ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS.
American
CryoStem Corporation
Consolidated
Balance Sheets
As of March
31, 2021 and September 30, 2020
|
|
31-Mar-21
|
|
|
30-Sep-20
|
|
|
|
Unaudited
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
109,108
|
|
|
$
|
41,760
|
|
Accounts Receivable -
net of allowance for bad debt
|
|
|
749,350
|
|
|
|
500,000
|
|
Other Receivables
|
|
|
4,961
|
|
|
|
—
|
|
Inventory
|
|
|
21,540
|
|
|
|
20,401
|
|
Prepaid Expenses
|
|
|
46,900
|
|
|
|
5,000
|
|
Total Current Assets
|
|
|
931,859
|
|
|
|
567,161
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
Investment in Baoxin
- at cost
|
|
|
300,000
|
|
|
|
300,000
|
|
Security Deposit
|
|
|
13,540
|
|
|
|
13,540
|
|
Patents and Patents Development
- net of accumulated amortization
|
|
|
355,385
|
|
|
|
365,676
|
|
Fixed Assets - net of
accumulated depreciation
|
|
|
120,035
|
|
|
|
126,591
|
|
Finance Lease - Right-of-Use-Asset
|
|
|
76,626
|
|
|
|
85,817
|
|
Operating Lease Right-of-Use-Asset
|
|
|
2,631
|
|
|
|
18,064
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,800,076
|
|
|
$
|
1,476,849
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts Payable &
Accrued Expenses
|
|
$
|
286,668
|
|
|
$
|
181,924
|
|
Legal & Accounting
Payable
|
|
|
29,168
|
|
|
|
23,568
|
|
Bridge Notes Payable
|
|
|
226,500
|
|
|
|
226,500
|
|
Convertible Notes Payable
|
|
|
573,500
|
|
|
|
558,552
|
|
PPP Loan - Current Portion
|
|
|
22,107
|
|
|
|
14,304
|
|
Finance Lease Liability
|
|
|
6,917
|
|
|
|
26,722
|
|
Operating Lease Liability
|
|
|
2,631
|
|
|
|
18,064
|
|
Total Current Liabilities
|
|
|
1,147,491
|
|
|
|
1,049,634
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities:
|
|
|
|
|
|
|
|
|
PPP Loan
|
|
|
1,300
|
|
|
|
9,103
|
|
Accrued Executive Salaries
|
|
|
860,186
|
|
|
|
740,186
|
|
Convertible Notes Payable
|
|
|
125,805
|
|
|
|
—
|
|
Payable to Related Parties
|
|
|
147,775
|
|
|
|
99,125
|
|
Total Liabilities
|
|
|
2,282,557
|
|
|
|
1,898,048
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Deficit:
|
|
|
|
|
|
|
|
|
Preferred Stock - $.0001 par value, 50,000,000
shares authorized, 0 shares issued and outstanding at March 31, 2021 and September 30, 2020
|
|
|
0
|
|
|
|
0
|
|
Common Stock - $.001
par value, 300,000,000 shares authorized, 60,471,697 shares issued and outstanding at March 31, 2021 and 59,570,666 issued
and outstanding at September 30, 2020
|
|
|
60,473
|
|
|
|
59,572
|
|
Additional Paid in Capital
|
|
|
16,205,988
|
|
|
|
15,917,408
|
|
Accumulated Deficit
|
|
|
(16,748,942
|
)
|
|
|
(16,398,179
|
)
|
Total Shareholders’ Deficit
|
|
|
(482,481
|
)
|
|
|
(421,199
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities &
Shareholders’ Deficit
|
|
$
|
1,800,076
|
|
|
$
|
1,476,849
|
|
|
|
|
|
|
|
|
|
|
See the notes
to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Operations
For the
Six Months and the Three Months Ended March 31, 2021 and 2020
Unaudited
|
|
6 months
|
|
|
3 months
|
|
|
|
31-Mar-21
|
|
|
31-Mar-20
|
|
|
31-Mar-21
|
|
|
31-Mar-20
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tissue Processing & Storage
|
|
$
|
2,775
|
|
|
$
|
11,900
|
|
|
$
|
1,175
|
|
|
$
|
11,900
|
|
Product Sales
|
|
|
760
|
|
|
|
15,900
|
|
|
|
760
|
|
|
|
14,440
|
|
Licensing Fees & Royalties
|
|
|
250,000
|
|
|
|
266,667
|
|
|
|
125,000
|
|
|
|
135,000
|
|
Total Revenues
|
|
|
253,535
|
|
|
|
294,467
|
|
|
|
126,935
|
|
|
|
161,340
|
|
Less Cost of Revenues
|
|
|
(8,090
|
)
|
|
|
(16,710
|
)
|
|
|
(4,789
|
)
|
|
|
(11,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
245,445
|
|
|
|
277,757
|
|
|
|
122,146
|
|
|
|
149,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research & Development
|
|
|
179,319
|
|
|
|
19,176
|
|
|
|
149,576
|
|
|
|
—
|
|
Laboratory Expense
|
|
|
32,344
|
|
|
|
44,622
|
|
|
|
15,461
|
|
|
|
27,224
|
|
Sales & Marketing
|
|
|
4,010
|
|
|
|
22,761
|
|
|
|
3,248
|
|
|
|
8,960
|
|
Professional Fees
|
|
|
102,190
|
|
|
|
72,220
|
|
|
|
84,255
|
|
|
|
38,072
|
|
Bad Debt Expense
|
|
|
—
|
|
|
|
326,800
|
|
|
|
—
|
|
|
|
324,800
|
|
General & Administrative
|
|
|
251,209
|
|
|
|
234,246
|
|
|
|
144,680
|
|
|
|
102,887
|
|
Total Operating Expenses
|
|
|
569,072
|
|
|
|
719,825
|
|
|
|
397,220
|
|
|
|
501,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Gain (Loss) from Operations
|
|
|
(323,627
|
)
|
|
|
(442,068
|
)
|
|
|
(275,074
|
)
|
|
|
(352,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
3
|
|
|
|
22
|
|
|
|
1
|
|
|
|
22
|
|
Laboratory Rent
|
|
|
3,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gain on Value of Derivative
|
|
|
—
|
|
|
|
133,892
|
|
|
|
—
|
|
|
|
132,019
|
|
Gain on write off of Liability
|
|
|
24,000
|
|
|
|
166,667
|
|
|
|
—
|
|
|
|
166,667
|
|
Loss on Debt Settlement
|
|
|
—
|
|
|
|
(2,504
|
)
|
|
|
—
|
|
|
|
(2,504
|
)
|
Foreign Taxes
|
|
|
—
|
|
|
|
(13,808
|
)
|
|
|
—
|
|
|
|
(7,247
|
)
|
Loss on Loan Issuance
|
|
|
—
|
|
|
|
(92,951
|
)
|
|
|
—
|
|
|
|
—
|
|
Amortization of Debt Discount
|
|
|
—
|
|
|
|
(84,000
|
)
|
|
|
—
|
|
|
|
(42,000
|
)
|
Exchange Rate
|
|
|
86
|
|
|
|
—
|
|
|
|
86
|
|
|
|
—
|
|
Interest Expense
|
|
|
(38,139
|
)
|
|
|
(42,930
|
)
|
|
|
(21,847
|
)
|
|
|
(21,343
|
)
|
Interest Expense (beneficial conversion feature-debenture)
|
|
|
(16,086
|
)
|
|
|
(41,382
|
)
|
|
|
(7,895
|
)
|
|
|
(20,691
|
)
|
Penalties
|
|
|
—
|
|
|
|
(25
|
)
|
|
|
—
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(350,763
|
)
|
|
$
|
(419,087
|
)
|
|
$
|
(304,729
|
)
|
|
$
|
(147,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & Fully Diluted Net Income (Loss) per Common Share:
|
|
$
|
(0.006
|
)
|
|
$
|
(0.008
|
)
|
|
$
|
(0.005
|
)
|
|
$
|
(0.003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average of Common Shares Outstanding - Basic & fully diluted
|
|
|
59,963,564
|
|
|
|
49,883,110
|
|
|
|
60,248,623
|
|
|
|
50,262,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Cash Flows
For the
Six Months and the Three Months Ended March 31, 2021 and 2020
Unaudited
|
|
31-Mar-21
|
|
|
31-Mar-20
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(350,763
|
)
|
|
$
|
(419,087
|
)
|
Adjustments
to reconcile net loss items not requiring the use of cash:
|
|
|
|
|
|
|
|
|
Gain
on Write Off of Liability
|
|
|
(24,000
|
)
|
|
|
—
|
|
Derivative
change in fair value
|
|
|
—
|
|
|
|
(133,892
|
)
|
Loss
on Loan Issuance
|
|
|
—
|
|
|
|
92,951
|
|
Amortization
of Debt Discount
|
|
|
—
|
|
|
|
84,000
|
|
Bad
Debt Expense
|
|
|
—
|
|
|
|
326,800
|
|
Common
Stock for Services
|
|
|
20,000
|
|
|
