ITEM 1. CONSOLIDATED
FINANCIAL STATEMENTS.
American
CryoStem Corporation
Consolidated
Balance Sheets
As of December 31, 2021 and
September 30, 2021
ASSETS | |
31-Dec-21 | | |
30-Sep-21 | |
| |
Unaudited
| | |
| | |
Current
Assets: | |
| | | |
| | |
Cash | |
$ | 103,027 | | |
$ | 8,244 | |
Accounts
Receivable - net of allowance for bad debt | |
| 83,736 | | |
| 78,782 | |
Inventory | |
| 23,928 | | |
| 17,934 | |
Deferred
Contract Expense | |
| 39,370 | | |
| 39,370 | |
Prepaid
Expenses | |
| 37,942 | | |
| 52,619 | |
Total Current
Assets | |
| 288,003 | | |
| 196,949 | |
| |
| | | |
| | |
Other
Assets: | |
| | | |
| | |
Investment
in Baoxin - at cost | |
| 244,919 | | |
| 244,919 | |
Security
Deposit | |
| 13,540 | | |
| 13,540 | |
Patents
and Patents Development - net of accumulated amortization | |
| 377,998 | | |
| 371,849 | |
Fixed Assets
- net of accumulated depreciation | |
| 110,206 | | |
| 113,483 | |
Finance
Lease - Right-of-Use-Asset | |
| 107,815 | | |
| 115,516 | |
| |
| | | |
| | |
Total
Assets | |
$ | 1,142,481 | | |
$ | 1,056,256 | |
| |
| | | |
| | |
LIABILITIES
AND SHAREHOLDERS’ DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Current
Liabilities: | |
| | | |
| | |
Accounts
Payable & Accrued Expenses | |
$ | 244,018 | | |
$ | 553,120 | |
Legal &
Accounting Payable | |
| 46,221 | | |
| 97,824 | |
Bridge
Notes Payable | |
| 226,500 | | |
| 226,500 | |
Convertible
Notes Payable | |
| 709,544 | | |
| 573,500 | |
PPP Loan
- Current Portion | |
| 23,407 | | |
| 23,407 | |
Finance
Lease Liability | |
| 33,100 | | |
| 34,512 | |
Deferred
Revenue | |
| 84,360 | | |
| 122,045 | |
Total
Current Liabilities | |
| 1,367,150 | | |
| 1,630,908 | |
| |
| | | |
| | |
Long
Term Liabilities: | |
| | | |
| | |
Accrued
Executive Salaries | |
| 1,073,186 | | |
| 980,186 | |
Convertible
Notes Payable | |
| — | | |
| 132,631 | |
Finance
Lease Liability | |
| 2,961 | | |
| 11,651 | |
Note Payable
to Related Party | |
| 130,433 | | |
| 147,775 | |
Payable
to Related Party | |
| — | | |
| 658 | |
Total
Liabilities | |
| 2,573,730 | | |
| 2,903,809 | |
| |
| | | |
| | |
Commitments
and Contingencies | |
| 0 | | |
| 0 | |
| |
| | | |
| | |
Shareholders’
Deficit: | |
| | | |
| | |
Preferred
Stock - $.0001 par value, 50,000,000 shares authorized, 1,000,000 shares issued and outstanding at December 31, 2021 and 0
shares issued and outstanding at September 30, 2021 | |
| 100 | | |
| 0 | |
Common
Stock - $.001 par value, 300,000,000 shares authorized, 43,521,920 shares issued and outstanding at December 31, 2021 and
61,374,524 issued and outstanding at September 30, 2021 | |
| 43,523 | | |
| 61,376 | |
Additional
Paid in Capital | |
| 18,183,648 | | |
| 17,368,836 | |
Accumulated
Deficit | |
| (19,658,520 | ) | |
| (19,277,765 | ) |
Total
Shareholders’ Deficit | |
| (1,431,249 | ) | |
| (1,847,553 | ) |
| |
| | | |
| | |
Total
Liabilities & Shareholders’ Deficit | |
$ | 1,142,481 | | |
$ | 1,056,256 | |
| |
| | | |
| | |
See
the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Operations
For the
Quarters Ended December 31, 2021 and 2020
Unaudited
| |
31-Dec-21 | | |
31-Dec-20 | |
Revenues | |
| | | |
| | |
Tissue Processing & Storage | |
$ | 60,585 | | |
$ | 1,600 | |
Product Sales | |
| 600 | | |
| — | |
Licensing Fees & Royalties | |
| — | | |
| 125,000 | |
Total Revenues | |
| 61,185 | | |
| 126,600 | |
Less Cost of Revenues | |
| (18,862 | ) | |
| (3,301 | ) |
Gross Margin | |
| 42,323 | | |
| 123,299 | |
| |
| | | |
| | |
Operating Expenses | |
| | | |
| | |
Clinical Study | |
| 2,031 | | |
| — | |
Laboratory Expense | |
| 19,496 | | |
| 46,626 | |
Sales & Marketing | |
| 435 | | |
| 762 | |
Professional Fees | |
| 50,516 | | |
| 17,935 | |
General & Administrative | |
| 324,322 | | |
| 106,529 | |
Total Operating Expenses | |
| 396,800 | | |
| 171,852 | |
Net Gain (Loss) from Operations | |
| (354,477 | ) | |
| (48,553 | ) |
| |
| | | |
| | |
Other Income (Expenses): | |
| | | |
| | |
Interest Income | |
| — | | |
| 2 | |
Laboratory Rent | |
| — | | |
| 3,000 | |
Gain on write off of Liability | |
| — | | |
| 24,000 | |
Interest Expense | |
| (22,865 | ) | |
| (16,292 | ) |
Interest Expense (beneficial conversion feature-debenture) | |
| (3,413 | ) | |
| (8,191 | ) |
Net Loss | |
| (380,755 | ) | |
| (46,034 | ) |
| |
| | | |
| | |
Basic & Fully Diluted Net Income (Loss) per Common Share: | |
$ | (0.007 | ) | |
$ | (0.001 | ) |
| |
| | | |
| | |
Weighted Average of Common Shares Outstanding - Basic & fully diluted | |
| 53,541,539 | | |
| 59,677,562 | |
| |
| | | |
| | |
See the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statements of Cash Flows
For the
Quarters Ended December 31, 2021 and 2020
Unaudited
| |
31-Dec-21 | | |
31-Dec-20 | |
Operating Activities: | |
| | | |
| | |
Net loss | |
$ | (380,755 | ) | |
$ | (46,034 | ) |
Adjustments to reconcile net loss items not requiring the use of cash: | |
| | | |
| | |
Gain on Write Off of Liability | |
| | | |
| (24,000 | ) |
Common Stock for Services | |
| | | |
| 20,000 | |
Depreciation & Amortization Expense | |
| 14,509 | | |
| 9,297 | |
Stock Based Compensation | |
| 105,522 | | |
| | |
Interest paid in Common Stock | |
| 26,537 | | |
| | |
Interest Expense - Beneficial Conversion Feature | |
| 3,413 | | |
| 8,191 | |
| |
| | | |
| | |
Changes in operating assets and liabilities | |
| | | |
| | |
Accounts Receivable | |
| (4,954 | ) | |
| (126,600 | ) |
Inventory | |
| (5,994 | ) | |
| (1,932 | ) |
Prepaid expense | |
| 14,677 | | |
| (7,500 | ) |
Accounts Payable and Accrued Expenses | |
| (360,705 | ) | |
| 28,927 | |
Accrued Executive Salaries | |
| 93,000 | | |
| 60,000 | |
Deferred Revenue | |
| (37,685 | ) | |
| — | |
Net cash used by operations | |
| (532,435 | ) | |
| (79,651 | ) |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Patents development | |
| (9,680 | ) | |
| (8,569 | ) |
Net cash used by investing activities | |
| (9,680 | ) | |
| (8,569 | ) |
| |
| | | |
| | |
Financing activities: | |
| | | |
| | |
Issuance of Common Shares | |
| 665,000 | | |
| 87,500 | |
Paid down Finance Lease | |
| (10,102 | ) | |
| (9,729 | ) |
Payable to related party | |
| (18,000 | ) | |
| (350 | ) |
Net cash provided by financing activities | |
| 636,898 | | |
| 77,421 | |
| |
| | | |
| | |
Net change in cash | |
| 94,783 | | |
| (10,799 | ) |
| |
| | | |
| | |
Cash balance at beginning of the period | |
| 8,244 | | |
| 8,244 | |
| |
| | | |
| | |
Cash balance at end of the period | |
$ | 103,027 | | |
$ | (2,555 | ) |
| |
| | | |
| | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Interest paid during the period | |
$ | 1,873 | | |
$ | 830 | |
Income taxes paid during the period | |
| — | | |
| — | |
| |
| | | |
| | |
See the notes to the financial statements.
American
CryoStem Corporation
Consolidated
Statement of Changes in Shareholders’ Deficit
For the Quarters
Ended December 31, 2021 and 2020
Unaudited
| |
|
|
|
|
|
| | |
|
|
|
|
|
| | |
| | |
| | |
| |
| |
Preferred Stock | | |
Common Stock | | |
| | |
| | |
| |
| |
Shares | | |
Par Value | | |
Shares | | |
Par Value | | |
Paid in Capital | | |
Accumulated Deficit | | |
Total Deficit | |
Balance at September 30, 2020 | |
| — | | |
| — | | |
| 59,570,665 | | |
$ | 59,572 | | |
$ | 15,917,408 | | |
$ | (16,398,179 | ) | |
$ | (421,199 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common shares | |
| — | | |
| — | | |
| 412,500 | | |
| 412 | | |
| 87,088 | | |
| — | | |
| 87,500 | |
Shares issued for services provided | |
| — | | |
| — | | |
| 80,000 | | |
| 80 | | |
| 19,920 | | |
| — | | |
| 20,000 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (46,034 | ) | |
| (46,034 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2020 | |
| — | | |
| — | | |
| 60,063,165 | | |
$ | 60,064 | | |
$ | 16,024,416 | | |
$ | (16,444,213 | ) | |
$ | (359,733 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at September 30, 2021 | |
| — | | |
| — | | |
| 61,374,524 | | |
$ | 61,376 | | |
$ | 17,368,836 | | |
$ | (19,277,765 | ) | |
$ | (1,847,553 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common shares | |
| — | | |
| — | | |
| 2,050,000 | | |
| 2,050 | | |
| 662,950 | | |
| — | | |
| 665,000 | |
Shares issued for to pay interest | |
| — | | |
| — | | |
| 97,396 | | |
| 97 | | |
| 26,440 | | |
| — | | |
| 26,537 | |
Transfer of Common Stock to Preferred Stock | |
| 1,000,000 | | |
$ | 100 | | |
| (20,000,000 | ) | |
| (20,000 | ) | |
| 19,900 | | |
| | | |
| — | |
Stock Options Granted | |
| — | | |
| — | | |
| — | | |
| — | | |
| 105,522 | | |
| | | |
| 105,522 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (380,755 | ) | |
| (380,755 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2021 | |
| 1,000,000 | | |
$ | 100 | | |
| 43,521,920 | | |
$ | 43,523 | | |
$ | 18,183,648 | | |
$ | (19,658,520 | ) | |
$ | (1,431,249 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
See the notes to the financial statements.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 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, preparing such stem cells for
long-term storage and developing autologous mesenchymal stem cell therapies. The process allows individuals to preserve their
stem cells for future personal use in cellular therapy. The adipose derived stem cells are prepared and stored in their raw form
without manipulation, bio-generation or the addition of biomarkers or other materials, making them suitable for use in cellular
treatments and therapies offered by existing and planned treatment centers worldwide. Individualized collection and storage of
adult stem cells provides personalized medicine solutions by making the patient’s own preserved stem cells available for
future cellular therapies.
The Company
has devoted a significant amount of its time and resources to develop its technologies and intellectual property. These efforts
have resulted in the development of cell lines, cell culture medium, other laboratory products and cellular therapies which the
Company believes are suitable for licensing and distribution by third parties. Additionally, the Company has initiated a licensing
program to license its technologies to laboratories currently processing other types of biologic materials including cord blood
and general blood banks. The Company closed its first licensing agreement in 2014 and intends to pursue additional licensing partners
in the future.
The
accompanying consolidated financial statements include the accounts of American CryoStem Corporation and its wholly owned subsidiaries.
The Company’s subsidiaries are APAC CryoStem Limited, a Hong Kong company and APAC CryoStem (Shenzhen) Ltd. which were established
to support its licensing agreement and operations, and collect the licensing fees in Hong Kong and China. Currently, Mr. Arnone
and Mr. Dudzinski serve as management and directors of both companies. All significant intercompany accounts and transactions
have been eliminated in the consolidation. Management believes all amounts have been adjusted properly.
Accounting
policies refer to specific accounting principles and the methods of applying those principles to present fairly the company’s
financial position and results of operations in accordance with generally accepted accounting principles. The policies discussed
below include those that management has determined to be the most appropriate in preparing the company’s financial statements.
