ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
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Forward-looking
Statements
We and our
representatives may from time to time make written or oral statements that are “forward-looking,” including
statements contained in this quarterly report and other filings with the Securities and Exchange Commission (the
“SEC”), reports to our stockholders and news releases. All statements that express expectations, estimates,
forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute
forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,”
“intend,” “plan,” “believe,” “seek,” “estimate,”
“project,” “forecast,” “may,” “should,” variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We
undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to
conform forward-looking statements to actual results. Important factors on which such statements are based on assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
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Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
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Our
failure to earn revenues or profits;
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Inadequate
capital to continue business;
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Volatility
or decline of our stock price;
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Potential
fluctuation in quarterly results;
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Rapid
and significant changes in markets;
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Litigation
with or legal claims and allegations by outside parties; and
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Insufficient
revenues to cover operating costs.
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The following
discussion should be read in conjunction with the financial statements and the notes thereto which are included in this quarterly
report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results
may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various
factors.
Background
American CryoStem
Corporation was incorporated in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly owned
subsidiary American CryoStem Acquisition Corporation, substantially all of the assets from, and assumed substantially all of the
liabilities of, ACS Global, Inc. (“
ACS
”) in exchange for our issuance of 21,000,000 shares of Common
Stock to ACS (the “
Asset Purchase
”). We filed a Current Report on Form 8-K with the Securities and Exchange
Commission (SEC) on April 27, 2011 disclosing the Asset Purchase and certain related matters.
Overview
American CryoStem
Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art,
FDA-registered, clinical laboratory dedicated to our standardized processing, bio-banking and development of cellular tools and
applications using autologous adipose (fat) tissue and adipose derived stem cells (“
ADSCs
”). The Company
has built a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that
form its core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and
processes, clinical services and international licensing opportunities. Our FDA registered clinical laboratory which we believe
to be in compliance with FDA regulations for human tissue processing, cryro-storage and cell culture and differentiation media
development is located in Monmouth Junction, New Jersey.
The Company
believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experimental variability. By standardizing handling, storage, and transportation
protocols we can substantially improve the quality and reproducibility of preclinical and clinical data to help accelerate the
transition from lab research to product development and market launch.
Our business
strategy is centered on marketing our standardized platform products as a complete adipose stem cell solution and expanding our
international footprint, research and development through scientific collaborations. We intend to generate revenue through the
sale and licensing of our patented products, laboratory tools, and services to attempt to capitalize on: (1) ADSC technologies;
(2) scientific breakthroughs incorporating ADSCs that have been developing in the fast growing Regenerative and Personalized Medicine
industries; (3) providing these growth industries with a standardized ADSC cell processing platform; (4) enhancing the delivery
of healthcare through cellular-based therapies and applications which address disease treatment, wound and burn healing, joint
repair and personalized health and beauty care; and (5) building a global network of physicians and affiliated laboratory facilities
for the delivery of our products and services internationally.
Our proprietary,
patent pending clinical processing platform allows for the collection, preparation and cryo-preservation of adipose tissue without
manipulation, bio-generation or the addition of animal-derived products or other chemical materials which require removal from
the tissue sample upon retrieval or prior to use. Management believes this core process makes each tissue sample suitable for
use in cosmetic grafting procedures or for further processing to adult stem cells for other types of stem cell therapies. Currently,
we believe there are numerous therapeutic and orthopedic applications for adipose tissue and adult stem cell treatments identified
or in use globally. As of May 1, 2016, a review of clinicaltrials.gov, operated by the US National Institutes of Health (NIH)
indicates that there is a significant number of clinical trials registered or completed that are focused on adipose tissue (1877),
adult stem cells (5346), adipose derived stem cells (165), mesenchymal stem cells (610), and stromal vascular fraction (53).
Products
and Services
American CryoStem
is focused on multiple high margin business lines capable of generating sustainable, recurring revenue streams from each of our
developed products and services. The Company also incorporates its proprietary and patented or patent pending laboratory products,
such as our
ACSelerate
™
cell culture media, into our processing product production and contract manufacturing
services. Additionally, the Company may require licensees of our tissue and cell processing technologies to purchase all the consumable
products required in the collection, processing, expansion and storage of tissue/stem cells as part of the licensing agreement.
To date, we
have generated minimal revenue; however, subject to, among other factors, obtaining the requisite financing, management believes
that we are well positioned to leverage our developed products and services as the basis for international distribution through
licensees of our technologies and a host of Regenerative Medicine uses and future applications.
The following
products and services are designed to become the basis of, or an integral part of, numerous planned licensing, revenue generating,
and cellular therapy development activities: Our products and services are:
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CELLECT
®
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Patent
Pending PCT/US2011-39260 Tissue Collection and transportation system designed for physicians to facilitate the collection
and overnight shipping of an individual’s adipose tissue to our FDA registered laboratory;
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The
CELLECT
®
transportation system is used for all American CryoStem adipose tissue processing services
(ATGRAFT
™
, ATCELL
™
, and contract manufacturing services).
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Manufacture
and sale of our CELLECT
®
collection system to licensees for our ATGRAFT
™
and ATCELL
™
technologies.
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Proprietary
transportation methodology utilizing our patent pending ACSelerate
™
-TR Transportation Medium for shipping adipose
tissue at ambient temperature.
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ATGRAFT
™
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Patent
pending PCT/US13/44621 adipose tissue processing at our Laboratory and preparation for long term storage of cleaned, whole
fat for fat transfer procedures and future reprocessing into cellular applications.
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Multiple
storage configuration sizes (4mL, 5mL, 50mL & 100mL) allow for maximum fat storage and transfer flexibility.
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ATGRAFT
™
is stored in a DMSO free cryoprotectant which requires no further processing by a physician upon retrieval of a patient’s
sample.
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Licensing
of the ATGRAFT
™
processing technology to international partners utilizing our CELLECT
®
collection boxes
and ACSelerate
™
mediums.
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ATCELL
™
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Patent
pending #13/646,676 for the processing and isolation of cellular specific components of an individual’s adipose tissue to
create adipose derived stem cell (ADSCs) lines for storage, expansion, or differentiation.
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Proprietary
processing methodologies of ATCELL
™
have been confirmed to be 96%+ pure ADSCs
by third party flow cytometry.
IRB
approved process as of June 2013.
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Clinical
and Research grade ATCELL
™
lines for use with or sale to collaborative partners in research and application development
and optimization, cell morphology and characterization assays, and growth analysis.
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ACSELERATE
™
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Patented
#7,989,205 with a continuation filed. Cell media line for transporting, expanding, differentiating
and storing human cells.
Specially
optimized for used with adipose tissue and adipose derived stem cells.
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Superior
growth and differentiation capabilities compared to industry competitors.
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Used
exclusively in all American CryoStem processing (ATGRAFT
™
, ATCELL
™
and contract manufacturing).
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Additional
Patent filed on December 31, 2015 for ACSelerate – MAX PCT/US/68350
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ACS
Laboratories
™
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Manufacturing
and sale of our patented ACSelerate
™
cell culture media products.
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Creation
and sale of research grade ATCELL
™
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Participation
and support of all collaborative research projects
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Contract
manufacturing, including Autokine-CM
®
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Provide
testing services for physicians performing in-office procedures and tissue processing
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International
Licensing
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Standard
Operating Procedures (SOPs) and all associated components and products
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Consulting
and Marketing Review and Assessment
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CELLECT
®
(consumable)
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ATGRAFT
™
(consumable)
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ATCELL
™
(consumable)
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Adipose
tissue processing, cellular expansion and product manufacture
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Our
branded product and service offerings include:
CELLECT
®
Validated Collection, Transportation, and Storage System
– An unbreakable “chain of custody” clinical
solution for physicians to collect and deliver tissue samples utilizing proprietary and patent pending methods and materials.
