UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended: September 30, 2014
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
file number: 000-54672
American CryoStem
Corporation
(Exact name
of registrant as specified in its charter)
Nevada |
|
26-4574088 |
(State
or other jurisdiction of incorporation
or organization) |
|
(I.R.S.
Employer Identification No.) |
|
|
|
1
Meridian Road, Suite 5
Eatontown,
NJ 07724 |
(Address
of principal executive offices) |
(732)
747-1007 |
(Registrant’s
telephone number, including area code) |
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.001
Indicate
by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
x
Indicate
by checkmark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
o No x
Indicate
by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by
check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No o
Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting
company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer |
o |
Accelerated
Filer |
o |
Non-Accelerated
Filer |
o |
Smaller
reporting company |
x |
Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes
o No x
The aggregate
market value of the voting and non-voting common equity held by non-affiliates of the registrant based on a closing price of $.0.32
on March 31, 2014 (the last business day of the registrants most recently completed second fiscal quarter) was approximately $3,805,076.
As of January
9, 2015, the registrant had 32,915,515 shares of its common stock, par value $0.001, outstanding.
TABLE
OF CONTENTS
FORWARD
LOOKING STATEMENTS
Included
in this Form 10-K are “forward-looking” statements, as well as historical information. Although we believe that
the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected
in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated
in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.”
Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “project,” “plan,”
“will,” “shall,” “should,” and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements
involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements.
We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after
the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.
PART
I
Item 1.
Business.
Company
Overview
History
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 (SEC)
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.
Upon
the closing of the Asset Purchase: (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, and
(iii) John Arnone and Anthony Dudzinski were appointed to our board of directors, with Mr. Arnone being appointed as Chairman
of the Board. 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. 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.
Our
Business
American
CryoStem Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art,
FDA-registered, clinical laboratory dedicated to our standardized processing, bio-banking and development of cellular tools and
applications using autologous adipose (fat) tissue and adipose derived stem cells (“ADSCs”). The Company
has built a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that
form its core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and
processes, clinical services and international licensing opportunities. Our FDA registered clinical laboratory which we believe
to be in compliance with the FDA’s current Good Manufacturing Procedures (“cGMP”) for human tissue
processing, cryro-storage and cell culture and differentiation media development is located in Mount Laurel, New Jersey at the
Burlington County College Science Incubator.
The Company
believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experimental variability. By standardizing handling, storage, and transportation
protocols we can substantially improve the quality and reproducibility of preclinical and clinical data will help to accelerate
the transition from lab research to drug development and market launch.
Our business
strategy is centered on marketing our standardized platform as a complete adipose stem cell solution and expanding our research
and development through scientific collaborations. We intend to generate revenue through the sale and licensing of our patented
products, laboratory tools, and services to attempt to capitalize on: (1) ADSC technologies; (2) scientific breakthroughs incorporating
ADSCs that have been developing in the fast growing Regenerative and Personalized Medicine industries; (3) providing these growth
industries with a standardized ADSC cell processing platform; (4) enhancing the delivery of healthcare through cellular-based
therapies and applications which address disease treatment, wound and burn healing, joint repair and personalized health and beauty
care; and (5) building a global network of physicians and affiliated laboratory facilities for the delivery of our products and
services.
Our proprietary,
patent pending clinical processing platform allows for the collection, preparation and cryo-preservation of adipose tissue without
manipulation, bio-generation or the addition of animal-derived products or other chemical materials which require removal from
the tissue sample upon retrieval or prior to use. Management believes this core process makes each tissue sample suitable for
use in cosmetic grafting procedures or for further processing to adult stem cells for other types of stem cell therapies. Currently,
we believe there are numerous therapeutic and orthopedic applications for adipose tissue and adult stem cell treatments identified
or in use globally. As of January 1, 2015, a review of clinicaltrials.gov, operated by the US National Institutes of Health (NIH)
indicates that there is a significant number of clinical trials registered or completed that are focused on adipose tissue (1485),
adult stem cells (4649), adipose derived stem cells (124), mesenchymal stem cells (453), and stromal vascular fraction (28).
![](acryo001_v1.jpg)
Products
and Services
American
CryoStem is focused on multiple high margin business lines capable of generating sustainable, recurring revenue streams from each
of our developed products and services. Our products and services are the result of more than five years of scientific development.
The Company also incorporates all of its proprietary and patented or patent pending laboratory products, such as our ACSelerate™
cell culture media, into our processing product production and contract manufacturing services. Additionally, the Company requires
licensee’s of our tissue and cell processing technologies to purchase all the consumable products required in the collection,
processing and storage of tissue/stem cells as part of the licensing agreement.
To date,
we have generated minimal revenue; however, subject to, among other factors, obtaining the requisite financing, management believes
that we are well positioned to leverage our developed products and services as the basis for international distribution through
licensees of our technologies and a host of Regenerative Medicine uses and future applications.
The following
products and services are designed to become the basis of, or an integral part of, numerous planned licensing, revenue generating,
and cellular therapy development activities: Our products and serves are:
· |
CELLECT® |
· |
Tissue
Collection methodology designed for participating physicians to facilitate the collection and overnight shipping of an individual’s
adipose tissue to our FDA registered laboratory; |
|
|
· |
Manufacture
and sale of our Cellect collection boxes to licensees for our ATGRAFT™ and ATCELL™ technologies. |
|
|
|
|
· |
ATGRAFT™ |
· |
Tissue
processing at our Laboratory of a customer’s received adipose tissue and preparation for long term storage in different
configuration sizes allowing future retrieval for tissue grafting procedures or Regenerative Medicine applications
|
|
|
· |
Licensing
of the ATGRAFT™ processing technology to international partners for utilizing our CELLECT™ collection
boxes and ACSelerate mediums. |
|
|
|
|
· |
ATCELL™ |
· |
Clinical
Processing separating the component parts of an individual’s adipose tissue, removing the adipocytes and red blood cells,
and creating the ATCELL™ autologous stem cell lines for storage, expansion, or differentiation |
|
|
· |
Clinical
and Research grade ATCELL™ lines for use with or sale to collaborative partners in research and application development
and optimization, cell morphology and characterization assays, and growth analysis. |
|
|
|
|
· |
ACS
Laboratories™ |
· |
Manufacturing
and sale of our patented ACSelerate cell culture media products |
|
|
· |
Creation
and sale of research grade ATCELL™ |
|
|
· |
Participation
and support of all collaborative research projects |
|
|
· |
Contract
manufacturing, including Autokine-CM® |
|
|
· |
Provide
testing services for physicians performing in-office procedures and tissue processing |
|
|
|
|
· |
International
Licensing |
· |
Standard
Operating Procedures (SOPs) and all associated components and products
|
|
|
· |
Consulting
and Marketing Review and Assessment |
|
|
· |
CELLECT®
|
|
|
· |
ATGRAFT™ |
|
|
· |
ATCELL™
|
|
|
· |
Adipose
tissue processing, cellular expansion and product manufacture |
CELLECT®
Validated Collection, Transportation, and Storage System – An unbreakable “chain of custody” clinical
solution for physicians to collect and deliver tissue samples utilizing proprietary and patent pending methods and materials.
The CELLECT® service is monitored in real-time and assures the highest cell viability upon laboratory receipt.
The Cellect system incorporates our ACSelerate–TR transport medium into all collection bags which supports the health of
the tissue during transport. The CELLECT® kit is an integral part of our validated ATGRAFT™ and
ATCELL™ technology to be used by all licensees. The CELLECT® service
is included in our pending patent application U.S. Serial No. 13/702,304.
American
CryoStem is the first tissue bank to globally incorporate through its CELLECT® service the International
Blood Banking identification and labeling and product identification coding system. The coding was developed in conjunction with
the American Association of Blood Banks (AABB), the American Red Cross and the International Society of Blood Transfusion (ISBT).
These groups formed the International Council for Commonality in Blood Banking Automation (ICCBBA) and developed the ISBT 128
Standard for machine readable labeling. This labeling system is an acceptable machine readable labeling standard, product description,
and bar coding system for FDA Center for Biologics Evaluation and Research under 21 CFR 606.12(c) 13. American CryoStem conforms
to this standard in its Mount Laurel facility and all cellular and tissue products produced at the facility carry our W3750 ICCBBA
facility identifier allowing any hospital, clinic, laboratory and regulator worldwide to identify the origin and obtain additional
information of any sample produced at an American CryoStem facility. The Company will promote this standard in all laboratories
that license or utilize our technology.
ATGRAFT™
Adipose Tissue Storage Service – A clinical fat storage solution allowing physicians to provide their patients
with multiple tissue/stem cell storage options. The ATGRAFT™ service, through one liposuction procedure allows individuals
the benefit of multiple cosmetic or regenerative procedures by using their own stored adipose tissue as a natural biocompatible
filler or cellular therapy application without the trauma of further liposuctions. ATGRAFT™ procedures include breast
reconstruction, layered augmentation, buttocks enhancement or volume corrections of the hands, feet, face and neck areas that
experience significant adipose tissue (fat) volume reduction as we age. ATGRAFT™ is processed and stored
utilizing our cGMP standards so that any stored fat tissue sample may be retrieved in the future and re-processed to create ATCELL™
our clinical grade stem cell product for use in Regenerative Medicine applications. The AGTRAFT™ service is included
in our pending patent application U.S. Serial No. 13/646,647)
The Company’s
charges standardized fees for ATGRAFT™ tissue processing and initial storage ranges from $750 to $3,000, depending
on the volume of tissue processed. The annual storage fee is $200 for up to 100ml of tissue. Storage of tissue over 100ml is billed
an additional $1 per 1ml annually. These fees may be paid by the collecting/treating physician or the consumer. The Company earns
additional fees ranging from $100 to $500 plus shipping costs, paid by the physician upon retrieval, for the thawing, packaging
and shipment of the stored samples to the physician for immediate use upon receipt.
ATGRAFT™
Storage Retrieval fees are determined by the storage configuration as follows:
| · | Small
Sample package – for storages of 100ml of adipose tissue or less. |
| · | Medium
Sample package – for storage of 100ml to 300ml of adipose tissue. |
| · | Large
Storage package – for storage of over 300ml of adipose tissue. |
| · | Custom
Package – storage configuration for pre planned procedures. |
The ATGRAFT™
service creates patient retention and significant revenue opportunities for the participating physician to promote additional
procedures and generate additional fees from waste material collected during liposuction procedures. These additional fees can
be generated with significantly lower physician costs by eliminating the overhead associated with performing a liposuction for
each procedure. Physician cost savings may include: materials, supplies, equipment, and the expenses of utilizing a surgical center,
hospital operating room or an in-office aseptic procedure room. The ATGRAFT™ service is designed to operate under
the minimally manipulated regulations contained in both 21 CFR 1271.10 and PHS 361.
ATCELL™
Adipose Derived Stem Cells (ADSCs) – Clinically processed and characterized adipose derived stem cells (ADSCs)
created using the Company’s proprietary Standard Operating Procedures (SOPs) and patented cell culture media. ATCELL™
is the Company’s trademarked name for its ADSC and differentiated cell products and processing. The Company
can create multiple master and differentiated cell lines and labels them according to their characterization. (i.e. ATCELL™
(adipose derived stem cells) ATCELL-SVF™ (stromal vascular fraction), ATCELL – CH™
(differentiated chondrocytes), etc.. Cell lines are custom created for patients desiring to store their cells for
their own use in future Regenerative Medicine. The Company charges the client fees ranging from $1,500 to $10,000 to process a
previously stored ATGRAFT™ sample or a minimum of $1,500 for newly collected client tissue samples.
Customer samples submitted for processing must utilize the CELLECT® collection system to conform
to our internal cGMP SOPs.
The Company
believes it will earn additional fees based upon the proposed storage configuration of the final ATCELL™
sample and for additional culturing in the ACSelerate™ cell culture and differentiation media.
We believe cell culturing and differentiation can be performed upon receipt of the raw tissue sample or at any time on a previously
processed and cryopreserved ATGRAFT™ or ATCELL™ sample. We believe
ATCELL™ is ideally suited for expansion and differentiation into additional cell types utilizing
the ACSelerate™ SFM (fetal bovine serum (FBS) free media), LSM (low 0.05% FBS media), or differentiation
media. The ATCELL™ products and services are incorporated into our pending patent filing US Serial
No. 13/646,647.
The
Company’s ATCELL™ cell lines are cGMP processed and cultured in our patented
ACSelerate™ – SFM animal product free cell culture media. All tissue, cells, and
research materials that are made available for sale to research institutions are tested for sterility, disease, lifespan, and
population doubling rate (PDL). Additionally, we believe these cells are suited for many types of cellular therapy or
regenerative medicine research. Cell morphology is confirmed by (i) flow cytometry and (ii) differentiation analysis using
ACSelerate™ differentiation media. The Company’s research program makes donor
demographics, processing, and testing data available to the clinical researcher. Each ATCELL™
line can be further cultured and differentiated allowing the Company to provide genetically matched clinical grade cell
types. We believe this research methodology provides opportunities for the Company’s
ATCELL™ and ACSelerate™ products to become building blocks of
final developed commercial applications.
The Company
intends to support its application research, development and collaborative efforts by making ATCELL™
and ATGRAFT™ samples available for research and product development purposes through joint ventures,
university and commercial collaborations. These cell lines we believe will be highly sought after by private researchers and universities
for use in pre-clinical trial studies and in-vitro research due to our clinical processing methodology, donor sample data and
the ability to create multiple cell types that have identical genetic profiles. We believe the clinical processing methods, data
collection and testing of our ATCELL™ and the ability to make multiple cell types from the same
donor line allows research teams to focus on application development and avoid or reduce bench to commercialization delays.
ACSelerate™
Cell Culture Media Products – Manufactured patented cell culture media products for growing human stromal
cells (including all cells found in human skin, fat and other connective tissue). Certain ACSelerate™ cell
culture media lines are available in animal serum free, which is suitable for human clinical and therapeutic uses; and a low serum
version for application development and research purposes is also available.
On August
2, 2011, the Company was issued US patent number 7,989,205 for “Cell Culture Media, Kits and Methods of Use.” The
granted claims include media variations for cellular differentiation of ADSCs into osteoblasts (bone), chondrocytes (cartilage),
adipocytes (fat), neural cells, and smooth muscles cells in both HSA medium (clinical) grade and FBS (research) grade. This patent
covers both non-GMP research grades and GMP clinical grades suitable for cell culture of adipose-derived stem cells intended for
use in humans. Additionally, in 2014 the Company filed a continuation of this granted patent U.S. Serial No. 13/194,900 with additional
claims and improvements.
