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
About American
CryoStem Corporation
American
CryoStem Corporation; (CRYO) founded in 2008, has evolved to become a biotechnology pioneer, standardizing adipose tissue derived
technologies (Adult Stem Cells) for the fields of Regenerative and Personalized Medicine. The Company operates a state-of-art,
FDA-registered, clinical laboratory in Monmouth Junction, New Jersey and licensed laboratories in Hong Kong, China and Tokyo,
Japan, which operate on our proprietary platform, dedicated to the collection, processing, bio-banking, culturing and differentiation
of adipose tissue (fat) and adipose derived stem cells (ADSCs) for current or future use in regenerative medicine. CRYO maintains
a strategic portfolio of intellectual property (IP) that surrounds our technology which supports a growing pipeline of stem cell
applications and biologic products. We are leveraging our, IRB approved, FDA compliant platform and a developed product portfolio
to create a domestic and global footprint of licensed laboratory affiliates, physicians networks, patients and research organizations
who purchase tissue collection, processing and storage consumables from our Company. Our laboratory stem cell products foundation
are characterized adult human Mesenchymal Stem Cell (MSC’s) derived from adipose tissue that work in conjunction with our
13 patented (non-animal) medium lines. The Company’s R&D efforts are focused on university and private collaborations
to discover, develop and commercialize ADSC and laboratory products combined with synergistic technologies to create jointly developed
regenerative medicine applications and new intellectual property.
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 which will help to accelerate
the transition from lab research to drug and therapy development and market launch. To this end, we have licensed affiliates
operating on our cellular collection-processing and storage platform in Tokyo, Japan, and Hong Kong. Our licensees purchase our
CELLECT adipose tissue collection kits and ACSelerate CP storage consumables from us.
Our business
strategy is centered on marketing our standardized platform as a complete adipose stem cell (Adult Stem Cells) solution and expanding
our research and development through scientific collaborations. We are generating initial revenues through the sale and licensing
of our patented products, laboratory tools, and services 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, 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 (2083),
adult stem cells (5709), adipose derived stem cells (205), mesenchymal stem cells (682), and stromal vascular fraction (69).
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 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 including
our
CELLECT
®
Validated Collection, Transportation, and Storage System
and
ACSelerate
™
Cell Culture Media
Products.
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 utilize our developed products and services as the foundation for international distribution through
licensees of our technologies and a host of Regenerative Medicine uses and future applications. In the US we operate an FDA registered
facility that generates revenue from; the processing and storage of adipose tissue (ATGRAFT), the processing of adipose tissue
into its cellular components for future use (ATCELL) and the production and sale of our CELLECT
®
tissue collection
boxes, and patented media products.
The products
and services are also designed to become an integral part of generating revenue from current and planned licensing territories,
our New Jersey based collection, processing and storage operations (CELLECT
®
) sale and licensing of our developed
laboratory products (ACSelerate
™
and ATCELL
™
) , and cellular therapy development
activities.
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 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
form 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 laboratory 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 on
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 and cell storage options. The ATGRAFT
™
service, through one liposuction procedure
allows individuals to prepare for future cosmetic or regenerative procedures by using their own stored adipose tissue as a natural
biocompatible filler or the components for 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 stem cells ATCELL
™
, our clinical grade 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 minimum annual storage fees depending on
the volume of tissue processed. These processing and storage fees may be paid by the collecting/treating physician or the consumer.
The Company earns additional fees upon sample retrieval, for the thawing, packaging and shipment of the stored samples to
the physician or clinic for immediate use upon receipt. Additionally, physicians may request that any stored ATGRAFT
™
tissue sample of 25ml or greater be reprocessed utilizing the Company’s ATCELL
™
and Autokine-CM
™
processing. The Company charges fees for the reprocessing of a 25ml stored ATGRAFT
™
sample and
may charge additional fee’s if expansion of the newly created ATCELL
™
sample is also requested.
The Company
believes the ATGRAFT
™
service may create patient retention, and significant revenue opportunities for
the participating physician. The ATGRAFT
™
service lowers physician overall costs by eliminating additional
liposuction procedures 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 regenerative cells
(ADRCs) created using the Company’s proprietary Standard Operating Procedures (SOPs) and ACSelerate
™
patented
cell culture media. ATCELL
™
is the Company’s trademarked name for its ADRCs 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 to process previously stored ATGRAFT
™
sample and for newly
collected client tissue samples to be processed. Customer samples submitted for processing must utilize the CELLECT
®
collection system and ACSelerate
™
mediums to conform to our internal SOPs and quality
control standards.
