Cryo-Cell International(CCEL) - 2025 Q2 - Quarterly Report

Form Information Form Details This document is a Quarterly Report (Form 10-Q) for Cryo-Cell International, Inc. for the period ended May 31, 2025 - The report is a Quarterly Report (Form 10-Q) for the period ended May 31, 2025[2] - Cryo-Cell International, Inc. is incorporated in Delaware and its common stock (CCEL) is listed on NYSE American LLC[2][5] Registrant Filer Status | Filer Status | Selection | | :-------------------- | :-------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☑ | | Smaller reporting company | ☑ | | Emerging growth company | ☐ | - As of July 15, 2025, 8,057,150 shares of $0.01 par value common stock were outstanding[5] PART I - FINANCIAL INFORMATION (UNAUDITED) Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including the Balance Sheets, Statements of Income, Cash Flows, and Stockholders' Deficit, along with detailed notes Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' deficit at specific points in time Consolidated Balance Sheet Highlights (Unaudited) | Metric | May 31, 2025 ($) | November 30, 2024 ($) | | :---------------------- | :--------------- | :-------------------- | | Total current assets | 13,052,920 | 12,554,593 | | Total assets | 64,437,909 | 64,677,633 | | Total current liabilities | 21,752,599 | 21,599,542 | | Total liabilities | 79,997,714 | 77,893,650 | | Total stockholders' deficit | (15,559,805) | (13,216,017) | - Total assets slightly decreased from $64.68 million to $64.44 million, while total liabilities increased from $77.89 million to $79.99 million, leading to an increased stockholders' deficit[11] Consolidated Statements of Income This section details the company's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Income Highlights (Unaudited) | Metric (3 Months Ended May 31) | 2025 ($) | 2024 ($) | | :----------------------------- | :---------- | :---------- | | Total revenue | 7,928,843 | 8,042,811 | | Total costs and expenses | 6,436,209 | 6,651,293 | | Operating Income | 1,492,634 | 1,391,518 | | Net income | 355,785 | 655,790 | | Net income per common share - basic | 0.04 | 0.08 | | Metric (6 Months Ended May 31) | 2025 ($) | 2024 ($) | | :----------------------------- | :---------- | :---------- | | Total revenue | 15,897,723 | 15,895,046 | | Total costs and expenses | 13,349,078 | 13,682,305 | | Operating Income | 2,548,645 | 2,212,741 | | Net income | 638,640 | 1,212,031 | | Net income per common share - basic | 0.08 | 0.15 | - Net income decreased significantly for both the three-month (45.8%) and six-month (47.3%) periods ended May 31, 2025, compared to the prior year, primarily due to losses on marketable securities and higher interest expense[14] - Operating income increased for both periods, but was offset by higher interest expense and losses on marketable securities in 2025[14] Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (Unaudited) - Six Months Ended May 31 | Cash Flow Activity | 2025 ($) | 2024 ($) | | :-------------------------- | :---------- | :---------- | | Net cash from operating activities | 1,661,077 | 1,416,616 | | Net cash used in investing activities | (1,790,284) | (3,095,647) | | Net cash (used in) provided by financing activities | (294,262) | 1,742,159 | | (Decrease) increase in cash and cash equivalents | (423,469) | 63,128 | | Cash and cash equivalents - end of period | 137,491 | 469,195 | - Operating cash flow increased by 17.2% YoY for the six months ended May 31, 2025. Investing activities used less cash in 2025 compared to 2024, mainly due to lower purchases of property and equipment[18] - Financing activities shifted from providing $1.74 million in cash in 2024 to using $0.29 million in 2025, primarily due to significant dividend payments in 2025[18] Consolidated Statements of Stockholders' Deficit This section outlines changes in the company's equity, including net income, dividends, and stock transactions Stockholders' Deficit Changes (Unaudited) - Six Months Ended May 31, 2025 | Item | Amount ($) | | :--------------------------------- | :----------- | | Balance at November 30, 2024 | (13,216,017) | | Compensatory element of stock options | 337,418 | | Treasury stock | (88,619) | | Dividends declared ($0.40 per share) | (3,231,227) | | Net income | 638,640 | | Balance at May 31, 2025 | (15,559,805) | - The total stockholders' deficit increased from $(13.2) million at November 30, 2024, to $(15.56) million at May 31, 2025, primarily due to dividends declared and treasury stock purchases, partially offset by net income and stock option compensation[21] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information for the financial statements Note 1 - Description of Business, Basis of Presentation and Significant Accounting Policies Cryo-Cell International, Inc. operates in three segments: cellular processing and cryogenic storage for family