EDGAR 10-K Filing

Company CIK: 862692
Filing Year: 2022
Filename: 862692_10-K_2022_0000950170-22-001637.json

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ITEM 1. BUSINESS
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; 1.) cellular processing and cryogenic storage for family use, with a current focus on the collection and preservation of umbilical cord blood and tissue stem cells, 2.) the manufacture of PrepaCyte® CB Processing System (“PrepaCyte CB”) units, the processing technology used to process umbilical cord blood stem cells, and 3.) 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. The Company's 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.
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 an 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 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 five-compartment cord blood freezer bag that allows for multiple uses of the baby’s cord blood stem cells,
•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, Michigan and Washington. 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 2021 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. 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, 2021 and November 30, 2020, 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:
1.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.
2.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.
3.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 with separation media or as a multi one-time use processing system. The system is 510(k) 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 is possible 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.
Patent Option Agreement with Duke University
Effective June 9, 2020, the Company entered into a Patent Option Agreement (the “Option”) with Duke University (“Duke”). The Option grants Cryo-Cell the exclusive option to obtain an exclusive license to certain of Duke’s patent rights to make, have made, use, import, offer for sale, sell and otherwise commercially exploit (with the right to sublicense) certain licensed products and to practice certain licensed processes, and the exclusive right to use certain regulatory data and technical information in connection with such licensed patent rights, in the treatment, prevention, cure, reduction, mitigation or other management of diseases in humans, except, with regard to certain patent rights, in certain excluded fields of use and in certain territories, as well as a limited license to make, have made or use certain products, processes, data and information for the purpose of evaluating the market potential for such products and processes in the designated field of use, subject to Duke’s reserved rights to practice the licensed rights for all research, public service, internal (including clinical) and/or educational purposes. This exclusive Option is for a period of six months from the effective date of the Option. As consideration for the Option, the Company paid Duke a non-refundable, option fee of $350,000 during June 2020. The Option was subject to extension by the Company for an additional six months by payment of $150,000 on or before the expiration of the initial six-month option period. On December 1, 2020, the Company made the extension payment of $150,000. Such option fee, plus the extension fee, will be fully credited against the license fee under the future license agreement. In connection with the option, Cryo-Cell anticipates opening a clinic to help patients have greater access to cord blood treatments established by Duke University under the FDA granted Expanded Access Program.
On February 23, 2021, pursuant to the Option, the Company entered into a Patent and Technology License Agreement (the “Agreement”) with Duke, pursuant to which Duke has granted to the Company an exclusive license to make, have made, use, import, offer for sale, sell and otherwise commercially exploit (with the right to sublicense) certain licensed products and to practice certain licensed processes, and the exclusive right to use certain regulatory data and technical information in connection with such licensed patent rights, in the treatment, prevention, cure, reduction, mitigation or other management of certain diseases in humans, except, with regard to certain patent rights, in certain excluded fields of use and in certain territories, subject to Duke’s reserved rights to practice the licensed rights for all research, public service, internal (including clinical) and/or educational purposes.
The Agreement extends until expiration of the last Royalty Term, unless sooner terminated as provided in the Agreement. Royalty Term generally means the period beginning on the first commercial sale of each licensed product or licensed process and ending fifteen (15) years thereafter. Upon expiration of the applicable Royalty Term with respect to a particular licensed product or licensed processes, the licenses and rights granted by Duke to the Company under the Agreement with respect to such product or process become fully paid-up, royalty-free, perpetual and irrevocable.
The Company is required to pay Duke a license fee equal to $12,000,000, of which $5,000,000 was due (and paid) within fourteen (14) days of February 23, 2021 (of which $500,000 was paid through the crediting of the previously paid $350,000 option fee plus $150,000, extension fee, as described above), $5,000,000 must be paid on the first anniversary of February 23, 2021, and $2,000,000 must be paid on the second anniversary of February 23, 2021. In addition, during the Royalty Term, subject to certain minimum royalties, the Company is required to pay Duke royalties based on a portion of the net sales varying from 7% - 12.5% based on volume. On March 8, 2021, the Company transferred $4,889,410 to Duke which included the first payment due of $5,000,000, less $500,000 previously paid and $389,410 in costs related to the patents.
Unless the Agreement is terminated or renegotiated as permitted per the Agreement, the Company is also required to pay Duke minimum annual royalties beginning on the second anniversary of the effective date. The minimum annual royalties are as follows:
•Year 2: $500,000
•Year 3: $1,000,000
•Year 4: $2,500,000
•Year 5 and each year thereafter during the term of this Agreement: $5,000,000
In addition, the Company is required to pay Duke certain milestone payments, as follows:
•Two Million Dollars ($2,000,000) upon initiation of the first Phase III clinical trial for an indication other than Autism Spectrum Disorder, for a licensed product comprising cord tissue; and
•a number of shares of the Company’s common stock equal to the corresponding percentage of the Company’s fully-diluted equity ownership outstanding as of February 23, 2021 as follows:
(1)5.0% upon execution of the Agreement (which shares have been issued);
(2)2.5% upon cumulative net sales of licensed product and licensed process of $10,000,000;
(3)2.5% upon cumulative net sales of licensed product and licensed process of $75,000,000;
(4)2.5% at each of the following market cap of the Company (based on a rolling 30-day average closing market cap) triggers:
oEqual to or greater than $300,000,000, provided such trigger occurs within eighteen (18) months of February 23, 2021; and
oEqual to or greater than $500,000,000, provided such trigger occurs within twenty-four (24) months of February 23, 2021.
On February 4, 2022, the Company entered into a First Amendment to License Agreement (the "Amendment") with Duke. The Amendment changes the requirements of the Company with regard to the minimum annual royalties payable to Duke beginning on the third anniversary of the effective date. As amended, the minimum annual royalties are as follows:
•Year 3: $500,000
•Year 4: $1,000,000
•Year 5: $2,500,000
•Year 6 and each year thereafter during the term of this Agreement: $5,000,000
The Amendment also changed the requirements of the Company to pay Duke certain milestone payments, as follows:
•$2,000,000 two years after the first patient or subject is treated in the first Phase III clinical trial of a licensed product comprising cord tissue derived MSC for an indication other than Autism Spectrum Disorder.
During the first quarter of fiscal 2021, the Company capitalized $15,372,382 as a Duke license agreement which represented the costs to obtain the Agreement and also recorded a corresponding liability to Duke for the license agreement. The costs that were capitalized as a Duke license agreement includes the present value of the $12,000,000 license fee, $3,585,172, or 409,734 shares, of the Company’s common stock transferred to Duke and certain acquisition costs. The Company is amortizing these costs over 16 years. As of the twelve months ended November
30, 2021, the Company recorded $720,580, in amortization expense which is reflected in amortization expense on the accompanying consolidated statements of income.
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.
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 empty spaces result from attrition, the Company has agreed 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. During fiscal 2016, 50% of the RSA for the state of Florida was repurchased by the Company. 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.
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. During fiscal 2016, 50% of the RSA for the state of Texas was repurchased by the Company.
Illinois. In 1996, the Company entered into an RSA with a group of investors (the “Erie Group”) 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. Previously, the Company had repurchased 45% of the Illinois RSA.
On August 31, 2020, the Company entered into a termination of the RSA agreement with the Erie Group. As a result, the Company made a payment of $1,939,748 which was offset by the carrying amount of the long-term liability of the RSA in the amount of $550,000 and accrued expenses in the amount of $279,100 to reflect the extinguishment of revenue sharing agreements in the amount of $1,070,900 for the twelve months ended November 30, 2020.
The Company made total payments to all RSA holders of $909,829 and $974,276 for the fiscal years ended November 30, 2021 and November 30, 2020, respectively, exclusive of termination and repurchase payments. The Company recorded an RSA accrual of $883,265 and $762,573 as of November 30, 2021 and November 30, 2020, respectively, related to interest owed to the RSA holders, which is included in accrued expenses. The Company also recorded interest expense of $1,030,521 and $1,148,592 for the fiscal years ended November 30, 2021 and 2020, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive income.
International
The Company enters into two types of international 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 royalty 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. Since inception of the License and Royalty Agreement, the Company has recorded approximately $10,000,000 in royalty income due under the terms of the License and Royalty Agreement, of which, LifeCell has paid the Company approximately $9,700,000 as of November 30, 2021. The balance of approximately $300,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets. As of November 30, 2021, the Company has recognized all of the licensee income due under the License and Royalty Agreement with LifeCell.
The initial license fees and processing and storage royalties are reflected in licensee income in the accompanying consolidated statements of comprehensive income. The processing and storage royalties earned for the technology agreements for fiscal years ended November 30, 2021 and November 30, 2020 were $0 and $629,702, respectively.
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, 2021, the Company had 83 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.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS.
Not applicable.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2. PROPERTIES
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 this lease through December 31, 2021. On January 11, 2021, the Company extended this lease through December 31, 2024.
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 this lease through December 31, 2019. In April 2021, the Company extended the lease through April 30, 2023.
Rent charged to operations was $328,877 and $318,587 for the fiscal years ended November 30, 2021 and 2020, respectively, and is included in cost of sales and selling, general and administrative expenses in the consolidated statements of comprehensive income.
The future minimum rental payments under the current operating lease are as follows:
Fiscal Year Ending November 30,
Rent
$
343,470
$
318,674
$
299,764
$
24,980

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
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 of any such claim, 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.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
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 The Nasdaq Stock Market LLC 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, 2020
6.55
7.82
May 31, 2020
5.50
7.87
August 31, 2020
6.15
9.55
November 30, 2020
6.60
8.24
February 28, 2021
7.33
10.00
May 31, 2021
8.40
10.00
August 31, 2021
8.30
11.31
November 30, 2021
11.21
14.16
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, 2021, the Company had 152 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, 2021, 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
75,000
$
2.63
-
Cryo-Cell International, Inc. 2012 Stock Incentive Plan
460,943
$
6.26
526,410
Total
535,943
$
5.75
526,410

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. RESERVED.
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2021, 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. Similarly, statements that describe future financial performance or plans or strategies are 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 lifetime 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 prepaid storage fees. The lifetime plan includes the collection kit, processing and testing, return medical courier service and prepaid 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. Cord:Use is entitled to an earnout from Cryo-Cell’s sale of the Public Cord Blood Inventory from and after closing. 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.
As disclosed in Note 19, on February 23, 2021, the Company entered into a Patent and Technology License Agreement (the “Agreement”) with Duke University (“Duke”). The Agreement grants the Company the rights to proprietary processes and regulatory data related to cord blood and cord tissue developed at Duke. The Company plans to explore, test, and administer these treatments to patients with conditions for which there are limited FDA approved therapies, including cerebral palsy, autism, multiple sclerosis and COVID-19. These treatments utilize the unique immunomodulatory and potential regenerative properties derived from cord blood and cord tissue. Per the Agreement, the Company has been granted exclusive commercial rights to Duke’s intellectual property assets, FDA regulatory data, clinical expertise and manufacturing protocols associated with various applications of cord blood and cord tissue stem cells. Through this Agreement, the Company intends to expand to a triad of core business units to include its cord blood bank, biopharmaceutical manufacturing (once BLA(s) or Emergency Use Authorization(s) are approved by the FDA), and infusion clinic(s) services, initially under the rights granted to Duke through the FDAs Expanded Access Program. The Company is projecting to open the Cryo-Cell Institute for Cellular Therapies and begin infusing patients with autologous cord blood units during the fourth quarter of 2022.
