Item
1. CONSOLIDATED Financial StatementS
American CryoStem
Corporation
Consolidated
Balance Sheets
As of June
30, 2022 and September 30, 2021
| |
30-Jun-22 | | |
30-Sep-21 | |
| |
Unaudited | | |
| |
ASSETS | |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash | |
$ | 2,757 | | |
$ | 8,244 | |
Accounts Receivable - net of allowance for bad debt | |
| 14,859 | | |
| 78,782 | |
Inventory | |
| 21,716 | | |
| 17,934 | |
Deferred Contract Expense | |
| 39,370 | | |
| 39,370 | |
Prepaid Expenses | |
| 36,371 | | |
| 52,619 | |
Total Current Assets | |
| 115,073 | | |
| 196,949 | |
| |
| | | |
| | |
Other Assets: | |
| | | |
| | |
Investment in Baoxin - at cost | |
| 244,919 | | |
| 244,919 | |
Security Deposit | |
| 13,540 | | |
| 13,540 | |
Patents, Patents Development and Trademarks - net of accumulated amortization | |
| 434,572 | | |
| 371,849 | |
Fixed Assets - net of accumulated depreciation | |
| 103,652 | | |
| 113,483 | |
Finance Lease - Right-of-Use-Asset | |
| 92,413 | | |
| 115,516 | |
Right of Use Asset | |
| 54,059 | | |
| — | |
| |
| | | |
| | |
Total Assets | |
$ | 1,058,228 | | |
$ | 1,056,256 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts Payable & Accrued Expenses | |
$ | 375,371 | | |
$ | 553,120 | |
Legal & Accounting Payable | |
| 123,900 | | |
| 97,824 | |
Bridge Notes Payable | |
| 226,500 | | |
| 226,500 | |
Convertible Notes Payable | |
| 716,370 | | |
| 573,500 | |
PPP Loan - Current Portion | |
| 23,407 | | |
| 23,407 | |
Finance Lease Liability | |
| 22,801 | | |
| 34,512 | |
Operating Lease Liability | |
| 28,505 | | |
| — | |
Deferred Revenue | |
| 27,690 | | |
| 122,045 | |
Total Current Liabilities | |
| 1,544,544 | | |
| 1,630,908 | |
| |
| | | |
| | |
Long Term Liabilities: | |
| | | |
| | |
Accrued Executive Salaries | |
| 1,239,436 | | |
| 980,186 | |
Convertible Notes Payable | |
| — | | |
| 132,631 | |
Finance Lease Liability | |
| | | |
| 11,651 | |
Operating Lease Liability | |
| 25,554 | | |
| — | |
Note Payable to Related Party | |
| 125,090 | | |
| 147,775 | |
Payable to Related Party | |
| — | | |
| 658 | |
Total Liabilities | |
| 2,934,624 | | |
| 2,903,809 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| 0 | | |
| 0 | |
| |
| | | |
| | |
Shareholders’ Deficit: | |
| | | |
| | |
Preferred Stock - $.0001 par value, 50,000,000
shares authorized, 1,000,000 shares issued and outstanding at June 30, 2022 and 0 shares issued and outstanding at
September 30, 2021 | |
| 100 | | |
| 0 | |
Common Stock - $.001 par value, 300,000,000 shares
authorized, 44,181,896 shares issued and outstanding at June 30, 2022 and 61,374,524 issued and outstanding at September
30, 2021 | |
| 44,183 | | |
| 61,376 | |
Additional Paid in Capital | |
| 19,103,297 | | |
| 17,368,836 | |
Accumulated Deficit | |
| (21,023,976 | ) | |
| (19,277,765 | ) |
Total Shareholders’ Deficit | |
| (1,876,396 | ) | |
| (1,847,553 | ) |
| |
| | | |
| | |
Total Liabilities & Shareholders’ Deficit | |
$ | 1,058,228 | | |
$ | 1,056,256 | |
| |
| | | |
| | |
See the notes to the financial statements.
American CryoStem Corporation
Consolidated
Statements of Operations
For the
Nine Months and the Three Months Ended June 30, 2022 and 2021
Unaudited
| |
|
|
|
|
|
| | |
|
|
|
|
|
| |
| |
9 months | | |
3 months | |
| |
30-Jun-22 | | |
30-Jun-21 | | |
30-Jun-22 | | |
30-Jun-21 | |
Revenues | |
| | | |
| | | |
| | | |
| | |
Tissue Processing & Storage | |
$ | 132,119 | | |
$ | 7,575 | | |
$ | 39,599 | | |
$ | 4,800 | |
Product Sales | |
| 3,600 | | |
| 760 | | |
| 3,000 | | |
| — | |
Licensing Fees & Royalties | |
| — | | |
| 375,000 | | |
| — | | |
| 125,000 | |
Total Revenues | |
| 135,719 | | |
| 383,335 | | |
| 42,599 | | |
| 129,800 | |
Less Cost of Revenues | |
| (26,658 | ) | |
| (8,672 | ) | |
| (4,781 | ) | |
| (582 | ) |
Gross Margin | |
| 109,061 | | |
| 374,663 | | |
| 37,818 | | |
| 129,218 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses | |
| | | |
| | | |
| | | |
| | |
Research & Development | |
| 210,769 | | |
| 298,889 | | |
| 15,563 | | |
| 119,570 | |
Laboratory Expense | |
| 56,835 | | |
| 50,056 | | |
| 20,213 | | |
| 17,712 | |
Sales & Marketing | |
| 17,477 | | |
| 5,196 | | |
| 16,820 | | |
| 1,186 | |
Professional Fees | |
| 156,501 | | |
| 142,026 | | |
| 35,453 | | |
| 39,836 | |
Consulting Expense | |
| 929,208 | | |
| 296,109 | | |
| 160,642 | | |
| 296,109 | |
Bad Debt Expense | |
| 65,320 | | |
| 990 | | |
| 65,680 | | |
| 990 | |
General & Administrative | |
| 342,672 | | |
| 346,798 | | |
| 100,272 | | |
| 95,589 | |
Total Operating Expenses | |
| 1,778,782 | | |
| 1,140,064 | | |
| 414,643 | | |
| 570,992 | |
Net Loss from Operations | |
| (1,669,721 | ) | |
| (765,401 | ) | |
| (376,825 | ) | |
| (441,774 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Income (Expenses): | |
| | | |
| | | |
| | | |
| | |
Interest Income | |
| 2 | | |
| 3 | | |
| 2 | | |
| — | |
Laboratory Rent | |
| — | | |
| 3,000 | | |
| — | | |
| — | |
Gain on write off of Liability | |
| — | | |
| 24,000 | | |
| — | | |
| — | |
Exchange Rate | |
| — | | |
| 86 | | |
| — | | |
| — | |
Interest Expense | |
| (66,253 | ) | |
| (59,422 | ) | |
| (21,453 | ) | |
| (21,283 | ) |
Interest Expense (beneficial conversion feature-debenture) | |
| (10,239 | ) | |
| (19,499 | ) | |
| (3,413 | ) | |
| (3,413 | ) |
Net Loss | |
$ | (1,746,211 | ) | |
$ | (817,233 | ) | |
$ | (401,689 | ) | |
$ | (466,470 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic & Fully Diluted Net Income (Loss) per Common Share: | |
$ | (0.037 | ) | |
$ | (0.014 | ) | |
$ | (0.009 | ) | |
$ | (0.008 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted Average of Common Shares Outstanding - Basic & fully diluted | |
| 47,063,587 | | |
| 60,141,838 | | |
| 43,995,180 | | |
| 60,496,428 | |
| |
| | | |
| | | |
| | | |
| | |
See the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Cash Flows
For the
Nine Months Ended June 30, 2022 and 2021
Unaudited
| |
30-Jun-22 | | |
30-Jun-21 | |
Operating Activities: | |
| | | |
| | |
Net loss | |
$ | (1,746,211 | ) | |
$ | (817,233 | ) |
Adjustments to reconcile net loss items not requiring the use of cash: | |
| | | |
| | |
Gain on Write Off of Liability | |
| — | | |
| (24,000 | ) |
Common Stock for Services | |
| — | | |
| 41,000 | |
Prepaid Expenses paid in Common Stock | |
| 50,000 | | |
| — | |
Depreciation & Amortization Expense | |
| 63,349 | | |
| 56,640 | |
Interest paid in Common Stock | |
| 59,310 | | |
| 44,346 | |
Bad Debt Expense | |
| 65,320 | | |
| 990 | |
Stock Compensation Expense | |
| 794,558 | | |
| 296,109 | |
Interest Expense - Beneficial Conversion Feature | |
| 10,239 | | |
| 19,499 | |
| |
| | | |
| | |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts Receivable | |
| 63,923 | | |
| (375,550 | ) |
Inventory | |
| (3,782 | ) | |
| (5,381 | ) |
Prepaid expense | |
| 16,248 | | |
| 80,000 | |
Operating Lease Asset | |
| (73,995 | ) | |
| — | |
Accounts Payable and Accrued Expenses | |
| (151,673 | ) | |
| 188,819 | |
Operating Lease | |
| 54,059 | | |
| | |
Accrued Executive Salaries | |
| 259,250 | | |
| 180,000 | |
Deferred Revenue | |
| (94,355 | ) | |
| — | |
Net cash used by operations | |
| (699,080 | ) | |
| (314,761 | ) |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Patents development | |
| (73,202 | ) | |
| (35,187 | ) |
Net cash used by investing activities | |
| (73,202 | ) | |
| (35,187 | ) |
| |
| | | |
| | |
Financing activities: | |
| | | |
| | |
Issuance of Common Shares | |
| 813,500 | | |
| 143,000 | |
Issuance of Convertible Notes | |
| — | | |
| 150,000 | |
Paid down Finance Lease | |
| (23,362 | ) | |
| (26,722 | ) |
Payable to related party | |
| (23,343 | ) | |
| 49,279 | |
Net cash provided by financing activities | |
| 766,795 | | |
| 315,557 | |
| |
| | | |
| | |
Net change in cash | |
| (5,487 | ) | |
| (34,391 | ) |
| |
| | | |
| | |
Cash balance at beginning of the period | |
| 8,244 | | |
| 41,760 | |
| |
| | | |
| | |
Cash balance at end of the period | |
$ | 2,757 | | |
$ | 7,369 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Interest paid during the period | |
$ | 3,582 | | |
$ | 1,435 | |
Income taxes paid during the period | |
| — | | |
| — | |
| |
| | | |
| | |
See the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Changes in Shareholders’ Deficit
For the
Nine Months and the Three Months Ended June 30, 2022 and 2021
Unaudited
| |
|
|
|
|
|
| | |
|
|
|
|
|
| | |
| | |
| | |
| |
| |
Preferred Stock | | |
Common Stock | | |
Paid in | | |
Accumulated | | |
Total | |
| |
Shares | | |
Par Value | | |
Shares | | |
Par Value | | |
Capital | | |
Deficit | | |
Deficit | |
Balance at September 30, 2020 | |
| — | | |
| — | | |
| 59,570,665 | | |
$ | 59,572 | | |
$ | 15,917,408 | | |
$ | (16,398,179 | ) | |
$ | (421,199 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common shares | |
| — | | |
| — | | |
| 640,000 | | |
| 640 | | |
| 142,360 | | |
| — | | |
| 143,000 | |
Common Stock for Services | |
| — | | |
| — | | |
| 164,000 | | |
| 164 | | |
| 40,836 | | |
| — | | |
| 41,000 | |
Common Stock for Prepaid Expenses | |
| — | | |
| — | | |
| 100,000 | | |
| 100 | | |
| 74,900 | | |
| — | | |
| 75,000 | |
Common Stock for Interest | |
| — | | |
| — | | |
| 109,519 | | |
| 109 | | |
| 44,237 | | |
| — | | |
| 44,346 | |
Stock Compensation Expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 296,109 | | |
| — | | |
| 296,109 | |
Beneficial Conversion Feature | |
| — | | |
| — | | |
| — | | |
| — | | |
| 25,333 | | |
| — | | |
| 25,333 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (817,233 | ) | |
| (817,233 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at June 30, 2021 | |
| — | | |
| — | | |
| 60,584,184 | | |
$ | 60,585 | | |
$ | 16,541,183 | | |
$ | (17,215,412 | ) | |
$ | (613,644 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2021 | |
| — | | |
$ | — | | |
| 61,374,524 | | |
$ | 61,376 | | |
$ | 17,368,836 | | |
$ | (19,277,765 | ) | |
$ | (1,847,553 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common shares | |
| — | | |
| — | | |
| 2,545,000 | | |
| 2,545 | | |
| 810,955 | | |
| — | | |
| 813,500 | |
Common Stock for Prepaid Expenses | |
| — | | |
| — | | |
| 91,091 | | |
| 91 | | |
| 49,909 | | |
| — | | |
| 50,000 | |
Common Stock for Interest | |
| — | | |
| — | | |
| 170,886 | | |
| 171 | | |
| 59,138 | | |
| — | | |
| 59,309 | |
Transfer of Common Stock to Preferred Stock | |
| 1,000,000 | | |
| 100 | | |
| (20,000,000 | ) | |
| (20,000 | ) | |
| 19,900 | | |
| — | | |
| — | |
Beneficial Conversion Feature | |
| — | | |
| — | | |
| — | | |
| — | | |
| 794,559 | | |
| — | | |
| 794,559 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,746,211 | ) | |
| (1,746,211 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at June 30, 2022 | |
| 1,000,000 | | |
$ | 100 | | |
| 44,181,501 | | |
$ | 44,183 | | |
$ | 19,103,297 | | |
$ | (21,023,976 | ) | |
$ | (1,876,396 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at March 31, 2021 | |
| — | | |
| — | | |
| 60,471,696 | | |
$ | 60,473 | | |
$ | 16,205,988 | | |
$ | (16,748,942 | ) | |
$ | (482,481 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Stock for Interest | |
| — | | |
| — | | |
| 28,488 | | |
| 28 | | |
| 18,170 | | |
| — | | |
| 18,198 | |
Common Stock for Services | |
| — | | |
| — | | |
| 84,000 | | |
| 84 | | |
| 20,916 | | |
| — | | |
| 21,000 | |
Stock Compensation Expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 296,109 | | |
| — | | |
| 296,109 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (466,470 | ) | |
| (466,470 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at June 30, 2021 | |
| — | | |
| — | | |
| 60,584,184 | | |
$ | 60,585 | | |
$ | 16,541,183 | | |
$ | (17,215,412 | ) | |
$ | (613,644 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at March 31, 2022 | |
| 1,000,000 | | |
$ | 100 | | |
| 43,659,688 | | |
$ | 43,661 | | |
$ | 18,784,854 | | |
$ | (20,622,287 | ) | |
$ | (1,793,672 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common shares | |
| — | | |
| — | | |
| 461,667 | | |
| 462 | | |
| 138,038 | | |
| — | | |
| 138,500 | |
Common Stock for Interest | |
| — | | |
| — | | |
| 60,146 | | |
| 60 | | |
| 24,762 | | |
| — | | |
| 24,822 | |
Stock Compensation Expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| 155,643 | | |
| — | | |
| 155,643 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (401,689 | ) | |
| (401,689 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at June 30, 2022 | |
| 1,000,000 | | |
$ | 100 | | |
| 44,181,501 | | |
$ | 44,183 | | |
$ | 19,103,297 | | |
$ | (21,023,976 | ) | |
$ | (1,876,396 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
See the notes to the financial statements.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 1. Organization of
the Company and Significant Accounting Policies
American
CryoStem Corporation (the “Company”) is a publicly held corporation formed on March 13, 2009 in the state of Nevada
as R&A Productions Inc. (R&A).
