American CryoStem Corp - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

American CryoStem Corporation

(Exact Name of Registrant as Specified in its Charter)

1 Me Road, Eatontown, NJ 07724

(Address of Principal Executive Offices)  (Zip Code)

(732) 747-1007

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 13, 2021, the issuer’s $0.001 par value Common Stock totaled 60,584,185 shares outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. CONSOLIDATED Financial StatementS

American CryoStem Corporation

Consolidated Balance Sheets

As of June 30, 2021 and September 30, 2020

See the notes to the financial statements.

American CryoStem Corporation

Consolidated Statements of Operations

For the Nine Months and the Three Months Ended June 30, 2021 and 2020

Unaudited

See the notes to the financial statements.

American CryoStem Corporation

Consolidated Statements of Cash Flows

For the Nine Months Ended June 30, 2021 and 2020

Unaudited

See the notes to the financial statements.

American CryoStem Corporation

Consolidated Statements of Changes in Shareholders’ Deficit

For the Nine Months and the Three Months Ended June 30, 2021 and 2020

Unaudited

See the notes to the financial statements.

American CryoStem Corporation

Notes to the Consolidated Financial Statements

June 30, 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 (ticker symbol: CRYO).

CRYO is a clinical stage biotechnology company, pioneering the development and delivering personalized manufactured mesenchymal stem cell therapies through its patented, “Regenerative Medicine Platform”. CRYO operates a, FDA registered laboratory, in Monmouth Junction, New Jersey, USA and has licensed laboratory facilities in Hong Kong, China and Thailand.

Through a single adipose-tissue harvest, the Company has the ability to deliver successive multiple cellular treatments of genetically matched cells to individuals. CRYO’s IP Portfolio (4 US and 2 International Patents Granted, 36 US and International Patents pending) and scalable Adipose Tissue Regenerative Medicine Platform supports a growing pipeline of biologic therapies.

CRYO is uniquely positioned to develop new adult stem cell therapies. CRYO has developed a validated robust and scalable, manufacturing processes which produces high quality adult stem cells. CRYO’s process produces adult stem cells that are consistent with the International Society for Cell and Gene Therapy (ISCT) standards for homogeneity, plasticity, self-renewal and tri-lineage differentiation. CRYO has successfully completed large animal pre-clinical and human pre-clinical safety studies of its flagship proprietary autologous adult stem cell product ATCell. CRYO plans to promote clinical candidates targeting significant unmet medical needs in osteoarthritis, wound healing, post-concussion syndrome, Duchene Muscular Dystrophy and long COVID.

CRYO, in collaboration with its strategic partners and leading academic medical institutions, is developing a clinical/non-clinical pipeline of products for additional studies for use in wound healing and orthopedic regenerative medicine treatments and application of its ATCell product.

CRYO’s team and advisors are experienced and accomplished in the use of FDA and EU accelerated approval, Regenerative Medicine Advanced Therapy, Orphan Disease and Expanded Use Authorization Regulatory Pathways.

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 serves as management and directors of both companies. All significant intercompany accounts and transactions have been eliminated in the consolidation. Management believes all amounts have been adjusted properly.

Accounting policies refer to specific accounting principles and the methods of applying those principles to present fairly the company’s financial position and results of operations in accordance with generally accepted accounting principles. The policies discussed below include those that management has determined to be the most appropriate in preparing the company’s financial statements.

The Consolidated Financial Statement Disclosures for the quarter ended June 30, 2021 are condensed and all necessary adjustments have been made. These Financial Statements should be read in conjunction with the Company’s Form 10K for the year ended September 30, 2020.

Use of Estimates - The preparation of the financial statements in conformity with United States generally accepted accounting principles (“GAAP”) uniformly applied requires management to make reasonable estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses at the date of the financial statements and for the period they include. Actual results may differ from these estimates.

Cash - For the purpose of calculating changes in cash flows, cash includes all cash balances and highly liquid short-term investments with an original maturity of three months or less. Occasionally, the Company maintains cash balances at financial institutions that exceed federally insured limits.

Accounting for Investments - The Company accounts for investments based upon the type and nature of the investment and the availability of current information to determine its value. Investments in marketable securities in which there is a trading market will be valued at market value on the nearest trading date relative to the Company’s financial reporting requirements. Investments which there is no trading market from which to obtain recent pricing and trading data for valuation purposes will be valued based upon management’s review of available financial information, disclosures related to the investment and recent valuations related to the investment’s fundraising efforts.

Revenue Recognition - Effective October 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. We recognized the cumulative effect of applying the new revenue standard to all contracts with customers that were not completed as of October 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods presented, since there is no material effect on the presentation of the financial positions or statements of operations. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, certain collaboration arrangements and financial instruments. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 did not have an impact on the amount of reported revenues. See Note 3 “Revenue Recognition” for additional information.

Advertising - Advertising Cost are reported as they are incurred. Advertising Costs were $582 and $222 for the nine months ended and the three months ended June 30, 2021; and $0 for the nine months ended June 30, 2020 and $0 for the three months ended June 30, 2020, which is included in Sales and Marketing Expenses within the Consolidated Statements of Operations.

Bad Debt Expense - The Company provides, through charges to income or loss, a charge for bad debt expense, which is based upon management’s evaluation of numerous factors. These factors include economic conditions prevailing, a predictive analysis of the outcome of the current portfolio by client, and prior credit loss experience of each client. The Company uses the information from this analysis to develop an estimate of bad debt reserve based upon the amount of accounts receivable by client at the balance sheet date. The Allowance for Doubtful Accounts was $338,504 at June 30, 2021 and $337,515 at September 30, 2020. See Note 12 for further explanation.

Inventory - Inventory is valued at lower of cost or market using the first in, first out method. Inventory consists of the disposables and materials used to create production kits, for processing of adipose tissue and cellular samples, the manufacture of Medias used to prepare the samples and cryoprotectant for the storage of the samples.

Inventory was composed of Raw Materials and Finished Goods, which was valued at $25,782 at June 30, 2021 and $20,401 at September 30, 2020.

Long Lived Assets - The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

Fixed Assets - Fixed assets are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful life of the assets, which is estimated as follows:

Schedule of Fixed Assets, Useful Life of Assets

Income taxes - The Company accounts for income taxes in accordance with generally accepted accounting principles which require an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between financial statement and income tax bases of assets and liabilities that will result in taxable income or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change during the period in deferred tax assets and liabilities.

The Company follows the accounting requirements associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the positions will be sustained upon examination by the tax authorities. It also provides guidance for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of June 30, 2021 and September 30, 2020, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. All tax returns from fiscal years 2014 to 2019 are subject to IRS and State of New Jersey audit.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates. This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting change would not have a material effect on the financial statements.

In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. This new ASU applies to companies that have collaborative arrangements, or agreements that involve two parties that actively participate in a joint operating activity. We believe our contract with Baoxin falls under the collaborative arrangements guidance in (ASC 808). ASU 2018-18 is effective for public companies for years beginning after December 15, 2019. The Company has implemented ASU 2018-18 in Fiscal 2021.

Implementation of ASU 2018-18 has not affected prior or current revenue recognition, since according to the contract we bill License Fees for the use of our intellectual property and for any products shipped.

NOTE 2. Going Concern

The accompanying consolidated financial statements have been presented in accordance with generally accepted accounting principles in the U.S., which assume the continuity of the Company as a going concern. However, the Company has incurred significant losses since its inception which raises substantial doubt about the Company’s ability to continue as a going concern. Management has made this assessment for the period one year from date of the issuance of this report. Management’s plans with regard to this matter are to continue to fund its operations through fundraising activities for the rest of fiscal 2021. The Company has recently executed a firm Letter of Intent (LOI) for a $10 million financing with EF Hutton.

NOTE 3. Revenue Recognition

Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

a. Identify the contract(s) with a customer;

b. Identify the performance obligations in the contract;

c. Determine the transaction price;

d. Allocate the transaction price to the performance obligations in the contract; and

e. Recognize revenue when (or as) the performance obligations are satisfied.