|
—
|
|
Interest
paid in Common Stock
|
|
|
26,148
|
|
|
|
—
|
|
Interest
Expense - Beneficial Conversion Feature
|
|
|
16,086
|
|
|
|
41,382
|
|
Depreciation
& Amortization Expense
|
|
|
45,274
|
|
|
|
16,689
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(249,350
|
)
|
|
|
(249,941
|
)
|
Related
Party Receivable
|
|
|
(4,961
|
)
|
|
|
—
|
|
Prepaid
expense
|
|
|
33,100
|
|
|
|
—
|
|
Inventory
|
|
|
(1,139
|
)
|
|
|
(11,253
|
)
|
Accounts
Payable and Accrued Expenses
|
|
|
134,344
|
|
|
|
(175,260
|
)
|
Accrued
Executive Compensation
|
|
|
120,000
|
|
|
|
120,000
|
|
Deferred
Revenue
|
|
|
—
|
|
|
|
(16,666
|
)
|
Net
cash used by operations
|
|
|
(235,261
|
)
|
|
|
(324,277
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
—
|
|
|
|
(2,740
|
)
|
Patents
development
|
|
|
(19,236
|
)
|
|
|
(5,190
|
)
|
Net
cash used by investing activities
|
|
|
(19,236
|
)
|
|
|
(7,930
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Issuance of Common
Shares
|
|
|
143,000
|
|
|
|
175,000
|
|
Note
Converted to Stock
|
|
|
—
|
|
|
|
168,000
|
|
Issuance
of Convertible Notes
|
|
|
150,000
|
|
|
|
—
|
|
Paid
down Finance Lease
|
|
|
(19,805
|
)
|
|
|
(17,210
|
)
|
Payable
to related party
|
|
|
48,650
|
|
|
|
(6,166
|
)
|
Net
cash provided by financing activities
|
|
|
321,845
|
|
|
|
319,624
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
67,348
|
|
|
|
(12,583
|
)
|
|
|
|
|
|
|
|
|
|
Cash balance at beginning
of the period
|
|
|
41,760
|
|
|
|
23,800
|
|
|
|
|
|
|
|
|
|
|
Cash balance at end of
the period
|
|
$
|
109,108
|
|
|
$
|
11,217
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
of cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid during the period
|
|
$
|
1,312
|
|
|
$
|
3,907
|
|
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
Six Months and the Three Months Ended March 31, 2021 and 2020
Unaudited
|
|
Common
|
|
|
Par
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance at September 30, 2019
|
|
|
49,387,918
|
|
|
$
|
49,389
|
|
|
$
|
13,931,500
|
|
|
$
|
(15,218,894
|
)
|
|
$
|
(1,238,005
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
875,000
|
|
|
|
875
|
|
|
|
174,125
|
|
|
|
|
|
|
|
175,000
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(419,087
|
)
|
|
|
(419,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
|
50,262,918
|
|
|
$
|
50,264
|
|
|
$
|
14,105,625
|
|
|
$
|
(15,637,981
|
)
|
|
$
|
(1,482,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
80,000
|
|
|
|
80
|
|
|
|
19,920
|
|
|
|
|
|
|
|
20,000
|
|
Common Stock for Prepaid Expenses
|
|
|
100,000
|
|
|
|
100
|
|
|
|
74,900
|
|
|
|
|
|
|
|
75,000
|
|
Common Stock for Interest
|
|
|
81,031
|
|
|
|
81
|
|
|
|
26,067
|
|
|
|
|
|
|
|
26,148
|
|
Beneficial Conversion Feature
|
|
|
|
|
|
|
|
|
|
|
25,333
|
|
|
|
|
|
|
|
25,333
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350,763
|
)
|
|
|
(350,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
|
60,471,696
|
|
|
$
|
60,473
|
|
|
$
|
16,205,988
|
|
|
$
|
(16,748,942
|
)
|
|
$
|
(482,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
50,262,918
|
|
|
$
|
50,264
|
|
|
$
|
14,105,625
|
|
|
$
|
(15,490,754
|
)
|
|
$
|
(1,334,865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147,227
|
)
|
|
|
(147,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
|
50,262,918
|
|
|
$
|
50,264
|
|
|
$
|
14,105,625
|
|
|
$
|
(15,637,981
|
)
|
|
$
|
(1,482,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
60,063,165
|
|
|
$
|
60,064
|
|
|
$
|
16,024,416
|
|
|
$
|
(16,444,213
|
)
|
|
$
|
(359,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares
|
|
|
227,500
|
|
|
|
228
|
|
|
|
55,272
|
|
|
|
|
|
|
|
55,500
|
|
Common Stock for Prepaid Expenses
|
|
|
100,000
|
|
|
|
100
|
|
|
|
74,900
|
|
|
|
|
|
|
|
75,000
|
|
Common Stock for Interest
|
|
|
81,031
|
|
|
|
81
|
|
|
|
26,067
|
|
|
|
|
|
|
|
26,148
|
|
Beneficial Conversion Feature
|
|
|
|
|
|
|
|
|
|
|
25,333
|
|
|
|
|
|
|
|
25,333
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(304,729
|
)
|
|
|
(304,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
|
60,471,696
|
|
|
$
|
60,473
|
|
|
$
|
16,205,988
|
|
|
$
|
(16,748,942
|
)
|
|
$
|
(482,481
|
)
|
See the notes
to the financial statements.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
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, and preparing such stem cells for long-term storage.
The process allows individuals to preserve their stem cells for future personal use in cellular therapy. The adipose derived stem
cells are prepared and stored in their raw form without manipulation, bio-generation or the addition of biomarkers or other materials,
making them suitable for use in cellular treatments and therapies offered by existing and planned treatment centers worldwide.
Individualized collection and storage of adult stem cells provides personalized medicine solutions by making the patient’s
own preserved stem cells available for future cellular therapies.
The Company’s first US
Clinical Study (FDA file No. 19089) for its flagship cellular therapy product ATCell was initiated in September of 2020. The clinical
study for Post Concussion Syndrome will establish safety and collect efficacy data for the use of ATCell delivered by infusion
therapy. The Company is planning additional studies with collaborators which the Company expects to file upon completion of the
protocol and submission and approval by the US Food and Drug Administration.
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. 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.
The Company has devoted a significant
amount of its time and resources to develop its technologies and intellectual property. These efforts have resulted in the development
of cell lines, cell culture medium and other laboratory products which the Company believes are suitable for licensing and distribution
by third parties. Additionally the Company has initiated a licensing program to license its technologies to laboratories currently
processing other types of biologic materials including cord blood and general blood banks. The Company closed its first licensing
agreement in 2014 and intends to pursue additional licensing partners in the future.
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.
The Consolidated Financial
Statement Disclosures for the quarter ended March 31, 2021 are condensed and all necessary adjustments have been made. These Financial
Statements should be read in conjunction with the Company’s Form 10K for the year ended September 30, 2020.
