30, 2019 was $2,332,763 compared to $0 for the 2018 period. Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge of $2,332,763 was recognized during the twelve months ended November 30, 2019 to reduce inventory from cost to net realizable value.

Interest Expense. Interest expense during the fiscal year ended November 30, 2019 was $1,703,446 compared to $1,546,900 in fiscal 2018, of which $759,386 and $698,876, respectively, related to the credit and subordination agreements with Texas Capital Bank, National Association and CrowdOut Capital LLC as described in Note 5. The remaining interest expense is comprised of amounts due to the parties to the Company’s revenue sharing agreements based on the Company’s storage revenue collected.

Income Taxes. U.S. income tax expense for the twelve months ended November 30, 2019 was $992,491, net of foreign taxes, compared to $4,364,190, net of foreign income taxes, for the twelve months ended November 30, 2018. Included in the $4,472,504 tax expense for the twelve months ended November 30, 2018 is approximately $3,078,100 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 Company’s deferred tax asset which resulted in an increase in the income tax expense.

Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The ultimate realization of our deferred tax assets depends upon generating sufficient future taxable income prior to the expiration of the tax attributes. In assessing the need for a valuation allowance, we must project future levels of taxable income. This assessment requires significant judgment. We examine the evidence related to the recent history of tax losses, the economic conditions in which we operate and our forecasts and projections to make that determination.

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 certain geographic areas where the Company has license agreements. The Company recorded approximately $108,000 and $108,000 for the years ended November 30, 2019 and 2018, respectively, of foreign income tax expense, which is included in income tax expense in the accompanying consolidated statements of comprehensive income (loss).

There was approximately $2,801,000 and $2,204,000 of U.S. income taxes paid for fiscal years ended November 30, 2019 and November 30, 2018, respectively.

Liquidity and Capital Resources

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.

Prior to the loans, the Company’s principal source of cash has been from sales of its umbilical cord blood program to customers and royalties from licensees.

At November 30, 2019, the Company had cash and cash equivalents of $6,541,037 as compared to $6,040,033 at November 30, 2018. The increase in cash and cash equivalents during the twelve months ended November 30, 2019 was primarily attributable to the following:

Net cash provided by operating activities in fiscal 2019 was $6,323,207 which was attributable to the Company’s operating activities and an increase in the Company’s new clients choosing the prepaid storage plans versus the annual storage fee plan.

Net cash provided by operating activities in fiscal 2018 was $5,333,330 which was attributable to the Company’s operating activities and an increase in the Company’s new clients choosing the prepaid storage plans versus the annual storage fee plan.

Net cash used in investing activities in fiscal 2019 was $690,659 which was primarily attributable to cash used to purchase property and equipment.

Net cash used in investing activities in fiscal 2018 was $11,282,411 which was primarily attributable to cash used to purchase CordUse in the amount of $10,500,000 and purchases of property, equipment and sales and purchases of marketable securities and other investments and intangibles of $782,411.

Net cash used in financing activities in fiscal 2019 was $5,131,544, which was primarily attributable to the payments of $4,100,000 to repay the note payable described above and $45,000 to Cord Use and $992,244 used to repurchase common stock which was offset by the receipt of $5,700 from the exercise of stock options.

Net cash provided by financing activities in fiscal 2018 was $5,709,960, which was primarily attributable to the payments of $3,291,665 to repay the note payable described above offset by the receipt of $170,925 from the exercise of stock options and $9,000,000 received as part of the Second Amendment to Credit Agreement with TCB described above.

The Company does not have a line of credit.

The Company anticipates making discretionary capital expenditures of approximately $500,000 over the next twelve months for software enhancements and purchases of property and equipment. The Company anticipates funding future property and equipment purchases with cash-on-hand and cash flows from future operations.

The Company anticipates that its cash and cash equivalents, marketable securities and cash flows from future operations will be sufficient to fund its known cash needs for at least the next 12 months. Cash flows from operations will depend primarily upon increasing revenues from sales of its umbilical cord blood and cord tissue cellular storage services and managing discretionary expenses. If expected increases in revenues are not realized, or if expenses are higher than anticipated, the Company may be required to reduce or defer cash expenditures or otherwise manage its cash resources during the next 12 months so that they are sufficient to meet the Company’s cash needs for that period. In addition, the Company may consider seeking equity or debt financing if deemed appropriate for its plan of operations, and if such financing can be obtained on acceptable terms. There is no assurance that any reductions in expenditures, if necessary, will not have an adverse effect on the Company’s business operations, including sales activities and the development of new services and technology.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The Company believes that its estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. For further discussion of the Company’s significant and critical accounting policies, refer to Note 1 – “Description of Business and Summary of Critical and Significant Accounting Policies” to the Consolidated Financial Statements contained in Item 8 of this document.

Revenue Recognition

Effective December 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The Company recognized the cumulative effect of applying the new revenue standard to all contracts with customers that were not completed as of December 1, 2018 as an adjustment to the opening balance of stockholders’ deficit at the beginning of fiscal year 2019. The reported results for 2019 reflect the application of ASC 606 guidance while the reported results for 2018 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605). 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.

The adoption of ASC 606 did not have an impact on the amount of reported revenues with respect to the Company’s product or service revenues. In connection with the adoption of ASC 606, the Company is required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed and amortize these costs on a systematic basis, consistent with the pattern of transfer of the storage services provided over time for which the asset relates. As of December 1, 2018, the Company capitalized in deposits and other assets, net, $329,231 in incremental contract acquisition costs related to sales commissions on prepaid storage contracts and reversed $18,408 of its variable consideration that the Company determined to be fully constrained, with a corresponding change in the opening balance of stockholders’ deficit of $253,447, net of tax, of $94,192.

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”).

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.

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 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 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.

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 twelve months ended November 30, 2019 and 2018.

Goodwill

Goodwill represents the excess of the purchase price of the assets acquired from Cord:Use (Note 2) over the estimated fair value of the net tangible 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.

Stock Compensation

As of November 30, 2019, the Company has two stock-based employee compensation plans, which are described in Note 11 to the consolidated financial statements.

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.

License and Royalty Agreements

The Company has entered into licensing agreements with certain investors in various international markets in an attempt to capitalize on the Company’s technology. The investors typically pay a licensing fee to receive Company marketing programs, technology and know-how in a selected area. The investor may be given a right to sell sub-license agreements as well. As part of the accounting for the up-front license revenue, revenue from the up-front license fee is recognized based on such factors as when the payment is due, collectability and when all material services or conditions relating to the sale have been substantially performed based on the terms of the agreement. The Company has twelve active licensing agreements. The following areas each have one license agreement: El Salvador, Guatemala, Panama, Honduras, China, and Pakistan. The following areas each have two license agreements: India, Nicaragua and Costa Rica. In October 2012, the Company sent a notice of termination to the Company’s Venezuelan affiliate for failure to meet its payment obligation in accordance with the contract. Subsequent to the notice of termination, payment was received for outstanding processing and storage fees due from Venezuela. The Company is in the process of discussing a new agreement with Venezuela. In December 2012, the Company sent notice of termination to the Company’s affiliate in Ecuador for failure to meet its payment obligation in accordance with the contract. Subsequent to the notice of termination, payment was received for outstanding processing and storage fees due from Ecuador. In August 2013, the Company was notified that its affiliate in Ecuador was closed by the National Institute of Organic Donation (INDOT). As a result, the Company recorded an allowance for uncollectible receivables for the $150,000 processing and storage fee receivable due from Ecuador in the third quarter of fiscal 2013. During the fourth quarter of fiscal 2013, the Company began to bill the Ecuadorian clients directly for cord blood specimens that are stored at the Company’s facility in Oldsmar, Florida. In the future, if the Company loses revenue due to lack of payment from the foreign affiliates or the foreign affiliates are closed, the Company’s overall revenue will decrease.

In addition to the license fee, the Company earns a royalty on processing and storage fees on subsequent processing and storage revenues received by the licensee in the licensed territory and a fee on any sub-license agreements that are sold by the licensee where applicable. The Company processes and stores specimens sent directly from customers of licensees in Mexico, El Salvador, Guatemala, Ecuador, Panama, Honduras, Nicaragua, Costa Rica, Pakistan and Venezuela. The Company also processes and stores specimens from sub-licenses of Venezuela, who are Chile, Colombia and Peru. These fees are included in processing and storage fees revenue on the consolidated statements of comprehensive income (loss). As part of the accounting for royalty revenue from India, the Company uses estimates and judgments based on historical processing and storage volume in determining the timing and amount of royalty revenue to recognize. The Company periodically reviews license and royalty receivables for collectability and, if necessary, will record an expense for an allowance for uncollectible accounts. If the financial condition of the Company’s sub-licensees 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. If the licensee’s customer base were to decrease, it would negatively impact the Company’s ongoing license income.

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 Asset Purchase Agreement, (see Note 2), 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 November 30, 2019, 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 12 blood units per month. 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 144 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).

Patents and Trademarks

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.

Revenue Sharing Agreements

The Company has entered into Revenue Sharing Agreements (“RSAs”) with various parties whereby these parties contracted with the Company for a percentage of future storage revenues the Company generates and collects from clients in specific geographical areas. The RSAs have no definitive term or termination provisions. The sharing applies to the storage fees collected for all specified specimens in the area up to the number covered in the contract. When the number of specimens is filled, any additional specimens stored in that area are not subject to revenue sharing. As there are empty spaces resulting from attrition, the Company agrees to fill them as soon as possible. The parties typically pay the Company a non-refundable up-front fee for the rights to these future payments. The Company recognized these non-refundable fees as a long-term liability. Given the criteria under which these RSAs are established, cash flows related to these contracts can fluctuate from period to period. All payments made to the other parties to the RSAs are recognized as interest expense. At such time as the total payments can be determined, the Company will commence amortizing these liabilities under the effective interest method. The Company does not intend to enter into additional RSAs.

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. See Note 2. 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.

Recently Issued Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable, as the Company is a smaller reporting company.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements and supplementary data listed in the accompanying Index to Consolidated Financial Statements are attached as part of this report.

The following consolidated financial statements of Cryo-Cell International, Inc. are included in Item 8:

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of November 30, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss)

For the Fiscal Years Ended November 30, 2019 and 2018

Consolidated Statements of Cash Flows

For the Fiscal Years Ended November 30, 2019 and 2018

Consolidated Statements of Stockholders’ Deficit

For the Fiscal Years Ended November 30, 2019 and 2018

Notes to Consolidated Financial Statements

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are already included in the Notes to Consolidated Financial Statements included under this Item 8 or are inapplicable, and therefore have been omitted.

LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Cryo-Cell International, Inc.

Oldsmar, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cryo-Cell International, Inc. and subsidiaries (the “Company”), as of November 30, 2019, and the related consolidated statements of comprehensive income, changes in stockholders’ deficit, and cash flows for the year then ended and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Wipfli LLP

We have served as the Company’s auditor since 2019.

Atlanta, Georgia

February 28, 2020

LOGO

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Cryo-Cell International, Inc.

Oldsmar, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cryo-Cell International, Inc. and subsidiaries (the “Company”), as of November 30, 2018, and the related consolidated statements of comprehensive loss, changes in stockholders’ deficit, and cash flows for the year then ended and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

/s/ Porter Keadle Moore, LLC

We have served as the Company’s auditor since 2016.

Atlanta, Georgia

February 28, 2019

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	November 30,			November 30,
	2019			2018
ASSETS
Current Assets
Cash and cash equivalents	$	6,541,037		$	6,040,033
Marketable securities		904,053			875,689
Accounts receivable (net of allowance for doubtful accounts of $2,584,091 and $2,264,848, respectively)		6,097,331			5,867,335
Prepaid expenses		500,260			461,815
Inventory, current portion		1,084,533			1,260,557
Other current assets		260,397			254,465

Total current assets		15,387,611			14,759,894

Property and Equipment-net		1,846,467			1,493,401

Other Assets
Investment - Tiahne Stock		308,000			308,000
Intangible assets, net		1,249,254			1,341,336
Inventory, net of current portion		12,646,000			14,775,316
Goodwill		1,941,411			1,941,411
Deferred tax assets		9,079,994			7,656,897
Deposits and other assets, net		427,423			113,888

Total other assets		25,652,082			26,136,848

Total assets	$	42,886,160		$	42,390,143

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	1,369,111		$	1,261,653
Accrued expenses		2,085,180			2,702,788
Current portion of note payable		3,100,000			3,100,000
Deferred revenue		8,875,138			8,365,284

Total current liabilities		15,429,429			15,429,725

Other Liabilities
Deferred revenue, net of current portion		23,633,373			20,317,231
Contingent Consideration		3,495,057			4,282,975
Note payable, net of current portion and debt issuance costs		5,856,152			9,843,510
Long-term liability - revenue sharing agreements		1,425,000			1,425,000

Total other liabilities		34,409,582			35,868,716

Total liabilities		49,839,011			51,298,441

Commitments and contingencies (Note 13)		—			—
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; 13,598,909 issued and 7,510,884 outstanding as of November 30, 2019 and 13,596,409 issued and 7,800,833 outstanding as of November 30, 2018)		135,989			135,964
Additional paid-in capital		35,918,827			35,515,382
Treasury stock, at cost		(20,563,357	)		(19,571,113	)
Accumulated other comprehensive income		—			340,984
Accumulated deficit		(22,444,310	)		(25,329,515	)

Total stockholders’ deficit		(6,952,851	)		(8,908,298	)

Total liabilities and stockholders’ deficit	$	42,886,160		$	42,390,143

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

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	November 30,			November 30,
	2019			2018
Revenue:
Processing and storage fees	$	29,991,972		$	27,817,872
Public banking revenue		652,204			296,295
Licensee and royalty income		1,000,000			1,000,000
Product revenue		172,395			104,323

Total revenue		31,816,571			29,218,490

Costs and Expenses:
Cost of sales		10,036,175			8,539,662
Selling, general and administrative expenses		14,891,462			15,632,696
Impairment of public inventory		2,332,763			—
Change in fair value of contingent consideration		(742,918	)		(415,280	)
Research, development and related engineering		30,145			91,845
Depreciation and amortization		206,238			180,264

Total costs and expenses		26,753,865			24,029,187

Operating Income		5,062,706			5,189,303

Other Expense:
Other income (expense)		32,155			(24,723	)
Interest expense		(1,703,446	)		(1,546,900	)

Total other expense		(1,671,291	)		(1,571,623	)

Income before income tax expense		3,391,415			3,617,680
Income tax expense		(1,100,641	)		(4,472,504	)

Net Income (Loss)	$	2,290,774		$	(854,824	)

Net income (loss) per common share—basic	$	0.29		$	(0.11	)

Weighted average common shares outstanding—basic		7,794,828			7,463,051

Net income (loss) per common share—diluted	$	0.27		$	(0.11	)

Weighted average common shares outstanding—diluted		8,412,414			7,463,051

Other Comprehensive Income
Unrealized gain on marketable securities (net of tax)	$	—		$	300,119

