AMERICAN CRYOSTEM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
March 31, 2013
|
|
|
Sept 30, 2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
25,912
|
|
|
$
|
4,039
|
|
Trade Accounts Receivable
|
|
|
1,496
|
|
|
|
0
|
|
Other Receivable
|
|
|
710
|
|
|
|
0
|
|
Prepaid Expenses
|
|
|
3,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
31,118
|
|
|
|
4,039
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment (Net of Accumulated Depreciation)
|
|
|
300,499
|
|
|
|
318,587
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
158,306
|
|
|
|
137,073
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
489,923
|
|
|
$
|
459,699
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts Payable & Accrued Expenses
|
|
$
|
228,828
|
|
|
$
|
240,530
|
|
Capital Lease Payable
|
|
|
19,093
|
|
|
|
20,239
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
247,921
|
|
|
|
260,769
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Notes Payable
|
|
|
259,000
|
|
|
|
72,475
|
|
Capital Lease Payable
|
|
|
22,946
|
|
|
|
10,901
|
|
Payable to Shareholder
|
|
|
139,447
|
|
|
|
139,812
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities
|
|
|
421,393
|
|
|
|
223,188
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Common stock ($.001 par value, 29,229,076 shares issued and outstanding at March 31, 2013, and 28,158,362 shares issued and outstanding at September 30, 2012; 300,000,000 shares authorized)
|
|
|
29,230
|
|
|
|
28,159
|
|
Additional paid in capital
|
|
|
3,997,011
|
|
|
|
3,623,232
|
|
Accumulated deficit
|
|
|
(4,205,632
|
)
|
|
|
(3,675,649
|
|
Total shareholders’ equity
|
|
|
(179,391
|
)
|
|
|
(24,258
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Shareholders’ Equity
|
|
$
|
489,923
|
|
|
$
|
459,699
|
|
See accompanying notes to consolidated financial
statements.
AMERICAN CRYOSTEM CORPORATION
(FKA R & A PRODUCTIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,354
|
|
|
$
|
13,877
|
|
|
$
|
1,228
|
|
|
$
|
23,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Fees
|
|
|
41,760
|
|
|
|
36,809
|
|
|
|
59,286
|
|
|
|
54,706
|
|
Consultants
|
|
|
95,520
|
|
|
|
43,950
|
|
|
|
158,809
|
|
|
|
117,050
|
|
Research & Development
|
|
|
76,403
|
|
|
|
105,469
|
|
|
|
125,577
|
|
|
|
183,604
|
|
Marketing
|
|
|
21,870
|
|
|
|
12,664
|
|
|
|
35,612
|
|
|
|
60,063
|
|
Administration
|
|
|
73,624
|
|
|
|
56,307
|
|
|
|
142,062
|
|
|
|
173,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
309,177
|
|
|
|
255,199
|
|
|
|
521,346
|
|
|
|
588,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss from Operations
|
|
|
(307,823
|
)
|
|
|
(241,322
|
)
|
|
|
(520,118
|
)
|
|
|
(565,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
(6,404
|
)
|
|
|
(2,520
|
)
|
|
|
(9,865
|
)
|
|
|
(6,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(314,227
|
)
|
|
$
|
(243,842
|
)
|
|
$
|
(529,983
|
)
|
|
$
|
(571,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & fully diluted net earnings (loss) per common share
|
|
$
|
(.011
|
)
|
|
$
|
(.009
|
)
|
|
$
|
(.019
|
)
|
|
$
|
(.021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average of common shares outstanding: Basic & fully diluted
|
|
|
28,659,711
|
|
|
|
27,113,142
|
|
|
|
28,440,067
|
|
|
|
26,900,903
|
|
See accompanying notes to consolidated financial
statements.
AMERICAN CRYOSTEM CORPORATION
(FKA R & A PRODUCTIONS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Six Months Ended March 31, 2013 and
2012
(Unaudited)
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(529,983
|
)
|
|
$
|
(571,586
|
)
|
Adjustments to reconcile net income items not requiring the use of cash:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
19,086
|
|
|
|
18,932
|
|
Accrued Interest
|
|
|
|
|
|
|
1,950
|
|
Changes in other operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(1,496
|
)
|
|
|
(6,875
|
)
|
Other Receivable
|
|
|
(710
|
)
|
|
|
0
|
|
Prepaid Expenses
|
|
|
(3,000
|
)
|
|
|
10,990
|
|
Accounts Payable and accrued expenses
|
|
|
(11,702
|
)
|
|
|
94,695
|
|
Net cash used by operations
|
|
|
(527,805
|
)
|
|
|
(451,894
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(998
|
)
|
|
|
(12,301
|
)
|
Investment in other assets
|
|
|
(21,233
|
)
|
|
|
(22,882
|
)
|
Net cash used by investing activities
|
|
|
(22,231
|
)
|
|
|
(35,183
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Issuance of convertible notes
|
|
|
186,525
|
|
|
|
|
|
Issuance of common stock
|
|
|
374,850
|
|
|
|
392,500
|
|
Loan from shareholder
|
|
|
(365
|
)
|
|
|
|
|
Capital Lease
|
|
|
10,899
|
|
|
|
(10,690
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
571,909
|
|
|
|
381,810
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash during the period
|
|
|
21,873
|
|
|
|
(105,267
|
)
|
|
|
|
|
|
|
|
|
|
Cash Balance, Beginning of Period
|
|
|
4,039
|
|
|
|
107,330
|
|
|
|
|
|
|
|
|
|
|
Cash balance, End of Period
|
|
$
|
25,912
|
|
|
$
|
2,063
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Interest Paid
|
|
$
|
223
|
|
|
$
|
2,836
|
|
Income Taxes Paid
|
|
$
|
0
|
|
|
$
|
0
|
|
See accompanying notes to consolidated financial
statements.
AMERICAN CRYOSTEM CORPORATION
(FKA R & A PRODUCTIONS, INC.)
