ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
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Forward-looking
Statements
We
and our representatives may from time to time make written or oral statements that are “forward-looking,”
including statements contained in this quarterly report and other filings with the Securities and Exchange Commission (the
“SEC”), reports to our stockholders and news releases. All statements that express expectations, estimates,
forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute
forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,”
“intend,” “plan,” “believe,” “seek,” “estimate,”
“project,” “forecast,” “may,” “should,” variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We
undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to
conform forward-looking statements to actual results. Important factors on which such statements are based on assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
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Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
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Our
failure to earn revenues or profits;
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Inadequate
capital to continue business;
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Volatility
or decline of our stock price;
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Potential
fluctuation in quarterly results;
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Rapid
and significant changes in markets;
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Litigation
with or legal claims and allegations by outside parties; and
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Insufficient
revenues to cover operating costs.
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The
following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this
quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result
of various factors.
Background
American
CryoStem Corporation was incorporated in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly
owned subsidiary American CryoStem Acquisition Corporation, substantially all of the assets from, and assumed substantially all
of the liabilities of, ACS Global, Inc. (“
ACS
”) in exchange for our issuance of 21,000,000 shares of
Common Stock to ACS (the “
Asset Purchase
”). We filed a Current Report on Form 8-K with the Securities
and Exchange Commission (SEC) on April 27, 2011 disclosing the Asset Purchase and certain related matters.
Overview
American
CryoStem Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art,
FDA-registered, clinical laboratory dedicated to our standardized processing, bio-banking and development of cellular tools and
applications using autologous adipose (fat) tissue and adipose derived stem cells (“
ADSCs
”). The Company
has built a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that
form its core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and
processes, clinical services and international licensing opportunities. Our FDA registered clinical laboratory which we believe
to be in compliance with FDA regulations for human tissue processing, cryro-storage and cell culture and differentiation media
development is located in Monmouth Junction, New Jersey.
The
Company believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experimental variability. By standardizing handling, storage, and transportation
protocols we can substantially improve the quality and reproducibility of preclinical and clinical data to help accelerate the
transition from lab research to product development and market launch.
Our
business strategy is centered on marketing our standardized platform products as a complete adipose stem cell solution and expanding
our international footprint, research and development through scientific collaborations. We intend to generate revenue through
the sale and licensing of our patented products, laboratory tools, and services to attempt to capitalize on: (1) ADSC technologies;
(2) scientific breakthroughs incorporating ADSCs that have been developing in the fast growing Regenerative and Personalized Medicine
industries; (3) providing these growth industries with a standardized ADSC cell processing platform; (4) enhancing the delivery
of healthcare through cellular-based therapies and applications which address disease treatment, wound and burn healing, joint
repair and personalized health and beauty care; and (5) building a global network of physicians and affiliated laboratory facilities
for the delivery of our products and services internationally.
Our
proprietary, patent pending clinical processing platform allows for the collection, preparation and cryo-preservation of adipose
tissue without manipulation, bio-generation or the addition of animal-derived products or other chemical materials which require
removal from the tissue sample upon retrieval or prior to use. Management believes this core process makes each tissue sample
suitable for use in cosmetic grafting procedures or for further processing to adult stem cells for other types of stem cell therapies.
Currently, we believe there are numerous therapeutic and orthopedic applications for adipose tissue and adult stem cell treatments
identified or in use globally. As of August 1, 2016, a review of clinicaltrials.gov, operated by the US National Institutes of
Health (NIH) indicates that there is a significant number of clinical trials registered or completed that are focused on adipose
tissue (1956), adult stem cells (5488), adipose derived stem cells (181), mesenchymal stem cells (641), and stromal vascular fraction
(56).
Products
and Services
American
CryoStem is focused on multiple high margin business lines capable of generating sustainable, recurring revenue streams from each
of our developed products and services. The Company also incorporates its proprietary and patented or patent pending laboratory
products, such as our
ACSelerate
™
cell culture media, into our processing product production and contract
manufacturing services. Additionally, the Company requires licensees of our tissue and cell processing technologies to purchase
consumable products including its CELLECT collection kit and ACSelerate – CP for the collection, processing, expansion and
storage of tissue/stem cells.
We
have generated initial revenues from our licensee’s in Japan and Hong Kong and subject to, obtaining the requisite financing,
management believes that we are well positioned to leverage our developed products and services as the basis for expansion of
international distribution through licensees of our technologies for a host of Regenerative Medicine uses and future applications.
The
following products and services are designed to become the basis of, or an integral part of, numerous planned licensing, revenue
generating, and cellular therapy development activities: Our products and services are:
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CELLECT
®
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Patent Pending PCT/US2011-39260 Tissue Collection
and transportation system designed for physicians to facilitate the collection and overnight shipping of an individual’s
adipose tissue to our FDA registered laboratory;
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The CELLECT
®
transportation system
is used for all American CryoStem adipose tissue processing services (ATGRAFT
™
, ATCELL
™
,
and contract manufacturing services).
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Manufacture and sale of our CELLECT
®
collection
system to licensees for our ATGRAFT
™
and ATCELL
™
technologies.
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Proprietary transportation methodology utilizing our patent pending
ACSelerate
™
-TR Transportation Medium for shipping adipose tissue at ambient temperature.
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ATGRAFT
™
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Patent pending PCT/US13/44621 adipose tissue processing at our
Laboratory and preparation for long term storage of cleaned, whole fat for fat transfer procedures and future reprocessing
into cellular applications.
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Multiple storage configuration sizes (4mL, 5mL, 50mL & 100mL)
allow for maximum fat storage and transfer flexibility.
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ATGRAFT
™
is stored in our Proprietary ACSelerate
– CP DMSO free cryoprotectant and requires no further processing by a physician upon retrieval of a patient’s
sample.
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Licensing of the ATGRAFT
™
processing technology
to international partners utilizing our CELLECT
®
collection boxes and ACSelerate
™
mediums.
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ATCELL
™
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Patent pending #13/646,676 for the processing and isolation of
cellular specific components of an individual’s adipose tissue to create adipose derived stem cell (ADSCs) lines for storage,
expansion, or differentiation.
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Proprietary processing methodologies of ATCELL
™
have been confirmed to be 96%+ pure ADSCs by third party flow cytometry.
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IRB approved process as of June 2013.
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Clinical and Research grade ATCELL
™
lines for
use with or sale to collaborative partners in research and application development and optimization, cell morphology
and characterization assays, and growth analysis.
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ACSELERATE
™
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Patented #7,989,205 with a continuation filed. Cell media line
for transporting, expanding, differentiating and storing human cells.
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Specially optimized for used with adipose tissue and adipose derived
stem cells.
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Superior growth and differentiation capabilities compared to industry
competitors.
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Used exclusively in all American CryoStem processing (ATGRAFT
™
,
ATCELL
™
and contract manufacturing).
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Additional Patent filed on December 31, 2015 for ACSelerate –
MAX PCT/US/68350
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ACS Laboratories™
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Manufacturing and sale of our patented ACSelerate
™
cell culture media products.
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Manufacture, assembly and shipment of our CELLECT
™
collection boxes
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Creation and sale of research grade ATCELL
™
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Participation and support of all collaborative research projects
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Contract manufacturing, including Autokine-CM
®
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Provide testing services for physicians performing in-office procedures
and tissue processing
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International Licensing
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Standard Operating Procedures (SOPs) and all associated
components and products
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Consulting and Marketing Review and Assessment
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CELLECT
®
(consumable)
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ATGRAFT
™
(consumable)
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ATCELL
™
(consumable)
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Adipose tissue processing, cellular expansion and product manufacture
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Our
branded product and service offerings include:
CELLECT
®
Validated Collection, Transportation, and Storage System
– An unbreakable “chain of custody” clinical
solution for physicians to collect and deliver tissue samples utilizing proprietary and patent pending methods and materials.