The CELLECT
®
service is monitored in real-time and assures the highest cell viability upon laboratory receipt.
The CELLECT
®
system incorporates our ACSelerate–TR transport medium into all collection bags which supports
the health of the tissue during transport. The CELLECT
®
kit is an integral part of our validated ATGRAFT
™
and ATCELL
™
technology to be used by all licensees of our technologies. The CELLECT
®
service
is included in our pending patent application U.S. Serial No. 13/702,304.
American CryoStem
is the first tissue bank to globally incorporate through its CELLECT
®
service the International Blood Banking
identification and labeling and product identification coding system. The coding was developed in conjunction with the American
Association of Blood Banks (AABB), the American Red Cross and the International Society of Blood Transfusion (ISBT). These groups
formed the International Council for Commonality in Blood Banking Automation (ICCBBA) and developed the ISBT 128 Standard for
machine readable labeling. This labeling system is an acceptable machine readable labeling standard, product description, and
bar coding system for FDA Center for Biologics Evaluation and Research under 21 CFR 606.12(c) 13. American CryoStem conforms to
this standard in its Monmouth Junction facility and all cellular and tissue products produced at the facility carry our W3750
ICCBBA facility identifier allowing any hospital, clinic, laboratory and regulator worldwide to identify the origin and obtain
additional information of any sample produced at an American CryoStem facility. The Company will promote this standard in all
laboratories that license or utilize our technology.
ATGRAFT
™
Adipose Tissue Storage Service –
A clinical fat storage solution allowing physicians to provide their patients
with multiple tissue/stem cell storage options. The ATGRAFT
™
service, through one liposuction procedure
allows individuals the benefit of multiple cosmetic or regenerative procedures by using their own stored adipose tissue as a natural
biocompatible filler or cellular therapy application without the trauma of further liposuctions. ATGRAFT
™
procedures may include breast reconstruction, layered augmentation, buttocks enhancement or volume corrections of the hands, feet,
face and neck areas that experience significant adipose tissue (fat) volume reduction as we age.
ATGRAFT
™
is processed and stored utilizing our standards so that any stored fat tissue sample may be retrieved in the future
and re-processed to create ATCELL
™
, our clinical grade stem cell product for use in Regenerative Medicine
applications. The ATGRAFT
™
service is included in our pending patent application U.S. Serial No. 13/646,647.
The Company’s
charges standardized fees for
ATGRAFT
™
tissue processing and initial storage ranges from $985 to $3,000,
depending on the volume of tissue processed. The annual storage fee is $200 for up to 100ml of tissue. Storage of tissue over
100ml is billed an additional $1 per 1ml annually. These fees may be paid by the collecting/treating physician or the consumer.
The Company earns additional fees ranging from $100 to $500 plus shipping costs, paid by the physician upon retrieval, for the
thawing, packaging and shipment of the stored samples to the physician for immediate use upon receipt. Additionally, physicians
may request that any stored package of ATGRAFT
™
of 25ml or greater be reprocessed utilizing the Company’s
ATCELL
™
and Autokine-CM
™
processing. The Company charges fees of $1,500 for the
reprocessing of a 25ml stored ATGRAFT
™
sample and may charge additional fee’s if additional expansion
of the newly created ATCELL
™
sample is also requested.
ATGRAFT
™
Processing, Storage and Retrieval fees are determined by the storage configuration as follows:
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Small
Sample package
– for storages of 100ml of adipose tissue or less.
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Medium
Sample package
– for storage of 100ml to 300ml of adipose tissue.
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Large
Storage package
– for storage of over 300ml of adipose tissue.
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Custom
Package
– storage configuration for pre planned procedures.
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The Company
believes, the ATGRAFT
™
service may create patient retention, and significant revenue opportunities for
the participating physician to promote additional procedures and generate additional fees from adipose tissue collected during
liposuction procedures. These additional fees can be generated with significantly lower physician costs by eliminating the overhead
associated with performing another liposuction for each scheduled fat transfer or therapy procedure. Physician cost savings may
include: materials, supplies, equipment, and the expenses of utilizing a surgical center, hospital operating room or an in-office
aseptic procedure room. The ATGRAFT
™
service is designed to operate under the minimally manipulated regulations
contained in both 21 CFR 1271.10 and PHS 361.
ATCELL
™
Adipose Derived Stem Cells (ADSCs) –
Clinically processed and characterized adipose derived stem cells (ADSCs)
created using the Company’s proprietary Standard Operating Procedures (SOPs) and patented cell culture media. ATCELL
™
is the Company’s trademarked name for its ADSC and differentiated cell products and processing methodology.
The Company maintains multiple master and differentiated cell lines and labels them according to their characterization. (i.e.
ATCELL
™
(adipose derived stem cells) ATCELL-SVF
™
(stromal vascular fraction),
ATCELL – CH
™
(differentiated chondrocytes), etc. Cell lines are custom created for patients
desiring to store their cells for their own use in future Regenerative Medicine procedures. The Company charges its customers
fees ranging from $1,500 to $10,000 to process a previously stored ATGRAFT
™
sample or a minimum
of $2,500 for newly collected client tissue samples to be processed to Stromal Vascular Fraction (SVF). Customer samples submitted
for processing must utilize the CELLECT
®
collection system to conform to our internal SOPs.
The Company
believes it will earn additional fees based upon the proposed storage configuration of the final ATCELL
™
sample and for additional culturing in the ACSelerate
™
cell culture and differentiation media.
We believe cell culturing and differentiation can be performed upon receipt of the raw tissue sample or at any time on a previously
processed and cryopreserved ATGRAFT
™
or ATCELL
™
sample. We believe
ATCELL
™
is ideally suited for expansion and differentiation into additional cell types utilizing
the ACSelerate
™
MAX (fetal bovine serum (FBS) free high yield media),SFM (standard serum free medium),
LSM (low 0.05% FBS media) or differentiation media. The ATCELL
™
products and services are incorporated
into our pending patent filing US Serial No. 13/646,647.
The Company’s
ATCELL
™
cell lines are processed and cultured in our patented ACSelerate
™
– MAX our high yield, animal product free cell culture media. All tissue, cells, and research materials that are made available
for sale to research institutions are tested for sterility, disease, lifespan, and population doubling rate (PDL). Additionally,
we believe these cells are suited for any type of cellular therapy or regenerative medicine research. Cell morphology is confirmed
by (i) flow cytometry and (ii) differentiation analysis using ACSelerate
™
differentiation media.
Each ATCELL
™
line can be further cultured and differentiated allowing the Company to provide genetically
matched clinical grade cell types. We believe this research methodology may provide opportunities for the Company’s ATCELL
™
and ACSelerate
™
products to become the building blocks of final developed commercial
applications.
The Company
intends to support its application research, development and collaborative efforts by making ATCELL
™
and ATGRAFT
™
samples available for research and product development purposes through joint ventures,
and university and commercial collaborations. These adipose tissue and cell line samples, we believe will be highly sought after
by private researchers and universities for use in pre-clinical trial studies and in-vitro research due to our clinical processing
methodology, donor sample data and the ability to create multiple cell types that have identical genetic profiles. We believe
the clinical processing methods, data collection and testing of our ATCELL
™
and the ability to
make multiple cell types from the same donor line allows research teams to focus on application development and avoid bench to
commercialization delays.
ACSelerate
™
Cell Culture Media Products
– Manufactured patented cell culture media products for growing human stromal
cells (including all cells found in human skin, fat and other connective tissue). Certain ACSelerate
™
cell
culture media lines are available in animal serum free, which is suitable for human clinical and therapeutic uses; and a low serum
version for application development and research purposes is also available. The patented ACSelerate
™
cell
culture media line was specifically developed to address increasing industry demand for animal serum-free cell culture products
and for the acceleration of products from the laboratory to the patient.
