NOTE 14 - LICENSE AGREEMENTS

The Company enters into two types of licensing agreements and in both types, the Company earns revenue on the initial license fees. Under the technology agreements, the Company earns processing and storage royalties from the affiliates that process in their own facility. Under the marketing agreements, the Company earns processing and storage revenues from affiliates that store specimens in the 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 program and menstrual stem cell program in India.

The Company changed the methodology used to record the processing and storage royalty income during fiscal year 2015 from recognizing royalty income based on historical estimates of specimens processed and stored to utilizing actual specimens processed and stored. The change increased licensee and royalty income by $322,353 in the fourth quarter of 2015. The Company accounted for this change as a change in accounting estimate.

Per the License and Royalty Agreement with LifeCell, there is a $1 million cap on the amount of royalty due to the Company per year and a $10 million cap on the amount of royalties due to the Company for the term of the License and Royalty Agreement. As of November 30, 2015, LifeCell has paid the Company approximately $4.1 million for royalties due under the terms of the License and Royalty Agreement.

The Company previously had a License and Royalty Agreement with Cryo-Cell de Mexico (“Mexico”) and on August 19, 2011, the Company received notification from Mexico that they were terminating the license agreement effective immediately due to an alleged breach of the license agreement. On October 17, 2011, the Company and Mexico entered into an amendment to the license agreement whereby the termination was revoked and Mexico would pay the Company $1,863,000 in 37 monthly installments of $50,000 beginning on October 17, 2011 with a final payment of $13,000. Mexico would have no other continuing obligations to the Company for royalties or other license payments and the agreement would be effectively terminated once the entire $1,863,000 was received. In December 2013, Mexico paid the balance due of $563,000 in full. The Company recognized the balance paid as licensee and interest income during the fiscal year ended November 30, 2014 in the accompanying consolidated statements of comprehensive income. Mexico has no other continuing obligations to the Company for royalties or other license payments and the agreement is terminated. The amendment has and is expected to result in a reduction of licensee and royalty income in future periods.

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. 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. The Company continues to accept umbilical cord blood stem cell specimens to be processed and stored during the negotiations. In December 2012, the Company sent a 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.

The following table details the initial license fees for the technology and marketing agreements and processing and storage royalties earned for the technology agreements for fiscal years 2015 and 2014. The initial license fees and processing and storage royalties are reflected in licensee income in the accompanying consolidated statements of comprehensive income.