ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
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Forward-looking
Statements
We
and our representatives may from time to time make written or oral statements that are “forward-looking,”
including statements contained in this quarterly report and other filings with the Securities and Exchange Commission (the
“SEC”), reports to our stockholders and news releases. All statements that express expectations, estimates,
forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute
forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,”
“intend,” “plan,” “believe,” “seek,” “estimate,”
“project,” “forecast,” “may,” “should,” variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We
undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to
conform forward-looking statements to actual results. Important factors on which such statements are based on assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
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Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
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Our
failure to earn revenues or profits;
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Inadequate
capital to continue business;
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Volatility
or decline of our stock price;
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Potential
fluctuation in quarterly results;
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Rapid
and significant changes in markets;
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Litigation
with or legal claims and allegations by outside parties; and
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Insufficient
revenues to cover operating costs.
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The
following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this
quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result
of various factors.
Background
American
CryoStem Corporation was incorporated in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly
owned subsidiary American CryoStem Acquisition Corporation, substantially all of the assets from, and assumed substantially all
of the liabilities of, ACS Global, Inc. (“
ACS
”) in exchange for our issuance of 21,000,000 shares of
Common Stock to ACS (the “
Asset Purchase
”). We filed a Current Report on Form 8-K with the Securities
and Exchange Commission (SEC) on April 27, 2011 disclosing the Asset Purchase and certain related matters.
Overview
American
CryoStem Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art,
FDA-registered, clinical laboratory dedicated to our standardized processing, bio-banking and development of cellular tools and
applications using autologous adipose (fat) tissue and adipose derived stem cells (“
ADSCs
”). The Company
has built a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that
form its core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and
processes, clinical services and international licensing opportunities. Our FDA registered clinical laboratory which we believe
to be in compliance with FDA regulations for human tissue processing, cryo-storage and cell culture and differentiation media
development is located in Monmouth Junction, New Jersey.
The
Company believes the reproducibility of scientific studies has become a substantial issue in life science research from drug discovery
and development through clinical trials as researchers throughout the world continue to use different protocols for processes
associated with sample preparation, cryopreservation and cold chain management. We believe the scientific community is becoming
more aware of factors that affect sample integrity and experimental variability. By standardizing handling, storage, and transportation
protocols we can substantially improve the quality and reproducibility of preclinical and clinical data to help accelerate the
transition from lab research to product development and market launch.
Our
business strategy is centered on marketing our standardized platform products as a complete adipose stem cell solution and expanding
our international footprint, research and development through scientific collaborations. We intend to generate revenue through
the sale and licensing of our patented products, laboratory tools, and services to attempt to capitalize on: (1) ADSC technologies;
(2) scientific breakthroughs incorporating ADSCs that have been developing in the fast growing Regenerative and Personalized Medicine
industries; (3) providing these growth industries with a standardized ADSC cell processing platform; (4) enhancing the delivery
of healthcare through cellular-based therapies and applications which address disease treatment, wound and burn healing, joint
repair and personalized health and beauty care; and (5) building a global network of physicians and affiliated laboratory facilities
for the delivery of our products and services.
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 February 1, 2017, 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 (2136)stem cells (5778) dipose derived stem cells (201), mesenchymal stem cells (694), 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 licensees of our tissue and cell processing technologies to purchase
our consumable products including our CELLECT
©
collection kit and ACSelerate – CP for the collection, processing,
expansion and storage of tissue/stem cells.
We have generated initial
revenues from our licensee’s in Japan and Hong Kong and subject to, obtaining the requisite financing, management believes
that we are well positioned to leverage our developed products and services as the basis for expansion of international distribution
through licensees of our technologies for a host of Regenerative Medicine uses and future applications.
Our
branded product and service offerings include:
CELLECT
®
Validated Collection, Transportation, and Storage System
– An unbreakable “chain of custody” clinical
solution for physicians to collect and deliver tissue samples utilizing proprietary and patent pending methods and materials.
The CELLECT
®
service is monitored in real-time and assures the highest cell viability upon laboratory receipt.
The CELLECT
®
system incorporates our ACSelerate–TR
™
transport medium into all collection
bags which supports the health of the tissue during transport. The CELLECT
®
kit is an integral part of our validated
ATGRAFT
™
and ATCELL
™
technology platform 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 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 a 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 for future culturing in the ACSelerate
™
cell culture and differentiation
media. Cell culturing and differentiation can be performed upon receipt of the raw tissue sample or at any time on a previously
processed and cryopreserved ATGRAFT
™
or ATCELL
™
sample. 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. In January 2017 the first medium line ACSelerate
Max
™
was manufactured and released for sale globally through PeproTech’s global sales force under
their PeproGrow
™
brand and for sale by the Company under our ACSelerate-Max
™
brand.
Additionally, the company will fill orders for its ATCELL
™
research grade adipose derived stem cells to
purchasers of either the PeproGrow
™
or ACSelerate Max
™
branded cell culture mediums.