On August 2,
2011, the Company was issued US patent number 7,989,205 for “Cell Culture Media, Kits and Methods of Use.” The granted
claims include media variations for cellular differentiation of ADSCs into osteoblasts (bone), chondrocytes (cartilage), adipocytes
(fat), neural cells, and smooth muscles cells in both HSA medium (clinical) grade and FBS (research) grade. This patent covers
both non-GMP research grades and GMP clinical grades suitable for cell culture of adipose-derived stem cells intended for use
in humans. Additionally, in 2014 the Company filed a continuation of this granted patent with additional claims and improvements,
U.S. Serial No. 13/194,900. The Company has received notice from the USPTO of certain allowable claims within the continuation
application and is aggressively pursuing the granting of these additional claims.
We
believe the most widely used cell culture medium today for growing and differentiating stem cell cultures for in vitro diagnostics
and research contains 10% or more FBS. The use of FBS and other animal products in clinical cellular therapy application development
and manufacture raises concerns and generates debates within the scientific and regulatory community relating to potential human/animal
cross-contamination. These same concerns may also need to be addressed through additional expensive and expansive testing and
documentation with the FDA during the application and approval process for new cellular therapies. FDA concerns are evidenced
in their Guidance’s and Guidelines regarding cellular therapy involving human cells, tissues and products (HCT/Ps) published
and maintained by the FDA such as: Guidance for Industry: Source Animal, Product, Preclinical and Clinical Issues Concerning the
Use of Xenotransplantation Products in Humans, FDA Final Guidance, April 2003. It is our belief that eliminating or greatly reducing
FBS in cellular manufacturing, applications and products can eliminate or ease these scientific and regulatory concerns and may
prove to be a winning strategy for cellular therapy application developers seeking FDA approval.
Currently, our
media products are being utilized by our research partners engaged in developing novel new cellular applications and treatments.
The Company supports these efforts by also making ATCELL
™
samples available for research purposes
and for internal product development through our research programs. We believe these cell lines are highly sought after by private
researchers and universities for use in pre-clinical trial studies and in-vitro research. We also believe that the Company’s
ability to provide clinical grade materials for these research and development collaborators, partners and other third parties
extends the Company’s ability to become a primary source of clinical grade materials and services necessary to support approved
applications and treatments.
The
Company has created several versions of its
ACSelerate
™
cell culture media including
:
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ACSelerate-MAX
™
- our improved clinical grade, animal serum free cell culture media, is ideally
suited for the rapid expansion of adipose-derived cell samples for direct use or further
culturing into other cell types;
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ACSelerate-SFM
™
- our general purpose clinical grade, manufactured animal serum free cell culture
media, which is ideally suited for the expansion of adipose-derived cell samples for
direct use or further culturing into other cell types;
|
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ACSelerate-LSM
™
- our research grade, low FBS (0.05%) cell culture media, which is ideally
suited for the rapid expansion of adipose-derived cell samples for research and cellular
application development or further culturing into other research grade cell types;
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ACSelerate-CY
™
-
for differentiation of
ATCELL
™
into chondrocytes (
ATCELL-CY
™
),
which are suitable for use in cartilage repair applications in knees and other joints
for patients suffering from joint injury, osteoarthritis and other diseases that cause
degeneration of joint cartilage;
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ACSelerate-OB
™
-
for differentiation of
ATCELL
™
into osteoblasts (
ATCELL-OB
™
)
for the repair of bone injuries resulting from traumatic injury and musculoskeletal diseases;
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ACSelerate-AD
™
-
for differentiation of
ATCELL™
into adipocytes (
ATCELL-AD™
)
for the repair of adipose tissue defects resulting from injury or surgical procedures
and is designed for those patients without an appropriate amount of body fat for corrective
tissue transfer procedures;
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ACSelerate-MY
™
-
for differentiation of
ATCELL
™
into myocytes (
ATCELL-MY
™
)
for the repair of muscle tissue defects and loss as the result of traumatic injury, surgery
or systemic disease;
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ACSelerate-CP
™
-
a clinical grade, non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media designed
to conform to certain FDA and PHS 361 exemptions available for marketing our
ATGRAFT
™
service.
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ACSelerate-
TR
™
- A clinical grade sterile transportation medium designed to
maintain the viability of the tissue, at ambient temperatures for up to 100 hours during
the shipment of adipose tissue to our processing facility.
|
The Company
continues to optimize additional versions of
ACSelerate
™
media through further research and testing to
develop versions for differentiation of
ATCELL
™
ADSCs into neural, lung and other specific cell types that
may be necessary for use in future clinical applications. Many of these applications are not currently approved by the US Food
and Drug Administration. On December 31, 2014 the Company filed a new patent application for an advanced medium formulation titled
Human Albumin Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799) representing
the most recent results of this ongoing optimization program. On December 31, 2015, the Company converted the provisional application
to an international PCT filing (PCT/US/68350) under the title Human Serum for Cell Culture for Clinical Groth of Human Adipose
Stromal Cells.
ACS Laboratories
™
:
Laboratory Product Sales, Contract Manufacturing and Professional Services
– ACS Laboratories is a division of American
CryoStem Corporation, responsible for the manufacturing and sale of all the Company’s patented and patent pending cellular,
cell culture, processing and testing products to professional, institutional and commercial clients. The Company operates a separate
website (
acslaboratories.com)
to distinguish the sale of commercial and research products from its consumer products and
services, which are marketed on its main website (
americancryostem.com
). ACS Laboratories manufactures a full line of ACSelerate
™
cell culture media and ATCELL
™
products; and provides these products to our collaborative partners
as further discussed below.
Contract
Manufacturing,
Autokine-CM
®
Anti-Aging, Autologous Skin Care Product Line
– Under agreement
with Personal Cell Sciences Corp. (PCS), we manufacture the key ingredient Autokine-CM
®
(autologous adipose
derived stem cell conditioned medium) for PCS’ U-Autologous
™
anti-aging topical formulation. Each product is
genetically unique to the patient and custom blended, deriving its key ingredients from the individual client’s own stem
cells. The Company provides its CELLECT
®
Tissue Collection service to collect the required tissue to manufacture
the U-Autologous product and processes it under the same Standard Operating Procedures that it developed for the ATGRAFT
™
and ATCELL
™
cell processing services utilizing ACSelerate
™
cell culture
media. The Company receives collection, processing and long term storage fees and earns a royalty on all U-Autologous product
sales. The utilization of the Company’s core services in its contract manufacturing relationships provides opportunities
for the Company to promote ATGRAFT
™
and ATCELL
™
products.
Our Company’s
contract manufacturing services can be extended to develop custom and/or white label products and services for both local and
global cosmetic and regenerative medicine companies, physicians, wellness clinics and medical spas. The Company intends to expand
its relationships and contract manufacturing regionally through its physician networks and globally through its International
Licensing Program.
International
Licensing Program –
The Company believes that globally, many jurisdictions outside the US currently permit use of cellular
therapies and regenerative medicine applications. The Company has received numerous international inquiries concerning the sale
or licensing of our SOPs, products and services in the Regenerative Medicine and Medical Tourism Markets. The Company believes
that the inquiries to date are a result of the global boom in Medical Tourism, Regenerative Medicine and the slow pace of approval
of cellular therapies and regenerative medicine applications in the US. To address the Company’s sales, marketing and branding
opportunities globally, the Company has created its international licensing program. To date we have licensed our technologies
in Hong Kong and Shenzhen, China and, Tokyo, Japan.