In April
2011, R&A purchased substantially all the assets and liabilities of American CryoStem Corporation (ACS) a company formed in
1987, for 21 million shares of common stock. ACS was deemed to be the accounting acquirer. At the date of the purchase, the former
operations of R&A were discontinued, and the name of the Company was changed to American CryoStem Corporation.
The Company
is in the business of collecting adipose tissue, processing it to separate the adult stem cells, preparing such stem cells for
long-term storage and developing autologous mesenchymal stem cell therapies. The process allows individuals to preserve their
stem cells for future personal use in cellular therapy. The adipose derived stem cells are prepared and stored in their raw form
without manipulation, bio-generation or the addition of biomarkers or other materials, making them suitable for use in cellular
treatments and therapies offered by existing and planned treatment centers worldwide. Individualized collection and storage of
adult stem cells provides personalized medicine solutions by making the patient’s own preserved stem cells available for
future cellular therapies.
The Company
has devoted a significant amount of its time and resources to develop its technologies and intellectual property. These efforts
have resulted in the development of cell lines, cell culture medium, other laboratory products and cellular therapies which the
Company believes are suitable for licensing and distribution by third parties. Additionally, the Company has initiated a licensing
program to license its technologies to laboratories currently processing other types of biologic materials including cord blood
and general blood banks. The Company closed its first licensing agreement in 2014 and intends to pursue additional licensing partners
in the future.
The
accompanying consolidated financial statements include the accounts of American CryoStem Corporation and its wholly owned subsidiaries. The Company’s subsidiaries are APAC CryoStem Limited, a Hong Kong company and APAC CryoStem (Shenzhen) Ltd. which were established
to support its licensing agreement and operations and collect the licensing fees in Hong Kong and China. Currently, Mr. Arnone
and Mr. Dudzinski serve as management and directors of both companies. All significant intercompany accounts and transactions
have been eliminated in the consolidation. Management believes all amounts have been adjusted properly.
Accounting
policies refer to specific accounting principles and the methods of applying those principles to present fairly the company’s
financial position and results of operations in accordance with generally accepted accounting principles. The policies discussed
below include those that management has determined to be the most appropriate in preparing the company’s financial statements.
Use
of Estimates - The preparation of the financial statements in conformity with United States generally accepted accounting
principles (“GAAP”) uniformly applied requires management to make reasonable estimates and assumptions that affect
the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts
of revenues and expenses at the date of the financial statements and for the period they include. Actual results may differ from
these estimates.
Cash
- For the purpose of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments
with an original maturity of three months or less. Occasionally, the Company maintains cash balances at financial institutions
that exceed federally insured limits.
Accounting
for Investments - The Company accounts for investments based upon the type and nature of the investment and the availability
of current information to determine its value. Investments in marketable securities in which there is a trading market will be
valued at market value on the nearest trading date relative to the Company’s financial reporting requirements. Investments
which there is no trading market from which to obtain recent pricing and trading data for valuation purposes will be valued based
upon management’s review of available financial information, disclosures related to the investment and recent valuations
related to the investment’s fundraising efforts.
Research
and Development - Research and development expenses include both external and internal expenses. External expenses primarily
include costs of intellectual property development, clinical trial development, fees paid for third party testing services, clinical
supply and manufacturing expenses, regulatory filing fees, consulting and professional fees as well as other general costs related
to the execution of research and development activities. Internal expenses primarily include compensation of employees engaged
in research and development activities. Research and development expenses are expensed as incurred. Manufacturing costs are generally
expensed as incurred.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 1. Organization of the
Company and Significant Accounting Policies (continued)
Revenue Recognition
- Effective October 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), using the
modified retrospective transition method. The comparative information has not been restated and continues to be reported under
the accounting standards in effect for the periods presented. This standard applies to all contracts with customers, except for
contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial
instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard
also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. The adoption of ASC 606 did not have an impact on the amount of reported revenues. See Note 3 “Revenue Recognition”
for additional information.
Advertising
- Advertising Costs are expensed as they are incurred. Advertising Costs were $612 and $582, respectively for the nine
months ended June 30, 2022 and 2021 and $168 and $222, respectively for the three months ended June 30, 2022 and 2021; which
is in Sales and Marketing Expenses within the Consolidated Statements of Operations.
Bad
Debt Expense - The Company provides, through charges to income or loss, a charge for bad debt expense, which is based upon
management’s evaluation of numerous factors. These factors include prevailing economic conditions, a predictive analysis
of the outcome of the current portfolio by client, and prior credit loss experience of each client. The Company uses the information
from this analysis to develop an estimate of bad debt reserve based upon the amount of accounts receivable by client at the balance
sheet date. The Allowance for Doubtful Accounts was $926,613 at June 30, 2022 and $860,933 at September 30, 2021. (See Note 3
for additional information).
Inventory
- Inventory is valued at lower of cost or market using the first in, first out method. Inventory consists of the disposables
and materials used to create production kits, for processing of adipose tissue and cellular samples, the manufacture of Medias
used to prepare the samples and cryoprotectant for the storage of the samples.
Inventory
was composed of Raw Materials and Finished Goods, which was valued at $21,716 at June 30, 2022 and $17,934 at September 30, 2021.
Long
Lived Assets - The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.
Fixed
Assets - Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over
the estimated useful life of the assets, which is estimated as follows:
Schedule of Fixed Assets, Useful Life of Assets
|
|
Office
Equipment |
5 years |
Lab
Equipment & Furniture |
7 years |
Lab
Software |
5 years |
Leasehold
Improvements |
15 years |
Income
taxes - The Company accounts for income taxes in accordance with generally accepted accounting principles which require an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed annually for differences between financial statement and income tax bases of assets and liabilities that will result
in taxable income or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred
tax assets and liabilities to the amount expected to be realized. Income tax expense is the tax payable or refundable for the
period adjusted for the change during the period in deferred tax assets and liabilities.
The Company
follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards
Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements
when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance
for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of June
30, 2022 and September 30, 2021, the Company has no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. All tax returns from fiscal years 2016 to 2021 are subject to IRS and State of New Jersey audit.
Recently
Issued Accounting Pronouncements
The FASB
recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 1. Organization of the
Company and Significant Accounting Policies (continued)
The guidance
in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion
features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in
ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from
the host contract and accounted for as derivatives.
In addition,
the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and
embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing
certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments
qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring
separate accounting from the host contract.
The amendments
in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per
share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement
for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
The amendments
in ASU 2020-06 are effective for our company for fiscal years beginning after December 15, 2023, with early adoption permitted.
The Company is currently assessing the impact of these amendments on its future financial reporting.
In June
2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation
about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses
and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates. This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company
is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting
change would not have a material effect on the financial statements.
NOTE 2. Going Concern
The accompanying consolidated
financial statements have been presented in accordance with generally accepted accounting principles in the U.S., which assume
the continuity of the Company as a going concern. However, the Company has incurred significant losses since its inception which
raises substantial doubt about the Company’s ability to continue as a going concern. Management has made this assessment
for the period one year from date of the issuance of this report. Management’s plans with regard to this matter are to continue
to fund its operations through fundraising activities for the rest of fiscal 2022.
NOTE
3. Revenue Recognition
Under ASC
606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the
consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition
for arrangements that we determine are within the scope of ASC 606,
we perform the following five steps:
| a. | Identify the contract(s) with a customer. |
| b. | Identify the performance obligations in the contract. |
| c. | Determine the transaction price. |
| d. | Allocate the transaction price to the performance obligations in the contract; and |
| e. | Recognize revenue when (or as) the performance obligations are satisfied. |
We only apply the five-step
model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or
services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606,
we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether
each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated
to the respective performance obligation when (or as) the performance obligation is satisfied.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE
3. Revenue Recognition (continued)
Our major sources of revenue
during the reporting periods were 1. Tissue Collection, Processing and Storage revenue from various customers; 2. Annual Storage
Fees for our ATGRAFT and ATCELL products, from customers who have had stored in our laboratory facility, along with former Bio-Life
and Cytori storage customers purchased by American CryoStem; 3. Licensing and other fees from Baoxin; and 4. Products sales revenues.
The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our Tissue Processing, Storage Fees
or Product Sales Revenue, since:
| 1. | Tissue Collection, Processing & Storage Revenue is recognized on the date the process is completed and stored in our facility. |
| 2. | Storage Fees are charged annually. |
| 3. | Licensing and other Fees - This is based on the passage of time and as the customer has access to the license. The Company
reviewed and analyzed the contract with Baoxin. Management’s judgments are: |
| a. | Baoxin
qualifies as a customer since American CryoStem does not take significant risks or receive
significant gains from the agreement. |
| b. | The
right to use the license does not have significant standalone functionality because consulting
is required by American CryoStem in order for the customer to be able to use the license. |
| c. | The
Company has determined as of the date of this report, due to Baoxin’s payment history
during the COVID pandemic, to make an adjustment for recognition of the Baoxin revenue.
The Company considered during its review Baoxin’s most recent audited financial
statements, documentation provided by Baoxin concerning the completion of their new 100,000
sq. ft facility in 2021, the uncertainty of the timing for restarting their tissue processing
operations in the new facility, and the ongoing uncertainties regarding the continuing
effects of the COVID-19 pandemic in China. (See Notes 12 and 13 for additional information) |
| 4. | The majority of our Product Sales Revenue continues to be recognized when the customer takes control of the product. |
Revenue and Allowances
All revenue for the nine months
and three months was provided by customers who were individuals rather than corporate partners.
Performance Obligations
At contract inception, we assess
the goods and services promised in our contracts and identify the performance obligations for each promise to transfer to the
customer goods or to provide the customer with a service that is distinct. To identify the performance obligations, we consider
all of the goods and services promised in the contract regardless of whether they are specifically stated or are implied by customary
business practices. We determined that the following distinct goods or services represent separate performance obligations:
| · | ATGRAFT and ATCELL Customer Tissue Processing Fees |
| · | ATGRAFT and ATCELL Customer Storage Fees |
| · | Licensing and other Fees |
| · | Supply of our Tissue Collection, Processing and Storage Products to Baoxin and CryoViva |
We principally sell our products
to end users, who have agreements with us to utilize our processing and storage technology. We provide processing and storage
services to individual customers. We charge various fees for consulting services or licensing of our technologies, which includes
processing and storage agreements, arrangements with biotechnology processing facilities for the provision of our services within
a limited geographic area.
For the customers that purchase
our Tissue Collection, Processing and Storage Products we transfer control at the point in time when the goods are shipped from
our facility, shipping costs are paid by the customer and these costs are not accrued when the related revenue is recognized.
