CRYO CELL INTERNATIONAL INC

Previous wording

our future performance and operating results;

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performance and operating results;

Previous wording

the success of the Company's new facility and the expansion of the Company's cryopreservation and cold storage business by introducing a new service, Extravault;

Current wording

the success of the Company's initiative to purchase a new facility and expand the Company's cryopreservation and cold storage business by introducing a new service, Extravault,

Previous wording

On February 23, 2021, the Company entered into a Patent and Technology License Agreement (the “Duke Agreement”) with Duke University (“Duke”). The Duke Agreement grants the Company certain rights to proprietary processes and regulatory data related to cord blood and cord tissue developed at Duke. The Company plans to explore, test, and/or administer these treatments to patients with osteoarthritis and with conditions for which there are limited U.S. Federal Drug Administration (“FDA”) approved therapies, including cerebral palsy, autism, and multiple sclerosis. These treatments utilize the unique immunomodulatory and potential regenerative properties derived from cord blood and cord tissue. Through the Duke Agreement, the Company, together with Celle Corp.

Current wording

On February 23, 2021, the Company entered into a Patent and Technology License Agreement (the “Duke Agreement”) with Duke University (“Duke”). The Duke Agreement grants the Company certain rights to proprietary processes and regulatory data related to cord blood and cord tissue developed at Duke. The Company plans to explore, test, and/or administer these treatments to patients with osteoarthritis and with conditions for which there are limited U.S. Federal Drug Administration (“FDA”) approved therapies, including cerebral palsy, autism, and multiple sclerosis. These treatments utilize the unique immunomodulatory and potential regenerative properties derived from cord blood and cord tissue. Through the Duke Agreement, the Company, together with Celle Corp. (if spun off), intends to have business units including: (1) its cord blood bank and other storage services; (2) cord blood and cord tissue infusion clinic services in conjunction with the undertaking of cord blood and cord tissue clinical trials to obtain biologics license application (“BLA”) approvals for new indications, and (3) biopharmaceutical manufacturing if BLA(s) are approved by the FDA. Due to delays in obtaining FDA approval for its Phase 3 CP Trial, the Company is projecting to open the Cryo-Cell Institute for Cellular Therapies and begin infusing patients during the 4th quarter of fiscal 2024..

Previous wording

Stem cells are found in umbilical cord blood (“cord blood stem cells”) and can be collected and stored after a baby is born. Over 50,000 cord blood stem cell transplants have been performed to date. The Company believes that many 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. Today, stem cell transplants are known and accepted treatments for approximately 80 diseases, we believe, 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. Moreover, researchers believe they may be utilized in the future for treating diseases that currently have no cure.

Current wording

Stem cells are found in umbilical cord blood (“cord blood stem cells”) and can be collected and stored after a baby is born. Over 50,000 cord blood stem cell transplants have been performed to date. The Company believes that many 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. Today, stem cell transplants are known and accepted treatments for at least 78 diseases, we believe, 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. Moreover, researchers believe they may be utilized in the future for treating diseases that currently have no cure.

Previous wording

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. 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.

Current wording

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. 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.

Previous wording

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. 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. 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.

Current wording

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.

Previous wording

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, and California. Revenue from the cryogenic storage of umbilical cord blood stem cells for public use, stored at Duke University, is generated from the sale of 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.

Current wording

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, and California. 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.

Previous wording

On July 18, 2022, the Company completed the purchase of a 56,000 square foot facility located near the Research Triangle Park in the Regional Commerce Center in Durham, North Carolina (the “New Facility”). The New Facility has space for not only its existing and future internal storage needs, but also has the capacity to offer third party pharmaceutical companies and medical institutions cold storage services (“ExtraVault” – seewww.extravault.com), to set up a cellular therapy laboratory to manufacture MSCs from cord tissue and the space to consolidate the Cryo-Cell Institute for Cellular Therapies under the same roof.

Current wording

On July 18, 2022, the Company completed the purchase of a 56,000 square foot facility located near the Research Triangle Park in the Regional Commerce Center in Durham, North Carolina (the “New Facility”). The New Facility has space for not only its existing and future internal storage needs, but also has the capacity to offer third party pharmaceutical companies and medical institutions cold storage services (“ExtraVault” – seewww.extravault.com), to set up a cellular therapy laboratory to manufacture mesenchymal stromal cells from cord tissue (“MSCs”) and the space to consolidate the Cryo-Cell Institute for Cellular Therapies under the same roof.