STATEMENT OF CHANGES IN SHAREHOLDERS’
EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 2013
Prices & shares adjusted for stock splits
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance at September 30, 2012
|
|
|
28,158,362
|
|
|
$
|
28,159
|
|
|
$
|
3,623,232
|
|
|
$
|
(3,675,649
|
)
|
|
$
|
(24,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Common Stock
|
|
|
1,070,714
|
|
|
|
1,071
|
|
|
|
373,779
|
|
|
|
|
|
|
|
374,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(529,983
|
)
|
|
|
(529,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013
|
|
|
29,229,076
|
|
|
$
|
29,230
|
|
|
$
|
3,997,011
|
|
|
$
|
(4,205,632
|
)
|
|
$
|
(179,391
|
)
|
See accompanying notes to consolidated financial
statements.
AMERICAN CRYOSTEM CORPORATION
(FKA R & A PRODUCTIONS, INC.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS AND
BASIS OF PRESENTATION
Description of Business
We were 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 Holdings, Inc. (“ACS”) in exchange for our
issuance of 21,000,000 shares of our common stock, par value $0.001 per share, to ACS (the “Asset Purchase”). We filed
a Current Report on Form 8-K with the Securities and Exchange Commission on April 27, 2011 disclosing the Asset Purchase and certain
related matters including, but not limited to, the appointment of our present officers and directors as well as the resignation
by the former chief executive officer and sole director. Our fiscal year ends September 30 of each calendar year.
American CryoStem Corporation, which we refer to as we, us, our
and our Company, is a developer, marketer and global licensor of patented adipose tissue-based cellular technologies and related
proprietary services with a focus on clinical processing, commercial bio-banking and application development for adipose (fat)
tissue and autologous adipose-derived regenerative cells (ADRCs). We maintain a strategic portfolio of intellectual property and
patent applications that form our Adipose Tissue Processing Platform, which supports and promotes a growing pipeline of biologic
products and processes, clinical services and international licensing opportunities. Through our ACS Laboratories division, we
operate an FDA registered, cGMP compliant human tissue processing, cryro-storage and cell culture and differentiation media development
facility in Mount Laurel, New Jersey at the Burlington County College Science Incubator.
The Company is publicly traded and is currently quoted on the OTCQB
under the symbol “CRYO.”
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present fairly the financial position of American CryoStem
Corporation as of March 31, 2013, the results of operations and cash flows for the three and six months ended March 31, 2013 and
2012. These results are not necessarily indicative of the results to be expected for the full year.
The financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC) and consequently have been condensed and do not include
all of the disclosures normally made in an Annual Report on Form 10-K. The September 30, 2012 balance sheet included herein was
derived from the audited financial statements included in the Company’s annual report on Form 10-K as of that date. Accordingly,
the financial statements included herein should be reviewed in conjunction with the financial statements and notes thereto included
in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012.
Summary of Significant Accounting Policies
During 2013, there have been no material changes in the Company’s
significant accounting policies to those previously disclosed in the Company’s Form 10-K for the year ended September 30,
2012.
NOTE 2. GOING CONCERN
The accompanying financial statements have been presented in accordance
with GAAP, which assumes the continuity of the Company as a going concern. However, the Company has incurred significant losses
since its inception and has no material revenues to date and continues to rely on financing and the issuance of shares to raise
capital to fund its business operations. Management’s plans with regard to this matter are as follows:
The Company has been
actively engaged in creating and implementing its new business model. In connection with this process, management of the Company
has raised $561,010 under SEC Rule 506 during the six months ended March 31, 2013, and has retained the services of new corporate
advisors and consultants.
The Company plans to continue to fund its operations through capital fundraising activities in 2013 until
the new commercial facilities generate sufficient revenue to support its operations.
NOTE 3. LOSS PER SHARE
The Company applies ASC 260, “
Earnings per Share”
to calculate loss per share. In accordance with ASC 260, basic net loss per share has been computed based on the weighted average
of common shares outstanding during the years. The effects of the notes convertible into shares of common stock, has been excluded
from the calculation of loss per share because their inclusion would be anti-dilutive.
Net loss per share is computed as follows:
|
|
For the Three Months Ended
|
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(314,227
|
)
|
|
$
|
(243,842
|
)
|
|
$
|
(529,983
|
)
|
|
$
|
(571,586
|
)
|
Weighted Average Shares Outstanding
|
|
|
28,659,711
|
|
|
|
27,113,142
|
|
|
|
28,440,067
|
|
|
|
26,900,903
|
|
Basic & Fully Diluted Net Earnings (Loss) Per Common Share
|
|
$
|
(0.011
|
)
|
|
$
|
(0.009
|
)
|
|
$
|
(0.019
|
)
|
|
$
|
(0.021
|
)
|
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
|
|
March 31, 2013
|
|
|
March 31, 2012
|
|
Office Furniture and Equipment
|
|
$
|
24,986
|
|
|
$
|
23,987
|
|
Lab Furniture and Equipment
|
|
|
241,945
|
|
|
|
239,715
|
|
Lab Software
|
|
|
123,000
|
|
|
|
|
|
Leasehold Improvements
|
|
|
7,753
|
|
|
|
5,104
|
|
|
|
|
397,684
|
|
|
|
388,806
|
|
Less: Accumulated Depreciation
|
|
|
-97,185
|
|
|
|
-61,761
|
|
Net Property and Equipment
|
|
$
|
300,499
|
|
|
$
|
327,045
|
|
NOTE 5. PATENTS
On August 2, 2011, the Company was awarded U.S. Patent No. US 7,989,205
B2, titled Cell Culture Media, Kits, and Methods of Use. The Patent is for cell culture media kits for the support of primary culture
of normal non-hematopoietic cells of mesodermal origin suitable for both research and clinical applications.
The Company is continually
expanding its intellectual property portfolio and has made five additional patent filings to date.