use, manufacture of PrepaCyte CB units, and public cryogenic storage, with financial statements prepared under SEC rules and key accounting policies detailed - Cryo-Cell International, Inc. operates in three reportable segments: (1) cellular processing and cryogenic cellular storage for family use, (2) manufacture of PrepaCyte CB units, and (3) cryogenic storage for public use[24] - Revenue is recognized when performance obligations are satisfied, measured by the transaction price, following a five-step model under ASC 606[27][28] - As of May 31, 2025, total aggregate transaction price allocated to unsatisfied performance obligations (deferred revenue) was $58,393,597, with $9,574,621 expected to be recognized in the next twelve months[39] Contract Assets and Liabilities | Item | May 31, 2025 ($) | November 30, 2024 ($) | | :--------------------------------- | :--------------- | :-------------------- | | Contract assets (sales commissions) | 814,796 | 775,147 | | Accounts receivable | 6,931,474 | 7,309,094 | | Short-term contract liabilities (deferred revenue) | 9,574,621 | 9,788,574 | | Long-term contract liabilities (deferred revenue) | 48,818,976 | 46,556,990 | - The company recognized approximately $337,000 and $485,000 in stock compensation expense for the six months ended May 31, 2025 and 2024, respectively[64] Marketable Securities Fair Value | Description | Fair Value at May 31, 2025 ($) | Level 1 ($) | | :------------------ | :----------------------------- | :---------- | | Marketable securities | 4,293,513 | 4,293,513 | | Description | Fair Value at November 30, 2024 ($) | Level 1 ($) | | :------------------ | :-------------------------------- | :---------- | | Marketable securities | 2,935,183 | 2,935,183 | - The company recorded unrealized holding losses of approximately ($380,000) and ($411,000) on marketable securities for the three and six months ended May 31, 2025, respectively, compared to gains in the prior year[74] - New accounting pronouncements (ASU 2023-07, ASU 2023-09, ASU 2024-03) related to segment reporting, income tax disclosures, and income statement expense disaggregation are being evaluated for their impact on financial statements[77][78][79] Note 2 – Segment Reporting The company reports across three segments: Umbilical cord blood and cord tissue stem cell service, PrepaCyte CB, and Public cord blood banking. The umbilical cord blood and cord tissue stem cell service is the primary revenue and operating profit driver, while Public cord blood banking consistently shows operating losses - The company's three reportable segments are: (1) Umbilical cord blood and cord tissue stem cell service, (2) PrepaCyte® CB, and (3) Public cord blood banking[80] Segment Net Revenue (Three Months Ended May 31) | Segment | 2025 ($) | 2024 ($) | | :---------------------------------------- | :---------- | :---------- | | Umbilical cord blood and cord tissue stem cell service | 7,871,719 | 7,965,500 | | PrepaCyte CB | 14,436 | 35,834 | | Public cord blood banking | 42,688 | 41,477 | | Total net revenue | 7,928,843 | 8,042,811 | Segment Operating Profit (Six Months Ended May 31) | Segment | 2025 ($) | 2024 ($) | | :---------------------------------------- | :---------- | :---------- | | Umbilical cord blood and cord tissue stem cell service | 2,889,802 | 2,573,225 | | PrepaCyte CB | 10,218 | (10,918) | | Public cord blood banking | (351,375) | (349,566) | | Total operating profit | 2,548,645 | 2,212,741 | - Public cord blood banking consistently reported operating losses for both three-month and six-month periods in 2025 and 2024[81] Note 3 – Inventory Inventory consists of public cord blood banking specimens, collection kits, finished goods, and work-in-process. Total inventory slightly decreased from $5.60 million to $5.54 million between November 30, 2024, and May 31, 2025 - Inventory includes public cord blood banking specimens, collection kits, finished goods, and work-in-process[83] Inventory Components | Inventory Component | May 31, 2025 ($) | November 30, 2024 ($) | | :------------------------ | :--------------- | :-------------------- | | Work-in-process | 318,434 | 207,291 | | Finished goods | 27,097 | 71,566 | | Finished goods – Public Bank | 5,163,139 | 5,279,866 | | Collection kits | 40,647 | 48,813 | | Inventory reserve | (7,718) | (7,718) | | Total inventory | 5,541,599 | 5,599,818 | Note 4 – Intangible Assets Intangible assets primarily include patents, a license agreement, and customer relationships. Net intangible assets decreased from $921,254 to $887,321 between November 30, 2024, and May 31, 2025, with amortization expense remaining consistent at approximately $17,000 for the three-month periods Intangible Assets (Net) | Intangible Asset | May 31, 2025 ($) | November 30, 2024 ($) | | :--------------------------- | :--------------- | :-------------------- | | Patents (net) | 142,064 | 147,876 | | License agreement (net) | 105,220 | 116,945 | | Customer relationships – PrepaCyte®CB (net) | 4,037 | 4,333 | | Brand (net) | 0 | 0 | | Customer relationships – Cord:Use (net) | 736,000 | 752,000 | | Net Intangible Assets | 887,321 | 921,254 | - Amortization expense for intangibles was approximately $17,000 for both the three months ended May 31, 2025 and May 31, 2024[87] Note 5 – Notes Payable The company has a Credit Agreement with Susser Bank, including a $10 million revolving line of credit and an $8.96 million term loan. The revolving line of credit balance increased significantly to $6.62 million as of May 31, 2025, from $3.52 million at November 30, 2024. Interest expense on notes payable increased for both three-month and six-month periods in 2025 compared to 2024 - The company has an unsecured revolving line of credit up to $10,000,000 and a term loan of $8,960,000 with Susser Bank[88] - The revolving line of credit balance increased from $3,520,000 at November 30, 2024, to $6,620,000 at May 31, 2025[89] Interest Expense on Notes Payable | Period | May 31, 2025 ($) | May 31, 2024 ($) | | :---------------------- | :--------------- | :--------------- | | Three months ended | 244,373 | 47,166 | | Six months ended | 472,620 | 47,166 | - The company terminated its interest rate swap agreement on April 15, 2024, receiving proceeds of $228,000[91] Note 6 – Income per Common Share Basic and diluted net income per common share decreased for both the three-month and six-month periods ended May 31, 2025, compared to the prior year, reflecting the overall decline in net income Net Income Per Common Share (Unaudited) | Metric (3 Months Ended May 31) | 2025 ($) | 2024 ($) | | :----------------------------- | :------- | :------- | | Basic | 0.04 | 0.08 | | Diluted | 0.04 | 0.08 | | Metric (6 Months Ended May 31) | 2025 ($) | 2024 ($) | | :----------------------------- | :------- | :------- | | Basic | 0.08 | 0.15 | | Diluted | 0.08 | 0.15 | - The company excluded a significant number of outstanding options from diluted EPS computation (823,278 for 3 months, 697,745 for 6 months ended May 31, 2025) as their effect would be anti-dilutive[96] Note 7 – Stockholders' Equity The company maintains three stock incentive plans (2006, 2012, and 2022 Plans) for equity awards. As of May 31, 2025, 621,700 shares were available for future issuance under the 2022 Plan. The company declared cash dividends of $0.25 and $0.15 per share in January and May 2025, respectively - The company has three stock-based compensation plans: the 2006 Plan, 2012 Plan, and 2022 Plan[99][100][101] - As of May 31, 2025, 621,700 shares were available for future issuance under the 2022 Plan[101] Stock Option Activity (Six Months Ended May 31, 2025) | Item | Options | Weighted Average Exercise Price ($) | | :--------------------------------- | :-------- | :-------------------------------- | | Outstanding at November 30, 2024 | 493,878 | 7.26 | | Granted | 103,000 | 7.89 | | Expired/forfeited | (45,000) | 13.48 | | Outstanding at May 31, 2025 | 551,878 | 6.87 | | Exercisable at May 31, 2025 | 425,995 | 6.83 | - The company declared cash dividends of $0.25 per share (paid Feb 28, 2025) and $0.15 per share (paid May 30, 2025)[111] Note 8 – License Agreements The company has definitive license agreements to market its umbilical cord blood stem cell programs in several Central American countries, earning processing and storage revenues from affiliates - The company has license agreements to market its umbilical cord blood stem cell programs in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama[112] - Revenue is earned from processing and storage fees from these international affiliates[112] Note 9 – Commitments and Contingencies The company has employment agreements with management and is involved in legal proceedings, including a class action lawsuit regarding advertising claims and an arbitration demand against Duke University for alleged fraudulent inducement and breach of a license agreement. Duke has counterclaimed, and the Duke License Agreement was terminated as of May 17, 2025. The company believes these matters will not have a material adverse effect but acknowledges inherent litigation uncertainty - The company is a defendant in a class action lawsuit (Lindsey Lehr v. Cryo-Cell International, Inc.) alleging misrepresentation of service value and efficacy, with a final arbitration hearing scheduled for September 2025[114] - The company filed an arbitration demand against Duke University on October 4, 2024, alleging fraudulent inducement and breach of the Patent and Technology License Agreement, seeking damages in excess of $100 million[115][125] - Duke University responded with counterclaims for breach of the License Agreement and indemnity, and issued a notice of termination of the License Agreement effective May 17, 2025[115][126][129] Note 