Variable Consideration
Under ASC 606, we are required to
make estimates of the net sales price, including estimates of variable consideration (such as rebates and discounts) and recognize
the estimated amount as revenue when we transfer control of the product or provide the service to our customers. Variable Consideration
must be determined using either an “expected value” or a “most likely amount” method. At the current time
the Company does not offer rebates or discounts on our provision of ATGRAFT and ATCELL customer processing and storage fees; Licensing
and other Fees; and offer Tissue Collection, Processing and Storage products; therefore, we have not made any provisions for variable
consideration related to discounts or rebates.
Product Returns
We only offer product returns in
the event a delivered product is found to be defective for which we offer replacement only. The Company has not had any product
returned based upon a defective product claim however return experience may change over time.
American CryoStem Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE
4. Loss per Share
The Company applies ASC 260,
“Earnings per Share” to calculate loss per share. In accordance with ASC 260, basic and fully diluted net loss
per share has been computed based on the weighted average of common shares outstanding during the years. The dilutive effects
of the convertible notes and the options outstanding are not included in the calculation of loss per share since their inclusion
would be anti-dilutive.
The Company had 13,636,500
shares and 10,436,500 shares of Common Stock issuable upon exercise of all outstanding stock options for the nine months ended
June 30, 2022 and 2021, respectively; and 2,334,784 and 2,334,784 shares issuable on the conversion of outstanding Convertible
Notes for the three months ended June 30, 2022 and 2021, respectively.
Net Loss per share for the following
periods is computed below:
Schedule of Net Loss per Share
| |
|
|
|
|
|
| | |
|
|
|
|
|
| |
| |
9 months | | |
3 months | |
| |
30-Jun-22 | | |
30-Jun-21 | | |
30-Jun-22 | | |
30-Jun-21 | |
Net Loss | |
$ | (1,746,211 | ) | |
$ | (817,233 | ) | |
$ | (401,689 | ) | |
$ | (466,470 | ) |
Basic & Fully Diluted Net Loss per Common Share: | |
$ | (0.037 | ) | |
$ | (0.014 | ) | |
$ | (0.009 | ) | |
$ | (0.008 | ) |
Weighted Average of Common Shares Outstanding - Basic & fully diluted | |
| 47,063,587 | | |
| 60,141,838 | | |
| 43,995,180 | | |
| 60,496,428 | |
NOTE 5. Fixed Assets
The fixed assets accounts of
the Company are comprised as follows:
Schedule of Fixed Assets
| |
June 30,
2022 | | |
September 30,
2021 | |
Laboratory Equipment | |
$ | 257,905 | | |
$ | 257,905 | |
Laboratory Leasehold Improvements | |
| 110,286 | | |
| 110,286 | |
Laboratory Furniture | |
| 1,841 | | |
| 1,841 | |
Office Equipment | |
| 27,869 | | |
| 27,869 | |
Office Leasehold Improvements | |
| 2,650 | | |
| 2,650 | |
Office Furniture | |
| 1,812 | | |
| 1,812 | |
Accumulated Depreciation | |
| (298,711 | ) | |
| (288,880 | ) |
Net Property and Equipment | |
$ | 103,652 | | |
$ | 113,483 | |
Depreciation
expense for the nine months ended June 30, 2022 and 2021 were $9,830 and $9,832, respectively and for the three months ended June
30, 2022 and 2021 were $3,277 and $3,277, respectively.
NOTE 6. Patent & Patents Filings
The patent and
patents development are recorded at cost and are being amortized on a straight-line basis over a period of seventeen years. The
company capitalizes Legal and Administrative Fees incurred in the process of filing for its patents. The Company has only been
amortizing the patents issued. Amortization Expense for the nine months ended June 30, 2022 and 2021 were $10,479 and $33,020,
respectively; and for the three months ended June 30, 2022 and 2021 were $3,493 and $3,493, respectively.
Patents still
in the application process have not been amortized. The unamortized costs of patents in the application process are $234,323 as
of June 30, 2022 and $164,194 as of September 30, 2021. Amortizable Patent Costs were $238,172 at June 30, 2022 and $238,172 at
September 30, 2021. The following is the anticipated amortization expense for these patents for the next 5 years:
Schedule of patent amortization
Twelve Months ending June 30, | |
| |
2023 | |
$ | 14,010 | |
2024 | |
$ | 14,010 | |
2025 | |
$ | 14,010 | |
2026 | |
$ | 14,010 | |
2027 | |
$ | 14,010 | |
The following
is a description of the Company’s patent assets:
On August 2,
2011, the Company was awarded U.S. Patent No. US 7,989,205 B2, titled Cell Culture Media, Kits, and Methods of Use. The Patent
is for cell culture media kits for the support of primary culture of normal non-hematopoietic cells of mesodermal origin suitable
for both research and clinical applications. The Company filed and maintained a continuation (U.S. Serial No. 13/194,900) and
additional claims were granted on November 8, 2016 under patent Number 9,487,755. The Company filed an additional continuation
on November 7, 2016 as part of our overall patent strategy and to cover expanded modifications of the original patent grant, US
Patent Application No. 15/344,805.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE
6. Patent & Patents Filings (continued)
On July 3, 2018,
the Company was awarded U. S. Patent No. US 10,014,079 B2 titled “Business Method for Collection, Cryogenic Storage and
Distribution of a Biologic Sample Material originally filed as US Serial No 13/702,304 filed June 6, 2011 with a priority date
of June 6, 2010. The patent covers the Company’s comprehensive business method for collecting, processing, cryogenic storage
and distribution of a biologic sample material. The Company has filed a continuation of the patent to cover addition claims and
will file additional Continuation in Part claims for improvements that it has developed since the original patent filing.
On December
18, 2018, the Company was awarded US Patent No. US 10,154,664 B2 titled “Systems and Methods for the Digestion of Adipose
Tissue Samples Obtained from a Client for Cryopreservation” U.S. Serial No. 13/646,647 filed October 5, 2012 with a priority
date of October 6, 2011.
The Company
has filed the following additional patents to extend its intellectual property to encompass additional aspects of the Company’s
platform processing technologies. To date the following additional patent filings have been made:
A business method
for Collection, Cryogenic Storage and Distribution of a Biologic Sample Material US Serial No 13/702,304 filed June 6, 2011 with
a priority date of June 6, 2010.
Additionally,
this patent has been filed European Union Application No. EPI3800847.9 and China Application No. 2013800391988.
Human Serum
for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells, International PCT filing PCT/US/68350 filed December
31, 2015 with a priority date of December 31, 2014. During 2017 the Company extended the filing into China, the EU, India, Japan,
the Kingdom of Saudi Arabia, Canada and Mexico.
The Company
is currently developing additional US and foreign patent applications and expects to file a number of additional provisional and
PCT patent applications in Fiscal 2022.
NOTE
7. Debt
The following
table describes the Company’s debt outstanding as of June 30, 2022:
Schedule of Debt
Debt | |
Carrying Value | | |
Maturity | | |
Rate | |
Bridge Notes | |
$ | 226,500 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 75 cents | |
$ | 150,000 | | |
Fiscal 2022 | | |
| 5.00 | % |
Convertible Notes @ 40 cents | |
$ | 100,000 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 35 cents | |
$ | 83,500 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 33 cents | |
$ | 150,000 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 30 cents | |
$ | 45,000 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 20 cents | |
$ | 155,000 | | |
Demand | | |
| 8.00 | % |
Convertible Notes @ 15 cents | |
$ | 40,000 | | |
Demand | | |
| 8.00 | % |
PPP Loan | |
$ | 23,407 | | |
Fiscal 2022 | | |
| 1.00 | % |
Note Payable to Related Party | |
$ | 125,089 | | |
Fiscal 2024 | | |
| 10.00 | % |
Finance Lease Liability | |
$ | 28,196 | | |
Fiscal 2023 | | |
| 13.25 | % |
The convertible notes are exercisable
at any time and have exercise prices ranging from $0.15 to $0.75 with the amount of shares exercisable based on the face value
of the convertible note. The holders of the bridge notes also have an option to purchase shares of the Company at $0.05 per share
with the number of shares dependent upon the face value of the bridge note. As of the date of this report, 36,500 of these options
remain outstanding.
In March 2021, the Company
issued debentures and received proceeds of $150,000. The debentures mature in December 2022 and have an exercise price of $.75
with interest at 5%. The entire Carrying Value of $150,000 is due in Fiscal 2023.
As a result of the issue, the
Company recognized interest expense of $25,333 as a beneficial conversion feature of the debentures, which has been amortized
over the lives of the notes. The Interest Expense due to the Beneficial Conversion Feature for the Nine Months and Three Months
ended June 30, 2022 was $10,239 and $3,413, respectively.
Note 8. Common Stock Issuances
During the nine months ended
June 30, 2021, the Company issued 640,000 shares and received proceeds of $143,000. The share price was determined by agreement
with the purchasers, based upon the current market price less a discount for purchasing restricted securities.
During the nine months ended
June 30, 2021, the Company issued 164,000 shares and for services valued at $41,000. The share price was determined by agreement
with the service provider, based upon the current market price less a discount for purchasing restricted securities.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
Note 8. Common Stock Issuances (continued)
During the nine months ended
June 30, 2021, the Company issued 100,000 shares for services to be provided valued at $75,000. The share price was determined
by agreement with the service provider, based upon the current market price less a discount for purchasing restricted securities.
During the nine months ended
June 30, 2021, the Company issued 109,519 shares to pay interest due holders of bridge notes and convertible notes. The amount
of interest paid was $44,346. The share prices were determined by the aggregate market price for the week in which the interest
became due.
During the nine months ended
June 30, 2022, the Company issued 2,545,000 shares and received proceeds of $813,500. The share price was determined by agreement
with the purchasers, based upon the current market price less a discount for purchasing restricted securities.
During the nine months ended
June 30, 2022, the Company issued 91,091 shares for Prepaid legal fees valued at $50,000. The share price was determined by agreement
with the service provider, based upon the current market price less a discount for purchasing restricted securities.
During the nine months ended
June 30, 2022, the Company issued 170,886 shares to pay interest due holders of bridge notes and convertible notes. The amount
of interest paid was $59,309. The share prices were determined by the aggregate market price for the week in which the interest
became due.
During
the nine months ended June 30, 2022, the Company exchanged 1,000,000 newly created Series A Voting Convertible Preferred Shares
for 20,000,000 common shares held by ACS Global, Inc. (See Note 14 for more details).
NOTE 9. Option Issuances
The Company applies ASC 718,
“Accounting for Stock-Based Compensation” to account for its option issues. Accordingly, all options granted are recorded
at fair value using a generally accepted option pricing model at the date of the grant. The Company uses the Black-Sholes option
pricing model to measure the fair values of its option grants. For purposes of determining the option values at issuance, the
fair value of each option granted is measured at the date of the grant by the option pricing model using the parameters of the
volatility of the Company’s share prices and the risk free interest rate.
The
Company normally issues options to its key personnel and consultants at the end of each fiscal year or as may be included in retainer
or employment agreements. The Company prepares an option agreement for each option grant that includes the date of the grant,
the vesting schedule, the expiration date and other terms of the granted options. The Company’s option plan calls
for the immediate expiration and cancellation of the granted options in the event of the termination of employment or the contract
associated with the original option grant except for certain circumstances including retirement or disability. The Company’s
method for exercising options is to require delivery of the executed option agreement with the payment of the option price to
the Company by the option holder. Upon receipt and confirmation of payment of the exercise price by Company management, the Company
prepares board minutes and issues instructions to the Company’s transfer agent to issue the requisite number of shares underlying
the option exercise
Using
the Black-Sholes valuation method the company issued options and recorded compensation of $754,589 for nine months ended June
30, 2022, and $155,642 for the three months June 30, 2022.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 9. Option Issuances (continued)
The
table below summarizes option activity and balances for nine months ended June 30, 2022 and 2021:
Schedule
of Stock Option Outstanding
| |
Amount | | |
Exercise
Price
Range | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Term (Years) | |
Outstanding at September 30, 2020 | |
| 7,936,500 | | |
$ | 0.05
- $0.40 | | |
| 0.26 | | |
| 2.32 | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| — | | |
| | | |
| | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Expired | |
| — | | |
| | | |
| | | |
| | |
Forfeited | |
| — | | |
| | | |
| | | |
| | |
Outstanding at June 30, 2021 | |
| 7,936,500 | | |
$ | 0.05 - $0.40 | | |
| 0.26 | | |
| 1.85 | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding at September 30, 2021 | |
| 11,536,500 | | |
$ | 0.05 - $0.40 | | |
| 0.26 | | |
| 3.73 | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| 2,100,000 | | |
$ | 0.40 | | |
| | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Expired | |
| — | | |
| | | |
| | | |
| | |
Forfeited | |
| — | | |
| | | |
| | | |
| | |
Outstanding at June 30, 2022 | |
| 13,636,500 | | |
$ | 0.05 - $0.40 | | |
| 0.28 | | |
| 2.52 | |
Vested at June 30, 2022 | |
| 9,386,500 | | |
$ | 0.05
- $0.40 | | |
| 0.29 | | |
| 2.82 | |
Option
forfeitures are recorded as they occur. The intrinsic value of the outstanding stock options is $770,240 and the intrinsic value
of the vested stock options is $496,240 at June 30, 2022.
