CRYO CELL INTERNATIONAL INC
For the period ended Aug 31, 2024. Filed Oct 15, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 31, 2024 · Filed Oct 15, 2024
CCEL$4.89-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-05-31; filed 2024-07-15.
0000950170-24-083637
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-31; filed 2024-10-15.
0000950170-24-114762
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 162 previous paragraphs and 170 current paragraphs.
115 unchanged; 41 reworded; 14 added; 4 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
our future operating plans;
Current report
the Company's ability to commercialize the rights licensed under the Duke License Agreement or otherwise obtaining the benefits of the Duke License Agreement;
Current report
(xxxi)
Current report
the Company's spinoff of Celle Corp.;
Current report
(xxxii)
Current report
the outcome of the Company's Arbitration Demand against Duke; and
Current report
(xxxiii)
Current report
Until the Duke arbitration claims are resolved, the Company does not anticipate making further investments (other than the completion of a comparability study estimated to cost less than $350,000 in additional capital) in activities related to the Duke License Agreement. The opening of the Cryo-Cell Institute for Cellular Therapies is also on pause and the Company can make no assurances as to when it will be opened. Additionally, the proposed spinoff of Celle Corp. is also on hold and may not occur depending on the outcome of the Duke dispute. See, “Risk Factors”.
Current report
Gains on Marketable Securities. Gains on marketable securities for the nine months ended August 31, 2024 was $1,056,052 compared to $100,082 for the nine months ended August 31, 2023.
Current report
Gains on Marketable Securities. Gains on marketable securities for the three months ended August 31, 2024 was $522,458 compared to $93,386 for the three months ended August 31, 2023.
Current report
As previously disclosed, the Company entered into a Patent and Technology License Agreement dated effective as of February 23, 2021 (as amended, the "Duke License Agreement") with Duke University (“Duke”). Through the Duke License Agreement, the Company had anticipated, either directly or through its wholly-owned subsidiary, Celle Corp., exploring, testing, and administering treatments to patients with osteoarthritis and with conditions for which there are limited U.S. Food and Drug Administration (“FDA”) approved therapies, including cerebral palsy, autism, and multiple sclerosis. In connection therewith, the Company had anticipated requiring capital to pay for the startup expenses relating to its planned infusion clinic, to finance clinical trials related to the Duke License Agreement, to develop biopharmaceutical manufacturing capabilities and for capital expenditures for software enhancements and purchases of equipment and obligations under the Duke License Agreement. Specifically, the Company had previously anticipated that over $50 million would be needed over the next 5 years to fund its activities related to the Duke License Agreement.
Current report
However, on October 4, 2024, the Company filed a demand for arbitration (the “Arbitration Demand”) against Duke with the American Arbitration Association (“AAA”). Among other things, the Company alleges in the Arbitration Demand that Duke fraudulently induced Cryo-Cell to enter the Duke License Agreement and further breached the agreement on various occasions. In connection therewith, the Company has requested that the arbitrator enter an award in the Company’s favor and against Duke for damages in an amount to be proved at a final hearing, interest, attorneys’ fees, and arbitration fees and costs, along with all other relief to which the Company is entitled at law or in equity. Cryo-Cell has notified Duke that it believes such damages exceed $100 million.
Current report
As result of the Company’s Arbitration Demand against Duke, the Company currently is unable to predict its funding needs for activities related to the Duke License Agreement. Until the Duke arbitration claims are resolved, the Company does not anticipate making further investments (other than the completion of a comparability study estimated to cost less than $350,000 in additional capital) in activities related to the Duke License Agreement. The opening of the Cryo-Cell Institute for Cellular Therapies is also on pause and the Company can make no assurances as to when it will be opened. Additionally, the proposed spinoff of Celle Corp. is also on hold and may not take place depending on the final outcome of the Duke dispute.
Current report
See, “Note 12” and “Risk Factors”.