The CELLECT
®
service is monitored in real-time and assures the highest cell viability upon laboratory receipt.
The CELLECT
®
system incorporates our ACSelerate–TR transport medium into all collection bags which supports
the health of the tissue during transport. The CELLECT
®
kit is an integral part of our validated ATGRAFT
™
and ATCELL
™
technology to be used by all licensees of our technologies. The CELLECT
®
service
is included in our pending patent application U.S. Serial No. 13/702,304.
American
CryoStem is the first tissue bank to globally incorporate through its CELLECT
®
service the International
Blood Banking identification and labeling and product identification coding system. The coding was developed in conjunction with
the American Association of Blood Banks (AABB), the American Red Cross and the International Society of Blood Transfusion (ISBT).
These groups formed the International Council for Commonality in Blood Banking Automation (ICCBBA) and developed the ISBT 128
Standard for machine readable labeling. This labeling system is an acceptable machine readable labeling standard, product description,
and bar coding system for FDA Center for Biologics Evaluation and Research under 21 CFR 606.12(c) 13. American CryoStem conforms
to this standard in its Monmouth Junction facility and all cellular and tissue products produced at the facility carry our W3750
ICCBBA facility identifier allowing any hospital, clinic, laboratory and regulator worldwide to identify the origin and obtain
additional information of any sample produced at an American CryoStem facility. The Company will promote this standard in all
laboratories that license or utilize our technology.
ATGRAFT
™
Adipose Tissue Storage Service –
A clinical fat storage solution allowing physicians to provide their patients
with multiple tissue/stem cell storage options. The ATGRAFT
™
service, through one liposuction procedure
allows individuals the benefit of multiple cosmetic or regenerative procedures by using their own stored adipose tissue as a natural
biocompatible filler or cellular therapy application without the trauma of further liposuctions. ATGRAFT
™
procedures may include breast reconstruction, layered augmentation, buttocks enhancement or volume corrections of the hands, feet,
face and neck areas that experience significant adipose tissue (fat) volume reduction as we age.
ATGRAFT
™
is processed and stored utilizing our standards so that any stored fat tissue sample may be retrieved in the future
and re-processed to create ATCELL
™
, our clinical grade stem cell product for use in Regenerative Medicine
applications. The ATGRAFT
™
service is included in our pending patent application U.S. Serial No. 13/646,647.
The Company’s
charges standardized fees for
ATGRAFT
™
tissue processing and initial storage ranges from $985 to $3,000,
depending on the volume of tissue processed. The annual minimum storage fee is $200 for up to 100ml of tissue. Storage of tissue
over 100ml is billed an additional $1 per 1ml. annually. These fees may be paid by the collecting/treating physician or the consumer.
The Company earns additional fees ranging from $100 to $500 plus shipping costs, paid by the physician upon retrieval, for the
thawing, packaging and shipment of the stored samples to the physician for immediate use upon receipt. Additionally, physicians
may request that any stored package of ATGRAFT
™
of 25ml or greater be reprocessed utilizing the Company’s
ATCELL
™
and Autokine-CM
™
processing. The Company charges a minimum fee of $1,500
for the reprocessing of a 25ml stored ATGRAFT
™
sample and may charge additional fee’s if additional
expansion of the newly created ATCELL
™
sample is also requested.
ATGRAFT
™
Processing, Storage and Retrieval fees are determined by the storage configuration as follows:
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Small
Sample package
– for storages of 100ml of adipose tissue or less.
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Medium
Sample package
– for storage of 100ml to 300ml of adipose tissue.
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Large
Storage package
– for storage of over 300ml of adipose tissue.
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Custom
Package
– storage configuration for pre planned procedures.
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The Company
believes, the ATGRAFT
™
service may create patient retention, and significant revenue opportunities for
the participating physician to promote additional procedures and generate additional fees from adipose tissue collected during
liposuction procedures. These additional fees can be generated with significantly lower physician costs by eliminating the overhead
associated with performing another liposuction for each scheduled fat transfer or therapy procedure. Physician cost savings may
include: materials, supplies, equipment, and the expenses of utilizing a surgical center, hospital operating room or an in-office
aseptic procedure room. The ATGRAFT
™
service is designed to operate under the minimally manipulated regulations
contained in both 21 CFR 1271.10 and PHS 361.
ATCELL
™
Adipose Derived Stem Cells (ADSCs) –
Clinically processed and characterized adipose derived stem cells (ADSCs)
created using the Company’s proprietary Standard Operating Procedures (SOPs) and patented cell culture media. ATCELL
™
is the Company’s trademarked name for its ADSC and differentiated cell products and processing methodology.
The Company maintains multiple master and differentiated cell lines and labels them according to their characterization. (i.e.
ATCELL
™
(adipose derived stem cells) ATCELL-SVF
™
(stromal vascular fraction),
ATCELL – CH
™
(differentiated chondrocytes) , etc. Cell lines are custom created for patients
desiring to store their cells for their own use in future Regenerative Medicine procedures. The Company charges its customers
fees ranging from $1,500 to $10,000 to process a previously stored ATGRAFT
™
sample or a minimum
of $2,500 for newly collected client tissue samples to be processed to Stromal Vascular Fraction (SVF). Customer samples submitted
for processing must utilize the CELLECT
®
collection system to conform to our internal SOPs.
The
Company believes it will earn additional fees based upon the proposed storage configuration of the final
ATCELL
™
sample and for additional culturing in the ACSelerate
™
cell culture and differentiation media. We believe cell culturing and differentiation can be performed upon receipt of the
raw tissue sample or at any time on a previously processed and cryopreserved ATGRAFT
™
or
ATCELL
™
sample. We believe ATCELL
™
is ideally suited for
expansion and differentiation into additional cell types utilizing the ACSelerate
™
MAX (fetal
bovine serum (FBS) free high yield media), SFM (standard serum free medium), LSM (low 0.05% FBS media) or differentiation
media. The ATCELL
™
products and services are incorporated into our pending patent filing US
Serial No. 13/646,647.
The Company’s
ATCELL
™
cell lines are processed and cultured in our patented ACSelerate
™
– MAX our high yield, animal product free cell culture media. All tissue, cells, and research materials that are made available
for sale to research institutions are tested for sterility, disease, lifespan, and population doubling rate (PDL). Additionally,
we believe these cells are suited for any type of cellular therapy or regenerative medicine research. Cell morphology is confirmed
by (i) flow cytometry and (ii) differentiation analysis using ACSelerate
™
differentiation media.
Each ATCELL
™
line can be further cultured and differentiated allowing the Company to provide genetically
matched clinical grade cell types. We believe this research methodology may provide opportunities for the Company’s ATCELL
™
and ACSelerate
™
products to become the building blocks of final developed commercial
applications.
The Company
intends to support its application research, development and collaborative efforts by making ATCELL
™
and ATGRAFT
™
samples available for research and product development purposes through joint ventures,
and university and commercial collaborations. These adipose tissue and cell line samples, we believe will be highly sought after
by private researchers and universities for use in pre-clinical trial studies and in-vitro research due to our clinical processing
methodology, donor sample data and the ability to create multiple cell types that have identical genetic profiles. We believe
the clinical processing methods, data collection and testing of our ATCELL
™
and the ability to
make multiple cell types from the same donor line allows research teams to focus on application development and avoid bench to
commercialization delays. The Company is investigating new sources of human mesenchymal cell lines for production and distribution
to the cellular therapy research market.
The Company
is preparing to distribute its ATCELL ADSC products to users of its ACSelerate cell culture medium.