We only apply the five step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, if the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Our major sources of revenue during the reporting periods were 1. Tissue Collection, Processing and Storage revenue from various customers; 2. Annual Storage Fees for our ATGRAFT and ATCELL products, from customers who have stored in our laboratory facility; 3. Licensing and other fees from Baoxin, Cell Source, CryoViva, Pepro-Tech and Personal Cell Sciences; and 4. Products sales revenues from Baoxin and CryoViva. The adoption of ASC 606 did not have an impact on the pattern or timing of recognition of our Tissue Processing, Storage Fees or Product Sales Revenue, since:

1.             Tissue Collection, Processing & Storage Revenue is recognized on the date the process is completed and stored in our facility.

2.             Storage Fees are charged annually.

3.             Licensing and other Fees - This is based on the passage of time and as the customer has access to the license. The Company reviewed and analyzed the contract with Baoxin. Management’s judgments are:

a.             Baoxin qualifies as a customer since American CryoStem does not take significant risks or receive significant gains from the agreement.

b.            The right to use the license does not have significant standalone functionality because consulting is required by American CryoStem in order for the customer to be able to use the license.

c.             The Company has determined as of the date of this report not to make an allowance upon recognition of the Baoxin revenue based upon review of Baoxin’s most recent audited financial statements, documentation provided by Baoxin concerning the completion of their new 100,000 sq ft facility during the pandemic and the ongoing uncertainties regarding the continuing effects of the COVID 19 pandemic in China.

4.             The majority of our Product Sales Revenue continues to be recognized when the customer takes control of the product.

We believe our contract with Baoxin falls under the collaborative arrangements guidance in (ASC 808) from the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. Implementation of ASU 2018-18 has not affected prior or current revenue recognition, since according to the contract, we bill License Fees for the use of our intellectual property and for any products shipped.

Revenue and Allowances

The following table provides information about Fees and Product Sales Revenue for the Nine Months and Three Months ended June 30, 2021 and 2020.

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:

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 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 10,436,500 and 8,761,500 shares of Common Stock issuable upon exercise of all outstanding stock options for the nine months ended June 30, 2021 and 2020, respectively; and 2,334,784 and 2,134,784 shares issuable on the conversion of outstanding Convertible Notes for the three months ended June 30, 2021 and 2020, respectively.

Net Loss per share for the following periods is computed below:

NOTE 5. Fixed Assets

The fixed assets accounts of the Company are comprised as follows:

Depreciation expense for the nine months ended June 30, 2021 and 2020 were $9,832 and $9,552, respectively and for the three months ended June 30, 2021 and 2020 were $3,277 and $4,886, respectively.

NOTE 6. Patents & Patent Filings

The patent and patents development are recorded at cost and are being amortized on a straight line basis over a period of seventeen years. The company capitalizes Legal and Administrative Fees incurred in the process of filing for its patents. The Company has only been amortizing the patents issued. Amortization Expense for the nine months ended June 30, 2021 and 2020 were $33,020 and $4,239, respectively and for the three months ended June 30, 2021 and 2020 were $3,493 and $1,407, respectively

Patents still in the application process and trademarks have not been amortized. The unamortized costs of patents in the application process along with costs of trademarks are $190,746 as of June 30, 2021 and $297,731 as of September 30, 2020. Amortizable Patent Costs were $238,172 at June 30, 2021 and $96,000 at September 30, 2020. The following is the amortization expense for these patents for the next 5 years:

Schedule of patent amortization

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.

NOTE 7. Debt

The following table describes the Company’s debt outstanding as of June 30, 2021:

The convertible notes are exercisable at any time and have exercise prices ranging from $0.15 to $0.75 with the amount of shares exercisable based on the face value of the convertible note. The holders of the bridge notes also have an option to purchase shares of the Company at $0.05 per share with the number of shares dependent upon the face value of the bridge note. As of the date of this report, 36,500 of these options remain outstanding.

On April 6, 2018, the Company issued a debenture and received proceeds of $100,000. The debenture matured March 2020 and has an exercise price of $.40 with interest at 8%. The entire Carrying Value of $100,000 was due March 2020.

In April 2019, the Company issued debentures and received proceeds of $150,000. The debentures mature in 2021 and have an exercise price of $.33 with interest at 5%. The entire Carrying Value of $150,000 is due in Fiscal 2021.

As a result of the issue, the Company recognized interest expense of $61,364 as a beneficial conversion feature of the debenture which has been amortized over the life of the note. The Interest Expense due to the Beneficial Conversion Feature for the Nine Months ended June 30, 2021 and 2020 was $14,948 and $24,573, respectively; and $0 and $8,191 for the Three Months ended June 30, 2021 and 2020, respectively.

In March 2021, the Company issued debentures and received proceeds of $150,000. The debentures mature in December 2022 and have an exercise price of $.75 with interest at 5%. The entire Carrying Value of $150,000 is due in Fiscal 2022.

As a result of the issue, the Company recognized interest expense of $25,333 as a beneficial conversion feature of the debentures, which has been amortized over the lives of the notes. The Interest Expense due to the Beneficial Conversion Feature for the Nine Months and Three Months ended June 30, 2021 was $4,551 and $3,413, respectively.

Note 8. Common Stock Issuances

During the nine months ended June 30, 2020, the Company issued 1,541,667 shares and received proceeds of $275,000. The share price was determined by agreement with the purchasers, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2020, the Company issued 2,965,659 shares for the conversion of a note along with interest and fees totaling $433,200. The share price was determined based upon the original note agreement.

During the nine months ended June 30, 2020, the Company issued 185,050 shares to pay interest due to holders of the bridge notes and convertible notes. The value of the interest paid was $49,899. The share prices were determined by the aggregate market price for the week in which the shares were issued.

During the nine months ended June 30, 2021, the Company issued 640,000 shares and received proceeds of $143,000. The share price was determined by agreement with the purchasers, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 164,000 shares and for services valued at $41,000. The share price was determined by agreement with the service provider, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 100,000 shares for services to be provided valued at $75,000. The share price was determined by agreement with the service provider, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 109,519 shares to pay interest due holders of bridge notes and convertible notes. The amount of interest paid was $44,346. The share prices were determined by the aggregate market price for the week in which the interest became due.

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 issued 2,500,000 options at market value during the three months ended June 30, 2021.

The options vest, 50% upon issuance, 25% at the first year anniversary, 25% at the second year anniversary and expire in 5 years.

The stock based compensation for the nine and three months ended June 30, 2021 was $296,109. The remaining balance to be amortized is $296,109.

The fair value of the options issued during the three months ended June 30, 2021 was calculated using the following assumptions:

The table below summarizes option activity and balances for nine months ended June 30, 2021 and 2020:

Option forfeitures are recorded as they occur. The intrinsic value of the outstanding stock options is $88,550 and the intrinsic value of the vested stock options is $132,300 at June 30, 2021.

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.

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 nine months ended June 30, 2021 and 2020 was $23,850 and $23,850, respectively and for the three months ended June 30, 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 $2,763 per month. Since the lease obligation is less than twelve months, the Company does not report a lease related asset or liability for this lease. Rent paid for the laboratory facility for the nine months ended June 30, 2021 and 2020 was $22,623 and $21,501, respectively; and for the three months ended June 30, 2021 and 2020 was $8,289 and $7,167, respectively.

NOTE 12. Concentration of Credit

The Company received 98% of its revenues for the nine months ended June 30, 2021 from one client, Baoxin. The Company received 97% of its revenues for the nine months ended June 30, 2020 from three clients, Baoxin, Cell Source and CryoViva. The Company also had accounts receivable from Baoxin of $1,200,000 at June 30, 2021 and $575,000 at June 30, 2020. For the Baoxin receivable, the Company has recorded an allowance for doubtful accounts of $325,000.

NOTE 13. Investments

During the first quarter of 2018, the Company invested $300,000 in Baoxin Ltd., a Chinese company that is involved in tissue storage and processing in Baoxin, China. Baoxin is not a publically traded corporation and the investment is carried at cost at June 30, 2021 and September 30, 2020. The Company annually reviews its investments for impairment. After reviewing investment transactions of Baoxin, the Company has determined that no impairment of its investment is necessary for the nine months ended June 30, 2021.

Baoxin will develop, own and operate multiple laboratory/treatment/training facilities in China using American CryoStem’s intellectual property. American CryoStem has received an upfront fee of $300,000 USD and a 5 year minimum annual guarantee of $500,000 USD per year from Baoxin. Additionally, as part of the transaction American CryoStem has invested $300,000 into Baoxin to obtain a 5% minority equity in Baoxin (China) and an option to acquire up to a 20% equity ownership interest in its Regenerative Medicine Center in Hong Kong (HK). The short term goals are to set up two additional GMP grade adipose tissue processing and storage facilities in Beijing and Shanghai to cover the need of the whole China region, and a proper education facility in China to promote the use of ATGRAFT as a more natural dermal filler over artificial fillers.