Comprehensive Income (Loss)	$	2,290,774		$	(554,705	)

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

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	November 30,			November 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	2,290,774		$	(854,824	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense		401,311			317,326
Impairment of public inventory		2,332,763			—
Loss on disposal of property and equipment		—			162,307
Change in fair value of contingent consideration		(742,918	)		(415,280	)
Compensatory element of stock options		397,770			478,378
Provision for doubtful accounts		767,128			727,483
Deferred income tax expense		(1,517,289	)		2,378,491
Amortization of debt issuance costs		112,642			109,292
Changes in assets and liabilities:
Accounts receivable		(997,124	)		(1,347,773	)
Prepaid expenses		(38,445	)		(20,796	)
Inventory		(27,423	)		316,650
Other current assets		(5,932	)		(48,329	)
Goodwill		—			66,565
Deposits and other assets, net		15,696			(85,000	)
Accounts payable		107,458			(666,889	)
Accrued expenses		(599,200	)		120,313
Deferred revenue		3,825,996			4,095,416

Net cash provided by operating activities		6,323,207			5,333,330

Cash flows used in investing activities:
Purchases of property and equipment		(662,295	)		(446,163	)
Purchase of intangible asset		—			(200,000	)
Purchases of marketable securities and other investments, net		(28,364	)		(136,248	)
Purchase of Cord Use		—			(10,500,000	)

Net cash used in investing activities		(690,659	)		(11,282,411	)

Cash flows from financing activities:
Treasury stock purchases		(992,244	)		—
Repayments of note payable		(4,100,000	)		(3,291,665	)
Proceeds from the exercise of stock options		5,700			170,925
Proceeds from note payable		—			9,000,000
Issuance costs associated with the proceeds from the note payable		—			(169,300	)
Payment of Cord Use earnout		(45,000	)		—

Net cash (used in) provided by financing activities		(5,131,544	)		5,709,960

Increase (decrease) in cash and cash equivalents		501,004			(239,121	)
Cash and cash equivalents - beginning of period		6,040,033			6,279,154

Cash and cash equivalents - end of period	$	6,541,037		$	6,040,033

Supplemental non-cash investing activities:
Unrealized gain on marketable securities, net of tax	$	—		$	300,119
Cumulative-effect adjustment due to the adoption of ASU 2016-01	$	(340,984	)	$	—

Assets acquired and liabilities assumed in acquisitions:
Assets acquired in acquisition	$	—		$	20,103,661

Liabilities assumed in acquisition	$	—		$	1,405,406

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

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT


					Additional					Other						Total
	Common Stock				Paid-In		Treasury			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		Stock			Income			Deficit			Deficit
Balance at November 30, 2017		12,899,517	$	128,995	$	31,373,048	$	(19,571,113	)	$	40,865		$	(24,474,691	)	$	(12,502,896	)
Common stock issued		696,892	$	6,969	$	3,663,956										$	3,670,925
Compensatory element of stock options						478,378											478,378
Unrealized loss on available for sale securities											300,119						300,119
Net loss														(854,824	)		(854,824	)

Balance at November 30, 2018		13,596,409	$	135,964	$	35,515,382	$	(19,571,113	)	$	340,984		$	(25,329,515	)	$	(8,908,298	)

Common stock issued		2,500		25		5,675											5,700
Compensatory element of stock options						397,770											397,770
Cumulative-effect adjustment due to the adoption of ASU 2016-01											(340,984	)		340,984			—
ASC 606 adoption adjustment, net of tax ($94,192)														253,447			253,447
Treasury Stock								(992,244	)								(992,244	)
Net income														2,290,774			2,290,774

Balance at November 30, 2019		13,598,909	$	135,989	$	35,918,827	$	(20,563,357	)	$	—		$	(22,444,310	)	$	(6,952,851	)

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

CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2019 and 2018

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business.

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, cellular processing and cryogenic cellular storage, with a current focus on the collection and preservation of umbilical cord blood stem cells for family use, the manufacture of PrepaCyte CB units, the processing technology used to process umbilical cord blood stem cells and cellular processing and 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.

On October 10, 2001, Saneron Therapeutics, Inc. merged into one of the Company’s wholly owned subsidiaries, CCEL Bio-Therapies, Inc. (”CCBT”), which then changed its name to Saneron CCEL Therapeutics, Inc. (“SCTI” or ”Saneron”). As part of the merger, the Company contributed 260,000 shares of its common stock, whose fair value was $1,924,000 and 195,000 common shares of another of its subsidiaries, Stem Cell Preservation Technologies, Inc., whose fair value was $3,900. At the conclusion of the merger, the Company retained a 43.42% non-controlling interest in the voting stock of SCTI. As of November 30, 2019 and 2018, the Company had an interest of approximately 33% in the voting stock of SCTI. The accompanying consolidated financial statements as of November 30, 2019 and 2018 reflect the investment in SCTI under the equity method of accounting.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements as of November 30, 2019 and November 30, 2018 and for the years then ended includes the accounts of the Company and all of its subsidiaries, which are inactive. All intercompany balances have been eliminated upon consolidation.

Concentration of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk are principally cash and cash equivalent accounts in financial institutions, which often exceed the Federal Deposit Insurance Corporation (FDIC) limit. The Company places its cash with high quality financial institutions and believes it is not exposed to any significant credit risk. The Company may from time to time invest some of its cash funds in certificates of deposit and bond investments maintained by brokers who are insured under the Securities Investor Protection Corporation (SIPC). The Company believes these are conservative investments with a low risk for any loss of principal. The Company regularly assesses its marketable security investments for impairment and adjusts its investment strategy as it deems appropriate.

The Company depends on one supplier for the source of its collection kits, a critical component of the umbilical cord blood stem cell collection process. However, the Company believes that alternative sources of supply are available.

The Company depends on three suppliers for the supply and manufacturing of the PrepaCyte CB units. However, the Company believes that alternative sources of supply and manufacturing are available.

The Company depends on one third party, the National Marrow Donor Program, to manage the public umbilical cord stem cells that are needed for transplant.

During fiscal 2019 and 2018, there were no concentration of risks.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

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.

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 life-time 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)	Processing

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

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 life-time, the storage fee is paid at the beginning of the storage period (prepaid plans). Alternatively, the Company 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 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 November 30, 2019, the total aggregate transaction price allocated to the unsatisfied performance obligations was recorded as deferred revenue amounting to $32,508,511, which will be recognized ratably on a straight-line basis over the contractual period of which $8,875,138 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 myeloblative 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

Prior to the adoption of ASC 606, the Company expensed in the period, all commissions paid to its internal and external sales representatives the Company employs and to its customers for generating new contracts. With the adoption of ASC 606 as of December 1, 2018, 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 exceeds the typical commission payment to a sales representative is recorded as a reduction to revenue under ASC 606. During the twelve months ended November 30, 2019, the Company recorded $35,300, in commission payments to customers under the RAF program as a reduction to revenue. As of December 1, 2018, the Company capitalized $329,231 in incremental contract acquisition costs related to contracts that were not completed, net of the cumulative amortization expense of $66,533 through the adoption date. The Company did not record any impairment losses in relation to costs capitalized. For the twelve months ended November 30, 2019, the Company capitalized additional contract acquisition costs of $87,518, net of amortization expense.

b)	Public banking revenue

The Company sells and provides units not likely to be of therapeutic use for research to qualified organizations and companies operating under Institutional Review Board approval. 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.

The adoption of ASC 606 did not have an impact on the timing of revenue recognition for any of the Company’s revenue streams.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by products and services:


	Twelve months ended
	November 30, 2019		November 30, 2018
Processing and storage fees	$	29,991,972	$	27,817,872
Public banking revenue		652,204		296,295
Licensee and royalty income		1,000,000		1,000,000
Product revenue		172,395		104,323

	$	31,816,571	$	29,218,490

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


	November 30, 2019		At Adoption
Contract assets (sales commissions)	$	398,535	$	329,231
Accounts receivables	$	6,097,331	$	5,867,335
Short-term contract liabilities (deferred revenue)	$	8,875,138	$	8,365,284
Long-term contract liabilities (deferred revenue)	$	23,633,373	$	20,317,231

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 twelve months ended November 30, 2019.

The following table presents changes in the Company’s contract assets and liabilities during the twelve months ended November 30, 2019:


	Balance at December 1, 2018		Additions		Deductions			Balance at November 30, 2019
Contract assets (sales commissions)	$	329,231	$	88,569	($	19,265	)	$	398,535
Accounts receivables	$	5,867,335	$	36,579,504	($	36,349,508	)	$	6,097,331
Contract liabilities (deferred revenue)	$	28,682,515	$	18,759,963	($	14,933,967	)	$	32,508,511

Revenue Sharing Agreements

The Company entered into Revenue Sharing Agreements (“RSAs”) prior to 2002 with various third and related parties. The Company’s RSAs provide that in exchange for a non-refundable up-front payment, the Company would share for the duration of the contract a percentage of its future storage revenue collected from the annual storage fees charged related to a certain number of specimens that originated from specific geographical areas. The RSAs have no definitive term or termination provisions. The sharing applies to the storage fees collected for all specified specimens in the area up to the number covered in the contract. When the number of specimens is filled, any additional specimens stored in that area are not subject to revenue sharing. As there are empty spaces resulting from attrition, the Company agrees to fill them as soon as possible. The Company has reflected these up-front payments as long-term liabilities on the accompanying consolidated balance sheets. The Company does not intend to enter into additional RSAs.

In the future, the Company could reverse the liability relating to the RSAs over an appropriate period of time, based on the Company’s expectations of the total amount of payments it expects to pay to the other party under the particular RSA. However, the RSAs do not establish a finite term or time frame over which to estimate the total payments and the Company had not previously estimated and has concluded that it is not currently practicable to estimate the projected cash flows under the RSAs. At present, the Company intends to defer the reversal of the liability, until such time as these amounts can

be determined. During the periods when the Company defers the reversal of the liability, the quarterly payments made during these periods will be treated as interest expense, which will be recognized as the payments become due. In future periods, if a portion of the liability can be de-recognized based on the effective interest method, the payments will be allocated between interest and amortization of the liability. As cash is paid out to the other party during any period, the liability would be de-recognized based on the portion of the total anticipated payouts made during the period, using the effective interest method. That is, a portion of the payment would be recorded as interest expense, and the remainder would be treated as repayment of principal, which would reduce the liability.

License and Royalty Agreements

In addition to the license fee, the Company earns processing and storage fees on subsequent processing and storage revenues received by the licensee in the licensed territory and a fee on any sub-license agreements that are sold by the licensee where applicable. These fees are included in processing and storage fees revenue on the consolidated statements of comprehensive income (loss). As part of the accounting for royalty revenue from India, the Company uses estimates and judgments based on historical processing and storage volume in determining the timing and amount of royalty revenue to recognize. The Company periodically reviews license and royalty receivables for collectability and, if necessary, will record an expense for an allowance for uncollectible accounts.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with a maturity date of three months or less at the time of purchase.

Accounts Receivable

Inventory

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided primarily by the straight-line method over the estimated useful lives of the related assets. Estimated useful lives of property and equipment are as follows:


Furniture and equipment		3-10 years

Leasehold improvements		Lesser of 8-10 years or the lives of the leases

Computer software – internal use		1-5 years

Leasehold improvements are amortized over the shorter of the respective life of the lease or the estimated useful lives of the improvements. Upon the sale or retirement of depreciable assets, the cost and related accumulated depreciation is removed from the accounts and the resulting profit or loss is reflected in earnings. Expenditures for maintenance, repairs and minor betterments are expensed as incurred.

The Company capitalizes external direct costs of materials and services consumed in developing or obtaining internal-use computer software. Capitalized internal-use software costs, which are included in property and equipment, are depreciated over the estimated useful lives of the software.

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 indicators of impairment as of November 30, 2019 and November 30, 2018, respectively.

Goodwill

Goodwill represents the excess of the purchase price of the assets acquired from Cord:Use (Note 2) 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.

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.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For fiscal 2019 and 2018 the Company had no uncertain tax provisions and therefore no material provisions for interest or penalties related to uncertain tax positions.

Research, Development and Related Engineering Costs

Research, development and related engineering costs are expensed as incurred.

Cost of Sales

Cost of sales represents the associated expenses resulting from the processing, testing, storage and delivery of the umbilical cord blood. Cost of sales related to PrepaCyte CB represents the associated expenses resulting from the manufacturing of the PrepaCyte CB units. Cost of sales related to the Public Cord Blood Bank represents the associated expenses resulting from the collection, shipping, processing and storage of the cord blood stem cell units.

Advertising

Advertising costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). Total advertising expense for the fiscal years ended November 30, 2019 and 2018 was approximately $981,448 and $986,664, respectively.

Rent Expense

Rent is expensed on a straight-line basis over the term of the lease and is included in cost of sales and selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). All leases include provisions for escalations and related costs.

Legal Expense

Legal fees are expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss).

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.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of November 30, 2019 and November 30, 2018, respectively, segregated among the appropriate levels within the fair value hierarchy:


	Fair Value at			at November 30, 2019 Using
Description	November 30, 2019			Level 1		Level 2		Level 3
Assets:
Marketable securities	$	904,053		$	904,053		—		—

Total	$	904,053		$	904,053		—		—

Liabilities:
Contingent consideration	$	3,495,057		$	—		—	$	3,495,057

Total	$	3,495,057		$	—		—	$	3,495,057

Contingent Consideration:
Beginning Balance as of November 30, 2018	$	4,282,975
Subtractions – Cord:Use earnout payment		(45,000	)
Fair value adjustment as of November 30, 2019		(742,918	)

Ending balance as of November 30, 2019	$	3,495,057


			Fair Value Measurements
	Fair Value at		at November 30, 2018 Using
Description	November 30, 2018		Level 1		Level 2		Level 3
Assets:
Trading securities	$	68,816	$	68,816		—		—
Available-for-sale securities		806,873		806,873		—		—

Total	$	875,689	$	875,689		—		—

Liabilities:
Contingent consideration	$	4,282,975	$	—		—	$	4,282,975

Total	$	4,282,975	$	—		—	$	4,282,975

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 of identical securities in active markets and are therefore classified within Level 1 of the fair value hierarchy. For trading securities, there was approximately ($28,000) in unrealized holding losses, respectively, recorded in other income and expense on the accompanying consolidated statements of comprehensive income (loss) for the twelve months ended November 30, 2018.

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 income (loss). For available-for-sale securities, there was approximately $300,000 in unrealized holding gains (loss), net of tax, respectively, reported as comprehensive income on the accompanying statements of comprehensive income (loss) for the year ended November 30, 2018.