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
:
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ACSelerate-MAX
™
- xeno serum free cell culture media,
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ACSelerate-SFM
™
- animal serum free cell culture media,;
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ACSelerate-LSM
™
- low FBS (0.05%) cell culture media,
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ACSelerate-CY
™
-
for differentiation of
ATCELL
™
into chondrocytes (
ATCELL-CY
™
),
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ACSelerate-OB
™
-
for differentiation of
ATCELL
™
into osteoblasts (
ATCELL-OB
™
)
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ACSelerate-AD
™
- for differentiation of
ATCELL
™
into adipocytes (
ATCELL-AD
™
)
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ACSelerate-MY
™
-
for differentiation of
ATCELL
™
into myocytes (
ATCELL-MY
™
)
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ACSelerate-CP
™
-
non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media
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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 is a division of American CryoStem Corporation, responsible for the manufacturing and sale of all the Company’s
patented and patent pending cellular, cell culture, processing and testing products to professional, institutional and commercial
clients. The Company operates a separate website (
acslaboratories.com)
to distinguish the sale of commercial and research
products from its consumer products and services, which are marketed on its main website (
americancryostem.com
). ACS Laboratories
manufactures a full line of ACSelerate
™
cell culture media and ATCELL
™
products;
and provides these products to our collaborative partners and international licensees as further discussed below.
Contract
Manufacturing,
Autokine-CM
®
Anti-Aging, Autologous Skin Care Product Line
– Under agreement
with Personal Cell Sciences Corp. (PCS), we manufacture the key ingredient Autokine-CM
®
(autologous adipose
derived stem cell conditioned medium) for PCS’ U-Autologous
™
anti-aging topical formulation. Each product is
genetically unique to the patient and custom blended, deriving its key ingredients from the individual client’s own stem
cells. The Company provides its CELLECT
®
Tissue Collection service to collect the required tissue to manufacture
the U-Autologous
™
product and processes it under the same Standard Operating Procedures that it developed
for the ATGRAFT
™
and ATCELL
™
cell processing services utilizing ACSelerate
™
cell culture media. The Company receives collection, processing and long term storage fees and earns a royalty on all
U-Autologous product sales. The utilization of the Company’s core services in its contract manufacturing relationships provides
opportunities for the Company to promote ATGRAFT
™
and ATCELL
™
products.
Our
Company’s contract manufacturing services can be extended to develop custom and/or white label products and services for
both local and global cosmetic and regenerative medicine companies, physicians, wellness clinics and medical spas. The Company
intends to expand its relationships and contract manufacturing regionally through its physician networks and globally through
its International Licensing Program.
International
Licensing Program –
The Company believes that globally, many jurisdictions outside the US currently permit use of cellular
therapies and regenerative medicine applications. The Company has received numerous international inquiries concerning the sale
or licensing of our SOPs, products and services in the Regenerative Medicine and Medical Tourism Markets. The Company believes
that the inquiries to date are a result of the global boom in Medical Tourism, Regenerative Medicine and the slow pace of approval
of cellular therapies and regenerative medicine applications in the US. To address the Company’s sales, marketing and branding
opportunities globally, the Company has created its international licensing program. To date we have licensed our technologies
in Hong Kong, Shenzhen, China and, Tokyo, Japan.
The
Company believes it can take advantage of the significant growth of the global cellular therapy market through its international
licensing and marketing efforts. A recently published study by Transparency Market Research predicts that the Stem Cell market
will grow at a CAGR of 24.2% upon its value of US $26.23 billion in 2013 and will reach an approximate value of US $119.52 billion
by 2019. The report, titled “Stem Cells Market - Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2012
- 2018”; which can be found at: (http://globenewswire.com/news-release/2014/12/22/693419/10113247/en/Global-Stem-Cells-Market-to-grow-at-a-CAGR-of-24-2-to-Push-US-119-52-billion-by-2019-Transparency-Market-Research
In
June of 2015, The Company entered into an initial agreement with CellSource, LTD. (“CellSource”) located in Shibuya,
Tokyo Japan for the licensing of our AGRAFT
™
tissue processing and storage technology and the purchase of our
CELLECT
®
collection products which include our ACSelerate-TR
™
transport medium. The Company also
assisted TCCS in upgrading its facility in Japan and provided training in the ATGRAFT
™
processing and recordkeeping
procedures. CellSource began marketing the new services initially within its existing network of 5 clinics throughout Japan and
begin purchasing its CELLECT
™
and ACSelerate-CP
™
cryoprotectant from the Company in the third
quarter of 2015. Upon execution of the Agreement the Company received an upfront payment and will receive additional minimum annual
payments, and consumable product sales revenue in future years. The Agreement also provided CellSource with a two year (2) opportunity
to exercise a right of first refusal for the licensing and distribution of other products marketed by the Company in Japan.