We
believe the most widely used cell culture medium today for growing and differentiating stem cell cultures for in vitro diagnostics
and research contains 10% or more FBS. The use of FBS and other animal products in clinical cellular therapy application development
and manufacture raises concerns and generates debates within the scientific and regulatory community relating to potential human/animal
cross-contamination. These same concerns may also need to be addressed through additional expensive and expansive testing and
documentation with the FDA during the application and approval process for new cellular therapies. FDA concerns are evidenced
in their Guidance’s and Guidelines regarding cellular therapy involving human cells, tissues and products (HCT/Ps) published
and maintained by the FDA such as: Guidance for Industry: Source Animal, Product, Preclinical and Clinical Issues Concerning the
Use of Xenotransplantation Products in Humans, FDA Final Guidance, April 2003. It is our belief that eliminating or greatly reducing
FBS in cellular manufacturing, applications and products can eliminate or ease these scientific and regulatory concerns and may
prove to be a winning strategy for cellular therapy application developers seeking FDA approval. Similar concerns exist worldwide
in markets governed by agencies similar to the FDA, such as the EMA in the European Union and the controlling regulatory bodies
in Japan, Korea and China, among others.
The
patented ACSelerate™ cell culture media line was specifically developed to address increasing industry
demand for animal serum-free cell culture products and for the acceleration of products from the laboratory to the patient.
Currently,
we believe our media products are being utilized by our research partners engaged in developing novel new cellular applications
and treatments. The Company supports these efforts by also making ATCELL™ samples available for
research purposes and for internal product development through our research programs. We believe these cell lines are highly sought
after by private researchers and universities for use in pre-clinical trial studies and in-vitro research. We also believe that
the Company’s ability to provide clinical grade materials for these research and development collaborators, partners and
other third parties extends the Company’s ability to become a primary source of clinical grade materials and services necessary
to support approved applications and treatments.
The
Company manufactures several versions of its ACSelerate™ cell culture media including:
| · | ACSelerate-SFM™
- our flagship clinical grade, cGMP manufactured animal serum free cell culture
media, which is ideally suited for the rapid expansion of adipose-derived cell samples
for direct use or further culturing into other cell types; |
| · | ACSelerate-LSM™
- our flagship research grade, cGMP manufactured low FBS (0.05%) cell culture
media, which is ideally suited for the rapid expansion of adipose-derived cell samples
for research and cellular application development or further culturing into other research
grade cell types; |
| · | ACSelerate-CY™-
for differentiation of ATCELL™ into chondrocytes (ATCELL-CY™),
which are suitable for use in cartilage repair applications in knees and other joints
for patients suffering from joint injury, osteoarthritis and other diseases that cause
degeneration of joint cartilage; |
| · | ACSelerate-OB™-
for differentiation of ATCELL™ into osteoblasts (ATCELL-OB™)
for the repair of bone injuries resulting from traumatic injury and musculoskeletal diseases; |
| · | ACSelerate-AD™
- for differentiation of ATCELL™ into adipocytes (ATCELL-AD™)
for the repair of adipose tissue defects resulting from injury or surgical procedures
and is designed for those patients without an appropriate amount of body fat for corrective
tissue transfer procedures; |
| · | ACSelerate-MY™-
for differentiation of ATCELL™ into myocytes (ATCELL-MY™)
for the repair of muscle tissue defects and loss as the result of traumatic injury, surgery
or systemic disease; |
| · | ACSelerate-CR™-
a clinical grade, non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media designed
to conform to certain FDA and PHS 361 exemptions available for marketing our ATGRAFT™
service. |
The Company
continues to optimize additional versions of ACSelerate™ media through further research and testing, to
develop versions for differentiation of ATCELL™ADSCs into neural, lung and other specific cell types that
may be necessary for use in future clinical applications. Many of these applications are not currently approved by the US Food
and Drug Administration. On December 31, 2014 the Company filed a new patent application for an advanced medium formulation titled
Human Albumin Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799) representing
the most recent results of this ongoing optimization program.
ACS
Laboratories™: Laboratory Product Sales, Contract Manufacturing and Professional Services–ACS
Laboratories is an unincorporated subsidiary of American CryoStem Corporation, responsible for the sale and licensing of all the
Company’s patented and patent pending cellular, cell culture, processing and testing products to professional, institutional
and commercial clients. The Company operates a separate website (acslaboratories.com) to distinguish the sale of commercial
and research products from its consumer products and services, which are marketed on its main website (americancryostem.com).
ACS Laboratories manufactures a full line of ACSelerate™ cell culture media and ATCELL™ products; and
provides these products to our collaborative partners as further discussed below.
Contract
Manufacturing, Autokine-CM® Anti-Aging, Autologous Skin Care Product Line – Under agreement
with Personal Cell Sciences (PCS), we manufacture the key ingredient Autokine-CM® (autologous adipose derived
stem cell conditioned medium) for PCS’ U-Autologous™ anti-aging topical formulation. Each product is genetically
unique to the patient and custom blended, deriving its key ingredients from the individual client’s own stem cells. The
Company provides its CELLECT® Tissue Collection service to collect the required tissue to manufacture the U-Autologous
product and processes it under the same cGMP standard operating procedures that it developed for the ATGRAFT™ and
ATCELL™ cell processing services utilizing ACSelerate™ cell culture media. The Company receives collection,
processing and long term storage fees and earns a royalty on all U-Autologous product sales. The utilization of the Company’s
core services in its contract manufacturing relationships provides opportunities for the Company to promote ATGRAFT™
and ATCELL™ products.
Our Company’s
contract manufacturing services can be extended to develop custom and/or white label products and services for both local and
global cosmetic and regenerative medicine companies, physicians, wellness clinics and med spas. The Company intends to expand
its relationships and contract manufacturing regionally through its physician networks and globally through its International
Licensing Program.
International
Licensing Program – The Company believes that globally, many jurisdictions outside the US currently permit use of cellular
therapies and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing
of our SOPs, products and services in international jurisdictions to service the Regenerative Medicine and Medical Tourism Markets.
The Company believes that the inquiries to date are a result of the global boom in Medical Tourism and the slow pace of approval
of cellular therapies and regenerative medicine applications in the US. To attempt to expand the Company’s sales, marketing
and branding opportunities globally, the Company has created an international licensing program.
Significant
to our international development activities is the proposed global expansion of the American CryoStem branded services and patented
products, as well as the proposed expansion of the Company’s services, technology and products as the core platform to implement
cellular therapies and regenerative medicine.
The
Company believes it can take advantage of the significant growth of the global cellular therapy market through its international
licensing and marketing efforts. A recently published study by Transparency Market Research predicts that the Stem Cell market
will grow at a CAGR of 24.2% upon its value of US $26.23 billion in 2013 and will reach an approximate value of US $119.52 billion
by 2019. The report, titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012
- 2018”; (http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research.)
Product
Development
Our strategic
approach to product development is to design, develop and launch new products and services that utilize our existing products
and services. Management believes that this approach will provide the Company with opportunities to produce near term cash flow,
strong recurring revenue streams, strong international licensing partners and complementary scientific data. We focus on developing
products, services and applications that require tissue collection and processing as the initial requirement to produce cellular
therapies and products. These products and services may include adipose tissue and stem cell sample processing and storage as
a form of personal “bio-insurance”, adipose tissue (fat) storage for cosmetic fat engraftment procedures, and
the creation and production of topical applications and ingredients used by other companies in the wound care and cosmetic industries
as well as cellular applications and bio-materials development.
We intend
to focus our efforts on expanding our product and services pipelines based upon our intellectual property portfolio, collaborative
development relationships, product sales and distribution, and international licensing and partnering opportunities. Our current
activities include supporting our university and industry collaborations by providing our products and services with the expectation
that our products and services become the basis for new adipose tissue and stem cell based Regenerative Medicine and cellular
therapy applications. We believe this strategy allows our proposed research partners and their application development to begin
with clinically harvested and processed adipose tissue and ADSCs (ATCELL™), which may be a significant
step toward accelerating the development and approval of new treatments.
Collaboration
and Partnering Opportunities
Protein
Genomics and Formation of Autogenesis Corporation
In
2012, American CryoStem entered into a Memorandum of Understanding (MOU) outlining our initial collaborative efforts with Protein
Genomics, Inc. (PGEN) to test and develop new products by combining certain components of our respective intellectual property
and patented products. We have provided PGEN and its research partner, Development Engineering Sciences (DES), with Adipose Derived
Stem Cells (ATCELL™) and our patented cell culture mediums (ACSelerate™) for testing with PGEN’s patented products
designed for the wound healing market. Research and development has been ongoing since late 2012 and notable progress has been
achieved. In October of 2013, the early results of this initiative was the subject of local media coverage in Arizona showcasing
the groundwork laid by PGEN, DES and American CryoStem in providing assistance in what we believe is a quicker way to heal skin
injuries using a patient’s stem cells.
As
a result of the success realized in the early stage of this research collaboration, in fiscal 2013 we entered into a formal joint
venture with Protein Genomics through the incorporation of Autogenesis, Corp. as required by the 2012 MOU. Each company (CRYO
and PGen) initially has an equal ownership interest. All products capable of being commercialized, as well as any new intellectual
property, resulting from the ongoing scientific collaboration will be wholly-owned by Autogenesis. This is representative of how
we believe additional research collaborations utilizing our Company’s technology may evolve in the future.
During
2013 and 2014, the collaborative efforts resulted in successful initial “proof of concept” combining PGEN’s
unique biomaterial and the Company’s ATCELL™ product. Management believes the publication of the preliminary results
showed successful healing of full depth wounds on the backs of immune deficient mice. Following this publication the partnership
agreed to file grant applications to fund the additional research. The grant applications were prepared and filed in 2014.
Our
collaborative research has established that membrane scaffolds fabricated from human proteins can be cultivated with ATCELL cells
causing the scaffolds to rapidly, completely become covered by the cells. The cells then secrete their own extracellular matrix,
creating a structure with layers of matrix, cells and scaffold. This living structure, when introduced into a mouse wound model,
localizes the stem cells in the wound, protects the cells within the wound environment, promotes cell growth and causes a statistically
significant increase in the rate of wound closure and healing compared to the standard of care. Further evaluation will
measure the performance of these scaffolds in accelerating the rate of wound closure, healed scar thickness, growth of new blood
vessels and production of key wound healing factors. Our objective is to show that these constructs can stimulate the growth of
new tissue and promote wound closure and healing. The next step in developing this remarkable result is preclinical and clinical
studies in humans.
Rutgers
University
In
May of 2012, American CryoStem entered into Material Transfer Agreements with three research scientists at Rutgers University
allowing them to utilize the Company’s autologous Adipose-Derived Stem Cells (ATCELL™) and patented, serum free, GMP
grade cell culture and differentiation mediums (ACSelerate™) for evaluation with the anticipation to implement additional
agreements to research, develop and commercialize innovative new cellular therapies targeting incurable diseases, neurological
disorders and the $5 billion global wound care market.
In
December of 2012, American CryoStem and Rutgers University executed a Collaboration and Research Agreement involving
stem cell differentiation molecules and molecular biological reagents under the direction and supervision of Dr. KiBum Lee, the
PRINCIPAL INVESTIGATOR (PI). Our collaborative efforts have advanced rapidly and new intellectual
property resulted from this work. Based on the collaborative efforts under the Collaboration and Research Agreement, our Company’s
patent counsel prepared patent applications based upon earlier developments which are now optioned to American CryoStem. In addition,
American CryoStem’s agreement with Rutgers University allows us the use of intellectual property and biomaterials developed
by Dr. Lee and his team in combination with our ATCELL™ and ACSelerate™ products
for the development of new cellular therapies and regenerative medicine applications. To support the new discoveries, Dr.
Lee and our professionals will develop, file and publish patent applications, research papers, government and private grant funding
applications to support future clinical studies as appropriate.
During
2013 and 2014 the Company and Dr. Lee’s team investigated various combinations of NanoScript and ATCELL™
focused on the regeneration of neural, cartilage and muscle cells. This research led to
filing a new patent jointly owned by Rutgers and the Company entitled “Nanoparticle-Mediated Synthetic Transcription Factor
from Enhanced Gene Expression and Cell Differentiation” and the publication of papers and posters by Dr. Lee’s team.
Dr. Lee’s team also received an initial seed grant to Dr. Lee from Rutgers neural engineering group. The team is continuing
its research, the creation of scientific papers and in 2014 filed for a new grant with the National Institute of Health.
Additional
Collaborations
The
Company is in the early stages of developing collaborations with additional industry and university partners. These developing
relationships in their earliest stages are covered by Confidential Disclosure Agreements and those that are more advanced also
include Material Transfer Agreements under which the Company supplies either ATCELL or ACSelerate™ medium products
for evaluation, testing, and the development of new cellular therapy applications.
To
Date the Company has advanced to a Material Transfer Agreement with the University of Miami, University of Washington, UHV Technologies,
and STEMCell Technologies and has provided both ATCELL™ and ACSelerate™ products to these entities
under Agreement. No assurance can be given that these relationships will progress to full collaborative agreements or ultimately
result in new technology for future commercialization.
Institutional
Review Board Approval of Protocols
In
an effort to make it easier for other physicians and researchers to study the safety of SVF and ADSCs, in 2013 we sought approval
from the Institutional Review Board (IRB) of the International Cell Surgical Society (ICSS) of our protocols for the processing
of SVF and culturing of mesenchymal stem cells from autologous adipose tissue. The two protocols, titled: Autologous
Adipose Tissue-Derived Stromal Vascular Fraction (SVF) Containing Adult Stem Cells with Isolation of SVF, and Culturing
of Adipose Derived Stem Cells (ADSCs) For Use in Institutional Review Board Studies, (the “IRB Studies”) provide
appropriate processing, storage and testing methods necessary to move the clinical investigative process towards uniform treatments.
The collection of cGMP processing and outcome data from IRB approved protocols is required by prevailing FDA regulations and guidance
for approval of regenerative cellular therapies, including potency (cell count), contamination testing and cell viability.
The
ICSS IRB thoroughly evaluated every step of our standardized processing protocols, which serve to isolate the SVF or ADSCs from
a patient’s adipose tissue. The objective of the IRB was to assess these protocols to ensure the highest patient safety possible
and to minimize the risks for those participating in innovative research and investigational studies. On June 30, 2013, the ICSS
IRB approved the protocols until June 30, 2014. Additionally,
the Company obtained approval for a new study, entitled “Comparative Viability Assessment of Human Adipose Tissue
before and After Cryopreservation (ICSS -2013-010), the Study was approved on November 22, 2013 and is valid until November
22, 2014
In
June of 2014 the Company submitted its IRB Studies to another Institutional Review Board; The Institute of Regenerative Cellular
Medicine (the “IRCM”) and on July 23, 2014 the ICEM IRB approved the following studies:
| · | Isolation
of SVF: Autologous Adipose Derived Stromal Vascular Fraction Containing Adult Stem Cells
(IRCM 2014-024) until July 23, 2015 |
| · | Comparative
Viability Assessment of Humean Adipose Tissue Before and After Cryopreservation (IRCM
2014-025) until July 23, 2015 |
| · | Isolation
of SCF and Culturing Adipose Derived Stem Cells for Use in Investigational Review Board
Studies (IRCM 2014-023) until July 23, 2015 |
The
Company is currently making its processing services available to physicians and clinical researchers utilizing the IRB-approved
protocols for inclusion in their studies. By adopting these standardized and repeatable protocols utilizing our laboratory services,
researchers are able to focus their resources on application development rather than creating, validating and managing a clinical
laboratory for processing tissue and cellular samples. These studies above do not currently involve actual human clinical trials,
but affords the IRB the opportunity to endorse our repeatable, standardized and validated processing methodologies for the isolation
of SVF and for tissue culture expansion of ADSCs obtained from SVF as the basis for future human clinical study.