Previous wording

The Company anticipates this New Facility will expand the Company’s cryopreservation and cold storage business by introducing a new service, ExtraVault (www.extravault.com). Information contained on our website is not deemed part of this quarterly report. With over 30 years of experience in handling biological specimens for both research and clinical use, Cryo-Cell intends to leverage this expertise and offer these biorepository services to biopharmaceutical companies and healthcare institutions. The new facility is being constructed to offer state-of-the-art biologic, reagent and vaccine storage at cost effective prices. A robust inventory management system is planned to be implemented that Cryo-Cell believes will allow customers to view their own inventory through a customer portal and place distribution orders online. As a result, it is anticipated ExtraVault will provide expertise, experience, customer electronic access and cost sensitive solutions to the Company’s partners in the biopharma and healthcare industries.

Current wording

The Company anticipates this New Facility will expand the Company’s cryopreservation and cold storage business by introducing a new service, ExtraVault (www.extravault.com). With over 30 years of experience in handling biological specimens for both research and clinical use, Cryo-Cell intends to leverage this expertise and offer these biorepository services to biopharmaceutical companies and healthcare institutions. The new facility is being constructed to offer state-of-the-art biologic, reagent and vaccine storage at cost effective prices. A robust inventory management system is planned to be implemented that Cryo-Cell believes will allow customers to view their own inventory through a customer portal and place distribution orders online. As a result, it is anticipated ExtraVault will provide expertise, experience, customer electronic access and cost sensitive solutions to the Company’s partners in the biopharma and healthcare industries.

Previous wording

We are a Delaware corporation that was incorporated in 1989. Our executive offices are located at 700 Brooker Creek Blvd, Suite 1800, Oldsmar, Florida 34677 and our telephone number at such office is (813) 749-2100. Our website address ishttps://www.cryo-cell.com. Information contained on our website is not deemed part of this quarterly report.

Current wording

We are a Delaware corporation that was incorporated in 1989. Our executive offices are located at 700 Brooker Creek Blvd, Suite 1800, Oldsmar, Florida 34677 and our telephone number at such office is (813) 749-2100. Our website address ishttps://www.cryo-cell.com. Information contained on our website is not deemed part of this report.

Previous wording

Revenue. Revenue for the three months ended February 29, 2024 was $7,852,235 as compared to $7,824,415 for the same period in 2023. The increase in revenue was in part due to a 3% increase in processing and storage fees.

Current wording

Revenue. Revenue for the six months ended May 31, 2024 was $15,895,046 as compared to $15,597,105 for the same period in 2023. The increase in revenue was in part due to a 4% increase in processing and storage fees.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended February 29, 2024 were $4,339,645 as compared to $3,878,903 for the 2023 period representing an 12% increase. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees. A large part of the increase in selling, general and administrative expenses for the three months ended February 29, 2024 was a $172,000 increase in selling expenses over the same period in 2023.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the six months ended May 31, 2024 were $8,361,002 as compared to $7,917,871 for the 2023 period representing a 6% increase. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees.

Previous wording

Company’s storage revenue collected. For the three months ended February 29, 2024, the remaining interest expense is attributable to a short-term payment plan for payments of an insurance premium. The remaining interest expense for the three months ended February 28, 2023 is due to the accretion of the outstanding liability due to Duke per the Agreement, see Note 12. During the three months ended February 29, 2024, the Company capitalized interest expense of $198,607 related to the construction of the Company's new facility in North Carolina.

Current wording

Interest Expense. Interest expense during the six months ended May 31, 2024, was $585,732 compared to $936,183 during the comparable period in 2023, of which, $456,473 and $417,543, respectively, related to the credit and subordination agreements with Susser Bank as described in Note 5. Interest expense also includes of $534,746 and $501,674 as of the six months ended May 31, 2024 and May 31, 2023, 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 six months ended May 31, 2023 is due to the accretion of the outstanding liability due to Duke per the Agreement, see Note 12. During the six months ended May 31, 2024, the Company capitalized interest expense of $409,307 related to the construction of the Company's new facility in North Carolina.

Previous wording

Processing and Storage Fees. For the three months ended February 29, 2024, processing and storage fees were $7,805,522 compared to $7,561,518 for the three months ended February 28, 2023. Processing and storage fee revenue is attributable to a 5% increase in recurring annual storage fee revenue offset by a less than 1% decrease in the number of new domestic cord blood specimens processed for the three months ended February 29, 2024 versus the three months ended February 28, 2023.

Current wording

Processing and Storage Fees. Processing and storage fee revenue is attributable to a 4% increase in recurring annual storage fee revenue and a 3% increase in the number of new domestic cord blood specimens processed for three months ended May 31, 2024 versus the same period in 2023.