Product
Development
Our
strategic approach to product development is to design, develop and launch new products and services that utilize our existing
products and services, i.e. the use of the CELLECT
®
collection materials in providing ATGRAFT
™
tissue storage services. Management believes that this approach will provide the Company with opportunities to produce near term
cash flow, strong recurring revenue streams, strong international licensing partners and complementary scientific data. We focus
on developing products, services and applications that require tissue collection and processing as the initial requirement to
produce cellular therapies and products. These products and services may include adipose tissue and stem cell sample processing
and storage as a form of personal
“bio-insurance”,
adipose tissue (fat) storage for cosmetic fat engraftment
procedures, and the creation and production of topical applications and ingredients used by other companies in the wound care
and cosmetic industries as well as cellular applications and bio-materials development.
We
intend to focus our efforts on expanding our product and services pipelines based upon our intellectual property portfolio, collaborative
development relationships, product sales and distribution, and international licensing and partnering opportunities. Our current
activities include supporting our university and industry collaborations by providing our products and services with the expectation
that our products and services become the basis for new adipose tissue and stem cell based Regenerative Medicine and cellular
therapy applications. We believe this strategy allows our proposed research partners and their application development teams to
begin with clinically harvested and processed adipose tissue and ADSCs (ATCELL
™
), which may be a significant
step toward accelerating the development and approval of new treatments.
Collaboration
/ Partnering Opportunities / Acquisitions
PeproTech,
Inc.
On
April 4, 2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech will
manufacture, market and distribute the Company’s ACSelerate – Max cell growth medium. 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.
In
January 2017 the first medium line ACSelerate Max
™
was manufactured and released for sale globally through
PeproTech’s global sales force under their PeproGrow
™
brand and for sale by the Company under our
ACSelerate-Max
™
brand. Additionally the company will fulfill orders for its ATCELL
™
research grade adipose derived stem cells to purchasers of either the PeproGrow
™
or ACSelerate Max
™
branded cell culture mediums.
BioLife
Customer and Physician Acquisition
In
February 2015 the Company entered into a binding asset purchase agreement with BioLife Cell Bank Dallas, LLC and BioLife Cell
Bank Management, LLC (collectively “BioLife”), to purchase all of BioLife’s adipose tissue, stem cell storage
clients samples, and physician network. The transaction was concluded in March of 2015. Transfer of the adipose tissue samples
was completed on April 24, 2015 and the Company undertook a complete physical inventory of the transferred samples. The Company
initiated annual storage fee billing to the acquired storage clients in June of 2015. Management believes that, with the acquisition
of BioLife, the Company became one of the largest commercial adipose tissue storage facility in the United States.
Protein
Genomics and Formation of Autogenesis Corporation
In
2012, American CryoStem entered into a Memorandum of Understanding (MOU) outlining our initial collaborative efforts with Protein
Genomics, Inc. (PGEN) to test and develop new products by combining certain components of our respective intellectual property
and patented products. We have provided PGEN and its research partner, Development Engineering Sciences (DES), with Adipose Derived
Stem Cells (ATCELL
™
) and our patented cell culture mediums (ACSelerate
™
) for testing
with PGEN’s products designed for the wound healing market. Research and development has been ongoing since late 2012 and
notable progress has been achieved.
As
a result of the success realized in the early stage of this research collaboration, in fiscal 2013 we entered into a formal joint
venture with Protein Genomics through the incorporation of Autogenesis, Corp. as required by the 2012 MOU. Each company (CRYO
and PGen) initially has an equal ownership interest. All products capable of being commercialized, as well as any new intellectual
property, resulting from the ongoing scientific collaboration will be wholly-owned by Autogenesis. This is representative of how
we believe additional research collaborations utilizing our Company’s technology may evolve in the future.
During
2013 and 2014, the collaborative efforts resulted in successful initial “proof of concept” combining PGEN’s
unique biomaterial and the Company’s ATCELL
™
and ACSelerate
™
products. Management
believes the publication of the preliminary results showed successful healing of full depth wounds on the backs of immune deficient
mice.
Our
collaborative research has established that membrane scaffolds fabricated from human proteins can be cultivated with ATCELL
™
cells causing the scaffolds to be rapidly and completely covered by the cells. The cells then secrete their own extracellular
matrix, creating a structure with layers of matrix, cells and scaffold. This living structure, when introduced into a mouse wound
model, localizes the stem cells in the wound, protects the cells within the wound environment, promotes cell growth and causes
a statistically significant increase in the rate of wound closure and healing compared to the standard of care. Further
evaluation will measure the performance of these scaffolds in accelerating the rate of wound closure, healed scar thickness,
growth of new blood vessels and production of key wound healing factors. Our objective is to show that these constructs can stimulate
the growth of new tissue and promote wound closure and healing.
