Statements in this Form 10-K Annual Report may be "forward-looking
statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions.
These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions
made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed
or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed
from time to time in this Form 10-K Annual Report, including the risks described under "Risk Factors" and "Management’s
Discussion and Analysis of Financial Condition and Results of Operations" and in other documents which we file with the Securities
and Exchange Commission.
In addition, such statements could be affected by risks and
uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition,
government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general
economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any
obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K Annual Report.
ITEM 1. BUSINESS.
DESCRIPTION OF BUSINESS
Overview
American CryoStem Corporation, which we refer to as we, us,
our and our Company, is a life sciences and biotechnology company that creates and markets products and services for the adipose
tissue, personal stem cell collection, and stem cell processing and storage industry.
Our principal line of business is the collection, processing
and storage of adipose (fat) tissue and adipose derived adult stem cells, in order to permit individuals to preserve their tissue
and adult stem cells for potential future use in cosmetic and plastic surgery procedures and the creation of individualized cellular
based products and regenerative cell therapy.
We have branded a number of products and services that are
the result of the development and validation of our core tissue processing and banking services as well as a number of laboratory
products and services that are used internally in the operation of our clinical tissue processing and storage operations. The products
and services are based upon our validated core processing and storage methodologies which can be marketed to a variety of end users
including consumers, physicians, research institutions, co-development partners and other biotechnology manufacturers.
We are also developing new products and services based upon
and as a result of our development of our core tissue processing and banking business. These new products and services are designed
for both professionals and consumers. We have continued the refinement of our intellectual property development to expand the opportunities
to commercialize products and services for the developing adult stem cell industry. We offer these services under the brand name
ACS Laboratory Services. To support the service offering and to provide a central location for potential customers to find information
about the services, we have launched a new laboratory website, www.acslaboratories.com.
We believe that current published medical research indicates
that adipose derived stem cells can be used to support tissue repair and cell therapies to expedite healing of wounds, physical
trauma and burns in joints, bone, muscle, tendons and ligaments. Our management also believes that the effects of diseases such
as cardiovascular disease, cancer, stroke, central nervous disorders and diabetes may be alleviated through the application of
stem cells. Our management also believes that in the near-term, our services may be applied to the storage of adipose tissue collected
from a customer during liposuction for future cosmetic and reconstructive procedures. Applications include the use of processed
adipose tissue and stem cells as biocompatible fillers in cosmetic and reconstructive surgery of the face, hands breasts and buttocks.
Products and Services
Our business remains in its formative stage and to date has
generated minimal revenue, however, subject to, among other factors, obtaining the requisite financing, management anticipates
that we will be able to provide the following services:
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Collecting an individual’s adipose tissue through a participating doctor who will forward the tissue to our laboratory;
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Processing the tissue in the laboratory to separate the component parts of an individual’s adipose tissue, which includes the stem cells and other regenerative cells; and
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Cryopreserving adipose tissue and stem cells for immediate use or long-term storage.
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Stem cells processed from adipose tissue are prepared and
cryopreserved in their raw form without manipulation, bio-generation or the addition of biomarkers or other materials, which management
believes may make such stem cells suitable for use in cellular treatments (i.e., the biomedical use of stem cells to treat patients)
currently offered by existing and planned treatment centers worldwide. Management believes that affordably preserving cells derived
from adipose tissue can provide a user with the opportunity to take advantage of the emerging field of regenerative medicine, i.e.,
healing the body using one’s own stem cells.
Storage Services
The adipose tissue we receive for processing and storage
is prepared and stored using a proprietary storage medium solution in our Mount Laurel, New Jersey laboratory facility. This proprietary
storage medium is comprised of pharmaceutical grade materials that are approved by the FDA for human injection. We believe that
the use of this storage medium as a cryoprotectant qualifies for exemption under section 361 of the PHS Act. On June 7, 2012 we
filed a provisional patent application titled “Compositions and Methods for Collecting, Washing, Cryopreserving, Recovering
and Return of Lipoaspirates to Physician for Autologous Adipose Transfer Procedures (US Serial No. 61/656,837) covering our methods
and materials developed for its adipose tissue collection, processing and storage services.