In
2014, the Company created and is the Sponsor of a new IRB study with The DaVinci Center, Dr. Louis Cona, Principal Investigator,
in George Town, Grand Cayman Island entitled Impact and Safety of Cultured Expanded Autologous, Adipose-Derived
Stem Cells deployed via Intravenous Injection for the Treatment of Multiple Sclerosis Protocol: CRYO-MS-ADSC-006. On July
23, 2014 the study was approved for 100 patients. On November 1, 2014 the first patient was treated at the Da Vinci
Center utilizing the approved protocol. The IRB filing can be found on www.clinicaltrials.gov, (ClinicalTrials.gov Identifier
NCT02326935).
Management
intends to pursue additional collaborative and partnering opportunities as a strategic method to enhance awareness of and expand
the distribution of our patented products, services, technologies and expertise in the IRB-approved clinical processing of adult
adipose tissue and ADSCs for autologous (self) use. We believe that as the pace of clinical trials and result reporting increase
and scientific and peer reviewed papers are published, new opportunities to market our existing products, services and Intellectual
Property portfolio may also emerge.
Moreover,
we believe that the combination of our validated cellular processing capabilities and patented products give us an economical
platform to develop and produce cellular therapy applications for injection or intravenous therapy, topical applications, burn
and wound healing, joint repair, disease treatments and cosmeticeuticals. The clinical methods and products we have developed
are designed to permit a variety of treatments for any patient with their own genetically matched raw materials ATCELL™
and ATGRAFT™ prepared with our patent pending line of ACSelerate cell culture
mediums. Autologous cellular therapies have shown promising results for safety and efficacy
in a variety of applications in published early stage clinical trial results and application studies.
Our Company
has filed multiple patent applications for our products and methods to be used in the IRB studies, which include:
|
· |
ACSelerate-SF™ (animal serum free) 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. |
Regulatory
Information
The Company
has spent years developing processing methodologies and the testing laboratory facilities which are designed to be in compliance
with all current Good Manufacturing Practices (cGMP) and current Good Tissue Practices (cGTP) as defined by the United States
Public Health Service Act (“PHS” or the “PHS Act”) and the Food and Drug Administration (FDA) regulations
as they relate to the operation of a tissue processing and storage facility.
The Company’s
Mount Laurel facility is registered with the FDA (FEI 3008307548) as a processing and storage facility for Human Cells, Tissues
and Cellular and Tissue Based Products (HCT/Ps) since 2010. In 2013, we registered the facility with the State of New York (CP169TP136)
and the State of California (CNC80948) the only states in the U.S. requiring registration. We renew the registrations as required.
These state registrations required the submission of our SOPs for review by the respective State Health Departments, and annual
updates to maintain the registrations are required. In addition, we have discussed our operations with the State of New Jersey
Health Department and Department of Environmental Protection (DEP) to ascertain any special regulations to which we may be subject.
Based upon these discussions, and our use of a registered medical waste disposal company, we do not at this time have any special
registrations or regulations for compliance with the State of New Jersey. Our New Jersey Medical Waste Generator registration
number is 036439.
The Company
is also subject to complying with a significant body of FDA and PHS regulation; the regulations governing our business are mainly
contained within 21 CFR 1271.10, 800, 600, 200, 210 and 211. The forgoing regulations govern all aspects of the Company’s
SOPs, which we periodically review with our FDA consultants.
Our SOPs
are the key to properly operating our clinical tissue processing facility. To ensure delivery of the highest quality services,
we incorporate these SOPs, which are designed to provide a basis for accreditation by the American Association of Blood Banks
(AABB), the American Association of Tissue Banks (AATB) and the Foundation for the Accreditation of Cellular Therapy (FACT-JACIE).
We have consistently endeavored to ensure that our processes, methodologies and procedures are and remain among the highest standards
in the global tissue collection, processing and storage market. To this end, we have equipped ourselves with state-of-the-art
quality processing and testing equipment, which help to ensure that every sample that is collected and processed is sterile (free
from adventitious agents), viable and capable of significant growth and expansion. While published studies generally report total
viable cells, our assessment testing also reports each sample’s growth capabilities.
Quality
Management
The
Company’s quality management program ensures that during processing and testing of each adipose tissue or SVF sample, the
appropriate quality management tests and processing methodologies are performed and the data is collected, recorded and reviewed
by the laboratory management team.
Chain
of Custody Control
Central
to the individual sample testing is an unbroken chain of custody and tracking. Sample tracking begins with the creation of each
collection box. All samples, processing, quality management, batch, and storage documents and records, are coded with this unique
number. All records and testing samples are cross referenced and verified as required by the standard operating procedures.
Testing
Design and Standard Operating Procedures
Testing
methods are standardized and operate under a complete set of validated SOPs and Quality Management (QM) processes. All SOPs are
designed to be in compliance with the US Food and Drug Administration’s cGMP/cGTP regulations and guidance for aseptic processing.
Strict QM is enforced to avoid and/or record any process deviations.
Intellectual
Property
From the
Company’s formation, our strategy has been to invest time and capital in intellectual property protection. This strategy
is intended to strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing
our IP portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative
partnerships with third parties. Our intellectual property portfolio currently includes one issued U.S. patent (No. 7989205, Cell
Culture Media Kits and Methods of Use); and five pending patent applications which are detailed in the following chart:
PATENT
TITLE |
USE
OF PATENT |
APPLICATION
# |
A
Business Method for “Collection, Cryogenic Storage and Distribution of a Biological Sample Material” |
Company
Core Tissue Collection Processing and Storage Methodology |
U.S.
Serial No. 13/702,304 filed June 6, 2011, and claiming a priority date of June 7, 2010 from provisional application 61/352,217 |
Systems
and Methods for “The Digestion of Adipose Tissue Samples Obtained From a Client for Cryopreservation” |
Adipose
Tissue Digestion Laboratory Processing Methods |
U.S.
Serial No. 13/646,647 filed October 5, 2012, and claiming a priority date of October 6, 2011 from provisional application
61/544,103 |
Compositions
and Methods for “Collecting, Washing, Cyroprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures” |
Company
Adipose Tissue Storage Platform for Cosmetic Procedures |
PCT/US13/44621
Filed June 6, 2013 and claiming a priority date of June 7, 2012 |
Stem
Cell-Based Therapeutic Devices and Methods |
Combining
ADRCs with Biomaterials for healing and tissue growth |
U.
S. Serial No. 14/196,616 filed March 4, 2014 and claiming a priority date from provisional
application 61/773,112 filed March 5, 2013 |
Autologous
Serum for Transport of Isolated Stromal Vascular Fraction or Adipose Derived Stem Cells |
Utilization
of Autologous Blood Components for the Transport of Adipose Derived Cells to a Patient |
U.S. Serial No. 14,250,338
and claiming a priority date from provisional application 61/810,970
filed April 11, 2013 |
Cell
Culture Media, Kits, and Methods of Use |
Continuation
of U.S. Serial No. 11/542,863, includes Optimized and improvements to Media Formulations |
U.S.
Serial No. 13/194,900 |
Additionally,
the Company has in-licensed or filed jointly owned IP with the following collaborations and joint ventures;
PATENT
TITLE |
USE
OF PATENT |
APPLICATION
# |
Nanoparticle-Mediated
Synthetic Transcription Factor from Enhanced Gene Expression and Cell Differentiation |
Rutgers
collaboration and R&D |
Rutgers Docket Number
20113-013
USPTO Provisional Filing
No. 61/947,898
(Jointly owned with
Rutgers) |
Direct
Stamping-Assisted Graphene Oxide Patterned Substrates for Controlling Adipose Derived Adult Stem Cell Differentiation |
Rutgers
collaboration and R&D |
Rutgers
Docket Number 2014-024 |
Single
Vehicular Delivery of siRNA and Small Molecules to Control Stem Cell Differentiation |
Rutgers
collaboration and R&D |
Docket
Number 2014-034 |
Devices
and Methods to Guide Stem Cell Differentiation Using Graphene Nanofiber Hybrid Scaffold |
Rutgers
collaboration and R&D |
US
Provisional Filing No. 61/978,177 |
Cosmetic
compositions including tropoelastin isomorphs |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#5,726,040 |
Cosmetic
compositions |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,451,326 |
Recombinant
hair treatment compositions |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,572,845 |
Wound
healing compositions and methods using tropoelastin and lysyl oxidase |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO:
#6,808,707 |
Business
methods, processes and systems for collection, cryogenic storage and distribution of cosmetic formulations from an obtained
stem cell based biological |
Personal
Cell Sciences and American CryoStem collaboration |
USPTO
application #61/588,841 |
Trademarks
In addition
to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office: American CryoStem®,
CELLECT® and ATGRAFT™. We plan to obtain additional registered trademarks for our future
products, slogans and themes to be used in our marketing initiatives, including, for example, ACSelerate-SFM™,
ACSelerate- LSM™ and ATCELL™.
The Company
has also secured a number of online domain names relevant to its business, including www.americancryostem.com and www.acslaboratories.com.
Market
Size and Opportunities
By leveraging
and capitalizing on our proprietary Adipose Tissue Processing Platform, our Company is working to address multiple high growth,
multi-billion dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals, Medical
Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market size of
its intended domestic and international markets and to identify additional areas within these markets where the Company’s
cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.
A recent
report published by Markets and Markets Research in July 2014 titled “Cell Culture Market by Equipment (Bioreactor, Incubator,
Centrifuge), by Reagent (Media, Sera, Growth Factors, Serum Free Media), by Application (Cancer Research, Gene Therapy, Drug Development,
Vaccine Production, Toxicity Testing) - Global Forecast to 2018” July 2014. (http://www.marketsandmarkets.com/Market-Reports/cell-culture-market-media-sera-reagents-559.html)
The report
states that “The global cell culture market was valued at $ 14,772 million in 2013 and is poised to grow at a CAGR of
10.71% between 2013 and 2018, to reach $24,574 million in 2018. Rapid increase in biopharmaceutical production and increasing
healthcare expenditure will be the two most important growth drivers for this market in the forecast period from 2013 to 2018.
Biopharmaceutical production had the largest share of the cell culture market in 2013. According to IMS Health, biopharmaceutical
is expected to one of the fastest growing pharmaceutical segment between 2012 and 2017. The increasing demand for biopharmaceutical
products like vaccines and antibodies coupled with strong pipelines for biopharmaceuticals and increasing healthcare expenditure
will drive the demand for cell culture products.”
The Report
further states that “The global cell culture market comprises of cell culture equipment and cell culture media, sera,
and reagent markets. The cell culture equipment market consists of five equipment segments, namely, lab equipment, bio-safety
cabinets, consumables, storage equipment, and sterilization equipment. On the other hand, the cell culture media, sera, and reagents
market consists of six segments, namely, serum, media, lab reagents, contamination detection kits, cryoprotective agents, and
other reagents.
The
application segments included in this report are biopharmaceutical production, tissue culture and engineering, vaccine production,
drug screening and development, gene therapy, toxicity testing, cancer research, and other applications. The biopharmaceutical
application segment had the largest share of the cell culture market in 2013, owing to the large demand for cell culture sera,
media, and reagents for biopharmaceutical production.”
Another
report by Transparency Market Research titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends
and Forecast, 2012 - 2018” states “The Global Stem Cells Market to grow at a CAGR of 24.2%, to Push US$119.52
billion by 2019. The report analyzes the highly fragmented stem cells market by the type of stem cells, processes in the
stem cell market, applications of stem cells, and geography. Regenerative medicine is by far the dominant application of stem
cells, including uses in neurology, cardiology, and oncology. According to process, the market is divided into the stem cell acquisition,
stem cell production, stem cell cryopreservation, and stem cell expansion segments. Due to the expected increase in demand, stem
cell acquisition will retain its position as the major segment of the stem cell market. Geographically, North America and Europe
will remain well ahead of the competition.”
(http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research.html#sthash.4vzqG1wc.dpuf)
Regenerative
Medicine Market
According
to a leading research firm focused on the biotechnology, healthcare and life sciences industries, TriMark Publications categorizes
the Regenerative Medicine market into three main categories:
| · | Biomolecules
(scaffolds, growth factors and stem cell therapy). |
TriMark
Publications.com cites in its “Regenerative Medicine Markets” report (March 2013) that the Regenerative Medicine market
continues to witness significant advances in clinical efficacy, regulatory approval and product commercialization of cell based
therapies which will catapult to over $35 billion by 2019. Affirmative results produced from the application of adult stem cells
have resulted in greater government and private sector investment in research and development of new cell therapies. Investment
made into the regenerative medicine market include firms that harvest, process, purify, expand, cryopreserve, store or administer
stem cells.”1
According
to BCC Research (January 2013), the market for Regenerative Medicine continues to grow worldwide. “It is expected to
accelerate at roughly 12% annually, from $3.8 billion in 2011 to $6.6 billion in 2016”. BCC Research states “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.”2
Medical
Tourism, Global Wellness Tourism
As
stated by the Global Wellness Institute; adding up all expenditures made by international/inbound and domestic, primary and secondary
wellness tourists, we estimate the wellness tourism industry to be $494 billion in 2013, a 12.7% increase over 2012. Wellness
tourism accounts for 14.6% of all tourism expenditures and is growing much faster than the 7.3% growth rate for overall tourism
expenditures from 2012-2013.
The
$494 billion in wellness tourism expenditures represent 586.5 million wellness trips taken in 2013, across 211 countries. Wellness
tourism accounts for about 6.2% of all domestic and international tourism trips taken in 2013.
http://www.globalwellnesssummit.com/images/stories/gsws2014/pdf/GWI_Global_Spa_and_Wellness_Economy_Monitor_Full_
Report_Final.pdf
Cell
Culture Market
1http://www.trimarkpublications.com/regenerative-medicine-markets/
2http://www.bccresearch.com/market-research/biotechnology/stem-cells-global-markets-bio035d.html
The
Company believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experiment variability. By standardizing handling, storage, and transportation
protocols we believe we can substantially improve the quality and reproducibility of preclinical and clinical data which we believe
will help to accelerate the transition from lab research to drug development and market launch.
Cosmeceutical
Market
Many industry
experts agree that Cosmeceuticals has become one of the fastest growing segment of the Cosmetics and Personal Care industry. Cosmeceutical
products have a big emphasis on scientifically advanced formulations and often contain active ingredients that can also be found
in pharmaceutical products. This continued emergence of increasingly sophisticated active ingredients is said to be the main driving
force behind the growth of this segment, which is rapidly evolving into significant category of the personal care industry.