The
Company believes it can take advantage of the significant growth of the global cellular therapy market through its international
licensing and marketing efforts. A recently published study by Transparency Market Research predicts that the Stem Cell market
will grow at a CAGR of 24.2% upon its value of US $26.23 billion in 2013 and will reach an approximate value of US $119.52 billion
by 2019. The report, titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012
- 2018”; which can be found at
(http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research
In June
of 2015, The Company entered into an initial agreement with CellSource, LTD. (“CellSource”) located in Shibuya, Tokyo
Japan for the licensing of our AGRAFT
™
tissue processing and storage technology and the purchase of our CELLECT
®
collection products which include our ACSelerate-TR
™
transport medium. The Company also assisted CellSource
in upgrading its facility in Japan and provided training in the ATGRAFT
™
processing and recordkeeping procedures.
The Company believes CellSource will begin marketing the new services initially within its existing network of 5 clinics throughout
Japan and begin purchasing its CELLECT
™
and ACSelerate-CP
™
cryoprotectant in the third quarter
of 2015. Upon execution of this Agreement the Company received an upfront payment and will receive additional minimum annual payments,
and consumable product sales revenue - in future years. The Agreement also provided CellSource with an opportunity to exercise
a right of first refusal for the licensing and distribution of other products marketed by the Company.
Product
Development
Our strategic
approach to product development is to design, develop and launch new products and services that utilize our existing products
and services, i.e. the use of the CELLECT
®
collection materials in providing ATGRAFT
™
tissue storage
services. Management believes that this approach will provide the Company with opportunities to produce near term cash flow, strong
recurring revenue streams, strong international licensing partners and complementary scientific data. We focus on developing products,
services and applications that require tissue collection and processing as the initial requirement to produce cellular therapies
and products. These products and services may include adipose tissue and stem cell sample processing and storage as a form of
personal
“bio-insurance”,
adipose tissue (fat) storage for cosmetic fat engraftment procedures, and the creation
and production of topical applications and ingredients used by other companies in the wound care and cosmetic industries as well
as cellular applications and bio-materials development.
We intend to
focus our efforts on expanding our product and services pipelines based upon our intellectual property portfolio, collaborative
development relationships, product sales and distribution, and international licensing and partnering opportunities. Our current
activities include supporting our university and industry collaborations by providing our products and services with the expectation
that our products and services become the basis for new adipose tissue and stem cell based Regenerative Medicine and cellular
therapy applications. We believe this strategy allows our proposed research partners and their application development teams to
begin with clinically harvested and processed adipose tissue and ADSCs (ATCELL
™
), which may be a significant
step toward accelerating the development and approval of new treatments.
Collaboration
/ Partnering Opportunities / Acquisitions
PeproTech,
Inc.
On April
4, 2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech will manufacture,
market and distribute the Company’s ACSelerate – Max cell growth medium. The Company and PeproTech are currently working
together to scale up manufacturing and develop the marketing program. The Company believes that marketing will begin in the third
quarter of 2016.
BioLife
Customer and Physician Acquisition
In February
2015 the Company entered into a binding asset purchase agreement with BioLife Cell Bank Dallas, LLC and BioLife Cell Bank Management,
LLC (collectively “BioLife”), to purchase all of BioLife’s current adipose tissue, stem cell storage clients
samples, and physician network. The transaction was concluded in March of 2015. Transfer of the adipose tissue samples was completed
on April 24, 2015 and the Company undertook a complete physical inventory of the transferred samples. The Company initiated annual
storage fee billing to the acquired storage clients in June of 2015. Management believes that, with the acquisition of BioLife,
the Company became one of the largest commercial adipose storage facility in the United States.
Protein
Genomics and Formation of Autogenesis Corporation
In 2012,
American CryoStem entered into a Memorandum of Understanding (MOU) outlining our initial collaborative efforts with Protein Genomics,
Inc. (PGEN) to test and develop new products by combining certain components of our respective intellectual property and patented
products. We have provided PGEN and its research partner, Development Engineering Sciences (DES), with Adipose Derived Stem Cells
(ATCELL
™
) and our patented cell culture mediums (ACSelerate
™
) for testing with
PGEN’s products designed for the wound healing market. Research and development has been ongoing since late 2012 and notable
progress has been achieved.
As a
result of the success realized in the early stage of this research collaboration, in fiscal 2013 we entered into a formal joint
venture with Protein Genomics through the incorporation of Autogenesis, Corp. as required by the 2012 MOU. Each company (CRYO
and PGen) initially has an equal ownership interest. All products capable of being commercialized, as well as any new intellectual
property, resulting from the ongoing scientific collaboration will be wholly-owned by Autogenesis. This is representative of how
we believe additional research collaborations utilizing our Company’s technology may evolve in the future.
During
2013 and 2014, the collaborative efforts resulted in successful initial “proof of concept” combining PGEN’s
unique biomaterial and the Company’s ATCELL
™
and ACSelerate
™
products. Management
believes the publication of the preliminary results showed successful healing of full depth wounds on the backs of immune deficient
mice.
Our collaborative
research has established that membrane scaffolds fabricated from human proteins can be cultivated with ATCELL
™
cells
causing the scaffolds to be rapidly and completely covered by the cells. The cells then secrete their own extracellular matrix,
creating a structure with layers of matrix, cells and scaffold. This living structure, when introduced into a mouse wound model,
localizes the stem cells in the wound, protects the cells within the wound environment, promotes cell growth and causes a statistically
significant increase in the rate of wound closure and healing compared to the standard of care. Further evaluation will
measure the performance of these scaffolds in accelerating the rate of wound closure, healed scar thickness, growth of new blood
vessels and production of key wound healing factors. Our objective is to show that these constructs can stimulate the growth of
new tissue and promote wound closure and healing.
INTEGRA
LifeSciences:
On
June 4, 2015, the Company and Autogenesis, Corp. entered into Non-Disclosure and Material Transfer Agreements with Integra LifeSciences,
under which the parties are exploring certain combinations of American CryoStem’s, ATCELL
™
stem
cells, Integra products and other biomaterials for the development of new products and services. Integra LifeSciences, a NYSE
traded (INT) New Jersey based company, is a world leader in medical technology and wound healing. Integra offers innovative
solutions, including leading regenerative technologies, in specialty surgical solutions, orthopedics and tissue technologies.
(
http://www.integralife.com/
)
Under
the terms of the Agreement the Company supplies Biomaterials to Integra and utilize its AGRFAFT
™
, CELLECT
®
,
ATCELL
™
and ACSelerate
™
products for the development of new devices and biologic
products. To date the Company has delivered biomaterials to Integra for use in the development of the new biomaterials and initiated
the processing and testing of porcine (pig) adipose tissue for use in the initial animal studies. The Company is currently working
with Integra to advance the product development combining our ATCELL
™
and ACSelerate
™
products with the new materials to form new biologic products to be used as wound coverings and bandages for the treatment of
bed sores, leg ulcers, and non healing wounds that are common to the diabetic and other systemic disease.
Rutgers
University
In
May of 2012, American CryoStem entered into Material Transfer Agreements with three research scientists at Rutgers University
allowing them to utilize the Company’s autologous Adipose-Derived Stem Cells (ATCELL™) and patented, serum free, GMP
grade cell culture and differentiation mediums (ACSelerate™) for evaluation with the anticipation to implement additional
agreements to research, develop and commercialize innovative new cellular therapies targeting incurable diseases, neurological
disorders and the $5 billion global wound care market.
During
the last quarter of 2015 the Company undertook a review of the collaborative efforts between the Company and Dr. Lee pending the
expiration of the agreements in November of 2015. Management believes that potential commercialization of the licensed technologies
would require a number of years of additional study and experimentation and requires substantial investment by the Company. In
November of 2015 the Collaboration and Research Agreement and the Licensing Agreement were terminated.