NOTE 6. NOTES PAYABLE
During the six months ended March 31, 2013,
the Company issued a principal amount of $633,750 of 8% Convertible Notes due September 30, 2014; for which it received proceeds
of $552,250, satisfied a maturing note for $72,500 and settled an overdue account payable for $9,000.
The notes are convertible into restricted shares of the Company’s
common stock at any time until maturity by the holder at $0.35 per share. The Company may also prepay the notes at any time upon
at least 30 days written notice to the holder(s) either in whole or in part. Upon any prepayment of the notes, the Company shall
issue to the holder a warrant to purchase 250 shares of common stock for each $1,000 of prepaid principal. Each warrant issued
upon prepayment shall have an exercise price of $0.35 per share of common stock and shall be exercisable for a period of two years
from the date of the prepayment. The Company has not prepaid any notes for the six months ended March 31, 2013 and has not issued
any stock purchase warrants. Certain purchasers of the convertible notes elected to convert a principal amount of $374,750 resulting
in the issuance of 1,070,714 restricted shares of the Company’s common stock.
An unsecured note payable to a shareholder was acquired by the Company
in the asset purchase in April 2011 previously discussed. The note was for $65,000 and carried an interest rate of 6%. The holder
of the note was issued the Company’s 8% Convertible Notes on December 31, 2012 in satisfaction of the outstanding note. The
note plus accrued interest on the note was $72,475 at December 31, 2012.
NOTE 7. COMMITMENTS & CONTINGENCIES
Operating Leases
- The Company has two operating leases for
its laboratory facilities at the Burlington County College Science Incubator in Burlington, New Jersey. Each lease is for a term
of one year with a monthly rent of $1,350 per laboratory. The total rent for laboratory facilities for the six months ended March
31, 2013 was $19,200.
The Company has an operating lease for its corporate headquarters at One Meridian Road in Eatontown, New
Jersey. The lease is for a term of three years with monthly rent of $2,500. The total rent for office facilities for the six months
ended March 31, 2013 was $15,000.
Capital Lease
– The Company has a capital lease for laboratory equipment. The minimum
lease payments due on the capital lease are as follows.
2013
|
|
|
11,220
|
|
2014
|
|
|
22,440
|
|
2015
|
|
|
11,220
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
44,880
|
|
Less amounts representing interest
|
|
|
(2,841
|
)
|
Present value of net minimum lease payments
|
|
$
|
42,038
|
|
Payable to Shareholder
- The Company has an unsecured liability
without interest of $139,447 due to ACS Global, Inc., the majority shareholder of the Company, for certain expenses paid by ACS
Global, Inc. in connection with the asset purchase transaction of April 2011. There is no maturity date associated with this liability.
NOTE 8. COMMON STOCK TRANSACTIONS AND
OPTION TRANSACTIONS
In fiscal 2010, the Company initiated a Private Reg D 506 Offering
for the sale of 735,000 shares of common stock. During the year, the Company sold 90,000 shares of its common stock and received
proceeds of $31,500.
In March of 2010, the Company issued 30,000 shares of common stock
at par value to the Company’s President for services rendered in lieu of cash.
In December of 2010, 670,000 shares were issued to the former President
of R&A for services rendered. The share issuance was valued at $335,000.
On April 20, 2011, the Company purchased 3,376,902 shares of common
stock from the former President of R&A for $355,000. The shares were recorded as treasury stock and immediately cancelled by
the Company for no proceeds.
On April 20, 2011, the Company issued 21,000,000 shares of common
stock to purchase substantially all the assets and liabilities of ACS. Upon issuance of these shares, ACS became the majority shareholder
of the Company. The assets and liabilities acquired in the transaction were valued at $98,612
During the year ended September 30, 2011, the Company issued 2,572,000
shares of common stock and received net proceeds of $1,286,000.
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.
During the fiscal year ended September 30, 2012, the Company
issued 1,558,000 shares of common stock and received proceeds of $779,000.
During the fiscal year ended September 30, 2012, an option holder
exercised 100,000 options and the Company received proceeds of $100. During the fiscal year ended September 30, 2012, the Company
issued 25,000 shares of common stock to pay an invoice totaling $12,500.
During the fiscal year ended September 30, 2012, the Company issued
3,000,000 options with an average exercise price of $0.125. The Company recorded compensation expense of $1,385,135 as a result
of the issue.
During the six months ended March 31, 2013, the Company issued 1,070,714
common shares in connection with the conversion by the holders of $374,850 principal amount of its 8% unsecured Convertible Notes.
The Company applies ASC 718, “Accounting for Stock-Based Compensation”
to account for its option issues. Accordingly, all options granted are recorded at fair value using a generally accepted option
pricing model at the date of the grant. For purposes of determining the option value at issuance, the fair value of each option
granted is measured at the date of the grant by the option pricing model with the following assumptions:
Dividend yield
|
|
|
0.00
|
%
|
Risk free interest rate
|
|
|
0.50
|
%
|
Volatility
|
|
|
68.04
|
%
|
The fair values generated by option pricing model may not be indicative
of the future values, if any, that may be received by the option holder.
The following is a summary of common stock options outstanding at
March 31, 2013:
|
|
|
|
|
Weighted Avg
|
|
|
Wgtd Years
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2013
|
|
|
2,900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Exercises
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Expires
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2013
|
|
|
2,900,000
|
|
|
$
|
0.14
|
|
|
|
4.80
|
|
NOTE 9. FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Measurements under Generally Accepted Accounting Principles
clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset
or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the
standard, fair value measurements are separately disclosed by level within the fair value hierarchy as follows.
Level 1 - Quoted prices in active markets for identical assets or
liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active
markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that
are significant to the measurement of fair value of assets or liabilities. To the extent that valuation is based on models or inputs
that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.
Cash, prepaid expense, security deposit, accounts payable and accrued
expenses, capital lease payable, payable to shareholder, and note payable to shareholder in the balance sheet are estimated to
approximate fair market value at March 31, 2013.