During the first quarter of fiscal 2021, the Company capitalized $15,372,382 in connection with the Duke license agreement which represented the costs to obtain the Agreement and also recorded a corresponding liability to Duke for the license agreement (see Note 19). As of November 30, 2021, the balance was $14,651,802, net of amortization, and is reflected as Duke License Agreement on the accompanying consolidated balance sheets.
During the fiscal year ended November 30, 2021, the Company’s total revenue decreased 7% as compared to fiscal 2020. The Company reported net income of $2,083,521, or $0.26 per basic common share and $0.25 per diluted share for fiscal 2021 compared to net income of $3,624,596, or $0.48 per basic and $0.45 per diluted common share for fiscal 2020. The decrease in net income for the twelve months ended November 30, 2021 principally resulted from 7% decrease in revenues, which was offset by a 7% decrease in cost of sales, which was offset by a 2% increase in selling, general and administrative expenses. Revenue and net income were negatively impacted by the reduction
of the U.S. Birth rate due to Covid-19 and the price pressures in the umbilical cord blood banking industry. The Contingent Consideration (described below) decreased 60% for the twelve months ended November 30, 2021 versus the twelve months ended November 30, 2020. Also included in the net income for the twelve months ended November 30, 2021 and November 30, 2020 was an impairment charge of $1,164,499 and $1,284,238, respectively. Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge was recognized during the fourth quarter of fiscal 2021 and the fourth quarter of fiscal 2020, respectively, to reduce inventory from cost to net realizable value.
As of November 30, 2021, the Company had cash and cash equivalents of $8,263,088. The Company’s cash decreased by $2,098,037 during fiscal 2021. Cash provided by operations was $7,926,094 and the Company received $1,276,417 from the exercise of stock options, which were offset by $1,833,997 used for the purchase of property and equipment, $5,106,224 paid to Duke as part of the Patent Option Agreement (see Note 19) and $4,100,000 used to repay the note payable with Texas Capital Bank (see Note 4).
In March 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (“COVID-19”) outbreak. The Company faces various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The Company believes it has taken appropriate steps to minimize the risk to our employees and to maintain normal business operations and continues to actively monitor the global outbreak and spread of COVID-19 and continues to take steps to mitigate the potential risks to us posed by its spread and related circumstances and impacts. Due to the change in consumer buying patterns as a result of COVID-19, the Company has experienced a decline in new client sales resulting in a decrease in revenues in fiscal 2021 compared to fiscal 2020. While the ultimate health and economic impact of COVID-19 remains highly uncertain, we expect that our business operations and results of operations, including our net sales, earnings and cash flows, may continue to be impacted by decreases in new client sales. We cannot predict the timing and speed of the recovery, and any delay in the recovery could significantly impact our future results.
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 the Company's common stock or RSA interests, 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.
Results of Operations
Revenue. For the fiscal year ended November 30, 2021, the Company had revenue of $28,884,902 compared to $31,147,593 for the fiscal year ended November 30, 2020, a decrease of 7% as a result of the reasons discussed below.
Processing and Storage Fees. For the fiscal year ended November 30, 2021, processing and storage fees were $28,397,401 compared to $29,547,150 for the fiscal year ended November 30, 2020. Processing and storage fee revenue is attributable to an 8% increase in recurring annual storage fee revenue offset by a 7% decrease in the number of new domestic cord blood specimens processed in fiscal year 2021 versus fiscal year 2020.
Product Revenue. For the twelve months ended November 30, 2021, revenue from the product sales was $111,400 compared to $244,187 for the twelve months ended November 30, 2020.
Public Cord Blood Banking Revenue. For the twelve months ended November 30, 2021, revenue from the public cord blood banking sales was $376,101 compared to $726,554 for the twelve months ended November 30, 2020.
Licensee Income. For the fiscal year ended November 30, 2021, licensee income was $0 as compared to $629,702 for fiscal 2020. Licensee income for the twelve months ended November 30, 2020 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.
Per the License and Royalty Agreement with LifeCell, there is a $1,000,000 cap on the amount of royalty 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. Since inception of the License and Royalty Agreement, the Company has recorded approximately $10,000,000 in royalty income due under the terms of the License and Royalty Agreement, of which, LifeCell has paid the Company approximately $9,700,000 as of November 30, 2021. The balance of approximately $300,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets. As of
November 30, 2021, the Company has recognized all of the licensee income due under the License and Royalty Agreement with LifeCell.
Cost of Sales. For the fiscal year ended November 30, 2021, cost of sales was $8,989,736, as compared to $9,657,442 for the fiscal year ended November 30, 2020, representing a 7% decrease. 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 $203,892 for the year ended November 30, 2021 compared to $205,893 for the 2020 period. Also, included in Cost of Sales is $154,140 and $156,111 related to the costs associated with production of the PrepaCyte CB processing and storage system for the twelve months ended November 30, 2021 and November 30, 2020, respectively. Also included in Cost of Sales is $1,484,186 and $1,811,723 for the twelve months ended November 30, 2021 and November 30, 2020, respectively, related to the public banking due to the Purchase Agreement with Cord:Use. The decrease in cost of sales for the twelve months ended November 30, 2021 versus November 30, 2020 is due to the decrease in the number of new domestic cord blood specimens processed during the twelve months ended November 30, 2021 versus November 30, 2020.
Selling, General and Administrative Expenses. Selling, general and administrative expenses during the fiscal year ended November 30, 2021 were $14,625,311 as compared to $14,294,233 for the fiscal year ended November 30, 2020 representing a 2% increase. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees.
Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the fiscal year ended November 30, 2021, were $49,870 as compared to $23,851 in 2020.
Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the fiscal year ended November 30, 2021 was $834,845 compared to $166,437 for fiscal 2020.
Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the fiscal year ended November 30, 2021 was $782,481 compared to $1,940,205 for fiscal 2020. 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, 2021. 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, 2021 was $1,164,499 compared to $1,284,238 for the 2020 period. Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge of $1,164,499 and $1,284,238 was recognized during the twelve months ended November 30, 2021 and November 30, 2020, respectively, to reduce inventory from cost to net realizable value.
Interest Expense. Interest expense during the fiscal year ended November 30, 2021 was $1,378,926 compared to $1,544,017 in fiscal 2020, of which $174,968 and $395,426, respectively, related to the credit and subordination agreements with Texas Capital Bank, National Association as described in Note 4. Interest Expense is also comprised of $1,030,521 and $1,148,592 as of the twelve months ended November 30, 2021 and November 30, 2020, respectively, for amounts due to the parties to the Company’s revenue sharing agreements based on the Company’s storage revenue collected. The remaining interest expense for the twelve months ended November 30, 2021 is due to the accretion of the outstanding liability due to Duke per the Agreement, see Note 19.
Extinguishment of Revenue Sharing Agreement. On August 31, 2020, the Company entered into a termination of the RSA agreement with the Erie Group. As a result, the Company made a payment of $1,939,748 which was offset by the carrying amount of the long-term liability of the RSA in the amount of $550,000 and accrued expenses in the amount of $279,100 to reflect the extinguishment of revenue sharing agreement in the amount of $1,070,900 for the twelve months ended November 30, 2020.
Income Taxes. U.S. income tax expense for the twelve months ended November 30, 2021 was $527,710, net of foreign taxes, compared to $1,346,625, net of foreign income taxes, for the twelve months ended November 30, 2020.
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 $0 and $68,102 for the years ended November 30, 2021 and 2020, respectively, of foreign income tax expense, which is included in income tax expense in the accompanying consolidated statements of comprehensive income.
There was approximately $3,533,000 and $1,877,000 of U.S. income taxes paid for fiscal years ended November 30, 2021 and November 30, 2020, respectively.
Liquidity and Capital Resources
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 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 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.
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, 2021, the Company had cash and cash equivalents of $8,263,088 as compared to $10,361,125 at November 30, 2020. The decrease in cash and cash equivalents during the twelve months ended November 30, 2021 was primarily attributable to the following:
•Net cash provided by operating activities in fiscal 2021 was $7,926,094 which was attributable to the Company’s operating activities and a portion of the Company’s new clients choosing the prepaid storage plans versus the annual storage fee plan.
•Net cash provided by operating activities in fiscal 2020 was $8,466,603 which was attributable to the Company’s operating activities and a portion of the Company’s new clients choosing the prepaid storage plans versus the annual storage fee plan.
•Net cash used in investing activities in fiscal 2021 was $6,951,171 which was primarily attributable $1,510,150 used to purchase real estate for the Company’s Institute of Cellular Therapies in North Carolina, $323,847 used to the purchase equipment and software and $5,106,224 used as part of the Patent Option and Technology License Agreement with Duke (See Note 19).
•Net cash provided by investing activities in fiscal 2020 was $357,485 which was attributable to cash received due to the liquidation of marketable securities in the amount of $807,447, offset by $99,962 used to purchase property and equipment and $350,000 used as part of the Patent Option Agreement with Duke (See Note 19).
•Net cash used in financing activities in fiscal 2021 was $3,072,960 which was primarily attributable to the payments of $4,100,000 to repay the note payable described above, offset by the receipt of $1,276,417 from the exercise of stock options.
•Net cash used in financing activities in fiscal 2020 was $5,004,000 which was primarily attributable to the payments of $3,100,000 to repay the note payable described above, $1,900,000 used to terminate a revenue sharing agreement (See Note 14), and $45,000 used to pay the Cord:Use earnout (See Note 1) which are offset by the receipt of $41,000 from the exercise of stock options.
The Company does not have a line of credit.
The Company anticipates making discretionary capital expenditures of approximately $14,000,000 over the next twelve months for software enhancements, purchases of property and equipment and obligations under the Patent and Technology License Agreement with Duke University. The Company anticipates funding future property and equipment purchases with cash-on-hand, cash flows from future operations and, potentially, with future additional financing However, there can be no assurances the Company will be able to obtain additional financing on favorable terms or at all.
The Company anticipates that its cash and cash equivalents, marketable securities and cash flows from future operations, together with external sources of capital, 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, developing its infusion services at the Cryo-Cell Institute for Cellular Therapies 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 is considering the possibility of seeking additional equity or debt financing. However, there can be no assurances the Company will be able to obtain additional financing on favorable terms or at all. Further, any reductions in expenditures, if necessary, may have an adverse effect on the Company’s business operations, including sales activities and the development of new services and technology. In the future, the Company anticipates using a substantial amount of cash to fund clinical trials related to the Patent and Technology License Agreement with Duke University (see Note 19) and to develop its biopharmaceutical manufacturing capabilities related to mesenchymal stromal cells derived from umbilical cord tissue.
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
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. ASC 606 also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
In accordance with 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.
Under ASC 606, revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised services are transferred to the customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring services to a customer ("transaction price").
At contract inception, if the contract is determined to be within the scope of ASC 606, the Company evaluates its contracts with customers using the five-step model: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company evaluates its contracts for legal enforceability at contract inception and subsequently throughout the Company’s relationship with its customers. If legal enforceability with regards to the rights and obligations exist for both the Company and the customer, then the Company has an enforceable contract and revenue recognition is permitted subject to the satisfaction of the other criteria. If, at the outset of an arrangement, the Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. The Company only applies the five-step model to contracts when it is probable that collection of the consideration that the Company is entitled to in exchange for the goods or services being transferred to the customer, will occur.
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, 2021 and November 30, 2020.