Management currently believes that we will be able to collect,
process and store adipose tissue and adipose derived stem cells for adults and include the first six months of storage fees for
an initial fee ranging from $750 to $2500 based upon the volume of tissue and the requested processing and testing services. During
the initial stages of our marketing program with new providers and in new locations we may from time to time offer discounts from
the list price. Thereafter, it is intended that each storage client will be responsible for the payment of an annual storage fee,
initially priced at $200.00 per year. The storage fees are based upon the type of material stored, the total volume, and the storage
configuration. Management believes that adipose tissue and Adipose Derived stem cells are currently being used in cosmetic surgery
and the emerging field of regenerative medicine globally and have the potential to become a multibillion dollar industry in the
future.
Wound Healing Market
On April 5, 2012 we entered into a Collaboration Agreement
with Protein Genomics, Inc. (PGen) to test and develop new products combining certain intellectual property and patented products.
Initially we provided PGen with research materials and our patented cell culture media for testing with PGen’s patented products
designed for the wound healing market. Initial testing has been completed and on September 1, 2012 we and PGen entered into a Memorandum
of Understanding (MOU) to further develop products based upon the results of the initial collaboration. The terms of the MOU call
for the creation of a new entity to be jointly owned by us and PGen for the mutual development and ownership of any jointly developed
intellectual property and to provide a separate vehicle to fund the additional scientific work. PGen is a private Company under
the control of Burt Ensley, PhD, a member of our medical advisory board.
Product Development
We are continuing to expand our intellectual property portfolio
and have filed three additional patent applications for our methods of collecting, processing and storing individual adipose tissue,
adipose derived cellular samples, the CELLECT™ service, methods for processing adipose tissue into its component cells, and
a new cryoprotectant for the storage of adipose tissue samples, the ATGRAFT™ service. We believe that the combination of
our 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 cosmetics.
We have implemented a strategic approach to developing and launching
new products that we believe can produce near term cash flow, residual revenue, and complimentary scientific data. We focus on
products that require little or no regulatory approval. These products include adipose tissue and stem cell sample storage as a
form of personal
“bio-insurance”,
or fat storage for cosmetic fat engraftment procedures as well as the creation
of topical applications and ingredients used by other companies in the wound healing and cosmetic industries.
Our cellular processing and storage services have been developed
under the CELLECT™ trademark. Our adipose tissue storage services are marketed under the ATGRAFT™ trademark. These
services are an end-to-end clinical solution for the collection, testing, processing, tracking and delivery of one or more tissue
or cellular samples for any individual. Stored tissue may be retrieved for (a) immediate use in cosmetic engraftment, (b) further
processing and delivery of a cellular sample for use in topical or orthopedic applications or (c) processing and expansion for
direct or intravenous injection for disease management and treatment.
We anticipate revenue generation for our CELLECT™
services from the initial collection and storage procedure, and all future processing or expansion of stored tissue samples. Based
upon the initial collection volume from the patient and intended use, we can create and store multiple tissue and cellular samples
for a lifetime of customer use and generate additional revenue for each individual tissue or cellular sample retrieval. Our tissue
collection, processing and storage services are marketed through physicians and our main website,
www.americancryostem.com
.
We also anticipate revenue generation from the sale of our
internally developed ACSelerate™ proprietary cell culture media products and the sale or licensing of our internally validated
standard operating procedures. Our laboratory processing products and services are marketed directly to research facilities, healthcare
facilities, and biotechnology companies and through our website,
www.acslaboratories.com
During the year ended September 30, 2012, we began offering
contract manufacturing services to biotechnology and cosmetic product manufacturers. We entered into our first such contract manufacturing
with Personal Cell Sciences (”PCS”) to provide cellular processing, sample storage and ingredient manufacturing for
a line of personalized skin care products. Personal Cell Sciences is a private company founded by our Chairman and CEO, John Arnone.
Intellectual Property
On August 2, 2011, we were awarded US Patent No. US 7,989,205
B2, titled Cell Culture Media, Kits, and Methods of Use. This Patent was assigned to us by our Chief Scientist, Dr. David Moscatello
in 2010 and was originally filed on October 4, 2006. We have continued to develop tools and cellular processing methods that have
the potential to result in new products and services being offered for commercial sale and licensing at a future date. Our management
cannot predict if a market for these products will develop and therefore cannot predict the potential impact these new products
will have upon our revenue.
We are continuing to expand our intellectual property portfolio
and have filed three additional patent applications for our methods of collecting, processing and storing individual adipose tissue,
adipose derived cellular samples, the CELLECT™ service, methods for processing adipose tissue into its component cells, and
a new cryoprotectant for the storage of adipose tissue samples, the ATGRAFT™ service.