10 – Share Repurchase Plan The Board of Directors has authorized the repurchase of up to 8 million shares of common stock. As of May 31, 2025, the company had repurchased 6,805,468 shares at an average price of $3.67 per share, including 18,008 shares during the six months ended May 31, 2025 - The Board of Directors authorized the repurchase of up to 8,000,000 shares of common stock[117] - As of May 31, 2025, 6,805,468 shares had been repurchased at an average price of $3.67 per share[118] - During the six months ended May 31, 2025, the company purchased 18,008 shares at an average price of $4.92 per share[118] Note 11 – Leases The company recognizes operating lease right-of-use assets and corresponding liabilities for leases longer than one year. As of May 31, 2025, the operating lease right-of-use asset was $620,225, and total lease liability was $730,371. Operating cash outflows from leases increased significantly in 2025 compared to 2024 Lease Liabilities and Assets | Item | May 31, 2025 ($) | November 30, 2024 ($) | | :--------------------------------- | :--------------- | :-------------------- | | Operating lease right-of-use asset | 620,225 | 806,339 | | Current portion of operating lease liabilities | 465,231 | 428,334 | | Operating lease long-term liabilities | 265,140 | 505,053 | | Total lease liability | 730,371 | 933,387 | Operating Cash Outflows from Leases | Period | May 31, 2025 ($) | May 31, 2024 ($) | | :---------------------- | :--------------- | :--------------- | | Three months ended | 126,629 | 88,743 | | Six months ended | 253,257 | 178,097 | Note 12 – License Agreement with Duke The company's exclusive license agreement with Duke University, intended for expanding into infusion clinic services and biopharmaceutical manufacturing, has been terminated by Duke as of May 17, 2025, due to alleged breaches. Cryo-Cell has filed an arbitration demand against Duke, seeking over $100 million in damages for fraudulent inducement and breach of contract, while Duke has filed counterclaims. Consequently, the company has paused further investments related to the Duke License Agreement and the planned Cryo-Cell Institute for Cellular Therapies and Celle Corp. spinoff are on hold - The Duke License Agreement, granting exclusive rights for certain licensed products and processes, was terminated by Duke University as of May 17, 2025[122][129] - Cryo-Cell filed an arbitration demand against Duke, alleging fraudulent inducement and breach of contract, seeking damages exceeding $100 million[124][125] - Duke has asserted counterclaims for breach of the License Agreement and indemnity[126] - Due to the dispute, the company has paused further investments in Duke-related activities (except for a comparability study under $350,000), and the opening of the Cryo-Cell Institute for Cellular Therapies and the Celle Corp. spinoff are on hold[130] - In fiscal 2023, the company recorded an impairment charge of $13,108,064 for assets associated with the Duke License Agreement[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and operational highlights for the three and six months ended May 31, 2025, compared to the prior year. It covers revenue breakdown, cost of sales, operating expenses, and other income/expenses, detailing the factors influencing changes. It also discusses the company's liquidity, capital resources, and critical accounting policies, emphasizing the impact of the ongoing dispute with Duke University on future business expansion and funding needs Forward Looking Statements This section highlights potential risks and uncertainties that could impact future financial results - The report contains forward-looking statements regarding future performance, liquidity, capital resources, and financial condition, which are subject to risks and uncertainties[131][132] - Key risk factors include complexities of the Celle Corp. spinoff, increased government regulation, competition, decreased demand for stem cell storage, international activity risks, technological breakthroughs, storage facility failures, litigation costs (especially Duke arbitration), and the ability to commercialize Duke License Agreement rights[133][137] Overview Cryo-Cell International, Inc., founded in 1989, is the world's first private cord blood bank, storing over 240,000 cord blood and tissue specimens. The company has expanded its R&D to include cord tissue services. Its planned expansion into infusion clinic services and biopharmaceutical manufacturing via the Duke License Agreement is now unlikely due to the termination of the agreement and ongoing arbitration with Duke, leading to a pause in related investments and the Celle Corp. spinoff - The company stores over 240,000 cord blood and cord tissue specimens and was the world's first private cord blood bank[135] - The Duke License Agreement, intended to expand business into cord