Goodwill
Goodwill represents the excess of the purchase price of the assets acquired from Cord:Use over the estimated fair value of the net tangible 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, 2021, the Company has two stock-based employee compensation plans, which are described in Note 10 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 following areas each have one license agreement: El Salvador, Guatemala, Panama, Honduras and Pakistan. The following areas each have two license agreements: India, Nicaragua and Costa Rica. The Company is in the process of discussing a new agreement for Venezuela. 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 El Salvador, Guatemala, Ecuador, Panama, Honduras, Nicaragua, Costa Rica, Pakistan and Venezuela. These fees are included in processing and storage fees revenue on the consolidated statements of comprehensive income. 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, 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, 2021, 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 2). Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge of $1,164,499 and $1,284,238 was recognized during the fourth quarter of fiscal 2021 and 2020, respectively, to reduce inventory from cost to net realizable value.
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 empty spaces result from attrition over time, 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. 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable, as the Company is a smaller reporting company.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of November 30, 2021 and 2020
Consolidated Statements of Comprehensive Income For the Fiscal Years Ended November 30, 2021 and 2020
Consolidated Statements of Cash Flows For the Fiscal Years Ended November 30, 2021 and 2020
Consolidated Statements of Stockholders’ Equity (Deficit) For the Fiscal Years Ended November 30, 2021 and 2020
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.
235 Peachtree Street NE
404 588 4200
Suite 1800
wipfli.com
Atlanta, GA 30303
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 sheets of Cryo-Cell International, Inc. and subsidiaries (the “Company”), as of November 30, 2021 and 2020, and the related consolidated statements of comprehensive income, changes in stockholders’ equity (deficit), and cash flows for the years 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, 2021 and 2020, and the results of its operations and its cash flows for the years 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Estimate of Public Inventory Valuation and Contingent Consideration - valuation related to the amount of public inventory sales
As described in Notes 1 and 2 to the financial statements, the Company’s inventory of finished goods related to public inventory totaled $10,193,789 and contingent consideration related to sales of public inventory totaled $727,371.
Inventories are recorded at the lower of cost or net realizable value. Management periodically evaluates the carrying value of public inventories in relation to the forecasts of demand and sales trends. When sales trends indicate cost capitalized into public inventories will not be recoverable, an impairment is recorded for excess inventories. Changes in assumptions of demand could have a significant impact on the amount of impairment recorded.
Contingent consideration represents the fair value of estimated earnout payments the Company will make to another company from which the Company acquired the majority of public inventory. Earnout payments are based on sales revenue from the acquired public inventory. Changes in assumptions of demand and related sales revenue from public inventory could have a significant impact on fair value of contingent consideration.
Given the inherent uncertainty in forecasting demand, auditing the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. Our procedures related to management’s forecasts of demand used to record an impairment for excess inventories and fair value of contingent consideration included the following, among others:
•We evaluated management’s ability to accurately forecast product demand by comparing actual results to management’s historical estimates.
•We tested the mathematical accuracy of management’s calculations.
•Performed corroborative inquiries with the personnel responsible for sales forecasting to evaluate the reasonableness of the demand forecasts.
/s/ Wipfli LLP
We have served as the Company’s auditor since 2016.
Atlanta, Georgia
February 22, 2022
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30,
November 30,
ASSETS
Current Assets
Cash and cash equivalents
$
8,263,088
$
10,361,125
Marketable securities
75,412
88,476
Accounts receivable (net of allowance for
doubtful accounts of $3,078,439 and $2,781,668, respectively)
5,253,173
6,322,960
Prepaid expenses
558,413
611,627
Inventory, current portion
921,213
927,318
Other current assets
711,208
244,696
Total current assets
15,782,507
18,556,202
Property and Equipment-net
3,230,204
1,640,774
Noncurrent Assets
Investment - Tianhe stock
308,000
308,000
Patent option agreement
-
350,000
Duke license agreement, net
14,651,802
-
Intangible assets, net
1,559,693
1,181,588
Inventory, net of current portion
9,695,363
11,064,034
Goodwill
1,941,411
1,941,411
Deferred tax assets
12,010,133
10,363,967
Operating lease right-of-use asset
916,493
299,089
Deposits and other assets, net
566,470
495,029
Total noncurrent assets
41,649,365
26,003,118
Total assets
$
60,662,076
$
46,200,094
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable
$
1,489,774
$
957,390
Accrued expenses
3,057,386
2,898,211
Current portion of note payable
1,898,065
3,100,000
Current portion of operating lease liability
312,067
275,570
Current portion of Duke license agreement liability
4,957,591
-
Deferred revenue
9,358,696
9,183,450
Total current liabilities
21,073,579
16,414,621
Other Liabilities
Deferred revenue, net of current portion
31,274,214
27,200,910
Contingent consideration
727,371
1,509,852
Note payable, net of current portion and debt issuance costs
-
2,841,214
Operating lease long-term liability
610,989
23,632
Duke license agreement liability
1,916,609
-
Long-term liability - revenue sharing agreements
875,000
875,000
Total other liabilities
35,404,183
32,450,608
Total liabilities
56,477,762
48,865,229
Commitments and contingencies (Note 12)
-
-
Stockholders' Equity (Deficit)
Preferred stock ($.01 par value, 500,000 authorized and none issued and
outstanding)
-
-
Series A Junior participating preferred stock ($.01 par value, 20,000
authorized and none issued and outstanding)
-
-
Common stock ($.01 par value, 20,000,000 authorized; 14,665,772 issued
and 8,557,326 outstanding as of November 30, 2021 and 13,633,638
issued and 7,545,613 outstanding as of November 30, 2020)
146,658
136,336
Additional paid-in capital
41,586,583
36,581,600
Treasury stock, at cost
(20,812,734
)
(20,563,357
)
Accumulated deficit
(16,736,193
)
(18,819,714
)
Total stockholders' equity (deficit)
4,184,314
(2,665,135
)
Total liabilities and stockholders' equity (deficit)
$
60,662,076
$
46,200,094
The accompanying notes are an integral part of these consolidated financial statements.
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
November 30,
November 30,
Revenue:
Processing and storage fees
$
28,397,401
$
29,547,150
Public banking revenue
376,101
726,554
Licensee and royalty income
-
629,702
Product revenue
111,400
244,187
Total revenue
28,884,902
31,147,593
Costs and Expenses:
Cost of sales
8,989,736
9,657,442
Selling, general and administrative expenses
14,625,311
14,294,233
Impairment of public inventory
1,164,499
1,284,238
Change in fair value of contingent consideration
(782,481
)
(1,940,205
)
Research, development and related engineering
49,870
23,851
Depreciation and amortization
834,845
166,437
Total costs and expenses
24,881,780
23,485,996
Operating Income
4,003,122
7,661,597
Other Expense:
Losses on marketable securities
(13,064
)
(8,130
)
Other income
Interest expense
(1,378,926
)
(1,544,017
)
Loss on extinguishment of revenue sharing agreement
-
(1,070,900
)
Total other expense
(1,391,891
)
(2,622,274
)
Income before income tax expense
2,611,231
5,039,323
Income tax expense
(527,710
)
(1,414,727
)
Net Income
$
2,083,521
$
3,624,596
Net income per common share - basic
$
0.26
$
0.48
Weighted average common shares outstanding - basic
8,137,342
7,544,494
Net income per common share - diluted
$
0.25
$
0.45
Weighted average common shares outstanding - diluted
8,361,720
8,140,180
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,
Cash flows from operating activities:
Net income
$
2,083,521
$
3,624,596
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense
1,039,105
372,289
Impairment of public inventory
1,164,499
1,284,238
Loss on disposal of property and equipment
15,111
1,032
Change in fair value of contingent consideration
(782,481
)
(1,940,205
)
Loss on marketable securities
13,064
8,130
Compensatory element of stock options
301,616
622,120
Provision for doubtful accounts
536,999
602,965
Loss on extinguishment of revenue sharing agreements
-
1,070,900
Deferred income tax expense
(1,646,166
)
(1,283,973
)
Amortization of debt issuance costs
56,851
85,062
Amortization of operating lease right-of-use asset
287,287
263,686
Changes in assets and liabilities:
Accounts receivable
532,788
(828,594
)
Prepaid expenses
53,214
(111,367
)
Inventory
210,277
454,943
Other current assets
(466,512
)
15,701
Deposits and other assets, net
15,549
(67,606
)
Accounts payable
532,384
(411,721
)
Accrued expenses
11,275
1,092,131
Operating lease liability
(280,837
)
(263,573
)
Deferred revenue
4,248,550
3,875,849
Net cash provided by operating activities
7,926,094
8,466,603
Cash flows from investing activities:
Purchases of property and equipment
(1,833,997
)
(99,962
)
Purchase of patent option agreement
-
(350,000
)
Payment of Duke License Agreement
(5,106,224
)
-
Purchase of intangible asset
(10,950
)
-
Liquidation of marketable securities
-
807,447
Net cash (used in) provided by investing activities
(6,951,171
)
357,485
Cash flows from financing activities:
Extinguishment of revenue sharing agreements
-
(1,900,000
)
Treasury stock purchases
(249,377
)
-
Repayments of note payable
(4,100,000
)
(3,100,000
)
Proceeds from the exercise of stock options
1,276,417
41,000
Payment of Cord:Use earnout
-
(45,000
)
Net cash used in financing activities
(3,072,960
)
(5,004,000
)
(Decrease) increase in cash and cash equivalents
(2,098,037
)
3,820,088
Cash and cash equivalents - beginning of period
10,361,125
6,541,037
Cash and cash equivalents - end of period
$
8,263,088
$
10,361,125
Supplemental non-cash operating activities:
Operating lease liability and right-of-use asset due to adoption of ASC 842
-
$
562,775
Lease liability arising from right-of-use asset
$
904,691
$
-
Patent option agreement credit to purchase of patents and licenses
$
500,000
$
-
Liabilities incurred for the purchase of patents and licenses
$
11,374,200
$
-
Taxes payable upon net exercise of stock options
$
147,900
$
-
Supplemental financing activities:
Stock issued for the purchase of patents and licenses from Duke
$
3,585,172
$
-
The accompanying notes are an integral part of these consolidated financial statements.
CRYO-CELL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional
Total
Common Stock
Paid-In
Treasury
Accumulated
Stockholders'
Shares
Amount
Capital
Stock
Deficit
Equity (Deficit)
Balance at November 30, 2019
13,598,909
$
135,989
$
35,918,827
$
(20,563,357
)
$
(22,444,310
)
$
(6,952,851
)
Exercise of stock options
34,729
$
$
40,653
$
41,000
Compensatory element of stock
options
622,120
622,120
Net income
3,624,596
3,624,596
Balance at November 30, 2020
13,633,638
$
136,336
$
36,581,600
$
(20,563,357
)
$
(18,819,714
)
$
(2,665,135
)
Exercise of stock options
622,400
6,224
1,122,293
1,128,517
Common stock issued to Duke
409,734
4,098
3,581,074
3,585,172
Compensatory element of stock
options
301,616
301,616
Treasury stock
(249,377
)
(249,377
)
Net income
2,083,521
2,083,521
Balance at November 30, 2021
14,665,772
$
146,658
$
41,586,583
$
(20,812,734
)
$
(16,736,193
)
$
4,184,314
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, 2021 and 2020
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.
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, 2021 and November 30, 2020 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 2021 and 2020, 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
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. ASC 606 also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Under ASC 606, revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised services are transferred to the customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring services to a customer ("transaction price").
At contract inception, if the contract is determined to be within the scope of ASC 606, the Company evaluates its contracts with customers using the five-step model: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The Company evaluates its contracts for legal enforceability at contract inception and subsequently throughout the Company’s relationship with its customers. If legal enforceability with regards to the rights and obligations exist for both the Company and the customer, then the Company has an enforceable contract and revenue recognition is permitted subject to the satisfaction of the other criteria. If, at the outset of an arrangement, the Company determines that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met. The Company only applies the five-step model to contracts when it is probable that collection of the consideration that the Company is entitled to in exchange for the goods or services being transferred to the customer, will occur.