Removed paragraphs (4)
Previous report
our future
Previous report
our future operating plans (including any potential spinoff of Celle Corp.);
Previous report
(v)
Previous report
The Company anticipates making discretionary capital expenditures of approximately $5,000,000 over the next twelve months for property build out, purchases of equipment, obligations under the Patent and Technology License Agreement with Duke University and software enhancements. The Company anticipates funding future property build out, equipment purchases, obligations under the Patent Technology License Agreement with Duke University and software enhancements with cash-on-hand, cash flows from future operations, the Company’s revolving line of credit (see Note 5) and potential additional debt financing. The Company intends to transfer the assets related to the Patent and Technology License Agreement with Duke University and certain other assets into a newly formed, wholly-owned subsidiary to provide more financial flexibility to fund future projects. Once such transfer is completed, the Company also intends to explore spinning off this subsidiary to the Company’s shareholders.
Reworded paragraphs (41)
Previous wording
performance and operating results;
Current wording
our future performance and operating results;
Previous wording
the expense, timing and uncertain results of clinical trials related to the Duke Agreement; and
Current wording
the expense, timing and uncertain results of clinical trials related to the Duke Agreement;
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. (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..
Current wording
As discussed further in Note 12, effective as of February 23, 2021, the Company entered into a Patent and Technology License Agreement (the “Duke License Agreement”) with Duke University (“Duke”). The Duke License Agreement grants the Company certain rights to proprietary processes and regulatory data related to cord blood and cord tissue developed at Duke. Through the Duke License Agreement, the Company had anticipated, either directly or through its wholly-owned subsidiary, Celle Corp., exploring, testing, and administering treatments to patients with osteoarthritis and with conditions for which there are limited U.S. Food and Drug Administration (“FDA”) approved therapies, including cerebral palsy, autism, and multiple sclerosis. These treatments were expected to utilize the unique immunomodulatory and potential regenerative properties derived from cord blood and cord tissue. Through the Duke License Agreement, the Company, together with Celle Corp., hoped to develop three business units, namely: (1) its cord blood bank and other storage services (its historical business); (2) cord blood and cord tissue infusion clinic services initially under the FDA's Expanded Access Program 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) were approved by the FDA. Additionally, to support such business expansion, the Company had anticipated opening and launching its Cryo-Cell Institute for Cellular Therapies, which it initially hoped to open as early as the fourth quarter of fiscal 2021, but no later than the first quarter of fiscal 2022, but more recently reported that it anticipated opening it during the fourth quarter of fiscal 2024. As of the date hereof, the Company can make no assurances it will be able to expand its business into business units (2) and (3) above.
Previous wording
During fiscal 2023, the Company recognized that there were indications of impairment of the assets associated with the Duke license agreement. The Company evaluated the triggering events that existed as of November 30, 2023, tested the asset group for recoverability and measured the long-lived asset impairment. During the fourth quarter of fiscal 2023, the results were received from a phase 2/3 trial to treat osteoarthritis of the knee conducted to compare the effectiveness of an injection of a corticosteroid control to mesenchymal stem cell (MSC) preparations from autologous bone marrow concentrate (BMAC), adipose derived stem cells in the form of Stromal Vascular Fraction (SVF), and third-party human mesenchymal stem cells manufactured from umbilical cord tissue at Duke University for the treatment of unilateral Knee Osteoarthritis (OA). No benefit was shown from any of the sources compared to the current standard of care. Given these results (that included the Duke MSCs to which the Company licensed the exclusive rights) and other factors, it was determined that the uncertain future cash flows from the Duke license agreement may not be enough to recover the carrying value of the asset resulting in a fully impaired asset. During the fourth quarter of fiscal 2023, the Company recorded an impairment charge of the full carrying value of $13,108,064.
Current wording
During fiscal 2023, the Company recognized that there were indications of impairment of the assets associated with the Duke License Agreement. The Company evaluated the triggering events that existed as of November 30, 2023, tested the asset group for recoverability and measured the long-lived asset impairment. As a result, during the fourth quarter of fiscal 2023, the Company recorded an impairment charge of the full carrying value of $13,108,064.