On June 7, 2012 we filed a provisional patent application
titled “Compositions and Methods for Collecting, Washing, Cryopreserving, Recovering and Return of Lipoaspirates to Physician
for Autologous Adipose Transfer Procedures (US Serial No. 61/656,837) covering our methods and materials developed for its adipose
tissue collection, processing and storage services.
Marketing and Distribution
We have deployed a multichannel marketing strategy to enroll
physicians and consumers in our tissue or stem cell storage programs. Our business relationships with other synergistic companies
are focused on marketing our laboratory services and products through either licensing or contract manufacturing arrangements.
Our major focus is the continual branding of American CryoStem’s tissue and stem cell storage platform as the “gold-standard”
in the industry. Increasing physician, consumer and corporate confidence in our ability to process and store a clinical grade sample
has led to unsolicited third party exposure of our technology.
As part of our marketing campaign towards physicians we are
actively seeking to bring highly qualified peer leaders onto our Medical Advisory Board to assist us in our industry speaking and
education platform. This physician education platform is designed to focus on the industry’s needs and demands as it relates
to current and future treatments using our adipose tissue and adult stem cell technologies. We have initiated a direct marketing
program focused upon plastic and cosmetic surgeons and have an initial group of providers that have begun to offer our services
to their patients. This marketing program has been implemented using a traditional sales approach common to the pharmaceutical
and biotechnology industries. This basic industry sales approach and the core of our marketing activities are being expanded using
a combination of in-house sales personnel and outside independent channels.
In addition, we have begun a comprehensive integrated marketing
campaign through various media such as the internet, social media, video, print, TV, radio and trade shows to reach targeted potential
consumers to promote awareness of our company and our products. 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. In addition, we 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.
The combination of a traditional sales approach supported
by continuous internal and external marketing programs will be closely coordinated with the expansion of our laboratory processing
capabilities. The initial approach is a ‘Top Down and Bottom Up Push’ which is intended to disseminate current and
future uses of adipose tissue and adult stem cells which supports our business model and products and services. We intend to also
employ both print advertising and social media sales campaigns. In addition, we plan to utilize key leaders, and early adaptors
in the medical community as a marketing resource to increase the number of surgeons who join our network and collaborate with us.
A key objective of our marketing campaign is to position
American CryoStem in the market as the premier, affordable adipose tissue and adult stem cell banking company in North America.
Our marketing strategy seeks to generate company awareness and increase the customer base through an Integrated Marketing Campaign
consisting of the following:
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Social Media:
development of social communities through Face book, Twitter, Linked-In, etc. for topic(s) discussion
and word-of-mouth promotion.
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Print media:
for brand awareness generating an ‘informed customer’ through national newspapers, and magazine
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Online media:
to channel customers to our website where customers are educated on the benefits of adult stem cell therapies
and regenerative medicine. Traditional TV and Radio
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Networking
: with specific organizations to generate large long-term contracts (hospitals, surgery center franchises,
unions, etc.)
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Trade shows:
conference participation with major institutions will help with company exposure and future relationships
with other companies and doctors.
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News publications:
promoting the innovation of American CryoStem and stem cell/regenerative medicine industry
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Vertical alignment:
with targeted associations and organizations specifically seeking alternative research for cures
that can be facilitated through the use of our proprietary stem cell processing.
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EMPLOYEES
Currently, we have six employees and continue to use consultants
on an as needed basis. As we grow, we will need to attract an unknown number of additional qualified employees, however we could
be unsuccessful in attracting and retaining the persons needed.
HISTORICAL DEVELOPMENT
We were incorporated in the State of Nevada on March 13,
2009 under the name R&A Productions, Inc. 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, American CryoStem
Corporation, a Nevada corporation (which subsequently changed its name to ACS Global, Inc.) in exchange for our issuance of 21,000,000
shares of our common stock, par value $0.001 per share, to ACS Global, Inc. (“ACS Global”) (the “Asset Purchase”).
Our fiscal year ends September 30 of each calendar year.
Upon the Asset Purchase Closing: (i) ACS Global became our
majority shareholder, (ii) John Arnone was appointed as our chief executive officer and president and Anthony Dudzinski was appointed
as our chief operating officer, treasurer and secretary, (iii) Messrs. Dudzinski and Arnone were appointed to our board of directors,
with Mr. Arnone being appointed as Chairman of the Board, and (iv) Mr. Medina resigned as the chief executive officer, president,
treasurer, secretary and the sole member of the board of directors and was simultaneously appointed as our Vice President of Film
Operations. Mr. Dudzinski is also a director and the President and Treasurer of ACS Global and Mr. Arnone is a director and Secretary
of ACS Global.