Contract modifications exist when the modification either creates new or changes in the existing enforceable rights and obligations. The Company’s contracts are occasionally modified to account for changes in contract terms and conditions, which the Company refers to as an upgrade or downgrade. An upgrade occurs when a customer wants to pay for additional years of storage. A downgrade occurs when a customer originally entered into a long-term contract (such as twenty-one year or lifetime plan) but would like to change the term to a one-year contract. Upgrade modifications qualify for treatment as a separate contract as the additional services are distinct and the increase in contract price reflects the Company’s stand-alone selling price for the additional services and will be accounted for on a prospective basis. Downgrade modifications do not qualify for treatment as a separate contract as there is no increase in price over the original contract, thus failing the separate contract criteria. As such, the Company separately considers downgrade modifications to determine if these should be accounted for as a termination of the existing contract and creation of a new contract (prospective method) or as part of the existing contract (cumulative catch-up adjustment). ASC 606 requires that an entity account for the contract modification as if it were a termination of the existing contract, and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. As the services after the modification were previously determined to be distinct, the Company concluded that downgrade modifications qualify under this method and will be accounted for on a prospective basis. Although contract modifications do occur, they are infrequent.
Performance Obligations
At contract inception, the Company assesses the goods and services promised in the contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company determined that the following distinct goods and services represent separate performance obligations involving the sale of its umbilical cord blood product:
•Collection and processing services
•Storage services
•Public cord blood banking
•License and royalties
•Sale of PrepaCyte CB product
a)Collection, Processing and Storage Fees
Processing and storage fees include the Company providing umbilical cord blood and tissue cellular processing and cryogenic cellular storage for private use. Revenues recognized for the cellular processing and cryogenic cellular storage represent sales of the umbilical cord blood stem cells program to customers and income from licensees who are selling the umbilical cord blood stem cells program to customers outside the United States.
The Company recognizes revenue from processing fees at the point in time of the successful completion of processing and recognizes storage fees over time, which is ratably over the contractual storage period as well as other income from royalties paid by licensees related to long-term storage contracts which the Company has under license agreements. Contracted storage periods are typically annual, eighteen years, twenty-one years and lifetime. 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 lifetime, 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, 2021, the total aggregate transaction price allocated to the unsatisfied performance obligations was recorded as deferred revenue amounting to $40,632,910, which will be recognized ratably on a straight-line basis over the contractual period of which $9,358,696 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. The product warranty is available to clients who enroll under this structure for as long as the specimen is stored with the Company. In the processing and storage agreements, the Company provides limited rights which are offered to customers automatically upon contract execution. The Company has determined that the payment warranty represents variable consideration payable to the customer.
Based on the Company’s historical experience to date, the Company has determined the payment warranty to be fully constrained under the most likely amount method. Consequently, the transaction price does not currently reflect any expectation of service level credits. At the end of each reporting period, the Company will update the
estimated transaction price related to the payment warranty including updating its assessment of whether an estimate of variable consideration is constrained to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.
Allocation of transaction price
As the Company’s processing and storage agreements contain multiple performance obligations, ASC 606 requires an allocation of the transaction price based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. The Company has selected an adjusted market assessment approach to estimate the stand-alone selling prices of the processing services and storage services and concluded that the published list price is the price that a customer in that market would be willing to pay for those goods or services. The Company also considered the fact that all customers are charged the list prices current at the time of their enrollment where the Company has separately stated list prices for processing and storage.
Costs to Obtain a Contract
The Company capitalizes commissions that are incremental in obtaining customer contracts and the costs incurred to fulfill a customer contract if those costs are not within the scope of another topic within the accounting literature and meet the specified criteria. These costs are deferred in other current or long-term assets and are expensed to selling, general and administrative expenses as the Company satisfies the performance obligations by transferring the service to the customer. These assets will be periodically assessed for impairment. As a practical expedient, the Company elected to recognize the incremental costs of obtaining its annual contracts as an expense when incurred, as the amortization period of the asset recognized would have been one year.
The Company has determined that payments under the Company’s refer-a-friend program (“RAF program”) are incremental costs of obtaining a contract as they provide an incentive for existing customers to refer new customers to the Company and is referred to as commission. The amount paid under the RAF program (either through issuance of credits to customers or check payments) which 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, 2021 and November 30, 2020, the Company recorded $49,378 and $49,609, respectively, in commission payments to customers under the RAF program as a reduction to revenue. For the twelve months ended November 30, 2021 and November 30, 2020, the Company capitalized additional contract acquisition costs of $95,168 and $89,471, respectively, net of amortization expense.
b)Public banking revenue
The Company sells cord blood units to the National Marrow Donor program ("NMDP") which distributes the cord blood units to transplant centers located in the United States and around the world. Control is transferred at the point in time when the shipment has occurred, at which time, the Company records revenue.
c) Licensee and royalty income
Licensee and royalty income consist of royalty income earned on the processing and storage of cord blood stem cell specimens by an affiliate where the Company has a License and Royalty Agreement. The Company records revenue from processing and storage of specimens and pursuant to agreements with licensees. The Company records the royalty revenue in same period that the related processing and storage is being completed by the affiliate.
d)Product Revenue
The Company records revenue from the sale of the PrepaCyte CB product line upon shipment of the product to the Company’s customers.
e)Shipping and handling
The Company elected to apply the practical expedient to account for shipping and handling activities performed after the control of a good has been transferred to the customer as a fulfillment cost. Shipping and handling costs that the Company incurs are therefore expensed and included in cost of sales.
Disaggregation of Revenue
The revenue as reflected in the statements of comprehensive income is disaggregated by products and services.
The following table provides information about assets and liabilities from contracts with customers:
November 30, 2021
November 30, 2020
Contract assets (sales commissions)
$
535,522
$
466,141
Accounts receivables
$
5,253,173
$
6,322,960
Short-term contract liabilities (deferred revenue)
$
9,358,696
$
9,183,450
Long-term contract liabilities (deferred revenue)
$
31,274,214
$
27,200,910
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, 2021 and November 30, 2020.
The following table presents changes in the Company’s contract assets and liabilities during the twelve months ended November 30, 2021:
Balance at
December 1,
Additions
Deductions
Balance at
November 30,
Contract assets (sales commissions)
$
466,141
$
95,168
$
(25,787
)
$
535,522
Accounts receivables
$
6,322,960
$
36,814,240
$
(37,884,027
)
$
5,253,173
Contract liabilities (deferred revenue)
$
36,384,360
$
17,685,646
$
(13,437,096
)
$
40,632,910
The following table presents changes in the Company’s contract assets and liabilities during the twelve months ended November 30, 2020:
Balance at
December 1,
Additions
Deductions
Balance at
November 30,
Contract assets (sales commissions)
$
398,535
$
89,471
$
(21,865
)
$
466,141
Accounts receivables
$
6,097,331
$
38,379,247
$
(38,153,618
)
$
6,322,960
Contract liabilities (deferred revenue)
$
32,508,511
$
21,237,546
$
(17,361,697
)
$
36,384,360
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
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 fee paid, or payable, to the Company, 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 by the Company 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 and Pakistan. The following areas each have two license agreements: India, Nicaragua and Costa Rica.
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. 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
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.
Inventory
As part of the Cord:Use Purchase Agreement, the Company has an agreement with Duke University (“Duke”) expiring on January 31, 2025 for Duke to receive, process, and store cord blood units for the Public Cord Blood Bank (“Duke Services”). As of November 30, 2021, 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 2). Due to changes in sales trends and estimated recoverability of cost capitalized into inventory, an impairment charge of $1,164,499
and $1,284,238 was recognized during the twelve months ended November 30, 2021 and November 30, 2020, respectively, to reduce inventory from cost to net realizable value and is included in the accompanying consolidated statements of comprehensive income.
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:
Building
39 years
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.
Investments
As part of the Cord:Use Purchase Agreement, the Company acquired the shares of common stock of Tianhe Stem Cell Biotechnologies, Inc. As there is no readily determinable fair value for this stock, the Company periodically reviews the value for impairment.
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, 2021 and November 30, 2020, respectively.
Goodwill
Goodwill represents the excess of the purchase price of the assets acquired from Cord:Use over the estimated fair value of the net tangible, intangible and identifiable assets acquired. The annual assessment of the reporting unit is performed as of September 1st, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. The Company first performs a qualitative assessment to test goodwill for impairment and concludes if it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the qualitative assessment concludes that it is not more likely than not that the fair value is less than the carrying value, the two-step goodwill impairment test is not required. If the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than the carrying value, then the two-step goodwill impairment test is required. Step one of the impairment assessment compares the fair value of the reporting unit to its carrying value and if the fair value exceeds its carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, the implied fair value of goodwill is compared to the carrying value of goodwill. If the implied fair value exceeds the carrying value then goodwill is not impaired; otherwise, an impairment loss would be recorded by the amount the carrying value exceeds the implied fair value.
Leases
Effective December 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective approach and utilizing the effective date as its date of initial application. As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”). The Company has elected to apply the ‘package of practical expedients’ which allows the Company to not reassess i) whether existing or expired
arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as a right-of-use (ROU) assets and as short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company believes it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
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 2021 and 2020 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. Total advertising expense for the fiscal years ended November 30, 2021 and 2020 was approximately $841,514 and $845,454, 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. 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.
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, 2021 and November 30, 2020, respectively, segregated among the appropriate levels within the fair value hierarchy:
Fair Value at
Fair Value Measurements at November 30, 2021
Using
Description
November 30,
Level 1
Level 2
Level 3
Assets:
Marketable securities
$
75,412
$
75,412
$
-
$
-
Total
$
75,412
$
75,412
$
-
$
-
Liabilities:
Contingent consideration
$
727,371
$
-
$
-
$
727,371
Total
$
727,371
$
-
$
-
$
727,371
Contingent Consideration:
Beginning Balance as of November 30, 2020
$
1,509,852
Subtractions - Cord:Use earnout payment
-
Fair value adjustment as of November 30, 2021
(782,481
)
Ending balance as of November 30, 2021
$
727,371
Fair Value at
Fair Value Measurements at November 30, 2020
Using
Description
November 30,
Level 1
Level 2
Level 3
Assets:
Marketable securities
$
88,476
$
88,476
$
-
$
-
Total
$
88,476
$
88,476
$
-
$
-
Liabilities:
Contingent consideration
$
1,509,852
$
-
$
-
$
1,509,852
Total
$
1,509,852
$
-
$
-
$
1,509,852
The following is a description of the valuation techniques used for these items, as well as the general classification of such items pursuant to the fair value hierarchy:
Marketable securities - Equity securities with readily determinable fair values are measured at fair value with the changes in fair value recognized through net income. There was approximately ($13,000) and ($8,000) in losses, respectively, recorded in other income and expense on the accompanying consolidated statements of comprehensive income for the twelve months ended November 30, 2021 and 2020.
Contingent consideration - The contingent consideration is the earnout that Cord:Use is entitled to from the Company’s sale of the public cord blood inventory from and after closing. The estimated fair value of the contingent earnout was determined using a Monte Carlo analysis examining the frequency and mean value of the resulting earnout payments. The resulting value captures the risk associated with the form of the payout structure. The risk-neutral method is applied, resulting in a value that captures the risk associated with the form of the payout structure and the projection risk. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liability.