Marketable securities - Effective December 1, 2018, the Company adopted ASU 2016-01, which requires equity securities with readily determinable fair values to be measured at fair value with the changes in fair value recognized through net income. Such securities are no longer reflected as trading or available-for-sale but are noted as marketable securities. As a result of this accounting change, in the first quarter of 2019, the Company recognized a cumulative-effect adjustment from accumulated other comprehensive income to retained earnings of approximately $341,000 in the consolidated statements of stockholders’ deficit as of the date of adoption. Prior periods have not been restated for the impact of this accounting change. There was $28,000 in unrealized holding gain recorded in other income and expense on the accompanying consolidated statements of comprehensive income (loss) for the twelve months ended November 30, 2019.

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. See Note 2. 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 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. 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 myeloblative 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. 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. Upon the adoption of 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 November 30, 2019. 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.

Income (Loss) per Common Share

Basic income (loss) per common share was computed by dividing net income by the weighted average number of common shares outstanding for the fiscal year ended or as of the date indicated. Diluted income per common share includes the effect of all dilutive stock options. The composition of basic and diluted net (loss) income per share is as follows:


	November 30, 2019		November 30, 2018
Numerator:
Net income (loss)	$	2,290,774	($	854,824	)
Denominator:
Weighted-average shares outstanding-basic		7,794,828		7,463,051
Dilutive common shares issuable upon exercise of stock options		617,586		—

Weighted-average shares-diluted		8,412,414		7,463,051

Income(Loss) per share:
Basic	$	0.29	($	0.11	)

Diluted	$	0.27	($	0.11	)

For the year ended November 30, 2019, the Company excluded the effect of 70,136 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 year ended November 30, 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.

Stock Compensation

As of November 30, 2019, the Company has two stock-based employee compensation plans, which are described in Note 11 to the consolidated financial statements. The Company’s stock-based employee compensation plan became effective December 1, 2011 as approved by the Board of Directors and approved by the stockholders at the 2012 Annual Meeting. The Company recognized approximately $398,000 and $478,000 for the fiscal years ended November 30, 2019 and November 30, 2018, respectively, of stock compensation expense. The Company reversed $444,000 of stock compensation expense during the twelve months ended November 30, 2018 as the Co-CEOs each opted to receive a lump sum cash payment in lieu of 30,000 shares of earned common stock pursuant to the terms of their Employment Agreements. The reversal had no impact on the accompanying consolidated statements of comprehensive income (loss) as other compensation expense was recognized to offset the reversal.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the reported results of operations.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles – Goodwill and Other Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This update addresses how a customer should account for the costs of implementing a cloud computing service arrangement (also referred to as a “hosting arrangement”). Entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract in the same way as accounting for implementation costs incurred to develop or obtain software for internal use using the guidance in Topic 350-40. The amendments address when costs should be capitalized rather than expensed, the term to use when amortizing capitalized costs, and how to evaluate the unamortized portion of these capitalized implementation costs for impairment. The ASU also includes guidance on how to present

implementation costs in the financial statements and creates additional disclosure requirements. The guidance is effective for annual periods beginning after December 15, 2019, and interim periods within that reporting period. The Company is currently evaluating the effect that the updated standard will have on our financial statements.

In June 2018, the FASB issued Accounting Standards Update No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update simplifies the accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within that reporting period. 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 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.

Note 2 – Acquisition

The aggregate consideration payable at closing under the Purchase Agreement was $14,000,000, with $10,500,000 paid in cash and the balance paid through the delivery to Seller of 465,426 shares of Cryo-Cell’s common stock, par value $0.01 per share (“Common Stock”), at $7.52 per share. In addition, Cryo-Cell assumed certain limited liabilities incurred by Cord:Use in connection with its business that were unpaid as of the closing date and that directly relate to the services to be provided after closing by Cryo-Cell. Cryo-Cell also assumed certain of Cord:Use’s contracts and the obligations arising therefrom after the closing.

Additionally, Cord:Use is entitled to an earnout from Cryo-Cell’s sale of the public cord blood inventory from and after closing. Each calendar year after the closing, Cryo-Cell will pay to Cord:Use 75% of all gross revenues, net of any returns, received from the sale of public cord blood inventory in excess of $500,000. Such payments will be made quarterly, within 30 days of the end of the last month of each calendar quarter, until the public cord blood inventory is exhausted. In addition, each calendar year after closing, until the public cord blood inventory is exhausted, for every $500,000 of retained gross

revenues, net of any returns, received and retained by Cryo-Cell in excess of the initial $500,000 retained by Cryo-Cell during such year, Cryo-Cell will deliver $200,000 worth of Cryo-Cell Common stock to Cord:Use, up to an aggregate value of $5,000,000. Cord:Use is also entitled to a portion of the gross profits generated, or deemed to have been generated, by Cryo-Cell from its ownership of the Tianhe Capital Stock.

The Company incurred $580,000 in costs associated with the acquisition of Cord:Use.

The following summarizes the fair value of the consideration of the Acquisition as of the purchase date:


Consideration
Cash	$	10,500,000
Cryo-Cell common stock		3,500,000
Cord blood inventory earnout		4,698,255

Consideration	$	18,698,255

The following summarizes the allocation of the total purchase price for the Acquisition:


Accounts receivable	$	188,019
Inventory		16,037,957
Prepaid expenses		68,867
Property and equipment		568,407
Other asset—Tianhe capital stock		308,000
Brand		31,000
Customer relationships		960,000

Total identifiable net assets acquired		18,162,250

Less: Deferred revenue		(1,405,406	)

Goodwill		1,941,411

Total	$	18,698,255

The Company has assigned goodwill to the segment reporting unit for cellular processing and cryogenic storage of umbilical cord blood and cord tissue stem cells for family use. Goodwill includes the fair value of the assembled workforce. The fair value of the assembled workforce was estimated by applying a cost approach, representing a level 2 measurement. The goodwill is not deductible for income tax purposes.

The property and equipment are stated at an estimate of fair value.

The Tianhe capital stock is an investment that is valued based on fair value. Cord:Use had a supply and equity participation agreement with Tianhe who is engaged in medical and life science research that involves the use of stem cells derived from umbilical cord blood units in clinical trials for humans.

The fair value of the company brand and customer relationships were estimated by applying an income approach, representing a level 3 measurement. The fair value estimates are based on (1) an assumed discount rate of 19%, (2) long-term sustainable growth rate of 3%, (3) market royalty rate of 1% and (4) one and thirty-year lives for the brand and customer relationships, respectively.

The fair values of the assets acquired includes public cord blood banking inventory of $16,037,957 which the Company expects to sell to outside customers. The Company also acquired accounts receivable of $188,019 and prepaid expenses of $68,867.

The fair values of the license agreement and customer relationships reflect the anticipated cash flows over their expected lives.

The fair value of deferred revenue is valued based on the cost method. Deferred revenues are pre-payment fees for future storage of umbilical cord blood and/or cord tissue specimens. The short- and long-term deferred revenue is $330,508 and $1,074,898, respectively.

Unaudited Pro forma Results

The following table provides the Company’s consolidated unaudited pro forma revenues, net income per basic and diluted common share had the results of the acquired businesses’ operations been included in its operations commencing on December 1, 2016, based on available information related to the respective operations. This proforma information presented is not necessarily indicative either of the combined results of operations that actually would have been realized by the Company had the acquisition been consummated at the beginning of the period for which the pro forma information is presented, or of future results, and does not account for any operation improvements to be made by the Company post-acquisition.


	Twelve months ended November 30, 2018
Revenue	$	31,388,278
Net income (loss)	($	2,658,679	)
Earnings (loss) per share:
Basic	($	0.36	)
Diluted	($	0.36	)

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 Public Cord Blood Bank includes finished goods that are specimens that are available for resale. The Company considers inventory in the Public Cord Blood Bank that has not completed all testing to determine viability to be work in process. Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge of $2,332,763 was recognized during the second quarter of fiscal 2019 to reduce inventory from cost to net realizable value and is included in the accompanying consolidated statements of comprehensive income (loss).

The components of inventory at November 30, 2019 and November 30, 2018 are as follows:


	As of November 30, 2019			As of November 30, 2018
Raw materials	$	—		$	—
Work-in-process		149,972			188,085
Work-in-process – Public Bank		—			—
Finished goods		52,451			5,262
Finished goods – Public Bank		13,491,375			15,831,081
Collection kits		44,453			19,163
Inventory reserve		(7,718	)		(7,718	)

Total inventory	$	13,730,533		$	16,035,873

Note 4– Intangible Assets

Intangible assets were as follows as of November 30, 2019 and 2018:


	Useful lives	November 30, 2019			November 30, 2018
Patents	10-20 years	$	234,570		$	234,570
Less: Accumulated amortization			(35,526	)		(23,663	)
License agreement	10 years		470,000			470,000
Less: Intangible asset impairment			(185,000	)		(185,000	)
Less: Accumulated amortization			(155,194	)		(123,528	)
Customer relationships – Prepacyte^®CB	15 years		41,000			41,000
Less: Intangible asset impairment			(26,267	)		(26,267	)
Less: Accumulated amortization			(6,329	)		(5,276	)
Brand	1 year		31,000			31,000
Less: Accumulated amortization			(31,000	)		(15,500	)
Customer relationships – Cord:Use	30 years		960,000			960,000
Less: Accumulated amortization			(48,000	)		(16,000	)

Net Intangible Assets		$	1,249,254		$	1,341,336

Expected amortization related to these intangible assets for each of the next five fiscal years and for periods thereafter is as follows:

Fiscal years ending November 30:


2020	$	67,667
2021	$	67,667
2022	$	67,667
2023	$	67,667
2024	$	67,667
Thereafter	$	910,919

Total	$	1,249,254

Amortization expense of intangibles was approximately $92,000 and $76,000 for the twelve months ended November 30, 2019 and November 30, 2018, respectively.

Note 5– 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 Company’s 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. On June 11, 2018, the Company entered into a Second Amendment to Credit Agreement with TCB. Pursuant to the terms of the Second Amendment to Credit Agreement, TCB increased the current outstanding principal amount of the loan from TCB by $9,000,000 to finance a portion of the purchase price of the Cord:Use Purchase. In connection therewith, Cryo-Cell executed and delivered to TCB a Second Amended and Restated Promissory Note, in the principal amount of $15,500,000. As of November 30, 2019, and November 30, 2018, the Company paid interest of $646,744 and $589,583, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive income (loss).

Collateral of the term and subordinated loans includes all money, securities and property of the Company.

The Company incurred debt issuance costs related to the term and subordinated loans in the amount of $548,085 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 November 30, 2019, and November 30, 2018, $112,642 and $109,293, respectively, of the debt issuance costs were amortized and are reflected in interest expense on the accompanying consolidated statements of comprehensive income (loss).

As of November 30, 2019, and November 30, 2018, the note payable obligation was as follows:


	November 30, 2019			November 30, 2018
Note payable	$	9,108,433		$	13,208,433
Unamortized debt issuance costs		(152,281	)		(264,923	)

Net note payable	$	8,956,152		$	12,943,510

Current portion of note payable	$	3,100,000		$	3,100,000
Long-term note payable, net of debt issuance costs		5,856,152			9,843,510

Total	$	8,956,152		$	12,943,510

Future principal payments under the note payable obligation are as follows:


Years ending November 30:	Amount
2020		3,100,000
2021		3,100,000
2022		2,908,433

Total	$	9,108,433

Interest expense on the note payable for the years ended November 30, 2019 and November 30, 2018 was as follows:


	November 30, 2019		November 30, 2018
Interest expense on notes payable	$	646,744	$	589,583
Debt issuance costs		112,642		109,293

Total interest expense	$	759,386	$	698,876

Note 6– Segment Reporting

During the third quarter of fiscal 2018, the Company purchased the assets and assumed contracts that Cord:Use used in the operation of its cord blood business (See Note 2). The Company evaluated and determined that this acquisition qualifies as a separate segment.

The Company is organized in three reportable segments:

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”).

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”).

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.

The following table shows, by segment: net revenue, cost of sales, operating profit, depreciation and amortization, interest expense, income tax (expense) benefit, other comprehensive loss, and assets for the years ended November 30, 2019 and 2018:


	For the years ended November 30,
	2019		2018
Net revenue:
Umbilical cord blood and cord tissue stem cell service	$	30,991,972	$	28,817,872
PrepaCyte CB		172,395		104,323
Public cord blood banking		652,204		296,295

Total net revenue	$	31,816,571	$	29,218,490

Cost of sales:
Umbilical cord blood and cord tissue stem cell service	$	8,490,824	$	7,744,208


PrepaCyte CB		249,487			169,397
Public cord blood banking		1,295,864			626,057

Total cost of sales	$	10,036,175		$	8,539,662

Operating profit:
Umbilical cord blood and cord tissue stem cell service	$	8,152,475		$	5,620,394
PrepaCyte CB		(113,346	)		(101,329	)
Public cord blood banking		(2,976,423	)		(329,762	)

Total operating profit	$	5,062,706		$	5,189,303

Depreciation and amortization:
Umbilical cord blood and cord tissue stem cell service	$	365,057		$	281,072
PrepaCyte CB		36,254			36,254
Public cord blood banking		—			—

Total depreciation and amortization	$	401,311		$	317,326

Interest expense:
Umbilical cord blood and cord tissue stem cell service	$	1,703,446		$	1,546,900
PrepaCyte CB		—			—
Public cord blood banking		—			—

Total interest expense	$	1,703,446		$	1,546,900

Income tax (expense) benefit:

Umbilical cord blood and cord tissue stem cell service	$	(1,100,641	)	$	(4,472,504	)

PrepaCyte CB		—			—
Public cord blood banking		—			—

Total income tax (expense) benefit	$	(1,100,641	)	$	(4,472,504	)

Other comprehensive income (loss):
Umbilical cord blood and cord tissue stem cell service	$	—		$	300,119
PrepaCyte CB		—			—
Public cord blood banking		—			—

Total other comprehensive income (loss)	$	—		$	300,119

The following table shows the assets by segment as of November 30, 2019 and November 30, 2018:


	2019		2018
Assets:
Umbilical cord blood and cord tissue stem cell service	$	28,975,002	$	26,239,260
PrepaCyte CB		289,804		319,802
Public cord blood banking		13,621,354		15,831,081

Total assets	$	42,886,160	$	42,390,143

NOTE 7—ALLOWANCE FOR DOUBTFUL ACCOUNTS

The activity in the allowance for doubtful accounts is as follows for the years ended November 30, 2019 and 2018:


December 1, 2017	$	2,098,991
Bad Debt Expense		727,483
Write-offs		(907,263	)
Recoveries		345,637

November 30, 2018		2,264,848
Bad Debt Expense		767,128
Write-offs		(756,688	)
Recoveries		308,803

November 30, 2019	$	2,584,091

NOTE 8—PROPERTY AND EQUIPMENT

The major classes of property and equipment are as follows:


	2019			2018
Furniture and equipment	$	6,568,205		$	5,905,910
Leasehold improvements		1,200,934			1,200,934
Computer software – internal use		1,194,039			1,194,039

		8,963,178			8,300,883
Less: Accumulated Depreciation		(7,116,711	)		(6,807,482	)

Total Property and Equipment	$	1,846,467		$	1,493,401

Depreciation expense was approximately $309,000 in fiscal 2019 and approximately $241,000 in fiscal 2018 of which approximately $195,000 and $137,000 is included in cost of sales, respectively, in the accompanying consolidated statements of comprehensive income (loss).