The Company
believes it will earn additional fees based upon the proposed storage configuration of the final ATCELL
™
sample and future culturing in the ACSelerate
™
cell culture and differentiation media. Cell culturing
and differentiation may be performed upon receipt of the raw tissue sample or at any time on a previously processed and
cryopreserved ATGRAFT
™
or ATCELL
™
sample. ATCELL
™
has shown that it is ideally suited for expansion and differentiation into additional cell types utilizing the ACSelerate
™
line of culture and differentiation mediums. 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
™
cell culture media. All tissue, cells, and research materials 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 cell therapy 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 preparing to distribute its ATCELL
™
cell products
to users of its ACSelerate
™
cell culture media during 2017. The Company is investigating new sources
of human mesenchymal cell lines for production and distribution to the cellular therapy research market.
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 or a low serum
version for application development and research purposes. 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 with PeproTech a life sciences company formed in 1988.
PeproTech
is the trusted source for the development and manufacturing of high quality cytokine products for the life-science and cell therapy
markets. Over the past 26 years the company has grown into a global enterprise with state-of-the-art manufacturing facilities
in the US, and offices around the world. With over 2,000 products PeproTech has developed and refined innovative protocols to
ensure quality, reliability and consistency.
During 2016 the Company and PeproTech completed the optimization and scale
up manufacturing studies and expect the licensed medium marketed under both PeproTech’s PeproGrow and the Company’s
ACSelerate MAX brands in 2017.
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. On November 8, 2016 the Company was granted additional claims from the continuation U.S. Serial No.
13/194,900 issued as a new Patent Serial No. 9,487,755. Prior to the issuance the Company filed a continuation in part (CIP) containing
additional claims related to our ongoing media development.
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 fetal bovine serum (FBS) and other animal derived products. 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
lead to additional expensive and expansive testing and documentation requirements with the FDA during the application and approval
process for new cellular therapies manufactured with or containing animal or animal derived products. 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. Management believes 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.
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
:
|
·
|
ACSelerate-MAX
™
- xeno serum free cell culture media,
|
|
·
|
ACSelerate-SFM
™
- animal serum free cell culture media,;
|
|
·
|
ACSelerate-LSM
™
- low FBS (0.05%) cell culture media,
|
|
·
|
ACSelerate-CY
™
-
for differentiation of
ATCELL
™
into chondrocytes (
ATCELL-CY
™
),
|
|
·
|
ACSelerate-OB
™
-
for differentiation of
ATCELL
™
into osteoblasts (
ATCELL-OB
™
)
|
|
·
|
ACSelerate-AD
™
- for differentiation of
ATCELL
™
into adipocytes (
ATCELL-AD
™
)
|
|
·
|
ACSelerate-MY
™
-
for differentiation of
ATCELL
™
into myocytes (
ATCELL-MY
™
)
|
|
·
|
ACSelerate-CP
™
-
non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media
|
|
·
|
ACSelerate-
TR
™
- sterile transportation medium designed to maintain the viability
of the tissue 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. On December 31, 2014 the Company filed a 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 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’s laboratory
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 the Company’s 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 and Personalized 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, Shenzhen, China and, Tokyo, Japan.
The Company
believes it can take advantage of the significant growth of the global cellular therapy market through its international licensing
and marketing efforts. A recently published study by Transparency Market Research predicts that the Stem Cell market will grow
at a CAGR of 24.2% upon its value of US $26.23 billion in 2013 and will reach an approximate value of US $119.52 billion by 2019.
The report, titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012 - 2018”;
which can be found at (
http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research
In June
of 2015, The Company entered into an initial agreement with CellSource, LTD. (“CellSource”) located in Shibuya, Tokyo
Japan for the licensing of our AGRAFT
™
tissue processing and storage technology and the purchase of our CELLECT
®
collection products which include our ACSelerate-TR
™
transport medium. The Company also assisted CellSource
in upgrading its facility in Japan and provided training in the ATGRAFT
™
processing and recordkeeping procedures.
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 limited
right of first refusal for the licensing and distribution of other products marketed by the Company in Japan. The limited right
of first refusal expires on June 2, 2017.