ACSelerate
™
Cell Culture Media Products
– Manufactured patented cell culture media products for growing human stromal
cells (including all cells found in human skin, fat and other connective tissue). Certain ACSelerate
™
cell
culture media lines are available in animal serum free, which is suitable for human clinical and therapeutic uses; and a low serum
version for application development and research purposes is also available. The patented ACSelerate
™
cell
culture media line was specifically developed to address increasing industry demand for animal serum-free cell culture products
and for the acceleration of products from the laboratory to the patient.
The Company
recently entered into a licensing and manufacturing agreement and is currently optimizing the ACSelerate – Max medium formulation
with a manufacturer and distributor for scale up manufacturing and distribution
of cell
culture products and reagents.
On August
2, 2011, the Company was issued US patent number 7,989,205 for “Cell Culture Media, Kits and Methods of Use.” The
granted claims include media variations for cellular differentiation of ADSCs into osteoblasts (bone), chondrocytes (cartilage),
adipocytes (fat), neural cells, and smooth muscles cells in both HSA medium (clinical) grade and FBS (research) grade. This patent
covers both non-GMP research grades and GMP clinical grades suitable for cell culture of adipose-derived stem cells intended for
use in humans. Additionally, in 2014 the Company filed a continuation of this granted patent with additional claims and improvements,
U.S. Serial No. 13/194,900. The Company has received notice from the USPTO of certain allowable claims within the continuation
application and is aggressively pursuing the granting of these additional claims.
Published
cell culture research indicates the most widely used cell culture medium today for growing and differentiating stem cell cultures
for in vitro diagnostics and research contains 10% or more FBS. The use of FBS and other animal products in clinical cellular
therapy application development and manufacture raises concerns and generates debates within the scientific and regulatory community
relating to potential human/animal cross-contamination. These same concerns may also need to be addressed through additional expensive
and expansive testing and documentation with the FDA during the application and approval process for new cellular therapies. FDA
concerns are evidenced in their Guidance’s and Guidelines regarding cellular therapy involving human cells, tissues and
products (HCT/Ps) published and maintained by the FDA such as: Guidance for Industry: Source Animal, Product, Preclinical and
Clinical Issues Concerning the Use of Xenotransplantation Products in Humans, FDA Final Guidance, April 2003. It is our belief
that eliminating or greatly reducing FBS in cellular manufacturing, applications and products can eliminate or ease these scientific
and regulatory concerns and may prove to be a winning strategy for cellular therapy application developers seeking FDA approval.
Currently,
our media products are being utilized by our research partners engaged in developing novel new cellular applications and treatments.
The Company supports these efforts by also making ATCELL
™
samples available for research purposes
and for internal product development through our research programs. We believe these cell lines are highly sought after by private
researchers and universities for use in pre-clinical trial studies and in-vitro research. We also believe that the Company’s
ability to provide clinical grade materials for these research and development collaborators, partners and other third parties
extends the Company’s ability to become a primary source of clinical grade materials and services necessary to support approved
applications and treatments.
The
Company has created several versions of its
ACSelerate
™
cell culture media including
:
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ACSelerate-MAX
™
- our improved clinical grade, xeno serum free cell culture media, is ideally suited for the rapid expansion of adipose-derived
cell samples for direct use or further culturing into other cell types;
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ACSelerate-SFM
™
- our general purpose clinical grade, manufactured animal serum free cell culture media, which is ideally suited for
the expansion of adipose-derived cell samples for direct use or further culturing into other cell types;
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ACSelerate-LSM
™
- our research grade, low FBS (0.05%) cell culture media, which is ideally suited for the rapid expansion of adipose-derived
cell samples for research and cellular application development or further culturing into other research grade cell types;
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ACSelerate-CY
™
-
for differentiation of
ATCELL
™
into chondrocytes (
ATCELL-CY
™
), which are suitable
for use in cartilage repair applications in knees and other joints for patients suffering from joint injury, osteoarthritis and
other diseases that cause degeneration of joint cartilage;
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ACSelerate-OB
™
-
for differentiation of
ATCELL
™
into osteoblasts (
ATCELL-OB
™
) for the repair of
bone injuries resulting from traumatic injury and musculoskeletal diseases;
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ACSelerate-AD
™
- for differentiation of
ATCELL
™
into adipocytes (
ATCELL-AD
™
) for the repair
of adipose tissue defects resulting from injury or surgical procedures and is designed for those patients without an appropriate
amount of body fat for corrective tissue transfer procedures;
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ACSelerate-MY
™
-
for differentiation of
ATCELL
™
into myocytes (
ATCELL-MY
™
) for the repair of muscle
tissue defects and loss as the result of traumatic injury, surgery or systemic disease;
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ACSelerate-CP
™
-
a clinical grade, non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media designed to conform to certain FDA and PHS 361
exemptions available for marketing our
ATGRAFT
™
service.
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ACSelerate-
TR
™
- A clinical grade sterile transportation medium designed to maintain the viability of the tissue, at
ambient temperatures for up to 100 hours during the shipment of adipose tissue to our processing facility.
|
The Company
continues to optimize additional versions of
ACSelerate
™
media through further research and testing to
develop versions for differentiation of
ATCELL
™
ADSCs into neural, lung and other specific cell types that
may be necessary for use in future clinical applications. Many of these applications are not currently approved by the US Food
and Drug Administration. On December 31, 2014 the Company filed a new patent application for an advanced medium formulation titled
Human Albumin Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799) representing
the most recent results of this ongoing optimization program. On December 31, 2015, the Company converted the provisional application
to an international PCT filing (PCT/US/68350) under the title Human Serum for Cell Culture for Clinical Growth of Human Adipose
Stromal Cells.
ACS
Laboratories
™
:
Laboratory Product Sales, Contract Manufacturing and Professional Services
–
ACS Laboratories is a division of American CryoStem Corporation, responsible for the manufacturing and sale of all the Company’s
patented and patent pending cellular, cell culture, processing and testing products to professional, institutional and commercial
clients. The Company operates a separate website (
acslaboratories.com)
to distinguish the sale of commercial and research
products from its consumer products and services, which are marketed on its main website (
americancryostem.com
). ACS Laboratories
manufactures a full line of ACSelerate
™
cell culture media and ATCELL
™
products;
and provides these products to our collaborative partners and international licensees as further discussed below.
Contract
Manufacturing,
Autokine-CM
®
Anti-Aging, Autologous Skin Care Product Line
– Under agreement
with Personal Cell Sciences Corp. (PCS), we manufacture the key ingredient Autokine-CM
®
(autologous adipose
derived stem cell conditioned medium) for PCS’ U-Autologous
™
anti-aging topical formulation. Each product is
genetically unique to the patient and custom blended, deriving its key ingredients from the individual client’s own stem
cells. The Company provides its CELLECT
®
Tissue Collection service to collect the required tissue to manufacture
the U-Autologous product and processes it under the same Standard Operating Procedures that it developed for the ATGRAFT
™
and ATCELL
™
cell processing services utilizing ACSelerate
™
cell culture
media. The Company receives collection, processing and long term storage fees and earns a royalty on all U-Autologous product
sales. The utilization of the Company’s core services in its contract manufacturing relationships provides opportunities
for the Company to promote ATGRAFT
™
and ATCELL
™
products.
Our Company’s
contract manufacturing services can be extended to develop custom and/or white label products and services for both local and
global cosmetic and regenerative medicine companies, physicians, wellness clinics and medical spas. The Company intends to expand
its relationships and contract manufacturing regionally through its physician networks and globally through its International
Licensing Program.
International
Licensing Program –
The Company believes that globally, many jurisdictions outside the US currently permit use of cellular
therapies and regenerative medicine applications. The Company has received numerous international inquiries concerning the sale
or licensing of our SOPs, products and services in the Regenerative Medicine and Medical Tourism Markets. The Company believes
that the inquiries to date are a result of the global boom in Medical Tourism, Regenerative Medicine and the slow pace of approval
of cellular therapies and regenerative medicine applications in the US. To address the Company’s sales, marketing and branding
opportunities globally, the Company has created its international licensing program. To date we have licensed our technologies
in Hong Kong and Shenzhen, China and, Tokyo, Japan.