NOTE 9—ACCRUED EXPENSES

Accrued expenses are as follows:


	November 30,
	2019		2018
Professional fees	$	115,000	$	14,867
Payroll and payroll taxes (1)		513,108		1,021,004
Interest expense		950,300		864,676
General expenses		330,726		478,449
Federal and state taxes		176,046		323,792

	$	2,085,180	$	2,702,788

(1)	– Payroll and payroll taxes includes accrued vacation and wages due as of November 30, 2019 and November 30, 2018.

NOTE 10—INCOME TAXES

The Company recorded the following income tax provision for the years ended November 30, 2019 and 2018.


	2019			2018
Current:
Federal	$	1,637,000		$	1,467,000
State		769,000			622,000
Foreign		108,000			108,000

Subtotal		2,514,000			2,197,000
Deferred:
Federal		(1,106,000	)		2,716,000
State		(307,000	)		(441,000	)
Foreign		—			—

Subtotal		(1,413,000	)		2,275,000

Income Tax Expense	$	1,101,000		$	4,472,000

As of November 2019 and 2018, the tax effects of temporary differences that give rise to the deferred tax assets are as follows:


	2019			2018
Tax Assets:
Deferred income (Net of Discounts)	$	6,256,000		$	5,157,000
Tax over book basis in unconsolidated affiliate		1,224,000			1,214,000
Accrued payroll		82,000			257,000
Reserves and other accruals		1,589,000			868,000
Stock compensation		411,000			330,000
Depreciation and Amortization		450,000			428,000
Transaction costs		18,000			18,000
RSA Buy-out		1,095,000			1,210,000

Total Assets:		11,125,000			9,482,000
Tax Liabilities:
Unrealized gains on marketable securities		(117,000	)		(112,000	)
NOL’s credits, and other carryforward items		(282,000	)		(79,000	)

Total Liabilities:		(399,000	)		(191,000	)
Less: Valuation Allowance		(1,646,000	)		(1,634,000	)

Net Deferred Tax Asset	$	9,080,000		$	7,657,000

A valuation allowance covering the deferred tax assets of the Company for November 30, 2019 and November 30, 2018, has been provided as the Company does not believe it is more likely than not that all of the future income tax benefits will be realized. The valuation allowance changed by approximately ($12,000) and ($711,000) during the years ended November 30, 2019 and 2018, respectively. The change for year ended November 30, 2019 was primarily due to changes in statutory rates. The change for year ended November 30, 2018 was a result of the revaluation impact of the Tax Cuts and Jobs Act of 2017 which reduced the federal tax rate from 34% to 21%.

The Company evaluates the recoverability of our deferred tax assets as of the end of each quarter, weighing all positive and negative evidence, and are required to establish and maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

The positive evidence that weighed in favor of releasing the allowance as of November 30, 2017 and ultimately outweighed the negative evidence against releasing the allowance was the following:

•

Identifiable sources of future income relating to the Company’s deferred revenue accounts;

•

Certainty as to the amount available of deferred tax assets and nature in which the deferred tax assets reverse;

•

Profitability for years ended November 30, 2015 and 2016 and our expectations regarding the sustainability of these profits;

•

The Company’s three-year cumulative position as of November 30, 2017; and

•

The Company’s taxable income projection for fiscal years ending November 30, 2018, 2019 and 2020.

The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. The Tax Act makes significant changes to provision of the Internal Revenue Code, including changing the corporate tax rate to a flat 21% rate as of January 1, 2018. This requires the Company’s net deferred tax assets and liabilities to be revalued at the newly enacted U.S. corporate rate. The impact will be recognized in tax expense in the year of enactment. Based on evaluation, the Company’s discrete expense for the rate impact will be approximately $3.1 million. Based on the Company’s evaluation, the Tax Act is not expected to impact the recoverability of its deferred tax asset.

A reconciliation of the income tax provision with the amount of tax computed by applying the federal statutory rate to pretax income follows:


	For the Years Ended November 30
	2019		%		2018		%
Tax at Federal Statutory Rate		733,198		21.00		799,507		22.10
State Income Tax Effect		220,527		6.32		216,608		5.99
Valuation Allowance Release		—		0.00		—		0.00
Tax Compensation Differences		26,330		0.75		260,845		7.21


Permanent Disallowances		76,775		2.20			149,141		4.12
Impact of Tax Reform		—		0.00			3,078,094		85.08
Deferred Repricing		24,533		0.70			(28,337	)	(0.78	)
Other		19,278		(0.10	)		(3,354	)	(0.09	)
Foreign tax credits		(108,150	)	(3.10	)		(108,314	)	(2.99	)
Foreign tax withholding		108,150		3.10			108,314		2.99

Total income taxes	$	1,100,641		30.87		$	4,472,504		123.63

The Company adopted the accounting standard for uncertain tax positions, ASC 740-10, on December 1, 2007. As required by the standard, 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. There were no uncertain tax positions as of November 30, 2019 and 2018.

There was approximately $2,801,000 and $2,204,000 of U.S. income taxes paid for the fiscal years ended November 30, 2019 and November 30, 2018, respectively.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the years ended November 30, 2019 and 2018, the Company had no material provisions for interest or penalties related to uncertain tax positions.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of November 30, 2019:


Jurisdiction	Open Tax Years	Examinations in Process
United States – Federal Income Tax	2015 – 2018	N/A
United States – Various States	2013 – 2018	N/A

NOTE 11—STOCKHOLDERS’ EQUITY.

Common Stock Issuances

During the year ended November 30, 2019, the Company issued 2,500 common shares to option holders who exercised options for $5,700. During the year ended November 30, 2018, the Company issued 63,750 common shares to option holders who exercised options for $170,925.

Employee Stock Incentive Plan

The Company maintains the 2006 Stock Incentive Plan (the “2006 Plan”) under which it has reserved 1,000,000 shares of the Company’s 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 November 30, 2019, and November 30, 2018, there were 325,000 and 380,000 options issued, but not yet exercised, under the 2006 Plan, respectively. As of November 30, 2019, there were 0 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 Company’s 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 Company’s common stock reserved for issuance to 2,500,000 shares. In October 2019, the Board of Directors approved amendments to the plan, subject to ratification by the stockholders, which occurred at the Company’s 2019 Annual Meeting of Stockholders on November 21, 2019. See the Company’s Proxy Statement filed with the Securities and Exchange Commission on October 29, 2019 in connection with the Company’s 2019 Annual Meeting (the “2019 Proxy Statement”). As of November 30, 2019, there were 763,274 service-based options issued, 129,729 service-based restricted common shares granted, 530,851 performance-based and 116,218 market-based restricted common shares granted under the 2012 Plan. As of November 30, 2018, there were 621,365 service-based options issued, 129,729 service-based restricted common shares granted, 823,415 performance-based and 116,240 market-based restricted common shares granted under the 2012 Plan. As of November 30, 2019, there were 667,479 shares available for future issuance under the 2012 Plan.

The Company granted 1,500 options to an optionee during the second fiscal quarter of 2019 as approved by the Board of Directors. These options were not issued under either the 2006 or 2012 Plan.

ratification of certain equity-based awards and stock issuances made pursuant to the Company’s incentive Plans, as well as the approval of certain amendments to those incentive Plans. All such matters presented to the stockholders were duly approved by the stockholders at the 2019 Annual Meeting. Accordingly, all references contained herein to the number of options or shares of common stock granted under the Company’s incentive Plans, the value thereof, and the number of securities that remain available for future issuance under the Company’s 2012 Plan for all periods presented in this Annual Report on Form 10-K have been calculated and are being presented after taking into account the ratification and surrender of the Defective Awards and Issuances in accordance with the Recommended Disposition, as further described in the 2019 Proxy Statement.

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 Company’s stock over the most recent period commensurate with the expected life of the Company’s 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 based upon historical exercise data. Expected dividends are based on the historical trend of the Company not issuing dividends.

Variables used to determine the fair value of the options granted for the years ended November 30, 2019 and November 30, 2018 are as follows:


	2019		2018
Weighted average values:
Expected dividends		0%		0%
Expected volatility		64.02%		50.85%
Risk free interest rate		1.55%		2.67%
Expected life		8.4 years		5.0 years

Stock option activity for options with only service-based vesting conditions for the year ended November 30, 2019, was as follows:


				Weighted		Weighted Average
				Average		Remaining		Aggregate
	Options			Exercise Price		Contractual Term (Years)		Intrinsic Value
Outstanding at November 30, 2018		1,001,365		$	2.77		3.97	$	4,580,967
Granted		143,409			7.55				4,851
Exercised		(2,500	)		2.28				14,175
Expired/forfeited		(52,500	)		4.82				143,450

Outstanding at November 30, 2019		1,089,774			3.30		3.91	$	4,648,111

Exercisable at November 30, 2019		964,540			2.75		3.33	$	4,644,277

The weighted average grant date fair value of options granted during the years ended November 30, 2019 and November 30, 2018 was $5.02 and $3.23, respectively.

The aggregate intrinsic value represents the total value of the difference between the Company’s 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 November 30, 2019 or November 30, 2018, as applicable. The intrinsic value of the Company’s stock options changes based on the closing price of the Company’s stock.

Significant option groups outstanding and exercisable at November 30, 2019 and related price and contractual life information are as follows:


	Outstanding						Exercisable
			Weighted Average
			Remaining		Weighted				Weighted
Range of Exercise Prices	Outstanding		Contractual Life (Years)		Average Exercise Price		Outstanding		Average Exercise Price
$1.01 to $2.00		422,500		2.10	$	1.73		422,500	$	1.73
$2.01 to $3.00		265,000		2.11	$	2.72		265,000	$	2.72
$3.01 to $4.00		204,729		6.23	$	3.14		204,729	$	3.14
$6.01 to $7.00		2,500		4.65	$	6.50		1,667	$	6.50
$7.01 to $8.00		195,045		7.84	$	7.63		70,644	$	7.67

		1,089,774		3.91	$	3.30		964,540	$	2.75

A summary of the status of the Company’s non-vested options as of November 30, 2019, and changes during the fiscal year then ended, is presented below:


				Weighted Average
				Grant-Date
	Options			Fair Value
Non-vested at November 30, 2018		40,254		$	3.06
Granted		143,409			5.02
Vested		(58,429	)		4.36
Forfeited		—			—

Non-vested at November 30, 2019		125,234		$	4.70

As of November 30, 2019, there was approximately $519,000 of total unrecognized compensation cost related to non-vested 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 1.16 years as of November 30, 2019. The total fair value of options vested during the fiscal year ended November 30, 2019 was approximately $255,000.

During the second fiscal quarter of 2018, the Company entered into Amended and Restated Employment Agreements (“2018 Employment Agreements”) with each of the Company’s Co-CEOs. Per the Employment Agreements, each of the Co-CEOs is to receive base grant equity awards in the form of qualified stock options of the Company’s common stock. As of March 8, 2018, David Portnoy and Mark Portnoy were granted 23,636 and 20,000 stock options of the Company’s common stock, respectively. The options were issued under the Company’s 2012 Stock Plan and will vest 1/3 upon grant, 1/3 on December 1, 2018 and the remaining 1/3 on November 30, 2019. The fair value of the options that vested through the twelve months ended November 30, 2019 and November 30, 2018 was approximately $77,000 and $62,000, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statement of comprehensive income (loss).

During the second fiscal quarter of 2018, the Company entered into an Amendment Agreement (“CIO Agreement”) with the Company’s CIO. Per the CIO Agreement, the CIO is to receive a base grant equity award in the form of qualified stock options of the Company’s common stock. As of May 21, 2018, Oleg Mikulinsky was granted 8,000 stock options of the Company’s common stock. The options were issued under the Company’s 2012 Stock Plan and will vest 1/3 upon grant, 1/3 on December 1, 2018 and the remaining 1/3 on November 30, 2019. The fair value of the options that vested through the twelve months ended November 30, 2019 and November 30, 2018 was approximately $18,000 and $10,000, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statement of comprehensive income (loss).

Performance and market-based vesting condition options

Per the 2018 Employment Agreements, based upon certain performance criteria, the Company shall grant David Portnoy and Mark Portnoy a percentage of up to 47,273 and 40,000, respectively, of qualified stock options of the Company’s common stock. For market-based vesting condition options, accounting principles do not require that the market condition be met in order for the compensation cost to be recognized. Fair value of these options has been determined using a Monte Carlo valuation approach and is being recognized over the requisite service period, regardless if the market condition will be met. During fiscal 2019 and 2018, 15,756 and 13,332, respectively, of qualified stock options were forfeited as certain market conditions were not met by the end of the requisite service period. The fair value of these options as of November 30, 2019 and November 30, 2018 was approximately $182,00 and $144,300, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statement of comprehensive income (loss). For performance-based vesting condition options, the Company estimates the fair value of qualified stock options that met certain performance targets by the end of the fiscal 2018 requisite service period using a Black-Scholes valuation model. As of August 30, 2019, the Company granted David Portnoy and Mark Portnoy 26,243 and 22,222 of non-qualified stock options of the Company’s common stock based upon certain performance criteria met by the end of the fiscal 2018 service period and per the 2018 Employment Agreements. These options were issued under the Company’s 2012 Stock Plan and will vest 1/3 upon date of grant, 1/3 on December 1, 2019 and 1/3 on November 30, 2020. The fair value of these options as of November 30, 2019 was approximately $86,000 and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). As of November 30, 2019, there was approximately $172,000 of total unrecognized compensation cost related to the non-vested options of common stock.

Per the Amendment Agreement, based upon certain performance criteria, the Company shall grant Oleg Mikulinsky a percentage of up to 8,000 of qualified stock options of the Company’s common stock. For market-based vesting condition options, accounting principles do not require that the market condition be met in order for the compensation cost to be recognized. Fair value of these options has been determined using a Monte Carlo valuation approach and is being recognized over the requisite service period, regardless if the market condition will be met. During fiscal 2019

and 2018, 2,666, respectively, of qualified stock options were forfeited as certain market conditions were not met by the end of the requisite service period. The fair value of these options as of November 30, 2019 and November 30, 2018 was approximately $19,200 and $13,500, and is reflected as selling, general and administrative expenses in the accompanying consolidated statement of comprehensive income (loss). For performance-based vesting condition options, the Company estimated the fair value of the qualified stock options that met certain performance targets by the end of the fiscal 2018 requisite service period using a Black-Scholes valuation model. As of September 4, 2019, the Company granted Oleg Mikulinsky 4,444 of qualified stock options of the Company’s common stock based upon certain performance criteria met by the end of the fiscal 2018 service period and the per the Amendment Agreement. These options were issued under the Company’s 2012 Stock Plan and will vest 1/3 upon date of grant, 1/3 on December 1, 2019 and 1/3 on November 30, 2020. The fair value of these options as of November 30, 2019 was approximately $8,000 and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income (loss). As of November 30, 2019, there was approximately $15,000 of total unrecognized compensation cost related to the non-vested options of common stock.