In
a report titled Global Cosmeceuticals Market Outlook 2016, published February 2013, RNCOS reports that the worldwide market
is estimated to be valued at $30.5 billion and is likely to grow at a consistent CAGR of 7.7% during the period 2012 through 2016.3
In a separate report, Transparency Market Research, a U.S. - based market intelligence firm states that the global facial
care market is expected to report an approximate value of $39.75 billion by 2019. The report, titled ‘Facial Care
Market (By Product Type - Skin Whitening/ Lightening and Anti-Ageing, Facial Creams, Face Wash, Cleansing Wipes, Serums and Masks
and Others (fade creams, pore strips and toners)- Asia-Pacific Industry Analysis, Size, Share, Growth, Trends and Forecast 2013
– 2019. http://globenewswire.com/news-release/2014/10/17/674123/10103135/en/Global-Facial-Care-Market-to-be-Worth-39-75-Billion-by-the-year-2019-Transparency-Market-Research.html
Marketing
and Distribution
The key
objective of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for adipose
tissue collection, cell processing and cryogenic storage, - therapeutic applications, and research/commercial uses of adipose
tissue within the current regulatory framework. The combination of a traditional sales approach supported by continuous internal
and external marketing programs are/will be closely coordinated with the expansion of our laboratory processing capabilities.
Our initial marketing efforts intend to disseminate current and future uses of adipose tissue and adult stem cells which support
our business model, products and services. In 2015, we intend to continue to employ both print advertising and social media sales
campaigns. In addition, we plan to continue to utilize key leaders, and early adopters in the medical community as a marketing
resource to enhance awareness of our proprietary, patented products and services and to increase the number of surgeons who join
our network, university and private collaboration and consumers who use our products and services.
We plan
to continue direct marketing programs focused on reaching plastic and cosmetic surgeons to join the initial group of providers
that began to offer our services to their patients in 2014. This marketing initiative has been implemented using a traditional
sales approach common to the pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing
activities is being strategically and tactically expanded using a combination of in-house sales personnel and outside independent
channels.
Our plan,
capital permitting, provides for a comprehensive integrated marketing approach using various traditional and new media, such as
the Internet, social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and promote
awareness of our Company and our branded products and services. The essence of this targeted strategy is to reach the end-users
as quickly as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside marketing
resources and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Development of
Regional U.S. Markets
3 http://www.researchandmarkets.com/research/mbmvbh/global
Physician
Network
The Company
continues to develop regional relationships to leverage its new products and services through existing cosmetic surgery and regenerative
medicine practices. The Company continues to develop and expand its network of physicians seeking to adopt its products and services,
initially focusing on surgeons performing liposuction, tissue transfer and regenerative procedures involving the use of adipose
tissue. The Company intends to continue expanding its efforts to medical professionals interested in Regenerative Medicine applications
utilizing ASDCs and establish itself as a primary source of collection, processing, and preparation of cellular therapies as they
are developed and approved for patient use by the FDA.
The
Stern Center
During
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.
Development
of International Markets
International
Licensing Program – Globally, many jurisdictions outside the US permit the use of adipose tissue, cellular therapies
and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products
and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these
inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering
an International Licensing Program.
The
program is designed to permit the licensing of the company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable
of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate
the CELLECT®, ATGRAFT™ and ATCELL™ services in their local market.
Strategically, the Company’s international licensees will maintain the branding of the Company’s services along the
lines of the “Intel Inside” branding program.
Qualified
Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual stem
cell samples for their clients with the comfort and confidence that they are providing services that have been developed to US
FDA standards. Core to the relationship is the developed proprietary and patent pending processing and laboratory operational
methodologies contained in our Standard Operating Procedures, Training, and Continuous Quality Management, Testing Program, and
Laboratory Operations manuals.
Licensing
programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI
agreement is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the
agreement which is credited toward future royalty payments. Following evaluation of the prospective licensee the Compay will enter
into a final Agreement which outlines all upfront fees, minimum royalties and consumable purchase obligations of the Licnesee.
The Company;’s first international licensing agreement was executed with Health Innovative Technology Company, LTD, a cord
blood collection and storage company with operations in Hong Kong and Shenzen China.
Significant
to our international development activities is the global expansion of the American CryoStem branded services and patented products,
as well as the expansion of the Company’s services, technology and products as the core platform to implement cellular therapies
and regenerative medicine.
Health
Information Technology Company, LTD
On
June 30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the
Company’s Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service
for Hong Kong. The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by
the Company. The Company and HIT have reached further agreement to extend their relationship on a non exclusive basis to include
HIT’s cord blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic
Zones.
The HIT agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will
also purchase CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kit as well as other American
CryoStem products necessary for clinical adipose tissue processing and storage at the Shenzhen cord blood collection facility.
The final master licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September
24, 2014.
BALS
Institute
On April
23, 2013, we announced receipt of our first commercial international shipment of adipose tissue
for processing and long term cryostorage. 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 cryostorage facilities in New Jersey are now able to send and receive viable tissue samples
to and from clients globally.
Scientific
and Medical Advisory Board
To expand
our Scientific, R&D and product marketing efforts we actively recruit and enlist the services of highly qualified peer leaders
through our Scientific and Medical Advisory Board to assist us in our industry speaking engagements and education platform. Our
education platform is designed to focus on physicians, and industry needs and demands as they relate to current and future treatments
utilizing our adipose tissue platform and adult stem cell technologies. Additionally, members of our advisory board provide assistance
and input to management on the oversight of our research relationships, laboratory development, aquality management systems and
sales and marketing of our products. The following are members to our Scientific and Medical Advisory Board:
Dr.
Gao is a world-renowned Professor of Mechanical Engineering and Biomedical Engineering at the University of Washington in Seattle.
He has been actively engaged in cryopreservation research for more than 20 years, with specific emphasis on fundamental and applied
cryobiology, which is the investigation of mechanisms in cryo-injury and cryo-protection with respect to living biological systems
at low temperatures; with the development of optimal methods and technologies for the cryopreservation; and with the banking of
living cells and tissues for biomedical applications. Dr. Gao has published 175 research papers in prestigious scientific/biomedical
journals, with over 250 papers/abstracts in conference proceedings. He has obtained 16 patents, and authored two scientific books
and numerous chapters in 17 scientific books. He currently serves on the Editorial Board, as Editor-in-Chief, of six scientific
journals, and is the Editor of the Cryopreservation Engineering section of Biopreservation and Biobanking. His research
in cryobiology and cryopreservation has been funded by the National Institutes of Health, the American Cancer Society, the Bill
and Melinda Gates Foundation, the American Heart Association, the Whitaker Foundation, the Washington Research Foundation and
the Kentucky Science Foundation, among others. Dr. Gao graduated with B.Sc. degree from the University of Science and Technology
in China, and received a Ph.D. in Mechanical Engineering from Concordia University, Montreal, Canada.
| · | Burt
D. Ensley, Ph.D. 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
Jacoby, MD – Laboratory Director Dr.
Jacoby is a board certified dermatologist, pathologist and dermatopathologist. Dr. Jacoby’s
extensive career includes a significant body of peer reviewed publications, numerous
medical journal editorial positions and professional and academic lecture invitations.
Dr. Jacoby is or has been a member of numerous professional and scientific societies
including the American Academy of Dermatology, the American Medical Association and the
International Society of Dermatopathology. In addition to his role with American CryoStem,
he is also part of the academic faculty, specializing in Health Policy, at a major Philadelphia,
Pa. university medical center. Dr. Jacoby received his BA in psychology from New York
University and his MD from Jefferson Medical College of Thomas Jefferson University.
He has practiced clinical dermatology and dermatopathology in academic, private and corporate
settings. His past corporate positions include Chief Medical Officer of two pathology
laboratory companies and Regional Managing Director of a publicly traded laboratory company.
|
| · | 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.
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.
Dr.
Mittman currently serves as a senior partner of Seaview Orthopaedic 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 orthopaedics, 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 orthopaedic training in 1978 at Montefiore Hospital in New York. He is
a member of the New Jersey Orthopaedic Society, Orthopaedic Surgeons of New Jersey, Monmouth County Medical Society and the American
College of Sports Medicine.
| · | 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 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.
Davis is currently a partner in and the Chief Operating Officer of Novare, LLC. NovareBiologistics 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.
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.
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.
Available
information
We file
electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at
http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information
on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.
Item
1A. Risk Factors
To
date we have generated only minimal operating revenues. Our recurring losses from operations and negative cash flows from operations
raise substantial doubt about our ability to continue as a going concern and as a result, our independent registered public accounting
firm included an explanatory paragraph in its report on our financial statements for the fiscal year ended September 30, 2014
with respect to this uncertainty which is included in this 10K. Substantial doubt about our ability to continue as a going concern
may create negative reactions to the price of our Common Stock and we may have a more difficult time obtaining financing.
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 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
from any revenues we generate and through the issue and sale of debt and/or equity securities. The recoverability of the costs
incurred by us to date is highly uncertain and is dependent upon, among other items, 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
have financed our development activities and expenses since inception through the sale of our debt and equity 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.
Even
if we obtain funding, we still 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.
Statements
concerning our future plans and operations are dependent on our ability to secure adequate funding and the absence of unexpected
delays or adverse developments. We may not be able to secure required funding.
The
statements concerning future events or developments or our future activities, such as current or planned research and development
activities, anticipated products and services, anticipated commercial introduction of products and services, and other statements
concerning our future operations and activities, are forward-looking statements that in each instance assume that we are able
to obtain sufficient funding in the near term and thereafter to support such activities and continue our operations and planned
activities in a timely manner. There can be no assurance that this will be the case. Also, such statements assume that there are
no significant unexpected developments or events that delay or prevent such activities from occurring. Failure to timely obtain
sufficient funding, or unexpected development or events, could delay the occurrence of such events or prevent the events described
in any such statements from occurring which could adversely affect our business, financial condition and results of operations.
We
have significant payment obligations under certain Notes due between January through July 2015. Any non-payment of the Notes when
due in the absence of an extension of the maturity date would constitute event of default under the Notes, and our financial condition
may be adversely affected.
As
of September 30, 2014, the Company had issued and outstanding $596,000 aggregate principal amount of Bridge Notes, which mature,
between January through July 2015 and bear interest at the rate of 8% per annum and $168,000 aggregate principal amount of Convertible
Notes which mature in September 2014, which Convertible Notes are convertible into shares of Common Stock and the rate of one
(1) share of Common Stock for each $0.35 of principal amount and/or interest so converted, and 30,000 of 8% convertible notes
which mature in September of 2016 and are convertible into shares of Common Stock and the rate of one (1) share of Common Stock
for each $0.30 of principal amount and/or interest so converted No assurances can be given that the Company will have sufficient
funds to repay the principal and/or interest on such Bridge Notes when due or on the Convertible Notes such Convertible Notes
are converted into Common Stock prior to maturity. In such event, we might be subject to, among other things, non-payment claims
of the Note holders, and our financial condition may be adversely affected.
Our
limited operating history may make it difficult to evaluate our business and our future viability.
We
are in the relatively early stage of operations and have only a limited operating history on which to base an evaluation of our
business and prospects. Even if we successfully obtain additional funding, we are subject to the risks associated with development
stage companies with a limited operating history, including: the need for additional financing; the uncertainty of research and
development efforts; successful commercialization of our products and services; market and customer acceptance of our products
and services; unexpected issues with federal or state regulatory authorities; competition from larger organizations; dependence
on key personnel; uncertain patent or other intellectual property protection; fluctuations in expenses; and dependence on corporate
partners and collaborators. Any failure to successfully address these risks and uncertainties could seriously harm our business
and prospects. We may not succeed given the technological, marketing, strategic and competitive challenges we will face. The likelihood
of our success must be considered in light of the expenses, difficulties, complications, problems and delays frequently encountered
in connection with the growth of a new business, the continuing development of new drug technology, and the competitive and regulatory
environment in which we operate or may choose to operate in the future.
Many
of our products, services and technologies are in early stages of development.
Processing
and cryogenic storage of adipose tissue and stem cells, and application development is in the early stages of development, and
there can be no assurance that our business will be successful. Further, potential products based upon individuals’ stem
cells will require extensive additional research and development before any commercial introduction. There can be no assurance
that any future research and development will result in viable products or meet efficacy standards.
Cell
therapy is a developing field and a significant market for our services has yet to emerge in the US.
Cell
therapy and regenerative medicine is a developing field, with we believe 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, storage of stem cells and
application development. We believe the market for stem 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 tissue processing and 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, among other items, 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 adipose tissue and 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 would
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. We are required to have licenses in two states
and have obtained tissue bank licenses to market and support our services in New York and California as well as annual registration
with the FDA as a tissue bank. While we believe that, given our proposed business, we are not presently required to obtain additional
state and federal regulatory approval to market our services 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.
Our
facilities require compliance with PHS and FDA regulations regarding current Good Manufacturing Protocols and there is no assurance
we are in and/or in the future will be in compliance with these protocols or that the PHS or FDA may find deficiencies upon inspection
of our facility.
The
Company has developed its processing methodologies, testing and Mount Laurel laboratory facilities which the Company believes
are in compliance with all current Good Manufacturing Practices (cGMP) and current Good Tissue Practices (cGTP) as defined by
the United States Public Health Service Act (“PHS” or the “PHS Act”) and the
Food and Drug Administration (“FDA”) regulations as they relate to the operation of a tissue processing
and storage facility. While we believe such facilities are in compliance with such regulations, no assurance can be given that
we are in fact in compliance and/or in the future will be in compliance with these regulations or that upon inspection by PHS
and/or FDA that we will not be required to amend our procedures or limit our operations based upon the finding of the inspection.
As
and if we evolve from a company primarily involved in the research and development of our technology into one that is also involved
in the commercialization of our technology, we may have difficulty managing our growth and expanding our operations.
As
and if our business grows, we will in all likelihood need to add employees and enhance our management, systems and procedures.
We may need to successfully integrate our internal operations with the operations of various third party services providers to
produce and market commercially viable products. We may also need to manage additional relationships with various collaborative
partners, suppliers and other organizations. Expanding our business may place a significant burden on our management and operations.
We may not be able to implement improvements to our management information and control systems in an efficient and timely manner
and we may discover deficiencies in our existing systems and controls. Our failure to effectively respond to such changes may
make it difficult for us to manage our growth and expand our operations.
We
currently are wholly dependent on John Arnone and Anthony Dudzinski; Conflicts of Interest.
We
currently are wholly dependent on John Arnone and Anthony Dudzinski, our only executive officers and directors. Our future performance
will depend on the continued services of such persons and our ability to retain such persons and to hire additional qualified
persons. The loss of either of Mr. Arnone or Mr. Dudzinski, or both, would materially and adversely affect our proposed business.
We have entered into employment agreements with Mr. Arnone or Mr. Dudzinski who have waived portions of their compensation for
fiscal 2013 and 2014. There are no assurances they will continue to do so. The employment agreements among other terms permit
each of Mr. Arnone and Mr. Dudzinski to conduct other business activities outside of their employment with us. Each such employment
agreement terminates in October 2017.