blood/tissue infusion clinics and biopharmaceutical manufacturing, has been terminated by Duke as of May 17, 2025[138] - Due to the Duke dispute, further investments in related activities are paused, the Cryo-Cell Institute for Cellular Therapies is on hold, and the proposed spinoff of Celle Corp. is uncertain[139] - An impairment charge of $13,108,064 was recorded in fiscal 2023 for assets associated with the Duke License Agreement[140] Cord Blood Stem Cell Processing and Storage Business The company's core business involves the cryopreservation of umbilical cord blood and tissue stem cells for family use, a service that has seen over 50,000 transplants to date for 78 diseases. Despite potential benefits, market penetration remains low due to lack of awareness and perceived high costs. Cryo-Cell emphasizes its competitive advantages, including its status as the first private cord blood bank, cGMP/cGTP-compliant facility, superior processing technology, and a payment warranty - Umbilical cord blood stem cells are used in over 50,000 transplants for at least 78 diseases[143] - Market penetration for cord blood stem cell preservation is low due to lack of awareness and misperception of high costs[146] - Competitive advantages include being the world's first private cord blood bank, cGMP/cGTP-compliant facility, superior processing technology (PrepaCyte CB), a five-compartment freezer bag, 100% viability rate upon thaw, and a payment warranty up to $100,000[150] Cord Tissue Introduced in August 2011, the cord tissue service involves storing a section of umbilical cord tissue, which is a rich source of Mesenchymal Stem Cells (MSCs) with potential in regenerative medicine for various conditions - The company introduced its cord tissue service in August 2011, storing umbilical cord tissue as a source of Mesenchymal Stem Cells (MSCs)[151] - MSCs are researched for their ability to inhibit inflammation, secrete growth factors for tissue repair, and differentiate into various cell types[151] Public Banking In June 2018, Cryo-Cell acquired Cord:Use's public cord blood inventory, creating a diverse inventory of stem cell units for public use. These units are stored in North Carolina and distributed globally through the National Marrow Donor Program (NMDP) - The company acquired Cord:Use's public cord blood inventory in June 2018, establishing a large, ethnically diverse inventory[152] - Public cord blood units are stored in North Carolina and sold through the National Marrow Donor Program (NMDP) for global distribution to transplant centers[152] ExtraVault The company purchased a new 56,000 square foot facility in Durham, NC, in July 2022, to expand its cryopreservation and cold storage business by offering third-party biorepository services under the 'ExtraVault' brand. This facility will also house internal storage needs and potentially a cellular therapy laboratory - A new 56,000 sq ft facility in Durham, NC, was purchased in July 2022 to expand cryopreservation and cold storage services[153] - The new service, 'ExtraVault,' will offer third-party pharmaceutical companies and medical institutions cold storage services, leveraging over 30 years of experience[153][154] Marketing Cryo-Cell markets its services directly to expectant parents and through healthcare professionals, utilizing a national team of educators, internet advertisements, telemarketing, and conference exhibits. A significant portion of new enrollments come from returning customers and referrals, often leading to multiyear storage contracts and deferred revenues - Marketing efforts target expectant parents and healthcare professionals through a national team of educators, internet ads, telemarketing, and conference exhibits[155][156] - A significant portion of new enrollments are generated from returning customers and referrals, often resulting in multiyear storage contracts and deferred revenues[159] Corporate Information Cryo-Cell International, Inc. is a Delaware corporation founded in 1989, with executive offices in Oldsmar, Florida - Cryo-Cell International, Inc. was incorporated in Delaware in 1989[162] - Executive offices are located at 700 Brooker Creek Blvd, Suite 1800, Oldsmar, Florida 34677[162] Results of Operations – Six-Month Period Ended May 31, 2025 Compared to the Six-Month Period Ended May 31, 2024 For the six months ended May 31, 2025, total revenue remained stable at $15.90 million. Processing and storage fees slightly decreased due to fewer new domestic cord blood specimens, while public banking revenue increased. Cost of sales decreased by 8%, but selling, general, and administrative expenses increased by 7%. Research and development expenses significantly decreased due to reduced funding for Duke-related studies. Depreciation and amortization increased due to the new Durham facility. Net income decreased by 47.3% primarily due to losses