INTEGRA
LifeSciences:
On
June 4, 2015, the Company and Autogenesis, Corp. entered into Non-Disclosure and Material Transfer Agreements with Integra LifeSciences,
under which the parties are exploring certain combinations of American CryoStem’s, ATCELL
™
stem
cells, Integra products and other biomaterials for the development of new products and services. Integra LifeSciences, a NYSE
traded (INT) New Jersey based company, is a world leader in medical technology and wound healing. Integra offers innovative
solutions, including leading regenerative technologies, in specialty surgical solutions, orthopedics and tissue technologies.
(
http://www.integralife.com/
)
Under
the terms of the Agreement the Company supplies biomaterials to Integra and utilize its AGRFAFT
™
, CELLECT
®
,
ATCELL
™
and ACSelerate
™
products for the development of new devices and biologic
products. To date the Company has delivered biomaterials to Integra for use in the development of the new biomaterials and initiated
the processing and testing of porcine (pig) adipose tissue for use in the initial animal studies. The Company is currently working
with Integra to advance the product development combining our ATCELL
™
and ACSelerate
™
products with the new materials to form new biologic products to be used as wound coverings and bandages for the treatment of
bed sores, leg ulcers, and non healing wounds that are common to the diabetic and other systemic disease.
Rutgers
University
In
May of 2012, American CryoStem entered into Material Transfer Agreements with three research scientists at Rutgers University
allowing them to utilize the Company’s autologous Adipose-Derived Stem Cells (ATCELL™) and patented, serum free, GMP
grade cell culture and differentiation mediums (ACSelerate™) for evaluation with the anticipation to implement additional
agreements to research, develop and commercialize innovative new cellular therapies targeting incurable diseases, neurological
disorders and the $5 billion global wound care market.
During
the last quarter of 2015 the Company undertook a review of the collaborative efforts between the Company and Dr. Lee pending the
expiration of the agreements in November of 2015. Management believes that potential commercialization of the licensed technologies
would require a number of years of additional study and experimentation and requires substantial investment by the Company. In
November of 2015 the Collaboration and Research Agreement and the Licensing Agreement were terminated.
Cells
on Ice:
In
August of 2015 the company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process
and cryopreserve adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network
of physicians interested in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies
and cellular medicine. The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples
at its NJ facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI
network physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies utilizing adipose
tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The
Company is incorporating its existing Standard Operating Procedures (SOPs), processing protocols and patented products 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 samples 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 a series of
regulatory 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 Disclosure Agreements and those that are more advanced also
include Material Transfer Agreements under which the Company supplies either ATCELL
™
or ACSelerate
™
medium products for evaluation, testing, and the development of new cellular therapy applications.
To
date the Company has a Material Transfer Agreement with the University of Miami, University of Washington, UHV Technologies, and
STEMCell Technologies and has provided both ATCELL
™
and ACSelerate
™
products to these entities
under Agreement. No assurance can be given that these relationships will progress to full collaborative agreements or ultimately
result in new technology for future commercialization. As of December 31, 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 of the treatments.
Institutional
Review Board Approval of Protocols
In
an effort to make it easier for other physicians and researchers to study the safety of SVF and ADSCs, in 2014 we obtained an
institutional review board (IRB) to review 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 under IRB review from 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 review was to assess these protocols to ensure the highest patient safety
possible and to minimize the risks for those participating in innovative research and investigational studies.
The
Company is currently making its processing services available to physicians and clinical researchers utilizing the Company’s
protocols for inclusion in their continuing 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.
In
2014, the Company became the Sponsor of an IRB study with The DaVinci Center, Dr. Louis Cona,
Principal Investigator
,
in George Town, Grand Cayman Island entitled
Impact and Safety of Cultured
Expanded Autologous, Adipose-Derived Stem Cells deployed via Intravenous Injection for the Treatment of Multiple Sclerosis
Protocol: CRYO-MS-ADSC-006.
On July 23, 2014 the study was approved for 100 patients. The study 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 2015 and 2016 for another one year period. The Company is continuing to recruit patients for
inclusion in this study.
Management
intends to pursue additional collaborative and partnering opportunities as a strategic method to enhance awareness of and expand
the distribution of our patented products, services, technologies and expertise in the IRB-approved clinical processing of adult
adipose tissue and ADSCs for autologous (self) use. We believe that as the pace of clinical trials and cellular therapy results
reporting increase and scientific and peer reviewed papers are published, new opportunities to market our existing products, services
and Intellectual Property portfolio may also emerge.
Moreover,
we further believe that the combination of our validated cellular processing capabilities and patented products give us an economical
platform to develop and produce cellular therapy applications for injection or intravenous therapy, topical applications, burn
and wound healing, joint repair, disease treatments and cosmeticeuticals. The clinical methods and products we have developed
are designed to permit a variety of treatments for any patient with their own genetically matched raw materials utilizing our
ATCELL
™
and ATGRAFT
™
products prepared with our patented line of ACSelerate
™
cell culture mediums. We believe that autologous cellular therapies have shown promising results for safety and efficacy
in a variety of applications in published early stage clinical trial results and application studies.