We
have not obtained any “key-man” life insurance policies nor do we presently plan to obtain or maintain any such policies
on Mr. Arnone, Mr. Dudzinski or any other of our employees.
Mr.
Arnone owns the majority of the issued and outstanding voting stock of Personal Cell Science, a Florida corporation (“PCS”).
PCS is in the cosmetic business and has entered into a contract manufacturing and royalty agreement with us to manufacture conditioned
medium. We also receive a royalty of 10% of the gross sales of any products sold by PCS containing the conditioned medium that
we manufacture. Mssrs. Arnone and Dudzinski collectively beneficially own in excess of 50.1% of our issued and outstanding voting
stock and as a result have the ability to directly and/or indirectly make all decisions for us. Mr. Arnone is also the CEO of
Regenerative BioTherapy Corp. Regenerative BioTherapy Corp, a Florida corporation which entered into a licensing Agreement with
the Company in September of 2014. The licensing agreement Permits Regenerative BioTheray the use of the Company’s Standard
Operating Procedures, Quality Management and General Operations procedures and process for the Companys product lines and IP;
to construct and operate a laboratory and treatment facility in the Caribbean.
We
may in the future seek to expand our business relationship with, and/or acquire PCS and/or Regenerative BioTherapy Corp.. Management
cannot assure you that any such business relationship or acquisition, if consummated, would be on terms favorable to us.
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 effect 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 or injunctions precluding us from utilizing our technology or services or marketing or
selling any products or services under the same. 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.
Risks
Related to Our Common Stock
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, 2014, there were 32,890,864 shares of Common Stock (excluding 10,556,000 shares issuable upon exercise of
all issued and outstanding stock options and warrants, and 596,666 shares issuable on the conversion of all outstanding Convertible
Notes, and no shares of preferred stock were issued and outstanding. Our board of directors 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 of directors 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.
Our
Common Stock is currently traded on the OTCQB and is subject to additional trading restrictions as a “penny stock,”
which could adversely affect the liquidity and price of such stock. If our Common Stock remains subject to the SEC’s penny
stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities
may be adversely affected.
Our
Common Stock currently trades on the OTCQB. The OTCQB may be viewed by investors as a less desirable, and less liquid, marketplace.
As a result, an investor may find it more difficult to purchase, dispose of or obtain accurate quotations as to the value of our
Common Stock.
Because
our Common Stock is not listed on any national securities exchange, such shares will also be subject to the regulations regarding
trading in “penny stocks,” which are those securities trading for less than $5.00 per share, and that are not otherwise
exempted from the definition of a penny stock under other exemptions provided for in the applicable regulations. The following
is a list of the general restrictions on the sale of penny stocks:
| · | Before
the sale of penny stock by a broker-dealer to a new purchaser, the broker-dealer must
determine whether the purchaser is suitable to invest in penny stocks. To make that determination,
a broker-dealer must obtain, from a prospective investor, information regarding the purchaser’s
financial condition and investment experience and objectives. Subsequently, the broker-dealer
must deliver to the purchaser a written statement setting forth the basis of the suitability
finding and obtain the purchaser’s signature on such statement. |
| · | A
broker-dealer must obtain from the purchaser an agreement to purchase the securities.
This agreement must be obtained for every purchase until the purchaser becomes an “established
customer.” |
| · | The
Exchange Act requires that before effecting any transaction in any penny stock, a broker-dealer
must provide the purchaser with a “risk disclosure document” that contains,
among other things, a description of the penny stock market and how it functions and
the risks associated with such investment. These disclosure rules are applicable to both
purchases and sales by investors. |
| · | A
dealer that sells penny stock must send to the purchaser, within 10 days after the end
of each calendar month, a written account statement including prescribed information
relating to the security. |
These
requirements can severely limit the liquidity of securities in the secondary market because fewer brokers or dealers are likely
to be willing to undertake these compliance activities. As a result of our Common Stock not being listed on a national securities
exchange and the rules and restrictions regarding penny stock transactions, an investor’s ability to sell to a third party
and our ability to raise additional capital may be limited. We make no guarantee that market-makers will make a market in our
Common Stock, or that any market for our Common Stock will continue.
Our
two (2) principal stockholders control us, and your interests as a stockholder may conflict with the interests of those persons.
Based
on the number of outstanding shares of our Common Stock held by our stockholders as of March 31, 2014, our two (2) directors,
executive officers and their respective affiliates beneficially owned in excess of 50.1% of our outstanding shares of Common Stock.
As a result, those stockholders have the ability to control, among other items, the outcome of all matters submitted to our stockholders
for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.
The interests of these persons may not always coincide with our interests or the interests of our other stockholders. This concentration
of ownership could harm the market price of our Common Stock by (i) delaying, deferring or preventing a change in corporate control,
(ii) impeding a merger, consolidation, takeover or other business combination involving us, and/or (iii) discouraging a potential
acquirer from attempting to obtain acquire us. The control held over us by such 2 persons may adversely affect the trading price
of our Common Stock due to investor’s awareness of conflicts of interest.
Our
stockholders may experience significant dilution as a result of any additional financing using our securities.
We
will need to raise significant additional capital in order to maintain and continue our operations. To the extent that we raise
additional funds by issuing equity securities or securities convertible into or exercisable for equity securities, our stockholders
may experience significant dilution and we may issue securities with better terms than those offered hereby.
We
have not paid dividends on our Common Stock in the past and do not expect to pay dividends on our Common Stock for the foreseeable
future. Any return on investment may be limited to the value of our Common Stock.
No
cash dividends have been paid on our Common Stock, and we do not expect to pay cash dividends on our Common Stock in the foreseeable
future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors
as our board of directors may consider relevant. If we do not pay dividends, our Common Stock may be less valuable because a return
on a stockholder’s investment will only occur if our stock price appreciates.
A
sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline and may impair our
ability to raise capital in the future.
Our
Common Stock is currently traded on the OTCQB, and there have been and may continue to be periods when it could be considered
“thinly-traded,” meaning that the number of persons interested in purchasing our Common Stock at or near bid prices
at any given time may be relatively small or non-existent. Finance transactions resulting in a large amount of newly issued shares
that become readily tradable or other events that cause stockholders to sell shares, could place downward pressure on the trading
price of our stock. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number
of shares of Common Stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market
price of our stock. If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons,
substantial amounts of our Common Stock in the public market, the market price of our Common Stock could decline. Sales of a substantial
number of shares of our Common Stock may make it more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem reasonable or appropriate.
The
Company may not have complied with various state securities laws in connection with prior issuances/sales of its securities.
Since
April 2011, the date of the closing of the Asset Purchase, through September 30, 2014, the Company sold approximately $2,935,000
gross amount of its equity and debt securities. In connection with such sales, the Company may have violated various state securities
laws. If the Company was determined by a court, FINRA or regulatory body with the required jurisdiction to have violated such
laws, any such violation could result in the Company being required to offer rescission rights to each such prior purchase from
the Company to rescind such purchases and pay to the prior purchaser an amount of funds equal to the purchase price paid by such
prior investors plus interest from the date of any such purchase. No assurances can be given the Company will, if it is required
to offer such purchasers rescission right, have sufficient funds to pay the prior purchasers the amount required. In addition,
if the Company violated one or more securities laws of a state in connection with prior offers and/or sales of its securities,
each such state could bring an enforcement, regulatory and/or other legal action against the Company which, among other things,
could result in the Company having to pay substantial fines, not being able to sell securities in such states in the future and/or
having a determination made by any such states against the Company that the Company failed to comply with such states’ securities
laws, which could result in the Company, among other untoward effects including those set forth above, not being able to have
its Common Stock be eligible for continued quotation on the OTCQB and/or other trading markets and/or mediums that the Common
Stock is then trading and/or eligible for quotation on and/or in the future seeks to be quoted or traded on.
As
a “thinly-traded” stock, large sales can place downward pressure on our stock price.
Our
stock experiences periods when it could be considered “thinly traded.” Financing transactions resulting in a large
number of newly issued shares that become readily tradable, or other events that cause current shareholders to sell shares, could
place further downward pressure on the trading price of our stock. In addition, the lack of a robust resale market may require
a shareholder who desires to sell a large number of shares to sell the shares in increments over time to mitigate any adverse
impact of the sales on the market price of our stock.
Shares
eligible for future sale may adversely affect the market for our Common Stock.
As
of September 30, 2014, we had 10,556,000 shares of Common Stock issuable upon exercise of all outstanding stock options and warrants,
and, 596,666 shares issuable on the conversion of outstanding Convertible Notes. If and when these securities are exercised or
converted into shares of our Common Stock, the number of our shares of Common Stock outstanding will increase. Such increase in
our outstanding shares, and any sales of such shares into the public market, could have a material adverse effect on the market
for our Common Stock and the market price of our Common Stock.
In
addition, from time to time, certain of our shareholders may be eligible to sell all or some of their shares of Common Stock by
means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject
to certain limitations. In general, pursuant to Rule 144, after satisfying a six month holding period: (i) affiliated shareholders
(or shareholders whose shares are aggregated) may, under certain circumstances, sell within any three month period a number of
securities which does not exceed the greater of 1% of the then outstanding shares of common stock and (ii) non-affiliated shareholders
may sell without such limitations, provided we are current in our public reporting obligations. Rule 144 also permits the sale
of securities by non-affiliates that have satisfied a one year holding period without any limitation or restriction. Any substantial
sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market
price of our securities.
Item
1B. Unresolved Staff Comments
Not applicable.
Item
2. Description of Property
We currently
rent office space at 1 Meridian Road, Eatontown, NJ 07724 for our corporate offices. Additionally we rent laboratory space at
the Burlington County College Science Incubator 100 Technology Way, Mount Laurel NJ 08054. Our laboratory facility consists of
approximately 1300 square feet of leased space located in the science incubator on the Campus of the Burlington Community College
located in Mount Laurel, New Jersey.
Item
3. Legal Proceedings
We are
currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results
of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies
or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material
adverse effect.
Item
4. Mine Safety Disclosures
Not applicable.
PART
II
Item
5. Market for Common Equity and Related Stockholder Matters
(a)
Market Information
Our common
stock was listed on the OTCQB under the symbol “RAPP” on November 12, 2010. In June 2011, we changed our name to American
CryoStem Corporation and since June 15, 2011, our common stock has traded under the stock symbol “CRYO” on the OTCQB.
The following table shows the reported high and low closing prices per share for our common stock for each quarterly period as
noted. The over-the-counter market quotations set forth for our common stock reflect interdealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
2014 Fiscal Year Quarter ended | |
High | | |
Low | |
December 31, 2013 | |
$ | 0.32 | | |
$ | 0.14 | |
March 31, 2014 | |
$ | 0.50 | | |
$ | 0.12 | |
June 30, 2014 | |
$ | 0.80 | | |
$ | 0.30 | |
September 30, 2014 | |
$ | 0.60 | | |
$ | 0.30 | |
2013 Fiscal Year
Quarter ended | |
High | | |
Low | |
December 31, 2012 | |
$ | 0.65 | | |
$ | 0.13 | |
March 31, 2013 | |
$ | 0.55 | | |
$ | 0.25 | |
June 30, 2013 | |
$ | 0.51 | | |
$ | 0.30 | |
September 30, 2013 | |
$ | 0.46 | | |
$ | 0.25 | |
(b)
Holders of Common Equity
As of September
30, 2014, there were approximately 122 holders of record of our common stock. This figure does not take into account those shareholders
whose certificates are held in the name of broker-dealers or other nominees.
(c)
Dividend Information
We have
never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those
securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development
of our business.
(d)
Sales of Unregistered Securities
During
fiscal year 2014, holders of the convertible debt converted $152,300 of convertible debt and the Company issued 435,143 shares
of common stock.
During
fiscal year 2013, the Company issued 3,467,359 shares of common stock as a result of the convertible notes exercised.
During
fiscal year 2013, the Company issued 660,000 shares of common stock to consultants for services rendered valued at $236,000.
(e)
Securities Authorized For Issuance Under Equity Compensation Plans
During
fiscal year 2014, option holders exercised 170,000 options and the Company issued 170,000 shares of common stock and received
proceeds of $24,500.
During
the fiscal year ended September 30, 2013, we issued 50,000 common shares to an advisory board member in connection with the exercise
of 50,000 options issued at an exercise price of $0.15 under the 2011 American CryoStem Corporation Stock Option Plan. The Company
accepted a $7,500 balance due to the option holder in payment for the Option exercise.
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:
| |
FY 2014 | | |
FY 2013 | |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Risk free interest rate | |
| 0.25 | % | |
| 0.50 | % |
Volatility | |
| 48.39 | % | |
| 16.60 | % |
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.
During
fiscal year 2014, the Company issued 3,816,000 options to employees, the holders of the bridge notes, and other professionals.
As a result, the Company recorded professional fees expense of $90,206, interest expense of $150,232, and labor expense of $597,771,
in its statement of operations.
Transfer
Agent
Our transfer
agent is Olde Monmouth Stock Transfer Co., Inc. located at 200 Memorial Parkway, Atlantic Highlands, New Jersey 07716. Its contact
phone is 732-872-2727.
Item
6. Selected Financial Data
Not applicable.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This annual
report on Form 10-K and other reports filed by American CryoStem Corporation (the “Company”) from time to time with
the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and
assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,”
“believe,” “estimate,” “expect,” “future,” “intend,” “plan,”
or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify
forward-looking statements. Such statements reflect the current view of the Company with respect to future events and
are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors”
section of the this Annual Report on Form 10-K, relating to the Company’s industry, the Company’s operations and results
of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended, or planned.
Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as required by applicable law, including the
securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial
statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments
and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and
liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods
presented. Our financial statements would be affected to the extent there are material differences between these estimates and
actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does
not require management’s judgment in its application. There are also areas in which management’s judgment in selecting
any available alternative would not produce a materially different result. The following discussion should be read in conjunction
with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Background
We were
incorporated in the State of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly owned subsidiaryAmerican
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, cryostorage 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 expanding our research and development through scientific collaborations to fully capitalize on (1) scientific
breakthroughs that have been rapidly shaping the fast growing Regenerative and Personalized Medicine industries; (2) to provide
these growth industries with a standardized cell processing platform and, (3) to enhance the delivery of healthcare through cellular-based
therapies and applications which address disease treatment, wound and burn healing, joint repair and management, and personalized
health and beauty care.
Through
our ACS Laboratories division, our Company operates its flagship FDA registered, cGMP human tissue processing, cryostorage and
cell culture and differentiation media development facility in Mount Laurel, New Jersey. On a mission to fulfill the pressing
need to set a global gold standard for end-to-end clinical collection, processing, tracking and storage, American CryoStem has
spent nearly six years designing and constructing the necessary clinical framework capable of replicating its protocols in markets
around the world.