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 by contracted companies to collect fresh tissue
for their product. Management believes that allowing other biotech companies to utilize portions of our platform will provide
the Company with additional 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 focus our
efforts on expanding our product and services pipelines based upon our intellectual property portfolio, collaborative development
relationships, product sales, distribution, and international licensing and partnering opportunities. Our current activities
include supporting university and industry collaborations by providing our products and services (ACSelerate
™
and ATCELL
™
) 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 Adipose Derived
Regenerative Cells ADRCs (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. During 2016 the Company and PeproTech completed
the optimization and scale up manufacturing studies and expect the licensed medium marketed under both PeproTech’s PeproGrow
and the Company’s ACSelerate MAX brands in early 2017. PeproTech will leverage its current global sales relationships which
reach a majority of all research laboratories worldwide to maximize distribution of the optimized media while the Company will
concentrate its sales efforts on its collaborative and licensing partners. Additionally, the Company and PeproTech are discussing
the licensing of additional American CryoStem patented media and products for production and distribution by PeproTech, any additional
media licensed to PeproTech will undergo similar optimization and scale up production testing prior to being released for sale.
We expect that the media will be initially released in the first quarter of 2017.
BioLife
Customer and Physician Acquisition
In February
2015 the Company entered into a binding asset purchase agreement with BioLife Cell Bank Dallas, LLC and BioLife Cell Bank Management,
LLC (collectively “BioLife”), to purchase all of BioLife’s current adipose tissue, stem cell storage clients
samples, and physician network. The transaction was concluded in March of 2015. Transfer of the adipose tissue samples was completed
on April 24, 2015. The Company initiated annual storage fee billing to the acquired storage clients in June of 2015. Management
believes that, with the acquisition of BioLife, the Company became one of the largest commercial adipose storage facilities in
the United States.
Additionally
the Company acquired the physician customer list of approximately 60 cosmetic and plastic surgeons, and began marketing its services
to all physician users of the BioLife services.
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 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.
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 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 (MTA) with Integra LifeSciences,
under which the parties are exploring certain combinations of American CryoStem’s, ATCELL
™
stem
cells, its biomaterials product and 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 will supply biomaterials and Company “know-how” to Integra and utilize
its AGRFAFT
™
, CELLECT
™
, ATCELL
™
and ACSelerate
™
products for the development of new devices and biologic products for use with the co-developed biomaterials. To date
the Company has delivered tropoelastin 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 schedule additional work necessary to advance the product development in 2017.
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 substantial investment by the Company. In November
of 2015 the Collaboration and Research Agreement and the Licensing Agreement were terminated. The Company continues to discuss
collaborations with Dr. Lee and the Rutgers Office of Technology Transfer for the continuing provision of our ATCELL
™
and ATGRAFT
™
products to Dr. Lee to support his continuing research.
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 under the COI brand for the collection, processing and storage of tissue samples at its NJ facility.
Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI network physicians.
COI plans to seek regulatory approval for use of the stored samples in clinical studies and trials utilizing adipose tissue processed
into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The Company is incorporating
its existing Institutional Review Board (IRB) approved protocols into COI’s studies and may provide processing and other
data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its cellular therapies. COI has initiated
several IRB approved studies including a recently completed transportation study approved in August of 2016 to measure the survivability
of cell shipped in a newly developed return transport medium, animal studies for traumatic brain injury approved in September
of 2016, and the safety of intravenously delivered autologous ATCELL
™
products approved in October of
2016. This initial work will become the basis for COI’s Investigational New Drug and Investigational Device Exemption
filings with the FDA in 2017.
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 Non-Disclosure Agreements and advanced to include Material Transfer Agreements
(MTA) under which the Company supplies ATCELL
™
and/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 ultimately result in new technology for future commercialization.
As of September 30, 2016 these relationships have yet to result in a commercial product.
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.
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 2014 we sought approval from the
Institutional Review Board (IRB) of the Institute of Regenerative Medicine of our protocols for the processing of SVF and culturing
of mesenchymal stem cells from autologous adipose tissue. The protocols 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 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.
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)
|
|
·
|
Comparative
Viability Assessment of Human Adipose Tissue Before and After Cryopreservation
(IRCM
2014-025)
|
|
·
|
Isolation
of SVF and Culturing Adipose Derived Stem Cells for Use in Investigational Review Board
Studies
(IRCM 2014-023)
|
The IRCM
approved studies require annual renewal and the Company renewed the studies in 2015, and August of 2016.
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, in Georgetown, 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 2016 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 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
New Jersey 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. 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 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 attempts to ensure 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 (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 two issued U.S. patent (No. 7,989,205,
Cell Culture Media Kits and Methods of Use
); and seven pending patent applications which are detailed in the following
chart:
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
A
Business Method for “Collection, Cryogenic Storage and Distribution of a Biological Sample Material”
|
Company
Core Tissue Collection Processing and Storage Methodology
|
U.S.
Serial No. 13/702,304 filed June 6, 2011, and claiming a priority date of June 7, 2010 from provisional application 61/352,217
|
Systems
and Methods for “The Digestion of Adipose Tissue Samples Obtained From a Client for Cryopreservation”
|
Adipose
Tissue Digestion Laboratory Processing Methods
|
U.S.