Use
of Estimates - The preparation of the financial statements in conformity with United States generally accepted accounting
principles (“GAAP”) uniformly applied requires management to make reasonable estimates and assumptions that affect
the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts
of revenues and expenses at the date of the financial statements and for the period they include. Actual results may differ from
these estimates.
Cash
- For the purpose of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments
with an original maturity of three months or less. Occasionally, the Company maintains cash balances at financial institutions
that exceed federally insured limits.
Accounting
for Investments - The Company accounts for investments based upon the type and nature of the investment and the availability
of current information to determine its value. Investments in marketable securities in which there is a trading market will be
valued at market value on the nearest trading date relative to the Company’s financial reporting requirements. Investments
which there is no trading market from which to obtain recent pricing and trading data for valuation purposes will be valued based
upon management’s review of available financial information, disclosures related to the investment and recent valuations
related to the investment’s fundraising efforts.
Research
and Development - Research and development expenses include both external and internal expenses. External expenses primarily
include costs of intellectual property development, clinical trial development, fees paid for third party testing services, clinical
supply and manufacturing expenses, regulatory filing fees, consulting and professional fees as well as other general costs related
to the execution of research and development activities. Internal expenses primarily include compensation of employees engaged
in research and development activities. Research and development expenses are expensed as incurred. Manufacturing costs are generally
expensed as incurred.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 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. The comparative information has not been restated and continues to be reported under
the accounting standards in effect for the periods presented. This standard applies to all contracts with customers, except for
contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial
instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard
also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. The adoption of ASC 606 did not have an impact on the amount of reported revenues. See Note 3 “Revenue Recognition”
for additional information.
Advertising
- Advertising Costs are expensed as they are incurred. Advertising Costs were $222 for the three months ended December
31, 2021 and $223 for the three months ended December 31, 2020, which is in Sales and Marketing Expenses within the Consolidated
Statements of Operations.
Bad
Debt Expense - The Company provides, through charges to income or loss, a charge for bad debt expense, which is based upon
management’s evaluation of numerous factors. These factors include 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 $860,933 at December 31, 2021 and $860,933 at September 30, 2021. (See Note
3 for additional information)
Inventory
- Inventory is valued at lower of cost or market using the first in, first out method. Inventory consists of the disposables
and materials used to create production kits, for processing of adipose tissue and cellular samples, the manufacture of Medias
used to prepare the samples and cryoprotectant for the storage of the samples.
Inventory
was composed of Raw Materials and Finished Goods, which was valued at $23,928 at December 31, 2021 and $17,934 at September 30,
2021.
Long
Lived Assets - The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.
Fixed
Assets - Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over
the estimated useful life of the assets, which is estimated as follows:
Schedule of Fixed Assets, Useful Life of Assets
|
|
Office
Equipment |
5 years |
Lab
Equipment & Furniture |
7 years |
Lab
Software |
5 years |
Leasehold
Improvements |
15 years |
Income
taxes - The Company accounts for income taxes in accordance with generally accepted accounting principles which require an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed annually for differences between financial statement and income tax bases of assets and liabilities that will result
in taxable income or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred
tax assets and liabilities to the amount expected to be realized. Income tax expense is the tax payable or refundable for the
period adjusted for the change during the period in deferred tax assets and liabilities.
The Company
follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards
Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements
when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance
for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December
31, 2021 and September 30, 2021, the Company has no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. All tax returns from fiscal years 2015 to 2020 are subject to IRS and State of New Jersey audit.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
NOTE 1. Organization
of the Company and Significant Accounting Policies (continued)
Recently
Issued Accounting Pronouncements
The FASB
recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity.
The guidance
in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion
features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in
ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from
the host contract and accounted for as derivatives.
In addition,
the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and
embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing
certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments
qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring
separate accounting from the host contract.
The amendments
in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per
share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement
for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
The amendments
in ASU 2020-06 are effective for our company for fiscal years beginning after December 15, 2023, with early adoption permitted.
The Company is currently assessing the impact of these amendments on its future financial reporting.
In June 2016,
the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation
about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses
and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates. This ASU is
effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company
is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting
change would not have a material effect on the financial statements.
NOTE 2. Going Concern
The accompanying
consolidated financial statements have been presented in accordance with generally accepted accounting principles in the U.S.,
which assume the continuity of the Company as a going concern. However, the Company has incurred significant losses since its
inception which raises substantial doubt about the Company’s ability to continue as a going concern. Management has made
this assessment for the period one year from date of the issuance of this report. Management’s plans with regard to this
matter are to continue to fund its operations through fundraising activities in fiscal 2022 for future operations and business
expansion. The Company has executed a firm Letter of Intent (LOI) for a $10 million financing with EF Hutton in 2022.
NOTE 3. Revenue
Recognition
Under ASC 606, we recognize revenue
when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive
in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of
ASC 606, we perform the following five steps:
| a. | Identify the contract(s) with a customer; |
| b. | Identify the performance obligations in the contract; |
| c. | Determine the transaction price; |
| d. | Allocate the transaction price to the performance obligations in the
contract; and |
| e. | Recognize revenue when (or as) the performance obligations are
satisfied. |
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
NOTE
3. Revenue Recognition (continued)
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.
Our major sources of revenue
during the reporting periods were 1. Tissue Collection, Processing and Storage revenue from various customers; 2. Annual Storage
Fees for our ATGRAFT and ATCELL products, from customers who have had stored in our laboratory facility, along with former Bio-Life
and Cytori storage customers purchased by American CryoStem; 3. Licensing and other fees from Baoxin; and 4. Products sales revenues.
The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our Tissue Processing, Storage Fees
or Product Sales Revenue, since:
| 1. | Tissue
Collection, Processing & Storage Revenue is recognized on the date the process is
completed and stored in our facility. |
| 2. | Storage
Fees are charged annually. |
| 3. | Licensing
and other Fees - This is based on the passage of time and as the customer has access
to the license. The Company reviewed and analyzed the contract with Baoxin. Management’s
judgments are: |
| a. | Baoxin
qualifies as a customer since American CryoStem does not take significant risks or receive
significant gains from the agreement. |
| b. | The
right to use the license does not have significant standalone functionality because consulting
is required by American CryoStem in order for the customer to be able to use the license. |
| c. | The
Company has determined as of the date of this report, due to Baoxin’s payment history
during the COVID pandemic, to make an adjustment for recognition of the Baoxin revenue.
The Company considered during its review Baoxin’s most recent audited financial
statements, documentation provided by Baoxin concerning the completion of their new 100,000
sq. ft facility in 2021, the uncertainty of the timing for restarting their tissue processing
operations in the new facility, and the ongoing uncertainties regarding the continuing
effects of the COVID-19 pandemic in China. (See Notes 13 and 14 for additional information) |
| 4. | The
majority of our Product Sales Revenue continues to be recognized when the customer takes
control of the product. |
Revenue and Allowances
The following table provides
information about Fees Revenue for the quarters ended December 31, 2021 and 2020:
| |
|
|
|
|
|
| |
| |
Quarters
Ended December 31, | |
| |
2021 | | |
2020 | |
Licensing
& Other Fees | |
| | | |
| | |
Baoxin | |
$ | — | | |
$ | 125,000 | |
Cell Source | |
| — | | |
| — | |
Totals | |
$ | — | | |
$ | 125,000 | |
Tissue Processing and Storage
was not included in the table since this revenue was provided by customers who were individuals rather than corporate partners.
Performance Obligations
At contract inception, we assess
the goods and services promised in our contracts and identify the performance obligations for each promise to transfer to the
customer goods or to provide the customer with a service that is distinct. To identify the performance obligations, we consider
all of the goods and services promised in the contract regardless of whether they are specifically stated or are implied by customary
business practices. We determined that the following distinct goods or services represent separate performance obligations:
| · | ATGRAFT
and ATCELL Customer Tissue Processing Fees |
| · | ATGRAFT
and ATCELL Customer Storage Fees |
| · | Licensing
and other Fees |
| · | Supply
of our Tissue Collection, Processing and Storage Products to Baoxin and CryoViva |
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
NOTE
3. Revenue Recognition (continued)
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 11,536,500 and 7,986,500 shares of Common Stock issuable upon exercise of all outstanding stock options and
warrants for the quarters ended December 31, 2021 and 2020, respectively; and, 2,334,784 and 2,134,784 shares issuable on the
conversion of outstanding Convertible Notes for quarters ended December 31, 2021 and 2020, respectively.
Net Loss
per share for the following quarters is computed below:
| |
31-Dec-21 | | |
31-Dec-20 | |
Net Loss | |
| (380,755 | ) | |
| (46,034 | ) |
Basic & Fully Diluted Net Income (Loss) per Common Share: | |
$ | (0.007 | ) | |
$ | (0.001 | ) |
Weighted Average of Common Shares Outstanding - Basic & fully diluted | |
| 53,541,539 | | |
| 59,677,562 | |
See the notes to the financial statements.
NOTE 5. Fixed Assets
The fixed assets accounts of
the Company are comprised as follows:
| |
12-31-2021 | | |
09-30-2021 | |
Laboratory Equipment | |
$ | 257,905 | | |
$ | 257,905 | |
Laboratory Leasehold Improvements | |
| 110,286 | | |
| 110,286 | |
Laboratory Furniture | |
| 1,841 | | |
| 1,841 | |
Office Equipment | |
| 27,869 | | |
| 27,869 | |
Office Leasehold Improvements | |
| 2,650 | | |
| 2,650 | |
Office Furniture | |
| 1,812 | | |
| 1,812 | |
Accumulated Depreciation | |
| (292,157 | ) | |
| (288,880 | ) |
| |
| | | |
| | |
Net Property and Equipment | |
$ | 110,206 | | |
$ | 113,483 | |
Depreciation
expense for quarters ended December 31, 2021 and 2020 were $3,277 and $3,278, respectively.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
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 quarters ended December 31, 2021 and 2020 were $3,531 and $1,423,
respectively.
Patents still
in the application process have not been amortized. The unamortized costs of patents in the application process are $173,874 as
of December 31, 2021 and $164,194 as of September 30, 2021. Amortizable Patent Costs were $238,172 at December 31, 2021 and $238,172
at September 30, 2021. The following is the anticipated amortization expense for these patents for the next 5 years:
Schedule of patent amortization
Twelve Months ending December 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.
Additionally,
this patent has been filed European Union Application No. EPI3800847.9 and China Application No. 2013800391988.
Human Serum
for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells, International PCT filing PCT/US/68350 filed December
31, 2015 with a priority date of December 31, 2014. During 2017 the Company extended the filing into China, the EU, India, Japan,
the Kingdom of Saudi Arabia, Canada and Mexico.
The Company
is currently developing additional US and foreign patent applications and expects to file a number of additional provisional and
PCT patent applications in Fiscal 2022.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
NOTE 7. Debt
The following
table describes the Company’s debt outstanding as of December 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 | | |
| 8.00 | % |
Convertible Notes
@ 30 cents | |
$ | 45,000 | | |
| Demand | | |
| 8.00 | % |
Convertible Notes
@ 20 cents | |
$ | 155,000 | | |
| Demand | | |
| 8.00 | % |
Convertible Notes
@ 15 cents | |
$ | 40,000 | | |
| Demand | | |
| 8.00 | % |
PPP Loan | |
$ | 23,407 | | |
| Fiscal
2022 | | |
| 1.00 | % |
Note Payable to Related
Party | |
$ | 130,433 | | |
| Fiscal
2024 | | |
| 10.00 | % |
Finance Lease Liability | |
$ | 36,061 | | |
| Fiscal
2021 | | |
| 13.25 | % |
The convertible notes are exercisable
at any time and have exercise prices ranging from $0.15 to $0.48 with the amount of shares exercisable based on the face value
of the convertible note. The holders of the bridge notes also have an option to purchase shares of the Company at $0.05 per share
with the number of shares dependent upon the face value of the bridge note. As of the date of this report, 36,500 of these options
remain outstanding.
In March 2021,
the Company issued debentures and received proceeds of $150,000. The debentures mature in December 2022 and have an exercise price
of $0.75 with interest at 5%. The entire Carrying Value of $150,000 is due in Fiscal 2023.
As a result
of the issue, the Company recognized interest expense of $25,333 as a beneficial conversion feature of the debentures, which has
been amortized over the lives of the notes. The Interest Expense due to the Beneficial Conversion Feature for the three months
ended September 30, 2021 was $3,143.
NOTE 8. Common Stock Transactions
During the quarter ended December
31, 2020, the Company issued 412,500 shares and received proceeds of $87,500. The share price was determined by agreement with
the purchasers, based upon the current market price less a discount for purchasing restricted securities.
During the quarter ended December
31, 2020, 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 restricted securities.
During the quarter ended December
31, 2021, the Company issued 2,050,000 shares and received proceeds of $665,000. 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 quarter
ended December 31, 2021, the Company issued 97,396 shares to pay interest due to holders of the bridge notes and convertible notes.