Cells
on Ice:
In August
of 2015 the company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process and
cryopreserve adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network of
physicians interested in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies
and cellular medicine. The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples
at its NJ facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI
network physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies and trials utilizing
adipose tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells.
The Company is incorporating its existing Institutional Review Board (IRB) approved protocols into COI’s studies and may
provide processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its
cellular therapies.
Additional
Collaborations
The Company
is in the early stages of developing collaborations with additional industry and university partners. These developing relationships
in their earliest stages are covered by Confidential Disclosure Agreements and those that are more advanced also include Material
Transfer Agreements under which the Company supplies either ATCELL
™
or ACSelerate
™
medium products
for evaluation, testing, and the development of new cellular therapy applications.
To Date
the Company has advanced to a Material Transfer Agreement with the University of Miami, University of Washington, UHV Technologies,
and STEMCell Technologies and has provided both ATCELL
™
and ACSelerate
™
products to these entities
under Agreement. No assurance can be given that these relationships will progress to full collaborative agreements or ultimately
result in new technology for future commercialization. As of March 31, 2016 these relationships have yet to result in a
material agreement.
Additionally
in August of 2015 the Company entered into a Confidential Disclosure Agreement and a Material Transfer Agreement with Dr. Sazlay,
a research scientist currently investigating unique cancer treatments at the University of Wurzburg in Germany and the University
of California in San Diego. Following execution of the Agreement, the Company delivered a number of ATCELL-SVF
™
,
ATCELL
™
and ACSelerate
™
samples to Dr. Sazlay for testing and determination of
usefulness of our products for development of his novel treatments. Dr. Sazlay has reported positive results of this initial work
and the Company and Dr. Sazlay are currently negotiating additional collaborative agreements for further development of the treatments.
Institutional
Review Board Approval of Protocols
In an effort
to make it easier for other physicians and researchers to study the safety of SVF and ADSCs, in 2013 we sought approval from the
Institutional Review Board (IRB) of the International Cell Surgical Society (ICSS) of our protocols for the processing of SVF
and culturing of mesenchymal stem cells from autologous adipose tissue. The two protocols, titled:
Autologous Adipose Tissue-Derived
Stromal Vascular Fraction (SVF) Containing Adult Stem Cells with Isolation of SVF,
and
Culturing of Adipose Derived
Stem Cells (ADSCs) For Use in Institutional Review Board Studies
, (the “IRB Studies”) provide appropriate
processing, storage and testing methods necessary to move the clinical investigative process towards uniform treatments. The collection
of processing and outcome data from IRB approved protocols is required by prevailing FDA regulations and guidance for approval
of regenerative cellular therapies, including potency (cell count), contamination testing and cell viability.
The ICSS IRB
thoroughly evaluated every step of our standardized processing protocols, which serve to isolate the SVF or ADSCs from a patient’s
adipose tissue. The objective of the IRB is to assess these protocols to ensure the highest patient safety possible and to minimize
the risks for those participating in innovative research and investigational studies. On June 30, 2013, the ICSS IRB approved
the protocols until June 30, 2014. Additionally, the Company obtained approval for a new study, entitled “
Comparative
Viability Assessment of Human Adipose Tissue before and After Cryopreservation
(ICSS -2013-010), the Study was approved
on November 22, 2013 and is valid until November 22, 2014.
In June of 2014
the Company submitted its IRB Studies to the Institutional Review Board of the Institute of Regenerative Cellular Medicine (the
“IRCM”) and on July 23, 2014 the ICEM IRB approved the following studies:
|
·
|
Isolation
of SVF: Autologous Adipose Derived Stromal Vascular Fraction Containing Adult Stem Cells
(IRCM 2014-024) until July 23,
2015
|
|
·
|
Comparative
Viability Assessment of Humean Adipose Tissue Before and After Cryopreservation
(IRCM 2014-025) until July 23, 2015
|
|
·
|
Isolation
of SCF and Culturing Adipose Derived Stem Cells for Use in Investigational Review Board Studies
(IRCM 2014-023) until
July 23, 2015
|
The IRCM approved
studies require annual renewal; the Company renewed the studies in July of 2015.
The Company
is currently making its processing services available to physicians and clinical researchers utilizing the IRB-approved protocols
for inclusion in their studies. By adopting these standardized and repeatable protocols utilizing our laboratory services, researchers
are able to focus their resources on application development rather than creating, validating and managing a clinical laboratory
for processing tissue and cellular samples. These studies above do not currently involve actual human clinical trials, but affords
the IRB the opportunity to endorse our repeatable, standardized and validated processing methodologies for the isolation of SVF
and for tissue culture expansion of ADSCs obtained from SVF as the basis for future human clinical study.
In
2014, the Company created and is the Sponsor of a new IRB study with The DaVinci Center, Dr. Louis Cona, Principal Investigator
,
in George Town, Grand Cayman Island entitled
Impact and Safety of Cultured Expanded Autologous, Adipose-Derived
Stem Cells deployed via Intravenous Injection for the Treatment of Multiple Sclerosis Protocol: CRYO-MS-ADSC-006.
On July
23, 2014 the study was approved for 100 patients.
On November 1, 2014 the first patient was treated at the Da Vinci
Center utilizing the approved protocol. The IRB filing can be found on
www.clinicaltrials.gov,
(ClinicalTrials.gov Identifier
NCT02326935). The Company renewed the IRB studies with The Institute of Regenerative Cellular Medicine in August of 2015 for another
one year period.
Management intends
to pursue additional collaborative and partnering opportunities as a strategic method to enhance awareness of and expand the distribution
of our patented products, services, technologies and expertise in the IRB-approved clinical processing of adult adipose tissue
and ADSCs for autologous (self) use. We believe that as the pace of clinical trials and cellular therapy results reporting increase
and scientific and peer reviewed papers are published, new opportunities to market our existing products, services and Intellectual
Property portfolio may also emerge.
Moreover, we
further believe that the combination of our validated cellular processing capabilities and patented products give us an economical
platform to develop and produce cellular therapy applications for injection or intravenous therapy, topical applications, burn
and wound healing, joint repair, disease treatments and cosmeticeuticals. The clinical methods and products we have developed
are designed to permit a variety of treatments for any patient with their own genetically matched raw materials utilizing our
ATCELL
™
and ATGRAFT
™
products prepared with our patented line of ACSelerate
™
cell culture mediums. We believe that autologous cellular therapies have shown promising results for safety and efficacy
in a variety of applications in published early stage clinical trial results and application studies.
Regulatory
Information
The Company
believes that its processing methodologies and the testing laboratory facilities are designed to be in compliance with all current
regulations as defined by the United States Public Health Service Act (“PHS” or the “PHS Act”) and the
Food and Drug Administration (FDA) regulations as they relate to the operation of a tissue processing and storage facility.
The Company’s
Monmouth Junction laboratory facility is registered with the FDA (FEI 3008307548) as a processing and storage facility for Human
Cells, Tissues and Cellular and Tissue Based Products (HCT/Ps) since 2010. In 2013, we registered the facility with the State
of New York (CP169TP136) and the State of California (CNC80948) the only states in the U.S. requiring registration. These state
registrations required the submission of our operating procedures for review by the respective State Health Departments, and annual
updates to maintain the registrations are required. In addition, we have discussed our operations with the State of New Jersey
Health Department and Department of Environmental Protection (DEP) to ascertain any special regulations to which we may be subject.
Based upon these discussions, and our use of a registered medical waste disposal company, we do not at this time have any special
registrations or regulations for compliance with the State of New Jersey. Our New Jersey Medical Waste Generator registration
number is 0364539.
The Company
is also subject to complying with a significant body of FDA and PHS regulation; the regulations governing our business are mainly
contained within 21 CFR 1271.10, 800, 600, 200, 210 and 211. The forgoing regulations govern all aspects of the Company’s
Standard Operating Procedures (SOPs), which we periodically review with our FDA advisors, Laboratory Director and Medical Laboratory
Director.