Previous wording
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 are provided by physicians, midwives and childbirth educators, and by client-to-client referrals and repeat clients storing the stem cells of their additional children.
Current wording
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 2022 are provided by physicians, midwives and childbirth educators, and by client-to-client referrals and repeat clients storing the stem cells of their additional children.
Previous wording
Results of Operations – Six-Month Period Ended May 31, 2024 Compared to the Six-Month Period Ended May 31, 2023
Current wording
Results of Operations – Nine-Month Period Ended August 31, 2024 Compared to the Nine-Month Period Ended August 31, 2023
Previous 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.
Current wording
Revenue. Revenue for the nine months ended August 31, 2024 was $23,961,761 as compared to $23,466,980 for the same period in 2023. The increase in revenue was in part due to a 3% increase in processing and storage fees.
Previous wording
Processing and Storage Fees. Processing and storage fee revenue is attributable to a 4% increase in recurring annual storage fee revenue and a 1% increase in the number of new domestic cord blood specimens processed in the first six months of fiscal 2024 versus the same period in 2023.
Current wording
Processing and Storage Fees. Processing and storage fee revenue is attributable to a 4% increase in recurring annual storage fee revenue offset by a 4% decrease in the number of new domestic cord blood specimens processed in the first nine months of fiscal 2024 versus the same period in 2023.
Previous wording
Product Revenue. For the six months ended May 31, 2024, revenue from the product sales was $38,834 compared to $59,377 for the six months ended May 31, 2023.
Current wording
Product Revenue. For the nine months ended August 31, 2024, revenue from the product sales was $39,470 compared to $61,920 for the nine months ended August 31, 2023.
Previous wording
Public Cord Blood Banking Revenue. For the six months ended May 31, 2024, revenue from the public cord blood banking sales was $85,190 compared to $394,513 for the six months ended May 31, 2023. The decrease in revenue is due to the volatility of customer demand.
Current wording
Public Cord Blood Banking Revenue. For the nine months ended August 31, 2024, revenue from the public cord blood banking sales was $205,799 compared to $398,896 for the nine months ended August 31, 2023. The increase in revenue is due to the volatility of customer demand.
Previous wording
Cost of Sales. Cost of sales for the six months ended May 31, 2024 was $4,185,218 as compared to $4,210,550 for the same period in 2023, representing a 1% 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 $60,000 and $106,000 for the six months ended May 31, 2024 and May 31, 2023, respectively. Cost of Sales also includes $35,863 and $26,450 for the six 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 $434,336 and $693,968 for the six months ended May 31, 2024 and May 31, 2023, respectively, related to the public banks.
Current wording
Cost of Sales. Cost of sales for the nine months ended August 31, 2024 was $6,311,064 as compared to $6,366,737 for the same period in 2023, representing a 1% 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 $89,103 and $140,203 for the nine months ended August 31, 2024 and August 31, 2023, respectively. Cost of Sales also includes $37,083 and $27,432 for the nine months ended August 31, 2024 and August 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 $699,872 and $872,895 for the nine months ended August 31, 2024 and August 31, 2023, respectively, related to the public banks.
Previous wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended May 31, 2024 were $4,021,357 as compared to $4,038,968 for the 2023 period representing a slight decrease. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees.
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the nine months ended August 31, 2024 were $12,510,787 as compared to $11,722,435 for the 2023 period representing an 7% increase. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees.
Previous wording
Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the six months ended May 31, 2024 were $743,974 as compared to $383,516 for the 2023 period, of which $270,368 and $0, respectively, related to the Clinical Study and Research Agreement with Duke University to provide funding to complete the Duke IMPACT Study (See Note 12).
Current wording
Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the nine months ended August 31, 2024 were $937,907 as compared to $727,648 for the 2023 period, of which $270,368 and $0, respectively, related to the Clinical Study and Research Agreement with Duke University to provide funding to complete the Duke IMPACT Study (See Note 12) and $273,309 and $0, respectively, related to clinical trial expenses related to the Company's Master Services Agreement with Emmes (See Note 12).