NOTE 10. Fair Values of Financial Instruments
Fair Value Measurements under
generally accepted accounting principles clarifies the principle that fair value should be based on the assumptions market participants
would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop
those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy
as follows:
Level 1 - Quoted prices in
active markets for identical assets or liabilities.
Level 2 - Observable inputs
other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable
or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or
liabilities.
Level 3 - Unobservable inputs
to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation
is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires
more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed
and is determined based on the lowest level input that is significant to the fair value measurement.
The
Company valued Accounts Receivable, Bridge Notes and Convertible Notes at cost. Financial instruments’ carrying value approximates
fair value. Stock Options are valued using level 3 of the fair value hierarchy.
NOTE 11. Leases
The Company
determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification
criteria of finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments
to present value; however, one of the Company’s leases does not provide a readily determinable implicit rate. Therefore,
the Company must discount lease payments based on an estimate of its incremental borrowing rate which is based on the interest
rate of similar debt outstanding. Effective October 1, 2019, the Company adopted the provision of ASC 842 Leases.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 11. Leases (continued)
Finance
Lease
The Company
leases Equipment at its laboratory from NFS Leasing, Inc. Lease payments are $2,993.62 per month for eighteen (18) months. The
final lease payment is scheduled for January 1, 2023. When the final payment is made, the Company will own the equipment. The
table below presents the lease related asset and liability recorded on the Company’s consolidated balance sheets as of June
30, 2022:
Schedule of Finance Lease related Assets and Liability
| |
Classification
on Balance Sheet | |
June
30, 2022 | |
Assets | |
| |
| |
Finance
Lease Asset | |
Finance lease right of use asset | |
$ | 92,413 | |
Total Finance lease assets | |
| |
$ | 92,413 | |
Liabilities | |
| |
| | |
Current Liabilities | |
| |
| | |
Finance lease liability | |
Current finance lease liability | |
$ | 22,801 | |
Noncurrent liabilities | |
| |
| | |
Finance lease liability | |
Long-Term finance lease liability | |
| — | |
Total operating lease liability | |
| |
$ | 22,801 | |
Schedule of Finance Lease Obligation
Lease obligations at June 30, 2022: | |
| |
Twelve Months ending June 30, 2023 | |
$ | 23,949 | |
Total Payments | |
| 23,949 | |
Amount representing interest | |
| (1,147 | ) |
Finance lease obligation, net | |
$ | 22,801 | |
Finance lease obligation, current portion | |
| 22,801 | |
Finance lease obligation, long-term | |
| — | |
Lease payments for the nine
months ended June 30, 2022 were $23,949, which consisted of amortization of $20,877 and interest of $3,582. Lease payments for
the three months ended June 30, 2022 were $5,987, which consisted of amortization of $5,394 and interest of $593. At June 30,
2022, the remaining lease term was 0.667 years (8 months) and the discount rate was 13.25%.
Operating
Lease
The Company
leases its office facility, in Eatontown, New Jersey, from Eaton Holdings LLC. The lease expired on April 30, 2021. The Company
extended the lease on March 23, 2022 for an additional three years from May 1, 2021 to April 30, 2024. The table below presents
the lease related asset and liability recorded on the Company’s consolidated balance sheets as of June 30, 2022:
Schedule
of Operating Lease
| |
Classification
on Balance Sheet | |
June
30, 2022 | |
Assets | |
| |
| |
Operating
Lease Asset | |
Operating lease right of
use asset | |
$ | 54,059 | |
Total Operating lease assets | |
| |
$ | 54,059 | |
Liabilities | |
| |
| | |
Current Liabilities | |
| |
| | |
Operating lease liability | |
Current operating lease liability | |
$ | 28,505 | |
Noncurrent liabilities | |
| |
| | |
Operating lease
liability | |
Long-Term operating lease liability | |
| 25,554 | |
Total operating lease liability | |
| |
$ | 54,059 | |
Schedule of Operating Lease Obligation
Lease obligations at June 30, 2022: | |
| |
Fiscal 2022 | |
$ | 7,950 | |
Fiscal 2023 | |
| 31,800 | |
Fiscal 2024 | |
| 18,550 | |
Total Payments | |
| 58,300 | |
Amount representing interest | |
| (4,241 | ) |
Operating lease obligation, net | |
| 54,059 | |
Operating lease obligation, current portion | |
| (28,505 | ) |
Operating lease obligation, long-term | |
$ | 25,554 | |
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 11. Leases (continued)
The lease expense for the nine
months ended June 30, 2022 and 2021 was $23,850 and $23,850, respectively; and for the three months ended June 30, 2022 and 2021
was $7,950 and $7,950, respectively. At June 30, 2022, the remaining lease term was 1.833 years (22 months).
The Company
leases its laboratory facility, in Monmouth Junction, New Jersey, from Princeton Corporate Plaza LLC. The Company renewed its
lease on April 1, 2022, for an additional 12 months and pays $2,465 per month. Since the lease obligation is less than twelve
months, the Company does not report a lease related asset or liability for this lease. Rent paid for the laboratory facility for
the nine months ended June 30, 2022 and 2021 was $24,823 and $22,623 respectively; and for the three months ended June 30, 2022
and 2021 was $9,750 and $8,289.
NOTE 12. Investments
During
the first quarter of 2018, the Company invested $300,000 in Baoxin Ltd., a Chinese company that is involved in tissue storage
and processing in Baoxin, China. Baoxin is not a publicly traded corporation and the investment is carried at the lower
of cost or market value. The Company annually reviews its investments for impairment. Based on the Company’s review, the
carrying value of the Baoxin Investment was reported as $244,919 on June 30, 2022 and $244,919 on September 30, 2021.
The Agreement with Baoxin is
for Baoxin to develop, own and operate multiple laboratory/treatment/training facilities in China using the American CryoStem’s
intellectual property. Under the Agreement, American CryoStem received an upfront fee of $200,000 USD and a yearly minimum annual
guarantee of $500,000 USD per year from Baoxin until the entire amount of the Contract ($6,000,000 USD) is paid. Additionally,
as part of the transaction American CryoStem has invested $300,000 into Baoxin to obtain a 5% minority equity in Baoxin (China)
and an option to acquire up to a 20% equity ownership interest in its Regenerative Medicine Center in Hong Kong (HK). The goals
are to set up two additional GMP grade adipose tissue processing and storage facilities in Beijing and Shanghai to cover the need
of the whole China region, and a proper education facility in China to promote the use of ATGRAFT as a more natural dermal filler
over artificial fillers. Due to the uncertainty caused by the pandemic, the Company has decided to increase its allowance for
doubtful accounts to include the amount owed by Baoxin at this time and to suspend its recognition of revenue from Baoxin until
such time as circumstances in China ease and Baoxin is able to return to normal operations and make the contractual payments.
NOTE
13. Concentration of Credit
The Company regularly reviews
all receivables and determines the amount of allowances if any on a quarterly basis.
The difficulties and uncertainties
caused by COVID, Chinese government policies and Baoxin’s going concern considerations have caused concern as to the collectibility
of the Baoxin receivable. Communications and correspondence with Baoxin Management indicate a continuing commitment to American
CryoStem’s technology and the Agreement to a Territorial License of its patents and other intellectual property. Baoxin
recently completed its state-of-the-art facilities in Shenzhen to roll out therapies to the Chinese people. Although Baoxin has
confirmed their receivable, the Technology Fees billed of $500,000 annually and a total contractual obligation of $6,000,000,
there is concern about to their ability to pay. For this reason, the Company is not reporting the Fees from this contract as revenue.
Baoxin is still relying on
investment (financing) to continue its operations, which is typical for biotechnology companies globally and is currently in negotiations
with the Chinese government which include funding requests. Management is optimistic that the effects of the pandemic will eventually
subside, Baoxin’s operations will return to normal, and they will obtain the financing necessary to pay American CryoStem.
NOTE 14. Related Party Transactions
On October 1,
2020, the Company executed a note with ACS Global, Inc. for a principal amount of $99,125 representing the outstanding balance
due to ACS Global. Inc. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may be paid in
cash or stock. The note is due and payable in full upon maturity. On March 1, 2021, the note was increased by $49,000. The note
may be prepaid at any time by the Company.
From time to
time the Company takes advances and makes principal payments on the note. During the nine months ended June 30, 2022, the Company
was advanced $2,120 and made payments of $24,805 on the note.
The principal
balance of the Note is $125,090 at June 30, 2022 and $147,775 at September 30, 2021.
The Company
exchanged 1,000,000 newly created Series A Voting Convertible Preferred Shares for 20,000,000 common shares held by ACS Global,
Inc.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
June 30, 2022
Unaudited
NOTE 14. Related Party Transactions (continued)
Terms of the
Series A Voting Convertible Preferred Shares are as follows:
| 1. | Each Series A Share is convertible into 20 shares of American CryoStem common stock $0.001 par
value, subject to any recapitalization event. |
| 2. | Stated annual dividend of $0.20 per share payable quarterly in cash or stock at the discretion
of the Company’s Board of Directors. |
| 3. | Each preferred share shall have 20 votes on all matters subject to a Company shareholder vote. |
| 4. | Convertible after one year at the discretion of the ACS Global board of directors. |
During the nine
months ended June 30, 2022, the company was advanced $14,900 by a company 100% owned by the Chief Executive Officer of American
CryoStem Corporation. At June 30, 2022, American CryoStem has a balance due of $14,900.
NOTE 15. Subsequent Events
The Company
has made a review of material subsequent events from June 30, 2022 through the date of issuance of this report. There are no subsequent
events to report as of the issuance of these financial statements.
We have completed, the clinical protocol for a new
Investigational New Drug (IND) application that was filed on July 7, 2022 and were approved to proceed with the study on August 5, 2022
by the US Food and Drug Administration. Our efforts led to the development of a new study filed with the US FDA as a “first
in human” study of ATCell in Long Covid titled: “A Pilot Study on Research Treatment OF Long Covid Post-Acute Sequelae
of SARS CoV-2 Infection (“PASC”) Using ATCell™” the approved study is scheduled to be conducted at the Walter
Reed National Military Medical Center (WRNMMC) in Bethesda, Maryland.
ITEM
2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
|
Forward-looking
Statements
We
and our representatives may from time to time make written or oral statements that are “forward-looking,” including
statements contained in this quarterly report and other filings with the Securities and Exchange Commission (the “SEC”),
reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are
forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made
by us or on our behalf. Words such as “expect,”“anticipate,”“intend,”“plan,”“believe,”“seek,”“estimate,”“project,”“forecast,”“may,”“should,”
variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking
statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly
report to conform forward-looking statements to actual results. Important factors on which such statements are based on assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
|
· |
Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; |
|
|
|
|
· |
Our
failure to earn revenues or profits; |
|
|
|
|
· |
Inadequate
capital to continue business; |
|
|
|
|
· |
Volatility
or decline of our stock price; |
|
|
|
|
· |
Potential
fluctuation in quarterly results; |
|
|
|
|
· |
Rapid
and significant changes in markets; |
|
|
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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.
|
The
following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this
quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our
actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as
a result of various factors.
Background
We were incorporated
in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly owned subsidiary American CryoStem
Acquisition Corporation, substantially all 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 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, president and treasurer of ACS Global and Mr.
Arnone is a director and secretary of ACS Global.
Overview
American CryoStem
Corporation; (CRYO) founded in 2008, is a biotechnology pioneer, having developed standardized adipose tissue derived technologies
(Adult Stem Cells) for the fields of regenerative and personalized medicine. These standardized technologies which include granted
patents, are the basis for our chemistry, manufacturing, and controls (cGMP Manufacturing) of our ATCell™ autologous cellular
therapy product for use in clinical investigations for Biologic License Applications with the US Food and Drug Administration
(FDA). Our laboratory stem cell products are characterized adult human Mesenchymal Stem Cell (MSC’s) derived from adipose
tissue that work in conjunction with our patented (non-animal) medium lines and knowhow.
The Company
filed its first Investigational New Drug Application (IND) with the FDA for our ATCell™ cellular therapy product. The IND
filing is titled “ATCell™ Expanded Autologous Adipose Derived Mesenchymal Stem Cells deployed via Intravenous Infusion
for the Treatment of Post-Concussion Syndrome (PCS) in Retired Athletes and Military Personnel” File number 19089 was approved
by the FDA on September 17, 2020 to commence the Phase 1 Clinical Trial. Post-concussion syndrome is a chronic, incurable central
nervous system condition affecting a significant number of the United States military and athletes, especially those involved
in contact sports such as football, boxing, soccer, and other sports where participants have suffered one or more concussions
or mild traumatic brain injuries (mTBI). Published research has indicated that up to 30% of all military personal, active and
retired, may suffer from this condition. According to the Department of Defense evaluation of U.S. military casualty statistics,
from 2000-2019 Q3, 413,858 United States Military personnel worldwide experienced a concussion.