NOTE 10. RELIANCE ON KEY PERSONNEL
The Company largely relies on the efforts of its Chief Operating
Officer and its Chief Executive Officer and Chairman of the Board of Directors. A withdrawal of the efforts of the Chief Operating
Officer or the Chief Executive Officer and Chairman would have a material adverse affect on the Company’s ability to continue
as a going concern.
NOTE 11. LITIGATION
The Company is not party to any pending litigation against it and
is not aware of any litigation contemplated against it as of March 31, 2013 and the date of these financial statements.
NOTE 12. SUBSEQUENT EVENTS
The Company has made a review of material subsequent events from
March 31, 2013 through the date of this report and found no material subsequent events reportable during this period.
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS.
|
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 are assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
|
·
|
Inadequate capital and barriers
to raising the additional capital or to obtaining the financing needed to implement our business plans;
|
|
|
|
|
·
|
Our failure to earn revenues or profits;
|
|
|
|
|
·
|
Inadequate capital to continue business;
|
|
|
|
|
·
|
Volatility or decline of our stock price;
|
|
|
|
|
·
|
Potential fluctuation in quarterly results;
|
|
|
|
|
·
|
Rapid and significant changes in markets;
|
|
|
|
|
·
|
Litigation with or legal claims and allegations
by outside parties; and
|
|
|
|
|
·
|
Insufficient
revenues to cover operating costs.
|
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
We were
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 our common stock, par value $0.001 per share,
to ACS (the “Asset Purchase”). We filed a Current Report on Form 8-K with the Securities and Exchange Commission on
April 27, 2011 disclosing the Asset Purchase and certain related matters including, but not limited to, the appointment of our
present officers and directors as well as the resignation by the former chief executive officer and sole director. Our fiscal
year ends September 30 of each calendar year.
Overview
American
CryoStem Corporation, which we refer to as we, us, our and our Company, is a developer, marketer and global licensor of patented
adipose tissue-based cellular technologies and related proprietary services with a focus on clinical processing, commercial bio-banking
and application development for adipose (fat) tissue and autologous adipose-derived regenerative cells (ADRCs). We maintain a
strategic portfolio of intellectual property and patent applications that form our Adipose Tissue Processing Platform, which supports
and promotes a growing pipeline of biologic products and processes, clinical services and international licensing opportunities.
Through our ACS Laboratories division, we operate an FDA registered, cGMP compliant human tissue processing, cryro-storage and
cell culture and differentiation media development facility in Mount Laurel, New Jersey at the Burlington County College Science
Incubator.
Our growth
strategy is centered on fully capitalizing on the scientific breakthroughs that have been rapidly shaping the fast growing Regenerative
and Personalized Medicine industries; and provide these industries with a standardized cell processing platform to enhance the
delivery of healthcare through cellular-based therapies and applications which address burn and wound healing, joint repair, disease
treatment and management, and personalized health and beauty care.
We have
pioneered a proprietary, patented clinical processing methodology that prepares and cryo-preserves adipose tissue in its raw form
without manipulation, bio-generation or the addition of animal-derived products or other chemical materials requiring removal
upon retrieval. This core process makes each sample suitable for use in cosmetic tissue grafting procedures or for further processing
to adult stem cells for other types of stem cell therapies. Currently, there are over 100 therapeutic and orthopedic applications
for adipose tissue and adult stem cell treatments identified and in use globally, and more discoveries are being made each day.
Products
and Services
Currently,
American CryoStem is focused on transitioning from a relative development-stage company to full commercial enterprise with multiple
high margin business lines generating sustainable, recurring revenue streams. 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 are well positioned to provide the following services:
|
·
|
Collecting an individual’s
adipose tissue through a participating doctor who will forward the tissue to our FDA registered laboratory;
|
|
|
|
|
·
|
Processing the tissue in the laboratory for
immediate storage or to separate the component parts of an individual’s adipose tissue, which includes the stem cells
and other regenerative cells;
|
|
|
|
|
·
|
Cryopreserving adipose tissue and/or adipose
derived stem cells for immediate use or long term storage;
|
|
|
|
|
·
|
Provide testing services for physicians performing
in-office procedures and tissue processing;
|
|
|
|
|
·
|
Contract manufacturing services to cosmetic
and biotechnology cellular application developers; and
|
|
|
|
|
·
|
Sale or licensing of our patented stem cell
culture and differentiation medium to researchers and product developers on a global basis.
|
Our branded
product and service offerings include:
Cellular
Processing and Cryopreservation Services
|
·
|
CELLECT™
Cellular Collection
and Storage Service
–
a clinical
solution for physicians
to aseptically collect
and deliver tissue
samples utilizing
proprietary and patent-pending
methods and materials.
The service creates
an unbreakable “chain
of custody”
between physician/client
and ACS Laboratories.
The
Cellect
service is monitored
in real-time and
assures the highest
cell viability upon
laboratory receipt.
|
Our
collection/processing/storage pricing model provides for an initial collection and processing fee ranging from $750 to $2500,
depending upon the volume of tissue and the desired processing and testing services required. The annual storage fee charged to
an individual is based upon the type of material being cryo-preserved (adipose tissue or ADRCs), the total volume and the storage
configuration. The minimum storage fee is $200 per year. There are currently over 35 medical practices, and counting, across the
United States now offering the Company’s adipose tissue and ADRC collection, processing and storage services.
|
·
|
ATGRAFT™
Adipose Tissue
Storage Service –
a clinical solution
for physicians to
provide their patients
with the highest
quality fat transfer
and body sculpting
procedures and storage
technologies. The
ATGRAFT
Service
permits individual
patients to benefit
by using their own
stored adipose tissue
as a natural biocompatible
filler for procedures
without the trauma
of further liposuctions.