The value of the interest paid was $26,537. The share prices were determined by the aggregate market price for the week in which
the shares were issued.
The Company
exchanged 1,000,000 newly created Series A Voting Convertible Preferred Shares for 20,000,000 common shares held by ACS Global,
Inc. (See Note 14 for more details).
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
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 stock options for the quarter ended December 31, 2021 or the quarter
ended December 31, 2020.
Schedule
of Stock Option Outstanding
| |
Amount | | |
Exercise
Price
Range | | |
Weighted
Average
Exercise
Price | | |
Weighted
Average
Remaining
Term
(Years) | |
Outstanding at September 30,
2020 | |
| 7,936,500 | | |
$ | 0.05
- $0.40 | | |
| 0.26 | | |
| 2.33 | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| — | | |
$ | 0.22
- $0.25 | | |
| 0.25 | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Expired | |
| — | | |
$ | 0.20 | | |
| | | |
| | |
Forfeited | |
| — | | |
| | | |
| | | |
| | |
Outstanding at December 31, 2020 | |
| 7,936,500 | | |
$ | 0.05
- $0.40 | | |
| 0.26 | | |
| 2.08 | |
| |
| | | |
| | | |
| | | |
| | |
Outstanding at September 30, 2021 | |
| 11,536,500 | | |
$ | 0.05
- $0.40 | | |
| — | | |
| 3.73 | |
| |
| | | |
| | | |
| | | |
| | |
Granted | |
| — | | |
$ | 0.22
- $0.25 | | |
| 0.25 | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Expired | |
| — | | |
$ | 0.20 | | |
| | | |
| | |
Forfeited | |
| — | | |
| | | |
| | | |
| | |
Outstanding at December 31, 2021 | |
| 11,536,500 | | |
$ | 0.05
- $0.40 | | |
| 0.26 | | |
| 3.48 | |
Vested at December 31, 2021 | |
| 7,711,500 | | |
$ | 0.05
- $0.40 | | |
| 0.28 | | |
| 2.99 | |
Option Forfeitures are recorded as
they occur. The intrinsic value of the outstanding stock options is $5,035,225 and the intrinsic value of the outstanding vested
stock options is $3,232,225 at December 31, 2021.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 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 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. Lease payments are $2,993.62 per month for eighteen (18) months. The
final lease payment is scheduled for January 1, 2023. When the final payment is made, the Company will own the equipment. The
table below presents the lease related asset and liability recorded on the Company’s consolidated balance sheets as of December
31, 2021:
Schedule of Finance Lease related Assets and Liability
| |
Classification on Balance Sheet | |
December 31,
2021 | |
Assets | |
| |
| | |
Finance Lease Asset | |
Finance lease right of use asset | |
$ | 107,815 | |
Total Finance lease assets | |
| |
$ | 107,815 | |
Liabilities | |
| |
| | |
Current Liabilities | |
| |
| | |
Finance lease liability | |
Current finance lease liability | |
$ | 33,100 | |
Noncurrent liabilities | |
| |
| | |
Finance lease liability | |
Long-Term finance lease liability | |
| 2,961 | |
Total operating lease liability | |
| |
$ | 36,061 | |
Schedule of Finance Lease Obligation
Lease obligations at December 31, 2021: | |
| | |
Twelve Months ending December 31, 2022 | |
$ | 35,923 | |
Twelve Months ending December 31, 2023 | |
| 2,994 | |
Total Payments | |
| 38,917 | |
Amount representing interest | |
| (2,856 | ) |
Finance lease obligation, net | |
$ | 36,061 | |
Finance lease obligation, current portion | |
| 33,100 | |
Finance lease obligation, long-term | |
| 2,961 | |
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
Note 11. Leases (continued)
The lease payments for the
three months ended December 31, 2021 were $11,975, which consisted of amortization of $10,102 and interest $1,873 and payments
for the three months ended December 31, 2020 were $10,559, which consisted of amortization of $9,729 and interest of $830. At
December 31, 2021, the remaining lease term was 1.06 years (13 months) and the discount rate was 13.25%.
Operating
Lease
The Company
leases its office facility, in Eatontown, New Jersey, from Eaton Holdings LLC. The lease expired on April 30, 2021 and the Company
can exercise a renewal option for an additional three years. The company has not exercised its option to renew for 36 months at
$2,650 per month. The company is renting month to month at $2,650 per month, while management evaluates whether it will renew
the lease. Since the lease obligation is less than twelve months, the Company does not report a lease related asset or liability
for this lease. The lease expense for the quarter ended December 31, 2021 and 2020 was $7,950 and $7,950, respectively.
The Company
leases its laboratory facility, in Monmouth Junction, New Jersey, from Princeton Corporate Plaza LLC. The Company renewed its
lease on April 1, 2021 for an additional 12 months and pays $2,462 per month. Since the lease obligation is less than twelve months,
the Company does not report a lease related asset or liability for this lease. Rent paid for the laboratory facility for quarter
ended December 31, 2021 and 2020 was $7,687 and $7,187, respectively.
NOTE
12. Investments
During
the first quarter of 2018, the Company invested $300,000 in Baoxin Ltd., a Chinese company that is involved in tissue storage
and processing in Baoxin, China. Baoxin is not a publically traded corporation and the investment is carried at the lower
of cost or market value. The Company annually reviews its investments for impairment. Based on the Company’s year end review,
the carrying value of the Baoxin Investment was reported as $244,919 at December 31, 2021 and $244,919 at September 30, 2021.
The Agreement
with Baoxin is for Baoxin to develop, own and operate multiple laboratory/treatment/training facilities in China using the American
CryoStem’s intellectual property. Under the Agreement, American CryoStem received an upfront fee of $200,000 USD and a yearly
minimum annual guarantee of $500,000 USD per year from Baoxin until the entire amount of the Contract ($6,000,000 USD) is paid.
Additionally, as part of the transaction American CryoStem has invested $300,000 into Baoxin to obtain a 5% minority equity in
Baoxin (China) and an option to acquire up to a 20% equity ownership interest in its Regenerative Medicine Center in Hong Kong
(HK). The goals are to set up two additional GMP grade adipose tissue processing and storage facilities in Beijing and Shanghai
to cover the need of the whole China region, and a proper education facility in China to promote the use of ATGRAFT as a more
natural dermal filler over artificial fillers. Due to the uncertainty caused by the pandemic and our pending public offering,
the Company has decided to increase its allowance for doubtful accounts to include the amount owed by Baoxin at this time and
to suspend its recognition of revenue from Baoxin until such time as circumstances in China ease and Baoxin is able to return
to normal operations and make the contractual payments.
NOTE
13. Concentration of Credit
The Company received 96% of
its revenue from one client, Baoxin, for the quarter ended December 31, 2020. There were no such concentrations for the three months ended December 31, 2021.
The Company regularly reviews
all receivables and determines the amount of allowances if any on a quarterly basis.
The difficulties and uncertainties
caused by COVID, Chinese government policies and Baoxin’s going concern considerations have caused concern as to the collectibility
of the Baoxin receivable. Communications and correspondence with Baoxin Management indicate a continuing commitment to American
CryoStem’s technology and the Agreement to a Territorial License of its patents and other intellectual property. Baoxin
recently completed its state of the art facilities in Shenzhen to roll out therapies to the Chinese people. Although Baoxin has
confirmed the receivable, the Technology Fees billed of $500,000 annually and a total contractual obligation of $6,000,000, there
is concern about to their ability to pay. For this reason, the Company is not reporting the Fees from this contract as revenue.
Baoxin is still relying on
investment (financing) to continue its operations, which is typical for biotechnology companies globally and is currently in negotiations
with the Chinese government which include funding requests. Management is optimistic that the effects of the pandemic will eventually
subside, Baoxin’s operations will return to normal and they will obtain the financing necessary to pay American CryoStem.
American CryoStem
Corporation
Notes to the
Consolidated Financial Statements
December 31,
2021
Unaudited
NOTE 14. Related Party Transactions
On October
1, 2020 the Company executed a note with ACS Global, Inc. for a principal amount of $99,125 representing the outstanding
balance due to ACS Global. Inc. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may
be paid in cash or stock. The note is due and payable in full upon maturity. On March 1, 2021, the note was increased by
$49,000. The note may be prepaid at any time by the Company.
From time to
time the Company makes principal payments on the note. During the three months ended December 31, 2021, the Company paid down
the note $18,000.
The principal
balance of the Note is $130,433 at December 31, 2021 and 147,775 at September 30, 2021.
The Company
exchanged 1,000,000 newly created Series A Voting Convertible Preferred Shares for 20,000,000 common shares held by ACS Global,
Inc.
Terms of the
Series A Voting Convertible Preferred Shares are as follows:
| 1. | Each
Series A Share is convertible into 20 shares of American CryoStem common stock $0.001
par value, subject to any recapitalization event. |
| 2. | Stated
annual dividend of $0.20 per share payable quarterly in cash or stock at the discretion
of the Company’s Board of directors. |
| 3. | Each
preferred share shall have 20 votes on all matters subject to a Company shareholder vote. |
| 4. | Convertible
after one year at the discretion of the ACS Global board of directors. |
NOTE 15. Subsequent Events
The Company
has made a review of material subsequent events from December 31, 2021 through the date of issuance of this report. There are
no subsequent events to report as of the issuance of these financial statements.
ITEM
2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
|
Forward-looking
Statements
We
and our representatives may from time to time make written or oral statements that are “forward-looking,”
including statements contained in this quarterly report and other filings with the Securities and Exchange Commission (the
“SEC”), reports to our stockholders and news releases. All statements that express expectations, estimates,
forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute
forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,”
“intend,” “plan,” “believe,” “seek,” “estimate,”
“project,” “forecast,” “may,” “should,” variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We
undertake no obligation to update or revise any of the forward-looking statements after the date of this quarterly report to
conform forward-looking statements to actual results. Important factors on which such statements are based on assumptions
concerning uncertainties, including but not limited to, uncertainties associated with the following:
|
· |
Inadequate
capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; |
|
|
|
|
· |
Our
failure to earn revenues or profits; |
|
|
|
|
· |
Inadequate
capital to continue business; |
|
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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
We were incorporated
in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly owned subsidiary American CryoStem
Acquisition Corporation, substantially all of the assets from, and assumed substantially all of the liabilities of, ACS Global,
Inc. (“ACS”) in exchange for our issuance of 21,000,000 shares of our common stock, par value $0.001 per share, to
ACS (the “Asset Purchase”). We filed a Current Report on Form 8-K with the Securities and Exchange Commission (SEC)
on April 27, 2011, disclosing the Asset Purchase and certain related matters including, but not limited to, the appointment of
our present officers and directors as well as the resignation by the former chief executive officer and sole director. Our fiscal
year ends September 30 of each calendar year. Upon the closing of the Asset Purchase: (i) ACS Global became our majority shareholder,
(ii) John Arnone was appointed as our chief executive officer and president Anthony Dudzinski was appointed as our chief operating
officer, treasurer and secretary, and (iii) John Arnone and Anthony Dudzinski were appointed to our board of directors, with Mr.
Arnone being appointed as Chairman of the Board. Mr. Dudzinski is also a director, president and treasurer of ACS Global and Mr.
Arnone is a director and secretary of ACS Global.
Overview
American CryoStem
Corporation; (CRYO) founded in 2008, is a biotechnology pioneer, having developed standardized adipose tissue derived technologies
(Adult Stem Cells) for the fields of regenerative and personalized medicine. These standardized technologies which include granted
patents, are the basis for our chemistry, manufacturing, and controls (cGMP Manufacturing) of our ATCell™ autologous cellular
therapy product for use in clinical investigations for Biologic License Applications with the US Food and Drug Administration
(FDA). Our laboratory stem cell products are characterized adult human Mesenchymal Stem Cell (MSC’s) derived from adipose
tissue that work in conjunction with our patented (non-animal) medium lines and knowhow.
The Company
filed its first Investigational New Drug Application (IND) with the FDA for our ATCell™ cellular therapy product. The IND
filing is titled “ATCell™ Expanded Autologous Adipose Derived Mesenchymal Stem Cells deployed via Intravenous Infusion
for the Treatment of Post-Concussion Syndrome (PCS) in Retired Athletes and Military Personnel” File number 19089 was approved
by the FDA on September 17, 2020 to commence the Phase 1 Clinical Trial. Post-concussion syndrome is a chronic, incurable central
nervous system condition affecting a significant number of the United States military and athletes, especially those involved
in contact sports such as football, boxing, soccer, and other sports where participants have suffered one or more concussions
or mild traumatic brain injuries (mTBI). Published research has indicated that up to 30% of all military personal, active and
retired, may suffer from this condition. According to the Department of Defense evaluation of U.S. military casualty statistics,
From 2000-2019 Q3, 413,858 United States Military personnel worldwide experienced a; were considered mild, 9.8% moderate, and
2.3% penetrating or severe.