The 21,000,000 shares of Common Stock issued to ACS Global
were issued pursuant to the exemption from registration provided under Regulation D of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 promulgated thereunder.
Contemporaneously with the Asset Purchase Closing, we sold
1,860,000 shares of Common Stock to accredited investors in a private placement at a purchase price of $0.50 per share for aggregate
gross proceeds of $930,000.
The Company issued an additional 712,000 shares of common
stock and received net proceeds of $356,000 for the year ended September 30, 2011.
The Company issued an additional 1,558,000 shares of common
stock and received net proceeds of $779,000 for the year ended September 30, 2012,
The foregoing shares of our common stock were issued pursuant
to the exemption from registration provided under Regulation D of the Securities Act and Rule 506 promulgated thereunder.
During the year ended September 30, 2012, the Company issued
25,000 shares of common stock for services rendered to pay an outstanding invoice of $12,500. During the year ended September 30,
2011, the Company issued 57,500 shares of common stock for services rendered at a cost of $28,751.
The Company did not issue any shares for services for the
year ended September 30, 2012.
As of September 30, 2012, the number of issued and outstanding
shares of our Common Stock was 28,158,362, consisting of (i) the 21,000,000 shares held by ACS Global, constituting approximately
74.6% of the issued and outstanding shares of our Common Stock, (ii) 2,845,862 shares held by our shareholders prior to the Asset
Purchase Closing Date, constituting approximately [10.1]% of the issued and outstanding shares of our Common Stock, (iii) 1,860,000
shares sold in the private offering completed in April 2011, constituting approximately [6.60]% of the issued and outstanding shares
of Common Stock, (iv) 2,270,000 shares sold in the Company’s current private offering as of September 30, 2012 constituting
approximately [8.06]% of the issued and outstanding shares of our Common Stock, (v) 100,000 shares issued upon the exercise of
options by an option holder representing less than 1% of the issued and outstanding shares of our Common Stock and (vi) 25,000
shares in 2012 and 57,500 shares in 2011 issued for consulting services from unaffiliated parties, representing less than 1% of
the issued and outstanding shares of our Common Stock.
In September 2011, we completed the required testing, validation
and verification of our core processing methodology and laboratory equipment.
On June 15, 2011, we changed our name
from “R & A Productions, Inc.” to “American CryoStem Corporation.” Simultaneously, our ticker symbol
was changed from “RAPP” to “CRYO.” On June 15, 2011, ACS Global changed its name from “American CryoStem
Corporation” to “ACS Global, Inc.” ACS Global’s ticker symbol on the pink sheets remains “AMCY.”
CORPORATE INFORMATION
Our principal executive offices are located at 1
Meridian Road, Eatontown, NJ 07724 and our telephone number is (732) 747-1007. We also lease and operate a tissue processing laboratory
in Mount Laurel, New Jersey at the Burlington County College Science Incubator located on the Burlington County College Campus.
Our website address is
www.americancryostem.com
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AVAILABLE INFORMATION
We file electronically with the SEC our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to such reports,
as well as other documents. Copies of these reports are available, free of charge, on our website. The public may read and copy
any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC, 20549. The public
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of these reports
can also be obtained from the SEC’s website at
www.sec.gov
. We make available through our website, free of charge,
our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to such reports,
as soon as reasonably practicable after they have been electronically filed with the SEC. Such reports are available via a link
from the Investors page on our website to a list of our reports on the SEC’s EDGAR website.
ITEM 1A. RISK FACTORS
Our business involves a high degree of risk and uncertainty,
including the following risks and uncertainties:
We have a history of losses; there are doubts
about our ability to continue as a going concern.
We have not achieved our planned principal operations and we are in the
formative stage of operations. We have incurred negative cash flows since inception from our developmental activities, and at
this time as well as for the foreseeable future will finance (until we can generate sufficient revenues, if ever, to cover expenses)
our activities and overhead expenses through the issue and sale of debt or equity securities. The recoverability of the costs
incurred by us to date is highly uncertain and is dependent upon achieving commercial production and sales of our services, of
which no assurances can be given. Our prospects must be considered in light of the risks, expenses and difficulties which are
frequently encountered by companies in the development stage in the emerging industry that we hope to commence operations in.
We expect to incur increased operating expenses for
the foreseeable future. The amount of net losses and the time required for us to reach and sustain profitability are uncertain.