Serial No. 13/646,647 filed October 5, 2012, and claiming a priority date of October 6, 2011 from provisional application
61/544,103
|
Compositions
and Methods for “Collecting, Washing, Cyroprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures”
|
Company
Adipose Tissue Storage Platform for Cosmetic Procedures
|
PCT/US13/44621
Filed June 6, 2013 and claiming a priority date of June 7, 2012
|
Stem
Cell-Based Therapeutic Devices and Methods
|
Combining
ADRCs with Biomaterials for healing and tissue growth
|
U.
S. Serial No. 14/196,616 filed March 4, 2014 and claiming a priority date from provisional
application 61/773,112 filed March 5, 2013
|
Autologous
Serum for Transport of Isolated Stromal Vascular Fraction or Adipose Derived Stem Cells
|
Utilization
of Autologous Blood Components for the Transport of Adipose Derived Cells to a Patient
|
U.S.
Serial No. 14,250,338 and claiming a priority date from provisional application 61/810,970
filed April 11, 2013
|
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 the following IP:
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 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.
Global Stem
Cells Market
A
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
A 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.”
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 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
Marketing
and Distribution
The key objective
of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for adipose tissue
collection, cell processing and cryogenic storage, therapeutic applications, and research/commercial uses of adipose tissue within
the current regulatory framework. The combination of a traditional sales approach supported by continuous internal and external
marketing programs, are closely coordinated with the expansion of our laboratory processing capabilities. Our initial marketing
efforts intend to disseminate current and future uses of adipose tissue and adult stem cells which support our business model,
products and services. In 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 2017. 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.
2
http://www.researchandmarkets.com/research/mbmvbh/global
Development of Regional
U.S. Markets
Cells
on Ice
In August
of 2015 the company entered into an Agreement with Cells On Ice, LLC. (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 under the COI brand 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 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.
Development
of International Markets
International
Licensing Program –
Globally,
many jurisdictions outside the US permit the use of adipose tissue based 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 regenerative
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 may or may not be 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.
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 (Hong Kong)
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 kits as well as other
American CryoStem products necessary for clinical adipose tissue processing and storage at the Shenzhen 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.
CellSource.
Tokyo, Japan
In the
second quarter of 2015 the Company entered into negotiations with CellSource, LLC in Tokyo, Japan for the licensing of its ATGRAFT
™
products and services and on June 2, 2015 the Company and Cell Source entered into an initial term sheet Licensing the ATGRAFT
™
technology to CellSource for Japan. The Agreement further calls for CellSource to purchase our CELLECT
™
collection boxes and ACSelerate Cryopreservation Medium and provides Cell Source with a limited right of first refusal for licensing
additional technologies for the Japanese markets. The limited right of first refusal expires June 2, 2017.
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.
Scientific
and Medical Advisory Board
To expand our
Scientific, R&D and product marketing efforts we continue to 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. This 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, certain members of
our advisory board provide assistance and input to management on the oversight of our research relationships, laboratory development
and quality management systems. As of September 30, 2016, the following are currently members of 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.
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|
Dr.
Fredric A. Stern, 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. 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.
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.
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.
|
·
|
Dr.
Vincent Giampapa, MD F.A.C.S
|
Dr. Giampapa
is the founder /di
r
ector of the Regenerative Medicine Institute located in Costa Rica, the Plastic Surgery Center International
and The Giampapa Institute for Anti-Aging Medical Therapy located in Montclair, NJ. Dr. Giampapa’s research focuses on stem
cell technologies and their clinical applications to improve the cellular aging process in order to enhance health span and quality
of life. As a result of his research, Dr. Giampapa has been awarded medical and intellectual property patents with the United
States Patent and Trademark Office for developments involving unique cell culture delivery techniques, new drug delivery systems,
stem cell reprogramming, DNA repair, and telomerase maintenance. He is a co-founder of The Academy of Anti-Aging Medicine (A4M),
comprised of over 26,000 members representing over 110 nations, the first president of the Board of Anti-Aging Medicine and the
founder of healthycell®, an advanced cell health nutritional supplement and StemBank™, a blood derived stem cell extraction
and storage company. Dr. Giampapa will have an active role assisting the Company with the development of its “From laboratory
to clinic/physician’s office” services and applications platform.