The Company
built and validated a new cGMP clean room processing and manufacturing area at our facility in Monmouth Junction NJ, implemented
and validated cGMP Standard Operating Procedures (SOPs) and installed a new Quality Management System to support its IND filings
and an increased focus on patent and product development and support additional clinical activities.
The Company
has built a domestic and international patent portfolio consisting of 32 patents. Our 4 primary operating patents regarding the
“collection – processing – cryopreservation and return to point-of-care” of adipose derived stem cells,
have been granted.
The Company
is expanding its efforts to attract and cultivate collaborative partners to accelerate its product development efforts, harnessing
its manufacturing platform and tissue processing platforms. The R&D collaborations are to discover, develop, and commercialize
cellular therapies, laboratory products and combinations thereof with synergistic technologies to create regenerative medicine
applications and develop new intellectual property.
Adipose
Tissue
The
Company’s manufacturing platform technologies, cell transportation products, cell culture mediums and cell therapies are
focused on the acquisition and processing of adipose tissue as the primary raw material. Many of our developed technologies have
been successfully applied to other raw materials such as bone marrow, umbilical and placenta tissue. Adipose tissue, also known
as fat tissue or fatty tissue, is a connective tissue that is mainly composed of fat cells called adipocytes. Adipocytes are energy
storing cells that contain large globules of fat known as lipid droplets surrounded by a structural network of fibers. tissue
and other stromal tissues. The Company is focused on adipose tissue because it contains higher densities of mesenchymal stems
cells (often 500 to 1000 times more) per gram of raw material when compared to other sources (bone marrow, umbilical cord tissue,
etc). The higher cellular density of adipose tissue supports the ability to create regenerative cellular products more efficiently
and with less expansion (lower passages and population doublings), which is preferred when producing cellular therapy products.
Adipose tissue
is considered one of the top human stem cell sources considering its accessibility, abundance, and least painful collection procedure
when compared to other sources such as bone marrow. The adipose derived mesenchymal stem cells (ADSCs) that adipose tissue contains
can be maintained and expanded in culture for long periods of time without losing their differentiation capacity, leading to large
cell quantities being increasingly used in cell therapy purposes. Many published and peer reviewed reports show that ADSC-based
cell therapy products demonstrated optimal efficacy and efficiency in various clinical indications for both autologous and allogeneic
purposes, hence they are increasingly being considered as potential tools for replacing, repairing, and regenerating dead or damaged
cells.
Adipose tissue
is a specialized type of connective tissue that arises from the differentiation of mesenchymal stem cells into adipocytes during
fetal development. Mesenchymal stem cells are multipotent cells that can transform into various cell types, including fat cells,
bone cells, cartilage cells, and muscle cells among others. Adipose tissue can be found in a number of different places throughout
the body. Adipose tissue is the most abundant type of fat in humans. It is distributed within subcutaneous fat, visceral fat,
and bone marrow fat. Subcutaneous fat is found throughout the whole body, in the spaces between the skin and underlying muscles.
Visceral fat is predominantly found around the organs in the abdominal cavity, such as the liver, intestines and kidneys, as well
as in the peritoneum (a serous membrane that lines the outside of the abdominal organs). Adipose tissue is also present in bone
marrow (a sponge-like tissue present in the central cavity of bones). In addition, adipose tissue can be found in the pericardium
surrounding the heart, or cushioning other parts of the body, like the soles of the feet, eyeballs, and certain blood vessels.
The main function
of adipocytes is to store excess energy in the form of fatty molecules, mainly triglycerides. Fat storage is regulated by several
hormones, including insulin, glucagon, catecholamines (adrenaline and noradrenaline), and cortisol. Depending on the body’s
immediate energy requirements, these hormones can either stimulate adipose tissue formation and storage (i.e. lipogenesis) or
initiate the release of fat from adipose tissue (i.e. lipolysis). Under the influence of insulin, for instance, adipocytes can
increase the uptake of blood glucose and transform it into fatty molecules, thereby increasing fat storage.
In addition
to being an energy storing reservoir, adipose tissue performs important endocrine and metabolic roles by secreting several biologically-active
factors known as adipokines. These molecules contribute to a variety of different functions, including regulation of energy balance,
food intake and satiety, inflammatory response, and metabolism of steroid hormones. Finally, adipose tissue also helps cushion
and protect parts of the body, as well as insulate the body from extreme temperatures.
In addition
to adipocytes, adipose tissue contains the stromal vascular fraction (SVF) comprised of cells including preadipocytes, fibroblasts,
vascular endothelial cells, and a variety of immune cells such as adipose tissue macrophages. Far from being hormonally inert,
adipose tissue has, in recent years, been recognized as a major endocrine organ, as it produces hormones such as leptin, estrogen,
resisting, and cytokines (especially TNFα). Adipose tissue contains some of the highest concentrations of adult stem cells,
progenitor cells and immune cells.
Processing
Technology
The FDA considers
processing and expanding cells as the manufacturing of a drug product. The Company’s completed proprietary, patented processing
and manufacturing platform is designed for the collection, preparation and cryo-preservation of pure adipose tissue and adipose
tissue derived cells. The processing platform has been validated to enable the Company to deliver cellular therapy samples with
repeatable and identifiable characteristics of safety, potency, viability, and purity which are the core FDA requirements for
the cGMP manufacturing of all drug products. Our manufacturing platform is approved by FDA for use
in our current clinical study of Post Concussion Syndrome for the manufacturing of the cellular therapy samples. The Company believes
that the platform is suitable to support the Company’s growing pipeline of product development and planned clinical studies,
and future biologic license applications for an array of target diseases and conditions.
The Company
believes the reproducibility of scientific studies is a substantial issue in cellular therapy research, from drug discovery and
development through clinical trials as researchers throughout the world continue to use different protocols for processes associated
with cell sample preparation, cryopreservation, and cold chain management. We believe our validated manufacturing processes for
our ATCell™ product solves this issue. The samples we produce with our patented platform and proprietary products have proven
purity, consistent viabilities above 80 percent, and cell identification panels across six biomarkers and proven sterility. Our
standardizing handling, storage, and transportation protocols substantially improve the quality and reproducibility of adipose
tissue derived stem cells and the adipose tissue collection, processing, storage and retrieval which is designed to permit us
to accelerate the time line of creating and processing cellular therapy products - from lab research to regulatory submission
and FDA approval.
Each
individual process has the potential to create multiple autologous products and to generate multiple revenue streams including
customer fees for storage of biomaterials. Our processing platform and methodology allow the opportunity for continuing revenue
streams from each tissue sample received and processed including, cellular therapy treatments, pure tissue storage for secondary
procedures, processing, and handling fees and CRYO storage and release fees.
We
are leveraging our patented platform and developing our product portfolio to create a global footprint of licensed laboratory
affiliates, physician’ networks, patients, research organizations, and licensees who purchase tissue collection, processing
and storage services or consumables from our Company.
Products
and Services
Therapy Product
Development
During the Company’s
initial stage of developing its manufacturing protocol and products chose adipose tissue as its source material following review
and experiments that included other biomaterials and cell sources such as bone marrow and peripheral blood samples. The selection
of adipose tissue is based upon a number of factors including high cell density and its wide array of other cell types including
precursor and immune cells that may be derived and developed as future products. Although the Company is currently focused on
the development of cellular therapy products utilizing adipose derived mesenchymal cells, the platform is designed to be easily
extendable to permit the acquisition and expansion of additional cellular derivatives from other biomaterials.
A significant
amount of research, case studies and anecdotal evidence has been published over the past several decades concerning the study
of cellular therapies for a wide range of diseases and maladies from ALS and Parkinson’s to wound healing and immunological
support. The Company, recognizing that each new application for therapy approval requires a standalone clinical study, has refined
its development strategy to initially encompass mild traumatic brain injury and immunosuppression as core targets for its development
strategy. We focus our efforts on expanding our product pipelines based upon our intellectual property portfolio, collaborative
development relationships, target market size, medical need, disease classification, and international licensing and partnering
opportunities.
The completion,
submission and approval of our validated manufacturing platform is the culmination of the Company’s development efforts.
Validation of the manufacturing platform for the study has provided the Company with the opportunity to expand its efforts and
resources on the further development of its downstream intellectual property. The objective is to provide deliverable commercial
cell therapy products to address patient populations with large unmet medical needs such as brain injuries and conditions that
include immunologic complications. The Company’s continuing efforts in the development of additional products includes an
increased focus on the recruitment of collaborative partners and the extension of our existing manufacturing capabilities to development
of other adipose tissue derivative and cellular/biomaterial combination products. Leveraging our repeatable processing platform
provides the Company with contributable technology and capabilities to rapidly develop clinical studies, accumulate complementary
scientific data and attract strong collaborative and developmental partners.
Our activities
include supporting collaborations by providing our products and services (ACSelerate™ and ATCELL™)
with the goal and expectation that our products and services become the basis for new cell based Regenerative Medicine and cellular
therapy applications.
Part of this
strategic approach to therapy product development is to design, develop and launch new products and services that rely on our
core processing technology and leverage existing products and services. Examples of this approach are the use of the CELLECT®
collection kit/ box and materials to collect fresh tissue for cellular therapy sample processing, use of our patented non-animal
growth medium for cell culture and use of our storage medium for cryo-storage. Management is currently pursing collaborative product
development agreements with healthcare institutions, universities, and other biotech companies.
2022 Therapy
Pipeline
The Company
has developed and refined its pipeline around its flagship cellular product, ATCell™, for clinical therapeutic use. The
initiation of this pipeline strategy occurred with the filing, approval and commencement of its Post-Concussion Syndrome Phase
1 clinical study. During this review process, the US FDA fully reviewed the Company’s manufacturing platform contained in
the Chemistry, Manufacturing and Control section of the Investigational New Drug (IND) submission. The Company’s filing
included unpublished research of ATCell™ use in an animal model as well as a report covering its safety results from a pilot
study that included the treatment of more than 80 patients that received one or more treatments with the ATCell™ product
that resulted in no reported adverse events.
| 1. | The
Company filed its first Investigational New Drug Application (IND) with the US Food and
Drug Administration (FDA) for the ATCELL cellular therapy product. The IND filing is
titled “ATCell™ Expanded Autologous Adipose Derived Mesenchymal Stem Cells
deployed via Intravenous Infusion for the Treatment of Post-Concussion Syndrome (PCS)
in Retired Athletes and Military Personnel”, File number 19089, which was approved
by the FDA on September 17, 2020. The Company intends to invite additional developers
of cellular therapies to initiate additional arms of the clinical study focused on the
use of ATCELL™ for use in systemic inflammatory response relief for patient suffering
from systemic diseases. A number of these additional study targets have been identified
and ongoing discussions support the Company’s belief that clinical investigations
can be developed and rapidly added upon completion of the new treatment protocol and
outcome assessment methodologies. |
| 2. | DMD
– The Company has completed the protocol for the treatment of Duchene Muscular
Dystrophy and is in final discussions with its Collaborative partner, to select the principal
investigator (PI) and clinical trial site selection. |
| 3. | Long
COVID – The Company has completed the protocol for treatment of Long COVID and
is currently finalizing its FDA filings. We have completed, along with a government partner
the clinical protocol for a new Investigational New Drug (IND) application to be filed
with FDA within the next 90 days for Long COVID. According to the Centers for Disease
Control and Prevention, “post-COVID conditions can be considered a lack of return
to a usual state of health following acute COVID-19 illness.” In the US, following
COVID recovery, it is reported that up to 30% of those afflicted, diagnosed, or treated
for COVID-19 have continuing symptoms and medical complications following recovery from
the acute illness. |
| 4. | Wound
Healing - the creation of topical applications and ingredients used by physicians in
the wound care and cosmetic industries as well as therapeutic cellular applications and
bio-materials development. An initial pilot study involving a minimum of 10 participants
for the assessment of its autologous tissue products for the wound healing market is
underway. The Company is combining its tissue products, which do not require FDA approval,
with current standard-of-care methods to accelerate and improve the healing of diabetic
and non-diabetic wounds and ulcers. |
| 5. | ATGRAFT™
- products include adipose tissue and cell sample processing and storage as a form of
personal “bio-insurance”, and adipose tissue (fat) storage for cosmetic fat
engraftment procedures. High demand for pure and natural aesthetics in fast growing cosmetic
industry with non-FDA required plastic, cosmetic, and reconstructive surgical “fat
filler”. The global facial fat transfer market alone is expected to growth with
a CAGR of 10.7% to $4.2b by 2027. |
About ATCELL™
The Company
has established and trademarked ATCELL™ as the brand name for its line of adipose derived stem cell products. ATCELL™
is a purified sample of adipose tissue derived from adipose tissue through our manufacturing processes that can be incubated and
grown (cultured) to large quantities in cGMP conditions.