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.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
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. We recognized the cumulative effect of applying the new revenue standard to all contracts with
customers that were not completed as of October 1, 2018. The comparative information has not been restated and continues to be
reported under the accounting standards in effect for the periods presented, since there is no material effect on the presentation
of the financial positions or statements of operations. 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
Cost are reported as they are incurred. Advertising Costs were $370 and $222 for the six months ended and the three months ended
March 31, 2021; and $0 for the six months ended March 31, 2020 and $0 for the three months ended March 31, 2020, which is included
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 economic conditions prevailing, 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 $337,515 at March 31, 2021 and $337,515 at September 30, 2020. See Note 12 for further explanation.
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 $21,540 at March 31, 2021 and $20,401 at September 30, 2020.
Long Lived Assets – The Company
reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result
from the use of the asset and its eventual disposition is less than its carrying amount.
Fixed Assets – Fixed
assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful life of the
assets, which is estimated as follows:
Office
Equipment
|
5
years
|
Lab Equipment &
Furniture
|
7
years
|
Lab Software
|
5
years
|
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.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
NOTE 1. Organization of the
Company and Significant Accounting Policies (continued)
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 March 31, 2021 and September
30, 2020, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
All tax returns from fiscal years 2014 to 2019 are subject to IRS and State of New Jersey audit.
Recently
Issued Accounting Pronouncements
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.
In
November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. This new ASU applies to companies that have collaborative arrangements, or
agreements that involve two parties that actively participate in a joint operating activity. We believe our contract with Baoxin falls under the collaborative arrangements guidance in (ASC 808). ASU 2018-18 is effective for public companies for years beginning
after December 15, 2019. The Company has implemented ASU 2018-18 in Fiscal 2021.
Implementation
of ASU 2018-18 has not affected prior or current revenue recognition, since according to the contract we bill License Fees for
the use of our intellectual property and for any products shipped.
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 in fiscal 2021 for future operations and business
expansion.
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
March 31,
2021
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 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, Cell Source, CryoViva, Pepro-Tech
and Personal Cell Sciences; and 4. Products sales revenues from Baoxin and CryoViva. 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 not to make an allowance upon recognition
of the Baoxin revenue based upon review of Baoxin’s most recent audited financial
statements, documentation provided by Baoxin concerning the completion of their new 100,000
sq ft facility during the pandemic and the ongoing uncertainties regarding the continuing
effects of the COVID 19 pandemic in China.
|
|
4.
|
The
majority of our Product Sales Revenue continues to be recognized when the customer takes
control of the product.
|
We believe our contract with
Baoxin falls under the collaborative arrangements guidance in (ASC 808) from the FASB issued ASU 2018-18, Clarifying the Interaction
between Topic 808 and Topic 606. Implementation of ASU 2018-18 has not affected prior or current revenue recognition, since
according to the contract, we bill License Fees for the use of our intellectual property and for any products shipped.
Revenue and Allowances
The following table provides
information about Fees and Product Sales Revenue for the Six Months and Three Months ended March 31, 2021 and 2020.
Licensing
& Other Fees
|
|
6
months
3-31-2021
|
|
|
6
months
3-31-2020
|
|
|
3
months
3-31-2021
|
|
|
3
months
3-31-2020
|
|
Baoxin
|
|
$
|
250,0
00
|
|
|
$
|
250,000
|
|
|
$
|
125,000
|
|
|
$
|
125,000
|
|
Cell Source
|
|
|
—
|
|
|
|
16,667
|
|
|
|
—
|
|
|
|
10,000
|
|
Totals
|
|
$
|
250,000
|
|
|
$
|
266,667
|
|
|
$
|
125,000
|
|
|
$
|
135,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baoxin
|
|
$
|
—
|
|
|
$
|
5,840
|
|
|
$
|
—
|
|
|
$
|
4,380
|
|
CryoViva
|
|
|
—
|
|
|
|
10,060
|
|
|
|
—
|
|
|
|
10,060
|
|
Science Diagnostics
|
|
|
760
|
|
|
|
—
|
|
|
|
760
|
|
|
|
—
|
|
Totals
|
|
$
|
760
|
|
|
$
|
15,900
|
|
|
$
|
760
|
|
|
$
|
14,440
|
|
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
NOTE
3. Revenue Recognition (continued)
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.
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 7,986,500 and
8,761,500 shares of Common Stock issuable upon exercise of all outstanding stock options for the six months ended March 31, 2021
and 2020, respectively; and 2,268,117 and 2,134,784 shares issuable on the conversion of outstanding Convertible Notes for the
three months ended March 31, 2021 and 2020, respectively.
Net Loss per share for the following
periods is computed below:
|
|
6 months
|
|
|
3 months
|
|
|
|
31-Mar-21
|
|
|
31-Mar-20
|
|
|
31-Mar-21
|
|
|
31-Mar-20
|
|
Net Loss
|
|
$
|
(350,763
|
)
|
|
$
|
(419,087
|
)
|
|
$
|
(304,729
|
)
|
|
$
|
(147,227
|
)
|
Basic & Fully Diluted Net Income (Loss) per Common Share:
|
|
$
|
(0.006
|
)
|
|
$
|
(0.008
|
)
|
|
$
|
(0.005
|
)
|
|
$
|
(0.003
|
)
|
Weighted Average of Common Shares Outstanding - Basic & fully diluted
|
|
|
59,963,564
|
|
|
|
49,883,110
|
|
|
|
60,248,623
|
|
|
|
50,262,918
|
|
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
NOTE 5. Fixed Assets
The fixed assets accounts of
the Company are comprised as follows:
|
|
March 31,
2021
|
|
|
September 30,
2020
|
|
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
|
|
|
(282,327
|
)
|
|
|
(275,772
|
)
|
Net Property and Equipment
|
|
$
|
120,036
|
|
|
$
|
126,591
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense for the six months ended March 31, 2021 and 2020 were $6,555 and $4,666, respectively and for the three months ended March
31, 2021 and 2020 were $3,277 and $3,207, 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 six and three months ended March 31, 2021 were $29,527 and $28,104,
respectively and for the six and three months ended March 31, 2020 were $2,832 and $1,408, respectively
Patents
still in the application process and trademarks have not been amortized. The unamortized costs of patents in the application process
along with costs of trademarks are $174,794 as of March 31, 2021 and $297,731 as of September 30, 2020. Amortizable Patent Costs
were $238,172 at March 31, 2021 and $96,000 at September 30, 2020. The following is the amortization expense for these patents
for the next 5 years:
For the twelve months ending March 31,
|
|
|
|
2022
|
|
$
|
14,010
|
|
2023
|
|
$
|
14,010
|
|
2024
|
|
$
|
14,010
|
|
2025
|
|
$
|
14,010
|
|
2026
|
|
$
|
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 maintains 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.
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.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
NOTE 6. Patent & Patents Filings
(continued)
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.
NOTE
7. Debt
The following
table describes the Company’s debt outstanding as of March 31, 2021:
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
|
|
|
|
5.00
|
%
|
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
|
%
|
Finance Lease Liability
|
|
$
|
7,039
|
|
|
|
Fiscal
2021
|
|
|
|
14.00
|
%
|
Operating Lease Liability
|
|
$
|
2,631
|
|
|
|
Fiscal
2021
|
|
|
|
8.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
On April 6, 2018, the Company
issued a debenture and received proceeds of $100,000. The debenture matured March 2020 and has an exercise price of $.40 with
interest at 8%. The entire Carrying Value of $100,000 was due March 2020.
In April 2019, the Company
issued debentures and received proceeds of $150,000. The debentures mature in 2021 and have an exercise price of $.33 with interest
at 5%. The entire Carrying Value of $150,000 is due in Fiscal 2021.
As a result of the issue, the
Company recognized interest expense of $61,364 as a beneficial conversion feature of the debenture which has been amortized over
the life of the note. The Interest Expense due to the Beneficial Conversion Feature for the Six and Three Months ended March 31,
2021 was $14,948 and $6,757, respectively; and $16,382 and $8,191 for the Six and Three Months ended March 31, 2020, respectively.