Product Warranty and Cryo-Cell CaresTM Program
In December 2005, the Company began providing its customers that enrolled after December 2005 a payment warranty under which the Company agrees to pay $50,000 to its client if the umbilical cord blood product retrieved is used for a stem cell transplant for the donor or an immediate family member and fails to engraft, subject to various restrictions. Effective February 1, 2012, the Company increased the $50,000 payment warranty to a $75,000 payment warranty to all of its new clients. Effective June 1, 2017, the Company increased the payment warranty to $100,000 to all new clients who choose the premium processing method, PrepaCyte CB. The product warranty is available to clients who enroll under this structure for as long as the specimen is stored with the Company. The Company has not experienced any claims under the warranty program, nor has it incurred costs related to these warranties.
As discussed above, the Company has determined that the payment warranty represents variable consideration payable to the customer. In accordance with ASC 606, the Company has concluded the payment warranty be fully constrained under the most likely amount method; therefore, the transaction price does not reflect any expectation of service level credits at November 30, 2021 and November 30, 2020. 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 per Common Share
Basic income 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 income per share is as follows:
November 30, 2021
November 30, 2020
Numerator:
Net income
$
2,083,521
$
3,624,596
Denominator:
Weighted-average shares outstanding-basic
8,137,342
7,544,494
Dilutive common shares issuable upon exercise of
stock options
224,378
595,686
Weighted-average shares-diluted
8,361,720
8,140,180
Income per share:
Basic
$
0.26
$
0.48
Diluted
$
0.25
$
0.45
For the year ended November 30, 2021, the Company excluded the effect of 15,900 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, 2020 the Company excluded the effect of 249,301 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, 2021, the Company has two stock-based employee compensation plans, which are described in Note 10 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 $302,000 and $622,000 for the fiscal years ended November 30, 2021 and November 30, 2020, respectively, of stock compensation expense.
The Company recognizes stock-based compensation based on the fair value of the related awards. Under the fair value recognition guidance of stock-based compensation accounting rules, stock-based compensation expense is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The fair value of service-based vesting condition and performance-based vesting condition stock option awards is determined using the Black-Scholes valuation model. For stock option awards with only service-based vesting conditions and graded vesting features, the Company recognizes stock compensation expense based on the graded-vesting method. To value awards with market-based vesting conditions 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.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance requires a modified retrospective transition method and early adoption is permitted. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses, Derivatives and Hedging, and Leases (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for smaller reporting companies until periods beginning after December 15, 2022. The Company will continue to evaluate the impact of ASU 2016-13 on its consolidated financial statements.
NOTE 2 - 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 $1,164,499 and $1,284,238 was recognized during the fourth quarter of fiscal 2021and the fourth quarter of fiscal 2020, respectively, to reduce inventory from cost to net realizable value and is included in the accompanying consolidated statements of comprehensive income.
The components of inventory at November 30, 2021 and November 30, 2020 are as follows:
As of
November 30, 2021
As of
November 30, 2020
Raw materials
$
-
$
-
Work-in-process
357,686
273,430
Work-in-process - Public Bank
-
-
Finished goods
29,821
63,327
Finished goods - Public Bank
10,193,789
11,629,307
Collection kits
42,998
33,006
Inventory reserve
(7,718
)
(7,718
)
Total inventory
$
10,616,576
$
11,991,352
NOTE 3 - INTANGIBLE ASSETS
The Company incurs certain legal and related costs in connection with patent and trademark applications. If a future economic benefit is anticipated from the resulting patent or trademark or an alternate future use is available to the Company, such costs are capitalized and amortized over the expected life of the patent or trademark. The Company’s assessment of future economic benefit involves considerable management judgment. A different conclusion could result in the reduction of the carrying value of these assets.
Intangible assets were as follows as of November 30, 2021 and 2020:
Useful lives
November 30, 2021
November 30, 2020
Patents
10-20 years
$
697,744
$
234,570
Less: Accumulated amortization
(80,159
)
(47,150
)
License agreement
10 years
474,000
470,000
Less: Intangible asset impairment
(185,000
)
(185,000
)
Less: Accumulated amortization
(201,709
)
(178,443
)
Customer relationships - PrepaCyte®CB
15 years
41,000
41,000
Less: Intangible asset impairment
(26,267
)
(26,267
)
Less: Accumulated amortization
(7,916
)
(7,122
)
Brand
1 year
31,000
31,000
Less: Accumulated amortization
(31,000
)
(31,000
)
Customer relationships - Cord:Use
30 years
960,000
960,000
Less: Accumulated amortization
(112,000
)
(80,000
)
Net Intangible Assets
$
1,559,693
$
1,181,588
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:
$
96,381
$
96,381
$
96,381
$
86,694
$
73,132
Thereafter
$
1,110,724
Total
$
1,559,693
Amortization expense of intangibles was approximately $89,000 and $68,000 for the twelve months ended November 30, 2021 and November 30, 2020, respectively.
NOTE 4 - 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 extended to June 2022 with Second Amendment. 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, 2021, and November 30, 2020, the Company paid interest of $118,117 and $310,364, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive income.
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, 2021, and November 30, 2020, $56,851 and $85,062, respectively, of the debt issuance costs were amortized and are reflected in interest expense on the accompanying consolidated statements of comprehensive income.
As of November 30, 2021, and November 30, 2020, the note payable obligation was as follows:
November 30, 2021
November 30, 2020
Note payable
$
1,908,433
$
6,008,433
Unamortized debt issuance costs
(10,368
)
(67,219
)
Net note payable
$
1,898,065
$
5,941,214
Current portion of note payable
$
1,898,065
$
3,100,000
Long-term note payable, net of debt issuance costs
-
2,841,214
Total
$
1,898,065
$
5,941,214
Interest expense on the note payable for the years ended November 30, 2021 and November 30, 2020 was as follows:
November 30, 2021
November 30, 2020
Interest expense on notes payable
$
118,117
$
310,364
Debt issuance costs
56,851
85,062
Total interest expense
$
174,968
$
395,426
NOTE 5 - SEGMENT REPORTING
The Company is organized in three reportable segments:
1.The cellular processing and cryogenic storage of umbilical cord blood and cord tissue stem cells for family use. Revenue is generated from the initial processing and testing fees and the annual storage fees charged each year for storage (the “Umbilical cord blood and cord tissue stem cell service”).
2.The manufacture of PrepaCyte CB units, the processing technology used to process umbilical cord blood stem cells. Revenue is generated from the sales of the PrepaCyte CB units (the “PrepaCyte CB”).
3.The cellular processing and cryogenic storage of umbilical cord blood stem cells for public use. Revenue is generated from the sale of the cord blood units to the National Marrow Donor Program (“NMDP”), which distributes the cord blood units to transplant centers located in the United States, and around the world.
The following table shows, by segment: net revenue, cost of sales, operating profit, depreciation and amortization, interest expense, and assets for the years ended November 30, 2021 and November 30, 2020:
For the years ended November 30,
Net revenue:
Umbilical cord blood and cord tissue stem cell service
$
28,397,401
$
30,176,852
PrepaCyte CB
111,400
244,187
Public cord blood banking
376,101
726,554
Total net revenue
$
28,884,902
$
31,147,593
Cost of sales:
Umbilical cord blood and cord tissue stem cell service
$
7,351,410
$
7,689,608
PrepaCyte CB
154,140
156,111
Public cord blood banking
1,484,186
1,811,723
Total cost of sales
$
8,989,736
$
9,657,442
Operating profit:
Umbilical cord blood and cord tissue stem cell service
$
6,347,061
$
9,928,886
PrepaCyte CB
(70,335
)
60,499
Public cord blood banking
(2,273,604
)
(2,327,788
)
Total operating profit
$
4,003,122
$
7,661,597
Depreciation and amortization:
Umbilical cord blood and cord tissue stem cell service
$
806,230
$
138,859
PrepaCyte CB
27,595
27,578
Public cord blood banking
1,020
-
Total depreciation and amortization
$
834,845
$
166,437
Interest expense:
Umbilical cord blood and cord tissue stem cell service
$
1,378,926
$
1,544,017
PrepaCyte CB
-
-
Public cord blood banking
-
-
Total interest expense
$
1,378,926
$
1,544,017
The following table shows the assets by segment as of November 30, 2021 and November 30, 2020:
Assets:
Umbilical cord blood and cord tissue stem cell
service
$
50,170,887
$
34,215,780
PrepaCyte CB
250,591
302,683
Public cord blood banking
10,240,598
11,681,631
Total assets
$
60,662,076
$
46,200,094
NOTE 6 - ALLOWANCE FOR DOUBTFUL ACCOUNTS
The activity in the allowance for doubtful accounts is as follows for the years ended November 30, 2021 and 2020:
December 1, 2019
$
2,584,091
Bad debt expense
602,965
Write-offs
(751,848
)
Recoveries
346,460
November 30, 2020
$
2,781,668
Bad debt expense
536,999
Write-offs
(564,957
)
Recoveries
324,729
November 30, 2021
$
3,078,439
NOTE 7 - PROPERTY AND EQUIPMENT
The major classes of property and equipment are as follows:
Building
$
1,510,150
$
-
Furniture and equipment
6,842,282
6,634,360
Leasehold improvements
1,205,893
1,200,934
Computer software - internal use
1,194,039
1,194,039
10,752,364
9,029,333
Less: accumulated depreciation
(7,522,160
)
(7,388,559
)
Total property and equipment
$
3,230,204
$
1,640,774
Depreciation expense was approximately $229,000 in fiscal 2021 and approximately $305,000 in fiscal 2020, of which approximately $204,000 and $206,000 is included in cost of sales, respectively, in the accompanying consolidated statements of comprehensive income.
NOTE 8 - ACCRUED EXPENSES
Accrued expenses are as follows:
November 30,
Professional fees
$
68,959
$
47,729
Payroll and payroll taxes (1)
1,673,693
606,828
Interest expense
888,732
779,444
General expenses
426,002
504,306
Federal and state taxes
-
959,904
$
3,057,386
$
2,898,211
(1)- Payroll and payroll taxes includes accrued vacation and wages due as of November 30, 2021 and November 30, 2020.
NOTE 9 - INCOME TAXES
The Company recorded the following income tax provision for the years ended November 30, 2021 and 2020.
Current:
Federal
$
1,468,000
$
1,757,000
State
740,000
598,000
Foreign
(34,000
)
68,000
Subtotal
2,174,000
2,423,000
Deferred:
Federal
(1,024,000
)
(847,000
)
State
(622,000
)
(161,000
)
Foreign
-
-
Subtotal
(1,646,000
)
(1,008,000
)
Income tax expense
$
528,000
$
1,415,000
As of November 30, 2021 and 2020, the tax effects of temporary differences that give rise to the deferred tax assets are as follows:
Tax assets:
Deferred income (net of discounts)
$
8,507,000
$
7,024,000
Tax over book basis in unconsolidated affiliate
1,246,000
1,209,000
Accrued payroll
109,000
100,000
Reserves and other accruals
2,341,000
1,895,000
Stock compensation
414,000
567,000
Depreciation and amortization
499,000
483,000
Transaction costs
19,000
19,000
RSA buy-out
1,374,000
1,482,000
Lease liability
174,000
81,000
Unrealized loss on securities
68,000
-
Total assets
14,751,000
12,860,000
Tax liabilities:
Unrealized gains on securities
-
(134,000
)
NOLs, credits, and other carryforward items
(1,050,000
)
(782,000
)
Right-of-use asset
(172,000
)
(81,000
)
Total liabilities
(1,222,000
)
(997,000
)
Less: valuation allowance
(1,519,000
)
(1,499,000
)
Net deferred tax asset
$
12,010,000
$
10,364,000
A valuation allowance covering the deferred tax assets of the Company for November 30, 2021 and November 30, 2020 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 $20,000 and ($147,000) during the years ended November 30, 2021 and 2020, respectively. The change for year ended November 30, 2021 was primarily due to changes in state statutory rates. The change for year ended November 30, 2020 was primarily due to the release of an RSA buyout.