NOTE 14. Related Party Transactions

On October 1, 2020 the Company executed a note with ACS Global for a principal amount of $99,125 representing the outstanding balance due to ACS Global. Inc. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may be paid in cash or stock. The note is due and payable in full upon maturity. On March 1, 2021 the note was increased by $49,000 for advances to the Company. The note may be prepaid at any time by the Company. The principal balance of the note at June 30, 2021 is $147,775.

The Company was indebted to a company that is majority owned by the Company’s two officers in the amount of $629 at June 30, 2021 and $99,125 at September 30, 2020. The advances were unsecured, and carry no interest rate and were collectible at the discretion of the company’s two officers/directors.

NOTE 15. Subsequent Events

The Company has made a review of material subsequent events from June 30, 2021 through the date of issuance of this report and reports the following subsequent event.

The Company has recently executed a firm Letter of Intent (LOI) for a $10 million financing with EF Hutton.

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:

The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this quarterly report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.

Background

American CryoStem Corporation was incorporated in the state of Nevada on March 13, 2009. On April 20, 2011, we acquired, through our wholly owned subsidiary American CryoStem Acquisition Corporation, substantially all of the assets from, and assumed substantially all of the liabilities of, ACS Global, Inc. (“ACS”) in exchange for our issuance of 21,000,000 shares of Common Stock to ACS (the “Asset Purchase”). We filed a Current Report on Form 8-K with the Securities and Exchange Commission (SEC) on April 27, 2011 disclosing the Asset Purchase and certain related matters.

Overview

American CryoStem Corporation is a biotechnology pioneer in the field of Regenerative and Personalized Medicine and operates a state-of-the-art, FDA-registered, laboratory dedicated to standardized processing, bio-banking and development of cellular tools and cell therapy treatment applications, using autologous adipose (fat) tissue and adipose derived stem cells (“ADSCs”). The Company has developed, patented, and fully validated its core platform for the collection, processing, and storage of adipose tissue (Atgraft) and adipose derived stem cell (ATCell) and is currently focusing it efforts on obtaining FDA marketing clearance for the use of its ATCell product in clinical regenerative therapies.

Due to the effects of the Corona pandemic, we have focused our efforts to advance clinical studies for our autologous therapeutic cellular product, ATCell (autologous adipose derived mesenchymal stem cells), patented technologies and business methods. Our focus on advancing ATCELL into clinical study has resulted in the Company’s approved Investigational New Drug Application (IND) with the US Food and Drug Administration (FDA). The IND Phase I clinical study filing 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” FDA File number 19089 was approved on September 17, 2020. This human study of autologous adipose derived stem cells (ATCell) for the treatment of Post Concussion Syndrome is underway, to date we have recruited 18 of the 20 participants. We expect to begin delivering therapies during the fourth quarter of 2021.

Significant to this FDA approval was the review of our Chemistry Manufacturing and Control (CMC) modules of our IND filing (our ATCell manufacturing platform) and acceptance of the platform to manufacture the clinical trial samples for IV infusion delivery to the trial participants.

The Company has refined its IND strategy to advance its application approval process and development efforts to focus on low-risk treatments in the short term. The Company will leverage its validated ATCell manufacturing platform (CMC) to produce cellular samples for direct injection into joints for the treatment of osteoarthritis and for topical use in the treatment of non-healing wounds such as diabetic ulcers and bed sores. The Company believes that based upon FDA’s approval history for these types of hCTP therapies and reliance on the CMC section of our currently approved IND for the manufacture of the ATCell product that we can accelerate the approval timeline of ATCell as a treatment option for low-risk targets. The Company is currently developing study protocols with clinical partners experienced in the treatment of these conditions and expects to complete the protocols for filing with FDA in Fiscal 2022.

The Company’s long-term goals include completion of its approved Post-Concussion Syndrome study and, further development of ATCell as a treatment regimen for incurable and untreatable systemic diseases such as Duchene Muscular Dystrophy, and a currently planned study treatment of the post infection symptoms associated with COVID-19 or Long COVID. The Company is currently working with clinical partners to complete development of the study protocols and expects to file these additional IND applications in Fiscal 2022. The Company believes that its long term focus on systemic diseases with significant untreated neurologic conditions will provide future opportunities for clinical studies of ATCell for Alzheimer’s Disease, Parkinson’s Disease, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s Disease) and Rheumatoid Arthritis among others.

The Company believes the reproducibility of scientific studies is a substantial issue in life science research from drug discovery and development through clinical trials as researchers throughout the world continue to use different materials and protocols for processes associated with sample preparation, cryopreservation and cold chain management. We believe our validated and standardized handling, processing, storage, and transportation protocols (CMC platform) has substantially improved the quality and reproducibility of our preclinical data already submitted to the US FDA to support and accelerate the transition of ATCell therapeutic uses from pre-clinical product and protocol development to clinical study applications to regulatory approval (BLA) and market launch.

Simultaneously with the development and validation of its platform technologies for the collection processing and storage of tissue and cellular samples, the Company has built a strong, strategic portfolio of intellectual property, patent applications, and proprietary operating processes that form its core standardized cellular platform which we believe supports and promotes a growing pipeline of biologic products and processes, services, and international licensing opportunities. Our FDA registered laboratory for human tissue processing, cryo-storage and cell culture and differentiation media development is located in Monmouth Junction, New Jersey. 

The Company has successfully negotiated a Cooperative Research and Development Agreement (CRADA) with Walter Reed National Military Medical Center (WRNMMC), our first collaboration with a government entity. The Company is developing additional studies necessary for approval of ATCell for Long Covid, wound healing, Duchene Muscular Dystrophy, and orthopedic uses. See Section Product Development below for additional information concerning these ongoing efforts.

The Company also markets a proprietary, patent pending processing platform for the collection, preparation, and cryo-preservation of adipose tissue without manipulation, bio-generation, animal-derived products or other chemical materials. The platform is used by plastic and cosmetic surgeons for the storage of adipose tissue for future tissue transfer procedures and is compliant with Section 361 of the US Food, Drug and Cosmetic Act and Title 21 part 1271 of the US Code of Federal Regulations for use as a homologous filler. Management believes this core process makes each adipose tissue sample suitable for use in cosmetic grafting procedures or for further processing to adult stem cells for other types of stem cell therapies.

Products and Services

ATCELL^™ Adipose Derived Stem Cells (ADSCs) Processed and characterized adipose derived regenerative cells (ADRCs), mesenchymal stem cells (MSCs) are cultured utilizing the Company’s proprietary Standard Operating Procedures (SOPs), ACSelerate^™ patented cell culture and differentiation media and processing methodology. Cell lines are custom created and stored for patients that can be delivered “On Demand” for their personal use in future Regenerative Medicine procedures when approved for use by FDA or for use under the FDA’s expanded use programs as applicable. The Company charges its customers for ATCell cellular processing based upon the requested cell quantity. A typical 25ml sample of adipose tissue can yield multiple master samples and expanded cell quantities up to one billion cells or more per master sample. Storing large quantities of expanded cells provides the opportunity for a client to receive multiple future treatments from a single ATCELL expansion process on demand for approved FDA treatment. All customer samples submitted for processing must utilize the CELLECT^® collection system and ACSelerate^™ mediums to conform to our internal SOPs, product specifications and quality control standards.

The Company’s ATCELL^™ cell lines are processed and cultured in our patented ACSelerate^™ cell culture media. All tissue, cells, and research materials made available for sale to research institutions are tested for sterility, disease, lifespan, and population doubling rate (PDL). Cell morphology is confirmed by (i) flow cytometry and (ii) differentiation analysis using ACSelerate^™ differentiation media. Each ATCELL^™ line can be further cultured and differentiated allowing the Company to provide genetically matched cell types. We believe this research methodology may provide opportunities for the Company’s ATCELL^™ and ACSelerate^™ products to become the building blocks of final developed commercial applications.