Restricted common shares

Based upon performance measures being obtained during prior fiscal years, David Portnoy and Mark Portnoy earned 304,946 and 265,172 shares of common stock, respectively. Pursuant to the terms of the Employment Agreements, the Co-CEOs each opted to receive a lump sum cash payment in lieu of 30,000 shares of earned common stock which amounted to approximately $444,000 each paid in fiscal 2018. Per the recommendation of the DCCL, as described above, David Portnoy and Mark Portnoy surrendered 157,472 and 134,977 commons shares, respectively, for cash which amounted to $534,917 and $457,327, respectively in 2019.

Based upon performance measures being obtained during prior fiscal years, Oleg Mikulinsky was granted 34,349 shares of common stock.

NOTE 12—LICENSE AGREEMENTS

Technology Agreements

Per the License and Royalty Agreement with Lifecell, there is a $1,000,000 cap on the amount of royalties due to the Company per year and a $10,000,000 cap on the amount of royalties due to the Company for the term of the License and Royalty Agreement. The cap(s) are calculated based on Lifecell’s fiscal year end, March 31^st. As of the end of the Company’s fiscal years ended November 30, 2019 and November 30, 2018, Lifecell had reached the $1,000,000. Since inception of the License and Royalty Agreement, the Company has recorded $9,300,000 in royalty income due under the terms of the License and Royalty Agreement, of which, Lifecell has paid the Company $8,400,000 as of November 30, 2019. The balance of $900,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets.


	For the years ended November 30,
	2019						2018
	License Fee		Processing and Storage Royalties		Total		License Fee		Processing and Storage Royalties		Total
India		—		1,000,000		1,000,000		—		1,000,000		1,000,000

Total	$	—	$	1,000,000	$	1,000,000	$	—	$	1,000,000	$	1,000,000

Marketing Agreements

The Company has definitive license agreements to market the Company’s umbilical cord blood stem cell programs in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Pakistan. `

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has employment agreements in place for certain members of management. These employment agreements which include severance arrangements, are for periods ranging from one to two years and contain certain provisions for severance payments in the event of termination or change of control.

Leases

The Company entered into a ten-year lease in April 2004 for its 17,600-square foot cGMP/cGTP compliant corporate headquarters in Oldsmar, Florida. This facility contains the Company’s executive offices, its conference and training center, its laboratory processing and cryogenic storage facility and its scientific offices. In July 2018, the Company extended the main lease through December 31, 2021 for the 17,600 square foot space.

The future minimum rental payments under the operating lease are as follows:


Fiscal Year Ending November 30,	Rent
2020	$	228,148
2021	$	224,928
2022	$	18,744

Legal Proceedings

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 Company’s 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 Company’s 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 14—RETIREMENT PLAN

The Company maintains a 401(k)-retirement plan (the “401(k) Plan”), which allows eligible employees to defer up to 15% of their eligible compensation. In fiscal 2008, the Company implemented an employer match up to certain limits. In fiscal 2010, the Company implemented a Safe Harbor provision with matching contributions up to certain limits. For the years ended November 30, 2019 and November 30, 2018, the Company made matching contributions of approximately $205,000 and $158,000, respectively, to the 401(k) Plan.

NOTE 15—REVENUE SHARING AGREEMENTS (“RSAs”)

Florida. On February 9, 1999, the previous agreements with the Company’s Arizona Revenue Sharing investors were modified and replaced by a RSA for the state of Florida for a price of $1,000,000. The revenue sharing agreement applies to net storage revenues originating from specimens from within the state of Florida. The revenue sharing agreement entitles the investors to revenues of up to a maximum of 33,000 storage spaces.

Illinois. In 1996, the Company signed agreements with a group of investors entitling them to an on-going 50% share of the Company’s 75% share of the annual storage fees (“net storage revenues”) less a deduction for 50% of billing and collection expenses generated by specimens stored in the Illinois Masonic Medical Center for a price of $1,000,000. The agreements were modified in 1998 to broaden the covered specimens to those originating in Illinois and its contiguous states and stored in Oldsmar, Florida for a maximum of up to 33,000 storage spaces.

Texas. On May 31, 2001, the Company entered into an RSA with Red Rock Partners, an Arizona general partnership, entitling them to on-going shares in a portion of the Company’s net storage revenue generated by specimens originating from within the State of Texas for a price of $750,000. The investors are entitled to a 37.5% share of net storage revenues originating in the State of Texas to a maximum of 33,000 storage spaces. During fiscal 2008, Red Rock assigned 50% of their interest in the agreement to SCC Investments, Inc., an Arizona corporation. During fiscal year 2010, SCC Investments, Inc. assigned its interest to SCF Holdings, LLC, an Arizona limited liability company.

NOTE 16 –SHARE REPURCHASE PLAN

In December 2011, the Company’s Board of Directors authorized management at its discretion to repurchase up to one million (1,000,000) shares of the Company’s outstanding common stock. On June 6, 2012, the Board of Directors of the Company increased the number of shares of the Company’s 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 Company’s 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 Company’s 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.

In March 2018, the Company received notice that shares of the Company’s common stock issued to certain executive officers pursuant to the Company’s 2012 Stock Incentive Plan had purportedly been issued in excess of the shares reserved for issuance under the Plan. The Company established an independent committee of the Board of Directors to review this issue. After completing its investigation, the independent committee determined that certain restricted stock awards and certain performance-based awards were granted in violation of the 2012 Plan (See Note 11). The Company repurchased 292,449 shares that were surrendered.

As of November 30, 2019, the Company had repurchased an aggregate of 6,093,535 shares of the Company’s common stock at an average price of $3.37 per share through open market and privately negotiated transactions. The Company purchased 292,449 and 0 shares of the Company’s common stock during the twelve months ended November 30, 2019 and November 30, 2018, respectively, at an average price of $3.39 per share and $0.00 per share, respectively.

The repurchased shares are held as treasury stock at cost and have been removed from common shares outstanding as of November 30, 2019 and November 30, 2018. As of November 30, 2019, and November 30, 2018, 6,093,535 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 Company’s common stock.

NOTE 17 – RELATED PARTY TRANSACTIONS

David Portnoy, the Company’s Chairman and Co-Chief Executive officer, is the brother of the Company’s Co-Chief Executive Officer Mark Portnoy. The Company’s Audit Committee Chairman, Harold Berger, provides accounting services to the Company’s Co-Chief Executive Officer Mark Portnoy and to PartnerCommunity, Inc. The Company’s Chairman and Co-Chief Executive Officer, David Portnoy, serves as the Chairman of the Board of PartnerCommunity, Inc.

On August 2, 2019, the Company entered into mutual releases with each of the Co-CEOs and certain directors and officers of the Company who received incentive awards that were submitted for ratification at the 2019 Annual Meeting or forfeited in connection therewith. The Company and each counterparty to a mutual release are agreeing, among other things, not to pursue certain claims relating to such ratification and surrenders).

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Based on their most recent review, as of the end of the period covered by this report, the Company’s principal executive officers and principal financial officer have concluded that the Company’s disclosure controls and procedures are not effective, and that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In March 2018, the Company received notice that shares of the Company’s common stock issued to certain executive officers pursuant to the Company’s 2012 Stock Incentive Plan had purportedly been issued in excess of the shares reserved for issuance under the Plan. The Company established an independent committee of the Board of Directors to review this issue. (See Note 11 for the independent committee’s conclusion) As part of this resolution, management is reviewing the Company’s disclosure controls and procedures.

The Company has not made an amended 8-K filing with respect to the Current Reports on Form 8-K that was filed on July 16, 2015 to announce the acquisition of PrepaCyte. Accordingly, the Company is not deemed a timely filer. Management intends to subsequently make this amended 8-K filing to include the required pre-acquisition financial statements of PrepaCyte as well as the required pro forma financial information.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officers and principal financial officer, we conducted an evaluation under the criteria set forth in the 1992 Internal Control—Integrated Framework of the effectiveness of our internal control over financial reporting as of November 30, 2019. The Company’s principal executive officers and principal financial officer concluded that the Company’s disclosure controls and procedures and internal controls over financial reporting were effective.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we engaged our independent registered public accounting firm to perform, an audit on our internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

Other than as disclosed in “Evaluation of Disclosure Controls and Procedures” above with respect to the matters reviewed in March 2018, there were no other changes in the Company’s internal controls over financial reporting during the year ended November 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our Co-CEOs and CFO, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CEO and CFO Certifications

Appearing as exhibits 31.1, 31.2 and 31.3 to this report there are Certifications of the Co-CEOs and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report is the information concerning the evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

ITEM 9B.

OTHER INFORMATION.

Not applicable.

Part III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

Below are the names, ages and background of the Board of Directors and Executive Officers of the Company, as well as the particular and specific experience, qualifications, attributes, or skills that led the Board to conclude that each director should serve on our Board of Directors in light of the Company’s business. The Board of Directors has determined that other than Messrs. Portnoy and Portnoy, who are officers of the Company, each of our directors is deemed to be independent under the Nasdaq standards which we choose to follow.

David I. Portnoy, age 57, Chairman and Co-Chief Executive Officer. Mr. Portnoy has served as Chairman of the Board and Co-Chief Executive Officer of the Company since August 2011. Since 2002, Mr. Portnoy has served as Chairman of the Board of Directors of Partner-Community, Inc., which provides software and hardware integration solutions to telecommunication companies and which was awarded the Verizon 2010 Supplier Recognition Award for Outstanding Performance. Mr. Portnoy provided the initial venture capital to Waves Audio Ltd, a leading audio technology company. Mr. Portnoy graduated Magna Cum Laude in 1984 from The Wharton School of Finance at the University of Pennsylvania where he earned a Bachelor of Science Degree in Economics with a joint major in finance and accounting. David I. Portnoy is the brother of Mark L. Portnoy, a director and Co-Chief Executive Officer of the Company. We believe that Mr. Portnoy’s knowledge of the Company having served as its Co-Chief Executive Officer assists the Board with its oversight of the strategic plan of the Company. Additionally, we believe that Mr. Portnoy’s financial and business experiences provide the Board with general business acumen.

Mark L. Portnoy, age 56, Co-Chief Executive Officer. Mr. Portnoy has served as a director and Co-Chief Executive Officer since August 2011. Additionally, since 2002 and 2007, Mr. Portnoy has served on the boards of directors of Partner-Community, Inc. and uTIPu Inc., a private Internet-based business, respectively. Mr. Portnoy has been engaged in managing his personal investments since April 1997. From January 1995 to April 1997, Mr. Portnoy was employed at Strome, Susskind Investments as its Chief Fixed Income Trader. From March 1986 until November 1991, Mr. Portnoy was employed at Donaldson, Lufkin & Jenrette Securities Corp. as a Fixed Income Arbitrage Trader, with a trading portfolio ranging in size from $1 billion to $7 billion. In addition to the finance experience, Mr. Portnoy’s experience includes negotiating contracts for National Basketball Association (NBA) players totaling approximately $30 million. Mr. Portnoy graduated Phi Beta Kappa from the University of North Carolina at Chapel Hill with a degree in Economics in December 1985. Mark L. Portnoy is the brother of David I. Portnoy, Chairman of the Board and Co-Chief Executive Officer of the Company. We believe that Mr. Portnoy’s knowledge of the Company having served as its Co-Chief Executive Officer assists the Board with its oversight of the strategic plan of the Company. Additionally, we believe that Mr. Portnoy’s financial and business experiences provide the Board with general business acumen.

Jonathan H. Wheeler M.D., age 60, has served as a director since August 2011. Dr. Wheeler is a licensed physician specializing in the fields of obstetrics and gynecology. He has practiced in these fields in Newport Beach, California since 1992. Dr. Wheeler received his B.A. in Biology from the State University of New York (SUNY) at Buffalo. He completed his medical degree at Cornell University Medical College in 1986. His Obstetrics and Gynecology training was received at UCLA Medical Center in a combined internship and residency program. There, he received honorary awards for his work in advanced laparoscopy and completed research in innovative surgical techniques. Dr. Wheeler is Board certified in Obstetrics and Gynecology. He is a member of the American College of Obstetrics and Gynecology, the American Association of Gynecologic Laparoscopists, the Orange County Obstetrics and Gynecology Society and is a Diplomat of the American Board of Obstetrics and Gynecology. In the past Dr. Wheeler has served as Chairman and Vice-Chairman of the Department of Obstetrics and Gynecology at Hoag Hospital and has served on numerous committees including education, surgery and advancement of Women’s Health Services. We believe that Dr. Wheeler’s professional experience provides the Board with critical insight into the medical fields of obstetrics and gynecology. Additionally, we believe that through his attendance at medical conferences and seminars, as well as through his daily medical practice, Dr. Wheeler provides the Company with additional business development opportunities through his extensive industry contacts.

George Gaines, age 66, has served as a director since August 2011. Since 2012 Mr. Gaines has been a Managing Director of Harpeth Fund Advisors, a division of Harpeth Capital LLC, an investment banking and private equity fund placement agent headquartered in Nashville, Tennessee. We believe that Mr. Gaines’ business experience provides the Board with general business acumen and an increased ability to effectively oversee and assess management’s execution of the Company’s business.

Harold D. Berger, age 56, has served as a director since August 2011. Mr. Berger is a certified public accountant. Prior to opening his own accounting practice in 2005, Mr. Berger was an equity partner with Habif, Arogeti & Wynne, LLP, an accounting firm based in Atlanta, Georgia. Over the past 25 years, Mr. Berger also has served on boards for a variety of charitable organizations. Mr. Berger currently serves as Treasurer and Executive Committee Member of the Holly Lane Foundation (f/k/a The Gatchell Home, Inc.), as Director and Finance committee member of the Jewish Educational Loan Fund, Inc., and as Director and financial adviser to The Atlanta Group Home Foundation, Inc. Mr. Berger graduated in December 1987 from the University of Texas at Austin with a Master’s Degree in Professional Accounting. Mr. Berger is a member of the American Institute of Certified Public Accountants (AICPA) and the Georgia Society of Certified Public Accountants (GSCPA). We believe that Mr. Berger’s years of experience as an auditor and accountant, including expertise in financial accounting, provides the Board and the Audit Committee of the Board with valuable financial and accounting experience.