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.
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
%
%
Tax at federal statutory rate
548,358
21.00
1,061,885
21.00
State income tax effect
175,654
6.73
282,514
5.59
Change in valuation allowance
20,262
0.77
(147,528
)
(2.92
)
Tax compensation differences
212,217
8.13
6,870
0.14
Permanent disallowances
34,356
1.31
55,372
1.10
Deferred repricing
(334,874
)
(12.82
)
80,692
1.60
Other
(93,976
)
(3.60
)
74,922
1.47
Foreign tax credits
-
-
(68,102
)
(1.35
)
Foreign tax withholding
(34,287
)
(1.31
)
68,102
1.35
Total income taxes
$
527,710
20.21
$
1,414,727
27.98
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.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the years ended November 30, 2021 and 2020, the Company had no material provisions for interest or penalties related to uncertain tax positions.
There was approximately $3,533,000 and $1,877,000 of U.S. income taxes paid for fiscal years ended November 30, 2021 and November 30, 2020, respectively.
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, 2021:
Jurisdiction
Open Tax Years
Examinations in Process
United States - Federal Income Tax
2018 - 2020
N/A
United States - Various States
2017 - 2020
N/A
NOTE 10 - STOCKHOLDERS' EQUITY
Common Stock Issuances
During the year ended November 30, 2021, the Company issued 622,400 common shares to option holders who exercised options for $1,276,417. During the year ended November 30, 2020, the Company issued 20,000 common shares to option holders who exercised options for $41,000.
In March 2021, the Company issued 409,734 common shares to Duke University (“Duke”) per the terms of the Patent Option Agreement (the “Option”). See Note 19.
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, 2021, and November 30, 2020, there were 75,000 and 305,000 options issued, but not yet exercised, under the 2006 Plan, respectively. As of November 30, 2021, 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. As of November 30, 2021, there were 460,943 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, 2020, there were 868,443 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, 2021, there were 526,410 shares available for future issuance under the 2012 Plan.
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.
There were 35,900 and 105,169 options granted during the twelve months ended November 30, 2021 and November 30, 2020, respectively.
Variables used to determine the fair value of the options granted for the years ended November 30, 2021 and November 30, 2020 are as follows:
Weighted average values:
Expected dividends
0%
0%
Expected volatility
52.75%
59.32%
Risk free interest rate
1.48%
1.12%
Expected life
7.3 years
7.9 years
Stock option activity for options with only service-based vesting conditions for the year ended November 30, 2021 was as follows:
Weighted
Weighted
Average
Remaining
Average
Contractual
Aggregate
Options
Exercise
Price
Term
(Years)
Intrinsic
Value
Outstanding at November 30, 2020
1,174,943
$
3.72
3.42
$
4,502,324
Granted
35,900
10.89
57,600
Exercised
(673,400
)
2.48
4,490,557
Expired/forfeited
-
-
-
Outstanding at November 30, 2021
537,443
$
5.76
5.22
$
3,564,067
Exercisable at November 30, 2021
474,409
$
5.25
5.00
$
3,381,779
The weighted average grant date fair value of options granted during the years ended November 30, 2021 and November 30, 2020 was $6.07 and $4.66, 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, 2021 or November 30, 2020, 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, 2021 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
15,000
1.63
$
1.95
15,000
$
1.95
$2.01 to $3.00
30,000
1.63
$
2.22
30,000
$
2.22
$3.01 to $4.00
197,229
4.25
$
3.15
197,229
$
3.15
$6.01 to $7.00
3,833
4.59
$
6.52
3,833
$
6.52
$7.01 to $8.00
248,481
6.24
$
7.64
223,945
$
7.60
$9.01 to $10.00
27,000
6.19
$
9.40
1,750
$
9.10
$12.01 to $13.00
15,900
9.89
$
12.63
2,652
$
12.63
537,443
5.22
$
5.76
474,409
$
5.25
A summary of the status of the Company’s non-vested options as of November 30, 2021, and changes during the fiscal year then ended, is presented below:
Weighted
Average
Grant-Date
Options
Fair Value
Non-vested at November 30, 2020
93,380
$
4.65
Granted
35,900
6.07
Vested
(66,246
)
5.10
Forfeited
-
-
Non-vested at November 30, 2021
63,034
$
4.99
As of November 30, 2021, there was approximately $236,000 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 2.38 years as of November 30, 2021. The total fair value of options vested during the fiscal year ended November 30, 2021 was approximately $338,000.
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 December 20, 2019, 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, 2020 and the remaining 1/3 on November 30, 2021. The fair value of the options that vested through the twelve months ended November 30, 2021 and November 30, 2020 was approximately $113,000 and $119,000, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income. As of November 30, 2021, there was $0 of total unrecognized compensation cost as the options are fully vested.
Performance vesting condition options
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 November 30, 2019, the Company granted David Portnoy and Mark Portnoy 26,243 and 22,222, respectively, 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 vested 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, 2021 and November 30, 2020 was approximately $0 and $172,000, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income. As of November 30, 2021, there was $0 of total unrecognized compensation cost as the options are fully vested.
On May 18, 2018, the Company entered into an Amendment Agreement (the “Amendment Agreement”), effective December 1, 2017, amending certain terms of Oleg Mikulinsky’s Employment Agreement dated March 5, 2012, as previously amended. 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 vested 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, 2021 and November 30, 2020 was approximately $0 and $15,000, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income. As of February 27, 2020, the Company granted Oleg Mikulinsky 1,333 of qualified stock options of the Company’s common stock based upon certain performance criteria met by the end of the fiscal 2019 service period and 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, 2020 and 1/3 on November 30, 2021. The fair value of these options as of November 30, 2021 and November 30, 2020 was approximately $3,000 and $2,600, respectively, and is reflected as selling, general and administrative expenses in the accompanying consolidated statements of comprehensive income. As of November 30, 2021, there was $0 of total unrecognized compensation cost as the options are fully vested.
NOTE 11 - 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 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 royalty 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. Since inception of the License and Royalty Agreement, the Company has recorded approximately $10,000,000 in royalty income due under the terms of the License and Royalty Agreement, of which, LifeCell has paid the Company approximately $9,700,000 as of November 30, 2021. The balance of approximately $300,000 is reflected as Accounts Receivable on the accompanying consolidated balance sheets. As of November 30, 2021, the Company has recognized all of the licensee income due under the License and Royalty Agreement with LifeCell.
The initial license fees and processing and storage royalties are reflected in licensee income in the accompanying consolidated statements of comprehensive income. The processing and storage royalties earned for the technology agreements for fiscal years ended November 30, 2021 and November 30, 2020 were $0 and $629,702, respectively.
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 12 - 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. On January 11, 2021, the Company extended the main lease through December 31, 2024 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. In April 2021, the Company extended the lease through April 30, 2023.
Rent charged to operations was $328,877 and $318,587 for the fiscal years ended November 30, 2020 and 2019, respectively, and is included in cost of sales and selling, general and administrative expenses in the consolidated statements of comprehensive income.
The future minimum rental payments under the current operating lease are as follows:
Fiscal Year Ending November 30,
Rent
$
343,470
$
318,674
$
299,764
$
24,980
Legal Proceedings
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 of any such claim, 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 13 - 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, 2021 and November 30, 2020, the Company made matching contributions of approximately $206,000 and $179,000, respectively, to the 401(k) Plan.
NOTE 14 - 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. During fiscal 2016, 50% of the RSA for the state of Florida was repurchased by the Company. 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.
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. During fiscal 2016, 50% of the RSA for the state of Texas was repurchased by the Company.
Illinois. In 1996, the Company signed agreements with a group of investors (the “Erie Group”) 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. Previously, the Company had repurchased 45% of the Illinois RSA.
The Company made total payments to all RSA holders of $909,829 and $974,276 for the fiscal years ended November 30, 2021 and November 30, 2020, respectively, exclusive of termination and repurchase payments. The Company recorded an RSA accrual of $883,265 and $762,573 as of November 30, 2021 and November 30, 2020, respectively, related to interest owed to the RSA holders, which is included in accrued expenses. The Company also recorded interest expense of $1,030,521 and $1,148,592 for the fiscal years ended November 30, 2021 and 2020, respectively, which is reflected in interest expense on the accompanying consolidated statements of comprehensive income.
Cancellation of Revenue Sharing Agreements
On August 31, 2020, the Company entered into a termination of the RSA agreement with the Erie Group. As a result, the Company made a payment of $1,939,748 which was offset by the carrying amount of the long-term liability of the RSA in the amount of $550,000 and accrued expenses in the amount of $279,100 to reflect the
extinguishment of revenue sharing agreement in the amount of $1,070,900 for the twelve months ended November 30, 2020.
NOTE 15 - 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.
As of November 30, 2021, the Company had repurchased an aggregate of 6,113,956 shares of the Company’s common stock at an average price of $3.40 per share through open market and privately negotiated transactions. The Company purchased 20,421 and 0 shares of the Company’s common stock during the twelve months ended November 30, 2021 and 2020, respectively, at an average price of $12.21 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, 2021 and November 30, 2020. As of November 30, 2021, and November 30, 2020, 6,113,956 and 6,093,535 shares, respectively, were held as treasury stock.
Subsequent to the balance sheet date, the Company repurchased 64,708 of additional shares of the Company’s common stock, at an average price of $11.10 per share.
NOTE 16 - LEASES
Effective December 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), using the modified retrospective approach and utilizing the effective date as its date of initial application. As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”). The Company has elected to apply the ‘package of practical expedients’ which allows the Company to not reassess i) whether existing or expired arrangements contain a lease, ii) the lease classification of existing or expired leases, or iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as a right-of-use (ROU) assets and as short-term and long-term lease liabilities, as applicable. The Company does not have any financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company believes it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
The following table presents the right-of-use asset and short-term and long-term lease liabilities amounts recorded on the consolidated balance sheets as of November 30, 2021:
November 30,
November 30,
Assets
Operating lease right-of-use asset
$
916,493
$
299,089
Liabilities
Current portion of operating lease liabilities
$
312,067
$
275,570
Operating lease long term liabilities
610,989
23,632
Total lease liability
$
923,056
$
299,202
The maturity of the Company’s lease liabilities at November 30, 2021 were as follows:
Future Operating
Fiscal Year Ending November 30,
Lease Payments
$
339,182
313,996
295,086
24,591
Less: Imputed interest
(49,799
)
Present value of lease liabilities
$
923,056
The remaining lease term and discount rates are as follows:
November 30,
November 30,
Lease Term and Discount Rate
Remaining lease term (years)
Operating lease
3.08
1.08
Discount rate (percentage)
Operating lease
3.5
%
5.3
%
Supplemental cash flow information related to leases is as follows:
Twelve
Months
Ended
Twelve
Months
Ended
November 30,
November 30,
Operating cash outflows from operating leases
$
328,752
$
278,790
NOTE 17 - COVID-19
In March 2020, the World Health Organization declared a pandemic related to the rapidly spreading coronavirus (“COVID-19”) outbreak. The Company faces various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The Company believes it has taken appropriate steps to minimize the risk to our employees and to maintain normal business operations and continues to actively monitor the global outbreak and spread of COVID-19 and continues to take steps to mitigate the potential risks to us posed by its spread and related circumstances and impacts. Due to the change in consumer buying patterns as a result of COVID-19, the Company has experienced a decline in new client sales resulting in a decrease in revenues in fiscal 2021 compared to fiscal 2020. While the ultimate health and economic impact of COVID-19 remains highly uncertain, we expect that our business operations and results of operations, including our net sales, earnings and cash flows, may continue to be impacted by decreases in new client sales. We cannot predict the timing and speed of the recovery, and any delay in the recovery could significantly impact our future results.