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 2022.
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 Six and Three Months ended
March 31, 2021 was $1,138 and $1,138, respectively.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
Note 8. Common Stock Issuances
During the six months ended
March 31, 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 six months ended
March 31, 2021, the Company issued 80,000 shares and for services valued at $20,000. 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 six months ended
March 31, 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 six months ended
March 31, 2021, the Company issued 81,031 shares to pay interest due holders of bridge notes and convertible notes. The amount
of interest paid was $26,147. The share prices were determined by the aggregate market price for the week in which the interest
became due.
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 The company did not issue any options and there was no stock based compensation for the six months ended March
31, 2021 and 2020.
|
|
Amount
|
|
|
Exercise
Price Range
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term (Years)
|
|
Outstanding at September 30, 2019
|
|
|
8,761,500
|
|
|
|
$0.05 - $0.40
|
|
|
$
|
0.26
|
|
|
|
1.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2020
|
|
|
8,761,500
|
|
|
|
$0.05 - $0.40
|
|
|
$
|
0.26
|
|
|
|
1.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2020
|
|
|
7,936,500
|
|
|
|
$0.05 - $0.40
|
|
|
|
0.26
|
|
|
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2021
|
|
|
7,936,500
|
|
|
|
$0.05 - $0.40
|
|
|
$
|
0.26
|
|
|
|
1.85
|
|
Vested at March 31, 2021
|
|
|
6,686,500
|
|
|
|
$0.05 - $0.40
|
|
|
|
0.26
|
|
|
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option forfeitures are recorded
as they occur. The intrinsic value of the outstanding stock options is $4,031,225 and the intrinsic value of the vested stock
options is $3,703,725 at March 31, 2021.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
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 and Derivative Liability 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.
Finance
Lease
The Company
leases Equipment at its laboratory from NFS Leasing, Inc. The final lease payment is scheduled for May 1, 2021. 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 March 31, 2021:
|
|
|
|
|
|
|
|
Classification
on Balance Sheet
|
|
March
31,
2021
|
|
Assets
|
|
|
|
|
|
|
Finance
Lease Asset
|
|
Finance
lease right of use asset
|
|
$
|
76,626
|
|
Total
Finance lease assets
|
|
|
|
$
|
76,626
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Finance
lease liability
|
|
Current finance lease
liability
|
|
$
|
6.917
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
Finance
lease liability
|
|
Long-Term
finance lease liability
|
|
|
—
|
|
Total
operating lease liability
|
|
|
|
$
|
6.917
|
|
Finance Lease obligations at March 31, 2021:
|
|
|
|
Total Payments
|
|
$
|
7,039
|
|
Amount representing interest
|
|
|
(122
|
)
|
Finance lease obligation, net
|
|
$
|
6,917
|
|
Finance lease obligation, current portion
|
|
|
6,917
|
|
Finance lease obligation, long-term portion
|
|
$
|
—
|
|
The lease expense for the six months
and three months ended March 31, 2021 was $10,503 and $5,078, respectively which consisted of amortization expenses of $9,191
and $4,596, respectively along with interest expenses of $1,312 and $482, respectively. At March 31, 2021, the remaining lease
term was 0.17 years (2 months) and the discount rate was 14.17%.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
Operating
Lease
The Company
leases its office facility, in Eatontown, New Jersey, from Eaton Holdings LLC. The lease expires on April 30, 2021 and the Company
can exercise a renewal option for an additional three years. The table below presents the lease related asset and liability recorded
on the Company’s consolidated balance sheets as of March 31, 2021:
|
|
Classification
on Balance Sheet
|
|
March
31,
2021
|
|
Assets
|
|
|
|
|
|
|
Operating
Lease Asset
|
|
Operating
lease right of use asset
|
|
$
|
2,631
|
|
Total
Operating lease assets
|
|
|
|
$
|
2,631
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Operating
lease liability
|
|
Current operating lease
liability
|
|
$
|
2,631
|
|
Noncurrent liabilities
|
|
|
|
|
|
|
Operating
lease liability
|
|
Long-Term
operating lease liability
|
|
|
—
|
|
Total
operating lease liability
|
|
|
|
$
|
2,631
|
|
Lease obligations at March 31, 2021:
|
|
|
|
|
Total Payments
|
|
$
|
2,650
|
|
Amount representing interest
|
|
|
(19
|
)
|
Operating lease obligation, net
|
|
$
|
2,631
|
|
Operating lease obligation, current portion
|
|
|
(2,631
|
)
|
Operating lease obligation, long-term portion
|
|
$
|
—
|
|
The lease expense for the six
months and three months ended March 31, 2021 was $15,900 and $7,950, respectively which consisted of amortization expense of $15,433
and $7,793, respectively and interest expense of $467 and $157, respectively. The cash paid under the operating lease during the
six months ended March 31, 2021 was $15,900. At March 31, 2021, the remaining lease term was 0.083.years (1 month) and the discount
rate was 8%.
The Company leases its laboratory
facility, in Monmouth Junction, New Jersey, from Princeton Corporate Plaza LLC. The lease expired on March 31, 2020 and the Company
can exercise a renewal option for an additional 6 months. The Company is currently in negotiations with the landlord regarding
renewing the lease. While the Company is negotiating the lease, it continues to pay rent on a month to month basis. 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 six months and three months ended March 31, 2021 was $14,334 and $7,167, respectively.
NOTE 12. Concentration of
Credit
The Company received 97% of
its revenues for the six ended March 31, 2021 from one client, Baoxin. The Company received 96% of its revenues for the six months
ended March 31, 2020 from three clients, Baoxin, Cell Source and CryoViva. The Company also had accounts receivable from Baoxin
of $1,075,000 at March 31, 2021 and $578,295 at March 31, 2020. For the Baoxin receivable, the Company has recorded an allowance
for doubtful accounts of $325,000.
NOTE 13. 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 publically traded corporation and the investment is carried at cost at
March 31, 2021 and September 30, 2020. The Company annually reviews its investments for impairment. After reviewing recent investment
transactions of Baoxin, the Company has determined that no impairment of its investment is necessary for the six months ended
March 31, 2021.
Baoxin will develop, own and
operate multiple laboratory/treatment/training facilities in China using American CryoStem’s intellectual property. American
CryoStem has received an upfront fee of $300,000 USD and a 5 year minimum annual guarantee of $500,000 USD per year from Baoxin.
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 short term 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.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
March 31,
2021
Unaudited
NOTE 14. Related Party Transactions
On October 1, 2020, the Company
executed a note with ACS Global 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 for advances to the Company. The
note may be prepaid at any time by the Company. The principal balance of the note at March 31, 2021 is $147,775.
The Company was indebted to
a company that is majority owned by the Company’s two officers in the amount of $99,125 at September 30, 2020. The advances
were unsecured, and carried no interest rate and were collectible at the discretion of the company’s two officers/directors.
As of March 31, 2021, a Company
majority owned by the CEO and Chairman of American CryoStem was indebted to American CryoStem Corporation in the amount of $4,961
for advances paid for expenses incurred.
NOTE 15. Subsequent Events
The Company
has made a review of material subsequent events from March 31, 2021 through the date of issuance of this report and reports there
are no subsequent events.
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:
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Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
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capital to continue business;
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fluctuation in quarterly results;
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Litigation
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The
following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this
quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result
of various factors.
Background
American
CryoStem Corporation was incorporated in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly
owned subsidiary American CryoStem Acquisition Corporation, substantially all of the assets from, and assumed substantially all
of the liabilities of, ACS Global, Inc. (“ACS”) in exchange for our issuance of 21,000,000 shares of
Common Stock to ACS (the “Asset Purchase”). We filed a Current Report on Form 8-K with the Securities
and Exchange Commission (SEC) on April 27, 2011 disclosing the Asset Purchase and certain related matters.