Regulatory
Information
The
Company believes that its processing methodologies and the testing laboratory facilities are designed to be in compliance with
all current regulations as defined by the United States Public Health Service Act (“PHS” or the “PHS Act”)
and the Food and Drug Administration (FDA) regulations as they relate to the operation of a tissue processing and storage facility.
The
Company’s Monmouth Junction, NJ laboratory facility is registered with the FDA (FEI 3008307548) as a processing and storage
facility for Human Cells, Tissues and Cellular and Tissue Based Products (HCT/Ps) since 2010. In 2013, we registered the facility
with the State of New York (CP169TP136) and the State of California (CNC80948) the only states in the U.S. requiring registration.
These state registrations required the submission of our operating procedures for review by the respective State Health Departments,
and annual updates to maintain the registrations are required. In addition, we have discussed our operations with the State of
New Jersey Health Department and Department of Environmental Protection (DEP) to ascertain any special regulations to which we
may be subject. Based upon these discussions, and our use of a registered medical waste disposal company, we do not at this time
have any special registrations or regulations for compliance with the State of New Jersey.
Our
Standard Operating Procedures (SOPs) are the key to properly operating our clinical tissue processing facility. To ensure delivery
of the highest quality services, we incorporate these SOPs, which are designed to provide a basis for accreditation by the American
Association of Blood Banks (AABB), the American Association of Tissue Banks (AATB) and the Foundation for the Accreditation of
Cellular Therapy (FACT-JACIE). We have consistently endeavored to ensure that our processes, methodologies and procedures remain
among the highest standards in the global tissue collection, processing and storage market. To this end, we have equipped ourselves
with state-of-the-art quality processing and testing equipment, which we believe helps to ensure that every sample collected and
processed is sterile (free from adventitious agents), viable and capable of significant cellular growth and expansion.
Quality
Management
The
Company’s quality management program ensures that during processing and testing of each adipose tissue, adipose derived
stem cell or SVF sample, the appropriate quality management tests and processing methodologies are performed and the data is collected,
recorded and reviewed by the laboratory management team.
Chain
of Custody Control
Central
to the individual sample testing is an unbroken chain of custody and tracking. Sample tracking begins with the creation of each
collection box. All samples, processing, quality management, batch, and storage documents and records, are coded with this unique
number. All records and testing samples are cross referenced and verified as required by the standard operating procedures.
Testing
Design and Standard Operating Procedures (SOPs)
Testing
methods are standardized and operate under a complete set of validated SOPs and Quality Management (QM) processes. All SOPs are
designed to be in compliance with the US Food and Drug Administration’s regulations and guidance for aseptic processing.
Strict QM is enforced to avoid and/or record any process deviations.
Intellectual
Property
From
the Company’s formation, our strategy has been to invest time and capital in intellectual property protection. This strategy
is intended to strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing
our IP portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative
partnerships with third parties. Our intellectual property portfolio currently includes one issued U.S. patent (No. 7989205,
Cell
Culture Media Kits and Methods of Use
); and five pending patent applications which are detailed in the following chart:
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
A
Business Method for “Collection, Cryogenic Storage and Distribution of a Biological Sample Material”
|
Company
Core Tissue Collection Processing and Storage Methodology
|
U.S.
Serial No. 13/702,304 filed June 6, 2011, and claiming a priority date of June 7, 2010 from provisional application 61/352,217
|
Systems
and Methods for “The Digestion of Adipose Tissue Samples Obtained From a Client for Cryopreservation”
|
Adipose
Tissue Digestion Laboratory Processing Methods
|
U.S.
Serial No. 13/646,647 filed October 5, 2012, and claiming a priority date of October 6, 2011 from provisional application
61/544,103
|
Compositions
and Methods for “Collecting, Washing, Cyroprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures”
|
Company
Adipose Tissue Storage Platform for Cosmetic Procedures
|
PCT/US13/44621
Filed June 6, 2013 and claiming a priority date of June 7, 2012
|
Stem
Cell-Based Therapeutic Devices and Methods
|
Combining
ADRCs with Biomaterials for healing and tissue growth
|
U.
S. Serial No. 14/196,616 filed March 4, 2014 and claiming a priority date from provisional
application 61/773,112 filed March 5, 2013
|
Autologous
Serum for Transport of Isolated Stromal Vascular Fraction or Adipose Derived Stem Cells
|
Utilization
of Autologous Blood Components for the Transport of Adipose Derived Cells to a Patient
|
U.S.
Serial No. 14,250,338 and claiming a priority date from provisional application 61/810,970
filed April 11,
2013
|
Cell
Culture Media, Kits, and Methods of Use
|
Continuation
of U.S. Serial No. 11/542,863, includes Optimized and improvements to Media Formulations
|
U.S.