Previous wording
Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the six months ended May 31, 2024 was $92,984 compared to $561,924 for the 2023 period. The decrease in depreciation and amortization for the six months ended May 31, 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 nine months ended August 31, 2024 was $287,543 compared to $843,201 for the 2023 period.
Previous wording
Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the six months ended May 31, 2024 was a decrease of $8,873 compared to a decrease of $187,825 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.
Current wording
Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the nine months ended August 31, 2024 was an increase of $3,829 compared to a decrease of $65,154 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 August 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
Impairment of investment – Tianhe stock. The impairment of investment – Tianhe stock for the six months ended May 31, 2024 was $308,000 compared to $0 for the same period in 2023. In accordance with the Asset Purchase Agreement between Cryo-Cell and Cord:Use dated June 11, 2018, Cryo-Cell acquired Cord:Use’s shares of common stock of Tianhe Stem Cell Biotechnologies, Inc., an Illinois corporation, engaged in medical and life science research that involves the use of stem cells derived from umbilical cord blood units in clinical trials for humans. The Tianhe stock investment value is based on fair value. Due to the lack of activity and lack of any profits, the Company believes that the investment is fully impaired.
Current wording
Impairment of investment – Tianhe stock. The impairment of investment – Tianhe stock for the nine months ended August 31, 2024 was $308,000 compared to $0 for the same period in 2023. In accordance with the Asset Purchase Agreement between Cryo-Cell and Cord:Use dated June 11, 2018, Cryo-Cell acquired Cord:Use’s shares of common stock of Tianhe Stem Cell Biotechnologies, Inc., an Illinois corporation, engaged in medical and life science research that involves the use of stem cells derived from umbilical cord blood units in clinical trials for humans. The Tianhe stock investment value is based on fair value. Due to the lack of activity and lack of any profits, the Company believes that the investment is fully impaired.
Previous 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.
Current wording
Interest Expense. Interest expense during the nine months ended August 31, 2024, was $1,119,196 compared to $1,405,825 during the comparable period in 2023, of which, $307,221 and $623,577, respectively, related to the credit and subordination agreements with Texas Capital Bank, National Association and Susser Bank as described in Note 5. Interest expense also includes of $806,244 and $765,283 as of the nine months ended August 31, 2024 and August 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 nine months ended August 31, 2023 is due to the accretion of the outstanding liability due to Duke per the Agreement, see Note 12. During the nine months ended August 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
Gain (Loss) on Interest Rate Swap. Gain on the change in the fair value of a derivative for the six months ended May 31, 2024 was $105,887 compared to a loss on the change in the fair value of a derivative of $223,974 for the six months ended May 31, 2023. The fair value is based on prevailing market data and derived from proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions.
Current wording
Gain (Loss) on Interest Rate Swap. Gain on the change in the fair value of a derivative for the nine months ended August 31, 2024 was $105,887 compared to $58,757 for the 2023 period. The fair value is based on prevailing market data and derived from proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions.
Previous wording
Income Taxes. U.S. income tax expense for the six months ended May 31, 2024 was $1,054,659 compared to $573,154 for the six months ended May 31, 2023.
Current wording
Income Taxes. U.S. income tax expense for the nine months ended August 31, 2024 was $1,382,845 compared to $960,214 for the nine months ended August 31, 2023.
Previous wording
Revenue. Revenue for the three months ended May 31, 2024 was $8,042,811 as compared to $7,772,690 for the same period in 2023, a 3% increase. The increase in revenue for the three months ended May 31, 2024 versus 2023 was in part due to a 5% increase in processing and storage fees.
Current wording
Revenue. Revenue for the three months ended August 31, 2024 was $8,066,715 as compared to $7,869,875 for the same period in 2023, a 3% increase.
Previous 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.
Current wording
Processing and Storage Fees. Processing and storage fee revenue is attributable to a 5% increase in recurring annual storage fee revenue offset by a 14% decrease in the number of new domestic cord blood specimens processed for three months ended August 31, 2024 versus the same period in 2023.