The Company
built and validated a new cGMP clean room processing and manufacturing area at our facility in Monmouth Junction NJ, implemented
and validated cGMP Standard Operating Procedures (SOPs) and installed a new Quality Management System to support its IND filings
and an increased focus on patent and product development and support additional clinical activities.
The Company
has built a domestic and international patent portfolio consisting of 32 patents. Our 4 primary operating patents regarding the
“collection – processing – cryopreservation and return to point-of-care” of adipose derived stem cells,
have been granted.
The Company
is expanding its efforts to attract and cultivate collaborative partners to accelerate its product development efforts, harnessing
its manufacturing platform and tissue processing platforms. The R&D collaborations are to discover, develop, and commercialize
cellular therapies, laboratory products and combinations thereof with synergistic technologies to create regenerative medicine
applications and develop new intellectual property.
Adipose
Tissue
The
Company’s manufacturing platform technologies, cell transportation products, cell culture mediums and cell therapies are
focused on the acquisition and processing of adipose tissue as the primary raw material. Many of our developed technologies have
been successfully applied to other raw materials such as bone marrow, umbilical, and placenta tissue. Adipose tissue, also known
as fat tissue or fatty tissue, is a connective tissue that is mainly composed of fat cells called adipocytes. Adipocytes are energy
storing cells that contain large globules of fat known as lipid droplets surrounded by a structural network of fibers. tissue
and other stromal tissues. The Company is focused on adipose tissue because it contains higher densities of mesenchymal stems
cells (often 500 to 1000 times more) per gram of raw material when compared to other sources (bone marrow, umbilical cord tissue,
etc). The higher cellular density of adipose tissue supports the ability to create regenerative cellular products more efficiently
and with less expansion (lower passages and population doublings), which is preferred when producing cellular therapy products.
Adipose tissue
is one of the top human stem cell sources considering its accessibility, abundance, and least painful collection procedure when
compared to other sources such as bone marrow. The adipose derived mesenchymal stem cells (ADSCs) that adipose tissue contains
can be maintained and expanded in culture for long periods of time without losing their differentiation capacity, leading to large
cell quantities being increasingly used in cell therapy purposes. Many published and peer reviewed reports show that ADSC-based
cell therapy products demonstrated optimal efficacy and efficiency in various clinical indications for both autologous and allogeneic
purposes, hence they are increasingly being considered as potential tools for replacing, repairing, and regenerating dead or damaged
cells.
Adipose tissue
is a specialized type of connective tissue that arises from the differentiation of mesenchymal stem cells into adipocytes during
fetal development. Mesenchymal stem cells are multipotent cells that can transform into various cell types, including fat cells,
bone cells, cartilage cells, and muscle cells among others. Adipose tissue can be found in many places throughout the body. Adipose
tissue is the most abundant type of fat in humans. It is distributed within subcutaneous fat, visceral fat, and bone marrow fat.
Subcutaneous fat is found throughout the whole body, in the spaces between the skin and underlying muscles. Visceral fat is predominantly
found around the organs in the abdominal cavity, such as the liver, intestines, and kidneys, as well as in the peritoneum (a serous
membrane that lines the outside of the abdominal organs). Adipose tissue is also present in bone marrow (a sponge-like tissue
in the central cavity of bones). In addition, adipose tissue can be found in the pericardium surrounding the heart, or cushioning
other parts of the body, like the soles of the feet, eyeballs, and certain blood vessels.
The main function
of adipocytes is to store excess energy in the form of fatty molecules, mainly triglycerides. Fat storage is regulated by several
hormones, including insulin, glucagon, catecholamines (adrenaline and noradrenaline), and cortisol. Depending on the body’s
immediate energy requirements, these hormones can either stimulate adipose tissue formation and storage (i.e. lipogenesis) or
initiate the release of fat from adipose tissue (i.e. lipolysis). Under the influence of insulin, for instance, adipocytes can
increase the uptake of blood glucose and transform it into fatty molecules, thereby increasing fat storage.
In addition
to being an energy storing reservoir, adipose tissue performs important endocrine and metabolic roles by secreting several biologically
active factors known as adipokines. These molecules contribute to a variety of different functions, including regulation of energy
balance, food intake and satiety, inflammatory response, and metabolism of steroid hormones. Finally, adipose tissue also helps
cushion and protect parts of the body, as well as insulate the body from extreme temperatures.
In addition
to adipocytes, adipose tissue contains the stromal vascular fraction (SVF) comprised of cells including preadipocytes, fibroblasts,
vascular endothelial cells, and a variety of immune cells such as adipose tissue macrophages. Far from being hormonally inert,
adipose tissue has, in recent years, been recognized as a major endocrine organ, as it produces hormones such as leptin, estrogen,
resisting, and cytokines (especially TNFα). Adipose tissue contains some of the highest concentrations of adult stem cells,
progenitor cells and immune cells.
Processing
Technology
The FDA considers
processing and expanding cells as the manufacturing of a drug product. The Company’s completed proprietary, patented processing
and manufacturing platform is designed for the collection, preparation and cryo-preservation of pure adipose tissue and adipose
tissue derived cells. The processing platform has been validated to enable the Company to deliver cellular therapy samples with
repeatable and identifiable characteristics of safety, potency, viability, and purity which are the core FDA requirements for
the cGMP manufacturing of all biologic drug products. Our manufacturing platform is approved by FDA
for use in our current clinical study of Post-Concussion Syndrome for the manufacturing of the cellular therapy samples. The Company
believes that the platform is suitable to support the Company’s growing pipeline of product development and planned clinical
studies, and future biologic license applications for an array of target diseases and conditions.
The Company
believes the reproducibility of scientific studies is a substantial issue in cellular therapy research, from drug discovery and
development through clinical trials as researchers throughout the world continue to use different protocols for processes associated
with cell sample preparation, cryopreservation, and cold chain management. We believe our validated manufacturing processes for
our ATCell™ product solves this issue. The samples we produce with our patented platform and proprietary products have proven
purity, consistent viabilities above 80 percent, and cell identification panels across six biomarkers and proven sterility. Our
standardizing of handling, storage, and transportation protocols substantially improve the quality and reproducibility of adipose
tissue derived stem cells. Our patented adipose tissue collection, processing, storage and retrieval protocols are designed to
permit us to accelerate the time line of creating and processing cellular therapy products - from lab research to regulatory submission
and FDA approval.
Each
individual process has the potential to create multiple autologous products and to generate multiple revenue streams including
customer fees for storage of biomaterials. Our processing platform and methodology allow the opportunity for continuing revenue
streams from each tissue sample received and processed including, cellular therapy treatments, pure tissue storage for secondary
procedures, processing, and handling fees and CRYO storage and release fees.
We
are leveraging our patented platform and developing our product portfolio to create a global footprint of licensed laboratory
affiliates, physician’ networks, patients, research organizations, and licensees who purchase tissue collection, processing
and storage services or consumables from our Company.
Products
and Services
Therapy Product Development
During the Company’s initial stage of
developing its manufacturing protocol and products chose adipose tissue as its source material following review and experiments
that included other biomaterials and cell sources such as bone marrow and peripheral blood samples. The selection of adipose tissue
is based upon numerous factors including high cell density and its wide array of other cell types including precursor and immune
cells that may be derived and developed as future products. Although the Company is currently focused on the development of cellular
therapy products utilizing adipose derived mesenchymal cells, the platform is designed to be easily extendable to permit the acquisition
and expansion of additional cellular derivatives from other biomaterials.
A significant amount of research, case studies
and anecdotal evidence has been published over the past several decades concerning the study of cellular therapies for a wide range
of diseases and maladies from ALS and Parkinson’s to wound healing and immunological support. The Company, recognizing that
each new application for therapy approval requires a standalone clinical study, has refined its development strategy to initially
encompass mild traumatic brain injury and immunosuppression as core targets for its development strategy. We focus our efforts
on expanding our product pipelines based upon our intellectual property portfolio, collaborative development relationships, target
market size, medical need, disease classification, and international licensing and partnering opportunities.
The completion, submission and approval of
our validated manufacturing platform is the culmination of the Company’s manufacturing development efforts. Validation of
the manufacturing platform for the current FDA approved study has provided the Company with the opportunity to expand its efforts
and resources on the further development of its downstream intellectual property. The objective is to provide deliverable commercial
cell therapy products to address patient populations with large unmet medical needs such as brain injuries and conditions that
include immunologic complications. The Company’s continuing efforts in the development of additional products includes an
increased focus on the recruitment of collaborative partners and the extension of our existing manufacturing capabilities to development
of other adipose tissue derivative and cellular/biomaterial combination products. Leveraging our repeatable processing platform
provides the Company with contributable technology and capabilities to rapidly develop clinical studies, accumulate complementary
scientific data and attract strong collaborative and developmental partners.
The Company has recently completed the development
of an additional study focused SARS-CoV-2, also know as Long Covid. The NIH defines Long Covid symptoms as fatigue, shortness of
breath, “brain fog”, sleep disorders, fevers, gastrointestinal symptoms, anxiety, and depression, can persist for months
and can range from mild to incapacitating. The US Congress recently received $1.15b in funding for NIH to support research into
the prolonged health consequences of SARS-CoV-2 (Long Covid) infection over the next 4 years. Approximately 20% to 30% of all people
that have recovered from acute SARS-CoV-2 infection are currently estimated to have developed Long Covid in the week and months
following their recovery from a SARS-CoV-2 infection.
Our development efforts have led to the development
of a new study to be initially filed with the US FDA as a “first in human” study of ATCell in Long Covid titled:
“A Pilot Study on Research Treatment OF Long Covid Post-Acute Sequelae of SARS CoV-2 Infection (“PASC”) Using
ATCell™” is scheduled to be conducted at the Walter Reed National Military Medical Center (WRNMMC) in Bethesda,
Maryland upon final approval from the FDA.
Our activities include supporting collaborations
by providing our products and services (ACSelerate™ and ATCELL™) with the goal and expectation
that our products and services become the basis for new cell based Regenerative Medicine and cellular therapy applications.
Part of this strategic approach to therapy
product development is to design, develop and launch new products and services that rely on our core processing technology and
leverage existing products and services. Examples of this approach are the use of the CELLECT® collection kit/ box
and materials to collect fresh tissue for cellular therapy sample processing, use of our patented non-animal growth medium for
cell culture and use of our storage medium for cryo-storage. Management is currently pursing collaborative product development
agreements with healthcare institutions, universities, and other biotech companies.
2022 Therapy Pipeline
The Company has developed and refined its pipeline
around its flagship cellular product, ATCell™, for clinical therapeutic use. The initiation of this pipeline strategy occurred
with the filing, approval and commencement of its Post-Concussion Syndrome Phase 1 clinical study. During this review process,
the US FDA fully reviewed the Company’s manufacturing platform contained in the Chemistry, Manufacturing and Control section
of the Investigational New Drug (IND) submission. The Company’s filing included unpublished research of ATCell™ use
in an animal model as well as a report covering its safety results from a pilot study that included the treatment of more than
80 patients that received one or more treatments with the ATCell™ product that resulted in no reported adverse events.
| 1. | The Company filed its first Investigational New Drug Application
(IND) with the US Food and Drug Administration (FDA) for the ATCELL cellular therapy product. The IND filing is titled “ATCell™
Expanded Autologous Adipose Derived Mesenchymal Stem Cells deployed via Intravenous Infusion for the Treatment of Post-Concussion
Syndrome (PCS) in Retired Athletes and Military Personnel”, File number 19089, which was approved by the FDA on September
17, 2020. The Company intends to invite additional developers of cellular therapies to initiate additional arms of the clinical
study focused on the use of ATCELL™ for use in systemic inflammatory response relief for patient suffering from systemic
diseases. A number of these additional study targets have been identified and ongoing discussions support the Company’s
belief that clinical investigations can be developed and rapidly added upon completion of the new treatment protocol and outcome
assessment methodologies. |
| 2. | DMD - The Company has completed the protocol for
the treatment of Duchene Muscular Dystrophy and is in final discussions with its Collaborative partner, to select the principal
investigator (PI) and clinical trial site selection. |
| 3. | Long COVID - The Company has completed the protocol
for treatment of Long COVID and its FDA filings. We have completed, along with a government partner the clinical protocol for
a new Investigational New Drug (IND) application that was filed on July 7, 2022, and we were approved to proceed with the study
on August 5, 2022 According to the Centers for Disease Control and Prevention, “post-COVID conditions can be considered
a lack of return to a usual state of health following acute COVID-19 illness.” In the US, following COVID recovery, it is
reported that up to 30% of those afflicted, diagnosed, or treated for COVID-19 have continuing symptoms and medical complications
following recovery from the acute illness. |
| 4. | Wound Healing - the creation of topical applications and
ingredients used by physicians in the wound care and cosmetic industries as well as therapeutic cellular applications and bio-materials
development. An initial pilot study involving a minimum of 10 participants for the assessment of its autologous tissue products
for the wound healing market is underway. The Company is combining its tissue products, which do not require FDA approval, with
current standard-of-care methods to accelerate and improve the healing of diabetic and non-diabetic wounds and ulcers. |
| 5. | ATGRAFT™ - products include adipose tissue and cell
sample processing and storage as a form of personal “bio-insurance”, and adipose tissue (fat) storage for cosmetic
fat engraftment procedures. High demand for pure and natural aesthetics in fast growing cosmetic industry with non-FDA required
plastic, cosmetic, and reconstructive surgical “fat filler”. |
| 6. | Osteoarthritis - The Company completed its study protocol
for ATCell for osteoarthritis and has completed the filing with the Cayman Island Ministry of Health. This new study is currently
pending approval. The study is designed for 100 participants as a “patient pay model”, an acceptable model in the
Cayman Islands. Upon approval the study will be marketed to patients in the Caribbean and the US and will generate revenue to
the Company for each patient’s processing and delivery of their treatment samples to the clinic n Grand Cayman. |
About ATCELL™
The Company has established and trademarked
ATCELL™ as the brand name for its line of adipose derived stem cell products. ATCELL™ is a purified sample of adipose
tissue derived from adipose tissue through our manufacturing processes that can be incubated and grown (cultured) to large quantities
in cGMP conditions.