ATCELL™
Adipose Derived Mesenchymal Cells Processed and characterized adipose derived cells created using the Company’s
proprietary, validated and patented Standard Operating Procedures (SOPs) of its manufacturing platform and the Company’s
ACSelerate™ patented cell culture media. Cell lines may also be custom created for patients desiring
to store their cells for their own future use in Regenerative Medicine procedures, shipped “On Demand”. Customer samples
are collected by the physician in an mini liposuction procedure and delivered to the Company’s facility utilizing the CELLECT®
collection system and ACSelerate™ transport medium to conform to our validated quality control
standards. The Company charges its customers a fee to process newly collected client tissue samples into cellular samples.
ATCELL’s
repeatable sample manufacturing process is designed to comply with the requirements of FDA to produce highly consistent and validated
cellular products necessary to achieve regulatory approval. The validation of our manufacturing process and quality control results
are of great value in biomanufacturing and serve as the basis for approval and commercial product development.
The Company’s
ATCELL™ cell lines are cultured in our patented ACSelerate™ cell
culture media. All processed samples: tissue, cells, and research materials are made available for clinical study therapies, tissue
transfer or sale to research institutions. All samples are tested for sterility, disease, lifespan, and population doubling rate
(PDL). Cell morphology is confirmed by (i) flow cytometry (6 markers) and (ii) tri-lineage differentiation analysis using ACSelerate™
differentiation media. Each ATCELL™ line can be further processed and differentiated
allowing the Company to provide genetically matched cell types. We believe this research methodology may provide opportunities
for the Company’s ATCELL™ and ACSelerate™ products to become
the building blocks of additional commercial application development.
The Company
believes it can earn additional fees based upon storage and retrieval fees and for future product creation. Cell culturing and
differentiation may be performed upon receipt of the raw tissue sample or at any time on a previously processed and cryopreserved
tissue or master cell sample. ATCELL™ has shown that it is ideally suited for differentiation into
additional cell types (bone, cartilage, etc.) utilizing our patented ACSelerate™ line of differentiation
mediums.
The ATCELL™
processing, products and services are incorporated into multiple granted patents including the granted claim of:
“Systems and Methods for the Digestion of Adipose Tissue Samples Obtained from a Client for Cryopreservation” US 10,154,664
issued December 18, 2018, and “Business Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic
Sample Material” US Patent Number 10,014,079, issued July 3, 2018. The ACSelerate™ Medium products are incorporated
into our granted patents “Cell Culture Media, Kits and Methods of Use”; US Patent No. 7,989,205 issued August 2, 2011,
with additional claims granted in US Patent No. 9,487,755 granted November 8, 2016.
Tissue Processing
and Storage Services:
ATGRAFT™–An
adipose tissue (fat) collection, processing and storage solution used by cosmetic and plastic surgeons to provide their patients
with multiple tissue transfer and storage options. The ATGRAFT™ service, through one liposuction procedure,
allows individuals to prepare for multiple future cosmetic or regenerative procedures by using their own stored adipose tissue
as natural biocompatible filler, or for multiple cellular therapy applications over time without the trauma of further liposuctions.
Many physicians currently offering tissue transfer or “stem cell (SVF)” therapies are required to perform a concurrent
tissue harvest for each transfer or procedure which increases the opportunities for infection at the harvest site and the development
of long-term complications related to the formation of scar tissue (stroma) at the harvest site(s).
ATGRAFT™
supported procedures include; breast reconstruction, layered augmentations, buttocks enhancement, volume corrections
of the hands, feet, face and neck areas that experience significant adipose tissue (fat) volume reduction as we age. ATGRAFT™
is processed and stored utilizing our cGMP standards so that any stored fat tissue sample may in the future be further
processed to create, “ATCELL™”, for use in Regenerative Medicine applications. The ATGRAFT™
service is included in our granted patent “Business Method for Collection, Processing, Cryogenic Storage and Distribution
of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.
The Company’s
charges processing fees for ATGRAFT™ tissue processing and minimum annual storage fees based on the volume of
tissue processed. These processing and storage fees may be paid by the collecting/treating physician or the consumer. The Company
earns additional fees upon sample retrieval, for the thawing, packaging and shipment of the stored samples to the physician or
clinical “point-of-care” for immediate use upon receipt. Additionally, physicians may request that any stored ATGRAFT™
tissue sample of 25ml or greater be reprocessed utilizing the Company’s ATCELL™ and Autokine-CM™
processing to create topical therapy or cosmetic products, on-demand.
Laboratory
Products; Culture Medium, and Manufacturing Services
CELLECT®
Collection, Transportation, and Storage System – An unbreakable “chain of custody” solution to
collect and deliver tissue samples utilizing proprietary and patent pending methods and materials. The CELLECT® service
is the required platform for the collection and transportation of live adipose tissue samples to American CryoStem Corporation’s
processing facility. Tissue collected and transported in our CELLECT kits is monitored through the transportation process to assures
the highest viability upon laboratory receipt. The CELLECT® system incorporates our ACSelerate–TR™
transport medium to support the health of the tissue during transport. The ability to support the health of the collected
tissue using our proprietary material and services greatly enhances our highly consistent and repeatable manufacturing and processing
protocol. The CELLECT® service is included in our granted patent “Business Method for Collection, Processing,
Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.
American CryoStem
is the first tissue bank to globally incorporate through its CELLECT® service the International Blood Banking
identification, labeling and product identification coding system. This labeling system is an acceptable machine-readable labeling
standard, product description, and bar-coding system for FDA Center for Biologics Evaluation and Research under 21 CFR 606.12(c)13.
American CryoStem conforms to this standard in its laboratory facility and all cellular and tissue products produced at the facility
carry our W3750 ICCBBA facility identifier allowing any hospital, clinic, laboratory and regulator worldwide to identify the origin
and obtain additional information on any sample produced at an American CryoStem laboratory facility. The Company requires use
of this standard in all laboratories that license or utilize our technology.
ACSelerate™
Cell Culture Media Products – Manufactured patented cell culture media products for growing human stromal cells
(including all cells found in human skin, fat and other connective tissue). Certain of the Company’s ACSelerate™
cell culture media lines are available in animal serum free, which may be suitable for human and therapeutic uses, or
in a low serum version for application development and research purposes. The patented ACSelerate™ cell
culture media line(s) were specifically developed to address increasing industry demand for fetal bovine serum-free cell culture
products. The use of fetal bovine serum (FBS) and other animal products in cellular therapy application development and manufacture
raises concerns and generates debates within the scientific and regulatory community relating to potential human/animal cross-contamination.
These same concerns may lead to additional expensive and expansive testing and documentation requirements with the FDA during
the application and approval process for new cellular therapies manufactured with or containing animal or animal derived products.
FDA concerns are evidenced in their Guidance’s and Guidelines regarding cellular therapy involving human cells, tissues
and products (HCT/Ps) published and maintained by the FDA. Management believes that eliminating or greatly reducing FBS in cellular
manufacturing, applications and products can eliminate or ease these scientific and regulatory concerns and may prove to be a
winning strategy for cellular therapy application developers seeking FDA approval.
The Company
entered into a licensing and manufacturing agreement with PeproTech (April 4, 2016) a life sciences company formed in 1988. PeproTech
is the trusted source for the development and manufacturing of high quality cytokine products for the life-science and cell therapy
markets. PeproTech has grown into a global enterprise with state-of-the-art manufacturing facilities in the US, and offices
around the world. With over 2,000 products PeproTech has developed and refined innovative protocols to ensure quality, reliability
and consistency. The licensed medium is marketed under both PeproTech’s PeproGrow and the Company’s ACSelerate MAX
brands.
On August 2,
2011, the Company was issued US patent number 7,989,205 for “Cell Culture Media, Kits and Methods of Use.” The granted
claims include media variations for cellular differentiation of ADSCs into osteoblasts (bone), chondrocytes (cartilage), adipocytes
(fat), neural cells, and smooth muscles cells in both HSA medium grade and FBS (research) grade. This patent covers both non-GMP
research grades and cGMP grades suitable for cell culture of adipose-derived stem cells. Additionally, on November 8, 2016, the
Company was granted additional claims from the continuation U.S. Serial No. 13/194,900 issued as a new Patent Serial No. 9,487,755.
Prior to the issuance the Company filed a continuation in part (CIP) containing additional claims related to our ongoing media
development.
The Company
supports its marketing efforts by making ATCELL™ samples available for research purposes and for
internal product development through our collaborative and partnering programs. We believe these cell lines may be suitable for
use by private researchers and universities for use in pre-clinical trial studies and in-vitro research. We also believe that
the Company’s ability to provide these materials for these research and development collaborators, partners and other third
parties extends the Company’s ability to become a primary source of clinical grade materials and services necessary to support
approved applications and treatments.
The Company has created several
versions of its ACSelerate™ cell culture media including:
| · | ACSelerate-MAX™
-xeno serum free cell culture media, |
| · | ACSelerate-SFM™
- animal serum free cell culture media, |
| · | ACSelerate-LSM™
- low FBS (0.05%) cell culture media, |
| · | ACSelerate-CY™-
for differentiation of ATCELL™ into chondrocytes (ATCELL-CY™), |
| · | ACSelerate-OB™-
for differentiation of ATCELL™ into osteoblasts (ATCELL-OB™) |
| · | ACSelerate-AD™
- for differentiation of ATCELL™ into adipocytes (ATCELL-AD™) |
| · | ACSelerate-MY™-
for differentiation of ATCELL™ into myocytes (ATCELL-MY™) |
| · | ACSelerate-CP™-
non-DMSO (Dimethyl Sulfoxide) cellular cryopreservation media |
| · | ACSelerate-TR™-
sterile transportation medium designed to maintain the viability of the tissue during
the shipment of adipose tissue to our processing facility. |
The Company
continues to optimize additional versions of ACSelerate™ media that may be necessary for use in future
applications. On December 31, 2014 the Company filed a patent application for an advanced medium formulation titled Human Albumin
Serum for Cell Culture Medium for Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799) representing the initial results
of this ongoing optimization program. On December 31, 2015, the Company converted the provisional patent application to an international
PCT filing (PCT/US/68350) under the title Human Serum for Cell Culture for Growth of Human Adipose Stromal Cells. To date the
patent has also been filed in the following additional countries: China and Hong Kong, India, Mexico, Brazil, the European Union,
US, Japan, Thailand, Brazil, Russia, Australia, New Zealand, Canada, and Saudi Arabia.
Contract
Manufacturing, Autokine-CM® Anti-Aging, Autologous Skin Care Product Line– Under agreement with
Personal Cell Sciences Corp. (PCS), we manufacture the key ingredient Autokine-CM® (autologous adipose derived
stem cell conditioned medium) for PCS’ U-Autologous™ anti-aging topical formulation. Every product is genetically
unique to the patient and custom blended, deriving its key ingredients from the individual client’s own adipose derived
stem cells. The Company provides its CELLECT® Tissue Collection service to collect the required tissue to manufacture
the U-Autologous™ product and processes it under the same Standard Operating Procedures (SOP’s)
that it developed for the ATGRAFT™ and ATCELL™ processing services utilizing ACSelerate™
cell culture media. The Company receives collection, processing and storage fees and earns a royalty on all U-Autologous
product sales. The utilization of the Company’s core services in its contract manufacturing relationships provides opportunities
for the Company to promote ATGRAFT™ and ATCELL™ products.
CRYO’s
contract manufacturing services can be extended to develop custom and/or white label products and services for both local and
global cosmetic and regenerative medicine companies, physicians, wellness clinics and medical spas. The Company intends to expand
its relationships and contract manufacturing regionally through its physician networks and globally through its International
Licensing Program.
International
Licensing Program – COVID RISK FACTOR
The development
of our products could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious
disease like the recent outbreak of COVID-19. For example, as a result of measures imposed by the governments in regions affected
by COVID-19 businesses have been suspended due to quarantines or “stay at home” orders intended to contain this outbreak.
Furthermore, many patients had concerns about making hospital and physician office visits for fear of contracting the virus. These
factors may have direct adverse impact on our ability to enroll participants in our clinical trial programs. In addition, travel
restrictions, stay-in-place orders and other measures including information control. specifically in Asian countries, such as
China, imposed by governmental agencies and health organizations to prevent the spread of COVID-19 and protect the citizenry,
have had an adverse impact on the flow of information, goods and services between nations. The supply disruptions have resulted
in shortages of goods and materials. This could also impact our ability to produce the products we need to conduct our clinical
trials. In addition, these measures have resulted in delays to the regulatory process, which may also have an adverse impact on
our business. We are still assessing our business plans and the impact COVID-19 may have on our ability to advance the development
of our drug candidates or to raise financing to support the development of our drug candidates, we cannot assure you that we will
be able to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment
generally or in our sector in particular.