ATGRAFT
procedures
include breast augmentation,
buttocks enhancement
or volume corrections
in the hands, face
and neck.
|
Anti-Aging,
Autologous Skin Care Product Line
Under agreement
with Personal Cell Sciences (PCS), we offer our
CELLECT
Service to PCS’ current and new clients. PCS is a private
company founded by our Chairman and CEO, John Arnone. Our ACS Laboratories division manufactures the key ingredient
Autokine-CM
for PCS’
U-Autologous
™
anti-aging topical formulation. Additionally, this relationship provides
PCS’ clients the ability to utilize the
ATGRAFT
service and create a clinical grade stem cell sample for future use
in Regenerative Medicine, a form of “bio-insurance.” Each cream is genetically unique and custom blended, deriving
its key ingredients from the individual client’s own stem cells. PCS’ customers pay ACS storage fees $200 per year.
Patented
Cell Culture Media Products
We are
also engaged in marketing, selling and licensing our patented human-based tissue culture media products under the trademark
ACSelerate
™.
The most
widely used medium today for storing and growing stem cell cultures for in vitro diagnostics and research use is fetal bovine
serum, raising questions about utilizing animals for the medium as well as generating debates relating to potential cross-contamination.
We have pioneered and patented a new cell culture medium for growing human stromal cells (including all cells found in human skin,
fat and other connective tissue) that is animal product free and suitable for human clinical and therapeutic uses.
More specifically,
the Company has been granted patent number 7,989,205 “Cell Culture Media, Kits and Methods of Use” (August 2, 2011).
The granted claims include “A cell culture medium for clinical growth of human adipose stromal cells for human clinical
and therapeutic applications.” The granted claims also include variations for cellular differentiation of adipose derived
stem cells into osteoblasts (bone), chondrocytes (cartilage), adipocytes (fat), neural cells, smooth muscles cells in both HSA
(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 mesenchymal stem cells intended for use in humans.
Product
Development
Our Company’s
core scientific endeavors are based on the original work of scientist Dr. David K. Moscatello, a founding member of our Scientific
and Medical Advisory board. Dr. Moscatello earned his Bachelor of Science degree in Microbiology from Pennsylvania State University
in 1975, and a PhD in Biology with a focus on cancer cell biology from Purdue University in 1984. He has held teaching positions
at Purdue University and Richard Stockton College of New Jersey. He returned to research as an NIH Post-Doctoral fellow at the
Kimmel Cancer Institute at Thomas Jefferson University working in the laboratory of Dr. Albert Wong. In October 1999, Dr. Moscatello
accepted a position at Coriell Institute to pursue his own research interests. He is a member of the American Association for
the Advancement of Science, the American Association for Cancer Research and the American Society for Cell Biology. His primary
research interests involve the isolation, culture and characterization of adult tissue-derived stem cells, i.e. stem and multi-potent
progenitor cells other than embryonic stem cells. He has had articles published in a variety of media, including
Nature
,
Journal of Biological Chemistry
,
International Journal of Cancer
,
British Journal of Cancer
and
Cancer
Research
.
We have
implemented a strategic approach to developing and launching new products and services that we believe can produce near term cash
flow, a strong recurring revenue stream and complementary scientific data. We focus on products, services and applications that
require little or no regulatory approval. These products and services 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.
We are
continuing to expand our products and services based upon our intellectual property portfolio and projects in the pipeline. Our
initial patent was granted on August 6, 2011 for our adipose stromal cell culture media and differentiation media. We have filed
multiple patent applications for our products and methods including:
|
·
|
ACSelerate-SF
(animal
serum free) and
ACSelerate-LS
(low dose bovine serum) adipose stromal cell culture and differentiation medium in clinical
and research grades;
|
|
|
|
|
·
|
The
CELLECT
collection and tracking
system for collecting tissue and cellular samples;
|
|
|
|
|
·
|
Adipose tissue, stromal vascular fraction
(SVF) and adipose derived mesenchymal cell processing, expansion and differentiation;
|
|
|
|
|
·
|
Storage preparation methods for adipose tissue,
stromal vascular fraction (SVF) and adipose derived cellular samples;
|
|
|
|
|
·
|
Testing and quality management methods, systems,
data collection and maintenance;
|
|
|
|
|
·
|
Cryoprotectant for the storage of adipose
tissue samples; and
|
|
|
|
|
·
|
The
ATGRAFT
service for the collection,
preparation, storage and retrieval of adipose tissue for cosmetic and plastic surgery biocompatible fillers.
|
Collaboration
and Partnering Opportunities
During
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 developed by our Company. We have 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 entered into a Memorandum of Understanding (MOU) with PGen to further develop products
based upon the results of the initial collaboration.
In April
2013, we
entered into Material Transfer Agreements with three leading research scientists
at Rutgers University, distinguished as one of the world’s top universities for stem cell research and training. We have
teamed with Kathy Uhrich, PhD, Professor and Dean, Mathematical & Physical Sciences; KiBum Lee, PhD, Assistant Profession
of Chemistry and Chemical Biology; and Prabhas Moghe, PhD, Professor of Biomedical Engineering and Professor of Chemical and Biochemical
Engineering, all of whom will be utilizing our autologous adipose-derived stem cells (ADSCs) and patented, serum free, GMP grade,
cell culture mediums to research, develop and commercialize innovative new cellular therapies to address the $5 billion global
wound care market.
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 clinical processing of adult adipose tissue
for autologous (self) use and ADRCs. We believe that as the pace of clinical trial results increases 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 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 cosmetics. 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 which have shown to be safe
and effective in a variety of applications in published early stage clinical trial results and application studies.
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 and Cell
Culture Media markets.