on marketable securities and higher interest expense, partially offset by the absence of Tianhe stock impairment Revenue Breakdown (Six Months Ended May 31) | Revenue Type | 2025 ($) | 2024 ($) | Change (%) | | :------------------------ | :---------- | :---------- | :--------- | | Processing and storage fees | 15,737,607 | 15,771,022 | -0.21 | | Public banking revenue | 124,767 | 85,190 | +46.47 | | Product revenue | 35,349 | 38,834 | -8.97 | | Total revenue | 15,897,723| 15,895,046| +0.02 | - Processing and storage fees decreased due to a 15% decrease in new domestic cord blood specimens processed, despite a 4% increase in recurring annual storage fee revenue[164] - Cost of sales decreased by 8% to $3,841,127, while selling, general and administrative expenses increased by 7% to $8,896,142[166][167] - Research, development and related engineering expenses significantly decreased from $743,974 to $229,854, primarily due to the cessation of funding for Duke University clinical studies[168] - Depreciation and amortization increased from $92,984 to $381,955, mainly due to the company's building in Durham, NC[169] - Net income decreased from $1,212,031 in 2024 to $638,640 in 2025, impacted by losses on marketable securities and higher interest expense[14][172] Results of Operations – Three-Month Period Ended May 31, 2025 Compared to the Three-Month Period Ended May 31, 2024 For the three months ended May 31, 2025, total revenue decreased by 1% to $7.93 million. Processing and storage fees saw a slight decline due to an 18% decrease in new domestic cord blood specimens, despite a 3% increase in recurring annual storage fees. Cost of sales decreased by 8%, while selling, general, and administrative expenses increased by 6%. Research and development expenses were significantly lower due to reduced Duke-related study funding. Depreciation and amortization increased due to the Durham facility. Net income decreased by 45.8% from $655,790 to $355,785, driven by losses on marketable securities and increased interest expense, with no impairment of Tianhe stock in 2025 Revenue Breakdown (Three Months Ended May 31) | Revenue Type | 2025 ($) | 2024 ($) | Change (%) | | :------------------------ | :---------- | :---------- | :--------- | | Processing and storage fees | 7,871,719 | 7,965,500 | -1.18 | | Public banking revenue | 42,688 | 41,477 | +2.92 | | Product revenue | 14,436 | 35,834 | -59.69 | | Total revenue | 7,928,843 | 8,042,811 | -1.42 | - Processing and storage fees decreased due to an 18% decrease in new domestic cord blood specimens processed, despite a 3% increase in recurring annual storage fee revenue[177] - Cost of sales decreased by 8% to $1,856,539, while selling, general and administrative expenses increased by 6% to $4,257,857[179][180] - Research, development and related engineering expenses decreased from $241,085 to $131,711, primarily due to reduced funding for Duke University clinical studies[181] - Depreciation and amortization increased from $59,798 to $190,102, mainly due to the company's building in Durham, NC[182] - Net income decreased from $655,790 in 2024 to $355,785 in 2025, impacted by losses on marketable securities and increased interest expense[14][184] Liquidity and Capital Resources The company's cash and cash equivalents decreased to $137,491 at May 31, 2025, from $560,960 at November 30, 2024. Operating activities provided $1.66 million in cash, while investing activities used $1.79 million, and financing activities used $0.29 million, largely due to dividend payments. The company anticipates $5 million in capital expenditures over the next 12 months. The ongoing arbitration with Duke University makes future funding needs for Duke-related activities unpredictable, and further investments are paused, impacting the planned infusion clinic and Celle Corp. spinoff. The company expects current resources and external capital to cover needs for the next 12 months, but acknowledges risks if revenues fall short or additional financing is unavailable - Cash and cash equivalents decreased from $560,960 at November 30, 2024, to $137,491 at May 31, 2025[190] - Net cash provided by operating activities was $1,661,077 for the six months ended May 31, 2025[190] - Net cash used in investing activities was $1,790,284, primarily for marketable securities purchases ($2,574,249) and equipment ($124,461), partially offset by sales[197] - Net cash used in financing activities was $294,262, driven by $3,231,227 in cash dividends and $88,619 in treasury stock purchases, partially offset by $6,800,000 from the line of credit[197] - The company anticipates $5,000,000 in discretionary capital expenditures over the next twelve months for property build-out, equipment, and software enhancements[192] - Due to the Duke arbitration, the company cannot predict funding needs for Duke-related activities and has paused