CELLECT^® Validated Collection, Transportation, and Storage System – The Company developed and implemented an unbreakable “chain of custody” clinical solution to collect and deliver tissue samples utilizing proprietary and patented methods and materials. The CELLECT^® service successfully eliminated the high cost and logistical complications associated with utilizing liquid nitrogen DEWARS or dry ice during shipments of adipose tissue. The service is monitored in real-time and assures the highest cell viability upon laboratory receipt. The CELLECT^® system incorporates our proprietary ACSelerate–TR^™ transport medium into all collection bags which supports the health of the tissue during transport at ambient temperature. The CELLECT^® kit is an integral part of our validated ATGRAFT^™ and ATCELL^™ technology platform to be used by our domestic physician network and licensees of our platform technologies. The CELLECT^® service is included in our granted patent “Business Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.

During the development of the CELLECT^® service the Company incorporated the International Blood Banking identification and labeling and product identification coding system. The coding system was developed in conjunction with the American Association of Blood Banks (AABB), the American Red Cross and the International Society of Blood Transfusion (ISBT). These groups form the International Council for Commonality in Blood Banking Automation (ICCBBA) and developed the ISBT 128 Standard for machine readable labeling. This labeling system is an acceptable machine readable labeling standard, product description, and bar coding system for the 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.; The identifier allows any hospital, clinic, laboratory and regulator worldwide to identify the origin and obtain additional information on any sample produced at an American CryoStem facility. The Company promotes this standard in all laboratories that license or utilize our technology.

ATGRAFT^™ Adipose Tissue Storage Service

The Company developed this clinical fat processing and storage (ATGRAFT™) as a solution for physicians to provide their patients with multiple tissue and cell storage options. Through one liposuction procedure, the ATGRAFT^™ service, allows individuals to prepare for future cosmetic or regenerative procedures by storing multiple samples of their own adipose tissue to be returned in the future as a natural biocompatible filler, or to be further processed to create cellular therapy applications without the trauma of further liposuctions. ATGRAFT^™ procedures may include breast reconstruction, layered augmentation, buttocks enhancement or volume corrections of the hands, feet, face and neck areas that experience significant adipose tissue (fat) volume reduction as we age. ATGRAFT^™ is processed and stored utilizing our validated standard operating procedures so that stored fat tissue sample(s) may be retrieved in the future and delivered to the physician on demand or for re-processing to create stem cells “ATCELL^™” for use in Regenerative medicine applications. The Company charges fees for the reprocessing of a 25ml stored ATGRAFT^™ sample and may charge additional fee’s if expansion of the newly created ATCELL^™ sample is also requested. The ATGRAFT^™ service is included in our granted patent “Business Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018.

The Company charges standardized fees for ATGRAFT^™ tissue processing based upon the volume of tissue stored. These processing fees may be paid to the Company by the collecting/treating physician or the consumer. The Company earns additional fees, for storage, thawing, packaging and shipment of the stored samples back to the physician or clinic for immediate use upon receipt. The ATGRAFT^™ service lowers physician/patient overall costs by eliminating additional liposuction procedures for each scheduled fat transfer or therapy procedure. Physician cost savings may include: materials, supplies, equipment, and the expenses of utilizing a surgical center, hospital operating room or an in-office aseptic procedure room. The ATGRAFT^™ service is designed to operate under the minimally manipulated regulations contained in both 21 CFR 1271.10 and PHS 361.

Cell Culture Media Products– On August 2, 2011, the Company was issued US patent number 7,989,205 for “Cell Culture Media, Kits and Methods of Use.” The granted claims include media variations for cellular differentiation of ADSCs into osteoblasts (bone), chondrocytes (cartilage), adipocytes (fat), neural cells, and smooth muscles cells in both HSA medium (clinical) grade and FBS (research) grade. This patent covers both research grades and grades - suitable for cell culture of adipose-derived stem cells intended for use in humans. Additionally, on November 8, 2016 the Company was granted additional claims from the continuation U.S. Serial No. 13/194,900 issued as a new Patent Serial No. 9,487,755.

The Company developed and patented cell culture media products for growing human stromal cells (including all cells found in human skin, fat and other connective tissue). ACSelerate^™ MAX cell culture media is manufactured animal serum free, which is suitable for human clinical and therapeutic uses. Additional versions have been developed and patented for application development and research purposes. The ACSelerate^™ cell culture media product line was specifically developed to address increasing industry demands for animal serum-free cell culture products and for the acceleration of products from the laboratory to the patient.

On March 16, 2016, the Company entered into a licensing and manufacturing agreement for manufacturing of ACSelerate Max media with PeproTech, a life sciences company formed in 1988 and a trusted source for the development and manufacturing of high-quality 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. The agreement calls for PeproTech to manufacture the medium for the Company’s use in processing the ATCell product and permits PeproTech to sell the product under its PeproGrow brand. The Company receives royalties from such sales. The Agreement automatically renews for one-year periods on its anniversary date.

On December 31, 2014, the Company filed a patent application for an advanced medium formulation titled Human Albumin Serum for Cell Culture Medium for Clinical Growth of Human Adipose Stromal Cells. (US Serial No. 62/098799). On December 31, 2015, the Company converted the provisional application to an international PCT filing (PCT/US/68350) under the title Human Serum for Cell Culture for Clinical Growth of Human Adipose Stromal Cells. To date the patent has also been filed in the following additional countries: China and Hong Kong, India, Mexico, Brazil, the European Union, US, Japan, Thailand, Brazil, Russia, Australia, New Zealand, Canada, and Saudi Arabia.

We have generated minimal culture media revenue from PeproTech’s sales efforts, management believes that we are well positioned to utilize our developed products and services as the foundation for domestic and international distribution through licensees of our technologies for a host of Regenerative Medicine application uses and future therapy products.

Contract Manufacturing, Autokine-CM^® Anti-Aging, Autologous Skin Care Product Line – Under agreement with Personal Cell Sciences Corp. (PCS), we manufacture the key ingredient Autokine-CM^®(autologous adipose derived stem cell conditioned medium) for PCS’ U-Autologous™ anti-aging topical formulation. Each product is genetically unique to the individual and custom blended, deriving its key ingredients from the individual client’s own stem cells. The Company provides its CELLECT^® Tissue Collection service to collect the required tissue to manufacture the U-Autologous^™ product and processes it under the same Standard Operating Procedures that it developed for the ATGRAFT^™ and ATCELL^™ cell processing services utilizing ACSelerate^™ cell culture media. The Company receives collection, processing and long-term storage fees and earns a royalty on all U-Autologous product sales. The utilization of the Company’s core services in its contract manufacturing relationships provides opportunities for the Company and its ATGRAFT^™ and ATCELL^™ products.

Our Company’s contract manufacturing services can be extended to develop custom and/or white label products and services for both local and global cosmetic and regenerative medicine companies, physicians, wellness clinics and medical spas. The Company intends to expand its relationships and contract manufacturing services domestically.

International Licensing Program –Many jurisdictions outside the US currently permit use of cellular therapies and regenerative medicine applications. The Company receives international inquiries concerning the sale or licensing of our SOPs, products and services into the Regenerative Medicine and Medical Tourism Markets. The Company believes that the inquiries to date are a result of the global boom in Regenerative Medicine, Medical Tourism and, the pace of approval of cellular therapies and regenerative medicine applications in the US. To address the Company’s sales, marketing and branding opportunities globally, the Company has created its international licensing program. To date we have licensed our technologies in Hong Kong, Shenzhen and Shanghai, China, and Bangkok Thailand. The Company is currently in discussions for additional licensed territories.

The Company believes it can take advantage of the significant growth of the global cellular therapy market through its international licensing and marketing efforts. A recently published study by Transparency Market Research predicts the global market for stem cells is expected to register a healthy CAGR of 13.8% during the period from 2017 to 2025 to become worth US$270.5 bn by 2025.

(https://www.transparencymarketresearch.com/pressrelease/stem-cells-market.htm)

China

On July 12, 2018 the Company announced the national launch of CRYO's ATGRAFT^TM tissue collection, processing and storage technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. ("Baoxin") in China. Under the terms of the Agreement, 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. The Company invested in and currently holds approximately five percent (5%) of Baoxin shares. Mr. Arnone and Mr. Dudzinski were elected to serve as Directors of Baoxin in 2018. Mr. Arnone resigned as a board Member of Baoxin in 2019. Mr. Dudzinski continues to serve the Company’s interests as a board member of Baoxin. During Fiscal 2020 due to the effects of the COVID pandemic in China, politics and government regulations Baoxin suspended operations at the onset of COVID-19. We have been informed by Baoxin’s Chairman and CEO that they and recently completed a new laboratory facility located in Shenzhen, China and were preparing to restart their sales and marketing efforts as soon as possible. The Company cannot at this time estimate timing to reopen operations in China.