Serial No. 13/194,900
|
Human
Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells
|
International
PCT filing of US Provisional Application Serial Number 62/098799 Filed December 31, 2014
|
PCT/US/68350
Filed December 31, 2015
|
Systems
and Methods to isolate and Expand Stem Cells from Urine
|
New
Provisional Patent Application for a new source of human stem cells
|
Provisional
Patent Application No. 62/335,426
|
Additionally,
the Company has in-licensed IP with the following collaborations and joint ventures;
PATENT
TITLE
|
USE
OF PATENT
|
APPLICATION
#
|
Cosmetic
compositions including tropoelastin isomorphs
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#5,726,040
|
Cosmetic
compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,451,326
|
Recombinant
hair treatment compositions
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO
#6,572,845
|
Wound
healing compositions and methods using tropoelastin and lysyl oxidase
|
Protein
Genomics and American CryoStem (Autogenesis) collaboration
|
USPTO:
#6,808,707
|
Business
methods, processes and systems for collection, cryogenic storage and distribution of cosmetic formulations from an obtained
stem cell based biological
|
Personal
Cell Sciences and American CryoStem collaboration
|
USPTO
application #61/588,841
|
Trademarks
In
addition to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office:
American
CryoStem
®
, CELLECT
®
and
ATGRAFT
™
. We utilize additional trademarks for
our products, slogans and themes to be used in our marketing initiatives including, for example,
ACSelerate – MAX SFM
™
ACSelerate-SFM
™
,
ACSelerate- LSM
™
and
ATCELL
™
.
The
Company has also secured a number of online domain names relevant to its business, including www.americancryostem.com, www.acslaboratories.com
and ATGRAFT.com.
Marketing
and Distribution
The
key objective of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for
adipose tissue collection, cell processing and cryogenic storage, therapeutic applications, 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 2017, 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 2015. 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.
Market
Size and Opportunities
By
leveraging and capitalizing on our proprietary Adipose Tissue Processing Platform, our Company is working to address multiple
high growth, multi-billion dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals,
Medical Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market
dynamics of its intended domestic and international markets and to identify additional areas within these markets where the Company’s
cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.
Global
Stem Cells Market
A
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.
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.”
1
http://www.trimarkpublications.com/regenerative-medicine-markets/
Cosmeceutical
Market
Many
industry experts agree that Cosmeceuticals has become one of the fastest growing segments of the Cosmetics and Personal Care industry.
Cosmeceutical products have a big emphasis on scientifically advanced formulations and often contain active ingredients that can
also be found in pharmaceutical products. This continued emergence of increasingly sophisticated active ingredients is said to
be the main driving force behind the growth of this segment, which is rapidly evolving into significant category of the personal
care industry.
In
a report titled
Global Cosmeceuticals Market Outlook 2016, published February 2013, RNCOS reports that the worldwide market
is estimated to be valued at $30.5 billion and is likely to grow at a consistent CAGR of 7.7% during the period 2012 through 2016.
2
In a separate report, Transparency Market Research, a U.S. - based market intelligence
firm states that the global facial care market is expected to report an approximate value of $39.75 billion by 2019. The report,
titled ’
Facial Care Market (By Product Type - Skin Whitening/ Lightening and Anti-Ageing, Facial Creams, Face Wash, Cleansing
Wipes, Serums and Masks and Others (fade creams, pore strips and toners)- Asia-Pacific Industry Analysis, Size, Share, Growth,
Trends and Forecast 2013 – 2019.
http://globenewswire.com/news-release/2014/10/17/674123/10103135/en/Global-Facial-Care-Market-to-be-Worth-39-75-Billion-by-the-year-2019-Transparency-Market-Research.html
Development of U.S.
Markets
Cells
on Ice
In
August of 2015 the Company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process
adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network of physicians interested
in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies and cellular medicine.
The Company has agreed to distribute its CELLECT
®
collection boxes and provide its ATGRAFT
™
and ATCELL
™
processing services for the collection, processing and storage of tissue samples at its NJ
facility. Under the agreement, COI will pay the Company for the processing and storage of each sample generated by COI network
physicians. COI plans to seek regulatory approval for use of the stored samples in clinical studies and trials utilizing adipose
tissue processed into Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The
Company is incorporating its Standard Operating Procedures (SOPs), processing protocols and products into COI’s studies
and providing processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of
its cellular therapies.
Physician
Network
The
Company continues to develop relationships to leverage our products and services through existing cosmetic surgery and regenerative
medicine practices while at the same time growing its current efforts to develop and expand its network of individual physicians
and surgeons seeking to adopt the Company’s products and services. These efforts are currently focused on surgeons performing
liposuction, tissue transfer or regenerative procedures involving the use of adipose tissue. The Company intends to expand its
efforts to non-cosmetic medical professionals interested in Regenerative Medicine applications utilizing ADSCs to establish itself
as a primary source of collection, processing and preparation of cellular therapies as they are developed and approved for patient
use by the FDA.