The
Company believes it can take advantage of the significant growth of the global cellular therapy market through its international
licensing and marketing efforts. A recently published study by Transparency Market Research predicts that the Stem Cell market
will grow at a CAGR of 24.2% upon its value of US $26.23 billion in 2013 and will reach an approximate value of US $119.52 billion
by 2019. The report, titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012
- 2018”; which can be found at (
http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research
In
June of 2015, The Company entered into an initial agreement with CellSource, LTD. (“CellSource”) located in Shibuya,
Tokyo Japan for the licensing of our AGRAFT
™
tissue processing and storage technology and the purchase of our
CELLECT
®
collection products which include our ACSelerate-TR
™
transport medium. The Company also
assisted TCCS in upgrading its facility in Japan and provided training in the ATGRAFT
™
processing and recordkeeping
procedures. CellSource began marketing the new services initially within its existing network of 5 clinics throughout Japan and
begin purchasing its CELLECT
™
and ACSelerate-CP
™
cryoprotectant from the Company in the third
quarter of 2015. Upon execution of the Agreement the Company received an upfront payment and will receive additional minimum annual
payments, and consumable product sales revenue - in future years. The Agreement also provided CellSource with an opportunity to
exercise a right of first refusal for the licensing and distribution of other products marketed by the Company in Japan.
Product
Development
Our strategic
approach to product development is to design, develop and launch new products and services that utilize our existing products
and services, i.e. the use of the CELLECT
®
collection materials in providing ATGRAFT
™
tissue storage
services. Management believes that this approach will provide the Company with opportunities to produce near term cash flow, strong
recurring revenue streams, strong international licensing partners and complementary scientific data. We focus on developing products,
services and applications that require tissue collection and processing as the initial requirement to produce cellular therapies
and products. These products and services may include adipose tissue and stem cell sample processing and storage as a form of
personal
“bio-insurance”,
adipose tissue (fat) storage for cosmetic fat engraftment procedures, and the creation
and production of topical applications and ingredients used by other companies in the wound care and cosmetic industries as well
as cellular applications and bio-materials development.
We intend
to focus our efforts on expanding our product and services pipelines based upon our intellectual property portfolio, collaborative
development relationships, product sales and distribution, and international licensing and partnering opportunities. Our current
activities include supporting our university and industry collaborations by providing our products and services with the expectation
that our products and services become the basis for new adipose tissue and stem cell based Regenerative Medicine and cellular
therapy applications. We believe this strategy allows our proposed research partners and their application development teams to
begin with clinically harvested and processed adipose tissue and ADSCs (ATCELL
™
), which may be a significant
step toward accelerating the development and approval of new treatments.
Collaboration
/ Partnering Opportunities / Acquisitions
PeproTech,
Inc.
On
April 4, 2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech will
manufacture, market and distribute the Company’s ACSelerate – Max cell growth medium. The Company and PeproTech are
currently working together to scale up manufacturing.. The Company believes that marketing will begin in the fourth quarter of
2016.
BioLife
Customer and Physician Acquisition
In
February 2015 the Company entered into a binding asset purchase agreement with BioLife Cell Bank Dallas, LLC and BioLife Cell
Bank Management, LLC (collectively “BioLife”), to purchase all of BioLife’s adipose tissue, stem cell storage
clients samples, and physician network. The transaction was concluded in March of 2015. Transfer of the adipose tissue samples
was completed on April 24, 2015 and the Company undertook a complete physical inventory of the transferred samples. The Company
initiated annual storage fee billing to the acquired storage clients in June of 2015. Management believes that, with the acquisition
of BioLife, the Company became one of the largest commercial adipose tissue storage facility in the United States.
Protein
Genomics and Formation of Autogenesis Corporation
In
2012, American CryoStem entered into a Memorandum of Understanding (MOU) outlining our initial collaborative efforts with Protein
Genomics, Inc. (PGEN) to test and develop new products by combining certain components of our respective intellectual property
and patented products. We have provided PGEN and its research partner, Development Engineering Sciences (DES), with Adipose Derived
Stem Cells (ATCELL
™
) and our patented cell culture mediums (ACSelerate
™
) for testing
with PGEN’s products designed for the wound healing market. Research and development has been ongoing since late 2012 and
notable progress has been achieved.
As
a result of the success realized in the early stage of this research collaboration, in fiscal 2013 we entered into a formal joint
venture with Protein Genomics through the incorporation of Autogenesis, Corp. as required by the 2012 MOU. Each company (CRYO
and PGen) initially has an equal ownership interest. All products capable of being commercialized, as well as any new intellectual
property, resulting from the ongoing scientific collaboration will be wholly-owned by Autogenesis. This is representative of how
we believe additional research collaborations utilizing our Company’s technology may evolve in the future.
During
2013 and 2014, the collaborative efforts resulted in successful initial “proof of concept” combining PGEN’s
unique biomaterial and the Company’s ATCELL
™
and ACSelerate
™
products. Management
believes the publication of the preliminary results showed successful healing of full depth wounds on the backs of immune deficient
mice.
Our
collaborative research has established that membrane scaffolds fabricated from human proteins can be cultivated with ATCELL
™
cells causing the scaffolds to be rapidly and completely covered by the cells. The cells then secrete their own extracellular
matrix, creating a structure with layers of matrix, cells and scaffold. This living structure, when introduced into a mouse wound
model, localizes the stem cells in the wound, protects the cells within the wound environment, promotes cell growth and causes
a statistically significant increase in the rate of wound closure and healing compared to the standard of care. Further
evaluation will measure the performance of these scaffolds in accelerating the rate of wound closure, healed scar thickness,
growth of new blood vessels and production of key wound healing factors. Our objective is to show that these constructs can stimulate
the growth of new tissue and promote wound closure and healing.
INTEGRA
LifeSciences:
On
June 4, 2015, the Company and Autogenesis, Corp. entered into Non-Disclosure and Material Transfer Agreements with Integra LifeSciences,
under which the parties are exploring certain combinations of American CryoStem’s, ATCELL
™
stem
cells, Integra products and other biomaterials for the development of new products and services. Integra LifeSciences, a NYSE
traded (INT) New Jersey based company, is a world leader in medical technology and wound healing. Integra offers innovative
solutions, including leading regenerative technologies, in specialty surgical solutions, orthopedics and tissue technologies.
(http://www.integralife.com/)
Under
the terms of the Agreement the Company supplies Biomaterials to Integra and utilize its AGRFAFT
™
, CELLECT
®
,
ATCELL
™
and ACSelerate
™
products for the development of new devices and biologic
products. To date the Company has delivered biomaterials to Integra for use in the development of the new biomaterials and initiated
the processing and testing of porcine (pig) adipose tissue for use in the initial animal studies. The Company is currently working
with Integra to advance the product development combining our ATCELL
™
and ACSelerate
™
products with the new materials to form new biologic products to be used as wound coverings and bandages for the treatment of
bed sores, leg ulcers, and non healing wounds that are common to the diabetic and other systemic disease.
Rutgers
University
In
May of 2012, American CryoStem entered into Material Transfer Agreements with three research scientists at Rutgers University
allowing them to utilize the Company’s autologous Adipose-Derived Stem Cells (ATCELL™) and patented, serum free, GMP
grade cell culture and differentiation mediums (ACSelerate™) for evaluation with the anticipation to implement additional
agreements to research, develop and commercialize innovative new cellular therapies targeting incurable diseases, neurological
disorders and the $5 billion global wound care market.
During
the last quarter of 2015 the Company undertook a review of the collaborative efforts between the Company and Dr. Lee pending the
expiration of the agreements in November of 2015. Management believes that potential commercialization of the licensed technologies
would require a number of years of additional study and experimentation and requires substantial investment by the Company. In
November of 2015 the Collaboration and Research Agreement and the Licensing Agreement were terminated.