ATCELL™ Adipose
Derived Mesenchymal Cells Processed and characterized adipose derived cells created using the Company’s proprietary,
validated and patented Standard Operating Procedures (SOPs) of its manufacturing platform and the Company’s ACSelerate™
patented cell culture media. Cell lines may also be custom created for patients desiring to store their cells for
their own future use in Regenerative Medicine procedures, shipped “On Demand”. Customer samples are collected by the
physician in a mini liposuction procedure and delivered to the Company’s facility utilizing the CELLECT®
collection system and ACSelerate™ transport medium to conform to our validated quality
control standards. The Company charges its customers a fee to process newly collected client tissue samples into cellular samples.
ATCELL’s repeatable sample manufacturing
process is designed to comply with the requirements of FDA to produce highly consistent and validated cellular products necessary
to achieve regulatory approval. The validation of our manufacturing process and quality control results are of great value in biomanufacturing
and serve as the basis for approval and commercial product development.
The Company’s ATCELL™
cell lines are cultured in our patented ACSelerate™ cell culture media. All processed samples: tissue,
cells, and research materials are made available for clinical study therapies, tissue transfer or sale to research institutions.
All samples are tested for sterility, disease, lifespan, and population doubling rate (PDL). Cell morphology is confirmed by (i)
flow cytometry (6 markers) and (ii) tri-lineage differentiation analysis has been confirmed using ACSelerate™
differentiation medias. Each ATCELL™ line can be further processed and differentiated allowing the
Company to provide genetically matched cell types. We believe this research methodology may provide opportunities for the Company’s
ATCELL™ and ACSelerate™ products to become the building blocks of
additional commercial application development.
The Company believes it can earn additional
fees based upon storage and retrieval fees and for future product creation. Cell culturing and differentiation may be performed
upon receipt of the raw tissue sample or at any time on a previously processed and cryopreserved tissue or master cell sample.
ATCELL™ has shown that it is ideally suited for differentiation into additional cell types (bone,
cartilage, etc.) utilizing our patented ACSelerate™ line of differentiation mediums.
The ATCELL™ processing,
products and services are incorporated into multiple granted patents including the granted claim of: “Systems and Methods
for the Digestion of Adipose Tissue Samples Obtained from a Client for Cryopreservation” US 10,154,664 issued December 18,
2018, and “Business Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material”
US Patent Number 10,014,079, issued July 3, 2018. The ACSelerate™ Medium products are incorporated into our granted patents
“Cell Culture Media, Kits and Methods of Use”; US Patent No. 7,989,205 issued August 2, 2011, with additional claims
granted in US Patent No. 9,487,755 granted November 8, 2016.
Tissue Processing and Storage Services:
ATGRAFT is an adipose tissue (fat) collection,
processing and storage solution used by cosmetic and plastic surgeons to provide their patients with multiple tissue transfer and
storage options. The ATGRAFT™ service, through one liposuction procedure, allows individuals to prepare
for multiple future cosmetic or regenerative procedures by using their own stored adipose tissue as natural biocompatible filler,
or for multiple cellular therapy applications over time without the trauma of further liposuctions. Many physicians currently offering
tissue transfer or “stem cell (SVF)” therapies are required to perform a concurrent tissue harvest for each transfer
or procedure which increases the opportunities for infection at the harvest site and the development of long-term complications
related to the formation of scar tissue (stroma) at the harvest site(s).
ATGRAFT™ supported
procedures include breast reconstruction, layered augmentations, buttocks enhancement, volume corrections of the hands, feet, face,
and neck areas that experience significant adipose tissue (fat) volume reduction as we age. ATGRAFT™ is
processed and stored utilizing our cGMP standards so that any stored fat tissue sample may in the future be further processed to
create, “ATCELL™”, for use in Regenerative Medicine applications. The ATGRAFT™
service is included in our granted patent “Business Method for Collection, Processing, Cryogenic Storage and Distribution
of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.
The Company’s charges processing fees
for ATGRAFT™ tissue processing and minimum annual storage fees based 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 clinical “point-of-care”
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 to create topical therapy or cosmetic products, on-demand.
Laboratory Products; Culture Medium, and
Manufacturing Services
CELLECT® Collection,
Transportation, and Storage System – An unbreakable “chain of custody” solution to collect and deliver tissue
samples utilizing proprietary and patent pending methods and materials. The CELLECT® service is the required platform
for the collection and transportation of live adipose tissue samples to American CryoStem Corporation’s processing facility.
Tissue collected and transported in our CELLECT kits is monitored through the transportation process to assures the highest viability
upon laboratory receipt. The CELLECT® system incorporates our ACSelerate–TR™ transport medium
to support the health of the tissue during transport. The ability to support the health of the collected tissue using our proprietary
material and services greatly enhances our highly consistent and repeatable manufacturing and processing protocol. The CELLECT®
service is included in our granted patent “Business Method for Collection, Processing, Cryogenic Storage and Distribution
of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.
American CryoStem is the first tissue bank
to globally incorporate through its CELLECT® service the International Blood Banking identification, labeling
and product identification coding system. 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 laboratory facility. The Company requires use of this standard in all
laboratories that license or utilize our technology.
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 of the Company’s ACSelerate™ cell culture media lines are available
in animal serum free, which may be suitable for human and therapeutic uses, or in a low serum version for application development
and research purposes. The patented ACSelerate™ cell culture media line(s) were specifically developed
to address increasing industry demand for fetal bovine serum-free cell culture products. The use of fetal bovine serum (FBS) and
other animal products in 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.
The Company entered into a licensing and manufacturing
agreement with PeproTech (April 4, 2016) 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. PeproTech 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. The licensed medium is marketed under both PeproTech’s PeproGrow and the Company’s ACSelerate
MAX brands.
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 grade and FBS (research) grade. This patent covers both non-GMP research grades and cGMP grades
suitable for cell culture of adipose-derived stem cells. Additionally, 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.
The Company supports its marketing efforts
by making ATCELL™ samples available for research purposes and for internal product development through
our collaborative and partnering programs. We believe these cell lines may be suitable for use 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 these
materials for these research and development collaborators, partners and other third parties extend 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 that may be necessary for use in future 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
Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799) representing the initial results of this ongoing optimization
program. On December 31, 2015, the Company converted the provisional patent application to an international PCT filing (PCT/US/68350)
under the title Human Serum for Cell Culture for Growth of Human Adipose Stromal Cells. To date the patent has also been filed
in the following additional countries: China and Hong Kong, India, Mexico, Brazil, the European Union, US, Japan, Thailand, Brazil,
Russia, Australia, New Zealand, Canada, and Saudi Arabia.
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. Every product is genetically unique to the patient and custom blended,
deriving its key ingredients from the individual client’s own adipose derived 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 (SOP’s) that it developed for the ATGRAFT™
and ATCELL™ processing services utilizing ACSelerate™ cell culture media. The Company
receives collection, processing and 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.
CRYO’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 –COVID
RISK FACTOR
The development of our products
could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease
like the recent outbreak of COVID-19. For example, as a result of measures imposed by the governments in regions affected by COVID-19
businesses have been suspended due to quarantines or “stay at home” orders intended to contain this outbreak. Furthermore,
many patients had concerns about making hospital and physician office visits for fear of contracting the virus. These factors may
have direct adverse impact on our ability to enroll participants in our clinical trial programs. In addition, travel restrictions,
stay-in-place orders and other measures including information control. specifically in Asian countries, such as China, imposed
by governmental agencies and health organizations to prevent the spread of COVID-19 and protect the citizenry, have had an adverse
impact on the flow of information, goods and services between nations. The supply disruptions have resulted in shortages of goods
and materials. This could also impact our ability to produce the products we need to conduct our clinical trials. In addition,
these measures have resulted in delays to the regulatory process, which may also have an adverse impact on our business. We are
still assessing our business plans and the impact COVID-19 may have on our ability to advance the development of our drug candidates
or to raise financing to support the development of our drug candidates, we cannot assure you that we will be able to avoid part
or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in
our sector in particular.
The Company is aware many jurisdictions outside
the US currently permit cellular therapies and regenerative medicine applications. The Company has targeted these jurisdictions
for licensing its technologies to local operators and facilities and receives numerous unsolicited international inquiries concerning
the sale or licensing of our SOPs, culture medium products and tissue banking services for use 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 included in its international
licensing program metrics to vet potential partners and collaborators and their facilities. To date we have licensed our technologies
in Hong Kong, China, and Thailand.
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
the global market for stem cells is expected to register a healthy CAGR of 13.8% during the period from 2017 to 2025 to become
worth US$270.5 bn by 2025.
(https://www.transparencymarketresearch.com/pressrelease/stem-cells-market.htm)
China
On July 12, 2018 the Company announced
the national launch of its ATGRAFTTM tissue collection, processing and storage technology by Baoxin Asia Pacific
Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in China. The Company’s management team traveled throughout southeast
China with the management and marketing team of Baoxin to present the ATGRAFTTM platform to leading plastic and
cosmetic surgery hospitals in Shenzhen, Nanning, Guangzhou, Guangxi and Changsha. Additionally, Mr. Arnone and Mr. Dudzinski attended
the signing of investment documents between Baoxin and Chinese government and Banking officials in Shenzhen, China as well as the
official launch presentation and evening gala hosted by Baoxin in Shenzhen.
The China launch activities were in
support of the Company’s licensing and supply agreement with Baoxin, under which Baoxin agreed to pay the Company a minimum annual
guarantee against a fixed fee per process and purchase certain necessary consumables from CRYO required for the collection, processing
and storage of the collected adipose tissue. Under the terms of the Agreements signed in Fiscal 2018, the Company invested in and
currently holds five percent (5%) of Baoxin shares. Additionally, Mr. Arnone and Mr. Dudzinski were elected to serve as Directors
of Baoxin during their visit to Shenzhen, China. Mr. Arnone resigned as a board Member of Baoxin in 2019. Mr. Dudzinski continues
to serve the Company’s interests as a board member of Baoxin.
During Fiscal 2020 and 2021, due to
the continuing effects of the COVID pandemic and associated government policies and regulations Baoxin suspended its processing
activities. Baoxin is an emerging biotechnology company in China that has relied to date on investment to fund operations and build
their facilities, as is typical for these types of companies. During 2020 and 2021, Baoxin developed a new state of the art facility
with sizable clean rooms and biomaterial storage space. The facility was completed in February 2021 and officially opened in May
of 2021. Unfortunately, due to the continued effects of COVID and the appearance of new variants Baoxin has been unable to restart
operations and its marketing programs in 2022.
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 reached
further agreement to extend their relationship on a nonexclusive 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. The HIT license has been extended per the terms of Schedule B of the
Term Sheet, dated June 30, 2014, for an additional 3-year period to June 30, 2023.
In 2017 as part of the Company’s
transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution rights granted to HIT under its
2014 agreement to Baoxin. The Company was paid of fee of US$100,000 in the transaction and was provided with an initial ownership
position in a planned Regenerative Treatment Center to be established by HIT in Hong Kong.
The current pandemic, changes in Chinese
regulations and policies regarding Hong Kong, recent political unrest and the inability of Chinese citizens to cross the border
between Hong Kong and China have significantly curtailed the ability of HIT to implement its business plans to utilize the Company’s
technology and purchase the associated consumables.
Thailand
On April 5, 2018 the Company announced
further expansion of its global laboratory and cellular technology footprint by entering into an agreement to license its ATGRAFT™
and ATCELL™ adipose tissue (fat) processing and storage technologies with CRYOVIVA (Thailand) Ltd., a Bangkok, Thailand based
Cord Blood processing and storage facility. CRYOVIVA, Thailand, currently offers collection, processing, and storage of Cord Blood
derived biologics to patients throughout Thailand and Southeast Asia.
American CryoStem licensed to CRYOVIVA
(Thailand) Ltd., established in 2007, the rights to utilize the Company’s Standard Operating Procedures (SOP’s) to
create and market the Company’s ATGRAFT™ tissue storage service and ATCELL™ adipose derived stem cell processing
and storage services in Thailand. The financial terms generally, call for the payment of certain training fees and, a percentage
of the gross revenue subject to annual minimum payments generated from our products. Additionally, the Agreement calls for the
purchase of CRYO consumable products required for ATGRAFT™ and ATCELL™ sample processing including CRYO’s ACSelerate™
non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue collection kit, and ACSelerate – Max™
cell culture medium.