In
2013, our Company received approvals from the Institutional Review Board (IRB) of the International Cell Surgical Society (ICSS)
and in 2014 the Institutional Review Board (IRB) of Institute of Regenerative Cellular Medicine (ICRM) for the Company’s
processing protocols for isolating Stromal Vascular Fraction (SVF) or ADSCs from a patient’s adipose tissue; and for culturing
mesenchymal stem cells from adipose tissue. These protocols provide validated testing methods necessary to move the clinical investigative
process towards uniform disease treatments’ and provide the collection of cGMP processing and outcome data required by prevailing
FDA regulations and guidance for approval of regenerative cellular therapies, including potency (cell count), contamination testing
and cell viability.
Today,
American CryoStem is focused on securing licensing arrangements with qualified partners around the world to institute and operate
its turnkey clinical laboratories that are properly equipped for processing and storing adipose tissue and ADSCs for use in Regenerative
and Personalized Medicine applications.
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 that would enable us to satisfy our cash requirements for a period of
the next 12 to 24 months. We have minimal long term debt and have been able to meet our past financial obligations. In order
to finance further market development with the associated expansion of operational capabilities for the time period discussed
above, we will need to raise additional working capital. 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.
In order
to move our Company through its next critical growth phase of development and commercialization and to ensure we are in position
to support our research collaborations and market penetration strategies, in September 2014 we engaged a new financial advisor.
With a goal of raising capital in early to mid-2015, we have been working in close concert with the corporate finance team to
determine our tactical approach to the equity markets, with particular emphasis on identifying the best deal structure to attract
and retain meaningful capital sponsorship from both the retail and institutional investing communities, while limiting dilution
to our current shareholders.
We expended
$381,214 during the fiscal year ended September 30, 2014 in professional fees (principally legal and accounting). In addition,
we expended $399,702 for Research and Development during the 12-month period ended September 30, 2014 primarily on the continuing
development and optimization of the Company’s patented cell culture medium products and the development of the new intellectual
property, adipose tissue processing and storage services and materials.
Going
Concern
As of the
date of this annual 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 proposed stem cell business.
We have
suffered recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from
our business operations or successfully raised the financing required to expand 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. Our continued existence is dependent
upon our ability to resolve our liquidity problems and achieve 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
As of the
fiscal year ended September 30, 2014, the Company had a cash balance of $ 21,471 and accounts receivable of $6,074. 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.
There
was no significant impact on the Company’s operations as a result of inflation for the fiscal year ended September 30, 2014.
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.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
We do not
hold any derivative instruments and do not engage in any hedging activities.
Item
8. Financial Statements
Our financial
statements are contained in pages F-1 through F-15 which appear at the end of this Annual Report.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item
9A. Controls and Procedures
(a)
Evaluation of Disclosure and Control Procedures
The Company’s
disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the
reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time
periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including
its principal executive officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.
Our principal
executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls
and procedures as of December 31, 2014, and concluded that the disclosure controls and procedures were effective as a whole.
(b) Management’s
Report on Internal Control over Financial Reporting
The Company’s
management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as
defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
in accordance with Generally Accepted Accounting Principles (“GAAP”).
Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such
reliability and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future
periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management
has conducted, with the participation of our Chief Executive Officer and our Principal Accounting Officer, an assessment of the
effectiveness of our internal control over financial reporting as of December 31, 2014. Management’s assessment
of internal control over financial reporting used the criteria set forth in SEC Release 33-8810 based on the framework established
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial
Reporting – Guidance for Smaller Public Companies. Based on this evaluation, Management concluded that our system of
internal control over financial reporting was effective as of December 31, 2014, based on these criteria.
(c)
Changes in Internal Control over Financial Reporting
There were
no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
(d)
Attestation Report of the Registered Public Accounting Firm
This annual
report does not include an attestation report of our independent registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to an exemption for smaller reporting companies.
Item
9B. Other Information.
None.
PART
III
Item
10. Directors, Executive Officers, and Corporate Governance
The following
table and biographical summaries set forth information, including principal occupation and business experience, about our directors
and executive officers at September 30, 2014:
Name | |
|
Age | | |
Position | |
Officer
and/or Director Since | |
| |
| | |
| |
| |
John Arnone | |
| 57 | | |
Chairman
and Chief Executive Officer | |
| 2011 | |
| |
| | | |
| |
| | |
Anthony F. Dudzinski | |
| 52 | | |
Chief Operating Officer
and Director | |
| 2011 | |
| |
| | | |
| |
| | |
John DiFolco | |
| 30 | | |
Executive Vice President
and Director of Marketing | |
| 2013 | |
John
Arnone – Chairman and Chief Executive Officer
Mr.
Arnone has been the Chairman of American CryoStem since 2008 and Chief Executive Officer since 2011. Prior to his involvement
in the life sciences/biotechnology industries, he spent 25 years in the investment banking/financial services industry as an investment
banker and a proactive investor. Over a 25 year period and holding six NASD licenses, Mr. Arnone founded, managed and operated
two general securities broker-dealers based in New York specializing in strategic planning, corporate structure, financial planning
and new business development. Over the years, he has provided advisory and business management services as a founder, officer,
director and/or shareholder to both mid-level and development stage private and public companies. Mr. Arnone also co-founded and
operated a global entertainment distribution corporation with 120 employees, and under his guidance the Company was voted medium
wholesaler of the year in the music industry (1997, 1998 and 2000) by the National Association of Recording Merchants. Mr. Arnone
holds a degree in Business Administration and a Bachelors of Art in Economics from Kean University in New Jersey.
Anthony
F. Dudzinski − Chief Operating Officer and Director
Mr. Dudzinski
is a founder of American CryoStem as well as its Chief Operating Officer. He is primarily focused on building and maintaining
the Company’s operational and laboratory infrastructure and their compliance with current regulations. Mr. Dudzinski has
been in the life sciences and biotechnology sector for more than eight years and has more than 25 years of experience in areas
of senior management with a variety of public and private companies. Beginning in the securities industry with a focus on regulatory
compliance and operations, he combined this experience with the biotechnology industry while building new investment vehicles
focused on life sciences and biotechnology companies in 2004. Mr. Dudzinski’s past
positions include Chief Executive Officer, President, Chief Operating Officer and Director of small and medium-sized organizations,
including a publicly traded company with approximately 300 employees. He was also the President and Chief Operating Officer of
a privately operated, registered broker-dealer with more than 175 sales associates. In addition to this experience, he was a founder
and Chief Executive Officer of a number of publicly available exchange traded funds; and the Founder, Chairman and Chief Operating
Officer of a target date fund complex and a registered investment company.
John
DiFolco – Executive Vice President & Director of Marketing
Mr.
DiFolco has served as American CryoStem’s Director of Marketing since 2008 and was named Executive Vice President in 2013.
His core focus is to create and implement marketing campaigns targeting prospective customers and business partners. Mr. DiFolco
has been has been involved directly and indirectly in creating and implementing marketing campaigns for various organizations
over the years. He has introduced new products and services to new markets and as a result increased overall awareness and revenue.
Mr. DiFolco is highly skilled in assessing the market landscape and determining and implementing tactical strategies to successfully
market a company’s services through multiple channels, including social networking, search engine marketing, local web searching
and grass roots print media campaigns. He has a deep understanding of technology, specifically web development and the creation
of digital media.
Compliance
with Section 16(A) of the Exchange Act
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more
of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and
regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely
on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the
fiscal year ended September 30, 2014, were timely with the exception of:
Code
of Ethics
We
have not adopted a Code of Ethics.
Item
11. Executive Compensation
The following
table sets forth compensation information for services rendered by certain of our executive officers in all capacities during
the last two completed fiscal years. The following information includes the dollar value of base salaries and certain
other compensation, if any, whether paid or deferred.
Summary
Compensation Table
Name and Position(s) | |
|
Year | | |
Salary($) | | |
Bonus | | |
Stock Awards | |
Option Awards1 | | |
Total Compensation | |
John S. Arnone | |
| 2014 | | |
$ | 50,176 | | |
| | | |
| |
$ | 219,726 | | |
$ | 269,902 | |
President and CEO | |
| 2013 | | |
$ | 36,826 | | |
| N/A | | |
N/A | |
$ | 187,528 | | |
$ | 224,354 | |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | |
Anthony F. Dudzinski | |
| 2014 | | |
$ | 41,941 | | |
| | | |
| |
$ | 219,726 | | |
$ | 261,667 | |
Chief Operating Officer | |
| 2013 | | |
$ | 27,850 | | |
| N/A | | |
N/A | |
$ | 187,528 | | |
$ | 215,378 | |
1This
column represents the aggregate grant-date fair value of the awards computed in accordance with FASB ASC Topic 718. These amounts
represent the accounting value for these awards and do not necessarily correspond to the actual value that may be realized by
the named executive officer. The assumptions used in the calculation of these amounts for the fiscal year ended September 30,
2014 are described in the Notes to our financial statements included in this Annual Report.
Employment
Contracts
The Company
has an Employment Agreement with John Arnone, President and Chief Executive Officer of the Company, which began on October 1,
2012 and expires on October 1, 2017. The Board of Directors determines and approves the annual compensation paid to Mr. Arnone,
which was set at $150,000 in base compensation for Fiscal 2014. During Fiscal 2014, Mr. Arnone was paid $50,176. Mr. Arnone agreed
to waive the balance of his base compensation for the fiscal 2014. The Company, however, has reserved the right in the future
to pay any waived salary in shares of restricted Common Stock.
The Company
has an Employment Agreement with Anthony Dudzinski, Chief Operating Officer of the Company, which began on October 1, 2012 and
expires on October 1, 2017. The Board of Directors determines and approves the annual compensation paid to Mr. Dudzinski, which
was set at $150,000 in base compensation for Fiscal 2014. During Fiscal 2014, Mr. Dudzinski was paid $41,191 Mr. Dudzinski has
agreed to waive the balance of his base compensation for Fiscal 2014. The Company, however, has reserved the right in the future
to pay any waived salary in shares of restricted Common Stock.
We do not
anticipate increasing the annual salaries paid to our officers until we have adequate funds to do so.
Compensation
of Directors
We
do not compensate any of our directors for their services as directors other than stock for their time. However, we do reimburse
our directors for expenses incurred in attending board meetings and issue stock for their time.
Item
12. Security Ownership of Certain Beneficial Owners and Management
The following
table sets forth certain information regarding the beneficial ownership of our Common Stock by: (i) each person who, to our knowledge,
beneficially owns 5% or more of our Common Stock and (ii) each of our directors and officers. Unless otherwise indicated, each
of the stockholders listed below has sole voting and investment power over its shares of Common Stock beneficially owned.
Name and Address of Beneficial Owner | |
Number of Shares | | |
Percent of Class 1 | |
Directors and Named Executive Officers 2: | |
| | | |
| | |
John S. Arnone 3 | |
| 23,880,000 | | |
| 72.60 | % |
Anthony Dudzinski 4 | |
| 23,580,000 | | |
| 72.51 | % |
| |
| | | |
| | |
All directors and named executive officers as a group (2 persons) | |
| | | |
| | |
| |
| | | |
| | |
Other 5% or Greater Beneficial Owners | |
| | | |
| | |
ACS Global, Inc. | |
| 21,000,000 | | |
| 63.84 | % |
1Beneficial
ownership is calculated based on 32,890,864 shares of Common Stock issued and outstanding as of September 30, 2014, together with
securities exercisable or convertible into shares of Common Stock within sixty (60) days of the date hereof for each stockholder.
Beneficial ownership is determined in accordance with Rule 13d-3 of the Commission. The number of shares of Common Stock beneficially
owned by a person includes shares of Common Stock issuable upon conversion of securities and subject to options or warrants held
by that person that are currently convertible or exercisable or convertible or exercisable within sixty (60) days of the date
hereof. The shares of Common Stock issuable pursuant to those convertible securities, options or warrants are deemed outstanding
for computing the percentage ownership of the person holding such convertible securities, options or warrants but are not deemed
outstanding for the purposes of computing the percentage ownership of any other person.
2Unless
otherwise specified, the address for the directors and officers is c/o American CryoStem Corporation at 1 Meridian Road, Eatontown,
NJ 07724.
3Mr.
Arnone presently owns 14,250,000 shares of Common Stock of ACS Global and has the right to receive an additional 12,000,000 such
shares upon the conversion of Series C Preferred Stock of ACS Global owned by him. As a result, he beneficially owns 35.8% percent
of the ACS Global Common Stock. Mr. Arnone is also an officer and a director of ACS Global. Consequently, Mr. Arnone is a control
person of ACS Global and may as such be deemed to “beneficially own” the 21,000,000 shares of Common Stock owned by
ACS Global. Mr. Arnone, however, disclaims beneficial ownership of all such shares. Mr. Arnone also holds 2,880,000 options to
purchase the Company’s Common Stock of which 880,000 expire September 4, 2017, 1,000,000 expire on September 28, 2018 and
1,000,000 expire on September 24, 2019.
4Mr.
Dudzinski presently owns 2,020,000 shares of ACS Global Common Stock and has the right to receive an additional 12,000,000 such
shares upon the conversion of ACS Global preferred stock owned by him. As a result, he beneficially owns 19.16% percent of the
ACS Global Common Stock. Mr. Dudzinski is also an officer and a director of ACS Global. Consequently, Mr. Dudzinski is a control
person of ACS Global and may as such be deemed to “beneficially own” the 21,000,000 shares of Common Stock owned by
ACS Global. Mr. Dudzinski, however, disclaims beneficial ownership of all such shares. Mr. Dudzinski also holds 2,580,000 options
to purchase the Company’s Common Stock of which 580,000 expire September 4, 2017, 1,000,000 expire on September 28, 2018
and 1,000,000 expire on September 24, 2019.
Description
of Securities
We
are authorized to issue 300,000,000 shares of Common Stock, par value $0.001 per share and 50,000,000 shares of preferred stock,
par value $0.0001 per share. As of January 09, 2014, there were 32,915,515 shares of Common Stock and no shares of preferred stock
issued and outstanding.
Outstanding Equity Awards
at Fiscal Year-End
The following
table sets forth information with respect to the outstanding equity awards to our named executive officers during fiscal 2014:
Option
Awards | |
| | |
| | |
| | |
| | |
|
Name | |
Number
of securities underlying unexercised options (#) Exercisable | | |
Number
of securities underlying unexercised options (#) Unexercisable | | |
Equity
incentive plan awards: Number of securities underlying unexercised options (#) | | |
Option
exercise price ($) | | |
Option
expiration date |
John
S. Arnone | |
| 1,000,000 | | |
| — | | |
| 1,880,000 | | |
$ | 0.25 | | |
9/24/2019 |
Anthony Dudzinski | |
| 1,000,000 | | |
| — | | |
| 1,580,000 | | |
$ | 0.25 | | |
9/24/2019 |
Option
Plans
On September
18, 2011 our Board of Directors approved the “American CryoStem Corporation Incentive Stock Option Plan” (the “2011
Plan”). Under the Plan, officers, directors, employees and consultants to the Company may be granted options to purchase
shares of the Company’s common stock, par value $0.001 per share. There are 3,000,000 shares of common stock reserved for
issuance under the Plan. The Plan is administered under the authority of the Stock Option Plan Committee (the “Committee”).