Previous wording

Product Revenue. For the three months ended February 29, 2024, revenue from the product sales was $3,000 compared to $32,200 for the three months ended February 28, 2023.

Current wording

Product Revenue. For the three months ended May 31, 2024, revenue from the product sales was $35,834 compared to $27,177 for the three months ended May 31, 2023.

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Public Cord Blood Banking Revenue. For the three months ended February 29, 2024, revenue from the public cord blood banking sales was $43,713 compared to $230,697 for the three months ended February 28, 2023.

Current wording

Public Cord Blood Banking Revenue. For the three months ended May 31, 2024, revenue from the public cord blood banking sales was $41,477 compared to $163,816 for the three months ended May 31, 2023. The decrease in revenue is due to the volatility of customer demand.

Previous wording

Cost of Sales. Cost of sales for the three months ended February 29, 2024 was $2,160,468 as compared to $2,067,364 for the same period in 2023, representing a 5% increase. Cost of sales includes wages and supplies associated with process enhancements to the existing production procedures and quality systems in the processing of cord blood specimens at the Company’s facility in Oldsmar, Florida and depreciation expense of approximately $31,000 and $53,000 for the three months ended February 29, 2024 and February 28, 2023, respectively. Cost of Sales also includes $25,483 and $17,122 for the three months ended February 29, 2024 and February 28, 2023, respectively, related to the costs associated with production of the PrepaCyte®-CB processing and storage system. Also included in Cost of Sales is $250,419 and $362,992 for the three months ended February 29, 2024 and February 28, 2023, respectively, related to the public banks.

Current wording

Cost of Sales. Cost of sales for the three months ended May 31, 2024 was $2,024,750 as compared to $2,143,186 for the same period in 2023, representing a 6% 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 approximately $29,000 and $53,000 for the three months ended May 31, 2024 and May 31, 2023, respectively. Cost of Sales also includes $10,380 and $9,328 for the three months ended May 31, 2024 and May 31, 2023, respectively, related to the costs associated with production of the PrepaCyte®-CB processing and storage system. Also included in Cost of Sales is $183,917 and $330,976 for the three months ended May 31, 2024 and May 31, 2023, respectively, related to the public banks.

Previous wording

Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the three months ended February 29, 2024 were $502,889 as compared to $78,834 for the 2023 period. The expenses are related to the development of a manufacturing laboratory related to the Duke License Agreement (See Note 12).

Current wording

Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the three months ended May 31, 2024 were $241,085 as compared to $304,682 for the 2023 period. The increase for the three months ended May 31, 2024 is due to the expenses related to the development of a manufacturing laboratory related to the Duke License Agreement (See Note 12).

Previous wording

Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the three months ended February 29, 2024 was $33,186 compared to $280,844 for the 2023 period. The decrease in depreciation and amortization for the three months ended February 29, 2024 was due to the impairment of the Duke assets as of November 30, 2023 (See Note 12).

Current wording

Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the three months ended May 31, 2024 was $59,798 compared to $281,080 for the 2023 period. The decrease in depreciation and amortization for the three months ended May 31, 2024 was due to the impairment of the Duke assets as of November 30, 2023 (See Note 12).

Previous wording

Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the three months ended February 29, 2024 was a decrease of $5,176 compared to a decrease of $164,701 for the 2023 period. 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 February 29, 2024. 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.

Current wording

Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the three months ended May 31, 2024 was a decrease of $3,697 compared to a decrease of $23,124 for the 2023 period. 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 May 31, 2024. 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.

Previous wording

Interest Expense. Interest expense during the three months ended February 29, 2024, was $256,459 compared to $466,231 during the comparable period in 2023, of which, $0 and $207,919, respectively, related to the credit and subordination agreement with Susser Bank as described in Note 5. Interest expense also includes of $254,550 and $241,348 as of the three months ended February 29, 2024 and February 28, 2023, respectively, for amounts due to the parties to the Company’s revenue sharing agreements based on the

Current wording

Interest Expense. Interest expense during the three months ended May 31, 2024, was $329,273 compared to $469,952 during the comparable period in 2023, of which, $257,865 and $209,624, respectively, related to the credit and subordination agreements with Susser Bank as described in Note 5. Interest expense also includes of $280,197 and $260,327 as of the three months ended May 31, 2024 and May 31, 2023, 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 three months ended May 31, 2023 is due to the accretion of the outstanding liability due to Duke per the Agreement, see Note 12. During the three months ended May 31, 2024, the Company capitalized interest expense of $210,700 related to the construction of the Company's new facility in North Carolina.