Hong Kong

On June 30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the Company’s Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service in Hong Kong. The Agreement called for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the Company. The Company and HIT reached further agreement to extend their relationship on a non-exclusive basis to include HIT’s cord blood laboratory located in Shenzhen, Guangdong Province, one of China’s most successful Special Economic Zones. The HIT agreement includes, initial upfront fees and royalty payments for predetermined gross revenue volumes. HIT will also purchase CRYO ACSelerate™ storage media, CELLECT™ collection and transportation kits as well as other American CryoStem products necessary for clinical adipose tissue processing and storage at the Shenzhen facility. The final master licensing agreement is for a period of 5 years with renewal options and was executed between the parties on September 24, 2014, the Agreement automatically renewed on September 24, 2019 for an additional 3 year period.

In 2017 as part of the Company’s transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution rights granted to HIT under its 2014 agreement to Baoxin. The Company was paid a fee of US $100,000 in the transaction. In addition, the Company was provided with an initial ownership of five percent and a warrant to purchase an additional fifteen percent in a planned Regenerative Treatment Center to be established by Baoxin in Hong Kong for an exclusive right to distribute the Company’s cell culture media products in Hong Kong. Due to regulatory changes in Hong Kong regarding cellular therapy treatments and manufacturing, Baoxin has not established the Regenerative Medicine Center in Hong Kong and has not distributed any Company medium products under the granted license.

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 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, called for the payment of certain up front training fees and, a percentage of the gross revenue subject to annual minimum payments generated from our products. Additionally, the Agreement calls for the purchase of CRYO consumable products required for ATGRAFT™ and ATCELL™ sample processing including CRYO’s ACSelerate™ non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue collection kit, and ACSelerate – Max™ cell culture medium.

The Company assisted CRYOVIVA with the development of their branding and marketing campaign for Thailand and providing technical assistance and support for their import of consumables purchased from the Company. CRYOVIVA had scheduled the launch of its marketing campaign for the first quarter of 2021. Due to the global impact of COVID-19, CRYOVIVA greatly reduced their operations in 2021 and the Company has generated minimal revenue. The Company cannot at this time estimate the timing for Thailand to restart operations due to COVID-19 and associated lockdowns in Thailand.

Product Development

Our strategic approach to product development is to design, develop and launch new products and services that utilize our existing products and services, i.e. the use of the CELLECT^® collection materials in providing ATCell and ATGRAFT^™ processing and storage services. This approach allows progress with our co-developed clinical studies to build our application pipeline with cellular therapies. We can rely upon the production and validation data to support our FDA application and Biologic License Application filings. Management believes that this approach may also provide the Company with opportunities to attract strong international licensing and collaborative partners and accumulate complementary scientific data.

To leverage the Company’s development efforts, the Company incorporates its proprietary and patented patent pending laboratory products, such as our ACSelerate™ cell culture media, into our processing and product production services. The Company requires licensees of our tissue and cell processing technologies to purchase the consumable products required in the collection, processing, and storage of tissue/stem cells as part of the licensing agreement including our CELLECT® Collection, Transportation, and Storage System and ACSelerate™ Cell Culture Media Products. Strategically, the incorporation of proprietary products into our current clinical studies generates the uniform and consistent data necessary to support product approval applications with FDA.

Our product development efforts have resulted in completing and validating the Company’s platform technologies for the collection, processing and storage of adipose tissue and stem cells evidences the Company’s ability to provide uniform cell samples and quantities from any adipose tissue sample. The consistency of the platform to produce autologous cellular therapy samples allows for the collection of reproduceable manufacturing results and additional clinical study data which is required by the US FDA and similar regulatory agencies around the globe to obtain clinical study and marketing approvals.

The Company’s validated its platform technologies for the Chemistry Manufacturing and Control (CMC) sections of its submitted and approved IND application for Post-Concussion Syndrome. The Company will incorporate and rely on the approved CMC as the manufacturing platform for all future IND applications with the FDA which management believes will help to accelerate the approval of its planed studies for orthopedic, wound healing and Duchene Muscular Dystrophy clinical study applications.

We intend to expand our product and services pipelines based upon our intellectual property portfolio, FDA clinical study applications, collaborative development relationships, and international licensing and partnering opportunities. Our plans include supporting collaborations by providing our products and services with the expectation that they become the basis for new adipose tissue and stem cell based Regenerative Medicine therapies, FDA clinical study applications approved biologic license approvals.

Investigational New Drug (IND)

The Company filed its first Investigational New Drug Application (IND) with the US Food and Drug Administration (FDA) for the ATCELL cellular therapy product. The IND filing is titled “ATCell™ Expanded Autologous Adipose Derived Mesenchymal Stem Cells deployed via Intravenous Infusion for the Treatment of Post Concussion Syndrome (PCS) in Retired Athletes and Military Personnel”. The Company made the original filing in August of 2019 to the FDA Electronic Common Technical Document system (eCTD) for technical review. Following this review, the Company made several amendments and received additional technical comments from FDA’s technical group. The Company completed all technical changes to the filing in October 2019 and was assigned File number 19089, for the filing accepted for review by the FDA on October 22, 2019. The Company received further comments from the FDA in a clinical hold letter dated December 19, 2019. The letter requested additional information, clarification of certain aspects of the filed documents, amendment to the screening and treatment protocols, and the implementation of additional testing during the production and release of the final samples. The FDA approved our application on September 17, 2020, and the Company began recruiting participants in March of 2021. We expect to complete the Phase I study in the first half of fiscal 2022.

Cooperative Research and Development Agreement (CRADA)

On December 3, 2020, the Company entered into a Cooperative Research and Development Agreement (CRADA) with Walter Reed National Military Medical Center (WRNMMC), the nation’s largest and most renowned joint military medical center serving the Army, Navy, Air Force and Marines located in Bethesda, Maryland.

A Cooperative Research and Development Agreement (CRADA) is a written agreement between a government agency and a non-federal entity that allows the federal government and its non-federal partners to optimize and maximize use of their resources, exchange technical expertise in a protected fashion, share intellectual property resulting from collaborative effort, and speed commercialization of federally developed technology. The Company has committed to provide materials including ATCell samples and Umbilical Cord stem cells, ACSelerate Max Growth and differentiation mediums testing and other processing supplies, processing and testing methods. The Company’s total in-kind and financial commitments are limited to $120,000 in supplies and expense reimbursement during the life of the Agreement.

The Company maintains the rights to commercialize all technology developed under this CRADA Agreement. The technology is centered on creating in vitro (test tube) assays to standardize and commercialize new treatment protocols; optimizing quality control measures; and developing standardized protocol potency assays for precise therapy dosing.

Management believes that these new assays can be commercialized to generate substantial sales and licensing revenues and create value for the Company’s stakeholders.

Through the Collaboration entitled “Stem Cells for Regeneration and Medical Innovation, a multi-faceted and multi-staged research project with WRNMMC Biomedical Laboratories, the Company plans to develop, validate and standardize baseline and assay metrics to identify mesenchymal stem cell (MSC) characteristics and quantities across various cell biomarkers and exosome expressions data sets for its ATCell™ product for biologics developers’ use worldwide. The focus of the Collaboration is to enable the creation of predictive and prescriptive cellular models which will further enhance American CryoStem’s mission as a premier biologics’ manufacturer and developer and be highly valuable to the medical community, biotech developers, and the public at large.

WRNMMC is part of The Military Health System (MHS) which is the enterprise within the United States Department of Defense that provides health care to active duty, Reserve component and retired U.S. Military personnel and their dependents.

The missions of the MHS are complex and interrelated: To ensure America’s 1.4 million active duty and 331,000 reserve-component personnel are healthy so they can complete their national security missions.

The MHS also provides health care, through the TRICARE health plan, to:

The MHS has a $50+ billion budget and serves approximately 9.5 million beneficiaries. The MHS employs more than 144,217 in 51 hospitals, 424 clinics, 248 dental clinics and 251 veterinary facilities across the nation and around the world, as well as in contingency and combat-theater operations worldwide.