Dr. McClain
earned his medical degree at Western University and completed his internship at the University of Southern California’s
Keck School of Medicine Residency Program (U.S.C. California Hospital). Dr. McClain has dedicated over 35
years of his personal and professional life studying nutrition, exercise, herbs and supplements and is also a Master of Acupuncture
and Traditional Chinese Medicine. Dr. McClain has participated in professional and elite amateur sport as an individual participant
and as well as a member of two U.S. teams and continues to participate competitively. His work is published in peer-reviewed and
popular journals and he enjoys sharing and participating in the beneficial changes he helps create in people’s lives.
Dr. McClain has worked with some of the best and original innovators in Sports, Rejuvenative, Regenerative (“Anti-Aging”),
Cosmetic and Family Medicine. He also practices as part of the Regenerative Medicine Institute an organization dedicated
to advancing cellular treatments, procedures and research in the use of all available avenues to slow or reverse physiological
and cosmetic effects of aging. Dr. McClain currently serves as Chief Medical Officer of Live Cell Research, a company dedicated
to the discovery and development of products designed to enhance health and quality of life through epigenomic manipulation. Dr.
McClain is also a Medical Advisory Board member of American Cryostem Corporation a publicly traded company operating clinical
laboratories dedicated to the collection, processing, bio-banking, culturing and differentiation of autologous adipose tissue
(fat) and adipose derived stem cells (ADSCs). Dr. McClain is a Board Member of Z.E.N. Foods, a gourmet food delivery and nutrition
service company that provides individually designed meal programs in conjunction with health providers and its own registered
dietician. Dr. McClain is also proud to be a member of the National Veteran Foundation’s Advisory Board.
|
·
|
Dr.
Richard Goldfarb, FACS
|
Dr. Richard
Goldfarb established the Center for SmartLipo with the vision of bringing patients 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 your 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
you with comprehensive consultative and treatment options to achieve your aesthetic goals.Dr. Goldfarb graduated from 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 did 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 has become a Cosmetic
Surgery Specialist. In view of his advanced training and skills, Dr. Goldfarb is highly sought after to lecture and train physicians
internationally on numerous cosmetic laser and surgery topics. He is the Medical Director, International and National trainer
for Selphyl, and National and International trainer/lecturer for the Silhouette Lift Procedure. Dr. Goldfarb pioneered the technique
to combine Silhouette Lift with fat transfer and Selphyl ® for total facial rejuvenation (“The Goldfarb Procedure”).
He is on the Board of Directors, and lectures and trains physicians for the National Society of Cosmetic Physicians and Surgeons.
He is a faculty member and lecturer for THE Aesthetics Show, a training organization for physicians in the field of laser and
aesthetic medicine and cosmetic surgery. 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. The American Society of Lasers in Medicine,
American Academy of Liposuction Surgery, and American Academy of Cosmetic Surgery all count him as a member. Dr. Goldfarb is board
certified and a Fellow of the American College of Surgeons, in addition to the American Society of Laser Medicine and Surgery.
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, 2016
with respect to this uncertainty which is included in the 2015 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 Regenerative Medicine 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 through January 31, 2016. 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, 2016, the Company had issued and outstanding; $226,500 aggregate principal amount of Bridge Notes, which matured, between
January through July 2015 and bear interest at the rate of 8% per annum, $133.900 aggregate principal amount of Convertible Notes
which matured in September 2014convertible 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, $52,500 of 8% convertible notes which matured 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, and $783,000 of 8% convertible notes which mature in January 31, 2018 convertible into shares of Common
Stock and the rate of one (1) share of Common Stock for each $0.20 of principal amount and/or interest so converted, and $365,500
of 8% convertible notes which mature in January 31, 2018 convertible into shares of Common Stock and the rate of one (1) share
of Common Stock for each $0.15 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
may require compliance with PHS and FDA regulations 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, and its Monmouth Junction, New Jersey laboratory facilities which the Company believes
may be required to be in compliance with all current applicable regulations and guidelines as defined by the United States Public
Health Service Act (“
PHS
” or the “
PHS Act
”) and the Food and Drug Administration
(“
FDA
”) regulations and guidance 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 service 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. 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
2020.
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 autologous 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 Company’s 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, 2016, there were 37,121,709 shares of Common Stock (excluding 14,183,215shares issuable upon exercise of all issued and outstanding
stock options and warrants, and 6,909,237 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 OTCIQ 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 OTCIQ. The OTCIQ 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:
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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.
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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.”
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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.
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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.
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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 September 30, 2015, 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 OTCIQ, 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, 2016, the Company sold approximately $3,990,877 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 OTCIQ 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, 2016, we had 14,183,215shares of Common Stock issuable upon exercise of all outstanding stock options and warrants, and, 6,909,237
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.