Previous 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.
Current wording
Product Revenue. For the three months ended August 31, 2024, revenue from the product sales was $636 compared to $2,543 for the three months ended August 31, 2023.
Previous 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.
Current wording
Public Cord Blood Banking Revenue. For the three months ended August 31, 2024, revenue from the public cord blood banking sales was $120,609 compared to $4,383 for the three months ended August 31, 2023. The increase in revenue is due to the volatility of customer demand.
Previous 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.
Current wording
Cost of Sales. Cost of sales for the three months ended August 31, 2024 was $2,125,846 as compared to $2,156,187 for the same period in 2023, representing an 1% 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 $28,765 and $35,000 for the three months ended August 31, 2024 and August 31, 2023, respectively. Cost of Sales also includes $1,220 and $982 for the three months ended August 31, 2024 and August 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 $265,536 and $178,927 for the three months ended August 31, 2024 and August 31, 2023, respectively, related to the public banks. The decrease in cost of sales for the three months ended August 31, 2024 versus August 31, 2023 is due to the decrease in the number of new domestic cord blood specimens processed during the three months ended August 31, 2024 versus August 31, 2023.
Previous 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.
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended August 31, 2024 were $4,149,785 as compared to $3,804,564 for the 2023 period representing a 9% increase. These expenses are primarily comprised of selling and marketing expenses, salaries and wages for personnel and professional fees.
Previous 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).
Current wording
Research, Development and Related Engineering Expenses. Research, development and related engineering expenses for the three months ended August 31, 2024 were $193,933 as compared to $344,132 for the 2023 period, of which $91,362 and $0, respectively, related to clinical trial expenses related to the Company's Master Services Agreement with Emmes (See Note 12).
Previous 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).
Current wording
Depreciation and Amortization. Depreciation and amortization (not included in Cost of Sales) for the three months ended August 31, 2024 was $194,559 compared to $281,277 for the 2023 period.
Previous 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.
Current wording
Change in the Fair Value of Contingent Consideration. Change in the fair value of the contingent consideration for the three months ended August 31, 2024 was an increase of $12,702 compared to an increase of $122,671 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 August 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 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.
Current wording
Interest Expense. Interest expense during the three months ended August 31, 2024, was $533,464 compared to $469,642 during the comparable period in 2023, of which, $260,055 and $206,034, respectively, related to the credit and subordination agreements with Texas Capital Bank, National Association and Susser Bank as described in Note 5. Interest expense also includes of $271,498 and $263,609 as of the three months ended August 31, 2024 and August 31, 2023, respectively, for amounts due to the parties to the Company’s revenue sharing agreements based on the Company’s storage revenue collected.
Previous wording
Gain (Loss) on Interest Rate Swap. Gain on the change in the fair value of a derivative for the three months ended May 31, 2024 was $151,175. Loss on the change in the fair value of a derivative for the three months ended May 31, 2023 was $223,974. The fair value is based on prevailing market data and derived from proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions.
Current wording
Gain on Change in Fair Value of Derivative. Gain on the change in the fair value of a derivative for the three months ended August 31, 2024 was $0 compared to $282,731 in the 2023 period. The fair value is based on prevailing market data and derived from proprietary models based on well recognized financial principles and reasonable estimates about relevant future market conditions.
Previous 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.
Current wording
Income Taxes. U.S. income tax expense for the three months ended August 31, 2024 was $328,186 compared to $387,060 for the three months ended August 31, 2023.
Previous 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:
Current wording
At August 31, 2024, the Company had cash and cash equivalents of $197,437 as compared to $406,067 at November 30, 2023. The decrease in cash and cash equivalents during the nine months ended August 31, 2024 was primarily attributable to the following:
Previous 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.
Current wording
Net cash from operating activities for the nine months ended August 31, 2024 was $3,853,917 which was attributable to the Company’s operating activities.
Previous 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.
Current wording
Net cash from operating activities for the nine months ended August 31, 2023 was $5,575,440 which was attributable to the Company’s operating activities.
