10-Q 1 celz_10q.htm FORM 10-Q celz_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2022

 

Or

 

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

 

For the transition period from ___________ to ___________

 

Commission File Number: 000-53500

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

87-0622284

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

211 E Osborn Road, Phoenix, AZ

 

85012

(Address of principal executive offices)

 

(Zip Code)

 

(480) 399-2822

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

CELZ

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant 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). Yes ☒     No ☐

 

Indicate by check mark whether the registrant has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). Yes ☒     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.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

 

Emerging growth company

 

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No ☒

 

The number of shares outstanding of the registrant’s common stock on November 10, 2022, was 14,076,246.

 

 

 

 

 

 

 

Page

Number

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets

 

3

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations

 

4

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

5

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ (Equity)

 

6

 

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

22

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

23

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

 

 

 

 

 

Item 6.

Exhibits

 

23

 

 

 
2

Table of Contents

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

September 30,

2022

 

 

December 31,

2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$16,969,063

 

 

$10,723,870

 

Certificates of deposit

 

 

5,021,307

 

 

 

-

 

Accounts receivable

 

 

-

 

 

 

2,485

 

Inventory

 

 

15,894

 

 

 

10,866

 

Total Current Assets

 

 

22,006,264

 

 

 

10,737,221

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

Other assets

 

 

3,281

 

 

 

3,281

 

Licenses, net of amortization

 

 

458,616

 

 

 

527,679

 

TOTAL ASSETS

 

$22,468,161

 

 

$11,268,181

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$327,843

 

 

$761,862

 

Accrued expenses

 

 

54,920

 

 

 

24,385

 

Management fee and patent liabilities - related parties

 

 

-

 

 

 

250,000

 

Advances from related party

 

 

14,194

 

 

 

14,194

 

Total Current Liabilities

 

 

396,957

 

 

 

1,050,441

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 25,000,000,000 and 6,000,000,000 shares authorized; 14,076,246 and 6,338,872 issued and 14,076,238 and 6,338,864 outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

14,077

 

 

 

6,339

 

Additional paid-in capital

 

 

69,653,293

 

 

 

53,879,215

 

Accumulated deficit

 

 

(47,596,166)

 

 

(43,667,814)

TOTAL STOCKHOLDERS' EQUITY

 

 

22,071,204

 

 

 

10,217,740

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$22,468,161

 

 

$11,268,181

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
3

Table of Contents

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the Three Months Ended

September 30,

2022

 

 

For the Three Months Ended

September 30,

2021

 

 

For the Nine Months Ended

September 30,

2022

 

 

For the Nine Months Ended

September 30,

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$55,000

 

 

$10,000

 

 

$70,000

 

 

$20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

16,000

 

 

 

4,000

 

 

 

22,791

 

 

 

8,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

39,000

 

 

 

6,000

 

 

 

47,209

 

 

 

11,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

230,940

 

 

 

59,180

 

 

 

900,635

 

 

 

59,180

 

Selling, general and administrative

 

 

805,461

 

 

 

757,235

 

 

 

3,043,946

 

 

 

1,536,479

 

Amortization of patent costs

 

 

23,021

 

 

 

23,021

 

 

 

69,063

 

 

 

69,063

 

TOTAL EXPENSES

 

 

1,059,422

 

 

 

839,436

 

 

 

4,013,644

 

 

 

1,664,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(1,020,422)

 

 

(833,436)

 

 

(3,966,435)

 

 

(1,653,222)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME/(EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

-

 

 

 

(1,305,273)

 

 

-

 

 

 

(1,875,687)

Gain on extinguishment of convertible notes

 

 

-

 

 

 

489,157

 

 

 

-

 

 

 

585,601

 

Change in fair value of derivatives liabilities

 

 

-

 

 

 

(194,044)

 

 

-

 

 

 

26,030,549

 

Other income

 

 

38,083

 

 

 

-

 

 

 

38,083

 

 

 

-

 

Total other income (expense)

 

 

38,083

 

 

 