Overview
American
CryoStem Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art,
FDA-registered, laboratory dedicated to standardized processing, bio-banking and development of cellular tools, and applications,
using autologous adipose (fat) tissue and adipose derived stem cells (“ADSCs”). The Company has built
a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that form its
core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and processes,
services and international licensing opportunities. Our FDA registered laboratory for human tissue processing, cryo-storage and
cell culture and differentiation media development is located in Monmouth Junction, New Jersey.
The Company
believes the reproducibility of scientific studies is a substantial issue in life science research from drug discovery and development
through clinical trials as researchers throughout the world continue to use different protocols for processes associated with
sample preparation, cryopreservation and cold chain management. We believe by standardizing handling, storage, and transportation
protocols we can substantially improve the quality and reproducibility of preclinical and clinical data to help accelerate the
transition from lab research to product development and market launch. To this end, we have licensed affiliates operating
on our cellular collection-processing and storage platform in Thailand, Hong Kong, and China. Significant to our efforts to advance
our technology and business methods, the Company updated its Standard Operating Procedures (SOP’s) to FDA, cGMP standards,
entered into a Cooperative Research and Development Agreement (CRADA) with Walter Reed National Military Medical Center (WRNMMC)
and filed its first Investigational New Drug Application (IND) with the US Food and Drug Administration (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 accepted and approved on September 17, 2020. In advance of the filing the Company built and validated
a new cGMP clean room processing and manufacturing area at our facility in Monmouth Junction NJ, implemented and validated new
Standard Operating Procedures and installed a new Quality Management System.
Our
proprietary, patent pending processing platform allows for the collection, preparation, and cryo-preservation of adipose tissue
without manipulation, bio-generation, animal-derived products or other chemical materials which require removal from the tissue
sample upon retrieval or prior to use. Management believes this core process makes each tissue sample suitable for use in cosmetic
grafting procedures or for further processing to adult stem cells for other types of stem cell therapies.
Products
and Services
American CryoStem
is focused on multiple high margin business lines capable of generating sustainable, recurring revenue streams from each of our
developed products and services. The Company incorporates its proprietary and patented or patent pending laboratory products,
such as our ACSelerate™ cell culture media, into our processing product production and contract manufacturing services.
Additionally, the Company requires licensees of our tissue and cell processing technologies to purchase the consumable products
required in the collection, processing and storage of tissue/stem cells as part of the licensing agreement including our CELLECT® Collection, Transportation, and Storage System and ACSelerate™ Cell Culture Media Products.
To date, we
have generated minimal revenue; however, subject to, among other factors, obtaining the requisite financing, management believes
that we are well positioned to utilize our developed products and services as the foundation for domestic and international distribution
through licensees of our technologies and a host of Regenerative Medicine application uses and future therapy products. In the
US we operate an FDA registered laboratory facility that generates revenue from; the processing and storage of adipose tissue
(ATGRAFT™), the processing of adipose tissue into its cellular components for future use (ATCELL™) and the production
and sale of our tissue collection boxes (CELLECT®), and patented media products (ACSelerate™).
Our branded product and service
offerings include:
CELLECT® Validated
Collection, Transportation, and Storage System – An unbreakable “chain of custody” clinical solution for
physicians or researchers to collect and deliver tissue samples utilizing proprietary and patent pending methods and materials.
The CELLECT® service is monitored in real-time and assures the highest cell viability upon laboratory receipt. The
CELLECT® system incorporates our proprietary ACSelerate–TR™ transport medium into all collection
bags which supports the health of the tissue during transport at ambient temperature. The CELLECT® kit is an integral
part of our validated ATGRAFT™ and ATCELL™ technology platform to be used by our domestic physician
network and international licensees of our platform technologies. 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
and labeling and product identification coding system. The coding was developed in conjunction with the American Association of
Blood Banks (AABB), the American Red Cross and the International Society of Blood Transfusion (ISBT). These groups form the International
Council for Commonality in Blood Banking Automation (ICCBBA) and developed the ISBT 128 Standard for machine readable labeling.
This labeling system is an acceptable machine readable labeling standard, product description, and bar coding system for FDA Center
for Biologics Evaluation and Research under 21 CFR 606.12(c) 13. American CryoStem conforms to this standard in its laboratory
facility and all cellular and tissue products produced at the facility carry our W3750 ICCBBA facility identifier allowing any
hospital, clinic, laboratory and regulator worldwide to identify the origin and obtain additional information on any sample produced
at an American CryoStem facility. The Company promotes this standard in all laboratories that license or utilize our technology.
ATGRAFT™ Adipose Tissue
Storage Service – A clinical fat storage solution allowing physicians to provide their patients with multiple tissue
and cell storage options. Through one liposuction procedure, the ATGRAFT™ service, allows individuals to
prepare for future cosmetic or regenerative procedures by storing multiple samples of their own adipose tissue to be returned in
the future as a natural biocompatible filler, or the sample may be further processed to create cellular therapy applications without
the trauma of further liposuctions. ATGRAFT™ procedures may include breast reconstruction, layered augmentation,
buttocks enhancement or volume corrections of the hands, feet, face and neck areas that experience significant adipose tissue (fat)
volume reduction as we age. ATGRAFT™ is processed and stored utilizing our validated standard operating
procedures so that stored fat tissue sample(s) may be retrieved in the future and re-processed to create stem cells “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 charges standardized
fees for ATGRAFT™ tissue processing and a minimum annual storage fee depending on the volume of tissue stored.
These processing and storage fees may be paid to the Company by the collecting/treating physician or the consumer. The Company
earns additional fees, for the thawing, packaging and shipment of the stored samples back to the physician or clinic for immediate
use upon receipt. Additionally, physicians or patients may request that any stored ATGRAFT™ tissue sample
of 25ml or greater be reprocessed utilizing the Company’s ATCELL™ and Autokine-CM™ processing. The Company charges fees for the reprocessing of a 25ml stored ATGRAFT™ sample and
may charge additional fee’s if expansion of the newly created ATCELL™ sample is also requested.
The Company believes the ATGRAFT™ service may create significant revenue opportunities and patient retention for the participating physician. The ATGRAFT™ service lowers physician/patient overall costs by eliminating additional liposuction procedures for each scheduled fat
transfer or therapy procedure. Physician cost savings may include: materials, supplies, equipment, and the expenses of utilizing
a surgical center, hospital operating room or an in-office aseptic procedure room. The ATGRAFT™ service
is designed to operate under the minimally manipulated regulations contained in both 21 CFR 1271.10 and PHS 361.
ATCELL™ Adipose
Derived Stem Cells (ADSCs) Processed and characterized adipose derived regenerative cells (ADRCs) are cultured utilizing the
Company’s proprietary Standard Operating Procedures (SOPs) and ACSelerate™ patented cell culture
media. ATCELL™ is the Company’s trademarked name for its ADRCs and differentiated cell products
and processing methodology. The Company maintains multiple master and differentiated cell lines labeled according to their characterization.
(i.e. ATCELL™ (adipose derived stem cells) ATCELL-SVF™ (stromal vascular fraction),
ATCELL–CH™ (differentiated chondrocytes), etc. Cell lines are custom created and stored for
patients desiring to have “On Demand” samples of their cells for their personal use in future Regenerative Medicine
procedures. The Company charges its customers fees for newly collected client tissue samples to be processed and to process a previously
stored ATGRAFT™ sample. All customer samples submitted for processing must utilize the CELLECT® collection system and ACSelerate™ mediums to conform to our internal SOPs and quality control standards.
The Company believes it will earn additional
fees based upon the proposed storage configuration of the final ATCELL™ sample, and for future cellular
product creation by culturing additional samples in the ACSelerate™ cell culture and differentiation
media. Cell culturing and differentiation can be performed upon receipt of the raw tissue sample or at any time on a previously
processed and cryopreserved ATGRAFT™ or ATCELL™ sample. ATCELL™ has shown that it is ideally suited for expansion and differentiation into additional cell types utilizing the ACSelerate™ line of culture and differentiation mediums. The ATCELL™ processing, products and services are incorporated into our granted patent “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.