Previous 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.
Current wording
Net cash used in investing activities for the nine months ended August 31, 2024 was $3,761,250 which was primarily attributable to $2,395,360 used to purchase equipment and and $1,759,828 used to purchase marketable securities, which was offset by the sale of marketable securities in the amount of $1,358,732.
Previous 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.
Current wording
Net cash used in investing activities for the nine months ended August 31, 2023 was $6,163,176 which was primarily attributable to $5,124,056 used to purchase property and equipment including a new facility and $1,082,924 used to purchase marketable securities.
Previous 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.
Current wording
Net cash used in financing activities for the nine months ended August 31, 2024 was $301,297 which was primarily attributable to the payments of $2,306,428 to partially repay the Susser Bank note payable and revolving line of credit described above and $1,423,871 used to repurchase the Company's common stock which were partially offset by the proceeds received from the line of credit with Susser Bank described above in the amount of $3,200,000.
Previous 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.
Current wording
Net cash used in financing activities for the nine months ended August 31, 2023 was $532,226 which was primarily attributable to the payments of $615,690 to partially repay the TCB and Susser Bank note payable described above and $799,036 used to repurchase the Company's common stock which was partially offset by the proceeds received from the line of credit with Susser Bank described above in the amount of $950,000.
Previous 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.
Current wording
The Company has a revolving line of credit, described above. The balance as of August 31, 2024 was $2,222,728 and is reflected on the accompanying balance sheet.
Previous wording
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, or if the Company is unable to obtain additional financing, the Company will 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. 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 12) and to develop its biopharmaceutical manufacturing capabilities related to mesenchymal stromal cells derived from umbilical cord tissue.
Current wording
The Company anticipates that its cash and cash equivalents, marketable securities and cash flows from operation, together with external sources of capital will be sufficient to fund its known cash needs for at least the next 12 months. However, cash flows from operations will depend primarily upon increasing revenues from sales of its umbilical cord blood and cord tissue cellular storage services and managing discretionary expenses. Additionally, depending in part on the outcome of the Duke Arbitration Demand, the Company may require capital to pay for the startup expenses relating to its planned infusion clinic, to finance clinical trials related to the Duke License Agreement, to develop biopharmaceutical manufacturing capabilities and for capital expenditures for software enhancements and purchases of equipment and obligations under the Duke License Agreement. While we previously anticipated that over $50 million would be needed over the next 5 years to fund its activities related to the Duke License Agreement, as result of the Company’s Arbitration Demand against Duke, as discussed further in Note 12, the Company currently is unable to predict its funding needs for those activities. Until the Duke arbitration claims are resolved, the Company does not anticipate making further investments (other than the completion of a comparability study estimated to cost less than $350,000 in additional capital) in activities related to the Duke License Agreement. However, if required to continue to invest in the Duke License Agreement, the Company anticipates funding the related capital expenditures with cash-on-hand, cash flows from future operations, the Company’s revolving line of credit (see Note 5), potential additional debt financing and potential equity sales. There can be no assurances that the Company will be able to obtain such additional debt or equity financing on favorable terms or at all. If expected increases in revenues are not realized, or if expenses are higher than anticipated, or if the Company is unable to obtain additional financing, the Company will 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. 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.
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Previous report — wording carried elsewhere
Impairment of investment – Tianhe stock. The impairment of investment – Tianhe stock for the three months ended May 31, 2024 was $308,000 compared to $0 for the same period in 2023. In accordance with the Asset Purchase Agreement between Cryo-Cell and Cord:Use dated June 11, 2018, Cryo-Cell acquired Cord:Use’s shares of common stock of Tianhe Stem Cell Biotechnologies, Inc., an Illinois corporation, engaged in medical and life science research that involves the use of stem cells derived from umbilical cord blood units in clinical trials for humans. The Tianhe stock investment value is based on fair value. Due to the lack of activity and lack of any profits, the Company believes that the investment is fully impaired.
Previous report — wording carried elsewhere
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.