Our Standard
Operating Procedures (SOPs) are the key to properly operating our clinical tissue processing facility. To ensure delivery of the
highest quality services, we incorporate these SOPs, which are designed to provide a basis for accreditation by the American Association
of Blood Banks (AABB), the American Association of Tissue Banks (AATB) and the Foundation for the Accreditation of Cellular Therapy
(FACT-JACIE). We have consistently endeavored to ensure that our processes, methodologies and procedures remain among the highest
standards in the global tissue collection, processing and storage market. To this end, we have equipped ourselves with state-of-the-art
quality processing and testing equipment, which we believe helps to ensure that every sample collected and processed is sterile
(free from adventitious agents), viable and capable of significant cellular growth and expansion.
Quality Management
The Company’s
quality management program ensures that during processing and testing of each adipose tissue, adipose derived stem cell or SVF
sample, the appropriate quality management tests and processing methodologies are performed and the data is collected, recorded
and reviewed by the laboratory management team.
Chain
of Custody Control
Central to the
individual sample testing is an unbroken chain of custody and tracking. Sample tracking begins with the creation of each collection
box. All samples, processing, quality management, batch, and storage documents and records, are coded with this unique number.
All records and testing samples are cross referenced and verified as required by the standard operating procedures.
Testing
Design and Standard Operating Procedures(SOPs)
Testing methods
are standardized and operate under a complete set of validated SOPs and Quality Management (QM) processes. All SOPs are designed
to be in compliance with the US Food and Drug Administration’s regulations and guidance for aseptic processing. Strict QM
is enforced to avoid and/or record any process deviations.
Intellectual
Property
From the Company’s
formation, our strategy has been to invest time and capital in intellectual property protection. This strategy is intended to
strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing our IP
portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative
partnerships with third parties. Our intellectual property portfolio currently includes one issued U.S. patent (No. 7989205,
Cell
Culture Media Kits and Methods of Use
); and seven pending patent applications which are detailed in the following chart:
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
A
Business Method for “Collection, Cryogenic Storage and Distribution of a Biological Sample Material”
|
Company
Core Tissue Collection Processing and Storage Methodology
|
U.S.
Serial No. 13/702,304 filed June 6, 2011, and claiming a priority date of June 7, 2010 from provisional application 61/352,217
|
Systems
and Methods for “The Digestion of Adipose Tissue Samples Obtained From a Client for Cryopreservation”
|
Adipose
Tissue Digestion Laboratory Processing Methods
|
U.S.
Serial No. 13/646,647 filed October 5, 2012, and claiming a priority date of October 6, 2011 from provisional application
61/544,103
|
Compositions
and Methods for “Collecting, Washing, Cyroprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures”
|
Company
Adipose Tissue Storage Platform for Cosmetic Procedures
|
PCT/US13/44621
Filed June 6, 2013 and claiming a priority date of June 7, 2012
|
Stem
Cell-Based Therapeutic Devices and Methods
|
Combining
ADRCs with Biomaterials for healing and tissue growth
|
U.
S. Serial No. 14/196,616 filed March 4, 2014 and claiming a priority date from provisional
application 61/773,112 filed March 5, 2013
|
Autologous
Serum for Transport of Isolated Stromal Vascular Fraction or Adipose Derived Stem Cells
|
Utilization
of Autologous Blood Components for the Transport of Adipose Derived Cells to a Patient
|
U.S. Serial No. 14,250,338 and claiming a priority date from provisional application 61/810,970 filed April 11, 2013
|
Cell
Culture Media, Kits, and Methods of Use
|
Continuation
of U.S. Serial No. 11/542,863, includes Optimized and improvements to Media Formulations
|
U.S.
Serial No. 13/194,900
|
Human
Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells
|
International
PCT filing of US Provisional Application Serial Number 62/098799 Filed December 31, 2014
|
PCT/US/68350
Filed December 31, 2015
|
Additionally,
the Company has in-licensed IP with the following collaborations and joint ventures;
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
Cosmetic
compositions including tropoelastin isomorphs
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#5,726,040
|
Cosmetic
compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,451,326
|
Recombinant
hair treatment compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,572,845
|
Wound
healing compositions and methods using tropoelastin and lysyl oxidase
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO:
#6,808,707
|
Business
methods, processes and systems for collection, cryogenic storage and distribution of cosmetic formulations from an obtained
stem cell based biological
|
Personal
Cell Sciences and American CryoStem collaboration
|
USPTO
application #61/588,841
|
Trademarks
In addition
to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office:
American CryoStem
®
,
CELLECT
®
and
ATGRAFT
™
. We additional trademarks for our future products, slogans and
themes to be used in our marketing initiatives, including, for example,
ACSelerate – MAX SFM
™
ACSelerate-SFM
™
,
ACSelerate- LSM
™
and
ATCELL
™
.
The Company
has also secured a number of online domain names relevant to its business, including
www.americancryostem.com
and
www.acslaboratories.com.
Marketing
and Distribution
The key objective
of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for adipose tissue
collection, cell processing and cryogenic storage, therapeutic applications, and research/commercial uses of adipose tissue within
the current regulatory framework. The combination of a traditional sales approach supported by continuous internal and external
marketing programs, are closely coordinated with the expansion of our laboratory processing capabilities. Our initial marketing
efforts intend to disseminate current and future uses of adipose tissue and adult stem cells which support our business model,
products and services. In 2016, we intend to continue to employ both print advertising and social media sales campaigns. In addition,
we plan to continue to utilize key leaders, and early adopters in the medical community as a marketing resource to enhance awareness
of our proprietary, patented products and services and to increase the number of surgeons who join our network, university and
private collaboration and consumers who use our products and services.
We plan to continue
direct marketing programs focused on reaching plastic and cosmetic surgeons to join the initial group of providers that offer
our services to their patients. This marketing initiative has been implemented using a traditional sales approach common to the
pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing activities is being
strategically and tactically expanded using a combination of in-house sales personnel and outside independent channels.
Our plan, capital
permitting, provides for a comprehensive integrated marketing approach using various traditional and new media, such as the Internet,
social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and promote awareness of
our Company and our branded products and services. The essence of this targeted strategy is to reach the end-users as quickly
as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside marketing resources
and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Market
Size and Opportunities
By leveraging
and capitalizing on our proprietary Adipose Tissue Processing Platform, our Company is working to address multiple high growth,
multi-billion dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals, Medical
Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market dynamics
of its intended domestic and international markets and to identify additional areas within these markets where the Company’s
cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.
Global Stem
Cells Market
A
recently released report from Transparency Market Research (TMR) forecasts that the
global
stem cells market
will grow at a remarkable CAGR of 24.2% from 2012 to 2018. According to TMR,
a market intelligence firm, the global stem cells market, which in 2013 stood at US$26.23 bn, is anticipated to reach US$119.52
bn by the end of the forecast period. The report, titled ’
Stem Cells Market - Global Industry Analysis, Size, Share,
Growth, Trends and Forecast, 2012 - 2018
’,
http://www.transparencymarketresearch.com/pressrelease/stem-cells-market.htm
Another report
by Transparency Market Research titled
“Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and
Forecast, 2012 - 2018”
states “
The Global Stem Cells Market to grow at a CAGR of 24.2%, to Push US$119.52 billion
by 2019.
The report analyzes the highly fragmented stem cells market by the type of stem cells, processes in the stem
cell market, applications of stem cells, and geography. Regenerative medicine is by far the dominant application of stem cells,
including uses in neurology, cardiology, and oncology. According to process, the market is divided into the stem cell acquisition,
stem cell production, stem cell cryopreservation, and stem cell expansion segments. Due to the expected increase in demand, stem
cell acquisition will retain its position as the major segment of the stem cell market. Geographically, North America and Europe
will remain well ahead of the competition.