Arthur Ellis, age 55, has served as a director since 2018. Mr. Ellis is a licensed attorney. Mr. Ellis received his AB and AM from The University of Chicago and his JD from Boston University. Mr. Ellis is a practicing attorney who regularly advises businesses on a broad range of legal issues from negotiating new business ventures through client disputes and litigation. Mr. Ellis currently serves as the treasurer of The Uptown People’s Law Center (UPLC), a legal aid clinic in serving residents of the Uptown neighborhood in Chicago and protecting the rights of prisoners in the Illinois Department of Corrections. Mr. Ellis served as chairman of the board of UPLC from 2008 through 2019. From 1995 through 2011, Mr. Ellis also founded and ran The Nanny Tax Company a company providing tax reporting services to domestic employers across the United States. Mr. Ellis previously served as a director for City National Bancshares, Inc. We believe that Mr. Ellis’ business and legal experience provide the Board with general business acumen, legal experience and assists in working with outside counsel.

Brian Sheehy, age 49, has served as a director since 2018. Mr. Sheehy received his B.A. in Biochemistry and Environmental Science from the University of California, Berkeley, his M.A. from University of Exeter and his M.D. from New York Medical College. Mr. Sheehy is the founder and managing partner, since 2010, of IsZo Capital. Mr. Sheehy was the cofounder in 2002 of Black Horse Capital and managing partner until 2008. He is also a Chartered Financial Analyst. We believe that Mr. Sheehy’s experience provides the Board with general business acumen and an increased ability to effectively oversee and assess management’s execution of the Company’s strategic business plan.

Biographical information regarding the Company’s executive officers who are not as directors of the Company is set forth below:

Jill Taymans, age 50, is the Company’s Vice President, Finance and Chief Financial Officer. Ms. Taymans joined the Company in April 1997 serving initially as Controller and was appointed Chief Financial Officer in May 1998. Ms. Taymans graduated from the University of Maryland in 1991 with a BS in Accounting. She has worked in the accounting industry for over 20 years in both the public and private sectors. Prior to joining the Company, she served for three years as Controller for a telecommunications company.

Oleg Mikulinsky, age 47, is the Company’s Chief Information Officer. Mr. Mikulinsky has served as Cryo-Cell’s Chief Information Officer since March 2012. Mr. Mikulinsky is a software technologist and serial entrepreneur. He has been a founding member of several software enterprises and most recently served as Chief Technology Officer of Partner-Community, Inc and Chief Technology Officer at uTIPu Inc. from 2007 to 2009. Before that, Mr. Mikulinsky served as the Director of Enterprise Architecture at WebLayers, Inc. where he defined enterprise architecture best practices for companies like AT&T, Defense Information’s Systems Agency (DISA), as well as for many major banking institutions. He contributed to the development of International systems interoperability standards at OASIS-OPEN.ORG and WS-I.ORG. Prior to starting his professional career as a software engineer in United States, Mr. Mikulinsky studied radio electronics at the Bauman Moscow State Technical University (BMSTU), Russia.

Audit Committee Financial Expert

The audit committee is comprised entirely of non-employee, independent members of the board of directors. The purpose of the audit committee is to assist the board of directors in fulfilling its oversight responsibilities by reviewing the Company’s internal control systems, audit functions, financial reporting processes, and methods of monitoring compliance with legal and regulatory matters and engaging the Company’s independent principal accountants. The board of directors has determined that each of the audit committee members is able to read and understand fundamental financial statements. In addition, the board of directors has determined that the chairman of the audit committee, Mr. Harold Berger, is an “audit committee financial expert” as that term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities and Exchange Act of 1934. Mr. Berger’s relevant experience includes his current position with his own accounting practice, as well as, his prior position as an equity partner with Habif, Arogeti & Wynne, LLP, an accounting firm based in Atlanta, Georgia.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who are the beneficial owners of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and beneficial owners of more than 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of the Forms 3, 4 and 5 and amendments that we received with respect to transactions during the fiscal year ended November 30, 2018, we believe that all such forms were filed on a timely basis.

Code of Ethics

The Company has adopted a code of ethics for its chief executive officer and all senior financial officers, including the chief financial officer and principal accounting officer. The code of ethics is available to any shareholder, without charge, upon written request to the Company in care of the Corporate Secretary at 700 Brooker Creek Boulevard, Suite 1800, Oldsmar, Florida 34677. The code of ethics is also available on the Company’s website, www.cryo-cell.com.

ITEM 11.

EXECUTIVE COMPENSATION.

Summary Compensation Table

The table below summarizes the total compensation paid or earned during the fiscal years ended November 30, 2019 and November 30, 2018 by (i) the Company’s Co-Chief Executive Officers and (ii) the two other most highly compensated individuals that served as executive officers of the Company as of November 30, 2019 whose total compensation received from the Company during such fiscal year (other than non-qualified deferred compensation earnings, if any) exceeded $100,000 (collectively, the “named executives”).


Name and Principal Position	Year		Salary ($)		Bonus ($)		Option and Restricted Common Stock Awards ($) (1)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($) (2)		Total ($)
David Portnoy Co-Chief Executive Officer		2019 2018	$ $	602,085 547,350	$ $	50,000 304,083	$ $	34,978 130,143	$ $	0 0	$ $	0 0	$ $	687,063 981,576
Mark Portnoy Co-Chief Executive Officer		2019 2018	$ $	478,995 435,450	$ $	40,000 241,916	$ $	32,512 79,284	$ $	0 0	$ $	0 0	$ $	551,507 756,650
Jill M. Taymans Vice President Finance, Chief Financial Officer		2019 2018	$ $	190,000 187,197	$ $	11,500 11,500	$ $	— —	$ $	0 0	$ $	0 0	$ $	201,500 198,697
Oleg Mikulinsky Chief Information Officer		2019 2018	$ $	250,000 250,114	$ $	8,333 27,775	$ $	16,611 59,689	$ $	0 0	$ $	0 0	$ $	274,944 337,578

(1)

Represents the dollar amount recognized for financial reporting purposes in fiscal 2019 and 2018. The fair value was estimated using the Black-Scholes option-pricing model. The amount reported has been adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. See Note 11, Stockholders’ Equity, to our consolidated financial statements for a discussion of our accounting for stock options and the assumptions used.

(2)	Represents perquisites and other benefits, valued on the basis of aggregate incremental cost to the Company.

Narrative Disclosure Regarding Summary Compensation Table

Compensation Philosophy

Our executive compensation policies are designed to provide competitive levels of compensation that integrate pay with our annual objectives and long-term goals, align the long-term interests of management with those of our shareholders, reward for achieving performance objectives, recognize individual initiative and achievements, and assist us in attracting and retaining highly qualified and experienced executives. The Compensation Committee of our board of directors is primarily responsible for acting on our philosophical approach to executive compensation. There are three primary elements in our executive compensation program: base salary compensation, cash bonus and stock options.

Base salary compensation is based on the potential impact the individual may have on the Company, the skills and experience required by the job, comparisons with comparable companies and the performance and potential of the incumbent in the job.

A cash bonus pool along with Company performance targets and individual performance objectives are established at the beginning of each fiscal year by the Compensation Committee. At the end of the fiscal year each performance target is measured and bonuses are paid if the set performance targets established at the beginning of the fiscal year are attained. A percentage of the pre-determined cash bonus pool is paid to the named executive officer depending on the performance targets met by the Company and the individual. In fiscal 2018 and 2019, pursuant to their Employment Agreements, the Company’s Co-CEOs were entitled to a cash bonus equal to the sum of (x) 11.11% of base salary times the number of the six performance targets achieved (based on threshold, target and stretch performance standards for each of the Company’s annual net revenue and weighted average stock price), plus (y) 11.11% times the number of three subjective performance criteria achieved (as determined in the sole discretion of the Compensation Committee of the Board of Directors after consultation with Co-CEOs, respectively). In fiscal 2018 and 2019, pursuant to his Employment Agreement, the Company’s Chief Information Officer was entitled to a cash bonus equal to a percentage of 20% of his Base Salary equal to the sum of (x) 11.11% of base salary times the number of the six performance targets achieved (based on threshold, target and stretch performance standards for each of the Company’s annual net revenue and weighted average stock price), plus (y) up to 33.33% times the number of three subjective performance criteria achieved (as subjectively determined by the Co-CEOs in their sole discretion). In fiscal 2019 and 2019, the Company’s Chief Financial Officer was entitled to a discretion cash bonus, pursuant to her Employment Agreement.

With respect to the subjective performance reviews, in addition to evaluating the Company’s overall financial performance, the Compensation Committee considers the performance of each named executive officer’s business line or area of responsibility. Several key management competencies and behaviors are assessed, including the named executive officer’s effectiveness as a leader and his or her role in building a cohesive executive team, as well as other strategic core competencies such as accountability, analytical ability and decision making, communication, cooperation and teamwork, creativity and problem-solving, and integrity. The named executive officer’s performance relating to these competencies forms the basis of a performance review discussion with the named executive officer that reinforces his or her role in achieving the Company’s business plan and short- and long-term strategies.

In fiscal 2019, the Company’s threshold, target and stretch performance standards required to earn cash bonuses were based on an increase of net revenue as of November 30, 2019, of 12%, 14% and 16%, respectively, and the Company’s weighted average stock price as of November 30, 2019 of $9.50, $10.50 and $11.50, respectively. In fiscal 2019, Cash bonuses were earned and are payable to the Co-CEO’s, Chief Information Officer and Chief Financial Officer in amounts totaling $50,000, $40,000, $8,333 and $11,500, respectively. In fiscal 2018, the Company’s threshold, target and stretch performance standards required to earn cash bonuses were based on an increase of net revenue as of November 30, 2018, of 6%, 8% and 10%, respectively, and the Company’s weighted average stock price as of November 30, 2018 of $8.75, $9.50 and $10.25, respectively. In fiscal 2018, cash bonuses were paid to the Co-CEO’s, Chief Information Officer and Chief Financial Officer totaling $304,053, $241,892, $27,775 and $11,500, respectively.

In fiscal 2019, pursuant to their Employment Agreements, David Portnoy and Mark Portnoy, the Company’s Co-CEOs, were granted 23,636 and 20,000 stock options, respectively. One-third of each grant vested upon grant, one-third will vest on December 1, 2020 and one-third will vest on November 30, 2021. In addition, the Employment Agreements for David Portnoy and Mark Portnoy provide that they are entitled to receive up to an additional 47,273 and 40,000 stock options, respectively, based on performance, with award being equal to the sum of (x) 11.11% times the number of the six performance targets achieved (based on threshold, target and stretch performance standards for each of the Company’s annual net revenue and weighted average stock price), plus (y) 11.11% times the number of three subjective performance criteria achieved (as determined in the sole discretion of the Compensation Committee of the Board of Directors after consultation with Co-CEOs, respectively). In 2019, neither of the Co-CEOs received any performance-based stock options.

In fiscal 2018, David Portnoy and Mark Portnoy, the Company’s Co-CEOs, were granted 23,636 and 20,000 stock options, respectively. One-third of each grant vested upon grant, one-third vested on December 1, 2018 and one-third vested on December 1, 2019. In addition, the Employment Agreements for David Portnoy and Mark Portnoy provide that they are entitled to receive up to an additional 47,273 and 40,000 stock options, respectively, based on performance, with award being equal to the sum of (x) 11.11% times the number of the six performance targets achieved (based on threshold, target and stretch performance standards for each of the Company’s annual net revenue and weighted average stock price), plus (y) 11.11% times the number of three subjective performance criteria achieved (as determined in the sole discretion of the Compensation Committee of the Board of Directors after consultation with Co-CEOs, respectively). In fiscal 2018, David Portnoy and Mark Portnoy were granted 26,243 and 22,222 performance-based stock options, respectively.

In fiscal 2019, pursuant to his Employment Agreement, the Company’s Chief Information Officer was granted 8,000 stock options. One-third vested upon grant, one-third will vest on December 1, 2020 and one-third will vest on November 30, 2021. In addition, pursuant to his Employment Agreement, the Company’s CIO is entitled to up to 8,000 stock options based on performance, with the award being equal to the sum of (x) the product of 11.11% and the number of the net revenue and weighted average stock price performance goals achieved at the “threshold”, “target” and “stretch” levels and (y) up to 33.33% at the discretion of the Co-CEOs based on his subjective performance. In 2019, no performance-based stock options were issued to the Chief Information Officer.

In fiscal 2018, pursuant to his Employment Agreement, the Company’s Chief Information Officer was granted 8,000 stock options. One-third vested upon grant, one-third vested on December 1, 2018 and one-third vested on December 1, 2019. In addition, pursuant to his Employment Agreement, the Company’s CIO is entitled to up to 8,000 stock options based on performance, with the award being equal to the sum of (x) the product of 11.11% and the number of the net revenue and weighted average stock price performance goals achieved at the “threshold”, “target” and “stretch” levels and (y) up to 33.33% at the discretion of the Co-CEOs based on his subjective performance. In 2018, 4,444 performance-based stock options were issued to the Chief Information Officer.

Stock options are granted to our executive officers in order to maintain competitive pay packages and to align management’s long-term interests with those of our stockholders. The compensation committee approves stock option grants to our executives and key personnel. Awards vest and options become exercisable based upon criteria established by the Compensation Committee.

Overall, the compensation committee attempts to establish levels of executive compensation that it believes to be competitive with those offered by employers of comparable size, growth and profitability in the Company’s industry and in general industry. In establishing the levels of the various compensation elements, the compensation committee has from time to time used the services of compensation consultants.

Employment Agreements and Change in Control Arrangements

David Portnoy and Mark Portnoy Employment Agreements. On March 8, 2018, the Company entered into new two-year employment agreements, effective December 1, 2017, with David Portnoy, Co-Chief Executive Officer of the Company, and Mark Portnoy, Co-Chief Executive Officer of the Company. The agreements superseded and replaced prior employment agreements with each of the executives. The employment agreements expired on November 30, 2019 and have not been renewed. The Company and the Co-CEOs are, currently negotiating new employment agreements and, as of the date hereof, the Co-CEOs are receiving a base salary consistent with the base salary stipulated in their employment agreements.

The agreements provided for an annual base salary of $547,350 for David Portnoy and $435,450 for Mark Portnoy. In addition to base salary. the agreements also provided for reimbursement for all business expenses, including reasonable commuting expenses for David Portnoy between his home in Miami, Florida to the Company’s headquarters in Tampa, Florida, including lodging and rental car expenses for when he is working in the Company’s offices in Tampa. David Portnoy’s principal place of employment shall be at the Company’s offices in Miami, Florida, provided he shall travel to the Company’s headquarters as necessary to fulfill his responsibilities under the agreement. The Company shall pay reasonable legal and financial consulting fees and costs incurred in negotiating the agreements and shall pay each executive up to $75,000 in legal fees related to any dispute or question of interpretation regarding the agreements. The executives will also participate in the employee benefit plans that the Company generally makes available to Company employees from time to time, including retirement and health plans.