Cells
on Ice:
In
August of 2015 the company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process
and cryopreserve adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network
of physicians interested in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies
and cellular medicine. The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples
at its NJ facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI
network physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies utilizing adipose
tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The
Company is incorporating its existing Institutional Review Board (IRB) approved protocols into COI’s studies and may provide
processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its cellular
therapies.
Additional
Collaborations
The
Company is in the early stages of developing collaborations with additional industry and university partners. These developing
relationships in their earliest stages are covered by Confidential Disclosure Agreements and those that are more advanced also
include Material Transfer Agreements under which the Company supplies either ATCELL
™
or ACSelerate
™
medium products for evaluation, testing, and the development of new cellular therapy applications.
To
Date the Company has advanced to a Material Transfer Agreement with the University of Miami, University of Washington, UHV Technologies,
and STEMCell Technologies and has provided both ATCELL
™
and ACSelerate
™
products to these entities
under Agreement. No assurance can be given that these relationships will progress to full collaborative agreements or ultimately
result in new technology for future commercialization. As of September 30, 2015 these relationships have yet to result in a material
agreement.
Additionally
in August of 2015 the Company entered into a Confidential Disclosure Agreement and a Material Transfer Agreement with Dr. Sazlay,
a research scientist currently investigating unique cancer treatments at the University of Wurzburg in Germany and the University
of California in San Diego. Following execution of the Agreement, the Company delivered a number of ATCELL-SVF
™
,
ATCELL
™
and ACSelerate
™
samples to Dr. Sazlay for testing and determination of
usefulness of our products for development of his novel treatments. Dr. Sazlay has reported positive results of this initial work
and the Company and Dr. Sazlay are currently negotiating additional collaborative agreements for further development of the treatments.
Institutional
Review Board Approval of Protocols
In
an effort to make it easier for other physicians and researchers to study the safety of SVF and ADSCs, in 2013 we sought approval
from the Institutional Review Board (IRB) of the International Cell Surgical Society (ICSS) of our protocols for the processing
of SVF and culturing of mesenchymal stem cells from autologous adipose tissue. The two protocols, titled:
Autologous Adipose
Tissue-Derived Stromal Vascular Fraction (SVF) Containing Adult Stem Cells with Isolation of SVF,
and
Culturing
of Adipose Derived Stem Cells (ADSCs) For Use in Institutional Review Board Studies
, (the “IRB Studies”) provide
appropriate processing, storage and testing methods necessary to move the clinical investigative process towards uniform treatments.
The collection of processing and outcome data from IRB approved protocols is required by prevailing FDA regulations and guidance
for approval of regenerative cellular therapies, including potency (cell count), contamination testing and cell viability.
The
ICSS IRB thoroughly evaluated every step of our standardized processing protocols, which serve to isolate the SVF or ADSCs from
a patient’s adipose tissue. The objective of the IRB is to assess these protocols to ensure the highest patient safety possible
and to minimize the risks for those participating in innovative research and investigational studies. On June 30, 2013, the ICSS
IRB approved the protocols until June 30, 2014. Additionally, the Company obtained approval for a new study, entitled “
Comparative
Viability Assessment of Human Adipose Tissue before and After Cryopreservation
(ICSS -2013-010), the Study was approved
on November 22, 2013 and is valid until November 22, 2014
In
June of 2014 the Company submitted its IRB Studies to the Institutional Review Board of the Institute of Regenerative Cellular
Medicine (the “IRCM”) and on July 23, 2014 the ICEM IRB approved the following studies:
|
·
|
Isolation
of SVF: Autologous Adipose Derived Stromal Vascular Fraction Containing Adult Stem Cells
(IRCM 2014-024) until July 23,
2015
|
|
·
|
Comparative
Viability Assessment of Human Adipose Tissue Before and After Cryopreservation
(IRCM 2014-025) until July 23, 2015
|
|
·
|
Isolation
of SCF and Culturing Adipose Derived Stem Cells for Use in Investigational Review Board Studies
(IRCM 2014-023) until
July 23, 2015
|
The
IRCM approved studies require annual renewal; the Company renewed the studies in July of 2015.
The
Company is currently making its processing services available to physicians and clinical researchers utilizing the IRB-approved
protocols for inclusion in their studies. By adopting these standardized and repeatable protocols utilizing our laboratory services,
researchers are able to focus their resources on application development rather than creating, validating and managing a clinical
laboratory for processing tissue and cellular samples. These studies above do not currently involve actual human clinical trials,
but affords the IRB the opportunity to endorse our repeatable, standardized and validated processing methodologies for the isolation
of SVF and for tissue culture expansion of ADSCs obtained from SVF as the basis for future human clinical study.
In
2014, the Company created and is the Sponsor of a new IRB study with The DaVinci Center, Dr. Louis Cona, Principal Investigator
,
in George Town, Grand Cayman Island entitled
Impact and Safety of Cultured Expanded Autologous, Adipose-Derived
Stem Cells deployed via Intravenous Injection for the Treatment of Multiple Sclerosis Protocol: CRYO-MS-ADSC-006.
On July
23, 2014 the study was approved for 100 patients.
On November 1, 2014 the first patient was treated at the Da Vinci
Center utilizing the approved protocol. The IRB filing can be found on www.clinicaltrials.gov, (ClinicalTrials.gov Identifier
NCT02326935). The Company renewed the IRB studies with The Institute of Regenerative Cellular Medicine in August of 2015 for another
one year period.
Management
intends to pursue additional collaborative and partnering opportunities as a strategic method to enhance awareness of and expand
the distribution of our patented products, services, technologies and expertise in the IRB-approved clinical processing of adult
adipose tissue and ADSCs for autologous (self) use. We believe that as the pace of clinical trials and cellular therapy results
reporting increase and scientific and peer reviewed papers are published, new opportunities to market our existing products, services
and Intellectual Property portfolio may also emerge.
Moreover,
we further believe that the combination of our validated cellular processing capabilities and patented products give us an economical
platform to develop and produce cellular therapy applications for injection or intravenous therapy, topical applications, burn
and wound healing, joint repair, disease treatments and cosmeticeuticals. The clinical methods and products we have developed
are designed to permit a variety of treatments for any patient with their own genetically matched raw materials utilizing our
ATCELL
™
and ATGRAFT
™
products prepared with our patented line of ACSelerate
™
cell culture mediums. We believe that autologous cellular therapies have shown promising results for safety and efficacy
in a variety of applications in published early stage clinical trial results and application studies.
Regulatory
Information
The
Company believes that its processing methodologies and the testing laboratory facilities are designed to be in compliance with
all current regulations as defined by the United States Public Health Service Act (“PHS” or the “PHS Act”)
and the Food and Drug Administration (FDA) regulations as they relate to the operation of a tissue processing and storage facility.
The
Company’s Monmouth Junction laboratory facility is registered with the FDA (FEI 3008307548) as a processing and storage
facility for Human Cells, Tissues and Cellular and Tissue Based Products (HCT/Ps) since 2010. In 2013, we registered the facility
with the State of New York (CP169TP136) and the State of California (CNC80948) the only states in the U.S. requiring registration.
These state registrations required the submission of our operating procedures for review by the respective State Health Departments,
and annual updates to maintain the registrations are required. In addition, we have discussed our operations with the State of
New Jersey Health Department and Department of Environmental Protection (DEP) to ascertain any special regulations to which we
may be subject. Based upon these discussions, and our use of a registered medical waste disposal company, we do not at this time
have any special registrations or regulations for compliance with the State of New Jersey. Our New Jersey Medical Waste Generator
registration number is 0364539.