NOTE 18 - 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.
NOTE 19 - PATENT OPTION AGREEMENT
Effective June 9, 2020, the Company entered into a Patent Option Agreement (the “Option”) with Duke University (“Duke”). The Option grants Cryo-Cell the exclusive option to obtain an exclusive license to certain of Duke’s patent rights to make, have made, use, import, offer for sale, sell and otherwise commercially exploit (with the right to sublicense) certain licensed products and to practice certain licensed processes, and the exclusive right to use certain regulatory data and technical information in connection with such licensed patent rights, in the treatment, prevention, cure, reduction, mitigation or other management of diseases in humans, except, with regard to certain patent rights, in certain excluded fields of use and in certain territories, as well as a limited license to make, have made or use certain products, processes, data and information for the purpose of evaluating the market potential for such products and processes in the designated field of use, subject to Duke’s reserved rights to practice the licensed rights for all research, public service, internal (including clinical) and/or educational purposes. This exclusive Option is for a period of six months from the effective date of the Option. As consideration for the Option, the Company paid Duke a non-refundable, option fee of $350,000 during June 2020. The Option was subject to extension by the Company for an additional six months by payment of $150,000 on or before the expiration of the initial six-month option period. On December 1, 2020, the Company made the extension payment of $150,000. Such option fee, plus the extension fee, will be fully credited against the license fee under the future license agreement. In connection with the option, Cryo-Cell anticipates opening a clinic to help patients have greater access to cord blood treatments established by Duke University under the FDA granted Expanded Access Program.
On February 23, 2021, pursuant to the Option, the Company entered into a Patent and Technology License Agreement (the “Agreement”) with Duke, pursuant to which Duke has granted to the Company an exclusive license to make, have made, use, import, offer for sale, sell and otherwise commercially exploit (with the right to sublicense) certain licensed products and to practice certain licensed processes, and the exclusive right to use certain regulatory data and technical information in connection with such licensed patent rights, in the treatment, prevention, cure, reduction, mitigation or other management of certain diseases in humans, except, with regard to certain patent rights, in certain excluded fields of use and in certain territories, subject to Duke’s reserved rights to practice the licensed rights for all research, public service, internal (including clinical) and/or educational purposes.
The Agreement extends until expiration of the last Royalty Term, unless sooner terminated as provided in the Agreement. Royalty Term generally means the period beginning on the first commercial sale of each licensed product or licensed process and ending fifteen (15) years thereafter. Upon expiration of the applicable Royalty Term with respect to a particular licensed product or licensed processes, the licenses and rights granted by Duke to the Company under the Agreement with respect to such product or process become fully paid-up, royalty-free, perpetual and irrevocable.
The Company is required to pay Duke a license fee equal to $12,000,000, of which $5,000,000 was due within 14 days of February 23, 2021 (of which $500,000 has previously been paid through the crediting of the previously paid $350,000 option fee plus $150,000, extension fee, as described above), $5,000,000 must be paid on the first anniversary of February 23, 2021, and $2,000,000 must be paid on the second anniversary of February 23, 2021. In addition, during the Royalty Term, subject to certain minimum royalties, the Company is required to pay Duke royalties based on a portion of net sales varying from 7% - 12.5% based on volume. On March 8, 2021, the Company transferred $4,889,410 to Duke which included the first payment due of $5,000,000, less $500,000 previously paid and $389,410 in costs related to the patents.
Unless the Agreement is terminated or renegotiated as permitted per the Agreement, the Company is also required to pay Duke minimum annual royalties beginning on the second anniversary of the effective date. The minimum annual royalties are as follows:
•Year 2: $500,000
•Year 3: $1,000,000
•Year 4: $2,500,000
•Year 5 and each year thereafter during the term of this Agreement: $5,000,000
In addition, the Company is required to pay Duke certain milestone payments, as follows:
•$2,000,000 upon initiation of the first Phase III clinical trial for an indication other than Autism Spectrum Disorder, for a licensed product comprising cord tissue; and
•A number of shares of the Company’s common stock equal to the corresponding percentage of the Company’s fully-diluted equity ownership outstanding as of February 23, 2021 as follows:
(1)5.0% upon execution of the Agreement;
(2)2.5% upon cumulative net sales of licensed product and licensed process of $10,000,000;
(3)2.5% upon cumulative net sales of licensed product and licensed process of $75,000,000;
(4)2.5% at each of the following market cap of the Company (based on a rolling 30-day average closing market cap) triggers:
oEqual to or greater than $300,000,000, provided such trigger occurs within eighteen (18) months of February 23, 2021; and
oEqual to or greater than $500,000,000, provided such trigger occurs within twenty-four (24) months of February 23, 2021.
On February 4, 2022, subsequent to the balance sheet date, the Company entered into a First Amendment to License Agreement ( the "Amendment") with Duke. The Amendment changes the requirements of the Company to now pay Duke minimum annual royalties beginning on the third anniversary of the effective date. The minimum annual royalties are as follows:
•Year 3: $500,000
•Year 4: $1,000,000
•Year 5: $2,500,000
•Year 6 and each year thereafter during the term of this Agreement: $5,000,000
The Amendment also changed the requirements of the Company to pay Duke certain milestone payments, as follows:
•$2,000,000 two years after the first patient or subject is treated in the first Phase III clinical trial of a licensed product comprising cord tissue derived MSC for an indication other than Autism Spectrum Disorder.
During the first quarter of fiscal 2021, the Company capitalized $15,372,382 as a Duke license agreement which represented the costs to obtain the Agreement and also recorded a corresponding liability to Duke for the license agreement. The costs that were capitalized as a Duke license agreement includes the present value of the $12,000,000 license fee, $3,585,172, or 409,734 shares, of the Company’s common stock transferred to Duke and certain acquisition costs. The Company is amortizing these costs over 16 years. As of the twelve months ended November 30, 2021, the Company recorded $720,580 in amortization expense which is reflected in amortization expense on the accompanying consolidated statements of income.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
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 fully 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 officers 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.
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, 2021. 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
Management has concluded there were no other significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal controls 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.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
Not applicable.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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.
David I. Portnoy, age 59, 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, 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 58, Co-Chief Executive Officer. Mr. Portnoy served as a director from August 2011 through September 2020 and has served as 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.
Harold D. Berger, age 58, has served as a director since August 2011. Mr. Berger is a certified public accountant and has served in that capacity at the accounting firm he established in 2005. 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.
Daniel Mizrahi, age 47, has served as a director since September 2021. Since 2012, Mr. Mizrahi has served as CEO of Power Tech, S.A. an overseas company serving over 3,000 retail clients in the Central America region. From 2008-2012, Mr. Mizrahi was the Director of Purchasing for Cohesa, S.A. - Toolcraft, one of the largest tool companies in Mexico with a purchase budget of approximately $60 million per year. From 2003-2008, Mr. Mizrahi served as Property Manager for Maayan, LLC, which represented a group of foreign investors in the acquisition and management of real estate properties in Florida with over 500 residential units. Over the last 10 years, Mr. Mizrahi has, at times, provided consulting services to Cryo-Cell relating to its Central and South American affiliates and also with regard to the international outsourcing of medical products and marketing materials. We believe that Mr. Mizrahi’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 board of directors of the Company is set forth below:
Jill Taymans, age 52, 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 49, 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.
Joanne Kurtzberg, M.D., is the Company's Medical Director. Dr. Kurtzberg has served as the Company's Medical Director since June 2018. Dr. Kurtzberg is a pioneer in the cord blood field, performing the first unrelated cord blood stem cell transplant, in 1993. She is an internationally renowned expert in pediatric hematology-oncology, pediatric blood and marrow transplantation, umbilical cord blood banking and transplantation, and the novel application of cord blood in the emerging fields of cellular therapy and regenerative medicine. Dr. Kurtzberg was awarded a lifetime achievement award from the PBMTC in 2012. She is the President of the Cord Blood Association. She previously served on the board of the Foundation for the Accreditation of Cellular Therapies and currently co-chairs their cord blood banking standards committee. She co-chairs the National Marrow Donor Program’s Cord Blood Advisory Group and is a past member of the Advisory Council for Blood Stem Cell Transplantation reporting to the Director of Health and Human Services. She is the Director of the Marcus Center for Cellular Cures at the Duke University School of Medicine. She served as an advisor on the Oncologic Drugs Advisory Committee (ODAC) meeting held for Mesoblast, Inc. in 2020.
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) Beneficial Ownership Reporting Compliance
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, 2021, 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.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The table below summarizes the total compensation paid or earned during the fiscal years ended November 30, 2021 and November 30, 2020 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 2021 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
$
620,080
$
600,000
$
61,267
$
-
$
-
$
1,281,347
Co-Chief Executive Officer
$
602,085
$
-
$
151,472
$
-
$
-
$
753,557
Mark Portnoy
$
493,344
$
380,000
$
51,839
$
-
$
-
$
925,184
Co-Chief Executive Officer
$
478,995
$
-
$
128,243
$
-
$
-
$
607,238
Jill M. Taymans
$
193,346
$
12,075
$
5,375
$
-
$
-
$
210,796
Vice President Finance, Chief Financial Officer
$
190,000
$
11,500
$
1,012
$
-
$
-
$
202,512
Oleg Mikulinsky
$
266,346
$
60,000
$
11,211
$
-
$
-
$
337,557
Chief Information Officer
$
250,000
$
11,524
$
19,084
$
-
$
-
$
280,608
(1)Represents the dollar amount recognized for financial reporting purposes in fiscal 2021and 2020. 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 10, 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.
At the end of fiscal 2021, pursuant to the Co-CEOs Employment Agreements, the Compensation Committee evaluated the Co-CEOs and the Company's performance for consideration of a subjective cash and /or equity bonus. David Portnoy and Mark Portnoy received $600,000 and $380,000, respectively, and 25,000 and 20,000 stock options, respectively. One-third of each grant vested upon grant, one-third will vest on December 22, 2022 and one-third will vest on December 22, 2023. In addition, the David Portnoy and Mark Portnoy were granted 280,000 and 100,000 market-based stock options, respectively, which will vest immediately if the Company's common stock reaches $25.00 per share within the seven-year option term. In 2020, neither of the Co-CEOs received any performance-based stock options. In fiscal 2020, a cash bonus pool along with Company performance targets and individual performance objectives were established at the beginning of the fiscal year by the Compensation Committee. At the end of the fiscal year each performance target was measured and bonuses were paid based on the attainment of the set performance targets established at the beginning of the fiscal year. A percentage of the pre-determined cash bonus
pool was paid to the named executive officer depending on the performance targets met by the Company and the individual. There were no cash bonuses paid to the Co-CEOs for fiscal 2020.