The Company’s ATCELL™ cell lines are processed and cultured in our patented ACSelerate™ cell culture media. All tissue,
cells, and research materials made available for sale to research institutions are tested for sterility, disease, lifespan, and
population doubling rate (PDL). Cell morphology is confirmed by (i) flow cytometry and (ii) differentiation analysis using ACSelerate™ differentiation media. Each ATCELL™ line can be further cultured and differentiated allowing the
Company to provide genetically matched cell types. We believe this research methodology may provide opportunities for the Company’s
ATCELL™ and ACSelerate™ products to become the building blocks of
final developed commercial applications.
The Company intends to support its
cell therapy application research, development and collaborative efforts by making ATCELL™ and ATGRAFT™ samples available for research and product development purposes through joint ventures, and university and commercial collaborations.
We believe these adipose tissue and cell line samples, will be highly sought after by private researchers and universities for
use in pre-clinical trial studies and in-vitro research due to our clinical processing methodology, donor sample data and the ability
to create multiple cell types that have identical genetic profiles. Additionally, we believe our clinical processing methods, data
collection, ATCELL™ testing and the ability to make multiple cell types from the same donor line
allows research teams to focus on application development and avoid bench to commercialization delays. The Company also makes available
research samples of its ATCELL™ cell products to users of its ACSelerate™ cell culture media for application development.
The Company filed its first Investigational
New Drug Application (IND) with the US Food and Drug Administration (FDA) for the ATCELL cellular therapy product 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 accepted for review by the FDA
on October 22, 2019, and approved on September 17, 2020.
ACSelerate™ Cell
Culture Media Products – Manufactured patented cell culture media products for growing human stromal cells (including
all cells found in human skin, fat and other connective tissue). Certain ACSelerate™ cell culture media
lines are available in animal serum free, which is suitable for human clinical and therapeutic uses or a low serum version for
application development and research purposes. The patented ACSelerate™ cell culture media line
was specifically developed to address increasing industry demand for animal serum-free cell culture products and for the acceleration
of products from the laboratory to the patient.
The Company 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 (clinical) grade and FBS (research) grade. This patent covers both research grades
and grades - suitable for cell culture of adipose-derived stem cells intended for use in humans. 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.
The
Company has created several versions of its ACSelerate™ cell culture media including:
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ACSelerate-MAX™ - xeno serum free cell culture media,
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ACSelerate-SFM™ - animal serum free cell culture media,
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ACSelerate-LSM™ - low FBS (0.05%) cell culture media,
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ACSelerate-CY™ - for differentiation of ATCELL™ into chondrocytes (ATCELL-CY™),
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ACSelerate-OB™ - for differentiation of ATCELL™ into osteoblasts (ATCELL-OB™)
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ACSelerate-AD™ - for differentiation of ATCELL™ into adipocytes (ATCELL-AD™)
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ACSelerate-MY™ - for differentiation of ATCELL™ into myocytes (ATCELL-MY™)
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ACSelerate-CP™ - non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media
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ACSelerate-TR™ - sterile transportation medium designed to maintain the viability of the tissue during the shipment of adipose
tissue to our processing facility.
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The Company continues to optimize additional
versions of ACSelerate™ media through further research and testing to develop medium versions for differentiation
of ATCELL™ ADSCs into neural, lung and other specific cell types that may be necessary for use in future clinical
applications. On December 31, 2014 the Company filed a patent application for an advanced medium formulation titled Human Albumin
Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799). On December 31, 2015,
the Company converted the provisional application to an international PCT filing (PCT/US/68350) under the title Human Serum for
Cell Culture for Clinical Growth of Human Adipose Stromal Cells. 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. Each product is genetically unique to the individual and
custom blended, deriving its key ingredients from the individual client’s own stem cells. The Company provides its CELLECT® Tissue Collection service to collect the required tissue to manufacture the U-Autologous™ product
and processes it under the same Standard Operating Procedures that it developed for the ATGRAFT™ and ATCELL™ cell processing services utilizing ACSelerate™ cell culture media. The Company receives collection, processing
and long-term storage fees and earns a royalty on all U-Autologous product sales. The utilization of the Company’s core services
in its contract manufacturing relationships provides opportunities for the Company and its ATGRAFT™ and
ATCELL™ products.
Our Company’s contract manufacturing
services can be extended to develop custom and/or white label products and services for both local and global cosmetic and regenerative
medicine companies, physicians, wellness clinics and medical spas. The Company intends to expand its relationships and contract
manufacturing regionally through its physician networks and globally through its International Licensing Program.
International Licensing Program – Many jurisdictions outside the US currently permit use of cellular therapies and regenerative medicine applications.
The Company has received international inquiries concerning the sale or licensing of our SOPs, products and services in the Regenerative
Medicine and Medical Tourism Markets. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism, Regenerative Medicine and the slow pace of approval of cellular therapies and regenerative medicine applications in the
US. To address the Company’s sales, marketing and branding opportunities globally, the Company has created its international
licensing program. To date we have licensed our technologies in Hong Kong, Shenzhen and Shanghai, China, and Bangkok Thailand.
The Company is currently in discussions for additional licensed territories.
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 CRYO’s ATGRAFT™ tissue collection, processing and storage technology by Baoxin Asia Pacific
Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in China. The Company’s management team traveled throughout south
east China with the management and marketing team of Baoxin to present the ATGRAFT™ 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 to
construct one of the largest biotech stem cell processing and storage laboratories in China as well as the official launch presentation
and evening gala hosted by Baoxin in Shenzhen.
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 approximately 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 due to the effects
and government regulations Baoxin suspended operations from February 2020 to December 2020. We have been informed by the Company
Chairman and CEO that they and recently completed their new facility located in Shenzhen, China. CRYO management is working with
Baoxin during this time to assist them in bringing their new facility online for processing tissue in 2021.
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 in Hong Kong. The Agreement called
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 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 Agreement automatically renewed on September 24, 2019 for
an additional 3 year period.
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.
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 South East 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.
The Company has been assisting CRYOVIVA
with the development of their branding and marketing campaign for Thailand and providing technical assistance and support for their
import of consumables purchased from the Company. CRYOVIVA has scheduled the launch of its marketing campaign for the first quarter
of 2020. Unfortunately, due to the global impact from COVID-19, CRYOVIVA suspended their tissue banking operation for most of fiscal
2020. We are currently assisting them with the restart of their operations and initiation of their marketing program for calendar
2021.
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 Company also assisted CellSource in upgrading its facility
in Japan and provided training in the ATGRAFT™ processing and recordkeeping procedures. CellSource began marketing
the new services initially within its existing network of clinics throughout Japan and began purchasing its CELLECT™ and ACSelerate-CP™ cryoprotectant from the Company in the third quarter of 2015. Upon execution of the Agreement,
the Company received an upfront payment and will receive additional minimum annual payments, and consumable product sales revenue
- in future years. The non-exclusive agreement expired in June of 2020.
Product Development
Our strategic approach to product
development is to design, develop and launch new products and services that utilize our existing products and services, i.e. the
use of the CELLECT® collection materials in providing ATGRAFT™ tissue storage services. Management
believes that this approach will provide the Company with opportunities to produce near term cash flow, strong recurring revenue
streams, strong international licensing partners and complementary scientific data. We focus on developing products, services and
applications that require tissue collection and processing as the initial requirement to produce cellular therapies and products.
These products and services may include adipose tissue and stem cell sample processing and storage as a form of personal “bio-insurance”,
adipose tissue (fat) storage for cosmetic fat engraftment procedures, and the creation and production of topical applications and
ingredients used by other companies in the wound care and cosmetic industries as well as cellular applications and bio-materials
development.
We focus our efforts on expanding our product
and services pipelines based upon our intellectual property portfolio, collaborative development relationships, product sales and
distribution, and international licensing and partnering opportunities. Our current activities include supporting collaborations
by providing our products and services (ACSelerate™ and ATCELL™) with the expectation that our
products and services become the basis for new adipose tissue and stem cell based Regenerative Medicine and cellular therapy applications.