Regenerative
Medicine Market
The market
for Regenerative Medicine continues to grow worldwide; according to BCC Research (January 2013), it is expected to accelerate
at roughly 12% annually, from $3.8 billion in 2011 to $6.6 billion in 2016.
|
§
|
The
global market for
stem cell products
was $3.8 billion
in 2011. This market
is expected to
reach nearly $4.3
billion in 2012
and $6.6 billion
by 2016, increasing
at a compound annual
growth rate (CAGR)
of 11.7% from 2011
to 2016.
|
|
§
|
The
American market
for stem cell products
was $1.3 billion
in 2011. This sector
is expected to
rise at a CAGR
of 11.5% and reach
nearly $2.3 billion
by 2016.
|
|
§
|
The
European market
for stem cell products
was $872 million
in 2011 and is
expected to reach
nearly $1.5 billion
by 2016, a CAGR
of 10.9%.
|
TriMarkPublications.com
cites in its “Regenerative Medicine Markets” report (March 2013) that the Regenerative Medicine market will catapult
to over $35 billion by 2019.
Cosmeceutical
Market
Many
industry experts agree that Cosmeceuticals have become the fastest growing segment of the Cosmetics and Personal Care industry.
These products are described as anti-aging cosmetic products with drug-like benefits. US retail sales of cosmeceuticals in 2011
totaled $9.7 billion with ongoing annual sales gains expected to boost the market to $11.7 billion by 2016, according to a Packaged
Facts report released in July 2012.
In
a new report titled
Global Cosmeceuticals Market Outlook 2016
, published February 2013, RNCOS believes 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.
Cell
Culture Market
The
Cell Culture market is $2.3 billion according to a report in
Genetic Engineering & Biotechnology News
(January 12,
2012 Vol. 32 No.2) and is expected to grow to $3.9 billion by 2015; this equates to 70% growth over a six-year period. This expected
growth may be further enhanced by an expected shortage of bovine serum, a major component in research and the manufacture of certain
cellular therapy products according to
“Peak Serum: Implications of serum supply for cell therapy manufacturing,”
a commentary by David A. Brindley published in
RegenMed
(2012, January 7(1), 7-13), which
further states “Without a sustainable supply or viable alternatives to these components, the commercial-scale production
of cell therapies will be impossible, halting the momentum of the industry.”
Marketing
and Distribution
A key objective
of our underpinning marketing strategic is to position American CryoStem in the market as the “Gold Standard” for
adipose tissue processing and cell storage, therapeutic applications, research and commercial uses of adipose tissue within the
regulatory framework. 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. Our initial marketing efforts
are intended to disseminate current and future uses of adipose tissue and adult stem cells which support our business model, products
and services. We intend to employ both print advertising and social media sales campaigns. In addition, we plan to utilize key
leaders, and early adoptors 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 and collaborate with us.
As part
of our marketing campaign to reach and educate physicians, we are actively seeking to bring highly qualified peer leaders onto
our Scientific and Medical Advisory Board to assist us in our industry speaking and education platform. This physician education
platform is designed to focus on industry needs and demands as they relate to current and future treatments using our adipose
tissue and adult stem cell technologies. To date, we have succeeded in winning the following members to our Scientific and Medical
Advisory Board:
|
·
|
Sanjay
Batra, PhD −
Advisory Board Chairman
|
Dr.
Batra currently serves as Chairman of the Medical & Scientific Advisory Board of American CryoStem Corporation. Until recently,
he was President and CEO of Aesthetic Factors, LLC, an emerging company providing autologous, point-of-care therapies in Regenerative
Medicine. In this role, Dr. Batra led the commercial growth of their platelet-rich plasma and autologous fat products and was
instrumental in establishing the Company as the science-driven leader. Dr. Batra spent ten years in the Johnson & Johnson
Family of Companies, culminating as Vice President of Research and Development, Pharmaceuticals, Asia Pacific & Japan. He
also worked at Bracco Diagnostics in Princeton, New Jersey and Alliance Pharmaceutical located in San Diego, California. Dr. Batra
obtained his PhD in Medical Physiology from the University of Ottawa and completed postdoctoral training in Japan & Switzerland.
Dr.
Bircoll was the first plastic surgeon to perform liposuction in North America. He pioneered that operation and saw it from its
early beginnings to become what is now the most frequently performed cosmetic procedure worldwide Dr. Bircoll is also the originator
of Fat Transfer (Autologous Fat Transplantation, AFT). His landmark presentation of Fat Transfer Using Liposuction Techniques
(1984) established this procedure for breast augmentation, facial rejuvenation, hand rejuvenation and a host of reconstructive
procedures. He is board certified by the American Board of Plastic Surgery and the American Board of Cosmetic Surgery. He is a
member of the American Society of Plastic Surgery and the American Academy of Cosmetic Surgery. Dr. Bircoll is retired from 25
years of private practice in Beverly Hills, California. He is currently actively lecturing and teaching the techniques of Fat
Transfer and Fat Storage for stem cell extraction, as well as cosmetic and reconstructive applications. Dr. Bircoll recently presented
the latest application of his Fat Transfer/Storage/Serial Injection concepts for breast cancer prevention surgery.
Mr.
Davis is currently a partner in and the Chief Operating Officer of Novare, LLC. Novare Biologistics was created to meet the need
of transporting and storing laboratory materials, including biological samples at required temperature anywhere within the U.S.
Over the past 20 years, Mr. Davis has concentrated on business development and sales in biotechnology, manufacturing and software
technology. Previously, he was primarily involved in retailing.
Dr.
Ensley is the Chief Executive Officer and Chairman of Protein Genomics, Inc. He previously served as Chief Executive Officer of
Phytotech, Inc. and President of NuCycle Therapy, Inc. prior to their sale. In addition, Dr. Ensley headed the Specialty Chemicals
Group at Amgen, Inc. for nearly a decade. He holds a PhD in Microbiology from University of Georgia; is a Fellow of the American
Academy of Microbiology; served on the BIO Directorate Board of the National Science Foundation; and is the Board Co-Chair of
the University of Arizona’s BIO5 Institute. Dr. Ensley holds 19 issued U.S. patents.
|
·
|
Richard
Goldfarb, MD, FACS
|
Dr.