At the end of fiscal 2021, pursuant to Company's Chief Information Officer's Employment Agreement, the Compensation Committee evaluated the Chief Information Officers and the Company's performance for consideration of a subjective cash bonus of an amount not to exceed 25% of his annual salary. The Chief Information Officer received a cash bonus of $60,000. In addition the Chief Information Officer was granted 20,000 market-based stock options, which will vest immediately if the Company's common stock reaches $25.00 per share within the seven-year option term. In fiscal 2020, pursuant to his Employment Agreement, the Company’s Chief Information Officer was entitled to a cash bonus equal to a percentage up to 20% of his Base Salary (as subjectively determined by the Co-CEOs in their sole discretion). In fiscal 2020, the Company’s Chief Financial Officer received a cash bonus of $11,524.
In addition, the Company’s CIO, Oleg Mikulinsky, was granted 10,000 stock options during fiscal 2021. In fiscal 2020, the Company granted Oleg Mikulinsky 1,333 of qualified stock options of the Company’s common stock based upon certain performance criteria met by the end of the fiscal 2019 service period and per the Amendment 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.
Stock options are granted to our executive officers and key personnel 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. During fiscal 2021 and 2020, 20,000 and 29,000 stock options, respectively, were awarded to executive officers and key personnel in addition to the stock options mentioned above.
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 June 24, 2021, the Company entered into new two-year employment agreements, effective December 1, 2020, 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 agreements provided for an annual base salary of $620,150 for David Portnoy and $493,400 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 is at the Company’s offices in Miami, Florida, but he is required to travel to the Company’s headquarters as necessary to fulfill his responsibilities. The Company paid reasonable legal and financial consulting fees and costs incurred in negotiating the employment agreements with the Co-CEOs and has agreed to reimburse 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 Agreements), the Agreements provide for severance pay equal to two times the Executive’s then-current annual base salary, paid within 90 days after the occurrence of the triggering event. In addition, the Company is required to provide, at no cost to the Co-CEOs, 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 24 months after the termination. If the termination of employment is due to disability (as defined in the Agreements), the Company shall pay the executive two times their then-current base salary in equal installments over three years no later than 30 days after such disability, reduced by any amount paid to them from any disability insurance, Social Security, workman’s compensation or other disability program. In addition, all unvested shares and options held by the Executives shall become fully vested upon their disability. If the termination of employment is due to death, the Company shall pay the Executives two times their then-current base salary as a cash lump sum within 30 days after their date of death, and the Company will continue to provide medical and dental coverage for the Executives family for two years after their 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, 2022. The Executive’s current base salary is $215,000.
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 July 29, 2021, the Company entered into a new two-year employment agreement (the “Mikulinsky Employment Agreement”) with Oleg Mikulinsky, as the Company’s Chief Information Officer effective August 1, 2021. Under the Mikulinksy Employment Agreement, the two-year term will automatically be 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.
Pursuant to the new two-year agreement, the Executive’s base salary is $300,000 (the “Base Salary”). In addition to base salary, for the fiscal years ending November 30, 2021 and November 30, 2022, the Executive’s and Company’s performance will be evaluated for consideration of a subjective cash bonus of an amount not to exceed 25% of the Executive’s 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.
Upon the occurrence of (i) an involuntary termination of employment; (ii) a voluntary termination of employment for “Good Reason” (as defined in the Agreement); 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 Agreement provides for severance pay equal to one times the Executive’s then-current annual base salary, paid within 90 days after the occurrence of the triggering event. In addition, the Company shall provide, at no cost to the Executive, continued life insurance coverage and nontaxable medical, dental and disability insurance coverage substantially similar to the coverage maintained by the Company for the executive prior to such termination for 24 months after the termination. If the termination of employment is due to disability (as defined in the Agreement), the Company shall pay the executive a sum equal to six months of the executive’s their then-current base salary in equal installments over three years no later than 30 days after such disability, reduced by any amount paid to them from any disability insurance, Social Security, workman’s compensation or other disability program. In addition, all unvested shares and options held by the Executives shall become fully vested upon their disability. If the termination of employment is due to death, the Company shall pay the Executive one times the Executive’s then-current base salary as a cash lump sum within 30 days after their date of death, and the Company will continue to provide medical and dental coverage for the Executives family for two years after their death. The Agreement includes a one-year non-competition restriction and an 18-month restriction on solicitation of employees or customers.
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, 2021:
Name
Grant Date
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
Option
Exercise
Price ($)
Option
Expiration
Date
David Portnoy
April 15, 2016
70,270
$3.14
April 15, 2026
March 8, 2018
23,636
$7.92
March 8, 2023
August 30, 2019
26,243
$7.53
August 30, 2029
December 20, 2019 (1)
23,636
$7.28
December 20, 2029
Mark Portnoy
April 15, 2016
59,459
$3.14
April 15, 2026
March 8, 2018
20,000
$7.92
March 8, 2023
August 30, 2019
22,222
$7.53
August 30, 2029
December 20, 2019 (1)
20,000
$7.28
December 20, 2029
Jill Taymans
June 2, 2016
7,500
$3.10
June 3, 2026
September 23, 2020 (2)
7,000
$8.00
September 23, 2027
Oleg Mikulinsky
April 18, 2016
40,000
$3.20
April 18, 2026
May 21, 2018
8,000
$7.49
May 21, 2028
September 4, 2019
4,444
$7.13
September 4, 2029
February 27, 2020 (1)
1,333
$6.55
February 27, 2030
September 23, 2020 (2)
10,000
$8.00
September 23, 2027
(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.
(2)1/3 of options vest one-year from the date of grant, 1/3 of the options vest two-years from the date of grant and 1/3 of the options vest three 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. Non-employee directors are paid an annual retainer in the amount of $25,500. Each non-employee director receives an annual stock option grant in the amount of 5,300 shares on the date of the annual stockholders meeting in each year with an exercise price equal to the fair market value of the common stock on the date of grant.
The table below summarizes the compensation paid by the Company to its non-employee directors for the fiscal year ended November 30, 2021:
Name
Fees Earned
or Paid in
Cash ($)
Option
Awards
($) (1)
Total
($)
Harold Berger
$
31,875
$
29,418
$
61,293
George Gaines
$
25,500
$
22,368
$
47,868
Jonathan Wheeler
$
25,500
$
22,368
$
47,868
Daniel Mizrahi
$
6,375
$
7,051
$
13,426
Brian Sheehy
$
31,875
$
64,967
$
96,842
(1)Represents the dollar amount recognized for financial reporting purposes in fiscal 2021 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 10, Stockholders’ Equity, to our consolidated financial statements for a discussion of our accounting for stock options and the assumptions used.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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 16, 2022 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
7.03
%
Adam Fleishman Trustee of the Adam Fleishman Trust dated April 13, 2001 (4)
509,000
5.98
%
IsZo Capital, Inc. (5)
482,931
5.68
%
Current directors, nominees and executive officers:
David Portnoy (6)
1,669,752
19.28
%
Mark Portnoy (7)
997,990
11.55
%
Daniel Mizrahi (8)
31,076
*
Harold Berger (10)
76,001
*
Jill Taymans (11)
55,229
*
Oleg Mikulinsky (12)
114,348
1.33
%
All current directors and executive officers as a group (7 persons) (13)
3,334,760
38.83
%
* 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 16, 2022 by (ii) the sum of (a) 8,502,618 which is the number of shares of common stock outstanding as February 16, 2022 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 16, 2022 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 16, 2022. 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)Based upon information provided by Mary J. Nyberg, as trustee of CDMJ Nyberg Family Trust, U/A/D June 9, 2005 filed a Schedule 13G/A filed with the SEC 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)Based upon information provided by Adam Fleishman as trustee of Adam Fleishman Trust April 13, 2001 in the Schedule 13G filed with the SEC 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.
(5)Based upon information provided by IsZo Capital, Inc. (“IsZo”), in its Amendment No. 4 to its Schedule 13G filing with the SEC on February 14, 2022, includes 496,503 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.
(6)Includes 98,162 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, 790,472 shares he owns individually, 152,882 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; 102,586 shares of Common Stock held by spouse, 9,974 shares held by David Portnoy as custodian for his minor son; 10,783 shares held by David Portnoy as custodian for his minor son; 11,352 shares held by David Portnoy as custodian for his minor son; 11,352 shares held by David Portnoy as custodian for his minor son; 9,122 shares held by David Portnoy as custodian for his minor daughter; and 15,611 shares held by David Portnoy as custodian for his minor daughter. Includes 144,240 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(7)Includes 42,266 shares of Common Stock held directly through a 401(k)-plan account, 762,514 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 121,681 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(8)Includes 2,650 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(9)Includes 50,750 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(10)Includes 9,833 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(11)Includes 59,999 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.
(12)Includes 389,153 shares subject to stock options that are currently exercisable or exercisable within 60 days of February 16, 2022.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table presents fees for professional audit services rendered by Wipfli LLP ("Wipfli") for the audit of the Company’s financial statements for the fiscal year ended November 30, 2021 and November 30, 2020,
audit related services rendered by Wipfli for the fiscal year ended November 30, 2021 and November 30, 2020, tax services rendered by Wipfli for fiscal year ended November 30, 2021 and November 30, 2020.
Audit fees
$
240,104
$
235,000
Audit related fees
-
1,500
Tax fees
53,000
58,837
Other
-
-
Total
$
293,104
$
295,337
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, 2021 and November 30, 2020 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 accountants during the fiscal years ended November 30, 2021 and November 30, 2020 related primarily to the accounting consultations.
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, 2021 and November 30, 2020.
Other Fees
The Company did not incur other fees by our principal accountants for the fiscal years ended November 30, 2021 and November 30, 2020.
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 Wipfli and 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 Wipfli. Furthermore, no work of Wipfli with respect to its services rendered to the Company was performed by anyone other than Wipfli.
Part IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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)
Employment Agreement with Oleg Mikulinsky dated March 5, 2012
10.32 (18)
Amendment dated May 1, 2013, amending Employment Agreement with Oleg Mikulinsky dated March 5, 2012
10.33 (19)
Employment Agreement with David Portnoy dated December 1, 2013
10.34 (19)
Employment Agreement with Mark Portnoy dated December 1, 2013
10.35 (20)
Employment Agreement with Linda Kelley dated June 18, 2012
10.36 (20)
Amendment dated October 29, 2013, amending Employment Agreement with Linda Kelley dated June 18, 2012
10.37 (21)
Certificate of Designation of Series A Junior Participating Preferred Stock of Cryo-Cell International, Inc.
10.38 (22)
Asset Purchase Agreement by and between Cytomedical Design Group LLC and Cryo-Cell International, Inc. dated June 15, 2015
10.39 (21)
Rights Agreement dated December 5, 2014
10.40 (23)
Amendment No. 1 to Asset Purchase Agreement dated June 30, 2015
10.41 (24)
Third Lease Amendment by and between the Company and EJB Brooker Creek, LLC., dated January 12, 2016.
10.42 (25)
Amended and Restated Employment Agreement with David Portnoy dated December 1, 2015
10.43 (25)
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
10.55 (33)
Patent Option Agreement
10.56 (34)
2020 Employment Agreement for David Portnoy
10.57 (34)
2020 Employment Agreement for Mark Portnoy
10.58 (35)
2021 Employment Agreement for Oleg Mikulinsky
10.59
First Amendment to License Agreement
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 Co-CEO 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
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Date File (embedded within the Inline XBRL 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)
Incorporated by reference to the Company’s Current Report on Form 8-K filed on March 9, 2012
(18)
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2013.
(19)
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.
(33)
Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 11, 2020.
(34)
Incorporated by reference to the Company's Current Report on Form 8-K filed on June 30, 2021.
(35)
Incorporated by reference to the Company's Current Report on Form 8-K filed on August 4, 2021.