Upon the occurrence of (i) an involuntary termination of employment; (ii) a voluntary termination of employment for “Good Reason” (as defined in the agreements); or (iii) an involuntary termination of employment or voluntary termination of employment for “Good Reason” at any time following a change in control (as defined in the agreement), the agreements provide for severance pay equal to two times the executive’s then-current annual base salary, paid in a lump sum no later than 30 days after the occurrence of the triggering event. The Company will also reimburse the executives, on a grossed-up basis, for any penalty taxes owed on any excess parachute amounts under Section 280G of the Internal Revenue Code of 1986, as amended. In addition, the Company shall provide, at no cost to the executives, continued life insurance coverage and nontaxable medical, dental and disability insurance coverage substantially similar to the coverage maintained by the Company for the executives prior to such termination for 36 months after the termination. If the termination of employment is due to disability (as defined in the agreement), the Company shall pay the executive two times his then-current base salary in a cash lump sum no later than 30 days after such disability, reduced by any amount paid to him from any disability insurance, Social Security, workman’s compensation or other disability program. In addition, all unvested shares and options held by the executive shall become fully vested upon his disability. If the termination of employment is due to death, the Company shall pay the executive two times his then-current base salary as a cash lump sum within 30 days after his date of death, and the Company will continue to provide medical and dental coverage for the executive’s family for two years after his death. The agreements include a one-year non-competition restriction and an 18-month restriction on solicitation of employees or customers.

Taymans Employment Agreement. On November 1, 2005, the Company entered into a one-year employment agreement with Jill M. Taymans, the Company’s Chief Financial Officer and Vice President (the “Taymans Employment Agreement”). Under the Taymans Employment Agreement, the one-year term is automatically extended for an additional one-year period unless, at least 60 days prior to the end

of the then-current term, either party notifies the other in writing of its intent not to renew the agreement. The Taymans Employment Agreement was amended in July 2008 to provide that the then-current term would expire on November 30, 2008. The ending date of the current term of the Taymans Employment Agreement is November 30, 2020.

At all times during the term of the Taymans Employment Agreement (as the same may be extended), Ms. Taymans will be eligible for discretionary merit increases and adjustments in base salary, in addition to discretionary annual bonuses awarded at the discretion of the compensation committee of the Company’s board of directors. The Taymans Employment Agreement provides that she will be eligible to receive long-term incentive awards provided to the Company’s senior executives generally, on terms finally determined by the compensation committee of the Company’s board of directors.

In the event of a termination of employment of Ms. Taymans upon or within one year of a Change in Control (as defined in the Taymans Employment Agreement), or prior to the Change in Control if the termination was related to the Change in Control, if the termination was by the Company without cause or was by Ms. Taymans due to being requested to accept without cause a demotion or relocation, Ms. Taymans will be entitled to receive the following: (i) all earned compensation through the date of termination (or, if greater, on the date immediately preceding a Change in Control); and (ii) 12 months of base salary as in effect on the termination date (or, if greater, base salary in effect immediately prior to the Change in Control).

Under the Taymans Employment Agreement, the Company will also provide Ms. Taymans with certain other benefits, including continued participation in all applicable Company benefit plans and payment of reasonable business expenses.

In the Taymans Employment Agreement, Ms. Taymans agreed not to compete with the Company or solicit its customers, clients or employees during the term of her Employment Agreement and for a 12-month period following her termination of employment under the agreement.

Mikulinsky Employment Agreement. On March 5, 2012, the Company entered into a one-year employment agreement (the “Mikulinsky Employment Agreement”) with Oleg Mikulinsky, as the Company’s Chief Information Officer. Under the Mikulinksy Employment Agreement, the one-year term was automatically extended for additional one-year periods unless, at least 30 days prior to the end of the then-current term, either party notifies the other in writing of its intent not to renew the agreement. On May 1, 2013, the Company entered into an Amendment Agreement amending certain terms of the Mikulinsky Employment Agreement dated March 5, 2012. On April 18, 2016, the Company entered into a second Amendment Agreement (the “Amendment”), effective December 1, 2015, amending certain terms of the Amendment Agreement dated May 1, 2013 and Mikulinsky Employment Agreement dated March 5, 2012. On May 18, 2018, the Company entered into an Amendment Agreement (the “Amendment”), effective December 1, 2017, amending certain terms of the Amendment Agreement dated April 20, 2016, Amendment Agreement dated May 1, 2013 and Employment Agreement dated March 5, 2012. The term of the Amendment is two years (“Initial Term”) and shall be automatically extended for successive additional one-year periods (“Additional Employment Terms”) unless, at least thirty (30) days prior to the end of the Initial Term or an Additional Employment Term, the Company or the Executive has notified the other in writing that the Agreement shall terminate at the end of the then-current term. The ending date of the current term of the Mikulinksy Employment Agreement is November 30, 2020.

Pursuant to the Amendment, the Executive’s base salary was $250,000 (the “Base Salary”).

At all times during the term of the Mikulinsky Employment Agreement (as the same may be extended), Mr. Mikulinsky will be eligible for discretionary merit increases and base salary adjustments, in addition to cash and equity annual bonuses discussed above. The Mikulinsky Employment Agreement provides he will also be eligible for long-term incentive awards provided to the Company’s senior executives generally, on terms finally determined by the compensation committee of the Company’s board of directors.

Per the Amendment, in the event of the Executive’s voluntary resignation from the Company’s employment upon a Change in Control or the Executive’s employment is terminated upon or within one (1) year after a Change in Control, as defined in the Employment Agreement, or prior to the Change in Control if the Executive’s termination, demotion or relocation was either a condition of the Change in Control or was at the request of any person related to the Change in Control, and such termination was initiated by the Company without cause or by the Executive due to being requested to accept without cause a demotion or relocation:

(i)

The Company shall pay to the Executive any earned and accrued but unpaid installment of Base Salary through the date of resignation or termination, at the rate in effect on the date of termination, or if greater, on the date immediately preceding the date that a Change in Control occurs, and all other unpaid amounts to which the Executive is entitled as of the date of termination under any compensation plan or program of the Company, including, without limitation, all accrued vacation time. Stock options, shares of restricted stock, performance awards, stock appreciation rights, and LTI awards granted to Executive by the Company through the date of termination shall be treated in accordance with the applicable plans and policies of the Company. All outstanding stock options shall vest upon termination.

(ii)

In lieu of any further Base Salary, bonus payments and benefits to the Executive for periods subsequent to the date of resignation or termination, the Company shall pay as liquidated damages to the Executive, an amount equal to twelve (12) months of the Executive’s annual Base Salary at the rate in effect as of the date of termination, or if greater, on the date immediately preceding the date that a Change in Control occurs.

In the Mikulinsky Employment Agreement, Mr. Mikulinsky agreed not to compete with the Company or solicit its customers, clients or employees during the term of his respective Employment Agreement and for a 12-month period following the termination of employment under agreements.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning stock options held by the named executive officers at November 30, 2019:


Name	Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable		Option Exercise Price ($)		Option Expiration Date
David Portnoy	August 31, 2011 December 1, 2011 April 15, 2016 March 8, 2018 (1) August 30, 2019 (1)		100,000 200,000 70,270 23,636 26,243	$ $ $ $ $	2.90 1.72 3.14 7.92 7.53	August 31, 2021 December 1, 2021 April 15, 2026 March 8, 2023 August 30, 2029
Mark Portnoy	August 31, 2011 December 1, 2011 April 15, 2016 March 8, 2018 (1) August 30, 2019 (1)		100,000 200,000 59,459 20,000 22,222	$ $ $ $ $	2.90 1.72 3.14 7.92 7.53	August 31, 2021 December 1, 2021 April 15, 2026 March 8, 2023 August 30, 2029
Jill Taymans	June 2, 2016		7,500	$	3.10	June 3, 2026
Oleg Mikulinsky	March 5, 2012 April 18, 2016 May 21, 2018 (1) September 4, 2019 (1)		20,000 40,000 8,000 4,444	$ $ $ $	2.05 3.20 7.49 7.13	March 5, 2022 April 18, 2026 May 21, 2028 September 4, 2029

(1)	1/3 of the options vest immediately on the date of grant, 1/3 of the options vest one-year from the date of grant and 1/3 of the options vest two-years from the date of grant.

Director Compensation

Directors who are employees of the Company receive no compensation for their services as directors or as members of board committees. Effective November 25, 2019, non-employee directors are paid an annual retainer in the amount of $25,500. Each non-employee director receives an annual stock option grant in the amount of 5,300 shares on the date of the annual stockholders meeting in each year with an exercise price equal to the fair market value of the common stock on the date of grant. Prior to November 25, 2019, non-employee directors were paid an annual retainer in the amount of $15,000 and an attendance fee of $4,000 for each board meeting and $2,000 for each telephonic quarterly board meetings, a $1,000 fee per committee per year and reimbursed for their reasonable expenses incurred for attending a meeting. Prior to November 25, 2019, each non-employee director received an annual stock option grant in the amount of 7,500 shares on the date of the annual stockholders meeting in each year. All of such stock options had an exercise equal to the fair market value of the common stock on the date of grant.

The table below summarizes the compensation paid by the Company to its non-employee directors for the fiscal year ended November 30, 2019:


Name	Fees Earned or Paid in Cash ($)		Option Awards ($) (1)		Total ($)
Harold Berger	$	30,750	$	10,422	$	41,172
George Gaines	$	31,750	$	10,422	$	42,172
Jonathan Wheeler	$	31,750	$	10,422	$	42,172
Arthur Ellis	$	31,750	$	35,871	$	67,621
Brian Sheehy	$	25,750	$	35,871	$	61,621

(1)

Represents the dollar amount recognized for financial reporting purposes in fiscal 2019 with respect to stock options. The fair value was estimated using the Black-Scholes option-pricing model. The amount reported has been adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. See Note 11, Stockholders’ Equity, to our consolidated financial statements for a discussion of our accounting for stock options and the assumptions used.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding beneficial ownership of our common stock as of February 21, 2020 by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of our common stock, (ii) each director and director nominee of the Company, (iii) each executive officer of the Company, and (iv) all current directors and executive officers of the Company as a group. Except as otherwise indicated below, each of the stockholders named in the table has sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law.


Name and Address of Beneficial Owner ⁽¹⁾	Number of Shares Beneficially Owned ⁽²⁾		Percent of Class ⁽¹⁾
Five Percent Shareholders:
Mary J. Nyberg Trustee of the CDMJ Nyberg Family Trust, U/A/D June 9, 2005 ⁽³⁾		600,000		7.95	%
CU Blood, Inc. ⁽⁴⁾		465,426		6.17	%
Adam Fleishman Trustee of the Adam Fleishman Trust dated April 13, 2001 ⁽⁵⁾		509,000		6.75	%
Current directors, nominees and executive officers:
David Portnoy ⁽⁶⁾		1,455,714		18.30	%
Mark Portnoy ⁽⁷⁾		958,964		12.09	%
George Gaines ⁽⁸⁾		1,112,908		14.67	%
IsZo Capital LP⁽⁹⁾		493,074		6.53	%
Harold Berger ⁽¹⁰⁾		65,838		*
Jonathan Wheeler ⁽¹¹⁾		104,708		1.38	%
Arthur Ellis ⁽¹²⁾		125,746		1.66	%
Jill Taymans ⁽¹³⁾		52,896		*
Oleg Mikulinsky⁽¹⁴⁾		101,164		1.33	%
All current directors and executive officers as a group (9 persons) ⁽¹⁵⁾		4,471,013		52.39	%

*	Less than 1%.

(1)

Pursuant to applicable SEC rules, the percentage of voting stock for each stockholder is calculated by dividing (i) the number of shares deemed to be beneficially held by such stockholders as February 21, 2020 by (ii) the sum of (a) 7,545,613 which is the number of shares of common stock outstanding as February 21, 2020 plus (b) the number of shares issuable upon exercise of options (which are shares that are not voting until exercised) held by such stockholder which were exercisable as of February 21, 2020 or will become exercisable within 60 days of that date. Unless otherwise indicated, the address of each director and executive officer in the table is 700 Brooker Creek Boulevard, Suite 1800, Oldsmar, Florida 34677.

(2)

In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of any shares of Common Stock if he or she has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from February 21, 2020. As used herein, “voting power” is the power to vote or direct the voting of shares, and “investment power” is the power to dispose or direct the disposition of shares. The shares set forth above for directors and executive officers include all shares held directly, as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting and investment power.

(3)

Mary J. Nyberg, as trustee of CDMJ Nyberg Family Trust, U/A/D June 9, 2005 filed a Schedule 13G/A on January 17, 2018 (“the Schedule 13G”) reporting the following beneficial ownership: (i) 600,000 shares of common stock held by CDMJ Nyberg Family Trust U/A/D June 9, 2005, as to which this trust has the sole power to vote and dispose or direct the disposition. Beneficial ownership information is supplied per the Schedule 13G. The address for the CDMJ Nyberg Family Trust is 4555 E. Mayo Blvd., Phoenix, AZ 85050.

(4)

CU Blood, Inc. filed a Schedule 13G on June 21, 2018 (“the CU Schedule 13G”) reporting the following beneficial ownership: (i) 465,426 shares of common stock held by CU Blood, Inc. as to which CU Blood, Inc. has the sole power to vote and dispose or direct the disposition. Beneficial ownership information is supplied per the Schedule 13G. The address for CU Blood, Inc. is 1991 Summit Park Drive, Suite 2000, Orlando, FL 32810.

(5)

Adam Fleishman as trustee of Adam Fleishman Trust April 13, 2001 filed a 13G on January 5, 2015 (”the Schedule 13G”) reporting the following beneficial ownership: (i) 279,000 shares of common stock held by Adam Fleishman Trust dated April 13, 2001, as to which this trust has sole power to vote and dispose or direct the disposition, and (ii) 230,000 shares of common stock held by Adam Fleishman. Beneficial ownership information is supplied per the Schedule 13G. The address for Adam Fleishman is 775 Summit Drive, Deerfield, Illinois 60015.

(6)

Includes 58,011 shares of Common Stock held directly through a 401(k) plan account, 199,080 shares of Common Stock held directly through IRA accounts of David Portnoy, 424,661 shares he owns individually, 151,224 shares of Common Stock held by Partner-Community, Inc., as to which David Portnoy may be deemed the beneficial owner as Chairman of the Board and Secretary, 55,219 shares of Common Stock held by uTIPu, as to which David Portnoy may be deemed the beneficial owner as Chairman of the Board, 59,027 shares of Common Stock held by Mayim Investment Limited Partnership, as to which David Portnoy may be deemed the beneficial owner as the managing member and owner of Mayim Management, LLC, which is the general partner of Mayim Management Limited Partnership, which is the general partner of Mayim Investment Limited Partnership; 78,864 shares of Common Stock held by spouse, 9,974 shares held by David Portnoy as custodian for his minor son; and 9,122 shares held by David Portnoy as custodian for his minor daughter. Includes 410,532 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(7)

Includes 18,055 shares of Common Stock held directly through a 401(k)-plan account, 482,514 shares that he owns individually and 71,529 shares of common stock held by Capital Asset Fund #1 Limited Partnership, as to which Mark Portnoy may be deemed beneficial owner as its general partner. Also, includes 386,866 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(8)	Includes 39,708 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(9)

Includes 484,199 shares of Common Stock held by IsZo Capital L.P (the “Fund”)., IsZo Capital GP LLC (“IsZo GP”), IsZo Capital Management LP (“ICM”) and Brian Sheehy. Also, includes 8,875 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(10)	Includes 39,708 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(11)	Includes 39,708 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(12)	Includes 8,875 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(13)	Includes 7,500 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(14)	Includes 46,815 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

(15)	Includes 988,588 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 21, 2020.