(1,010,160)

 

 

38,083

 

 

 

24,740,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

 

 

(982,339)

 

 

(1,843,596)

 

 

(3,928,352)

 

 

23,087,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$(982,339)

 

$(1,843,596)

 

$(3,928,352)

 

$23,087,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC NET INCOME (LOSS) PER SHARE

 

$(0.07)

 

$(0.75)

 

$(0.40)

 

$9.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED NET INCOME (LOSS) PER SHARE

 

$(0.07)

 

$(0.75)

 

$(0.40)

 

$9.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC

 

 

14,068,412

 

 

 

2,452,076

 

 

 

9,872,450

 

 

 

2,313,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED

 

 

14,068,412

 

 

 

2,452,076

 

 

 

9,872,450

 

 

 

2,363,145

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
4

Table of Contents

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED CASH FLOWS

 

 

 

 

 

 

 

For the Nine

Months Ended

September 30,

2022

 

 

For the Nine

Months Ended

September 30,

2021

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$(3,928,352)

 

$23,087,241

 

Adjustments to reconcile net income (loss) to

 

 

 

 

 

 

 

 

net cash from operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

59,584

 

 

 

595,380

 

Amortization

 

 

69,063

 

 

 

69,063

 

Amortization of debt discounts

 

 

-

 

 

 

1,755,104

 

Change in fair value of derivatives liabilities

 

 

-

 

 

 

(26,030,549)

Increase in principal and accrued interest balances due to penalty provision

 

 

-

 

 

 

93,821

 

Gain on extinguishment of convertible notes

 

 

-

 

 

 

(585,601)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,485

 

 

 

-

 

Inventory

 

 

(5,028)

 

 

-

 

Accounts payable

 

 

(434,019)

 

 

103,626

 

Accrued expenses

 

 

30,535

 

 

 

26,169

 

Management fee payable

 

 

-

 

 

 

(168,700)

Net cash used in operating activities

 

 

(4,205,732)

 

 

(1,054,446)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of certificates of deposit

 

 

(5,021,307)

 

 

-

 

Advance to related party

 

 

-

 

 

 

(200,000)

Net cash used in investing activities

 

 

(5,021,307)

 

 

(200,000)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock and warrants, net of issuance costs

 

 

15,471,775

 

 

 

-

 

Proceeds from exercise of warrants

 

 

457

 

 

 

-

 

Proceeds from note payable

 

 

-

 

 

 

3,887,750

 

Payments on notes payable

 

 

-

 

 

 

(105,000)

Payment of debt issuance costs

 

 

-

 

 

 

(443,239)

Payment of deferred offering costs

 

 

-

 

 

 

(3,282)

Proceeds from convertible notes payable

 

 

-

 

 

 

435,040

 

Proceeds from sale of preferred stock

 

 

-

 

 

 

462,000

 

Related party advances

 

 

-

 

 

 

226,500

 

Repayment of related party advances

 

 

-

 

 

 

(220,000)

Payments to settle convertible notes payable and warrants

 

 

-

 

 

 

(705,405)

Net cash provided by financing activities

 

 

15,472,232

 

 

 

3,534,364

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH

 

 

6,245,193

 

 

 

2,279,918

 

BEGINNING CASH BALANCE

 

 

10,723,870

 

 

 

98,012

 

ENDING CASH BALANCE

 

$16,969,063

 

 

$2,377,930

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash payments for interest

 

$-

 

 

$9,186

 

Cash payments for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Accrued dividends on preferred stock

 

$-

 

 

$27,725

 

Warrants issued with notes payable as a service fee

 

$-

 

 

$2,097,629

 

Conversion of notes payable, accrued interest and derivative liabilities into common stock

 

$-

 

 

$13,747,415

 

Conversion of management fees and patent liability into common stock

 

$250,000

 

 

$50,000

 

Discounts on convertible notes payable due to derivative liabilities

 

$-

 

 

$134,640

 

Exchange of preferred stock for notes payable

 

$-

 

 