further investments (except for a comparability study under $350,000)[196][198] Critical Accounting Policies The company's critical accounting policies, which require significant judgment and estimates, include revenue recognition, allowance for doubtful accounts, stock-based compensation, income taxes, and license and revenue sharing agreements. These policies are detailed in Note 1 to the Consolidated Financial Statements - Critical accounting policies include revenue recognition, allowance for doubtful accounts, stock-based compensation, income taxes, and license and revenue sharing agreements[200] Recently Issued Accounting Pronouncements Refer to Note 1 to the Consolidated Financial Statements for details on recently issued accounting pronouncements - Details on recently issued accounting pronouncements are provided in Note 1 to the Consolidated Financial Statements[201] Off-Balance Sheet Arrangements The company has no material off-balance sheet arrangements that would significantly affect its financial condition or results of operations - The company has no material off-balance sheet arrangements[202] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section addresses the company's exposure to market risks, such as interest rate and foreign currency fluctuations - This item is not applicable[203] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting - The company's principal executive and financial officers concluded that disclosure controls and procedures were fully effective as of May 31, 2025[204][205] - No material changes in internal control over financial reporting occurred during the quarter ended May 31, 2025[206] - Management acknowledges that control systems have inherent limitations and provide only reasonable, not absolute, assurance against error and fraud[207][208] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in a class action lawsuit (Lindsey Lehr v. Cryo-Cell International, Inc.) concerning advertising claims, which is proceeding to arbitration. Additionally, Cryo-Cell has filed an arbitration demand against Duke University for alleged fraudulent inducement and breach of a license agreement, seeking over $100 million in damages, while Duke has counterclaimed and terminated the agreement. The company believes these matters will not have a material adverse effect but acknowledges the inherent uncertainty of litigation - A class action lawsuit (Lindsey Lehr v. Cryo-Cell International, Inc.) alleging misrepresentation of service value and efficacy is scheduled for a final arbitration hearing in September 2025[211] - Cryo-Cell filed an arbitration demand against Duke University, alleging fraudulent inducement and breach of the License Agreement, seeking damages exceeding $100 million[212] - Duke University has asserted counterclaims and issued a notice of termination of the License Agreement as of May 17, 2025[212] Item 1A. Risk Factors This section outlines significant risks that could materially affect the company's business, financial condition, and results of operations. These risks span business operations, government regulation, international activities, information technology, intellectual property, and public company obligations. Key concerns include the uncertainty of the Celle Corp. spinoff and Duke License Agreement, the need for additional capital, intense competition, rapid technological changes, regulatory compliance, international operational challenges, cybersecurity threats, intellectual property protection, and the costs and demands of being a public company Risk Related to our Business This section outlines risks specific to the company's operations, market, and strategic initiatives - Uncertainty exists regarding the successful completion of the Celle Corp. spinoff and strategic alternatives due to the Duke arbitration[217] - The company may need to raise additional capital, especially if required to invest further in the Duke License Agreement, with no assurance of obtaining favorable financing[220] - Future success depends on the continued viability and market acceptance of stem cell use, which is subject to rapid technological and therapeutic changes[224][240] - The stem cell preservation market is increasingly competitive, potentially hindering revenue growth and business maintenance[236] - A failure or disruption in cryopreservation storage facilities or systems could harm the business and reputation, potentially leading to litigation and uncompensated losses[237] - There is uncertainty regarding the outcome of the Duke Arbitration Demand and the ability to recoup damages or investment in the Duke License Agreement[241][242][243][244] Risk Related to Government Regulation This section details regulatory compliance risks, including FDA requirements and state licensing - The company is subject to substantial FDA regulation, including registration, inspection, and