Regenerative
Medicine Institute
The
Company recently announced that Dr. Vincent Giampapa, MD F.A.C.S has joined its Medical and Scientific Advisory Board. Dr. Giampapa
is the founder /director of the Regenerative Medicine Institute (RMI) located in Costa Rica and the US, the Plastic Surgery Center
International and The Giampapa Institute for Anti-Aging Medical Therapy located in Montclair, NJ. Dr. Giampapa’s research focuses
on stem cell technologies and their clinical applications to improve the cellular aging process in order to enhance health span
and quality of life. As a result of his research, Dr. Giampapa has been awarded medical and intellectual property patents with
the United States Patent and Trademark Office for developments involving unique cell culture delivery techniques, new drug delivery
systems, stem cell reprogramming, DNA repair, and telomerase maintenance. He is a co-founder of The Academy of Anti-Aging Medicine
(A4M), comprised of over 26,000 members representing over 110 nations, the first president of the Board of Anti-Aging Medicine
and the founder of healthycell®, an advanced cell health nutritional supplement and StemBank™, a blood derived stem
cell extraction and storage company. Dr. Giampapa will have an active role assisting the Company with the development of its “From
laboratory to clinic/physician’s office” services and applications platform.
2
http://www.researchandmarkets.com/research/mbmvbh/global
Development
of International Markets
International
Licensing Program –
Globally,
many jurisdictions outside the US permit the use of adipose tissue, cellular therapies
and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products
and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these
inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering
an International Licensing Program.
The
program is designed to permit the licensing of the company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable
of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate
the
CELLECT
®
,
ATGRAFT™
and
ATCELL™
services in their local market.
Strategically, the Company’s international licensees will maintain the branding of the Company’s services along the
lines of the “Intel Inside” branding program.
Qualified
Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual stem
cell samples for their clients with the comfort and confidence that they are providing services that have been developed to US
FDA standards. Core to the relationship is the developed proprietary and patent pending processing and laboratory operational
methodologies contained in our Standard Operating Procedures (SOPs), Training, and Continuous Quality Management, Testing Program,
and Laboratory Operations manuals.
Licensing
programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI
agreement is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the
agreement which is credited toward future royalty payments. Following evaluation of the prospective licensee the Company will
enter into a final Agreement which outlines all upfront fees, minimum royalties and consumable purchase obligations of the Licensee.
The Company’s first international licensing agreement was executed with Health Innovative Technology Company, LTD, a cord
blood collection and storage company with operations in Hong Kong and Shenzhen China.
We
have committed extensive resources to establishing and perfecting our international shipping methodologies and protocols, ensuring
that our processes meet the highest possible standards of regulatory compliance for shipment of biologic materials. As a result,
our FDA registered laboratory and cryostorage facilities in New Jersey are now able to send and receive viable tissue samples
to and from clients globally.
CellSource,
LTD. – Tokyo, Japan
On
June 2, 2015 the Company and Cell Source Ltd entered into an Agreement for licensing the ATGRAFT
™
technology
to Cell Source Ltd. for Japan. The Agreement calls for Cell Source Ltd to purchase consumables from us including the CELLECT
®
collection boxes and ACSelerate
™
Cryopreservation Medium. The agreement also provides Cell Source
with a twenty four month limited Right of First Refusal for licensing additional technologies from the Company for the Japanese
market. According to Allied Market Research, World Regenerative Medicines Market
Currently,
North America dominates the global Regenerative Medicine market due to heavy investment in development of regenerative products
as well as more number of commercialized products. However, the growing focus on research and development in Japan and South Korea
makes Asia-Pacific the fastest growing region at a CAGR of 30.9% during 2014-2020.
Health
Information Technology Company, LTD – Hong Kong and Shenzhen, China
On
June 30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the
Company’s Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service
in Hong Kong. The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the
Company. The Company and HIT have reached further agreement to extend their relationship on a non exclusive basis to include HIT’s
cord blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The
HIT agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase
CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kit as well as other American CryoStem products
necessary for clinical adipose tissue processing and storage at the Shenzhen cord blood collection facility. The final master
licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September 24, 2014.
Corporate
Information
Our
principal executive offices are located at 1 Meridian Road, Eatontown, New Jersey 07724 and our telephone number is (732) 747-1007.
Our website is
www.americancryostem.com
. We also lease and operate a tissue processing laboratory in Monmouth Junction,
New Jersey at 7 Deer Park Rd, Monmouth Junction, NJ. 08852. Our laboratory website address is
www.acslaboratories.com.
Available
Information
We
file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website
at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information
on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.