$572,275

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
5

Table of Contents

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

Preferred Stock

 

 

Series B

Preferred Stock

 

 

Series C

Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

 Deficit

 

 

Equity

 

  December 31, 2021

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

6,338,864

 

 

$6,339

 

 

$53,879,215

 

 

$(43,667,814)

 

$10,217,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock and accompanying warrants, net of issuance costs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,991,669

 

 

 

2,992

 

 

 

15,468,783

 

 

 

-

 

 

 

15,471,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for related party patent liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

181,818

 

 

 

182

 

 

 

249,818

 

 

 

-

 

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for warrant exercise

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,563,887

 

 

 

4,564

 

 

 

(4,107)

 

 

-

 

 

 

457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

59,584

 

 

 

-

 

 

 

59,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,928,352)

 

 

(3,928,352)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 September 30, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

14,076,238

 

 

$14,077

 

 

$69,653,293

 

 

$(47,596,166)

 

$22,071,204

 

 

 

 

Series A

Preferred Stock

 

 

Series B

Preferred Stock

 

 

Series C

Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

 Deficit

 

 

Equity

 

 June 30, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

13,956,238

 

 

$13,957

 

 

$69,644,239

 

 

$(46,613,827)

 

$23,044,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for warrant exercise

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

120,000

 

 

 

120

 

 

 

(108)

 

 

-

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,162

 

 

 

-

 

 

 

9,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(982,339)

 

 

(982,339)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  September 30, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

14,076,238

 

 

$14,077

 

 

$69,653,293

 

 

$(47,596,166)

 

$22,071,204

 

 

 
6

Table of Contents

 

 

 

Series A

Preferred Stock

 

 

Series B

Preferred Stock

 

 

Series C

Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

 Deficit

 

 

Deficit

 

 December 31, 2020

 

 

3,000,000

 

 

$3,000

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

1,537,073

 

 

$1,537

 

 

$22,082,689

 

 

$(61,890,236)

 

$(39,803,010)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of preferred stock

 

 

-

 

 

 

-

 

 

 

350

 

 

 

321,000

 

 

 

150

 

 

 

141,000

 

 

 

4,286

 

 

 

4

 

 

 

(4)

 

 

-

 

 

 

462,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for related party management liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

89,286

 

 

 

89

 

 

 

49,911

 

 

 

-

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of convertible notes, accrued interest and derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

789,727

 

 

 

790

 

 

 

1,382,541

 

 

 

-

 

 

 

1,383,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Relief of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,364,084

 

 

 

-

 

 

 

12,364,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,725)

 

 

-

 

 

 

(27,725)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cashless exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37,870

 

 

 

38

 

 

 

(38)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued with notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,097,629

 

 

 

-

 

 

 

2,097,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock redemption

 

 

-

 

 

 

-

 

 

 

(350)

 

 

(321,000)

 

 

(150)

 

 

(141,000)

 

 

-

 

 

 

-

 

 

 

(110,275)

 

 

-

 

 

 

(572,275)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

595,380

 

 

 

-

 

 

 

595,380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,087,241

 

 

 

23,087,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

3,000,000

 

 

$3,000

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

2,458,242

 

 

$2,458

 

 

$38,434,192

 

 

$(38,802,995)

 

$(363,345)

 

 

 

Series A

Preferred Stock

 

 

Series B

Preferred Stock

 

 

Series C

Preferred Stock

 

 

Common Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

 Deficit

 

 June 30, 2021

 

 

3,000,000

 

 

$3,000

 

 

 

350

 

 

$321,000

 

 

 

150

 

 

$141,000

 

 

 

2,440,614

 

 

2,440

 

 

$35,777,506

 

 

$(36,959,399)

 

$(714,453)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for conversion of convertible notes, accrued interest and derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

17,628

 

 

 

18

 

 

 

153,962

 

 

 

-

 

 

 

153,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Relief of derivative liabilities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

138,731

 

 

 

-

 

 

 

138,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,973)

 

 

-

 

 

 

(6,973)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued with notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,097,629