The likelihood of our success must be considered in light of the problems, expenses, difficulties, and delays frequently encountered
in connection with a development stage business, including, but not limited to, uncertainty as to development and the time required
for our planned services to become available in the marketplace. There can be no assurance that we will ever generate revenues
or achieve profitability at all or on any substantial basis. These matters raise substantial doubt about our ability to continue
as a going concern. If we cease or curtail our development activities, it is highly likely that you would lose your entire investment
in our Company.
We will require substantial additional capital
to pursue our business plan.
We have limited revenues and no income. We have financed our development activities since inception through the sale of securities.
Our capital requirements will depend on many factors, including, among other things, the cost of developing our business and marketing
activities, the efficacy and effectiveness of our proposed services, costs (whether or not foreseen), the length of time required
to collect accounts receivable we may in the future generate, competing technological and market developments and acceptance. Changes
in our proposed business or business plan could materially increase our capital requirements. We cannot assure you that our proposed
plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than
currently anticipated.
We will need to obtain substantial additional financing
to, among other things, fund the future development of any services we attempt to undertake and for general working capital purposes.
Any additional equity financing, if available, may be dilutive to stockholders and any such additional equity securities may have
rights, preferences or privileges that are senior to those of the holders of shares of our Common Stock. Debt financing, if available,
will require payment of interest and may involve our granting security interests on our assets and restrictive covenants that could
impose limitations on our operating flexibility.
Our ability to obtain needed financing may be impaired
by such factors as the capital markets, our capital structure, our development stage, the lack of an active market for shares of
our Common Stock, and our lack of profitability, all of which would impact the availability or cost of future financings. We cannot
assure prospective investors that we will be able to obtain requisite financing in a timely fashion or at all and, if obtained,
on acceptable terms. Our inability to obtain needed financing on acceptable terms would have a material adverse effect on the implementation
of our proposed business plan.
We are wholly dependent on Messrs. Arnone and Dudzinski.
We are wholly dependent on Messrs. Arnone and Dudzinski, our only two (2) executive officers and directors. Our future performance
will depend on the continued services of such persons and our ability to retain such persons and/or hire additional qualified persons.
The loss of Messrs. Arnone and/or Dudzinski would materially and adversely affect our proposed business. We have not yet entered
into employment agreements with Messrs. Arnone and Dudzinski, but we intend to do so in the near future. It is expected that such
employment agreements will, among other terms, permit each of Messrs. Arnone and Dudzinski to conduct other business activities
outside of their employment with us.
Mr. Arnone is presently involved with another entity
that operates in an industry similar to ours but that management does not believe to be in competition with us. We may in the future
seek to initiate a business relationship with, and/or acquisition of, this other entity. Management cannot assure you that any
such business relationship or acquisition, if consummated, would be on terms favorable to us.
We have not obtained any “key-man” life
insurance policies nor do we presently plan to obtain or maintain any such policies on Messrs. Arnone, Dudzinski or any other of
our employees.
We may be unable to protect our intellectual property
from infringement by third parties, and third parties may claim that we are infringing on their intellectual property, either of
which could materially and adversely affect us.
We intend to rely on patent protection, trade secrets,
technical know-how and continuing technological innovation to protect our intellectual property, and we expect to require any employees,
consultants and advisors that we may hire or engage in the future to execute confidentiality and assignment of inventions agreements
in connection with their employment, consulting or advisory relationships. There can be no assurance, however, that these agreements
will not be breached or that we will have adequate remedies for any such breach.
Despite our efforts to protect our intellectual property,
third parties may infringe or misappropriate our intellectual property or may develop intellectual property competitive with ours.
Our competitors may independently develop similar technology or otherwise duplicate our proposed processes or services. As a result,
we may have to litigate to enforce and protect our intellectual property rights to determine their scope, validity or enforceability.
Intellectual property litigation is particularly expensive, time-consuming, diverts the attention of management and technical personnel
and could result in substantial cost and uncertainty regarding our future viability. The loss of intellectual property protection
or the inability to secure or enforce intellectual property protection would limit our ability to produce and/or market our services
in the future and would likely have an adverse affect on any revenues we may in the future be able to generate by the sale or license
of such intellectual property.
We may be subject to costly litigation in the event
our future services or technology infringe upon another party’s proprietary rights. Third parties may have, or may eventually
be issued, patents that would be infringed by our technology. Any of these third parties could make a claim of infringement against
us with respect to our technology. We may also be subject to claims by third parties for breach of copyright, trademark or license
usage rights. Any such claims and any resulting litigation could subject us to significant liability for damages. An adverse determination
in any litigation of this type could require us to design around a third party’s patent, license alternative technology from
another party or otherwise result in limitations in our ability to use the intellectual property subject to such claims.