The Company issued 2,910,000 of the Options available under the 2011 Plan in Fiscal 2012. To date 210,000 options from the 2011
Plan have been exercised and a total of 2,700,000 remain outstanding at an average weighted exercise price of $0.14.
On May
1, 2013 our Board of Directors approved the 2013 American CryoStem Corporation Incentive Stock Option Plan (the “2013 Plan”.
Under the Plan, officers, directors, employees and consultants to the Company may be granted options to purchase shares of the
Company’s common stock, par value $0.001 per share. There are 5,000,000 shares of common stock reserved for issuance under
the Plan. The Plan is administered under the authority of the Stock Option Plan Committee (the “Committee”). During
2013 the Company granted a total of 3,750,000 at a weighted average price of $0.18 to certain employees, advisory board members
and consultants. To date no Options issued under the plan have been exercised.
On September
21, 2014 our Board of Directors approved the 2014 American CryoStem Corporation Incentive Stock Option Plan (the “2014 Plan”.
Under the Plan, officers, directors, employees and consultants to the Company may be granted options to purchase shares of the
Company’s common stock, par value $0.001 per share. There are 4,000,000 shares of common stock reserved for issuance under
the Plan. The Plan is administered under the authority of the Stock Option Plan Committee (the “Committee”). During
2014 the Company granted a total of 3,516,000 at a weighted average price of $0.21 to certain employees, advisory board members
and consultants. To date no Options issued under the plan have been exercised.
Our current
Board of Directors serves as the Committee. The Plan further provides for the Committee to set the terms of any Options granted
at the time of the grant and terminates ten years for its effective date and is subject to final shareholder approval.
On September
18, 2011, our Board of Directors approved the Annual Bonus Performance Plan for Executive Officers. To promote the success of
our Company by providing to participating executives bonus incentives that qualify as performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code of 1986 as amended. The plan provides for the granting of up to an aggregate
amount of bonuses awarded to all Participants of up to 10% of our income before taxes. The plan shall be administered by a Committee
currently consisting of our Board of Directors. No bonuses have been granted under this plan during fiscal 2014.
Item
13. Certain Relationships and Related Transactions
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. (formerly known as American CryoStem Corporation)
a Nevada corporation (“ACS Global”), in exchange for 21,000,000 shares of our Common Stock. At the time of the acquisition,
John Arnone, our Chairman of the Board, CEO and President was a director and the secretary of ACS Global and Anthony Dudzinski,
one of our directors and our Chief Operating Officer, Treasurer and Secretary was a director, president and secretary of ACS Global.
In addition, Mr. Arnone owns 14,250,000 shares of Common Stock of ACS Global and has the right to receive an additional 12,000,000
such shares upon the conversion of Series C Preferred Stock of ACS Global owned by him and Mr. Dudzinski owns 2,020,000 shares
of ACS Global Common Stock and has the right to receive an additional 12,000,000 such shares upon the conversion of ACS Global
preferred stock owned by him. As a result, assuming the conversion of such preferred stock, Mr. Arnone and Mr. Dudzinski would
have been deemed to be the beneficial owners of approximately 35.8% and 19.1% of the Common Stock of ACS Global, respectively.
Further, Mr. Arnone and Mr. Dudzinski, as control persons of ACS Global may be deemed to beneficially own the 21,000,000 shares
of our Common Stock issued to ACS Global in the acquisition. Each of Mr. Arnone and Mr. Dudzinski disclaim such beneficial ownership.
Mr. Arnone
remains a Director and Secretary of ACS Global and Mr. Dudzinski remains as a Director, President and Treasurer of ACS Global.
Director
Independence
Using the
definition of “independent” using the rules of The Nasdaq Stock Market, we have determined that neither John Arnone
nor Anthony Dudzinski are independent.
Item
14. Principal Accountant Fees and Services
Audit Fees
The aggregate
fees billed by Donahue Associates, for professional services rendered for the audit of our annual financial statements for fiscal
year ended September 30, 2014 were $10,000 and $10,000 for the fiscal year ended September 2013.
Audit-Related
Fees
There were
no other fees billed by Donahue Associates, LLC for professional services rendered, other than as stated under the captions Audit
Fees.
Tax Fees
There were
no other fees billed Donahue Associates, LLC for professional services rendered, other than as stated under the captions Audit
Fees.
All Other
Fees
There were
no other fees billed by Donahue Associates, LLC for professional services rendered, other than as stated under the captions Audit
Fees, Audit-Related Fees, and Tax Fees.
PART
IV
Item
15. Exhibits
(a)
SIGNATURES
In accordance
with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
|
AMERICAN
CRYOSTEM CORPORATION |
|
|
|
|
|
|
Dated:
January 20, 2015 |
By: |
/s/ John
S, Arnone |
|
|
John
S. Arnone
President,
CEO and Chairman of the Board
|
|
|
|
|
|
|
Dated:
January 20, 2015 |
By: |
/s/
Anthony F. Dudzinski |
|
|
Anthony
F. Dudzinski
COO,
Treasurer, Secretary and Director |
PART F/S
INDEX TO FINANCIAL STATEMENTS
AUDITED
FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
The Shareholders,
American CryoStem Corporation
We
have audited the accompanying balance sheets of American CryoStem Corporation as of September 30, 2014 and 2013, and the related
statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended September 30,
2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion,
the financial statements referred to above present fairly, in all material respects, the financial position of American CryoStem
Corporation as of September 30, 2014 and 2013, and the results of its operations and its cash flows for each of the two years
in the period ended September 30, 2014 in conformity with U.S. generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations that
raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters
are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Donahue Associates LLC
Monmouth Beach, New Jersey
January 5, 2015
American CryoStem
Corporation
Balance
Sheets
As of September
30, 2014 and 2013
| |
30-Sep-14 | | |
30-Sep-13 | |
ASSETS | |
| | |
| |
| |
| | |
| |
Current assets: | |
| | | |
| | |
Cash | |
$ | 21,471 | | |
$ | 115,932 | |
Deferred expense | |
| 54,250 | | |
| 0 | |
Accounts receivable | |
| 6,074 | | |
| 2,003 | |
Total current assets | |
| 81,795 | | |
| 117,935 | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Other deposit | |
| 550 | | |
| 0 | |
Investment in joint venture | |
| 1,000 | | |
| 0 | |
Security deposit | |
| 5,800 | | |
| 5,800 | |
Patent- net | |
| 200,767 | | |
| 163,935 | |
Fixed assets- net | |
| 250,182 | | |
| 281,362 | |
| |
| | | |
| | |
Total assets | |
$ | 540,094 | | |
$ | 569,032 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable & accrued expenses | |
$ | 698,105 | | |
$ | 260,129 | |
Bridge notes payable | |
| 596,000 | | |
| 0 | |
Convertible notes payable | |
| 173,000 | | |
| 190,800 | |
Deferred revenues | |
| 17,768 | | |
| 0 | |
Capital lease payable | |
| 10,898 | | |
| 20,239 | |
Total current liabilities | |
$ | 1,495,771 | | |
$ | 471,168 | |
| |
| | | |
| | |
Convertible notes payable | |
| 30,000 | | |
| 0 | |
Capital lease payable | |
| 0 | | |
| 10,901 | |
Payable to shareholders | |
| 134,947 | | |
| 139,447 | |
| |
| | | |
| | |
Shareholders’ equity: | |
| | | |
| | |
Common stock- $.001 par value, authorized
300,000,000 shares authorized, issued and outstanding, 32,285,721 shares at September 30, 2013 and 32,890,864 at September
30, 2014 | |
$ | 32,892 | | |
$ | 32,286 | |
Additional paid in capital | |
| 7,010,026 | | |
| 5,990,623 | |
Accumulated deficit | |
| (8,163,542 | ) | |
| (6,075,393 | ) |
Total shareholders’ deficit | |
| (1,120,624 | ) | |
| (52,484 | ) |
| |
| | | |
| | |
Total Liabilities & Shareholders’ Deficit | |
$ | 540,094 | | |
$ | 569,032 | |
See
the notes to the financial statements.
American
CryoStem Corporation
Statements
of Operations
For the
Years Ended September 30, 2014 and 2013
| |
30-Sep-14 | | |
30-Sep-13 | |
| |
| | |
| |
Tissue storage | |
$ | 34,599 | | |
$ | 6,411 | |
Royalties | |
| 86,357 | | |
| 0 | |
Total revenues | |
$ | 120,956 | | |
$ | 6,411 | |
| |
| | | |
| | |
General and administrative expenses: | |
| | | |
| | |
Professional fees | |
$ | 381,214 | | |
$ | 392,420 | |
Research & development | |
| 399,702 | | |
| 257,905 | |
Administration | |
| 1,230,062 | | |
| 1,477,608 | |
Total general & administrative expenses | |
| 2,010,978 | | |
| 2,127,933 | |
| |
| | | |
| | |
Net loss from operations | |
($ | 1,890,022 | ) | |
($ | 2,121,522 | ) |
| |
| | | |
| | |
Other income (expenses): | |
| | | |
| | |
Interest income | |
| 0 | | |
| 0 | |
Interest expense | |
| (198,127 | ) | |
| (278,222 | ) |
| |
| | | |
| | |
Net loss before provision for income taxes | |
($ | 2,088,149 | ) | |
($ | 2,399,744 | ) |
| |
| | | |
| | |
Provision for income taxes | |
| 0 | | |
| 0 | |
| |
| | | |
| | |
Net loss | |
($ | 2,088,149 | ) | |
($ | 2,399,744 | ) |
| |
| | | |
| | |
Basic & fully diluted net loss per common share: | |
| | | |
| | |
Net loss | |
($ | 0.06 | ) | |
($ | 0.08 | ) |
| |
| | | |
| | |
Weighted average of common shares outstanding: | |
| | | |
| | |
Basic & fully diluted | |
| 32,607,073 | | |
| 29,472,803 | |
See the notes to the financial statements.
American
CryoStem Corporation
Statements
of Cash Flows
For
the Years Ended September 30, 2014 and 2013
| |
30-Sep-14 | | |
30-Sep-13 | |
Operating Activities: | |
| | | |
| | |
Net loss | |
($ | 2,088,149 | ) | |
($ | 2,399,744 | ) |
Adjustments to reconcile net
loss items not requiring the use of cash: | |
| | | |
| | |
Labor & salaries | |
| 597,771 | | |
| 912,250 | |
Interest expense | |
| 155,232 | | |
| 259,225 | |
Professional fees | |
| 90,206 | | |
| 0 | |
Depreciation & amortization expense | |
| 40,821 | | |
| 42,539 | |
Changes in other operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (4,071 | ) | |
| (2,003 | ) |
Deferred charge | |
| (54,250 | ) | |
| 0 | |
Other deposit | |
| (550 | ) | |
| 5,000 | |
Deferred revenue | |
| 17,768 | | |
| 0 | |
Accounts payable and accrued expenses | |
| 437,976 | | |
| 37,920 | |
Net cash used by operations | |
($ | 807,246 | ) | |
($ | 1,144,813 | ) |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Patents development | |
($ | 38,826 | ) | |
($ | 41,977 | ) |
Investment in joint venture | |
| (1,000 | ) | |
| 0 | |
Purchase of lab equipment | |
| (7,647 | ) | |
| (999 | ) |
Net cash used by investing activities | |
| (47,473 | ) | |
| (42,976 | ) |
| |
| | | |
| | |
Financing activities: | |
| | | |
| | |
Issuance of bridge notes | |
$ | 596,000 | | |
$ | 0 | |
Issuance of convertible notes | |
| 164,500 | | |
| 1,318,368 | |
Options exercised | |
| 24,500 | | |
| 0 | |
Payment of capital lease | |
| (20,242 | ) | |
| (18,321 | ) |
Payable to shareholder | |
| (4,500 | ) | |
| (365 | ) |
Net cash provided by financing activities | |
| 760,258 | | |
| 1,299,682 | |
| |
| | | |
| | |
Net increase (decrease) in cash | |
($ | 94,461 | ) | |
$ | 111,893 | |
| |
| | | |
| | |
Cash balance at beginning of the fiscal year | |
| 115,932 | | |
| 4,039 | |
| |
| | | |
| | |
Cash balance at September 30th | |
$ | 21,471 | | |
$ | 115,932 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Interest paid during the fiscal year | |
$ | 2,474 | | |
$ | 6,657 | |
Income taxes paid during the fiscal year | |
$ | 0 | | |
$ | 0 | |
See the notes to the financial statements.
American
CryoStem Corporation
Statements
of Changes in Shareholders’ Equity
For the Years
Ended September 30, 2014 and 2013
| |
Common | | |
Par | | |
Paid in | | |
Retained | | |
Total | |
| |
Shares | | |
Value | | |
Capital | | |
Deficit | | |
Deficit | |
| |
| | |
| | |
| | |
| | |
| |
Balance at September 30, 2012 | |
| 28,158,362 | | |
$ | 28,159 | | |
$ | 3,623,232 | | |
($ | 3,675,649 | ) | |
($ | 24,258 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exercises of convertible notes and options | |
| 3,467,359 | | |
| 3,467 | | |
| 1,196,576 | | |
| | | |
| 1,200,043 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Shares issued to consultants | |
| 660,000 | | |
| 660 | | |
| 235,340 | | |
| | | |
| 236,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of options | |
| | | |
| | | |
| 676,250 | | |
| | | |
| 676,250 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of convertible notes | |
| | | |
| | | |
| 259,225 | | |
| | | |
| 259,225 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| | | |
| | | |
| | | |
| (2,399,744 | ) | |
| (2,399,744 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2013 | |
| 32,285,721 | | |
$ | 32,286 | | |
$ | 5,990,623 | | |
($ | 6,075,393 | ) | |
($ | 52,484 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exercises of convertible notes and options | |
| 605,143 | | |
| 606 | | |
| 176,194 | | |
| | | |
| 176,800 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of options | |
| | | |
| | | |
| 838,209 | | |
| | | |
| 838,209 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of convertible notes | |
| | | |
| | | |
| 5,000 | | |
| | | |
| 5,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| | | |
| | | |
| | | |
| (2,088,149 | ) | |
| (2,088,149 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2014 | |
| 32,890,864 | | |
$ | 32,892 | | |
$ | 7,010,026 | | |
($ | 8,163,542 | ) | |
($ | 1,120,624 | ) |
See
the notes to the financial statements.
American CryoStem
Corporation
Notes to the
Financial Statements
For the Years
Ended September 30, 2014 and 2013
Note 1. Organization of
the Company and Significant Accounting Policies
American CryoStem Corporation
(the “Company”) is a publicly held corporation formed on March 13, 2009 in the state of Nevada as R&A Productions
Inc. (R&A)
In April 2011, R&A purchased
substantially all the assets and liabilities of American CryoStem Corporation (ACS), a company formed in 1987, for 21 million
shares of common stock. ACS was deemed to be the accounting acquirer. At the date of the purchase, the former operations of R&A
were discontinued and R&A’s name was changed to ACS.