 

 

 

-

 

 

 

2,097,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock redemption

 

 

-

 

 

 

-

 

 

 

(350)

 

 

(321,000)

 

 

(150)

 

 

(141,000)

 

 

-

 

 

 

-

 

 

 

(110,275)

 

 

-

 

 

 

(572,275)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

383,612

 

 

 

-

 

 

 

383,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,843,596)

 

 

(1,843,596)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

3,000,000

 

 

$3,000

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

2,458,242

 

 

$2,458

 

 

$38,434,192

 

 

$(38,802,995)

 

$(363,345)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
7

Table of Contents

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization – Creative Medical Technologies Holdings, Inc. (the “Company”) is a commercial stage biotechnology company focused on immunology, urology, orthopedics and neurology using adult stem cell treatments. The Company was incorporated on December 3, 1998, in the State of Nevada under the name Jolley Marketing, Inc. On May 18, 2016, the Company closed a transaction which was accounted for as a recapitalization, reverse merger, under which Creative Medical Technologies, Inc., a Nevada corporation (“CMT”) became the Company’s wholly-owned subsidiary, and Creative Medical Health, Inc. (“CMH”), which was CMT’s sole stockholder prior to the merger, became the Company’s principal stockholder. In connection with this merger, the Company changed its name to Creative Medical Technologies Holdings, Inc. to reflect its current business.

 

CMT was originally created on December 30, 2015 (“Inception”), as the urological arm of CMH to monetize a patent and related intellectual property related to the treatment of erectile dysfunction (“ED”), which it acquired from CMH in February 2016. Subsequently, the Company has expanded its development and acquisition of intellectual property beyond urology to include therapeutic treatments utilizing “re-programmed” stem cells, and the treatment of neurologic disorders, lower back pain, type I diabetes, and heart, liver, kidney and other diseases using various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and AmnioStem LLC subsidiaries. However, neither ImmCelz Inc., StemSpine Inc. nor AmnioStem LLC have commenced commercial activities.

 

The Company currently conducts substantially all of its commercial operations through CMT, which markets and sells the Company’s CaverStem® and FemCelz® disposable kits utilized by physicians to perform autologous procedures that treat erectile dysfunction and female sexual dysfunction, respectively.

 

On October 20, 2022 the Company announced it has produced an allogenic Cell Line called AlloStem™, which includes a Master Cell Bank and a Drug Master File which shall be submitted for FDA registration. The importance of the company creating and developing such assets, as opposed to licensing agreements with third parties, provides further de-risking of an important component to many of our programs, including, but not limited to, the ImmCelz® immunotherapy platform for multiple diseases, OvaStem® for Premature Ovarian Failure, AlloStem™ for Type 1 diabetes, StemSpine® for lower back pain, and IPSCelz ™ inducible pluripotent stem cell program in ongoing development with Greenstone Biosciences.

 

In 2020, through the Company’s ImmCelz Inc. subsidiary, the Company began exploring the development of an immunotherapy platform that “supercharges” the patients own immune cells. Secreted factors from AlloStem™ cells are used to “reprogram” the patient’s own immune cells. They are then harvested and injected back into the patient in less than 72 hours. The Company believes this process endows the immune cells with regenerative properties that may be suitable for the treatment of multiple indications. In contrast to other stem cell-based approaches, the immune cells are significantly smaller in size than stem cells and are believed to more effectively penetrate areas of the damaged tissues and induce regeneration.

 

On June 15, 2022, the Company signed an agreement with Greenstone Biosciences Inc. in Palo Alto, CA for the development of a human induced pluripotent stem cell (iPSC) pipeline for the Company's ImmCelz® platform. This project is identified as iPScelzTM. Human iPSc's are genetically reprogrammed to differentiate into a wide array of human cell and tissue types, possess the ability to proliferate almost indefinitely in culture, and represent a single source of cells that could be used to replace those lost to damage or disease. Beyond the therapeutic benefits offered by iPSC, the next generation iPScelzTM pipeline for ImmCelz® will enable the ability for large scale production and sustainability, while helping to reduce long term costs of manufacturing.