Goldfarb established the Center for SmartLipo with the vision of providing advanced treatments and techniques to help patients
restore and maintain a more youthful appearance. He has formed a team of specialists, each with a unique strength in treating
the various parts of the face and body. Included are Aesthetic Laser and Liposuction Specialists, Facial Plastic Surgeons, a Plastic
and Reconstructive Surgeon and a Medical Weight Loss team. As a group, they are unequaled in their ability to provide comprehensive
consultative and treatment options to achieve an individual’s aesthetic goals. Doctors visit the Center for SmartLipo from
all over the world on a regular basis to learn state-of-the-art cosmetic treatments and techniques from Dr. Goldfarb and his team.
In view of his unrivaled expertise and skills, Dr. Goldfarb is highly sought after to lecture and train physicians internationally
on numerous cosmetic laser and surgery topics. He is the Medical Director, International and National Trainer for
Selphyl
®
,
and National and International trainer/lecturer for the Silhouette Lift Procedure. Dr. Goldfarb pioneered the technique to combine
Silhouette Lift with fat transfer and
Selphyl
for total facial rejuvenation (“The Goldfarb Procedure”). He
is on the Board of Directors of, and lectures and trains physicians for, the National Society of Cosmetic Physicians and Surgeons.
Dr. Goldfarb is a faculty member and lecturer for The Aesthetics Show, a training organization for physicians in the field of
Laser and Aesthetic Medicine and Cosmetic Surgery. The American Society of Lasers in Medicine, American Academy of Liposuction
Surgery and American Academy of Cosmetic Surgery all count him as a member. He is board certified and a Fellow of the American
College of Surgeons, in addition to the American Society of Laser Medicine and Surgery. Dr. Goldfarb graduated from the University
of Health Sciences / Finch University, The Chicago
Medical School with top honors in Surgery.
He completed his surgical training at Northeastern Ohio College of Medicine. He completed additional training in Cosmetic Surgery
at the University of Pennsylvania, Department of Plastic Surgery and Yale University. He has over 30 years of General and Vascular
Surgery experience, and is a Cosmetic Surgery Specialist.
Mr.
Levitch is President of his own consulting firm, Peter Levitch and Associates, located in New Jersey. He provides clients guidance
in the development of pharmaceuticals, medical devices, biologics and diagnostics. Mr. Levitch also possesses a background in
the clinical evaluation and FDA regulatory approval phases of product development in the biotechnology industry. He has consulted
for more than 200 pharmaceutical and biotechnology companies including Amgen, Inc.; Genentech, Inc.; DuPont; Monsanto Company;
Johnson & Johnson Family of Companies, Beckman Coulter, Inc.; Chiron Corp.; Eastman Kodak Company and EMD Serono, Inc. He
has authored several papers for publication and has lectured all over the country on various topics including Good Manufacturing
Practices (GMP), the FDA approval process, and preparing INDs and NDAs. Peter has also served as an FDA liaison for FDA/company
meetings. He is listed in
Who’s Who in Finance and Industry
, is the co-founder of the Regulatory Affairs Professional
Society, and a member of the Drug Information Association and the New York Academy of Sciences.
Dr.
Mittman currently serves as a senior partner of Seaview Orthopedic and Medical Associates (SOMA) located in Ocean, New Jersey.
He has assembled a team of highly qualified board certified, fellowship trained physicians to practice at SOMA specializing in
general orthopedics, as well as surgery of the Spine, Hand/Wrist, Knee/Shoulder, Total Joints, Foot and Ankle, Sports Medicine,
Pain Management and Osteoporosis. SOMA currently operates six locations committed to providing quality care in Monmouth and Ocean
Counties. After earning a Bachelor of Arts degree at John Hopkins University, Dr. Mittman earned his Medical Degree at the Albert
Einstein College of Medicine in New York and completed orthopedic training in 1978 at Montefiore Hospital in New York. He is a
member of the New Jersey Orthopedic Society, Orthopedic Surgeons of New Jersey, Monmouth County Medical Society and the American
College of Sports Medicine.
|
·
|
David
K. Moscatello, PhD
− Chief Scientist
|
Dr.
Moscatello earned his Bachelor of Science degree in Microbiology from Pennsylvania State University in 1975, and a PhD in Biology
with a focus on cancer cell biology from Purdue University in 1984. He has held teaching positions at Purdue University and Richard
Stockton College of New Jersey. He returned to research as an NIH Post-Doctoral fellow at the Kimmel Cancer Institute at Thomas
Jefferson University working in the laboratory of Dr. Albert Wong. In October 1999, Dr. Moscatello accepted a position at Coriell
Institute to pursue his own research interests. He is a member of the American Association for the Advancement of Science, the
American Association for Cancer Research and the American Society for Cell Biology. Dr. Moscatello’s primary research interests
involve the isolation, culture and characterization of adult tissue-derived stem cells, i.e. stem and multi-potent progenitor
cells other than embryonic stem cells. He has had articles published in a variety of media, including
Nature
,
Journal
of Biological Chemistry
,
International Journal of Cancer
,
British Journal of Cancer
and
Cancer Research
.
Dr. Moscatello advises American CryoStem regarding its laboratory operations and processing.
Mr.
Ruh has been an associate and lecturer at the Harvard Information Infrastructure Project and spent more than 20 years in project
finance and banking (Gerken Capital/Sino-Asia Industrial Equity Fund, The Fuji Bank Limited and Mellon Bank), closing more than
100 global transactions. He holds a Law degree from Yale University; Master’s Degree of Public Administration from Harvard
University; Master’s Degrees in Business Administration and Public Policy from the Heinz School, Carnegie Mellon University;
a Master’s Certificate in Materials Science from the University of Michigan; and a Bachelor of Science degree in Biomedical
Engineering from Pennsylvania State University.
|
·
|
Fredric
A. Stern, MD, FACS
|
Dr.