The
Company is also subject to complying with a significant body of FDA and PHS regulation; the regulations governing our business
are mainly contained within 21 CFR 1271.10, 800, 600, 200, 210 and 211. The forgoing regulations govern all aspects of the Company’s
Standard Operating Procedures (SOPs), which we periodically review with our FDA advisors, Laboratory Director and Medical Laboratory
Director.
Our
Standard Operating Procedures (SOPs) are the key to properly operating our clinical tissue processing facility. To ensure delivery
of the highest quality services, we incorporate these SOPs, which are designed to provide a basis for accreditation by the American
Association of Blood Banks (AABB), the American Association of Tissue Banks (AATB) and the Foundation for the Accreditation of
Cellular Therapy (FACT-JACIE). We have consistently endeavored to ensure that our processes, methodologies and procedures remain
among the highest standards in the global tissue collection, processing and storage market. To this end, we have equipped ourselves
with state-of-the-art quality processing and testing equipment, which we believe helps to ensure that every sample collected and
processed is sterile (free from adventitious agents), viable and capable of significant cellular growth and expansion.
Quality
Management
The
Company’s quality management program ensures that during processing and testing of each adipose tissue, adipose derived
stem cell or SVF sample, the appropriate quality management tests and processing methodologies are performed and the data is collected,
recorded and reviewed by the laboratory management team.
Chain
of Custody Control
Central
to the individual sample testing is an unbroken chain of custody and tracking. Sample tracking begins with the creation of each
collection box. All samples, processing, quality management, batch, and storage documents and records, are coded with this unique
number. All records and testing samples are cross referenced and verified as required by the standard operating procedures.
Testing
Design and Standard Operating Procedures (SOPs)
Testing
methods are standardized and operate under a complete set of validated SOPs and Quality Management (QM) processes. All SOPs are
designed to be in compliance with the US Food and Drug Administration’s regulations and guidance for aseptic processing.
Strict QM is enforced to avoid and/or record any process deviations.
Intellectual
Property
From
the Company’s formation, our strategy has been to invest time and capital in intellectual property protection. This strategy
is intended to strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing
our IP portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative
partnerships with third parties. Our intellectual property portfolio currently includes one issued U.S. patent (No. 7989205,
Cell
Culture Media Kits and Methods of Use
); and 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
|
Human
Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells
|
International
PCT filing of US Provisional Application Serial Number 62/098799 Filed December 31, 2014
|
PCT/US/68350
Filed December 31, 2015
|
Systems
and Methods to isolate and Expand Stem Cells from Urine
|
New
Provisional Patent Application for a new source of human stem cells
|
Provisional
Patent Application No. 62/335,426
|
Additionally,
the Company has in-licensed IP with the following collaborations and joint ventures;
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
Cosmetic
compositions including tropoelastin isomorphs
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#5,726,040
|
Cosmetic
compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,451,326
|
Recombinant
hair treatment compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,572,845
|
Wound
healing compositions and methods using tropoelastin and lysyl oxidase
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO:
#6,808,707
|
Business
methods, processes and systems for collection, cryogenic storage and distribution of cosmetic formulations from an obtained
stem cell based biological
|
Personal
Cell Sciences and American CryoStem collaboration
|
USPTO
application #61/588,841
|
Trademarks
In
addition to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office:
American
CryoStem
®
, CELLECT
®
and
ATGRAFT
™
. We utilize additional trademarks for
our products, slogans and themes to be used in our marketing initiatives, including, for example,
ACSelerate – MAX SFM
™
ACSelerate-SFM
™
,
ACSelerate- LSM
™
and
ATCELL
™
.
The
Company has also secured a number of online domain names relevant to its business, including www.americancryostem.com and www.acslaboratories.com.
Marketing
and Distribution
The
key objective of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for
adipose tissue collection, cell processing and cryogenic storage, therapeutic applications, to prepare patients for current or
future regenerative applications using their own adult stem cells to address the impact of aging, injury and other disorders.
The company has built distribution channels with global physician and patient networks and has also carved out research institutions
and licensing partners to capitalize on other patented product platforms to preserve stem cell integrity.
Our
Marketing Program is a combination of a traditional sales approach supported by continuous internal and external marketing programs,
which are closely coordinated with the expansion of our laboratory processing capabilities to ensure value added services accompany
the latest technology. Our marketing efforts intend to disseminate current and future uses of adipose tissue and adult stem cells
which support the significant growth in the Regenerative Medicine Market and along with our business model, products and services.
In 2016, we intend to boost the Company’s multi-channel marketing campaigns utilizing both traditional print advertising
and digital campaigns with social media, email campaigns, blogging, you-tube, radio, SEO and PR to drive information seekers and
potential customers to the company’s website. In addition, consumer education and peer to peer physician programs are planned
as we continue to utilize key industry leaders, and early adopters in the medical community as a marketing resource to enhance
awareness of our proprietary, patented products and services. This approach will continue to increase the number of global surgeons
who join our network, as well as university and private researchers and consumers who are experiencing positive results with our
products and services.
During
the period ended June 30, 2016 the Company engaged the services of Carol Ann Mireider, Founder and CEO of CAM& Associates.
Ms. Mireider has a track record for growing global businesses in the medical device, diagnostics and consumer products industries.
She has launched over 30 products in her career and specializes in multi-channel marketing and the use of digital platforms to
build brand awareness. Ms. Mireider is known for KOL development and blending clinical and commercial programs to gain market
acceptance quickly for new, advancing products and technologies. She has served in leadership roles for Fortune 500 companies,
including Abbott Laboratories, Johnson & Johnson, Bristol Myers-Squibb, and Estee Lauder.
With
Ms. Mireider’s direction, we plan on expanding the Company’s marketing efforts to broaden and capture both physician
and consumer engagement. This marketing initiative uses traditional sales approach common to the pharmaceutical and biotechnology
industries. In addition, educational programs to both physicians and consumers are planned to strengthen professional training
and elevated awareness of stem cell therapy/wellness for patients. This fundamental approach is being strategically and tactically
expanded using a combination of in-house marketing personnel and outside KOL’s and independent experts. Outside of the US,
significant licensing opportunities are planned and a desire to enter into medical tourism to embrace stem cell regenerative medicine
for wellness applications.
We
plan to update and continue direct marketing programs focused on reaching plastic and cosmetic surgeons to join our group of providers
that offer our services to their patients. This marketing initiative uses a traditional sales approach common to the pharmaceutical
and biotechnology industries. This fundamental sales approach at the core of our marketing activities is being strategically and
tactically expanded using a combination of in-house sales personnel and outside independent channels.
Our
plan, capital permitting, provides for a comprehensive integrated marketing approach using various traditional and new media,
such as the Internet, social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and
promote awareness of our Company and our branded products and services. The essence of this targeted strategy is to reach the
end-users as quickly as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside
marketing resources and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Market
Size and Opportunities
By
leveraging and capitalizing on our proprietary Adipose Tissue Processing Platform, our Company is working to address multiple
high growth, multi-billion dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals,
Medical Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market
dynamics of its intended domestic and international markets and to identify additional areas within these markets where the Company’s
cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.
Global
Stem Cells Market
A
recently released report from Transparency Market Research (TMR) forecasts that the
global
stem cells market
will grow at a remarkable CAGR of 24.2% from 2012 to 2018. According to TMR,
a market intelligence firm, the global stem cells market, which in 2013 stood at US$26.23 bn, is anticipated to reach US$119.52
bn by the end of the forecast period. The report, titled ’
Stem Cells Market - Global Industry Analysis, Size, Share,
Growth, Trends and Forecast, 2012 - 2018
’, http://www.transparencymarketresearch.com/pressrelease/stem-cells-market.htm
Another
report by Transparency Market Research titled
“Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends
and Forecast, 2012 - 2018”
states “
The Global Stem Cells Market to grow at a CAGR of 24.2%, to Push US$119.52
billion by 2019.