Cell therapy is a developing field and a significant
market for our services has yet to emerge
.
Cell therapy and regenerative medicine is a developing field, with few cell therapy products or services approved for clinical
and/or commercial use. We are wholly dependent on the acceptance of cell therapy (and specifically stem cells) to develop into
a large and profitable industry. We hope to develop services related to the collection, processing and storage of stem cells. We
believe the market for cell and tissue-based therapies is in its infancy, substantially research oriented and financially speculative
and has yet to achieve substantial commercial success. Stem cell products and services may in general be susceptible to various
risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy,
lack of acceptance by physicians, hospital and consumers, or other characteristics that may prevent or limit their approval or
commercial use. Management believes that the demand for stem cell processing and the number of people who may use cell or tissue-based
therapies is difficult, if not impossible, to forecast. Our success is dependent on the establishment of a market for our proposed
services and our ability to capture a share of this market.
Our proposed services may not attain commercial
acceptance absent endorsement by physicians.
Our proposed services will compete against individual cellular samples derived from alternate sources, such as bone marrow, umbilical
cord blood and perhaps embryos. We believe that physicians and hospitals are historically slow to adopt new technologies like ours,
whatever the merits, when older technologies continue to be supported by established providers. Overcoming such inertia often requires
very significant marketing expenditures or definitive product performance and/or pricing superiority. Management currently believes
physicians’ and hospitals’ inertia and skepticism to be a significant barrier as we attempt to gain market penetration
with our proposed services. Failure to achieve market acceptance of our proposed services could have a material adverse effect
on our future prospects.
If we should in the future become required to obtain
regulatory approval to market and sell our proposed services we will not be able to generate any revenues until such approval is
received.
The medical industry is subject to stringent regulation by a wide range of authorities. While we believe that, given our proposed
business, we are not presently required to obtain regulatory approval to market our services because we do not (i) produce or market
any clinical devices or other products, (ii) sell any products or services to the customer, we cannot predict whether regulatory
clearance will be required in the future and, if so, whether such clearance will at such time be obtained, whether for the stem
cells and/or any other services that we are developing or may attempt to develop. Should such regulatory approval in the future
be required, our services may be suspended or may not be able to be marketed and sold in the United States until we have completed
the regulatory clearance process as and if implemented by the FDA. Satisfaction of regulatory requirements typically takes many
years, is dependent upon the type, complexity and novelty of the product or service and would require the expenditure of substantial
resources.
If regulatory clearance of a service we propose to
provide is granted, this clearance may be limited to those particular states and conditions for which the service is demonstrated
to be safe and effective, which would limit our ability to generate revenue. We cannot ensure that any service developed by us
will meet all of the applicable regulatory requirements needed to receive marketing clearance. Failure to obtain regulatory approval
will prevent commercialization of our services where such clearance is necessary. There can be no assurance we will obtain regulatory
approval of our proposed services that may require it.
We are authorized to issue 300,000,000 shares of
Common Stock and 50,000,000 shares of “blank check” preferred stock, the issuance of which could, among other things,
reduce the proportionate ownership interests of current shareholders.
We are authorized to issue 300,000,000 shares of Common
Stock and 50,000,000 shares of “blank check” preferred stock. As of September 30, 2012, there were 28,158,362 shares
of Common Stock and no shares of preferred stock issued and outstanding. Our board of directors (the “Board”) has the
ability, without seeking shareholder approval, to issue additional shares of Common Stock and/or to designate, establish the terms
and conditions of, and issue shares of preferred stock for such consideration, if any, as the Board may determine. Any such shares
of preferred stock could have dividend, liquidation, conversion, voting or other rights, which could adversely affect the voting
power or other rights of the holders of shares of Common Stock. In the event of such issuance, the preferred stock could, among
other items, be used as a method of discouraging, delaying or preventing a change in control of our Company, which could have the
effect of discouraging bids for our Company and thereby prevent security-holders from receiving the maximum value for their shares
of our Common Stock.
Lack of liquidity.
The shares of our Common Stock trade sporadically,
if at all, on the OTCQB under the symbol “CRYO.” Consequently, holders of our Common Stock may not be able to liquidate
their investment in the event of an emergency or at any time. There can be no assurance that a robust market will ever develop
for our Common Stock or, if developed, will continue or be sufficiently liquid to enable the shareholders to liquidate their investment
in us.