Stern is the founder and Medical Director of the Stern Center for Aesthetic Surgery in Bellevue, Washington. Following his education
at Columbia University Medical School, Dr. Stern earned his Board Certification in Ophthalmology at the University of Washington,
and underwent extensive additional training in oculofacial plastic and laser surgery. In 1987, he joined Virginia Mason Medical
Center in Seattle, serving as Director of the Oculoplastic Surgery Division for ten years. While at Virginia Mason, Dr. Stern
performed an extensive number of cosmetic laser procedures. He is honored to have been chosen as one of a select group of instructors
of the
Botox Cosmetic
®
National Education Faculty, as well as the
Radiesse™
Medical Education
Faculty. Dr. Stern is also an instructor for the
Sciton
™
Laser
. In 2011, he was voted the Best Plastic Surgeon
in Western Washington by
KING 5
(NBC affiliate) TV’s viewing audience. Dr. Stern is a Fellow of the American College
of Surgeons, the American Academy of Facial Plastic and Reconstructive Surgeons, the American Academy of Cosmetic Surgery, and
the American Society of Liposuction Surgery, as well as a member of the International Society of Hair Restoration Surgery. In
addition, over the past several years, he has appeared on
Northwest Afternoon
,
Evening Magazine
, as well as
KOMO
,
KIRO
and
Q13
news, discussing and
demonstrating the latest techniques in facial
and eyelid laser cosmetic surgery,
Botox
®
and laser-assisted liposuction. He is also an accomplished winemaker
& published novelist. Dr. Stern’s latest novel is a medical thriller titled,
The Sigma Project
.
We have
also initiated a direct marketing program focused on reaching plastic and cosmetic surgeons and have an initial group of 35 providers
that have begun to 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
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.
Development
of Regional U.S. Markets
The Company
seeks to develop regional relationships to leverage its new products and services through existing cosmetic surgery and regenerative
medicine practices. During our first fiscal quarter ended December 31, 2012, we announced the initiation of adult stem cell and
adipose tissue collection at the Stern Center for Aesthetic Surgery in Bellevue Washington. Dr. Frederick Stern, a member of the
Company’s Scientific and Medical Advisory Board, founded the Stem Center in 1997. The Stern Center offers state-of-the-art
laser and cosmetic surgical techniques to patients throughout the western U.S., and is one of the premier laser-assisted liposuction
centers in the Pacific Northwest.
Also during
the first quarter of fiscal 2013, the Company entered into it first private label agreement with XeoStem, LLC of Coral Gables,
Florida under which American CryoStem will provide its proprietary adipose tissue processing and storage services. The agreement
permits XeoStem to offer the Company’s tissue, cell banking and storage services to its customers and through other XeoStem-affiliated
physicians.
Early in
the second quarter, ended March 31, 2013, we announced that Eterna MD of Orlando, Florida began offering our
ATGRAFT
fat
storage service to its patients for future natural cosmetic enhancements. Eterna MD is a medical spa and medical rejuvenation
center specializing in anti-aging, laser hair removal, Botox, Lipodissolve, cellulite and age management.
The Company
intends to pursue additional private label opportunities as they develop in the future.
Development
of International Markets
American
CryoStem also seeks to develop relationships with strategic business partners operating in key international markets capable of
leveraging our proprietary Adipose Tissue Processing Platform.
On April
23, 2013, we announced
receipt of our first commercial international shipment of adipose tissue
for processing and long term cryo-storage.
The master sample was shipped to the Company by BALS (Biomedical and Life Sciences)
Institute (BALS), a Hong Kong-based regenerative medicine company and client of Personal Cell Sciences Corp. (PCS), the developer
of
U-Autologous
skin care products and formulations. The product uses an individual’s own adult stem cells to create
and supply that individual with his or her own personalized anti-aging skin care line.
As
part of the contract manufacturing arrangement between American CryoStem and PCS, we are responsible for clinically testing, processing,
culturing and storing samples shipped from PCS clients to create
Autokine-CM
, the key ingredient in the
U-Autologous
formulation. BALS Institute has teamed with PCS to ensure the people in Greater China gain access to safe, quality and effective
life science technologies through partnerships with leading international corporations.
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 cryo-storage facilities in New Jersey are now able to send and receive viable tissue samples
to and from clients globally.
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 Mount Laurel, New Jersey
at the Burlington County College Science Incubator located on the Burlington County College campus. Our laboratory website address
is
www.acslaboratories.com.
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 on a current
basis.
In order
to finance further market development with the associated expansion of operational capabilities for the time period discussed
above, 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
$137,270 during the six months ended March 31, 2013 in professional fees (legal, accounting and consultants) and $76,403 in Research
and Development.
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 $25,912 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.
Commitments
As of the
date of this quarterly report, the Company’s material capital commitments were (i) the continued funding of the expansion
of our marketing efforts and laboratory processing capabilities; (ii) an equipment lease in the amount of $67,320 for laboratory
equipment with monthly payments of $1,869.74 and the final payment due March 2015; and (iii) the current two-year lease for the
laboratory spaces at the Burlington County College Science Incubator, Laboratory 110 and 108, which was signed on February1, 2012
and is subject to a monthly payment of $1,650
.
The Company
has an operating lease for its main office facility located at 1 Meridian Road, Eatontown, New Jersey 07724. The lease is for
a term of three years with a monthly rent of $2,500. The total rent for office facilities for the three months ended March 31,
2013 was $7,500
The Company
in connection with the closing of the Asset Purchase Agreement assumed an unsecured note payable in the face amount of $65,000
with interest payable upon maturity of 6%. As a result of the Company’s negotiation with the note holder, the holder of
the original note was issued $72,500 of the Company’s 8% Convertible Notes on December 31, 2012 in satisfaction of the maturing
note. The note plus accrued interest on the note was $72,475 at December 31, 2012. The Company has unsecured liabilities without
interest of $139,447 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.
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.