compliance with 21 CFR Part 1271 for HCT/Ps and 21 CFR 800s for medical devices (PrepaCyte CB)[246][249][251] - Compliance with state-specific licensing requirements (e.g., California, Illinois, Maryland, New Jersey, New York) is necessary to operate in those states[252] - Evolving legislation and regulations, including those related to patient privacy (HIPAA) and hazardous materials, could increase costs or subject the company to liability[254][256][257] Risks Related to International Operations This section covers challenges and risks associated with the company's global business activities - International operations face challenges including weaker intellectual property protection, local business practices favoring competitors, political/economic instability, currency fluctuations, and difficulties in enforcing contracts[259] - Compliance with complex foreign and U.S. laws like the Foreign Corrupt Practices Act (FCPA) increases costs and risks of fines or sanctions[259][261] - The business may be impacted by global events such as political events, trade disputes, war (e.g., Ukrainian-Russian conflict), natural disasters, and public health issues[262][263] Risks Related to Information Technology This section addresses risks related to data security, system failures, and cybersecurity threats - Failure or disruption of critical information systems, including those hosted by third-party providers, could materially harm the business and reputation[264][276] - Significant data security breaches or cyber-attacks could lead to loss/misuse of information, regulatory actions, litigation, and reputational damage[265][266] - Increasing use of social media by the company and employees could lead to liability, data security breaches, or reputational damage[268][269] - The use of open source software in products may pose risks, including unanticipated license conditions, claims of ownership, or security vulnerabilities[270][271] Risks Related to Intellectual Property This section discusses challenges in protecting intellectual property and potential infringement claims - The company may not be able to protect its intellectual property rights globally, especially in jurisdictions with weaker enforcement, leading to potential infringement and costly litigation[272][273] - Claims from third parties alleging patent infringement could result in costly litigation, diversion of management attention, and the need for royalty or license agreements[275] Risks Related to being a Public Company This section highlights the compliance costs, governance demands, and other challenges of public company status - Operating as a public company incurs significant legal, accounting, and compliance costs, including Sarbanes-Oxley Act requirements, and demands substantial management time[277] - Failure to maintain effective internal control over financial reporting could adversely affect investor confidence and stock value[278] - The company's principal stockholders and management own approximately 45% of voting stock, allowing them to exert significant control over stockholder-approved matters[282] - As a 'smaller reporting company,' reduced disclosure obligations may make the common stock less attractive to some investors[284] - Certain provisions in the company's charter, bylaws, and Delaware law may delay, defer, or prevent tender offers or takeover attempts[287][288][291] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During May 2025, the company repurchased 18,008 shares of its common stock at an average price of $4.92 per share under its publicly announced share repurchase program, leaving 1,196,532 shares yet to be purchased Issuer Purchases of Equity Securities (May 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------------------------------------------------------- | | May 1 - 31, 2025 | 18,008 | 4.92 | 1,196,532 | Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[293] Item 4. Mine Safety Disclosures This section is not applicable to the company - This item is not applicable[294] Item 5. Other Information There is no other information to report in this section - No other information to report[295] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, agreements, equity incentive plans, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, By-Laws, Purchase Agreement, 2022 Equity Incentive Plan, Commercial Lease, Fourth Amendment to Credit Agreement, and various certifications (Co-CEO, CFO, Section 906)[296] SIGNATURES Signatures The report is duly signed on behalf of Cryo-Cell International, Inc. by its Co-Chief Executive Officers, David Portnoy and Mark Portnoy, and its Vice President, Finance, Chief Financial Officer, Jill M. Taymans, as of July 15, 2025 - The report is signed by David Portnoy (Co-CEO), Mark Portnoy (Co-CEO), and Jill M. Taymans (VP, Finance, CFO)[299][300][301] - The signing date is July 15, 2025[301]