The current COVID pandemic has delayed
CRYOVIVA’s scheduled launch of its marketing campaign several times and unfortunately, CRYOVIVA suspended their tissue banking
operations in 2020 and 2021. We are currently in discussions with them concerning the restart of their operations and initiation
of their marketing program for calendar 2022 although there is no certainty that the effects of the pandemic will ease sufficiently
to do so in the near term.
Japan
In June 2015, The Company entered into
a licensing 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 non-exclusive agreement expired in June of 2020.
Collaborations
/ Partnering Opportunities / Acquisitions
The Company
recognizes the benefits of collaborations with industry and university partners and has increased its efforts to attract and develop
these relationships. Strategically, the Company believes that with a current approved IND application with the US FDA and the
strength of its granted and pending patent portfolio, that it can attract new partners and collaborative arrangements These relationships
are generally covered by Confidential Non-Disclosure Agreements and include Material Transfer Agreements (MTA) under which the
Company may supply ATCELL™ and/or ACSelerate™ medium products for evaluation, testing, and the
development of new cellular therapy applications. The Company has entered into Non-Disclosure and Material Transfer Agreements
with a number of potential collaborators. No assurance can be given that these efforts or relationships will ultimately result
in new technology for future commercialization.
The Company
has developed a strategy to expand the opportunities to commercialize its products by increasing its ability to identify and pursue
collaborative and partnering opportunities by cultivating and engaging new relationships with biotechnology companies engaged
in similar or complimentary development activities. Included in this strategy is the increased recruitment of consultants and
other biotechnology experts to identify potential collaborators, partners and acquisition candidates. The Company’s goal
is to develop additional standardized cellular processing models to support FDA IND treatment protocol approvals. This may be
accomplished by further identifying, and validating certain mechanisms and characteristics of mesenchymal stem cells related to
regulating modulation of immune response(s) and promoting tissue regeneration and stability (homeostasis) for the treatment of
traumatic injuries, inflammation, auto-immune diseases, and brain and organ damage associated with viruses such as SARS-CoV-2
(COVID-19), including, the expanding group of patients dealing with the chronic and debilitating symptoms of what is commonly
termed “Long Haul COVID” or “Long COVID.” To date the Company has completed agreements with the following
entities for development of new products and cellular therapy targets although the successful commercialization of new products
and therapies resulting from these activities cannot be assured or predicted at this time.
WRNMMC
On
December 3, 2020, the Company entered into a Cooperative Research and Development Agreement (CRADA) with Walter Reed National
Military Medical Center (WRNMMC), the nation’s largest and most renowned joint military medical center serving the Army,
Navy, Air Force and Marines located in Bethesda, Maryland.
A
Cooperative Research and Development Agreement (CRADA) is a written agreement between a government agency and a non-federal entity
that allows the federal government and its non-federal partners to optimize and maximize use of their resources, exchange technical
expertise in a protected fashion, share intellectual property resulting from collaborative effort, and speed commercialization
of federally developed technology. The Company has committed to provide materials including ATCell samples and Umbilical Cord
stem cells, ACSelerate Max Growth and differentiation mediums testing and other processing supplies, processing and testing methods.
The Company maintains the rights to commercialize all technology developed under this CRADA Agreement. The technology is centered
on creating in vitro (test tube) assays to standardize and commercialize new treatment protocols; optimizing quality control measures;
and developing standardized protocol potency assays for precise therapy dosing. Management believes that these new assays can
be commercialized to generate substantial sales and licensing revenues and create value for the Company’s stakeholders.
Through
the Collaboration entitled “Stem Cells for Regeneration and Medical Innovation, a multi-faceted and multi-staged research
project with WRNMMC Biomedical Laboratories, the Company plans to develop, validate and standardize baseline and assay metrics
to identify mesenchymal stem cell (MSC) characteristics and quantities across various cell biomarkers and exosome expressions
data sets for its ATCell™ product for biologics developers’ use worldwide. The focus of the Collaboration is to enable
the creation of predictive and prescriptive cellular models which will further enhance American CryoStem’s mission as a
premier biologics’ manufacturer and developer and be highly valuable to the medical community, biotech developers, and the
public at large.
WRNMMC
is part of The Military Health System (MHS) which is the enterprise within the United States Department of Defense
that provides health care to active duty, Reserve component and retired U.S. Military personnel and
their dependents.
The
missions of the MHS are complex and interrelated: To ensure America’s 1.4 million active duty and 331,000 reserve-component
personnel are healthy so they can complete their national security missions.
| · | To
ensure that all active and reserve medical personnel in uniform are trained and ready
to provide medical care in support of operational forces around the world. |
| · | To
provide a medical benefit commensurate with the service and sacrifice of more than 9.5
million active-duty personnel, military retirees, and their families. |
The
MHS also provides health care, through the TRICARE health plan, to:
| · | Active-duty service members
and their families, |
| · | Retired service members and
their families, |
| · | Reserve component members
and their families, |
| · | Surviving family members, |
| · | Medal of Honor recipients
and their families |
| · | Some former spouses, and |
| · | Others identified as eligible
in the Defense Enrollment Eligibility Reporting System |
The
MHS has a $50+ billion budget and serves approximately 9.5 million beneficiaries. The MHS employs more than 144,217 in 51 hospitals,
424 clinics, 248 dental clinics and 251 veterinary facilities across the nation and around the world, as well as in contingency
and combat-theater operations worldwide.
Muscular
Dystrophy
In March
2020, the Company entered into a collaborative agreement with RACEMD, a 501c(3) charitable organization focused on the improvement
of treatments and therapies for patient with Duchenne Muscular Dystrophy. Duchenne muscular dystrophy (DMD) is a severe type of
muscular dystrophy that primarily affects boys. Muscle weakness usually begins around the age of four and worsens quickly. Muscle
loss typically occurs first in the thighs and pelvis followed by the arms. Most affected individuals are unable to walk by the
age of 12. Some may have intellectual disability. DMD affects about one in 3,500 to 6,000 males at birth. It is the most common
type of muscular dystrophy. The life expectancy is 26; however, with excellent care, some may live into their 30s or 40s. The
disease is much rarer in girls, occurring approximately once in 50,000,000 live female births.
The terms
of the Agreement call for the Company to work with RACEMD to develop clinical therapies and studies focused on mitigating the
effect of the disease, improve muscle strength and quality of life in the short term and to build upon successes to seek a more
curative cellular therapy solution to extend life expectancy over the long term. The Company is in the final stages of completing
its plans with RACEMD to submit an initial safety study for use of ATCell as the treatment protocol and expects to make its initial
filing to FDA in early 2022. RACEMD has committed to funding the initial studies and to assist the Company in creating non-dilutive
funding opportunities for larger advanced studies in the future.
PeproTech,
Inc.
On April
4, 2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech manufactures,
markets and distributes the Company’s ACSelerate – Max cell growth medium. The Company and PeproTech completed the
optimization and scale up manufacturing studies and the licensed medium is marketed under both PeproTech’s, PeproGrow and
the Company’s ACSelerate MAX brands. PeproTech plans to 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 international 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.
The Company is in ongoing discussion with PeproTech related to increasing the visibility and sales of the medium and the optimization
of additional medium products focused on the differentiation of adult stem cells that are synergistic to the cell culture medium.
On January 5th, 2022, Thermo Fisher Scientific completed its acquisition of PeproTech for $1.85 billion.
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 four issued U.S. patents (No. 7,989,205,
and Serial No. 9,487,755, Cell Culture Media Kits and Methods of Use, “Systems and Methods for the Digestion of Adipose
Tissue Samples Obtained from a Client for Cryopreservation” US 10,154,664 issued December 18, 2018, and “Business
Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079,
issued July 3, 2018); and has additional pending patent applications which are detailed in the following chart:
Title |
Technology |
Patent
/ Application Number |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Covers 12 types of Medium |
US Patent No. 7,989,205
Issued August 2, 2011 |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Additional claim Granted
for all 12 medium types |
US Patent No. 9,487,755
Issued November 8, 2016
Continuation of US Patent
No. 7,989,205 |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Continuation of Granted Patent
covering additional improvements |
US Patent Application No.
15/344,805
Continuation of US Patent
No. 7,989,205 |
Human
serum for cell culture medium for growth of human adipose stromal cells |
A cell culture medium for
growth of human adipose stromal cells for human and therapeutic applications
|
PCT/US15/68350
30 month National Phase entry
date of June 31, 2017, additional International Filings for China, India, the European Union, Saudi Arabia, Israel, Brazil,
Mexico, Australia and New Zealand. |
A
Business Method for Collection, Cryogenic Storage and Distribution of a Biological Sample Material |
Company Core Tissue Collection
Processing and Storage Methodology
Covers CELLECT Kit, Transport
and Cryopreservation Medium for ATGRAFT and ATCELL Products |
US Serial No 13/194,900
Filed June 6, 2010
Patent Application Published
December 5, 2013 Claims Granted
US Patent No. 10,014,079. Continuation filed upon issuance. |
A
Business Method for Collection, Cryogenic Storage and Distribution of a Biological Sample Material |
Company Core Tissue Collection
Processing and Storage Methodology
Continuation covering Improvements |
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 13/194,900 imminent (PCT
Application filing planned) |
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 6, 2011, Claims Granted US Patent No.10,154,664. Continuation filed upon issuance. |
Systems
and Methods for the Digestion of Adipose Tissue Samples Obtained From a Client For Cryopreservation |
Adipose Tissue Digestion
Laboratory Processing Methods
|
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 13/646,900 imminent (PCT
Application filing planned) |
Compositions
and Methods for collecting, Washing, Cryoprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous Adipose
Transfer Procedures” |
Company
Adipose Tissue Storage Platform for Cosmetic Procedures Covers the core processing adipose tissue for ATGRAFT adipose tissue
dermal filler product |
U.S. Serial No. 14/406,203
National Phase entry date of December 5, 2014 based on PCT/US2013/044621
European Union Application
No. EPI3800847.9
China Application No. 2013800391988 |
Compositions
and Methods for “Collecting, Washing, Cryoprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures” |
Company Adipose Tissue Storage
Platform for Cosmetic Procedures
Covers additional claims
related to ATGRAFT process not included in original application |
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 14/406,203 imminent (PCT
Application filing planned) |
Systems
and methods to isolate and expand stem cells from urine |
Isolation of stem cells from
urine of patients for use in research and therapeutics
|
US
Serial Nos. 62/335,426 and 62/439,106 |
Additionally,
the Company has in-licensed the following IP:
Patent
Title |
Use
of Patent |
Application
# |
Cosmetic compositions
including tropoelastin isomorphs
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#5,726,040 |
Cosmetic compositions
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,451,326 |
Recombinant hair
treatment compositions
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,572,845 |
Wound healing compositions
and methods using tropoelastin and lysyl oxidase
(wound healing) |
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 a 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
our proprietary Adipose Tissue Processing Platform, the Company is working to address multiple high growth, multi-billion dollar
market opportunities prevailing within the Regenerative Medicine, Cosmeceuticals, Medical Tourism and Cell Therapy 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 laboratory products, cell culture medium, 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 is expected to register a
healthy CAGR of 13.8% during the period from 2017 to 2025 to become worth US$270.5 bn by 2025. Depending upon geography, the key
segments of the global stem cells market are North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa.
At present, North America dominates the market because of the substantial investments in the field, impressive economic growth,
rising instances of target chronic diseases, and technological progress. As per the TMR report, the market in North America will
likely retain its dominant share in the near future to become worth US$167.33 bn by 2025.
A
report published by Markets and Markets Research in 2017 titled “Cell Expansion Market by Product (Reagent, Media,
Flow Cytometer, Centrifuge, Bioreactor), Cell Type (Human, Animal), Application (Regenerative Medicine & Stem Cell Research,
Cancer), End user (Research Institute, Cell Bank) - Global Forecasts to 2021”. The report states: “The
global cell expansion market is expected to reach USD $18.76 Billion by 2021 from USD $8.34 Billion in 2016 at a CAGR of 17.6%.
Geographically, the cell expansion market is dominated by North America, followed by Europe, Asia, and the Rest of the World (RoW).
Growth in the North American segment is primarily driven by increasing incidence of chronic diseases in the North American countries.
According to the American Medical Association and the American Medical Group Association, more than 50% of Americans suffered
from one or more chronic diseases in 2012; the number of Americans suffering from chronic diseases was around 133 million in 2005
and this figure is expected to reach around 157 million by 2020. With this significant growth in the number of patients suffering
from chronic diseases, the market for cell expansion is expected to grow in this region in the coming years.
Regenerative
Medicine Market
The Global
Translational Regenerative Medicine market is expected to grow significantly over the forecast period. The Global Translational
Regenerative Medicine market was valued at $5.8bn in 2016. Vision gain forecasts this market to increase to $14.5bn in
2021. The market is estimated to grow at a CAGR of 19.9% in the first half of the forecast period and 17.7% from 2016 to 2027.