The Company’s long term research is focused on further developing standardized cellular processing models to support FDA, IND treatment protocol approvals by further identifying, and validating certain mechanisms and characteristics of mesenchymal stem cells related to regulating modulation of immune response(s) and promoting tissue regeneration and stability (homeostasis) for the treatment of traumatic injuries, inflammation, auto-immune diseases, and brain and organ damage associated with viruses such as SARS-CoV-2 (COVID-19), including, the expanding group of people dealing with the chronic and debilitating symptoms of what is commonly termed “Long Haul COVID” or “Long COVID.”

PeproTech, Inc.

On April 4, 2016 the Company entered into an Agreement with PeproTech, Inc of Rocky Hill, NJ. Under the Agreement PeproTech manufactures, markets and distributes the Company’s ACSelerate – Max cell growth medium. The Company and PeproTech completed the optimization and scale up manufacturing studies and the licensed medium is marketed under both PeproTech’s, PeproGrow and the Company’s ACSelerate MAX™ brands. To date sales of the medium by PeproTech have been minimal. The Company has had discussions with PeproTech related to increasing the visibility and sales of the medium and the optimization of additional medium products focused on the differentiation of adult stem cells that are synergistic to the cell culture medium. In connection with these discussions, the Company completed an amendment to its original agreement for the expansion its collaborative efforts to finalize development of its differentiation mediums and support additional product development. The additional product development project is currently on hold due to the effects of COVID-19.

Cells on Ice:

In August of 2015 the Company entered into an Agreement with Cells On Ice, Inc. (COI) located in Los Angeles, California to process and cryopreserve adipose tissue and adipose derived cellular samples for future use in Regenerative Medicine as a contract manufacturer.

On January 3, 2018, the Company received a warning letter from the US FDA concerning its contract manufacturing services provided to Cells On Ice. The FDA informed the Company that the FDA has determined that autologous adipose derived cells are a drug under current FDA regulations and guidance and requested that the Company cease shipment of ATCell under the agreement with COI and file an Investigational New Drug (IND) application for ATCell. In response to the letter the Company immediately complied with the FDA request to cease shipment of its ATCELL™ product within the United States and entered into discussions with the FDA concerning the filing of an IND. Since the Company’s initial response to the Warning letter, it has spent considerable time and effort to develop and refine an IND filing with requisite data collection and process validation to address the concerns and observations highlighted in the letter. Specifically, the Company fully validated it manufacturing and quality control processes which are collective referred to as Chemistry Manufacturing and Control (CMC); and filed it first Investigation New Drug Application with FDA which was accepted for review on October 22, 2019 and was approved on September 17, 2020,Additionally, the Company developed ,implemented, qualified, and validated a complete redesign of its manufacturing SOPs and Quality Management program, as well as constructed new cleanroom manufacturing space in its facility in Monmouth Junction, N.J, The Company submitted its final responses to FDA regarding the Warning Letter which was delivered to FDA OTAT in January 2020. The FDA has acknowledged the receipt of our response on March 31, 2020.

Additional Collaborations

The Company is developing collaborations with industry and university partners. These developing relationships in their earliest stages are covered by Confidential Disclosure Agreements (CDA) and those that are more advanced may also include Material Transfer Agreements (MTA) under which the Company supplies either ATCELL^™ or ACSelerate^™ medium products for evaluation, testing, and the development of new cellular therapy applications. No assurance can be given that these relationships will progress to full collaborative agreements or ultimately result in new technology for future commercialization.

Intellectual Property

From the Company’s formation, our strategy has been to invest time and capital in intellectual property protection. This strategy is intended to strengthen our Company’s foundation in any defensive or offensive legal challenge. In addition, we are developing our IP portfolio to ensure and enhance our business flexibility and allow us to gain favorable terms in potential future collaborative partnerships with third parties. Our intellectual property portfolio currently includes four issued U.S. patents (No. 7,989,205, and Serial No. 9,487,755, “Cell Culture Media Kits and Methods of Use”, “Systems and Methods for the Digestion of Adipose Tissue Samples Obtained from a Client for Cryopreservation” US 10,154,664 issued December 18, 2018, and “Business Method for Collection, Processing, Cryogenic Storage and Distribution of a Biologic Sample Material” US Patent Number 10,014,079, issued July 3, 2018);and has additional pending patent applications which are detailed in the following chart:

The Company in-licenses the following IP:

Trademarks

In addition to patents, the Company has registered the following trademarks with the U.S. Patent and Trademark Office: American CryoStem^®, American CryoStem “America’s Stem Cell Bank” ^®, CELLECT^® and ATGRAFT^™. We utilize additional trademarks for our products, slogans and themes to be used in our marketing initiatives, including, for example, ACSelerate – MAX SFM^™, ACSelerate-SFM^™, ACSelerate- LSM^™ and ATCELL^™.

The Company has also secured a number of online domain names relevant to its business, including www.americancryostem.com, www.acslaboratories.com and ATGRAFT.com.

Marketing and Distribution

The key objective of our marketing strategy is to position American CryoStem in the market as the “Gold Standard” for adipose tissue collection, cell processing and cryogenic storage, therapeutic applications, and research/commercial uses of adipose tissue within the current regulatory framework. The combination of a traditional sales approach supported by continuous internal and external marketing programs is closely coordinated with the expansion of our laboratory processing capabilities. Our initial marketing efforts intend to disseminate current and future uses of adipose tissue and adult stem cells which support our business model, products and services. We intend to continue to employ advertising and social media sales campaigns. In addition, we plan to continue to utilize key leaders, and early adopters in the medical community as a marketing resource to enhance awareness of our proprietary, patented products and services and to increase the number of surgeons who join our network, university and private collaboration and consumers who use our products and services.

We plan to continue marketing programs focused on reaching plastic and cosmetic surgeons to join the initial group of providers that began to offer our services to their patients. This marketing initiative has been implemented using a traditional sales approach common to the pharmaceutical and biotechnology industries. This fundamental sales approach at the core of our marketing activities is being strategically and tactically expanded using a combination of in-house sales personnel and outside independent channels.

Our plan, capital permitting, provides for a comprehensive integrated marketing approach using various traditional and new media, such as the Internet, social media/blogging, video, print, TV, radio and trade shows to reach targeted potential consumers and promote awareness of our Company and our branded products and services. The essence of this targeted strategy is to reach the end-users as quickly as possible and to accelerate the adoption curve of our products and services. We also plan to utilize outside marketing resources and trade groups to increase the number of surgeons willing to offer our products and services to their patients.

Market Size and Opportunities

By leveraging and capitalizing on our proprietary Adipose Tissue Processing Platform, we are working to address multiple high growths, multi-billion-dollar market opportunities, including those prevailing within the Regenerative Medicine, Cosmeceuticals, Medical Tourism and Cell Culture Media markets. The Company regularly reviews independent market research to gauge the market dynamics of its intended domestic and international markets and to identify additional areas within these markets where the Company’s cell culture medium, laboratory products, and tissue and cellular processing services, can be marketed, sold and/or licensed.

Global Stem Cells Market

A report from Transparency Market Research (TMR) forecasts that the global stem cells market is expected to register a healthy CAGR of 13.8% during the period from 2017 to 2025 to become worth US$270.5 bn by 2025. Depending upon geography, the key segments of the global stem cells market are North America, Latin America, Europe, Asia Pacific, and the Middle East and Africa. At present, North America dominates the market because of the substantial investments in the field, impressive economic growth, rising instances of target chronic diseases, and technological progress. As per the TMR report, the market in North America will likely retain its dominant share in the near future to become worth US$167.33 bn by 2025.

A report published by Markets and Markets Research in 2017 titled “Cell Expansion Market by Product (Reagent, Media, Flow Cytometer, Centrifuge, Bioreactor), Cell Type (Human, Animal), Application (Regenerative Medicine & Stem Cell Research, Cancer), End user (Research Institute, Cell Bank) - Global Forecasts to 2021”. The report states: The global cell expansion market is expected to reach USD 18.76 Billion by 2021 from USD 8.34 Billion in 2016 at a CAGR of 17.6%. Geographically, the cell expansion market is dominated by North America, followed by Europe, Asia, and the Rest of the World (RoW). Growth in the North American segment is primarily driven by increasing incidence of chronic diseases in the North American countries. According to the American Medical Association and the American Medical Group Association, more than 50% of Americans suffered from one or more chronic diseases in 2012; the number of Americans suffering from chronic diseases was around 133 million in 2005 and this figure is expected to reach around 157 million by 2020. With this significant growth in the number of patients suffering from chronic diseases, the market for cell expansion is expected to grow in this region in the coming years.