The Company is in the business of
collecting adipose tissue, processing it to separate the adult stem cells, and preparing such stem cells for long-term storage.
The process allows individuals to preserve their stem cells for future personal use in cellular therapy. The adipose derived stem
cells are prepared and stored in their raw form without manipulation, bio-generation or the addition of biomarkers or other materials,
making them suitable for use in cellular treatments and therapies offered by existing and planned treatment centers worldwide.
Individualized collection and storage of adult stem cells provides personalized medicine solutions by making the patient’s
own preserved stem cells available for future cellular therapies.
The Company has devoted a significant
amount of its time and resources to develop its technologies and intellectual property. These efforts have resulted in the development
of cell lines, cell culture medium and other laboratory products which the Company believes are suitable for licensing and distribution
by third parties. Additionally the Company has initiated a licensing program to license its technologies to laboratories currently
processing other types of biologic materials including cord blood and general blood banks. The Company closed its first licensing
agreement in 2014 and intends to pursue additional licensing partners in the future.
Use of Estimates - The
preparation of the financial statements in conformity with United States generally accepted accounting principles (“GAAP”)
uniformly applied requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets
and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date
of the financial statements and for the period they include. Actual results may differ from these estimates.
Cash - For the purpose
of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments with an original
maturity of three months or less.
Revenue Recognition –
The Company recognizes tissue storage revenue from the processing of adipose tissue into usable stem cells once all the procedures
have been performed and the client sample has been stored in the Company’ cryogenic storage tank. Storage revenues for stored
client samples are recognized on an annual basis on the anniversary date of the storage.
Royalties from the licensing
of the Company’s assets are recognized when earned and collection of the royalty is reasonable assured.
Long Lived Assets -
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to
result from the use of the asset and its eventual disposition is less than its carrying amount.
Fixed Assets –
Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful
life of the assets, which is estimated as follows:
Office equipment |
5 years |
Lab equipment & furniture |
7 years |
Lab software |
5 years |
Income taxes - The Company
accounts for income taxes in accordance with generally accepted accounting principles which require an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences
between financial statement and income tax bases of assets and liabilities that will result in taxable income or deductible expenses
in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change during the period in
deferred tax assets and liabilities.
The Company
follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards
Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial
statements when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides
guidance for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
As of September 30, 2014 and September 30, 2013, the Company has no uncertain tax positions that qualify for either recognition
or disclosure in the financial statements. All tax returns from fiscal years 2010 to 2013 are subject to IRS audit.
Recently
Issued Accounting Pronouncements- There are no recently issued accounting pronouncements that have a material impact on the
Company’s financial statements.
Note 2. Going Concern
The accompanying financial
statements have been presented in accordance with generally accepted accounting principles in the U.S., which assume 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 debt and equity to raise capital to fund its business
operations. Management’s plans with regard to this matter are as follows:
On August 26th 2013
the Company entered into an Agreement with Forefront Capital as the exclusive financial advisor and placement agent in connection
with a private offering of the Company’s securities for $5,000,000 with an additional $1,000,000 overallotment option. The
Company and Forefront are completing the due diligence and expect to begin the offering in the first quarter of fiscal 2014. The
Company terminated its agreement with ForeFront Capital on August 26, 2014.
The Company plans to continue
to fund its operations through capital fundraising activities through the sale of its debt and equity securities in fiscal 2015
until it generates sufficient revenue to support its operations. The Company has entered into a advisory agreement with new advisors
to assist in raising additional capital from institutional and strategic investors to fund the marketing and distribution of its
products.
Note 3. Loss per Share
The Company applies ASC 260, “Earnings
per Share” to calculate loss per share. In accordance with ASC 260, basic and fully diluted net loss per share has been
computed based on the weighted average of common shares outstanding during the years. The dilutive effects of the convertible
notes and the options outstanding are not included in the calculation of loss per share since their inclusion would be anti-dilutive.
Net
loss per share is computed as follows:
| |
30-Sep-14 | | |
30-Sep-13 | |
| |
| | |
| |
Net loss | |
($ | 2,088,149 | ) | |
($ | 2,399,744 | ) |
| |
| | | |
| | |
Weighted average shares outstanding | |
| 32,607,073 | | |
| 29,472,803 | |
| |
| | | |
| | |
Basic & fully diluted net loss per common share: | |
| | | |
| | |
Net gain (loss) | |
($ | 0.06 | ) | |
($ | 0.08 | ) |
Note 4. Fixed Assets
The fixed assets owned by
the Company are comprised as follows.
| |
30-Sep-14 | | |
30-Sep-13 | |
| |
| | |
| |
Office equipment | |
$ | 26,637 | | |
$ | 26,637 | |
Lab furniture | |
| 642 | | |
| 642 | |
Office furniture | |
| 999 | | |
| 999 | |
Lab equipment | |
| 254,054 | | |
| 246,407 | |
Lab software | |
| 123,000 | | |
| 123,000 | |
Accumulated depreciation | |
| (155,150 | ) | |
| (116,323 | ) |
| |
| | | |
| | |
Fixed assets- net | |
$ | 250,182 | | |
$ | 281,362 | |
Lab equipment includes $88,000
of leased equipment. Depreciation expense on this leased asset for 2014 and 2013 was $12,572 and $12,521, respectively.
Note 5. Patent & Patents Filings
The patent and patents development
are recorded at cost and are being amortized on a straight line basis over a period of seventeen years. The following is a description
of the Company’s patent assets.
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 filed and maintains a continuation (U.S. Serial No. 13/194,900) with additional claims pending
The Company has filed the following
additional patents to extend its intellectual property to encompass additional aspects of the Company’s platform processing
technologies. To date the following additional patent filings have been made.
A business method for Collection,
Cryogenic Storage and Distribution of a Biologic Sample Material US Serial No. 13/702,304 filed June 6, 2011with a priority date
of June 6, 2010
Systems and Methods for the
Digestion of Adipose Tissue Samples Obtained from a Client for Cryopreservation U.S. Serial No. 13/646,647 filed October 5, 2012
with a priority date of October 6, 2011
Compositions and Methods for Collecting,
Washing, Cryopreserving, Recovering and Return of Lipoaspirates to Physician for Autologous Adipose Transfer Procedures PCT/US13/44621
filed June 6, 2013 with a priority date of June 7, 2013
Stem Cell Based Therapuetic Devices
and Methods U.S. Serial No. 14/196,616 filed March 4, 2014 with a priority dated of March 10, 2013
Autologous Serum for Transport of
Isolated Stromal Vascular Fraction or Adipose Derived Stem Cells US Serial No. 14,250,338 filed in 2014 with a priority date of
April 11, 2013
Cell Culture Media, Kits and Methods
of Use, US Serial No. 13/1-94/900 continuation of US Serial No. 11/542,863
Note 6. Debt
As of September 30, 2014, the
Company had $203,000 of convertible notes outstanding. Convertible notes of $168,000 came due on September 30, 2014. The Company
is currently in negotiations with the holders of these notes to convert their notes or to extend their maturity dates. These notes
are convertible into common stock at $0.35 per share. Convertible notes of $5,000 are due at the end of fiscal year 2015 and are
exercisable into common stock at $0.30 per share. Convertible notes of $30,000 come due at the end of fiscal year 2016 and are
exercisable into common stock at $0.30 per share.
During fiscal year 2014, the
company issued “bridge notes” and received proceeds of $596,000. The notes are due in fiscal year 2015 at 8% interest.
Holders of the notes received options to purchase 596,000 shares of common stock at $0.05 per share. The notes are unsecured.
The following table describes
the Company’s debt outstanding at September 30, 2014.
Debt | |
Carrying
Value | | |
Fair Value | | |
|
Maturity | | |
Rate | |
| |
| | |
| | |
| | |
| |
Capital lease | |
$ | 10,898 | | |
$ | 10,898 | | |
| Fiscal 2015 | | |
| 10.00 | % |
| |
| | | |
| | | |
| | | |
| | |
Convertible notes | |
$ | 168,000 | | |
$ | 168,000 | | |
| Demand | | |
| 8.00 | % |
| |
| | | |
| | | |
| | | |
| | |
Convertible notes | |
$ | 5,000 | | |
$ | 5,000 | | |
| Fiscal 2015 | | |
| 8.00 | % |
| |
| | | |
| | | |
| | | |
| | |
Convertible notes | |
$ | 30,000 | | |
$ | 53,000 | | |
| Fiscal 2016 | | |
| 8.00 | % |
| |
| | | |
| | | |
| | | |
| | |
Bridge notes | |
$ | 596,000 | | |
$ | 596,000 | | |
| Fiscal 2015 | | |
| 8.00 | % |
| |
| | | |
| | | |
| | | |
| | |
Due to shareholder | |
$ | 134,947 | | |
$ | 134,947 | | |
| Demand | | |
| 0.00 | % |
Note 7. Administration Expense
A detail of administrative
expenses in the statements of operations is as follows.
| |
30-Sep-14 | | |
30-Sep-13 | |
| |
| | |
| |
Advertising & promotion | |
$ | 110,421 | | |
$ | 20,026 | |
Automobile | |
| 5,500 | | |
| 7,529 | |
Bank fees | |
| 567 | | |
| 624 | |
Business meetings | |
| 7,991 | | |
| 11,036 | |
Consulting | |
| 139,056 | | |
| 199,402 | |
Depreciation & amortization | |
| 40,821 | | |
| 42,539 | |
Dues & subscriptions | |
| 3,825 | | |
| 5,112 | |
Insurance | |
| 4,235 | | |
| 2,303 | |
Travel & meals | |
| 28,313 | | |
| 48,744 | |
Administration | |
| 41,674 | | |
| 51,568 | |
Labor & salaries | |
| 790,659 | | |
| 1,031,879 | |
Rent | |
| 31,350 | | |
| 30,000 | |
Postage | |
| 14,662 | | |
| 15,384 | |
Telecommunications | |
| 9,181 | | |
| 8,123 | |
Web site maintenance | |
| 1,807 | | |
| 3,339 | |
| |
| | | |
| | |
Total | |
$ | 1,230,062 | | |
$ | 1,477,608 | |
Note 8. Common Stock Issuances
During fiscal year 2013, the Company
issued 3,467,359 shares of common stock as a result of convertible notes exercised.
During fiscal year 2013, the Company
issued 660,000 shares of common stock to consultants for services rendered valued at $236,000.
During fiscal year 2014, option
holders exercised 170,000 options and the Company issued 170,000 shares of common stock and received proceeds of $24,500.
During fiscal year 2014, holders
of convertible notes converted $152,300 of convertible notes and the Company issued 435,143 shares of common stock.
Note 9. Option Issuances
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. The Company uses the Black-Sholes option pricing
model to measure the fair values of its option grants. For purposes of determining the option values 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:
| |
2014 | | |
2013 | |
| |
| | |
| |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Risk free interest rate | |
| 0.25 | % | |
| 0.25 | % |
Volatility | |
| 48.39 | % | |
| 16.60 | % |
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.
During fiscal year 2014, the Company
issued 3,816,000 options to employees, the holders of the bridge notes, and other professionals. As a result, the Company recorded
professional fees expense of $90,206, interest expense of $150,232, and labor expense of $597,771, in its statement of operations.
The following is a summary of common
stock options outstanding at September 30, 2014:
| |
| | |
Wgtd Avg | | |
Wgtd Years | |
| |
Amount | | |
Exercise Price | | |
to Maturity | |
| |
| | |
| | |
| |
Outstanding at September 30, 2012 | |
| 2,910,000 | | |
$ | 0.14 | | |
| 4.58 | |
| |
| | | |
| | | |
| | |
Issues | |
| 4,050,000 | | |
| | | |
| | |
Exercises | |
| (50,000 | ) | |
| | | |
| | |
Expires | |
| 0 | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Outstanding at September 30, 2013 | |
| 6,910,000 | | |
$ | 0.18 | | |
| 4.16 | |
| |
| | | |
| | | |
| | |
Issues | |
| 3,816,000 | | |
| | | |
| | |
Exercises | |
| (170,000 | ) | |
| | | |
| | |
Expires | |
| 0 | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Outstanding at September 30, 2014 | |
| 10,556,000 | | |
$ | 0.21 | | |
| 3.74 | |
Note
10. 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, accounts receivable,
deferred expense, other deposit, security deposit, accounts payable and accrued expenses, capital lease payable, bridge notes
payable, deferred revenue, payable to shareholder, and advances payable to shareholder in the balance sheet are estimated to approximate
fair market value at September 30, 2014 and September 30, 2013 because of their short term nature.
Note 11. Commitments &
Contingencies
Operating Leases - The
Company leases laboratory facilities at the Burlington County College Science Incubator in Burlington, New Jersey. The lease is
on a “month to month” basis and rents for approximately $2,700 per month.
The Company is not party to
any litigation against it and is not aware of any litigation contemplated against it as of September 30, 2014.
Note 12. Concentrations
of Credit
The Company largely relies
on the efforts of its Chief Operating Officer and its Chief Executive Officer. A withdrawal of the efforts of these individuals
would have a material adverse affect on the Company’s ability to continue as a going concern.
In addition, all of the royalty
revenues in the statement of operations for fiscal year 2014 were from one client.
Note 13. Joint Venture
During fiscal year 2014, the
Company invested $1,000 in a joint venture. The joint venture is called Autogenesis Corporation and was incorporated in the state
of Florida. The Company and its two chief executives own 50% of Autogenesis. Autogenesis was formed for the purpose of developing
a wound healing protocol. The Company has no further obligations to Autogenesis and the joint venture will be responsible for
its own funding.
Autogenesis has no business
operations to date.
Note 14. Related Party Transactions
The other party to the joint
venture discussed in Note 13 is controlled by a member of the Company’s scientific advisory board.
At September 30, 2014, the
company was indebted to the Company’s president and also to its majority shareholder for advances to the Company of $134,937.
The advances are due on demand, are unsecured, and carry no interest rate.
Note 15. Subsequent Events
The Company
has made a review of material subsequent events from September 30, 2014 through the date of this report and found no material
subsequent events reportable during this period.
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
I, John Arnone, certify that:
1. I have reviewed this annual report on Form 10-K of American CryoStem Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: January 20, 2015
|
/s/ John Arnone
|
|
|
John Arnone,
Principal Executive Officer
|
|
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
I, Anthony Dudzinski, certify that:
1. I have reviewed this annual report on Form 10-K of American CryoStem Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: January 20, 2015
|
/s/ Anthony Dudzinski
|
|
|
Anthony Dudzinski,
Principal Financial Officer
|
|
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
I, Anthony Dudzinski, certify that:
1. I have reviewed this annual report on Form 10-K of American CryoStem Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: January 20, 2015
|
/s/ Anthony Dudzinski
|
|
|
Anthony Dudzinski,
Principal Financial Officer
|
|
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