Cell Culture
Market
Cell Culture
Market Global Forecast to 2023, according to “marketsandmarkets”
the cell culture market is expected to reach USD $26.28 Billion by 2023 from USD $15.32 Billion in 2018, at a CAGR of 11.4%. Growth
in this market is driven by the growing number of regulatory approvals for cell culture-based vaccines, increasing demand for
monoclonal antibodies (mAbs), funding for cell-based research, growing preference for single-use technologies, and the launch
of advanced cell culture products.
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, research/commercial uses, and therapeutic applications of adipose tissue within
the current regulatory framework. The combination of a traditional sales approach supported by continuous internal and external
marketing program(s) is 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. We intend to employ both print advertising and social media sales campaigns. In addition, we plan 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 regenerative medicine physicians and plastic and cosmetic surgeons to join our network
of providers that offer our services to their patients. This marketing initiative has been implemented using a traditional sales
approach common to the pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing
activities is being strategically and tactically expanded using a combination of in-house sales personnel and outside independent
channels.
Our plan, capital
permitting, provides for a comprehensive integrated marketing approach using various traditional and new media, such as the Internet,
social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and promote awareness of
our Company and our branded products and services. The essence of this targeted strategy is to reach the end-users as quickly
as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside marketing resources
and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Development of Regional
U.S. Markets
Physician
Network
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 tissue storage and 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, physicians, 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 conform
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 receives 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.
Baoxin
Asia Pacific Biotechnology (Shenzhen) Co. Ltd. On July 12, 2018, the Company announced the national launch of CRYO’s ATGRAFTTM tissue
collection, processing and storage technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in
China. The management team traveled throughout southeast China with the management and marketing team of Baoxin to present the
ATGRAFTTM platform to leading plastic and cosmetic surgery hospitals in Shenzhen, Nanning, Guangzhou, Guangxi
and Changsha. The China launch activities are in support of the Company’s previously announced licensing and supply agreement
with Baoxin, under which Baoxin will pay the Company a minimum annual guarantee against a fixed fee per process and purchase certain
necessary consumables from CRYO required for the collection, processing and storage of the collected adipose tissue. Under the
terms of the Agreements signed in Fiscal 2018, the Company invested in and currently holds five percent (5%) of Baoxin shares.
Additionally, Mr. Arnone and Mr. Dudzinski were elected to serve as Directors of Baoxin during their visit to Shenzhen, China.
During 2019 Mr. Arnone resigned from the board of Baoxin.
During
Fiscal 2020 and 2021, due to the continuing effects of the COVID pandemic and associated government policies and regulations Baoxin
suspended its processing activities. Baoxin is an emerging biotechnology company in China that has relied to date on investment
to fund operation and build their facilities, as is typical for these types of companies. During 2020 and 2021, Baoxin developed
a new state of the art facility with sizable clean rooms and biomaterial storage space. The facility was completed in February
2021 and officially opened in May of 2021. Unfortunately, due to the continued effects of COVID and the appearance of new variants
Baoxin has been unable to restart operations and its marketing programs.
See
Note 3, Note 13 and Note 14 for additional information.
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. The HIT license has been extended per the terms of Schedule B of the Term
Sheet, dated June 30, 2014, for an additional 3 year period to June 30, 2023.
In 2017
as part of the Company’s transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution
rights granted to HIT under its 2014 agreement to Baoxin. The Company was paid a fee in the transaction and was provided with
an initial ownership position in a planned Regenerative Treatment Center to be established by HIT in Hong Kong.
The current
pandemic, changes in Chinese regulations and policies regarding Hong Kong, recent political unrest, and the inability of Chinese
citizens to cross the border between Hong Kong and China have significantly curtailed the ability of HIT to implement its business
plans to utilize the Company’s technology and purchase the associated consumables.
CRYOVIVA
(Thailand), Ltd. - On April 5, 2018 the Company announced further expansion of its global laboratory and cellular technology
footprint by entering into an agreement to license its ATGRAFT™ and ATCELL adipose tissue (fat) processing and storage technologies
with Cryoviva (Thailand) Ltd., a Bangkok, Thailand based Cord Blood processing and storage facility. Cryoviva, Thailand, currently
offers collection, processing and storage of Cord Blood derived biologics to patients throughout Thailand and Southeast Asia.
American CryoStem
has licensed to Cryoviva (Thailand) Ltd., established in 2007, the rights to utilize the Company’s Standard Operating Procedures
(SOP’s) to create and market the Company’s ATGRAFT™ tissue storage service and ATCELL™ adipose derived
stem cell processing and storage services in Thailand. The financial terms generally, call for the payment of certain training
fees and, a percentage of the gross revenue subject to annual minimum payments generated from our products. Additionally, the
Agreement calls for the purchase of CRYO consumable products required for ATGRAFT and ATCELL sample processing including CRYO’s
ACSelerate™ non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue collection kit, and ACSelerate
– Max™ cell culture medium.
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 non- exclusive agreement
expired in June of 2020.
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 at Princeton Corporate
Plaza in Monmouth Junction NJ. 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 proposed business.
We have suffered
recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from our business
operations or successfully raised the financing required to expand our business. As a result of these and other factors, our independent
auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore,
are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional
capital may have a material and adverse effect upon us and our shareholders.
Our plans with
regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital
deficiency, and (ii) implementing a plan to generate sales of our proposed products. Our continued existence is dependent upon
our ability to resolve our liquidity problems and achieve profitability in our current business operations. However, the outcome
of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments
that might result from the outcome of these risks and uncertainties.
Results
of Operations - Three Months
The
Company’s revenue for the quarter ended June 30, 2022, decreased to $42,599 versus $132,119 for the same period of Fiscal
2021.
Operating
expenses decreased to $414,643 for the quarter ended June 30, 2022, from $570,992 for the same period in Fiscal 2021. The Company
incurred a decrease in its Research and Development and Consulting Expense paid with stock options. The Company incurred an increase
in Bad Debt Expense since Management increased its Allowance for Doubtful Accounts.
Net
loss for the quarter ended June 30, 2022, was $401,689 compared to a net loss of $466,470 for the same period of Fiscal 2021.
The decrease in the net loss for quarter versus the same period in 2021, was primarily due to the reduction in revenue show above.
Liquidity
and Capital Resources
As
of June 30, 2022, the Company had a cash balance of $2,757, compared to $8,244 at September 30, 2021. We used $699,080 of our
cash for operations and $73,202 for investing activities. The main sources of cash provided by financing activities included new
equity issuances totaling $813,500.
Accounts
Receivable decreased to $14,859 at June 30, 2022 from $78,782 at September 30, 2021.
Convertible
debt increased to $716,370 as of June 30, 2022, versus $706,131 as of September 30, 2021. This increase was due to the effects
of amortizing the beneficial conversion feature of the notes. See Note 7. Debt reported in the financial statements.
The
Company will continue to focus on its financing and investment activities, but should we be unable to raise sufficient funds,
we will be required to curtail our operating plans or cease them entirely. We cannot assure you that we will generate the necessary
funding to operate or develop our business. Please see “Cash Requirements” above for our existing plans with respect
to raising the capital we believe will be required. In the event that we are able to obtain the necessary financing to move forward
with our business plan, we expect that our expenses will increase significantly as we attempt to grow our business. Accordingly,
the above estimates for the financing required may not be accurate and must be considered in light these circumstances.
There
was no significant impact on the Company’s operations as a result of inflation for the nine months ended June 30, 2022.
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 12 to 24 months.
In order to finance further market development with the associated expansion of operational capabilities for the time period discussed
above, we will need to raise additional working capital. However, we cannot assure you we can attract sufficient capital to enable
us to fully fund our anticipated cash requirements during this period. In addition, we cannot assure you that the requisite financing,
whether over the short or long term, will be raised within the necessary time frame or on terms acceptable to us, if at all. Should
we be unable to raise sufficient funds we may be required to curtail our operating plans if not cease them entirely. As a result,
we cannot assure you that we will be able to operate profitably on a consistent basis, or at all, in the future.
In order to
move our Company through its next critical growth phase of development and commercialization and to ensure we are in position
to support our research collaborations and market penetration strategies, Management continues to seek new investment into the
Company from existing and new investors with particular emphasis on identifying the best deal structure to attract and retain
meaningful capital sponsorship from both the retail and institutional investing communities, while limiting dilution to our current
shareholders. Management also focuses its efforts on increasing sales and licensing revenue and reducing expenses.
Effects
of COVID-19
The
development of our drug candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic
or outbreak of an infectious disease like the recent outbreak of COVID-19. For example, as a result of measures imposed by the
governments in regions affected by COVID-19 businesses and schools have been suspended due to quarantines or “stay at home”
orders intended to contain this outbreak. Furthermore, many patients had concerns about making hospital and physician office visits
for fear of contracting the virus. These factors had an direct adverse impact on our ability to enroll participants in our clinical
trial programs. In addition, travel restrictions, stay-in-place orders and other measures imposed by governmental agencies and
health organizations to prevent the spread of COVID-19 and protect the citizenry, have had an adverse impact on the flow of goods
and services between nations. The supply disruptions have resulted in shortages of goods and materials. This could also impact
our ability to produce the products we need to conduct our clinical trials. In addition, these measures have resulted in delays
to the regulatory process, which may also have an adverse impact on our business. Finally, initially, the outbreak of COVID-19
led to steep declines in the Dow Industrial Average and other domestic and international stock indices at the end of February
and during March and April 2020. While the markets have rebounded nicely since then, recent concerns over the “Delta variant”
and the impact it may have on the U.S. and global economies, have led to “risk-off” sessions in the global markets.
We are still assessing our business plans and the impact COVID-19 may have on our ability to advance the development of our drug
candidates or to raise financing to support the development of our drug candidates, we cannot assure you that we will be able
to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment
generally or in our sector in particular.
Commitments
Effective
October 1, 2019, the Company adopted the provision of ASC 842 Leases. The Company determines whether a contract is or contains
a lease at inception of the contract and whether that lease meets the classification criteria of finance or operating lease. When
available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, one of the Company’s
leases does not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an
estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.
Finance
Lease
The
Company leases Equipment at its laboratory from NFS Leasing, Inc. Lease payments are $2,993.62 per month for eighteen (18) months.
The final lease payment is scheduled for January 1, 2023. When the final payment is made, the Company will own the equipment.
See Note 11. Leases in the Financial Statements.
Operating
Lease
The
Company leases its office facility, in Eatontown, New Jersey, from Eaton Holdings LLC. The Company extended the lease on March
23, 2022 for an additional three years from May 1, 2021 to April 30, 2024. at $2,650 per month. See Note 11. Leases in the Financial
Statements.
The
Company leases its laboratory facility, in Monmouth Junction, New Jersey, from Princeton Corporate Plaza LLC. The Company renewed
its lease on April 1, 2022, for an additional 12 months and pays $2,465 per month. See Note 11. Leases in the Financial Statements.
The
Company was not party to any litigation against it and is not aware of any litigation contemplated against it as of June 30, 2022.
See also Legal Proceedings below.
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.
Related Party Transactions
On October 1,
2020, the Company executed a note with ACS Global, Inc. for a principal amount of $99,125 representing the outstanding balance
due to ACS Global. Inc. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may be paid in
cash or stock. The note is due and payable in full upon maturity. On March 1, 2021, the note was increased by $49,000. The note
may be prepaid at any time by the Company.
From time to
time the Company takes advances and makes principal payments on the note. During the nine months ended June 30, 2022, the Company
was advanced $2,120 and made payments of $24,805 on the note.
The principal
balance of the Note is $125,090 at June 30, 2022 and $147,775 at September 30, 2021.
The Company
exchanged 1,000,000 newly created Series A Voting Convertible Preferred Shares for 20,000,000 common shares held by ACS Global,
Inc.
Terms of the
Series A Voting Convertible Preferred Shares are as follows:
| 1. | Each Series A Share is convertible into 20 shares of American CryoStem common stock $0.001 par
value, subject to any recapitalization event. |
| 2. | Stated annual dividend of $0.20 per share payable quarterly in cash or stock at the discretion
of the Company’s Board of Directors. |
| 3. | Each preferred share shall have 20 votes on all matters subject to a Company shareholder vote. |
| 4. | Convertible after one year at the discretion of the ACS Global board of directors. |
During the nine
months ended June 30, 2022, the company was advanced $14,900 by a company 100% owned by the Chief Executive Officer of American
CryoStem Corporation. At June 30, 2022, American CryoStem has a balance due of $14,900.
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. See
Note 1 and Note 3 to the Financial Statements for more information.
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.
Recent
Accounting Pronouncements
The FASB
recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity.
The guidance
in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion
features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in
ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from
the host contract and accounted for as derivatives.
In addition,
the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and
embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing
certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments
qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring
separate accounting from the host contract.
The amendments
in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per
share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement
for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
The amendments
in ASU 2020-06 are effective for our company for fiscal years beginning after December 15, 2023, with early adoption permitted.
The Company is currently assessing the impact of these amendments on its future financial reporting.
In June
2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation
about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses
and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates. This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company
is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting
change would not have a material effect on the financial statements.