The report analyzes the highly fragmented stem cells market by the type of stem cells, processes in the
stem cell market, applications of stem cells, and geography. Regenerative medicine is by far the dominant application of stem
cells, including uses in neurology, cardiology, and oncology. According to process, the market is divided into the stem cell acquisition,
stem cell production, stem cell cryopreservation, and stem cell expansion segments. Due to the expected increase in demand, stem
cell acquisition will retain its position as the major segment of the stem cell market. Geographically, North America and Europe
will remain well ahead of the competition.
”
(http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research.html#sthash.4vzqG1wc.dpuf)
Regenerative
Medicine Market
According
to a leading research firm focused on the biotechnology, healthcare and life sciences industries, TriMark Publications categorizes
the Regenerative Medicine market into three main categories:
|
·
|
Biomolecules
(scaffolds, growth factors and stem cell therapy).
|
TriMark
Publications.com cites in its “Regenerative Medicine Markets” report (March 2013) that the Regenerative Medicine market
continues to witness significant advances in clinical efficacy, regulatory approval and product commercialization of cell based
therapies which will catapult to over $35 billion by 2019. Affirmative results produced from the application of adult stem cells
have resulted in greater government and private sector investment in research and development of new cell therapies. Investment
made into the regenerative medicine market include firms that harvest, process, purify, expand, cryopreserve, store or administer
stem cells”
1
In a study from Market Research Reports, released “Global Regenerative
Medicine Market (Technology, Applications, Geography) – Industry Analysis, Trends, Opportunities and Forecast, 2013-2020.”
In it, the market analysis firm found the
global regenerative medicine market will be worth some $67.6 billion by
2020
– a stark and notable increase from the $16.4 billion valuation it received in 2013.
Between 2014 and 2020, the report expects the regenerative medicine market to grow at a compounded annual growth rate of 23.2
percent.
According
to Allied Market Research,
on the basis of geography, this market can be
classified into North America, Europe, Asia-Pacific and LAMEA. Currently, North America dominates the global market due to heavy
investment in development of regenerative products as well as more number of commercialized products. However, the growing focus
on research and development in Japan and South Korea makes Asia-Pacific the fastest growing region at a CAGR of 30.9% during 2014-2020.
Medical
Tourism, Global Wellness Tourism
As
stated by the Global Wellness Institute; adding up all expenditures made by international/inbound and domestic, primary and secondary
wellness tourists, we estimate the wellness tourism industry to be $494 billion in 2013, a 12.7% increase over 2012. Wellness
tourism accounts for 14.6% of all tourism expenditures and is growing much faster than the 7.3% growth rate for overall tourism
expenditures from 2012-2013. The $494 billion in wellness tourism expenditures represent 586.5 million wellness trips taken in
2013, across 211 countries. Wellness tourism accounts for about 6.2% of all domestic and international tourism trips taken in
2013.
http://www.globalwellnesssummit.com/images/stories/gsws2014/pdf/GWI_Global_Spa_and_Wellness_Economy_Monitor_Full_Report_Final.pdf
Cell
Culture Market
The
Company believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experiment variability. By standardizing handling, storage, and transportation
protocols we believe we can substantially improve the quality and reproducibility of preclinical and clinical data which we believe
will help to accelerate the transition from lab research to drug development and market launch.
1
http://www.trimarkpublications.com/regenerative-medicine-markets/
According
to MarketsandMarkets,
the global cell culture market was valued at an estimated $14,772 million in 2013. This market is
expected to grow at a CAGR of 10.71% between 2013 and 2018, to reach $24,574 million in 2018. The cell culture media, sera,
and reagents market consists of six segments, namely, contamination detection kits, cryoprotective agents, lab reagents,
media, serum, and other reagents. Of these, the serum product segment had the largest share of the cell culture media, sera,
and reagents market in 2013, whereas the media product segment is expected to grow at the highest CAGR between 2013 and
2018.
Cosmeceutical
Market
Many
industry experts agree that Cosmeceuticals has become one of the fastest growing segments of the Cosmetics and Personal Care industry.
Cosmeceutical products have a big emphasis on scientifically advanced formulations and often contain active ingredients that can
also be found in pharmaceutical products. This continued emergence of increasingly sophisticated active ingredients is said to
be the main driving force behind the growth of this segment, which is rapidly evolving into significant category of the personal
care industry.
In
a report titled
Global Cosmeceuticals Market Outlook 2016
, published February 2013, RNCOS reports that the worldwide market
is estimated to be valued at $30.5 billion and is likely to grow at a consistent CAGR of 7.7% during the period 2012 through 2016.
2
In a separate report, Transparency Market Research, a U.S. - based market intelligence
firm states that the global facial care market is expected to report an approximate value of $39.75 billion by 2019. The report,
titled ’
Facial Care Market (By Product Type - Skin Whitening/ Lightening and Anti-Ageing, Facial Creams, Face Wash,
Cleansing Wipes, Serums and Masks and Others (fade creams, pore strips and toners)- Asia-Pacific Industry Analysis, Size, Share,
Growth, Trends and Forecast 2013 – 2019.
http://globenewswire.com/news-release/2014/10/17/674123/10103135/en/Global-Facial-Care-Market-to-be-Worth-39-75-Billion-by-the-year-2019-Transparency-Market-Research.html
Development
of U.S. Markets
Cells
on Ice
In
August of 2015 the company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process
adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network of physicians interested
in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies and cellular medicine.
The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples at its NJ
facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI network
physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies and trials utilizing adipose
tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The
Company is incorporating its existing Institutional Review Board (IRB) approved protocols into COI’s studies and providing
processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its cellular
therapies.
Physician
Network
The
Company continues to develop relationships to leverage our products and services through existing cosmetic surgery and regenerative
medicine practices while at the same time growing its current efforts to develop and expand its network of individual physicians
and surgeons seeking to adopt the Company’s products and services. These efforts are currently focused on surgeons performing
liposuction, tissue transfer or regenerative procedures involving the use of adipose tissue. The Company intends to expand its
efforts to non-cosmetic medical professionals interested in Regenerative Medicine applications utilizing ADSCs to establish itself
as a primary source of collection, processing and preparation of cellular therapies as they are developed and approved for patient
use by the FDA.
2
http://www.researchandmarkets.com/research/mbmvbh/global
Regenerative
Medicine Institute
The
Company recently announced that Dr. Vincent Giampapa, MD F.A.C.S has joined its Medical and Scientific Advisory Board. Dr. Giampapa
is the founder /director of the Regenerative Medicine Institute (RMI) located in Costa Rica and the US, the Plastic Surgery Center
International and The Giampapa Institute for Anti-Aging Medical Therapy located in Montclair, NJ. Dr. Giampapa’s research focuses
on stem cell technologies and their clinical applications to improve the cellular aging process in order to enhance health span
and quality of life. As a result of his research, Dr. Giampapa has been awarded medical and intellectual property patents with
the United States Patent and Trademark Office for developments involving unique cell culture delivery techniques, new drug delivery
systems, stem cell reprogramming, DNA repair, and telomerase maintenance. He is a co-founder of The Academy of Anti-Aging Medicine
(A4M), comprised of over 26,000 members representing over 110 nations, the first president of the Board of Anti-Aging Medicine
and the founder of healthycell®, an advanced cell health nutritional supplement and StemBank™, a blood derived stem
cell extraction and storage company. Dr. Giampapa will have an active role assisting the Company with the development of its “From
laboratory to clinic/physician’s office” services and applications platform.
Development
of International Markets
International
Licensing Program –
Globally,
many jurisdictions outside the US permit the use of adipose tissue, cellular therapies
and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products
and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these
inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering
an International Licensing Program.