The Company
is aware many jurisdictions outside the US currently permit cellular therapies and regenerative medicine applications. The Company
has targeted these jurisdictions for licensing its technologies to local operators and facilities and receives numerous unsolicited
international inquiries concerning the sale or licensing of our SOPs, culture medium products and tissue banking services for
use in the Regenerative Medicine and Medical Tourism Markets. The Company believes that the inquiries to date are a result of
the global boom in Medical Tourism, Regenerative and Personalized Medicine and the slow pace of approval of cellular therapies
and regenerative medicine applications in the US. To address the Company’s sales, marketing and branding opportunities globally,
the Company has included in its international licensing program metrics to vet potential partners and collaborators and their
facilities. To date we have licensed our technologies in Hong Kong, China, and Thailand.
The
Company believes it can take advantage of the significant growth of the global cellular therapy market through its international
licensing and marketing efforts. A recently published study by Transparency Market Research predicts the global market for stem cells is expected to register a healthy CAGR of 13.8% during the period from 2017 to 2025 to become
worth US$270.5 bn by 2025.
(https://www.transparencymarketresearch.com/pressrelease/stem-cells-market.htm)
China
On July
12, 2018 the Company announced the national launch of its ATGRAFTTM tissue collection, processing and storage
technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in China. The Company’s management
team traveled throughout southeast China with the management and marketing team of Baoxin to present the ATGRAFTTM platform
to leading plastic and cosmetic surgery hospitals in Shenzhen, Nanning, Guangzhou, Guangxi and Changsha. Additionally, Mr. Arnone
and Mr. Dudzinski attended the signing of investment documents between Baoxin and Chinese government and Banking officials in
Shenzhen, China as well as the official launch presentation and evening gala hosted by Baoxin in Shenzhen.
The China launch
activities were in support of the Company’s licensing and supply agreement with Baoxin, under which Baoxin agreed to pay
the Company a minimum annual guarantee against a fixed fee per process and purchase certain necessary consumables from CRYO required
for the collection, processing and storage of the collected adipose tissue. Under the terms of the Agreements signed in Fiscal
2018, the Company invested in and currently holds five percent (5%) of Baoxin shares. Additionally, Mr. Arnone and Mr. Dudzinski
were elected to serve as Directors of Baoxin during their visit to Shenzhen, China. Mr. Arnone resigned as a board Member of Baoxin
in 2019. Mr. Dudzinski continues to serve the Company’s interests as a board member of Baoxin.
During Fiscal
2020 and 2021, due to the continuing effects of the COVID pandemic and associated government policies and regulations Baoxin suspended
its processing activities. Baoxin is an emerging biotechnology company in China that has relied to date on investment to fund
operation and build their facilities, as is typical for these types of companies. During 2020 and 2021, Baoxin developed a new
state of the art facility with sizable clean rooms and biomaterial storage space. The facility was completed in February 2021
and officially opened in May of 2021. Unfortunately, due to the continued effects of COVID and the appearance of new variants
Baoxin has been unable to restart operations and its marketing programs.
Hong
Kong
On June
30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the Company’s
Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service for Hong Kong.
The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the Company. The
Company and HIT reached further agreement to extend their relationship on a non exclusive basis to include HIT’s cord blood
laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The HIT agreement
includes initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase CRYO ACSelerate™
storage media, CELLECT™ collection and transportation kits as well as other American CryoStem products necessary for clinical
adipose tissue processing and storage at the Shenzhen facility. The final master licensing agreement is for a period of 5 years
with renewal options and was executed between the parties on September 24, 2014. The HIT license has been extended per the terms
of Schedule B of the Term Sheet, dated June 30, 2014, for an additional 3-year period to June 30, 2023.
In 2017
as part of the Company’s transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution
rights granted to HIT under its 2014 agreement to Baoxin. The Company was paid of fee of US$100,000 in the transaction and was
provided with an initial ownership position in a planned Regenerative Treatment Center to be established by HIT in Hong Kong.
The current
pandemic, changes in Chinese regulations and policies regarding Hong Kong, recent political unrest and the inability of Chinese
citizens to cross the border between Hong Kong and China have significantly curtailed the ability of HIT to implement its business
plans to utilize the Company’s technology and purchase the associated consumables.
Thailand
On April
5, 2018 the Company announced further expansion of its global laboratory and cellular technology footprint by entering into an
agreement to license its ATGRAFT™ and ATCELL™ adipose tissue (fat) processing and storage technologies with CRYOVIVA
(Thailand) Ltd., a Bangkok, Thailand based Cord Blood processing and storage facility. CRYOVIVA, Thailand, currently offers collection,
processing and storage of Cord Blood derived biologics to patients throughout Thailand and Southeast Asia.
American
CryoStem licensed to CRYOVIVA (Thailand) Ltd., established in 2007, the rights to utilize the Company’s Standard Operating
Procedures (SOP’s) to create and market the Company’s ATGRAFT™ tissue storage service and ATCELL™ adipose
derived stem cell processing and storage services in Thailand. The financial terms generally, call for the payment of certain
training fees and, a percentage of the gross revenue subject to annual minimum payments generated from our products. Additionally,
the Agreement calls for the purchase of CRYO consumable products required for ATGRAFT™ and ATCELL™ sample processing
including CRYO’s ACSelerate™ non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue
collection kit, and ACSelerate – Max™ cell culture medium.
The current
COVID pandemic has delayed CRYOVIVA’s scheduled launch of its marketing campaign several times and unfortunately, CRYOVIVA
suspended their tissue banking operations in 2020 and 2021. We are currently in discussions with them concerning the restart of
their operations and initiation of their marketing program for calendar 2022 although there is no certainty that the effects of
the pandemic will ease sufficiently to do so in the near term.
Japan
In June 2015,
The Company entered into a licensing agreement with CellSource, LTD. (“CellSource”) located in Shibuya, Tokyo Japan
for the licensing of our AGRAFT™ tissue processing and storage technology and the purchase of our CELLECT®
collection products which include our ACSelerate-TR™ transport medium. The non-exclusive agreement expired
in June of 2020.
Collaborations
/ Partnering Opportunities / Acquisitions
The Company
recognizes the benefits of collaborations with industry and university partners and has increased its efforts to attract and develop
these relationships. Strategically, the Company believes that with a current approved IND application with the US FDA and the
strength of its granted and pending patent portfolio, that it can attract new partners and collaborative arrangements These relationships
are generally covered by Confidential Non-Disclosure Agreements and include Material Transfer Agreements (MTA) under which the
Company may supply ATCELL™ and/or ACSelerate™ medium products for evaluation, testing, and the
development of new cellular therapy applications. The Company has entered into Non-Disclosure and Material Transfer Agreements
with a number of potential collaborators. No assurance can be given that these efforts or relationships will ultimately result
in new technology for future commercialization.
The Company
has developed a strategy to expand the opportunities to commercialize its products by increasing its ability to identify and pursue
collaborative and partnering opportunities by cultivating and engaging new relationships with biotechnology companies engaged
in similar or complimentary development activities. Included in this strategy is the increased recruitment of consultants and
other biotechnology experts to identify potential collaborators, partners and acquisition candidates. The Company’s goal
is to develop additional standardized cellular processing models to support FDA IND treatment protocol approvals. This may be
accomplished by further identifying, and validating certain mechanisms and characteristics of mesenchymal stem cells related to
regulating modulation of immune response(s) and promoting tissue regeneration and stability (homeostasis) for the treatment of
traumatic injuries, inflammation, auto-immune diseases, and brain and organ damage associated with viruses such as SARS-CoV-2
(COVID-19), including, the expanding group of patients dealing with the chronic and debilitating symptoms of what is commonly
termed “Long Haul COVID” or “Long COVID.” To date the Company has completed agreements with the following
entities for development of new products and cellular therapy targets although the successful commercialization of new products
and therapies resulting from these activities cannot be assured or predicted at this time.
WRNMMC
On December
3, 2020, the Company entered into a Cooperative Research and Development Agreement (CRADA) with Walter Reed National Military
Medical Center (WRNMMC), the nation’s largest and most renowned joint military medical center serving the Army, Navy, Air
Force and Marines located in Bethesda, Maryland.
A Cooperative
Research and Development Agreement (CRADA) is a written agreement between a government agency and a non-federal entity that allows
the federal government and its non-federal partners to optimize and maximize use of their resources, exchange technical expertise
in a protected fashion, share intellectual property resulting from collaborative effort, and speed commercialization of federally
developed technology. The Company has committed to provide materials including ATCell samples and Umbilical Cord stem cells, ACSelerate
Max Growth and differentiation mediums testing and other processing supplies, processing and testing methods. The Company maintains
the rights to commercialize all technology developed under this CRADA Agreement. The technology is centered on creating in vitro
(test tube) assays to standardize and commercialize new treatment protocols; optimizing quality control measures; and developing
standardized protocol potency assays for precise therapy dosing. Management believes that these new assays can be commercialized
to generate substantial sales and licensing revenues and create value for the Company’s stakeholders.
Through
the Collaboration entitled “Stem Cells for Regeneration and Medical Innovation, a multi-faceted and multi-staged research
project with WRNMMC Biomedical Laboratories, the Company plans to develop, validate and standardize baseline and assay metrics
to identify mesenchymal stem cell (MSC) characteristics and quantities across various cell biomarkers and exosome expressions
data sets for its ATCell™ product for biologics developers’ use worldwide. The focus of the Collaboration is to enable
the creation of predictive and prescriptive cellular models which will further enhance American CryoStem’s mission as a
premier biologics’ manufacturer and developer and be highly valuable to the medical community, biotech developers, and the
public at large.
WRNMMC
is part of The Military Health System (MHS) which is the enterprise within the United States Department of Defense
that provides health care to active duty, Reserve component and retired U.S. Military personnel and
their dependents.
The missions
of the MHS are complex and interrelated: To ensure America’s 1.4 million active duty and 331,000 reserve-component
personnel are healthy so they can complete their national security missions.
| · | To
ensure that all active and reserve medical personnel in uniform are trained and ready
to provide medical care in support of operational forces around the world. |
| · | To
provide a medical benefit commensurate with the service and sacrifice of more than 9.5
million active-duty personnel, military retirees, and their families. |
The MHS
also provides health care, through the TRICARE health plan, to:
| · | Active-duty
service members and their families, |
| · | Retired
service members and their families, |
| · | Reserve
component members and their families, |
| · | Surviving
family members, |
| · | Medal
of Honor recipients and their families |
| · | Some
former spouses, and |
| · | Others
identified as eligible in the Defense Enrollment Eligibility Reporting System |
The MHS
has a $50+ billion budget and serves approximately 9.5 million beneficiaries. The MHS employs more than 144,217 in 51 hospitals,
424 clinics, 248 dental clinics and 251 veterinary facilities across the nation and around the world, as well as in contingency
and combat-theater operations worldwide.
Muscular
Dystrophy
In March
2020, the Company entered into a collaborative agreement with RACEMD, a 501c(3) charitable organization focused on the improvement
of treatments and therapies for patient with Duchenne Muscular Dystrophy. Duchenne muscular dystrophy (DMD) is a severe type of
muscular dystrophy that primarily affects boys. Muscle weakness usually begins around the age of four and worsens quickly. Muscle
loss typically occurs first in the thighs and pelvis followed by the arms. Most affected individuals are unable to walk by the
age of 12. Some may have intellectual disability. DMD affects about one in 3,500 to 6,000 males at birth. It is the most common
type of muscular dystrophy. The life expectancy is 26; however, with excellent care, some may live into their 30s or 40s. The
disease is much rarer in girls, occurring approximately once in 50,000,000 live female births.
The terms
of the Agreement call for the Company to work with RACEMD to develop clinical therapies and studies focused on mitigating the
effect of the disease, improve muscle strength and quality of life in the short term and to build upon successes to seek a more
curative cellular therapy solution to extend life expectancy over the long term. The Company is in the final stages of completing
its plans with RACEMD to submit an initial safety study for use of ATCell as the treatment protocol and expects to make its initial
filing to FDA in early 2022. RACEMD has committed to funding the initial studies and to assist the Company in creating non-dilutive
funding opportunities for larger advanced studies in the future.
PeproTech,
Inc.
On April 4,
2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech manufactures,
markets and distributes the Company’s ACSelerate – Max cell growth medium. The Company and PeproTech completed the
optimization and scale up manufacturing studies and the licensed medium is marketed under both PeproTech’s, PeproGrow and
the Company’s ACSelerate MAX brands. PeproTech plans to leverage its current global sales relationships which reach a majority
of all research laboratories worldwide to maximize distribution of the optimized media while the Company will concentrate its
sales efforts on its collaborative and international licensing partners. Additionally, the Company and PeproTech are discussing
the licensing of additional American CryoStem patented media and products for production and distribution by PeproTech, any additional
media licensed to PeproTech will undergo similar optimization and scale up production testing prior to being released for sale.
The Company is in ongoing discussion with PeproTech related to increasing the visibility and sales of the medium and the optimization
of additional medium products focused on the differentiation of adult stem cells that are synergistic to the cell culture medium.
On January 5th, 2022, Thermo Fisher Scientific completed its acquisition of PeproTech for $1.85 billion.