Previous wording

Income Taxes. U.S. income tax expense for the three months ended February 29, 2024 was $238,269 compared to $447,715 for the three months ended February 28, 2023.

Current wording

Income Taxes. U.S. income tax expense for the three months ended May 31, 2024 was $816,390 compared to $125,439 for the three months ended May 31, 2023.

Previous wording

At February 29, 2024, the Company had cash and cash equivalents of $247,112 as compared to $406,067 at November 30, 2023. The decrease in cash and cash equivalents during the three months ended February 29, 2024 was primarily attributable to the following:

Current wording

At May 31, 2024, the Company had cash and cash equivalents of $469,195 as compared to $406,067 at November 30, 2023. The increase in cash and cash equivalents during the six months ended May 31, 2024 was primarily attributable to the following:

Previous wording

Net cash used in operating activities for the three months ended February 29, 2024 was $356,865, which was attributable to the Company’s operating activities.

Current wording

Net cash used in operating activities for the six months ended May 31, 2024 was $1,416,616 which was attributable to the Company’s operating activities.

Previous wording

Net cash provided by operating activities for the three months ended February 28, 2023 was $1,643,926, which was attributable to the Company’s operating activities.

Current wording

Net cash provided by operating activities for the six months ended May 31, 2023 was $3,633,026 which was attributable to the Company’s operating activities.

Previous wording

Net cash used in investing activities for the three months ended February 29, 2024 was $341,049 which was primarily attributable to $457,722 used to purchase equipment and $743,811 used to purchase marketable securities, which was offset by the sale of marketable securities in the amount of $860,484.

Current wording

Net cash used in investing activities for the six months ended May 31, 2024 was $3,095,647 which was primarily attributable to $2,209,654 used to purchase equipment and $854,869 used to purchase marketable securities, which was offset by the sale of marketable securities in the amount of $902,210.

Previous wording

Net cash used in investing activities for the three months ended February 28, 2023 was $1,201,938 which was primarily attributable to $375,600 used to purchase equipment and $1,017,738 used to purchase marketable securities.

Current wording

Net cash used in investing activities for the six months ended May 31, 2023 was $2,776,908 which was primarily attributable to $1,833,043 used to purchase equipment and $1,082,923 used to purchase marketable securities.

Previous wording

Net cash provided by financing activities for the three months ended February 29, 2024 was $538,959 which was primarily attributable to the proceeds received from the line of credit with Susser Bank described above in the amount of $950,000, which were offset by payments of $240,665 to partially repay the Susser note payable and line of credit described above and $170,376 used to repurchase the Company's common stock.

Current wording

Net cash provided by financing activities for the six months ended May 31, 2024 was $1,742,159 which was primarily attributable to the proceeds received from the line of credit with Susser Bank described above in the amount of $3,200,000, which were offset by payments of $278,370 to partially repay the Susser Bank note payable and line of credit described above and $1,407,471 used to repurchase the Company's common stock.

Previous wording

Net cash used in financing activities for the three months ended February 28, 2023 was $772,847 which was primarily attributable to the payments of $529,646 to partially repay the Susser note payable and line of credit described above and $243,201 used to repurchase the Company's common stock.

Current wording

Net cash used in financing activities for the six months ended May 31, 2023 was $1,436,078 which was primarily attributable to the payments of $577,126 to partially repay the TCB and Susser note payable described above and $791,452 used to repurchase the Company's common stock.

Previous wording

The Company has a revolving line of credit, described above. The balance as of February 29, 2024 is $1,972,728 and is reflected on the accompanying balance sheet.

Current wording

The Company has a revolving line of credit, described above. The balance as of May 31, 2024 is $4,222,728 and is reflected on the accompanying balance sheet.

Previous wording

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. For a full discussion of our accounting policies please refer to Note 1 to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K filed with the SEC on February 28, 2023. Our most critical accounting policies and estimates include: recognition of revenue and the related allowance for doubtful accounts, stock-based compensation, income taxes and license and revenue sharing agreements. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, historical experience and other factors that we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There have been changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Annual Report on Form 10-K. Please refer to Note 1 to the Consolidated Financial Statements.

Current wording

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures of contingent assets and liabilities. For a full discussion of our accounting policies please refer to Note 1 to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K filed with the SEC on February 28, 2024. Our most critical accounting policies and estimates include: recognition of revenue and the related allowance for doubtful accounts, stock-based compensation, income taxes and license and revenue sharing agreements. We continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, historical experience and other factors that we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.