 

Use of Estimates – The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

 
8

Table of Contents

 

Basis of Presentation - The consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. The operations for the nine-month period ended September 30, 2022, are not necessarily indicative of the operating results for the full year.

 

Risks and Uncertainties - The Company has a limited operating history and has only recently started to generate revenues from its planned principal operations.

On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, to-date, the Company has experienced a reduction in revenues due to the COVID-19 outbreak.

 

The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions, including the political environment and acts or threats of war or terrorism. Adverse developments in these general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on the Company’s financial condition and the results of its operations.

 

The Company has only recently started to generate sales and we have limited marketing and/or distribution capabilities. The Company has limited experience in developing, training or managing a sales force and will incur substantial additional expenses if it decides to market any of its current and future products and services with an internal sales organization. Developing a marketing and sales force is also time consuming and could delay launch of its future products and services. In addition, the Company will compete with many companies that currently have extensive and well-funded marketing and sales operations. The Company’s marketing and sales efforts may be unable to compete successfully against these companies. In addition, the Company has limited capital to devote to sales and marketing.

 

The Company’s industry is characterized by rapid changes in technology and customer demands. As a result, the Company’s products and services may quickly become obsolete and unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and services and enhance the Company’s current products and services on a timely and cost-effective basis. Further, the Company’s products and services must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products and services or enhanced versions of existing products and services. Also, the Company may not be able to adapt new or enhanced products and services to emerging industry standards, and the Company’s new products and services may not be favorably received. In addition, the Company may not have the capital resources to further the development of existing and/or new ones.

 

 
9

Table of Contents

 

On July 8, 2022, the Company received a letter from The Nasdaq Stock Market LLC advising us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price of our common stock was below $1.00 per share for 30 consecutive business days. Pursuant to Nasdaq’s Listing Rules, the Company has a 180 day grace period, until January 4, 2023, during which the Company may regain compliance if the bid price of our common stock closes at $1.00 per share or more for a minimum of ten consecutive business days. In addition, the Company may be eligible for an additional 180-day grace period if we meet Nasdaq’s initial listing standards (other than with respect to minimum bid price) for The Nasdaq Capital Market. The Company intends to actively monitor the bid price for our common stock between now and January 4, 2023, and will consider available options to regain compliance with Nasdaq’s minimum bid price requirements. However, there can be no assurance that the Company will be able to regain compliance with Nasdaq’s Listing Rules and maintain our Nasdaq listing. The delisting of our shares of common stock from Nasdaq may have a material negative impact on the liquidity of our securities, as well as a material negative impact on our ability to raise capital in the future.

 

Revenue - The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from contracts with customers”. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Deferred revenue represents amounts which still have yet to be earned.

 

The Company generates revenue from the sale of disposable stem cell concentration kits. Revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, which is generally on delivery to the customer.

 

Payments received for which the earnings process is not yet complete are deferred. As of September 30, 2022, the Company had no deferred revenue.

 

Concentration Risks - The Federal Deposit Insurance Corporation insures cash deposits in most general bank accounts for up to $250,000 per institution. The Company maintains its cash balances at two financial institutions. As of September 30, 2022, the Company’s balance exceeded the limit at both institutions.

 

Fair Value of Financial Instrument - The Company’s financial instruments consist of cash and cash equivalents, and payables. The carrying amount of cash and cash equivalents and payables approximates fair value because of the short-term nature of these items.

 

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy:

 

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

 

Level 3 – Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

When determining fair value, whenever possible the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. As of September 30, 2022, the Company has no derivative liabilities.

 

 
10

Table of Contents

 

Basic and Diluted Loss Per Share – The Company follows Financial Accounting Standards Board (“FASB”) ASC 260 Earnings per Share to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated, based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when an award is settled are assumed to be used to repurchase shares in the current period. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

The following is a summary of outstanding securities which have been included in the calculation of diluted net income per share and reconciliation of net income to net income available to common stockholders for the Nine-Months ended September 30, 2021.