Regenerative Medicine Market

The Global Translational Regenerative Medicine market is expected to grow significantly over the forecast period. The Global Translational Regenerative Medicine market was valued at $5.8bn in 2016. Vision gain forecasts this market to increase to $14.5bn in 2021. The market is estimated to grow at a CAGR of 19.9% in the first half of the forecast period and 17.7% from 2016 to 2027.

Cell Culture Market

Cell Culture Market Global Forecast to 2023, according to “marketsandmarkets” the cell culture market is expected to reach USD $26.28 Billion by 2023 from USD $15.32 Billion in 2018, at a CAGR of 11.4%. Growth in this market is driven by the growing number of regulatory approvals for cell culture-based vaccines, increasing demand for monoclonal antibodies (mAbs), funding for cell-based research, growing preference for single-use technologies, and the launch of advanced cell culture products.

Development of Regional U.S. Markets

Physician Network

The Company continues to develop relationships to leverage our products and services through existing cosmetic surgery and regenerative medicine practices The Company continues its efforts to develop and expand its network of individual physicians and surgeons seeking to adopt the Company’s products and services focusing on surgeons performing liposuction, tissue transfer and regenerative procedures involving the use of adipose tissue. The Company intends to expand its efforts to medical professionals interested in Regenerative Medicine applications utilizing ADSCs to establish itself as a primary source of collection, processing and preparation of cellular therapies as they are developed and approved for patient use by the FDA.

Development of International Markets

International Licensing Program – Globally, many jurisdictions outside the US permit the use of adipose tissue based cellular therapies and regenerative medicine applications. The Company has received numerous inquiries concerning the sale or licensing of our products and services in these jurisdictions. The Company believes that the inquiries to date are a result of the global boom in Medical Tourism and the slow pace of approval of cellular therapies and regenerative medicine applications in the US. To address these inquiries and to expand the Company’s sales, marketing and branding opportunities the Company has designed and is offering an International Licensing Program.

The program is designed to permit the licensing of the Company’s products and services to organizations that meet the Company’s financial and technical criteria. The licensing program allows for a variety of business relationship including franchising, partnering and joint venturing. Marketing efforts to date have been to clinics, physician and hospitals in foreign jurisdictions capable of rapidly building or committing the appropriate facilities and personnel to create the required laboratory facilities to operate the CELLECT^®, ATGRAFT™ and ATCELL™ services in their local market. Strategically, the Company’s international licensees will maintain the branding of the Company’s services along the lines of the “Intel Inside” branding program.

Qualified Licensees can quickly take advantage of the rapidly expanding opportunity to collect, process, store and culture individual regenerative cell samples for their clients with the comfort and confidence that they are providing services that have been developed to conform to US FDA standards. Core to the relationship is the developed proprietary patented and patent pending processing and laboratory operational methodologies contained in our Standard Operating Procedures, Training, and Continuous Quality Management, Testing Program, and Laboratory Operations manuals.

Licensing programs may be initiated through a letter of intent (LOI) agreement between the Company and the prospective licensee. This LOI agreement is designed for due diligence and facility qualifications purposes. The Company may receive an initial fee under the agreement which may or may not be credited toward future royalty payments. Following evaluation of the prospective licensee the Company will enter into a final Agreement which outlines all upfront fees, minimum royalties, consumable purchase obligations of the Licensee and may contain a minimum annual license fee.

Significant to our international development activities is the global expansion of the American CryoStem branded services and patented products, as well as the expansion of the Company’s services, technology and products as the core platform to implement cellular therapies and regenerative medicine.

CRYOVIVA (Thailand) Ltd

On August 23, 2021the Company entered into an agreement to license its ATGRAFT™ and ATCELL™ adipose tissue (fat) processing and storage technologies to CRYOVIVA (Thailand) Ltd., established in 2007, (“CRYOVIVA”) a Bangkok, Thailand based Cord Blood processing and storage facility. CRYOVIVA, Thailand, offers collection, processing and storage of Cord Blood derived biologics to patients throughout Thailand and Southeast Asia.

American CryoStem licensed to CRYOVIVA (Thailand) Ltd., the rights to utilize the Company's Standard Operating Procedures (SOP's) to create and market the Company's ATGRAFT™ tissue storage service and ATCELL™ adipose derived stem cell processing and storage services in Thailand. The financial terms include the payment of certain training fees and, a percentage of the gross revenue subject to annual minimum payments generated from our products. Additionally, the Agreement calls for the purchase of CRYO consumable products required for ATGRAFT™ and ATCELL™ sample processing including CRYO's ACSelerate™ non-DMSO cryogenic tissue storage media, transportation media, Cellect™ tissue collection kit, and ACSelerate – Max™ cell culture medium.

The Company has been assisting CRYOVIVA with the development of their branding and marketing campaign for Thailand and providing technical assistance and support for their import of consumables purchased from the Company. CRYOVIVA had originally scheduled the launch of its marketing campaign for the first quarter of 2020. Based upon communication with the management team of CRYOVIVA, the scheduled launch of CRYOVIVA’s marketing plan has been delayed due to the COVID 19 outbreak, response and lockdown in Thailand and the US.

Due to the continuing global impact from COVID-19, CRYOVIVA has greatly reduced their and operations and put their marketing plans on hold in 2021 and the Company has generated minimal revenues. The Company cannot at this time estimate the timing for Thailand to restart operations due to COVID-19 and associated lockdowns in Thailand.

Baoxin Asia Pacific Biotechnology (Shenzhen) Co., Ltd

On July 12, 2018, The Company announced the national launch of CRYO's ATGRAFT^TM tissue collection, processing, and storage technology by Baoxin Asia Pacific Biotechnology (Shenzhen) Co. Ltd. ("Baoxin") in China. The management team traveled throughout south east China with the management and marketing team of Baoxin to present the ATGRAFT^TM 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.

We have been informed by the Baoxin’s Chairman and CEO that they completed their new facility located in Shenzhen, China. The Company cannot at this time estimate the timing for China to restart operations due to COVID-19 and associated lockdowns in China.

CellSource, LTD. – Tokyo, Japan

In the second quarter of 2015 the Company entered into negotiations with CellSource, LLC in Tokyo, Japan for the licensing of its ATGRAFT^™ products and services and on June 2, 2015 the Company and Cell Source entered into an initial term sheet licensing the ATGRAFT^™ technology to CellSource for Japan. The non-exclusive agreement expired in June of 2020 and has not been renewed.

Health Information Technology Company, LTD – Hong Kong and Shenzhen, China

On June 30, 2014 the Company granted Health Information Technology Company, LTD (“HIT”) exclusive rights to utilize the Company’s Standard Operating Procedures (SOP’s) to market the Company’s ATGRAFT™ tissue storage service in Hong Kong. The Agreement calls for upfront fees, royalties and the purchase by HIT of certain consumables manufactured by the Company. In 2017 as part of the Company’s transaction with Baoxin, HIT and the Company agreed to transfer certain product and distribution rights granted to HIT under its 2014 agreement to Baoxin. The Company was paid a fee in the transaction and was provided with an initial ownership position in a planned Regenerative Treatment Center to be established by HIT in Hong Kong. The HIT license has been extended per the terms of Schedule B of the Term Sheet, dated June 30, 2014, for an additional 3 year period to June 30, 2023.

Corporate Information

Our principal executive offices are located at 1 Meridian Road, Eatontown, New Jersey07724 and our telephone number is (732) 747-1007 our fax number is 732-747-7782. Our website is www.americancryostem.com. We also lease and operate a tissue processing laboratory in Monmouth Junction, New Jersey at 7 Deer Park Drive, Monmouth Junction, NJ 08852.

Available Information

We file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.

Going Concern

As of the date of this report, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our proposed business.