Intellectual
Property
From the Company’s
formation, our strategy has been to invest time and capital in intellectual property protection. This strategy is intended to
strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing our IP
portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative
partnerships with third parties. Our intellectual property portfolio currently includes four issued U.S. patents (No. 7,989,205,
and Serial No. 9,487,755, Cell Culture Media Kits and Methods of Use, “Systems and Methods for the Digestion of Adipose
Tissue Samples Obtained from a Client for Cryopreservation” US 10,154,664 issued December 18, 2018, and “Business
Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079,
issued July 3, 2018); and has additional pending patent applications which are detailed in the following chart:
Title |
Technology |
Patent
/ Application Number |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Covers 12 types of Medium |
US Patent No. 7,989,205
Issued August 2, 2011 |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Additional claim Granted
for all 12 medium types |
US Patent No. 9,487,755
Issued November 8, 2016
Continuation of US Patent
No. 7,989,205 |
Cell
culture media, Kits, and Methods of Use |
ACS cell culture media line
Continuation of Granted Patent
covering additional improvements |
US Patent Application No.
15/344,805
Continuation of US Patent
No. 7,989,205 |
Human
serum for cell culture medium for growth of human adipose stromal cells |
A cell culture medium for
growth of human adipose stromal cells for human and therapeutic applications
|
PCT/US15/68350
30 month National Phase entry
date of June 31, 2017, additional International Filings for China, India, the European Union, Saudi Arabia, Israel, Brazil,
Mexico, Australia and New Zealand. |
A
Business Method for Collection, Cryogenic Storage and Distribution of a Biological Sample Material |
Company Core Tissue Collection
Processing and Storage Methodology
Covers CELLECT Kit, Transport
and Cryopreservation Medium for ATGRAFT and ATCELL Products |
US Serial No 13/194,900
Filed June 6, 2010
Patent Application Published
December 5, 2013 Claims Granted
US Patent No. 10,014,079. Continuation filed upon issuance. |
A
Business Method for Collection, Cryogenic Storage and Distribution of a Biological Sample Material |
Company Core Tissue Collection
Processing and Storage Methodology
Continuation covering Improvements |
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 13/194,900 imminent (PCT
Application filing planned) |
Systems
and Methods for the Digestion of Adipose Tissue Samples Obtained From a Client For Cryopreservation |
Adipose Tissue Digestion
Laboratory Processing Methods
|
U.S.
Serial No. 13/646,647 filed
October 6, 2011, Claims Granted US Patent No.10, 154,664. Continuation filed upon issuance. |
Systems
and Methods for the Digestion of Adipose Tissue Samples Obtained From a Client For Cryopreservation |
Adipose Tissue Digestion
Laboratory Processing Methods
|
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 13/646,900 imminent (PCT
Application filing planned) |
Compositions
and Methods for collecting, Washing, Cryoprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous Adipose
Transfer Procedures” |
Company
Adipose Tissue Storage Platform for Cosmetic Procedures Covers the core processing adipose tissue for ATGRAFT adipose tissue
dermal filler product |
U.S. Serial No. 14/406,203
National Phase entry date of December 5, 2014 based on PCT/US2013/044621
European Union Application
No. EPI3800847.9
China Application No. 2013800391988 |
Compositions
and Methods for “Collecting, Washing, Cryoprocessing, Recovering and Return of Lipoaspirate to Physicians for Autologous
Adipose Transfer Procedures” |
Company Adipose Tissue Storage
Platform for Cosmetic Procedures
Covers additional claims
related to ATGRAFT process not included in original application |
Developed
Improvement established; Divisional, Continuation-In-Part claiming priority to US Serial No. 14/406,203 imminent (PCT
Application filing planned) |
Systems
and methods to isolate and expand stem cells from urine |
Isolation of stem cells from
urine of patients for use in research and therapeutics
|
US
Serial Nos. 62/335,426 and 62/439,106 |
Additionally,
the Company has in-licensed the following IP:
Patent
Title |
Use
of Patent |
Application
# |
Cosmetic compositions
including tropoelastin isomorphs
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#5,726,040 |
Cosmetic compositions
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,451,326 |
Recombinant hair
treatment compositions
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO
#6,572,845 |
Wound healing compositions
and methods using tropoelastin and lysyl oxidase
(wound healing) |
Protein
Genomics and American CryoStem (Autogenesis) collaboration |
USPTO:
#6,808,707 |
Business methods,
processes and systems for collection, cryogenic storage and distribution of cosmetic formulations from an obtained stem
cell based a biological
|
Personal
Cell Sciences and American CryoStem collaboration |
USPTO
application #61/588,841 |
Trademarks
In addition
to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office: American CryoStem®,
CELLECT® and ATGRAFT™. We plan to obtain additional registered trademarks for our future
products, slogans and themes to be used in our marketing initiatives, including, for example, ACSelerate-SFM™,
ACSelerate- LSM™ and ATCELL™. The Company has also secured a number of online
domain names relevant to its business, including www.americancryostem.com and www.acslaboratories.com.
Market
Size and Opportunities
By leveraging
our proprietary Adipose Tissue Processing Platform, the Company is working to address multiple high growth, multi-billion dollar
market opportunities prevailing within the Regenerative Medicine, Cosmeceuticals, Medical Tourism and Cell Therapy markets. The
Company regularly reviews independent market research to gauge the market size of its intended domestic and international markets
and to identify additional areas within these markets where the Company’s laboratory products, cell culture medium, and
tissue and cellular processing services can be marketed, sold and/or licensed.
Global
Stem Cells Market
A
report from Transparency Market Research (TMR) forecasts that the global stem cells market is expected to register a
healthy CAGR of 13.8% during the period from 2017 to 2025 to become worth US$270.5 bn by 2025. Depending upon geography, the key
segments of the global stem cells market are North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa.
At present, North America dominates the market because of the substantial investments in the field, impressive economic growth,
rising instances of target chronic diseases, and technological progress. As per the TMR report, the market in North America will
likely retain its dominant share in the near future to become worth US$167.33 bn by 2025.
A
report published by Markets and Markets Research in 2017 titled “Cell Expansion Market by Product (Reagent, Media,
Flow Cytometer, Centrifuge, Bioreactor), Cell Type (Human, Animal), Application (Regenerative Medicine & Stem Cell Research,
Cancer), End user (Research Institute, Cell Bank) - Global Forecasts to 2021”. The report states: “The
global cell expansion market is expected to reach USD $18.76 Billion by 2021 from USD $8.34 Billion in 2016 at a CAGR of 17.6%.
Geographically, the cell expansion market is dominated by North America, followed by Europe, Asia, and the Rest of the World (RoW).
Growth in the North American segment is primarily driven by increasing incidence of chronic diseases in the North American countries.
According to the American Medical Association and the American Medical Group Association, more than 50% of Americans suffered
from one or more chronic diseases in 2012; the number of Americans suffering from chronic diseases was around 133 million in 2005
and this figure is expected to reach around 157 million by 2020. With this significant growth in the number of patients suffering
from chronic diseases, the market for cell expansion is expected to grow in this region in the coming years.
Regenerative
Medicine Market
The Global
Translational Regenerative Medicine market is expected to grow significantly over the forecast period. The Global Translational
Regenerative Medicine market was valued at $5.8bn in 2016. Vision gain forecasts this market to increase to $14.5bn in
2021. The market is estimated to grow at a CAGR of 19.9% in the first half of the forecast period and 17.7% from 2016 to 2027.
Cell Culture
Market
Cell Culture
Market Global Forecast to 2023, according to “marketsandmarkets”
the cell culture market is expected to reach USD $26.28 Billion by 2023 from USD $15.32 Billion in 2018, at a CAGR of 11.4%. Growth
in this market is driven by the growing number of regulatory approvals for cell culture-based vaccines, increasing demand for
monoclonal antibodies (mAbs), funding for cell-based research, growing preference for single-use technologies, and the launch
of advanced cell culture products.
Marketing
and Distribution
The key objective
of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for adipose tissue
collection, cell processing and cryogenic storage, research/commercial uses and therapeutic applications of adipose tissue within
the current regulatory framework. The combination of a traditional sales approach supported by continuous internal and external
marketing program(s) is closely coordinated with the expansion of our laboratory processing capabilities. Our initial marketing
efforts intend to disseminate current and future uses of adipose tissue and adult stem cells which support our business model,
products and services. We intend to continue to employ both print advertising and social media sales campaigns. In addition, we
plan to continue to utilize key leaders, and early adopters in the medical community as a marketing resource to enhance awareness
of our proprietary, patented products and services and to increase the number of surgeons who join our network, university and
private collaboration and consumers who use our products and services.
We plan to continue
direct marketing programs focused on reaching regenerative medicine physicians and plastic and cosmetic surgeons to join our network
of providers that offer our services to their patients. This marketing initiative has been implemented using a traditional sales
approach common to the pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing
activities is being strategically and tactically expanded using a combination of in-house sales personnel and outside independent
channels.
Our plan, capital
permitting, provides for a comprehensive integrated marketing approach using various traditional and new media, such as the Internet,
social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and promote awareness of
our Company and our branded products and services. The essence of this targeted strategy is to reach the end-users as quickly
as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside marketing resources
and trade groups to increase the number of surgeons willing to offer our products and services to their patients.
Development of Regional
U.S. Markets
Physician
Network
Physician
Network - The Company continues to develop regional relationships to leverage its new products and services through existing
cosmetic surgery and regenerative medicine practices. The Company continues to develop and expand its network of physicians seeking
to adopt its products and services, initially focusing on surgeons performing liposuction, tissue transfer and regenerative procedures
involving the use of adipose tissue. The Company intends to continue expanding its efforts to medical professionals interested
in tissue storage and Regenerative Medicine applications utilizing ASDCs and establish itself as a primary source of collection,
processing, and preparation of cellular therapies as they are developed and approved for patient use by the FDA.
Development
of International Markets
International
Licensing Program – Globally, many jurisdictions outside the US permit the use of adipose tissue based cellular
therapies and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing
of our products and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global
boom in Medical Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US.
To address these inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed
and is offering an International Licensing Program.
The program
is designed to permit the licensing of the Company’s products and services to organizations that meet the Company’s
financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering
and joint venturing. Marketing efforts to date have been to clinics, 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 and patent pending processing and laboratory operational
methodologies contained in our Standard Operating Procedures, Training, and Continuous Quality Management, Testing Program, and
Laboratory Operations manuals.
Licensing
programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI
agreement is designed for due diligence and facility qualifications purposes. The Company receives an initial fee under the agreement
which may or may not be credited toward future royalty payments. Following evaluation of the prospective licensee the Company
will enter into a final Agreement which outlines all upfront fees, minimum royalties and consumable purchase obligations of the
Licensee.
Significant
to our international development activities is the global expansion of the American CryoStem branded services and patented products,
as well as the expansion of the Company’s services, technology and products as the core platform to implement cellular therapies
and regenerative medicine.
Baoxin
Asia Pacific Biotechnology (Shenzhen) Co. Ltd. On July 12, 2018 the Company announced the national launch of CRYO’s ATGRAFTTM tissue
collection, processing and storage technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. (“Baoxin”) in
China. The management team traveled throughout southeast China with the management and marketing team of Baoxin to present the
ATGRAFTTM platform to leading plastic and cosmetic surgery hospitals in Shenzhen, Nanning, Guangzhou, Guangxi
and Changsha. The China launch activities are in support of the Company’s previously announced licensing and supply agreement
with Baoxin, under which Baoxin will pay the Company a minimum annual guarantee against a fixed fee per process and purchase certain
necessary consumables from CRYO required for the collection, processing and storage of the collected adipose tissue. Under the
terms of the Agreements signed in Fiscal 2018, the Company invested in and currently holds five percent (5%) of Baoxin shares.
Additionally, Mr. Arnone and Mr. Dudzinski were elected to serve as Directors of Baoxin during their visit to Shenzhen, China.
During 2019 Mr. Arnone resigned from the board of Baoxin.
During
Fiscal 2020 and 2021, due to the continuing effects of the COVID pandemic and associated government policies and regulations Baoxin
suspended its processing activities. Baoxin is an emerging biotechnology company in China that has relied to date on investment
to fund operation and build their facilities, as is typical for these types of companies. During 2020 and 2021, Baoxin developed
a new state of the art facility with sizable clean rooms and biomaterial storage space. The facility was completed in February
2021 and officially opened in May of 2021. Unfortunately, due to the continued effects of COVID and the appearance of new variants
Baoxin has been unable to restart operations and its marketing programs.
See
Note 3, Note 13 and Note 14 for additional information.