 

 

 

For the Nine-

Months Ended September 30,

2021

 

Weighted average common shares outstanding used in calculating basic earnings per share

 

 

2,313,005

 

Effect of Series B and C preferred stock

 

 

-

 

Effect of warrants

 

 

50,140

 

Effect of convertible notes payable

 

 

-

 

Effect of convertible related party management fee and patent liabilities

 

 

-

 

Weighted average common shares outstanding used in calculating diluted earnings per share

 

 

2,363,145

 

 

 

 

 

 

Net income as reported

 

$23,087,241

 

Add - Interest on convertible notes payable

 

 

-

 

Net income available to common stockholders

 

$23,087,241

 

 

The Company excluded 7 options and 18 warrants from the computation of diluted net income per share for the Nine-Months ended September 30, 2021 as their exercise prices were in excess of the average closing market price of the Company’s common stock during that period.

 

During the Nine-Months ended September 30, 2022, the Company had 111,824 options and 22,849,272 warrants to purchase shares of common stock which have been excluded from the dilutive net loss per share calculation as their effects are anti-dilutive.

 

On November 10, 2021, we effected a 1-for-500 reverse split of our authorized and issued and outstanding shares of common stock. All share references have been restated for this reverse split to the earliest period presented. As a result of the split, the authorized shares of the Company’s common stock decreased to 50,000,000 shares.

 

Recent Accounting Pronouncements – The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 

 
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NOTE 2 – LICENSING AGREEMENTS

 

ED Patent – The Company acquired a patent from CMH, a related company on February 2, 2016, in exchange for 431,111 shares of CMTH restricted common stock valued at $100,000. The patent expires in 2025 and the Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $7,479 was recorded for the Nine-Months ended September 30, 2022 and 2021. As of September 30, 2022, the carrying value of the patent was $33,507. The Company expects to amortize $9,972 annually through 2026 related to the patent costs.

 

Multipotent Amniotic Fetal Stem Cells License Agreement - On August 25, 2016, CMT entered into a License Agreement dated August 25, 2016, with a University. This license agreement grants to CMT the exclusive right to all products derived from a patent for use of multipotent amniotic fetal stem cells composition of matter throughout the world during the period ending on the expiration date of the longest-lived patent rights under the patent. The license agreement also permits CMT to grant sublicenses. Under the terms of the license agreement, CMT is required to diligently develop, manufacture, and sell any products licensed under the agreement. CMT paid the University an initial license fee within 30 days of entering into the agreement. CMT is also required to pay annual license maintenance fees on each anniversary date of the agreement, which maintenance fees would be credited toward any earned royalties for any given period. The License Agreement provides for payment of various milestone payments and earned royalties on the net sales of licensed products by CMT or any sub licensee. CMT is also required to reimburse the University for any future costs associated with maintaining the patent. CMT may terminate the license agreement for any reason upon 90 days’ written notice and the University may terminate the agreement in the event CMT fails to meet its obligations set forth therein, unless the breach is cured within 30 days of the notice from the University specifying the breach. CMT is also obligated to indemnify the University against claims arising due to the exercise of the license by CMT or any sub licensee. As of September 30, 2022, no amounts are currently due to the University.

 

The Company estimates that the patent expires in February 2026 and has elected to amortize the patent through the period of expiration on a straight-line basis. Amortization expense of $879 was recorded for the Nine-Months ended September 30, 2022 and 2021. As of September 30, 2022, the carrying value of the patent was $3,498. The Company expects to amortize approximately $1,172 annually through 2026 related to the patent costs. 

 

Lower Back Patent – The Company, through its subsidiary StemSpine, LLC, acquired a patent from CMH, a related company, on May 17, 2017, covering the use of various stem cells for the treatment of lower back pain from pursuant to a Patent Purchase Agreement, which was amended in November 2017. As amended, the agreement provides the following:

 

 

·

The Company is required to pay CMH $100,000 within 30 days of demand as an initial payment.