The accompanying consolidated financial statements have been presented in accordance with generally accepted accounting principles in the U.S., which assume the continuity of the Company as a going concern. However, the Company has incurred significant losses since its inception which raises substantial doubt about the Company’s ability to continue as a going concern. Management has made this assessment for the period one year from date of the issuance of these financial statements. Management’s plan with regard to this matter is to continue to fund its operations through fundraising activities in fiscal 2021 to fund future operations and business expansion.

Our plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency, and (ii) implementing a plan to generate sales of our proposed products. Our continued existence is dependent upon our ability to resolve our liquidity problems and achieve profitability in our current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.

Results of Operations- Three Months

The Company’s revenue for the quarter ended June 30, 2021, decreased to $129,800 versus $138,436 in the same period of Fiscal 2020. Licensing Revenue decreased to $125,000 compared to $131,666 in Fiscal 2020.

Operating expenses increased to $570,992 for the quarter ended June 30, 2021, from $133,851 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 stock compensation expense.

Administrative expenses decreased to $95,589 from $108,384, due to the Company’s reduced use of consultants.

Interest expense for the quarter ending June 30, 2021, decreased to $24,696 compared to $27,119 for the same period in 2020. The interest expense for the quarters ended June 30, 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 third quarter of Fiscal 2021 was $466,470 compared to a loss of $230,457 for the third quarter of Fiscal 2020. The increase in the net loss for the quarter versus the same period in 2020 is attributed to increase in investing in Research and Development an Stock Compensation expense.

Liquidity and Capital Resources

As of June 30, 2021, the Company had a cash balance of $7,369, a decrease of $34,391 since September 30, 2020. We used $314,761 of our cash for operations and $35,187 for investing activities, in new patents development. The main sources of cash provided by financing activities included new equity and debt issuances totaling $315,557

Accounts Receivable increased to $874,560 at June 30, 2021 from $500,000 at September 30, 2020 mainly due to an increase in receivables from Baoxin for licensing fees due to the current economic and health conditions in China, including increased tariffs and the Corona virus, the Company is closely monitoring the impact of these circumstances.

Convertible debt increased to $702,718 as of June 30, 2021, versus $558,552 as of September 30, 2020. This increase was due to the issuance of new convertible notes and effects of amortizing the beneficial conversion feature of the notes. See Note 7. Debt reported in the financial statements.

The Company will continue to focus on its financing and investment activities, but should we be unable to raise sufficient funds, we will be required to curtail our operating plans or cease them entirely. We cannot assure you that we will generate the necessary funding to operate or develop our business. Please see “Cash Requirements” above for our existing plans with respect to raising the capital we believe will be required. In the event that we are able to obtain the necessary financing to move forward with our business plan, we expect that our expenses will increase significantly as we attempt to grow our business. Accordingly, the above estimates for the financing required may not be accurate and must be considered in light these circumstances.

There was no significant impact on the Company’s operations as a result of inflation for the nine months ended June 30, 2021.

Cash Requirements

We will require additional capital to fund marketing, operational expansion, processing staff training, as well as for working capital. We are attempting to raise sufficient funds that would enable us to satisfy our cash requirements for a period of the next 12 to 24 months. In order to finance further market development with the associated expansion of operational capabilities for the time period, we will need to raise additional working capital. However, we cannot assure you we can attract sufficient capital to enable us to fully fund our anticipated cash requirements during this period. In addition, we cannot assure you that the requisite financing, whether over the short or long term, will be raised within the necessary time frame or on terms acceptable to us, if at all. Should we be unable to raise sufficient funds we may be required to curtail our operating plans if not cease them entirely. As a result, we cannot assure you that we will be able to operate profitably on a consistent basis, or at all, in the future.

In order to move our Company through its next critical growth phase of development and commercialization and to ensure we are in position to support our research collaborations and market penetration strategies, Management continues to seek new investment into the Company from existing and new investors with particular emphasis on identifying the best deal structure to attract and retain meaningful capital sponsorship from both the retail and institutional investing communities, while limiting dilution to our current shareholders. Management also focuses its efforts on increasing sales and licensing revenue and reducing expenses.

Effects of COVID 19

The main effects of the COVID 19 pandemic were with the Company’s US domestic physician network and its international partners. China, Hong Kong and Thailand have been in lockdown during the quarter. This has hindered our attempts to resolve our outstanding receivable from Baoxin. Considering this, we elected to increase our provision for doubtful accounts by $325,000 in Fiscal 2019 with regard to their outstanding balance. CRYOVIVA Thailand was implementing a new marketing program in January 2021 which continues to be delayed due to the circumstances surrounding the effects of the COVID-19 pandemic in Thailand.

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.

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 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 $2,763 per month. Since the lease obligation is less than twelve months, the Company does not report a lease related asset or liability for this lease. Rent paid for the laboratory facility for the nine months ended June 30, 2021 and 2020 was $22,623 and $21,501, respectively; and for the three months ended June 30, 2021 and 2020 was $8,289 and $7,167, respectively. Since the lease obligation is less than twelve months, the Company does not report a lease related asset or liability for this lease.

The Company was not party to any litigation against it and is not aware of any litigation contemplated against it as of June 30, 2021. See also Legal Proceedings below.

We anticipate that any further capital commitments that may be incurred will be financed principally through the issuance of our securities. However, we cannot assure you that additional financing will be available to us on a timely basis, on acceptable terms, or at all.

Related Party Transactions

On October 1, 2020 the Company executed a note with ACS Global for a principal amount of $99,125 representing the outstanding balance due to ACS Global. The Company increased the amount of the note to $148,125 on March 1, 2021. The Note matures on October 1, 2023 and carries an interest rate of 10% per annum which may be paid in cash or stock. The note is due and payable in full upon maturity. The note may be prepaid at any time by the Company. The principal balance of the note at March 31, 2021 is $147,775.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies

We prepare financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates and assumptions that affect the amounts reported in our combined and consolidated financial statements and related notes. See Note 1 and Note 3 to the Financial Statements for more information.

Basis of Presentation

Our financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Long-Lived Assets

We review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, we compare the assets’ carrying amounts against the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period.

Statement of Cash Flows

For purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments-Credit Losses. The new guidance provides better representation about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates. This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted. The company is studying the impact of adopting the ASU in fiscal year 2024, and what effect it could have. The Company believes the accounting change would not have a material effect on the financial statements.

In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. This new ASU applies to companies that have collaborative arrangements, or agreements that involve two parties that actively participate in a joint operating activity. The Company policy is to enter into collaborative arrangements that benefit its expansion of its products and services. We believe our contract with Baoxin falls under the collaborative arrangement’s guidance in (ASC 808). We are collaborating with Baoxin to develop and expand clinical study of our product in China. According to the agreement, we retain all rights to co-developed intellectual property, while providing a Licensing Agreement to our collaborator allowing the use of our intellectual property in their geographic region. Since ASU 2018-18 is effective for public companies for years beginning after December 15, 2019, the Company has implemented ASU 2018-18 for Fiscal 2021. Implementation of ASU 2018-18 has not affected prior or current revenue recognition, since according to the contract we bill License Fees for the use of our intellectual property and for any products shipped. 

Not Applicable

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021 and concluded that the disclosure controls and procedures were effective as a whole.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Not applicable.

During the nine months ended June 30, 2020, the Company issued 1,541,667 shares and received proceeds of $275,000. The share price was determined by agreement with the purchasers, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2020, the Company issued 2,965,659 shares for the conversion of a note along with interest and fees totaling $180,217. The share price was determined based upon the original note agreement.

During the nine months ended June 30, 2020, the Company issued 185,050 shares to pay interest due to holders of the bridge notes and convertible notes. The value of the interest paid was $49,899. The share prices were determined by the aggregate market price for the week in which the shares were issued.

During the nine months ended June 30, 2021, the Company issued 640,000 shares and received proceeds of $143,000. The share price was determined by agreement with the purchasers, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 164,000 shares and for services valued at $20,000. The share price was determined by agreement with the service provider, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 100,000 shares for services to be provided valued at $75,000. The share price was determined by agreement with the service provider, based upon the current market price less a discount for purchasing restricted securities.

During the nine months ended June 30, 2021, the Company issued 109,519 shares to pay interest due holders of bridge notes and convertible notes. The amount of interest paid was $44,346. The share prices were determined by the aggregate market price for the week in which the interest became due.

None

Not Applicable

None

(a) Exhibits furnished as Exhibits hereto:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.