Investigational New Drug (IND)
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”. The Company made
the original filing in August of 2019 to the FDA Electronic Common Technical Document system (eCTD) for technical review. Following
this review, the Company made several amendments and received additional technical comments from FDA’s technical group. The
Company completed all technical changes to the filing in October 2019 and was assigned File number 19089, for the filing accepted
for review by the FDA on October 22, 2019. The Company received further comments from the FDA in a clinical hold letter dated December
19, 2019. The letter requested additional information, clarification of certain aspects of the filed documents, amendment to the
screening and treatment protocols, and the implementation of additional testing during the production and release of the final
samples. These additional testing requirements necessitated amendments to the processing and release protocols and validation of
the new test methods which will be completed in the Company’s fiscal third quarter. The Company expects to file the completed
response in the third fiscal quarter.
The Company upon Phase 1 approval by FDA 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 additional investigations can be developed
and rapidly added upon completion of the new study protocol and outcome assessment methodologies.
Cooperative
Research and Development Agreement (CRADA)
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’s total in-kind and financial commitments are limited to $120,000 in supplies and expense reimbursement during
the life of the Agreement.
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.
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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.
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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.
The
Company’s long term research is focused on further developing standardized cellular processing models to support FDA, IND
treatment protocol approvals 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 people dealing with the chronic and debilitating symptoms of what
is commonly termed “Long Haul COVID” or “Long COVID.”
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.
In connection with these discussions, the Company has completed an amendment to its original agreement for the expansion its collaborative
efforts to finalize development of its differentiation mediums and support additional product development. The proposed amendment
calls for the use of the Company’s facility by PeproTech employees for the development efforts which require the use of
the Company’s cell processing facility and research samples of ATCELL throughout the testing and development. This project
was scheduled for initiation in February of 2020 but has been delayed by the recent COVID 1 pandemic. The Company and PeproTech
completed the amendment on August 1, 2020 and expect initial work under the amendment to begin in 2021.
Cells
on Ice:
In August
2015, the Company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process and cryopreserve
adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine. COI is a network of physicians interested
in the development and use of adipose tissue and adipose derived cellular samples in regenerative therapies and cellular medicine.
The Company agreed to distribute its CELLECT® collection boxes and provide its ATGRAFT™ and ATCELL™ processing services for the collection, processing and storage of tissue samples at its NJ
facility. Under the agreement, COI paid the Company for the processing and storage of each sample generated by COI network physicians.
COI planned to seek regulatory approval for use of the stored samples in clinical studies utilizing adipose tissue processed into
Stromal Vascular Fraction (SVF) and ultimately expanded adipose derived mesenchymal adult stem cells. The Company incorporated
its existing Standard Operating Procedures (SOPs), processing protocols and patented products into COI’s studies and may
provide processing and other data to COI in support of their ongoing efforts to develop and obtain regulatory approval of its
cellular therapies. This initial work became the basis for Investigational New Drug and Investigational Device Exemption filings
with the FDA.
On January 3,
2018, the Company received a warning letter from the US FDA concerning its contract manufacturing services provided to Cells On
Ice. The FDA informed the Company that the FDA has determined that its autologous adipose derived cell product ATCELL™ is
a drug under current FDA regulations and guidance and requested that the Company file an Investigational New Drug (IND) application.
In response to the letter the Company ceased shipment of its ATCELL™ product within the United States and entered into discussions
with the FDA concerning the filing of an IND. Since the Company’s initial response to the Warning letter, it has spent considerable
time and effort to comply with the concerns and observations highlighted in the letter. Specifically, the Company designed and
filed it first Investigation New Drug Application with FDA which was accepted for review on October 22, 2019 and was approved
on September 17, 2020. Additionally, the Company has implemented, qualified, validated a complete redesigned of its manufacturing
SOPs and Quality Management program, as well as constructed new cleanroom manufacturing space in its facility in Monmouth Junction,
N.J, The Company has completed its final responses to FDA regarding the Warning Letter which was delivered to FDA OTAT in January
2020. The FDA has acknowledged the receipt of our response and has indicated that upon resumption of the production of ATCELL
for our clinical study that an audit of our new manufacturing facility and processes may be performed at the completion of Phase
I, prior to beginning Phase II.
Additional
Collaborations
The
Company is in the early stages of developing collaborations with additional industry and university partners. These developing
relationships in their earliest stages are covered by Confidential Disclosure Agreements and those that are more advanced also
include Material Transfer Agreements under which the Company supplies either ATCELL™ or ACSelerate™ medium products for evaluation, testing, and the development of new cellular therapy applications.
The
Company has entered into Non-Disclosure and Material Transfer Agreements with a number of potential collaborators. No assurance
can be given that these relationships will progress to full collaborative agreements or ultimately result in new technology for
future commercialization.
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 December 18,2018. 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)
|
The Company
in-licenses 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
(PCS)
|
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®, American CryoStem “America’s Stem Cell Bank”®, CELLECT® and ATGRAFT™.
We utilize additional trademarks for our products, slogans and themes to be used in our marketing initiatives including, for example,
ACSelerate – MAX SFM™, ACSelerate-SFM™, ACSelerate- LSM™ and ATCELL™.
The
Company has also secured a number of online domain names relevant to its business, including www.americancryostem.com, www.acslaboratories.com
and ATGRAFT.com.
Marketing
and Distribution
The
key objective of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for
adipose tissue collection, cell processing and cryogenic storage, therapeutic applications, and research/commercial uses of adipose
tissue within the current regulatory framework. The combination of a traditional sales approach supported by continuous internal
and external marketing programs 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 continue to employ advertising and social media sales campaigns. In addition, we plan
to continue to utilize key leaders, and early adopters in the medical community as a marketing resource to enhance awareness of
our proprietary, patented products and services and to increase the number of surgeons who join our network, university and private
collaboration and consumers who use our products and services.
We
plan to continue marketing programs focused on reaching plastic and cosmetic surgeons to join the initial group of providers that
began to offer our services to their patients. This marketing initiative has been implemented using a traditional sales approach
common to the pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing activities
is being strategically and tactically expanded using a combination of in-house sales personnel and outside independent channels.
Our
plan, capital permitting, provides for a comprehensive integrated marketing approach using various traditional and new media,
such as the Internet, social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and
promote awareness of our Company and our branded products and services. The essence of this targeted strategy is to reach the
end-users as quickly as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside
marketing resources and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Market
Size and Opportunities
By
leveraging and capitalizing on our proprietary Adipose Tissue Processing Platform, we are working to address multiple high growths,
multi-billion-dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals, Medical
Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market dynamics
of its intended domestic and international markets and to identify additional areas within these markets where the Company’s
cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.
Global
Stem Cells Market
A
report from Transparency Market Research (TMR) forecasts that the global stem cells market 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.
Development of Regional
U.S. Markets
Physician
Network
The
Company continues to develop relationships to leverage our products and services through existing cosmetic surgery and regenerative
medicine practices The Company continues its efforts to develop and expand its network of individual physicians and surgeons seeking
to adopt the Company’s products and services focusing on surgeons performing liposuction, tissue transfer and regenerative
procedures involving the use of adipose tissue. The Company intends to expand its efforts to medical professionals interested
in Regenerative Medicine applications utilizing ADSCs to establish itself as a primary source of collection, processing and preparation
of cellular therapies as they are developed and approved for patient use by the FDA.
Development
of International Markets
International
Licensing Program – Globally, many jurisdictions outside the US permit the use of adipose tissue based cellular therapies
and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products
and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical
Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these
inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering
an International Licensing Program.
The
program is designed to permit the licensing of the Company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable
of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate
the CELLECT®, ATGRAFT™ and ATCELL™ services in their local market. Strategically, the Company’s
international licensees will maintain the branding of the Company’s services along the lines of the “Intel Inside”
branding program.
Qualified
Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual regenerative
cell samples for their clients with the comfort and confidence that they are providing services that have been developed to conform
to US FDA standards. Core to the relationship is the developed proprietary patented and patent pending processing and laboratory
operational methodologies contained in our Standard Operating Procedures, Training, and Continuous Quality Management, Testing
Program, and Laboratory Operations manuals.