As discussed in further detail in the Company’s Proxy Statement filed with the Securities and Exchange Commission on October 29, 2019 in connection with the Company’s 2019 Annual Meeting (the “2019 Proxy Statement”), on or about March 26, 2018, the Company received a letter from counsel for a purported stockholder. Among other things, the letter identified equity awards allegedly made in violation of the 2012 Plan. The Board formed a committee of directors (the “Demand Review Committee”) to (among other things) conduct an investigation of the allegations in that letter. After completing its investigation, the Demand Review Committee determined that certain restricted stock awards and certain performance-based awards were granted in violation of the 2012 Plan and the Delaware General Corporation Law (“DGCL”). The Demand Review Committee also determined that certain stock option awards were granted in violation of the 2012 Plan, the 2006 Plan, the 2000 Stock Incentive Plan, as amended (the “2000 Plan”) and the DGCL. Annex II attached to the 2019 Proxy Statement describes each of these awards and the applicable Plan that the awards were purportedly granted under, and Annexes I and II of the 2019 Proxy Statement describe each defective award and defective stock issuance identified by the Demand Review Committee (the “Defective Awards and Issuances”).

Based on the recommendation of the Demand Review Committee, the Board of Directors approved the proposed treatment of each award and issuance listed on Annexes I and II in the manner identified in the column entitled “Recommended Disposition” in each of those Annexes and recommended to the Company’s stockholders that such awards and issuances be ratified as proposed by the Recommended Dispositions. On November 21, 2019, the Company held its Annual Meeting of Stockholders. At the 2019 Annual Meeting, the Company’s stockholders considered various matters presented to them, including the ratification of certain equity-based awards and stock issuances made pursuant to the Company’s incentive Plans, as well as the approval of certain amendments to those incentive Plans. All such matters presented to the stockholders were duly approved by the stockholders at the 2019 Annual Meeting. Accordingly, all references contained in this Annual Report on Form 10-K to the number of options or shares of common stock granted under the Company’s incentive Plans, the value thereof, and the number of securities that remain available for future issuance under the Company’s 2012 Plan for all periods presented in this Annual Report on Form 10-K have been calculated and are being presented after taking into account the ratification and surrender of the Defective Awards and Issuances in accordance with the Recommended Disposition, as further described in the 2019 Proxy Statement.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

David Portnoy, the Company’s Chairman and Co-Chief Executive officer, is the brother of the Company’s Co-Chief Executive Officer, Mark Portnoy. The Company’s Audit Committee Chairman, Harold Berger, provides accounting services to the Company’s Co-Chief Executive Officer Mark Portnoy and to PartnerCommunity, Inc. The Company’s Chairman and Co-Chief Executive Officer, David Portnoy, serves as the Chairman of the Board of PartnerCommunity, Inc.

Approval of Related Party Transactions

Historically, the Company followed a policy of review and approval of transactions with directors, executive officers and their affiliates by the board of directors, with interested members of the board of directors abstaining from voting on approval of the transactions. Under this policy, the board of directors would approve such transactions only if they were found to be on terms no less favorable to the Company than would be available from third parties in arms-length transactions. The Board of Directors has a policy that the Company will not enter into any transaction or commercial relationship with any director, director nominee, executive officer or greater than 5% stockholder of the Company.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Porter Keadle Moore, LLC (“PKM”) served as the Company’s independent registered public accounting firm for the fiscal year ended November 30, 2018.

Effective October 1, 2019 PKM combined its practice (the “Practice Combination”) with WIPFLI LLP (“WIPFLI”). As a result of the Practice Combination, PKM effectively resigned as the Company’s independent registered public accounting firm and WIPFLI, as the successor to PKM following the Practice Combination, was engaged as the Company’s independent registered public accounting firm. The Company’s Audit Committee was notified of the Practice Combination and the effective resignation of PKM and ratified and approved the engagement of WIPFLI. On November 21, 2019 the appointment was ratified by the Company’s shareholders at the 2019 Annual Meeting of Shareholders.

The following table presents fees for professional audit services rendered by PKM for the audit of the Company’s financial statements for the fiscal year ended November 30, 2018, tax services rendered by PKM for fiscal year ended November 30, 2018, professional audit services rendered by PKM and WIPFLI for the fiscal year ended November 30, 2019, tax services rendered by PKM and WIPFLI for the fiscal year ended November 30, 2019 and fees billed for other services rendered by PKM and WIPFLI during these periods.


	2019		2018
Audit Fees	$	238,665	$	255,457
Audit Related Fees		7,500		49,718
Tax Fees		64,858		84,478
Other		—		—

Total	$	312,023	$	389,653

Audit Fees

Audit fees consisted of the aggregate fees billed by our principal accountants for professional services rendered for the audit of the Company’s annual financial statements set forth in the Company’s Annual Report on Form 10-K for the fiscal years ended November 30, 2018 and November 30, 2017 as well as assistance with and review of documents filed with the SEC.

Audit Related Fees

Audit related fees consisted of fees billed for professional services rendered by our principal accounts during the fiscal years ended November 30, 2019 and November 30, 2018.

Tax Fees

Tax fees consisted of the aggregate fees billed by our principal accountants for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended November 30, 2019 and November 30, 2018.

Other Fees

The Company did not incur other fees by our principal accountants for the fiscal years ended November 30, 2019 and November 30, 2018.

The policy of the Company’s audit committee is to review and pre-approve both audit and non-audit services to be provided by the independent auditors (other than with de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002). This duty may be delegated to one or more designated members of the audit committee with any such approval reported to the committee at its next regularly scheduled meeting. All of the fees described above under the captions “Audit-Related Fees”, “Tax Fees” and “Other Fees” and paid to PKM were pre-approved by the audit committee.

No services in connection with appraisal or valuation services, fairness opinions or contribution-in-kind reports were rendered by PKM or WIPFLI. Furthermore, no work of PKM and WIPFLI with respect to its services rendered to the Company was performed by anyone other than PKM and WIPFLI.

Part IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.


Exhibit No.		Description
3.1 (1)		Amended and Restated Certificate of Incorporation
3.2 (2)		Amended and Restated By-Laws
10.6 (3)		Secondary Storage Agreement with Safti-Cell, Inc. dated October 1, 2001
10.7 (3)		Addendum Agreement dated November 2001 to Secondary Storage Agreement with Safti-Cell, Inc.
10.9 (4)		Lease Agreement dated April 15, 2004 between Brooker Creek North, LLP and the Company
10.10 (5)		Employment Agreement with Mercedes Walton, dated August 15, 2005
10.11 (6)		Employment Agreement with Jill M. Taymans dated November 1, 2005.
10.12 (6)		Forms of Stock Option Agreements under 2000 Stock Incentive Plan.
10.13 (7)		First Lease Amendment by and between the Company and Brooker Creek North I, LLP, dated June 7, 2006.
10.14 (8)		2006 Stock Incentive Plan
10.15 (9)		Employment Agreement dated April 1, 2007 between the Company and Julie Allickson
10.16 (10)		Agreement dated June 4, 2007 by and among the Company and Andrew J. Filipowski, the Andrew J. Filipowski Revocable Trust and Matthew G. Roszak
10.17 (11)		Agreement dated January 24, 2008 by and among the Company and Andrew J. Filipowski, the Andrew J. Filipowski Revocable Trust, Matthew G. Roszak and SilkRoad Equity LLC
10.18 (11)		Agreement dated January 24, 2008 by and among the Company and Ki Yong Choi and the UAD 7/21/01 FBO Choi Family Living Trust
10.20 (12)		Amendment dated July 16, 2007, amending Employment Agreement with Mercedes Walton, dated August 15, 2005
10.21 (13)		Amendment dated July 18, 2008, amending Employment Agreement with Mercedes Walton, dated August 15, 2005
10.22 (13)		Amendment dated July 18, 2008, amending Employment Agreement with Jill M. Taymans, dated November 1, 2005
10.23 (14)		2000 Stock Incentive Plan
10.24 (14)		Amendment to 2000 Stock Incentive Plan dated April 6, 2004
10.25 (14)		Amendment to 2000 Stock Incentive Plan dated August 14, 2008
10.26 (12)		Stipulation and Order of Court of Chancery of the State of Delaware dated June 18, 2008
10.27 (15)		Employment Agreement with David Portnoy dated December 1, 2011
10.28 (15)		Employment Agreement with Mark Portnoy dated December 1, 2011
10.29 (16)		Amendment dated, February 13, 2012, amending Employment Agreement with David Portnoy
10.30 (16)		Amendment dated, February 13, 2012, amending Employment Agreement with Mark Portnoy
10.31 (17) 10.32 (18) 10.33 (19) 10.34 (19) 10.35 (20) 10.36 (20) 10.37 (21) 10.38 (22) 10.39 (21) 10.40 (23) 10.41 (24) 10.42 (25) 10.43 (25)		Employment Agreement with Oleg Mikulinsky dated March 5, 2012 Amendment dated May 1, 2013, amending Employment Agreement with Oleg Mikulinsky dated March 5, 2012 Employment Agreement with David Portnoy dated December 1, 2013 Employment Agreement with Mark Portnoy dated December 1, 2013 Employment Agreement with Linda Kelley dated June 18, 2012 Amendment dated October 29, 2013, amending Employment Agreement with Linda Kelley dated June 18, 2012 Certificate of Designation of Series A Junior Participating Preferred Stock of Cryo-Cell International, Inc. Asset Purchase Agreement by and between Cytomedical Design Group LLC and Cryo-Cell International, Inc. dated June 15, 2015 Rights Agreement dated December 5, 2014 Amendment No. 1 to Asset Purchase Agreement dated June 30, 2015 Third Lease Amendment by and between the Company and EJB Brooker Creek, LLC., dated January 12, 2016. Amended and Restated Employment Agreement with David Portnoy dated December 1, 2015 Amended and Restated Employment Agreement with Mark Portnoy dated December 1, 2015
10.44 (26)		Amendment Agreement with Oleg Mikulinsky dated December 1, 2015.
10.45 (27)		Stock Purchase Agreement dated June 16, 2016.
10.46 (28)		2012 Equity Incentive Plan.
10.47 (29)		Amended and restated Employment Agreement with David Portnoy dated March 8, 2018.
10.48 (29)		Amended and restated Employment Agreement with Mark Portnoy dated March 8, 2018.
10.49 (30)		Amended Agreement with Oleg Mikulinsky effective December 1, 2017.
10.50 (31)		Second Amendment to Credit Agreement with Texas Capital Bank dated June 11, 2018.
10.51 (31)		Second Amended and Restated Promissory Note dated June 11, 2018
10.52 (32)		Retrospective Amendments to the 2000 Stock Incentive Plan
10.53 (32)		Retrospective Amendments to the 2006 Stock Incentive Plan
10.54 (32)		2012 Amended and Restated Equity Incentive Plan
24		Power of Attorney (included on signature page)
31.1		Certification of Co-CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of CoCEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3		Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonony Extension Definition Linkbase Document
101.LAB		XBRL Taxonony Extension Label Linkbase Document
101.PRE		XBRL Taxonony Extension Presentation Linkbase Document
(1)		Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB for the quarter ended May 31, 2002.
(2)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 11, 2018.
(3)		Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended November 30, 2002.
(4)		Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB for the quarter ended May 31, 2004.
(5)		Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed for the quarter ended August 31, 2005.
(6)		Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended November 30, 2005.
(7)		Incorporated to the Company’s Quarterly Report on Form 10-QSB for the quarter ended May 31, 2006.
(8)		Incorporated by reference to Annex B to the Definitive Proxy Statement filed June 1, 2006.
(9)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2007.
(10)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 8, 2007.
(11)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 25, 2008.
(12)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2008.
(13)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2008.
(14)		Incorporated by reference to the Company’s Annual Report on Form 10-KSB for the year ended November 30, 2008.
(15)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 7, 2011.
(16)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 17, 2012.
(17) (18) (19)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on March 9, 2012 Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2013. Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 27, 2014.
(20)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended November 30, 2013.
(21)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 3, 2014.
(22)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 19, 2015
(23)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 16, 2015
(24)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended November 30, 2015
(25)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 19, 2016.
(26)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 20, 2016.
(27)		Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 24, 2016.
(28)		Incorporated by reference to Appendix B to the proxy statement for the Annual Meeting of Stockholders of the Company (Commission File No. 000-23386), filed by the Company under the Exchange Act with the Commission on June 21, 2012.
(29)		Incorporated by reference to the Company’s Current Report on Form 8-K filed March 13, 2018.
(30)		Incorporated by reference to the Company’s Current Report on Form 8-K filed May 24, 2018.
(31)		Incorporated by reference to the Company’s Current Report on Form 8-K filed June 15, 2018.
(32)		Incorporated by reference the proxy statement for the Annual Meeting of Stockholders of the Company (Commission File No. 000-23386 ), filed by the Company under the Exchange Act with the Commission on October 29, 2019.

ITEM 16.

FORM 10-K SUMMARY

Not applicable.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.


CRYO-CELL INTERNATIONAL, INC.

By:		/s/ David Portnoy
		David Portnoy, Co-Chief Executive Officer

Dated: February 28, 2020

POWER OF ATTORNEY

Each of the undersigned officers and directors of Cryo-Cell International, Inc., hereby constitutes and appoints David Portnoy, Mark Portnoy and Jill Taymans, each their true and lawful attorneys-in-fact and agents, for them and in their name, place and stead, in any and all capacities, to sign their names to any and all amendments to this Report on Form 10-K, and other related documents, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys, full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned for himself or herself hereby ratifies and confirms all that said attorney shall lawfully do or cause to be done by virtue hereof.

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated:


SIGNATURE	TITLE	DATE

/s/ David Portnoy	Chairman of the Board and
David Portnoy	Co-Chief Executive Officer
	(principal executive officer)	February 28, 2020

/s/ Mark Portnoy	Co-Chief Executive Officer	February 28, 2020
Mark Portnoy

/s/ Jill Taymans	Chief Financial Officer
Jill Taymans	(principal financial
	and accounting officer)	February 28, 2020

/s/ Harold Berger	Director	February 28, 2020
Harold Berger

/s/ Arthur Ellis	Director	February 28, 2020
Arthur Ellis

/s/ George Gaines	Director	February 28, 2020
George Gaines

/s/ Brian Sheehy	Director	February 28, 2020
Brian Sheehy

/s/ Jonathan Wheeler	Director	February 28, 2020
Jonathan Wheeler