 

·

In the event the Company determines to pursue the technology via use of autologous cells, the Company will pay CMH:

 

 

o

$100,000 upon the signing agreement with a university for the initiation of an IRB clinical trial.

 

o

$200,000, upon completion of the IRB clinical trial.

 

o

$300,000 in the event we commercialize the technology via use of autologous cells by a physician without a clinical trial.

 

 

·

In the event the Company determines to pursue the technology via use of allogenic cells, the Company will pay CMH:

 

 

o

$100,000 upon filing an IND with the FDA.

 

o

$200,000 upon dosing of the first patient in a Phase 1-2 clinical trial.

 

o

$400,000 upon dosing the first patient in a Phase 3 clinical trial.

 

 

·

Payment may be made in cash or shares of our common at a discount of 30% to the lowest closing price within 20 business days prior to the conversion date.

 

·

In the event the Company’s shares of common stock trade below $0.01 per share for two or more consecutive trading days, the number of any shares issuable as payment doubles.

 

 

·

For a period of five years from the date of the first sale of any product derived from the patent, the Company is required to make royalty payments of 5% from gross sales of products, and 50% of sale price or ongoing payments from third parties for licenses granted under the patent to third parties.

 

 
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The Company paid CMH the $100,000 obligation of the initial payment due under this agreement, by a $50,000 cash payment and the issuance of 6,667 shares of common stock on December 12, 2019. On January 8, 2021, following the Company’s announcement with respect to the clinical commercialization of the StemSpine technology, the Company paid CMH $50,000 of the $300,000 obligation due under this agreement through the issuance of 133 shares of common stock. On September 30, 2020, the Company paid CMH an additional $40,000 of the $300,000 obligation due under this agreement through the issuance of 84,656 shares of common stock, and in January 2021 the Company paid CMH an additional $50,000 of the $300,000 obligation due under this agreement through the issuance of 89,286 shares of common stock. The remaining portion of the $300,000 obligation was paid in cash in 2021.

 

The patent expires on May 19, 2027 and the Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $7,500 was recorded for the nine-month periods ended September 30, 2022 and 2021. As of September 30, 2022, the carrying value of the initial patent license was $47,500. The Company expects to amortize approximately $10000 annually through 2027 related to the patent costs.

 

The Company has elected to amortize the increased obligation from the election to commercialize the StemSpine technology over a ten-year period on a straight-line basis. Amortization expense of $34,455 was recorded for the nine-month periods ended September 30, 2022 and 2021. As of September 30, 2022, the carrying value of the patent was $167,859. The Company expects to amortize approximately $46,000 annually through 2027 related to the patent costs.

 

ImmCelz™ - On December 28, 2020, ImmCelz, Inc. (“ImmCelz”), a newly formed Nevada corporation and wholly owned subsidiary of the Company, entered into a Patent License Agreement dated December 28, 2020 (the “Agreement”), with Jadi Cell, LLC. (“Jadi”), a company controlled by Dr. Amit Patel, a former director of the Company. The Agreement grants to ImmCelz™ the patent rights under U.S. Patent# 9,803,176 B2, “Methods and compositions for the clinical derivation of an allogenic cell and therapeutic uses”. The contract grants ImmCelz™ access to proprietary process of expanding the master cell bank of Jadi Cell LLC, as currently practiced by Licensor and as documented in standard operating procedures (SOPs) and other written documentation. The terms of the agreement are as follows:

 

 

·

Licensee shall pay Licensor a license fee of $250,000 (the “Upfront Royalty”), which can also be paid in CELZ stock at a discount of 25% of the closing price of $0.0037, which is based on the date of this agreement

 

·

Within thirty (30) days of the end of each calendar quarter during the term of this Agreement, Licensee will pay Licensor five percent (5%) of the Net Income of ImmCelz™. during such calendar quarter (the “Continuing Royalty”)

 

 

·

in one or a series of related transactions, of all or substantially all of the business or assets of Licensee ImmCelz, Inc. (“Sale of Assets”) will result in a one-time ten-percent allocation to the licensor, the Continuing Royalty will be calculated at five percent (5%) of the Net Income of Licensee in any calendar quarter in which the Net Income in such calendar quarter reflects the receipt of any consideration from such Sale of Assets.