Licensing
programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI
agreement is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the
agreement which may or may not be credited toward future royalty payments. Following evaluation of the prospective licensee the
Company will enter into a final Agreement which outlines all upfront fees, minimum royalties, consumable purchase obligations
of the Licensee and may contain a minimum annual license fee.
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.
Cryoviva
(Thailand) Ltd
On
March 23, 2018, the Company into an agreement to license its ATGRAFT™ and ATCELL™ adipose tissue (fat) processing
and storage technologies to Cryoviva (Thailand) Ltd., (“Cryoviva”) 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 South East 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 include 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 Company
has been assisting CRYOVIVA with the development of their branding and marketing campaign for Thailand and providing technical
assistance and support for their import of consumables purchased from the Company. CRYOVIVA has scheduled the launch of its marketing
campaign for the first quarter of 2020 and the Company believes that it will see an increase in the sale of consumables and licensing
fees from CRYOVIVA in fiscal 2020. Based upon communication with the management team of CRYOVIVA, the scheduled launch of CRYOVIVA’s
marketing plan has been delayed due to the COVID 19 outbreak, response and lockdown in Thailand and the US. The Company believes
that the Marketing program will commence in 2021.
Baoxin
Asia Pacific Biotechnology (Shenzhen) Co., Ltd
On
July 12, 2018, the Company announced the national launch of CRYO’s ATGRAFT™ tissue collection, processing and
storage technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in China. The management team
traveled throughout south east China with the management and marketing team of Baoxin to present the ATGRAFT™ 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,
due to the effects of the COVID 19 Pandemic and government regulations, Baoxin suspended operations. We have been informed by the
Company Chairman and CEO that they have recently completed their new facility in Shenzhen, China. CRYO management is working with Baoxin
during this time to assist them in bringing their new facility online for tissue processing in 2021.
CellSource,
LTD. – 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 and has not been renewed.
Health
Information Technology Company, LTD – Hong Kong and Shenzhen, China
On June
30, 2014, the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the Company’s
Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service in Hong Kong.
The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the Company. The
Company and HIT have reached further agreement to extend their relationship on a non exclusive basis to include HIT’s cord
blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The HIT
agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase
CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kit as well as other American CryoStem products
necessary for clinical adipose tissue processing and storage at the Shenzhen cord blood collection facility. The final master
licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September 24, 2014.
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 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.
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 fax number is 732-747-7782. Our website is www.americancryostem.com. We also lease and operate a tissue processing laboratory in Monmouth Junction, New Jersey at 7 Deer Park Drive, Monmouth Junction,
NJ 08852.
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 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.
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 these financial statements. Management’s plan with
regard to this matter is to continue to fund its operations through fundraising activities in fiscal 2021 to fund future operations
and business expansion.
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 March 31, 2021 decreased to $126,935 versus $161,340 in the same period of Fiscal
2020. Licensing Revenue decreased to $125,000 compared to $135,000 in Fiscal 2020.
Operating
expenses decreased to $397,220 for the quarter ended March 31, 2021, from $501,943 for the same period in Fiscal 2020. Although
the company increased its Research and Development efforts and increased it Professional Fees due to hiring an Investor Relations
firm, it was able to reduce its overall Operating Expenses, since in 2020 it increased its Allowance for Doubtful Accounts.
Administrative
expenses increased to $144,680 from $102.887 due to an increase in amortization of patents.
Interest
expense for the quarter ending March 31, 2021 decreased to $29,742 as compared to $42,034 for the same period in 2020. The interest
expense for the quarters ended March 31, 2021 and 2020 includes an additional $7,985 and $20,691 respectively for the effects
of the beneficial conversion feature associated with debenture holders.
Net
loss for the second quarter of Fiscal 2021 was $304,729 compared to a net loss of $147,227 for the second quarter of Fiscal 2020.
The increase of the loss for the 2021 quarter was primarily due to the absence of Other Income Items such as the Gain on the value
of the derivative and the Gain due to the write-off of an outstanding liability in the 2020 quarter.
Liquidity
and Capital Resources
As
of March 31, 2021, the Company had a cash balance of $109,108, an increase of $67,348 since September 30, 2020. We used $235,261
of our cash for operations and $19,236 for investing activities. The main sources of cash provided by financing activities included
new equity and debt issuances totaling $342,500
Accounts
Receivable increased to $749,350 at March 31, 2021 from $500,000 at September 30, 2020 mainly due to an increase in receivables
from Baoxin for licensing fees. Due to the current economic and health conditions in China, including increased tariffs and the
Corona virus, the Company is closely monitoring the impact of these circumstances.
Convertible
debt increased to $699,305 an increase of $140,753 since September 30, 2020. This increase was due to the issuance of an additional
$150,000 of new Convertible Notes along with the effects of increasing and amortizing the beneficial conversion feature of these
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 three months ended March 31, 2021.
Cash
Requirements
We
will require additional capital to fund marketing, operational expansion, processing staff training, as well as for working capital.
We are attempting to raise sufficient funds that would enable us to satisfy our cash requirements for a period of the next 12
to 24 months. In order to finance further market development with the associated expansion of operational capabilities for the
time period, 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 main effects
of the COVID 19 pandemic were with the Company’s US domestic physician network and its international partners. China, Hong Kong and Thailand
have been in lockdown since January 2020. This has hindered our attempts to resolve our outstanding receivable from Baoxin. Considering
this, we elected to increase our provision for doubtful accounts by $325,000 in Fiscal 2019 with regard to their outstanding balance.
Cryoviva Thailand was in the midst of implementing a new marketing program in January 2021 which continues to be delayed due to the circumstances.
Based upon our discussions in March 2021 with Cryoviva (Thailand) and Baoxin (China) we expect them to restart the marketing campaign
efforts in 2021.
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. The final lease payment was made on May 1, 2021. Now that the
final payment has been made, the Company owns 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 lease expired on April 30, 2021 and
the Company exercised a renewal option for an additional three years. See Note 11. Leases in the Financial Statements.
The Company leases a laboratory
facility in Monmouth Junction, New Jersey, from Princeton Corporate Plaza LLC. The lease expired on March 31, 2021 and is on a
month-to-month basis. The Company is currently negotiating an extension of the lease to March 31, 2022. The rent payment was $2,389
per month. Total rent paid for the laboratory facility for the three months ended March 31, 2021 was $7,167.
Since
the lease obligation is less than twelve months, the Company does not report a lease related asset or liability for this lease.
The
Company was not party to any litigation against it and is not aware of any litigation contemplated against it as of March 31,
2021. 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 for a principal amount of $99,125 representing the outstanding balance due to ACS Global. The
Company increased the amount of the note to $148,125 on March 1, 2021. 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. The note may be prepaid
at any time by the Company. The principal balance of the note at March 31, 2021 is $147,775.
The Company was indebted to
a company (ACS Global) that is majority owned by the Company’s two officers in the amount of $99,125 at September 30, 2020.
The advances were unsecured, and carried no interest rate and were collectible at the discretion of the company’s two officers/directors.
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
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.
In November
2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. This new ASU applies
to companies that have collaborative arrangements, or agreements that involve two parties that actively participate in a joint
operating activity. The company policy is to enter into collaborative arrangements that benefit its expansion of its products
and services. We believe our contract with Baoxin falls under the collaborative arrangements guidance in (ASC 808). We are collaborating
with Baoxin to develop and expand clinical study of our product in China. According to the agreement, we retain all rights to
co-developed intellectual property, while providing a Licensing Agreement to our collaborator allowing the use of our intellectual
property in their geographic region. Since ASU 2018-18 is effective for public companies for years beginning after December 15,
2019, the Company has implemented ASU 2018-18 for Fiscal 2021. Implementation of ASU 2018-18 has not affected prior or current
revenue recognition, since according to the contract we bill License Fees for the use of our intellectual property and for any
products shipped.