The
program is designed to permit the licensing of the company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable
of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate
the
CELLECT
®
,
ATGRAFT™
and
ATCELL™
services in their local market.
Strategically, the Company’s international licensees will maintain the branding of the Company’s services along the
lines of the “Intel Inside” branding program.
Qualified
Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual stem
cell samples for their clients with the comfort and confidence that they are providing services that have been developed to US
FDA standards. Core to the relationship is the developed proprietary and patent pending processing and laboratory operational
methodologies contained in our Standard Operating Procedures (SOPs), Training, and Continuous Quality Management, Testing Program,
and Laboratory Operations manuals.
Licensing
programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI
agreement is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the
agreement which is credited toward future royalty payments. Following evaluation of the prospective licensee the Company will
enter into a final Agreement which outlines all upfront fees, minimum royalties and consumable purchase obligations of the Licensee.
The Company’s first international licensing agreement was executed with Health Innovative Technology Company, LTD, a cord
blood collection and storage company with operations in Hong Kong and Shenzhen China.
We
have committed extensive resources to establishing and perfecting our international shipping methodologies and protocols, ensuring
that our processes meet the highest possible standards of regulatory compliance for shipment of biologic materials. As a result,
our FDA registered laboratory and cryostorage facilities in New Jersey are now able to send and receive viable tissue samples
to and from clients globally.
CellSource,
LTD. – Tokyo, Japan
On
June 2, 2015 the Company and Cell Source Ltd entered into an Agreement for licensing the ATGRAFT
™
technology
to Cell Source Ltd for Japan. The Agreement calls for Cell Source Ltd to purchase consumables from us including the CELLECT
®
collection boxes and ACSelerate
™
Cryopreservation Medium. The agreement also provides Cell Source
with a twenty four month limited Right of First Refusal for licensing additional technologies from the Company for the Japanese
market. According to Allied Market Research, World Regenerative Medicines Market
Currently,
North America dominates the global Regenerative Medicine market due to heavy investment in development of regenerative products
as well as more number of commercialized products. However, the growing focus on research and development in Japan and South Korea
makes Asia-Pacific the fastest growing region at a CAGR of 30.9% during 2014-2020.
Health
Information Technology Company, LTD – Hong Kong and Shenzhen, China
On
June 30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the
Company’s Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service
in Hong Kong. The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the
Company. The Company and HIT have reached further agreement to extend their relationship on a non exclusive basis to include HIT’s
cord blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The
HIT agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase
CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kit as well as other American CryoStem products
necessary for clinical adipose tissue processing and storage at the Shenzhen cord blood collection facility. The final master
licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September 24, 2014.
Corporate
Information
Our
principal executive offices are located at 1 Meridian Road, Eatontown, New Jersey 07724 and our telephone number is (732) 747-1007.
Our website is
www.americancryostem.com
. We also lease and operate a tissue processing laboratory in Monmouth Junction,
New Jersey at 7 Deer Park Rd, Monmouth Junction, NJ 08852. Our laboratory website address is
www.acslaboratories.com.
Available
Information
We
file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website
at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information
on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.
Going
Concern
As
of the date of this quarterly report, there is substantial doubt regarding our ability to continue as a going concern as we have
not generated sufficient cash flow to fund our business.
We
have suffered recurring losses from operations since our inception. In addition, we have yet to generate sufficient internal cash
flow from our business operations or successfully raise the financing required to fully develop our business. As a result of these
and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our
future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate
sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Our
plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our
working capital deficiency, and (ii) implementing a plan to generate sales of our proposed products and services. Our continued
existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our current business operations.
However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements
do not include any adjustments that might result from the outcome of these risks and uncertainties.
Liquidity
and Capital Resources
We
had a cash balance of $37, 313 as of the date of this quarterly report. Our principal source of funds has been sales of our securities.
Should we be unable to raise sufficient funds, we will be required to curtail our operating plans if not cease them entirely.
We cannot assure you that we will generate the necessary funding to operate or develop our business. Please see “
Cash
Requirements
” above for our existing plans with respect to raising the capital we believe will be required.
In
the event that we are able to obtain the necessary financing to move forward with our business plan, we expect that our expenses
will increase significantly as we attempt to grow our business. Accordingly, the above estimates for the financing required may
not be accurate and must be considered in light these circumstances.
Cash
Requirements
We
will require additional capital to fund marketing, operational expansion, processing staff training, as well as for working capital.
We are attempting to raise sufficient funds would enable us to satisfy our cash requirements for a period of the next twelve (12)
to twenty-four (24) months. We have minimal long term debt and have been able to meet our past financial obligations.
In
order to finance further market development with the associated expansion of operational capabilities for the time period discussed
above we are planning additional fundraising through the sale of our equity and debt securities however we cannot assure you we
can attract sufficient capital to enable us to fully fund our anticipated cash requirements during this period. In addition, we
cannot assure you that the requisite financing, whether over the short or long term, will be raised within the necessary time
frame or on terms acceptable to us, if at all. Should we be unable to raise sufficient funds we may be required to curtail our
operating plans if not cease them entirely. As a result, we cannot assure you that we will be able to operate profitably on a
consistent basis, or at all, in the future.
We
expended $61,193 during the three months ended June 30, 2015 in professional fees (legal, accounting and consultants) and $47,039
in Laboratory expenses
Commitments
The
Company leases approximately 1,628 square feet of laboratory facilities at 7 Deer Park Drive in Monmouth Junction, New Jersey.
The term of the lease is from February 1, 2016 to January 31, 2019. The monthly rent and operating expenses are $5,225.
The
Company’s main office facility is located at 1 Meridian Road, Eatontown, New Jersey 07724. The lease expired during fiscal
2015 and is currently on a month to month basis with monthly rent of $2,650. The total rent for office facilities for the three
months ended June 30, 2016 was $7,950.
The
Company has unsecured liabilities without interest of $123,447 due to ACS Global, the majority shareholder of the Company, for
certain prepaid expenses made by ACS Global prior to the closing of the transaction. There is no due date associated with this
liability.
At
June 30, 2016 the Company was indebted to an affiliated company. The Chief Executive Officer of American CryoStem Corporation
is the majority shareholder of the affiliated company. Advances of $12,020 are due on demand, are unsecured, and carry no interest
rate.
At
June 30, 2016, the Company was indebted to an affiliated company. The Chief Executive Officer of American CryoStem Corporation
is the majority shareholder of the affiliated company. Advances of $1,134 are due on demand, are unsecured, and carry no interest
rate.
At
June 30, 2016 The Company had a Federal Tax Lien of $76,931 for taxes, penalties and interest. As of the filing date of this financial
statement, the Company has paid $23,000 of these taxes penalties and interest.
We
anticipate that any further capital commitments that may be incurred will be financed principally through the issuance of our
securities. However, we cannot assure you that additional financing will be available to us on a timely basis, on acceptable terms,
or at all.
Off
Balance Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
Critical
Accounting Policies
We
prepare financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires
us to make estimates and assumptions that affect the amounts reported in our combined and consolidated financial statements and
related notes. We periodically evaluate these estimates and assumptions based on the most recently available information, our
own historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ
from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We
believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our
financial statements.
Basis
of Presentation
Our
financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles
in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred.
Management’s
Use of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Long-Lived
Assets
We
review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book
value may not be recoverable. When such factors and circumstances exist, we compare the assets’ carrying amounts against
the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts
are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash
flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period.
Statement
of Cash Flows
For
purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have
original maturities of three months or less) to be cash equivalents.
Fair
Value of Financial Instruments
Our
financial instruments consist of cash and cash equivalents. The fair value of cash and cash equivalents approximates the recorded
amounts because of the liquidity and short-term nature of these items.
Recent
Accounting Pronouncements
We
have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe that any future adoption
of such pronouncements will have a material impact on our financial condition or the results of our operations.