Going
Concern
As
of the date of this quarterly report, there is substantial doubt regarding our ability to continue as a going concern as we have
not generated sufficient cash flow to fund our business.
We
have suffered recurring losses from operations since our inception. In addition, we have yet to generate sufficient internal cash
flow from our business operations or successfully raise the financing required to fully develop our business. As a result of these
and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our
future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate
sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.
Our
plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our
working capital deficiency, and (ii) implementing a plan to generate sales of our proposed products and services. Our continued
existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our current business operations.
However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements
do not include any adjustments that might result from the outcome of these risks and uncertainties.
Liquidity
and Capital Resources
We
had a cash balance of $34,247 as of the date of this quarterly report. Our principal source of funds has been sales of our securities.
Should we be unable to raise sufficient funds, we will be required to curtail our operating plans if not cease them entirely.
We cannot assure you that we will generate the necessary funding to operate or develop our business. Please see “
Cash
Requirements
” above for our existing plans with respect to raising the capital we believe will be required.
In
the event that we are able to obtain the necessary financing to move forward with our business plan, we expect that our expenses
will increase significantly as we attempt to grow our business. Accordingly, the above estimates for the financing required may
not be accurate and must be considered in light these circumstances.
Cash
Requirements
We
will require additional capital to fund marketing, operational expansion, processing staff training, as well as for working capital.
We are attempting to raise sufficient funds would enable us to satisfy our cash requirements for a period of the next twelve (12)
to twenty-four (24) months. We have minimal long term debt and have been able to meet our past financial obligations.
In
order to finance further market development with the associated expansion of operational capabilities for the time period discussed
above we are planning additional fundraising through the sale of our equity and debt securities however we cannot assure you we
can attract sufficient capital to enable us to fully fund our anticipated cash requirements during this period. In addition, we
cannot assure you that the requisite financing, whether over the short or long term, will be raised within the necessary time
frame or on terms acceptable to us, if at all. Should we be unable to raise sufficient funds we may be required to curtail our
operating plans if not cease them entirely. As a result, we cannot assure you that we will be able to operate profitably on a
consistent basis, or at all, in the future.
We
expended $16,436 during the three months ended December 31, 2016 in professional fees (legal, accounting and consultants) and
$41,589 in Laboratory expenses
Commitments
The
Company leases approximately 1,628 square feet of laboratory facilities at 7 Deer Park Drive in Monmouth Junction, New Jersey.
The term of the lease is from February 1, 2016 to January 31, 2019. The monthly rent and operating expenses are $5,225.
The
Company’s main office facility is located at 1 Meridian Road, Eatontown, New Jersey 07724. The lease expired during fiscal
2015 and is currently on a month to month basis with monthly rent of $2,650. The total rent for office facilities for the three
months ended December 31, 2016 was $7,950.
The
Company has unsecured liabilities without interest of $117,184 due to ACS Global, the majority shareholder of the Company, for
certain prepaid expenses made by ACS Global prior to the closing of the transaction. There is no due date associated with this
liability.
Related
Party Transactions
At
December 31, 2016, the Company has an advance receivable from Autogenesis, discussed in Note 12, for $10,880. The advance receivable
has no interest rate, is unsecured, and due on demand.
At
December 31, 2016, the company was indebted to a Corporation that is the majority owner of the Company $117,184. The advances
are due on demand, are unsecured, and carry no interest rate.
At
December 31, 2016, the company was indebted to Company that is majority owned by the Company’s chief executive officer for
$14,316. The advances are due on demand, are unsecured, and carry no interest rate.
At
December 31, 2016, the company was indebted to a Corporation that is majority owned by one Company’s chief executive officers
for $2.237. The advances are due on demand, are unsecured, and carry no interest rate.
We
anticipate that any further capital commitments that may be incurred will be financed principally through the issuance of our
securities. However, we cannot assure you that additional financing will be available to us on a timely basis, on acceptable terms,
or at all.
Off
Balance Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
Critical
Accounting Policies
We
prepare financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires
us to make estimates and assumptions that affect the amounts reported in our combined and consolidated financial statements and
related notes. We periodically evaluate these estimates and assumptions based on the most recently available information, our
own historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ
from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We
believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our
financial statements.
Basis
of Presentation
Our
financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles
in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred.
Management’s
Use of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Long-Lived
Assets
We
review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book
value may not be recoverable. When such factors and circumstances exist, we compare the assets’ carrying amounts against
the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts
are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash
flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period.
Statement
of Cash Flows
For
purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have
original maturities of three months or less) to be cash equivalents.
Fair
Value of Financial Instruments
Our
financial instruments consist of cash and cash equivalents. The fair value of cash and cash equivalents approximates the recorded
amounts because of the liquidity and short-term nature of these items.
Recent
Accounting Pronouncements
We
have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe that any future adoption
of such pronouncements will have a material impact on our financial condition or the results of our operations.