”
(http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research.html#sthash.4vzqG1wc.dpuf)
Regenerative
Medicine Market
According to
a leading research firm focused on the biotechnology, healthcare and life sciences industries, TriMark Publications categorizes
the Regenerative Medicine market into three main categories:
|
·
|
Biomolecules
(scaffolds, growth factors and stem cell therapy).
|
TriMark Publications.com
cites in its “Regenerative Medicine Markets” report (March 2013) that the Regenerative Medicine market continues to
witness significant advances in clinical efficacy, regulatory approval and product commercialization of cell based therapies which
will catapult to over $35 billion by 2019. Affirmative results produced from the application of adult stem cells have resulted
in greater government and private sector investment in research and development of new cell therapies. Investment made into the
regenerative medicine market include firms that harvest, process, purify, expand, cryopreserve, store or administer stem cells”
1
In a study from Market Research Reports, released “Global Regenerative Medicine Market
(Technology, Applications, Geography) – Industry Analysis, Trends, Opportunities and Forecast, 2013-2020.” In it,
the market analysis firm found the
global regenerative medicine market will be worth some $67.6 billion by 2020
–
a stark and notable increase from the $16.4 billion valuation it received in 2013. Between 2014 and 2020, the report expects the
regenerative medicine market to grow at a compounded annual growth rate of 23.2 percent.
According to
Allied Market Research,
on the basis of geography, this market can be classified
into North America, Europe, Asia-Pacific and LAMEA. Currently, North America dominates the global market due to heavy investment
in development of regenerative products as well as more number of commercialized products. However, the growing focus on research
and development in Japan and South Korea makes Asia-Pacific the fastest growing region at a CAGR of 30.9% during 2014-2020.
Medical
Tourism, Global Wellness Tourism
As stated
by the Global Wellness Institute; adding up all expenditures made by international/inbound and domestic, primary and secondary
wellness tourists, we estimate the wellness tourism industry to be $494 billion in 2013, a 12.7% increase over 2012. Wellness
tourism accounts for 14.6% of all tourism expenditures and is growing much faster than the 7.3% growth rate for overall tourism
expenditures from 2012-2013. The $494 billion in wellness tourism expenditures represent 586.5 million wellness trips taken in
2013, across 211 countries. Wellness tourism accounts for about 6.2% of all domestic and international tourism trips taken in
2013.
http://www.globalwellnesssummit.com/images/stories/gsws2014/pdf/GWI_Global_Spa_and_Wellness_Economy_Monitor_Full_Report_Final.pdf
Cell
Culture Market
The Company
believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experiment variability. By standardizing handling, storage, and transportation
protocols we believe we can substantially improve the quality and reproducibility of preclinical and clinical data which we believe
will help to accelerate the transition from lab research to drug development and market launch.
1
http://www.trimarkpublications.com/regenerative-medicine-markets/
According to
MarketsandMarkets,
the global cell culture market was valued at an estimated $14,772 million in 2013. This market is expected
to grow at a CAGR of 10.71% between 2013 and 2018, to reach $24,574 million in 2018. The cell culture media, sera, and reagents
market consists of six segments, namely, contamination detection kits, cryoprotective agents, lab reagents, media, serum, and
other reagents. Of these, the serum product segment had the largest share of the cell culture media, sera, and reagents market
in 2013, whereas the media product segment is expected to grow at the highest CAGR between 2013 and 2018.
Cosmeceutical
Market
Many industry
experts agree that Cosmeceuticals has become one of the fastest growing segment of the Cosmetics and Personal Care industry. Cosmeceutical
products have a big emphasis on scientifically advanced formulations and often contain active ingredients that can also be found
in pharmaceutical products. This continued emergence of increasingly sophisticated active ingredients is said to be the main driving
force behind the growth of this segment, which is rapidly evolving into significant category of the personal care industry.
In
a report titled
Global Cosmeceuticals Market Outlook 2016
, published February 2013, RNCOS reports that the worldwide market
is estimated to be valued at $30.5 billion and is likely to grow at a consistent CAGR of 7.7% during the period 2012 through 2016.
2
In a separate report, Transparency Market Research, a U.S. - based market intelligence
firm states that the global facial care market is expected to report an approximate value of $39.75 billion by 2019. The report,
titled ‘
Facial Care Market (By Product Type - Skin Whitening/ Lightening and Anti-Ageing, Facial Creams, Face Wash, Cleansing
Wipes, Serums and Masks and Others (fade creams, pore strips and toners)- Asia-Pacific Industry Analysis, Size, Share, Growth,
Trends and Forecast 2013 – 2019.
http://globenewswire.com/news-release/2014/10/17/674123/10103135/en/Global-Facial-Care-Market-to-be-Worth-39-75-Billion-by-the-year-2019-Transparency-Market-Research.html
Development of U.S. Markets
Cells
on Ice
In August
of 2015 the company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process adipose
tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network of physicians interested
in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies and cellular medicine.
The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples at its NJ
facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI network
physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies and trials utilizing adipose
tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The
Company is incorporating its existing Institutional Review Board (IRB) approved protocols into COI’s studies and providing
processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its cellular
therapies.
Physician
Network
The Company
continues to develop relationships to leverage our products and services through existing cosmetic surgery and regenerative medicine
practices while at the same time growing its current efforts to develop and expand its network of individual physicians and surgeons
seeking to adopt the Company’s products and services. These efforts are currently focused on surgeons performing liposuction,
tissue transfer or regenerative procedures involving the use of adipose tissue. The Company intends to expand its efforts to non-cosmetic
medical professionals interested in Regenerative Medicine applications utilizing ADSCs to establish itself as a primary source
of collection, processing and preparation of cellular therapies as they are developed and approved for patient use by the FDA.
2
http://www.researchandmarkets.com/research/mbmvbh/global
Regenerative
Medicine Institute
The Company
recently announced that Dr. Vincent Giampapa, MD F.A.C.S has joined its Medical and Scientific Advisory Board. Dr. Giampapa is
the founder /director of the Regenerative Medicine Institute located in Costa Rica, the Plastic Surgery Center International and
The Giampapa Institute for Anti-Aging Medical Therapy located in Montclair, NJ. Dr. Giampapa’s research focuses on stem cell technologies
and their clinical applications to improve the cellular aging process in order to enhance health span and quality of life. As
a result of his research, Dr. Giampapa has been awarded medical and intellectual property patents with the United States Patent
and Trademark Office for developments involving unique cell culture delivery techniques, new drug delivery systems, stem cell
reprogramming, DNA repair, and telomerase maintenance.
He is a co-founder of The Academy of Anti-Aging
Medicine (A4M), comprised of over 26,000 members representing over 110 nations, the first president of the Board of Anti-Aging
Medicine and the founder of healthycell®, an advanced cell health nutritional supplement and StemBank™, a blood derived
stem cell extraction and storage company. Dr. Giampapa will have an active role assisting the Company with the development of
its “From laboratory to clinic/physician’s office” services and applications platform.
Development
of International Markets
International
Licensing Program –
Globally,
many jurisdictions outside the US permit the use of adipose tissue, cellular therapies
and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products
and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these
inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering
an International Licensing Program.
The program
is designed to permit the licensing of the company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable
of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate
the
CELLECT
®
,
ATGRAFT™
and
ATCELL™
services in their local market.
Strategically, the Company’s international licensees will maintain the branding of the Company’s services along the
lines of the “Intel Inside” branding program.