Health
Information Technology Company, LTD (Hong Kong) - On June 30, 2014 the Company granted Health Information Technology Company,
LTD (“HIT”) exclusive rights to utilize the Company’s Standard Operating Procedures (SOP’s) to market
the Company’s ATGRAFT™ tissue storage service for Hong Kong. The Agreement calls for upfront fees, royalties and the
purchase by HIT of certain consumables manufactured by the Company. The Company and HIT have reached further agreement to extend
their relationship on a non-exclusive basis to include HIT’s cord blood laboratory located in Shenzhen, Guangdong Province,
one of China’s most successful Special Economic Zones. The HIT agreement includes initial upfront fees and royalty payments
for predetermined gross revenue volumes. HIT will also purchase CRYO ACSelerate™ storage media, CELLECT™ collection
and transportation kits as well as other American CryoStem products necessary for clinical adipose tissue processing and storage
at the Shenzhen facility. The final master licensing agreement is for a period of 5 years with renewal options and was executed
between the parties on September 24, 2014. The HIT license has been extended per the terms of Schedule B of the Term Sheet, dated
June 30, 2014, for an additional 3 year period to June 30, 2023.
In 2017
as part of the Company’s transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution
rights granted to HIT under its 2014 agreement to Baoxin. The Company was paid a fee in the transaction and was provided with
an initial ownership position in a planned Regenerative Treatment Center to be established by HIT in Hong Kong.
The current
pandemic, changes in Chinese regulations and policies regarding Hong Kong, recent political unrest and the inability of Chinese
citizens to cross the border between Hong Kong and China have significantly curtailed the ability of HIT to implement its business
plans to utilize the Company’s technology and purchase the associated consumables.
CRYOVIVA
(Thailand), Ltd. - On April 5, 2018 the Company announced further expansion of its global laboratory and cellular technology
footprint by entering into an agreement to license its ATGRAFT™ and ATCELL adipose tissue (fat) processing and storage technologies
with Cryoviva (Thailand) Ltd., a Bangkok, Thailand based Cord Blood processing and storage facility. Cryoviva, Thailand, currently
offers collection, processing and storage of Cord Blood derived biologics to patients throughout Thailand and Southeast Asia.
American CryoStem
has licensed to Cryoviva (Thailand) Ltd., established in 2007, the rights to utilize the Company’s Standard Operating Procedures
(SOP’s) to create and market the Company’s ATGRAFT™ tissue storage service and ATCELL™ adipose derived
stem cell processing and storage services in Thailand. The financial terms generally, call for the payment of certain training
fees and, a percentage of the gross revenue subject to annual minimum payments generated from our products. Additionally, the
Agreement calls for the purchase of CRYO consumable products required for ATGRAFT and ATCELL sample processing including CRYO’s
ACSelerate™ non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue collection kit, and ACSelerate
– Max™ cell culture medium.
CellSource
Tokyo, Japan - In the second quarter of 2015 the Company entered into negotiations with CellSource, LLC in Tokyo, Japan for
the licensing of its ATGRAFT™ products and services and on June 2, 2015 the Company and Cell Source entered into
an initial term sheet licensing the ATGRAFT™ technology to CellSource for Japan. The non- exclusive agreement
expired in June of 2020.
Corporate
Information
Our
principal executive offices are located at 1 Meridian Road, Eatontown, New Jersey 07724 and our telephone number is (732) 747-1007.
Our website is www.americancryostem.com. We also lease and operate a tissue processing laboratory at Princeton Corporate
Plaza in Monmouth Junction NJ. Our laboratory website address is www.acslaboratories.com.
Available
Information
We
file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website
at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information
on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.
Going
Concern
As of the date
of this annual report, there is substantial doubt regarding our ability to continue as a going concern as we have not generated
sufficient cash flow to fund our proposed business.
We have suffered
recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from our business
operations or successfully raised the financing required to expand our business. As a result of these and other factors, our independent
auditor has expressed substantial doubt about our ability to continue as a going concern. Our future success and viability, therefore,
are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional
capital may have a material and adverse effect upon us and our shareholders.
Our plans with
regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital
deficiency, and (ii) implementing a plan to generate sales of our proposed products. Our continued existence is dependent upon
our ability to resolve our liquidity problems and achieve profitability in our current business operations. However, the outcome
of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments
that might result from the outcome of these risks and uncertainties.
Results
of Operations - Three Months
The
Company’s revenue for the quarter ended December 31, 2021, decreased to $61,185 versus $126,600 in the same period of Fiscal
2020.
Operating
expenses increased to $396,800 for the quarter ended December 31, 2021, from $171,852 for the same period in Fiscal 2020. The
Company incurred increases in its Research and Development efforts due to the initiation of the Company’s FDA approved clinical
study for Post-Concussion Syndrome and Professional Fees (primarily legal) to prepare for an upcoming financing and increased
stock compensation expenses.
Administrative
expenses increased to $324,322 from $106,529. The increase is primarily related to the development of additional clinical studies
for the Company’s ATCell products.
Interest
expense for the quarter ending December 31, 2021, increased to $26,278 compared to $24,483 for the same period in 2020. The
interest expense for the quarters ended December 31, 2021, and 2020 includes an additional $3,413 and $8,191 respectively for
the effects of the beneficial conversion feature associated with debenture holders.
Net
loss for the first quarter of Fiscal 2021 was $354,477 compared to a net loss of $46,034 for the same period of Fiscal 2020. The
increase in the net loss for quarter versus the same period in 2020, was due to increased expenses in Research and Development,
primarily Clinical Study efforts.
Liquidity
and Capital Resources
As
of December 31, 2021, the Company had a cash balance of $103,027, compared to $8,244 at September 30, 2021. We used 532,435
of our cash for operations and $9,680 for investing activities, in new patents development. The main sources of cash provided
by financing activities included new equity issuances totaling $665,000
Accounts
Receivable increased to $83,736 at December 31, 2021 from $78,782 at September 30, 2021 mainly due to an increase in receivables
storage and processing fees.
Convertible debt increased to $709,544 on December 31, 2021, versus $706,131 as of September 30, 2021. This increase was due to the effects of amortizing the beneficial conversion feature of the notes. See Note 7. Debt reported in
the financial statements.
The
Company will continue to focus on its financing and investment activities, but should we be unable to raise sufficient funds,
we will be required to curtail our operating plans or cease them entirely. We cannot assure you that we will generate the necessary
funding to operate or develop our business. Please see “Cash Requirements” above for our existing plans with respect
to raising the capital we believe will be required. In the event that we are able to obtain the necessary financing to move forward
with our business plan, we expect that our expenses will increase significantly as we attempt to grow our business. Accordingly,
the above estimates for the financing required may not be accurate and must be considered in light these circumstances.
There
was no significant impact on the Company’s operations as a result of inflation for the nine months ended December 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 would enable us to satisfy our cash requirements for a period of the next 12 to 24 months.
In order to finance further market development with the associated expansion of operational capabilities for the time period discussed
above, we will need to raise additional working capital. However, we cannot assure you we can attract sufficient capital to enable
us to fully fund our anticipated cash requirements during this period. In addition, we cannot assure you that the requisite financing,
whether over the short or long term, will be raised within the necessary time frame or on terms acceptable to us, if at all. Should
we be unable to raise sufficient funds we may be required to curtail our operating plans if not cease them entirely. As a result,
we cannot assure you that we will be able to operate profitably on a consistent basis, or at all, in the future.
In order to
move our Company through its next critical growth phase of development and commercialization and to ensure we are in position
to support our research collaborations and market penetration strategies, Management continues to seek new investment into the
Company from existing and new investors with particular emphasis on identifying the best deal structure to attract and retain
meaningful capital sponsorship from both the retail and institutional investing communities, while limiting dilution to our current
shareholders. Management also focuses its efforts on increasing sales and licensing revenue and reducing expenses.
Effects
of COVID 19
The
development of our drug candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic
or outbreak of an infectious disease like the recent outbreak of COVID-19. For example, as a result of measures imposed by the
governments in regions affected by COVID-19 businesses and schools have been suspended due to quarantines or “stay at home”
orders intended to contain this outbreak. Furthermore, many patients had concerns about making hospital and physician office visits
for fear of contracting the virus. These factors had an direct adverse impact on our ability to enroll participants in our clinical
trial programs. In addition, travel restrictions, stay-in-place orders and other measures imposed by governmental agencies and
health organizations to prevent the spread of COVID-19 and protect the citizenry, have had an adverse impact on the flow of goods
and services between nations. The supply disruptions have resulted in shortages of goods and materials. This could also impact
our ability to produce the products we need to conduct our clinical trials. In addition, these measures have resulted in delays
to the regulatory process, which may also have an adverse impact on our business. Finally, initially, the outbreak of COVID-19
led to steep declines in the Dow Industrial Average and other domestic and international stock indices at the end of February
and during March and April 2020. While the markets have rebounded nicely since then, recent concerns over the “Delta variant”
and the impact it may have on the U.S. and global economies, have led to “risk-off” sessions in the global markets.
We are still assessing our business plans and the impact COVID-19 may have on our ability to advance the development of our drug
candidates or to raise financing to support the development of our drug candidates, we cannot assure you that we will be able
to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment
generally or in our sector in particular.
Commitments
Effective
October 1, 2019, the Company adopted the provision of ASC 842 Leases. The Company determines whether a contract is or contains
a lease at inception of the contract and whether that lease meets the classification criteria of finance or operating lease. When
available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, one of the Company’s
leases does not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an
estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.
Finance
Lease
The
Company leases Equipment at its laboratory from NFS Leasing, Inc. Lease payments are $2,993.62 per month for eighteen (18) months.
The final lease payment is scheduled for January 1, 2023. When the final payment is made, the Company will own the equipment.
See Note 11. Leases in the Financial Statements.
Operating
Lease
The
Company leases its office facility, in Eatontown, New Jersey, from Eaton Holdings LLC. The lease expired on April 30, 2021 and
the Company can exercise a renewal option for an additional three years. The company has not exercised its option to renew for
36 months at $2,650 per month. The company is renting month to month at $2,650 per month, while management evaluates whether it
will renew the lease. See Note 11. Leases in the Financial Statements.
The
Company was not party to any litigation against it and is not aware of any litigation contemplated against it as of December 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, Inc. for a principal amount of $99,125 representing the outstanding balance
due to ACS Global. Inc. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may be paid in
cash or stock. The note is due and payable in full upon maturity. On March1, 2021, the note was increased by $49,000. The note
may be prepaid at any time by the Company.
From time to
time the Company makes principal payments on the note. During the three months ended December 31, 2021, the Company paid down
the note $18,000.
The principal
balance of the Note is $130,433 at December 31, 2021 and 147,775 at September 30, 2021.
The Company
entered into an agreement with ACS Global, Inc wherein the Company exchanged 1,000,000 newly created Series A Voting C The Company
entered into an agreement with ACS Global, Inc wherein the Company exchanged 1,000,000 newly created Series A Voting Convertible
Preferred Shares for 20,000,000 common shares held by ACS Global, Inc.
Terms of the
Series A Voting Convertible Preferred Shares are as follows:
| 1. | Each
Series A Share is convertible into 20 shares of American CryoStem common stock $0.001
par value, subject to any recapitalization event. |
| 2. | Stated
annual dividend of $0.20 per share payable quarterly in cash or stock at the discretion
of the Company’s Board of directors. |
| 3. | Each
preferred share shall have 20 votes on all matters subject to a Company shareholder vote. |
| 4. | Convertible
after one year at the discretion of the ACS Global board of directors. |
convertible
Preferred Shares for 20,000,000 common shares held by ACS Global, Inc.
Terms of the Series A Voting
Convertible Preferred Shares are as follows:
| 1. | Each
Series A Share is convertible into 20 shares of American CryoStem common stock $0.001
par value, subject to any recapitalization event. |
| 2. | Stated
annual dividend of $0.20 per share payable quarterly in cash or stock at the discretion
of the Company’s Board of directors. |
| 3. | Each
preferred share shall have 20 votes on all matters subject to a Company shareholder vote. |
| 4. | Convertible
after one year at the discretion of the ACS Global board of directors. |
Off
Balance Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.
Critical
Accounting Policies
We prepare financial
statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates
and assumptions that affect the amounts reported in our combined and consolidated financial statements and related notes. See
Note 1 and Note 3 to the Financial Statements for more information.
Basis
of Presentation
Our
financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles
in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred.
Management’s
Use of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Long-Lived
Assets
We
review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book
value may not be recoverable. When such factors and circumstances exist, we compare the assets’ carrying amounts against
the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts
are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash
flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period.
Statement
of Cash Flows
For
purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have
original maturities of three months or less) to be cash equivalents.
Recent
Accounting Pronouncements
The FASB
recently issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity.
The guidance
in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion
features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in
ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from
the host contract and accounted for as derivatives.
In addition,
the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and
embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing
certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments
qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring
separate accounting from the host contract.
The amendments
in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per
share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement
for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
The amendments
in ASU 2020-06 are effective for our company for fiscal years beginning after December 15, 2023, with early adoption permitted.
The Company is currently assessing the impact of these amendments on its future financial reporting.
In June
2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation
about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses
and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates.
This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company
is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting
change would not have a material effect on the financial statements.