Qualified
Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual stem
cell samples for their clients with the comfort and confidence that they are providing services that have been developed to US
FDA standards. Core to the relationship is the developed proprietary and patent pending processing and laboratory operational
methodologies contained in our Standard Operating Procedures (SOPs), Training, and Continuous Quality Management, Testing Program,
and Laboratory Operations manuals.
Licensing programs
may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI agreement
is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the agreement
which is credited toward future royalty payments. Following evaluation of the prospective licensee the Company will enter into
a final Agreement which outlines all upfront fees, minimum royalties and consumable purchase obligations of the Licensee. The
Company’s first international licensing agreement was executed with Health Innovative Technology Company, LTD, a cord blood
collection and storage company with operations in Hong Kong and Shenzhen China.
We have committed
extensive resources to establishing and perfecting our international shipping methodologies and protocols, ensuring that our processes
meet the highest possible standards of regulatory compliance for shipment of biologic materials. As a result, our FDA registered
laboratory and cryostorage facilities in New Jersey are now able to send and receive viable tissue samples to and from clients
globally.
CellSource,
LTD. – Tokyo, Japan
On June
2, 2015 the Company and Cell Source Ltd entered into an initial term sheet for licensing the ATGRAFT
™
technology
to Cell Source Ltd for Japan. The Agreement further calls for Cell Source Ltd to purchase consumables from us including the CELLECT
®
collection boxes and ACSelerate
™
Cryopreservation Medium and provides Cell Source with a twenty
four month limited Right of First Refusal for licensing additional technologies for the Japanese markets. According to Allied
Market Research, World Regenerative Medicines Market
currently
, North America
dominates the global Regenerative Medicine market due to heavy investment in development of regenerative products as well as more
number of commercialized products. However, the growing focus on research and development in Japan and South Korea makes Asia-Pacific
the fastest growing region at a CAGR of 30.9% during 2014-2020.
Health
Information Technology Company, LTD – Hong Kong and Shenzhen, China
On June
30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the Company’s
Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service in Hong Kong.
The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the Company. The
Company and HIT have reached further agreement to extend their relationship on a non exclusive basis to include HIT’s cord
blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The HIT
agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase
CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kit as well as other American CryoStem products
necessary for clinical adipose tissue processing and storage at the Shenzhen cord blood collection facility. The final master
licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September 24, 2014.
Corporate
Information
Our principal
executive offices are located at 1 Meridian Road, Eatontown, New Jersey 07724 and our telephone number is (732) 747-1007. Our
website is
www.americancryostem.com
. We also lease and operate a tissue processing laboratory in Monmouth Junction, New
Jersey at 7 Deer Park Rd, Monmouth Junction, NJ 08852. Our laboratory website address is
www.acslaboratories.com.
Available
Information
We file electronically
with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or
at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of
the Public Reference Room is available by calling the SEC at 800-SEC-0330.
Going Concern
As of the date
of this quarterly report, there is substantial doubt regarding our ability to continue as a going concern as we have not generated
sufficient cash flow to fund our business.
We have suffered
recurring losses from operations since our inception. In addition, we have yet to generate sufficient internal cash flow from
our business operations or successfully raise the financing required to fully develop our business. As a result of these and other
factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our future
success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient
revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Our plans with
regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital
deficiency, and (ii) implementing a plan to generate sales of our proposed products and services. Our continued existence is dependent
upon our ability to resolve our liquidity problems and increase profitability in our current business operations. However, the
outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include
any adjustments that might result from the outcome of these risks and uncertainties.
Liquidity
and Capital Resources
We had a cash
balance of $20,462 as of the date of this quarterly report. Our principal source of funds has been sales of our securities. Should
we be unable to raise sufficient funds, we will be required to curtail our operating plans if not cease them entirely. We cannot
assure you that we will generate the necessary funding to operate or develop our business. Please see “
Cash Requirements
”
above for our existing plans with respect to raising the capital we believe will be required.
In the event
that we are able to obtain the necessary financing to move forward with our business plan, we expect that our expenses will increase
significantly as we attempt to grow our business. Accordingly, the above estimates for the financing required may not be accurate
and must be considered in light these circumstances.
Cash Requirements
We will require
additional capital to fund marketing, operational expansion, processing staff training, as well as for working capital. We are
attempting to raise sufficient funds would enable us to satisfy our cash requirements for a period of the next twelve (12) to
twenty-four (24) months. We have minimal long term debt and have been able to meet our past financial obligations.
In order to
finance further market development with the associated expansion of operational capabilities for the time period discussed above
we are planning additional fundraising through the sale of our equity and debt securities however we cannot assure you we can
attract sufficient capital to enable us to fully fund our anticipated cash requirements during this period. In addition, we cannot
assure you that the requisite financing, whether over the short or long term, will be raised within the necessary time frame or
on terms acceptable to us, if at all. Should we be unable to raise sufficient funds we may be required to curtail our operating
plans if not cease them entirely. As a result, we cannot assure you that we will be able to operate profitably on a consistent
basis, or at all, in the future.
We expended
$44,563 during the three months ended June 30, 2015 in professional fees (legal, accounting and consultants) and $44,981 in Laboratory
expenses
Commitments
The Company
leases approximately 1,628 square feet of laboratory facilities at 7 Deer Park Drive in Monmouth Junction, New Jersey. The term
of the lease is from February 1, 2016 to January 31, 2019. The monthly rent and operating expenses are $5,225.
The Company’s
main office facility is located at 1 Meridian Road, Eatontown, New Jersey 07724. The lease expired during fiscal 2015 and is currently
on a month to month basis with monthly rent of $2,650. The total rent for office facilities for the three months ended December
31, 2015 was $7,950.
The Company
has unsecured liabilities without interest of $126,947 due to ACS Global, the majority shareholder of the Company, for certain
prepaid expenses made by ACS Global prior to the closing of the transaction. There is no due date associated with this liability.
At March 31,
2016, the Company was indebted to an affiliated company. The Chief Executive Officer of American CryoStem Corporation is the majority
shareholder of the affiliated company. Advances of $14,665 are due on demand, are unsecured, and carry no interest rate.
At March 31,
2016, the Company was indebted to an affiliated company. The Chief Executive Officer of American CryoStem Corporation is the majority
shareholder of the affiliated company. Advances of $4,485 are due on demand, are unsecured, and carry no interest rate.
We anticipate
that any further capital commitments that may be incurred will be financed principally through the issuance of our securities.
However, we cannot assure you that additional financing will be available to us on a timely basis, on acceptable terms, or at
all.
Off Balance
Sheet Arrangements
We have no off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
Critical
Accounting Policies
We prepare financial
statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates
and assumptions that affect the amounts reported in our combined and consolidated financial statements and related notes. We periodically
evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various
other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates
is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting
policies require higher degrees of judgment than others in their application. We believe the following accounting policies involve
the most significant judgments and estimates used in the preparation of our financial statements.
Basis of
Presentation
Our financial
statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles in the
United State of America, whereby revenues are recognized in the period earned and expenses when incurred.
Management’s
Use of Estimates
The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Long-Lived
Assets
We review and
evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may
not be recoverable. When such factors and circumstances exist, we compare the assets’ carrying amounts against the estimated
undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater
than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash flows. Any excess
of the carrying amounts over the fair values are recorded as impairments in that fiscal period.
Statement
of Cash Flows
For purposes
of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original
maturities of three months or less) to be cash equivalents.
Fair Value
of Financial Instruments
Our financial
instruments consist of cash and cash equivalents. The fair value of cash and cash equivalents approximates the recorded amounts
because of the liquidity and short-term nature of these items.
Recent Accounting
Pronouncements
We have reviewed
all recently issued, but not yet effective, accounting pronouncements and do not believe that any future adoption of such pronouncements
will have a material impact on our financial condition or the results of our operations.