 

To date, the Company has not made any payments to Jadi Cell under this agreement, other than the $250,000 initial license fee, which was paid by the issuance of 180,180 shares of common stock to Jadi Cell in February 2022.

 

The Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $18,750 were recorded for the nine-month periods ended September 30, 2022 and 2021. As of September 30, 2022, the carrying value of the patent was $206,250. The Company expects to amortize approximately $25,000 annually through 2030 related to the patent costs.

 

 
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The following is a roll-forward of the Company’s licensing agreements for the Nine-Months ended September 30, 2022.

 

 

 

Assets

 

 

Accumulated

Amortization

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

$760,000

 

 

$(232,321 )

Addition of new assets

 

 

 

 

 

 

-

 

Amortization

 

 

-

 

 

 

(69,063 )

Balances at September 30, 2022

 

$760,000

 

 

$(301,384 )

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

Management Reimbursement Agreement

 

On November 17, 2017, the Company entered into a Management Reimbursement Agreement with CMH, a related party whose directors and executive officers include the Company’s officers and directors. Pursuant to this agreement, during 2019 and 2020, and until September 16, 2021, the Company reimbursed CMH an aggregate of $45,000 per month for the services of management and consultants employed by CMH (including the Company’s Chief Executive Officer and Chief Financial Officer, and the Company’s former directors Dr. Patel and Dr. Ichim). The agreement provided that at the option of CMH, the reimbursable amounts may be paid from time to time in shares of common stock of the Company at a price equal to a 30% discount to the lowest closing price during the 20 trading days prior to time the notice is given. This agreement was terminated effective September 15, 2021. At September 30, 2021 and 2022, no amounts were owed CMH under this agreement.

 

Debt Settlement Agreement

 

On January 12, 2018, the Company entered into a Debt Settlement Agreement with Timothy Warbington, the Company’s Chief Executive Officer, under which the Company issued 3,000,000 shares of super-voting Series A Preferred Stock to Mr. Warbington in exchange for the cancellation of $150,000 of debt owed by the Company to CMH, which CMH in turn was obligated to pay Mr. Warbington. The Series A Preferred Stock previously provided Mr. Warbington with substantial control over all matters subject to a vote of the Company’s shareholders. Mr. Warbington surrendered the Series A Preferred Stock to the Company in December 2021 immediately prior to the closing of the Company’s public offering in exchange for $150,000 plus 8% interest on such amount from January 2018 until the date of surrender.

 

Jadi Cell License Agreement

 

On December 28, 2020, the Company entered into a patent license agreement with Jadi Cell, LLC, a company owned and controlled by Dr. Amit Patel, a former director of the Company. The agreement provides Company with an exclusive, worldwide license to U.S. Patent No. 9,803,176 “Methods and compositions for the clinical derivation of an allogenic cell and therapeutic uses” and the proprietary process of expanding the master cell bank of Jadi Cell LLC, in the field of enhancing autologous cells. The agreement is described in detail in Note 2 above. To date, the Company has not made any payments to Jadi Cell under this agreement, other than the $250,000 initial license fee, which was paid by the issuance of 181,818 shares of common stock to Jadi Cell in February 2022.

 

StemSpine Patent Purchase 

 

The Company acquired U.S. Patent No. 9,598,673 covering the use of various stem cells for the treatment of lower back pain from its affiliate CMH pursuant to a Patent Purchase Agreement dated May 17, 2017, which was amended in November 2017. The inventors of the patent were Thomas Ichim, PhD and Amit Patel, MD, former directors of the Company, and Annette Marleau, PhD. The Patent Purchase Agreement is described in detail in Note 2 above. Pursuant to the Patent Purchase Agreement, the Company paid CMH the $100,000 obligation of the initial payment due under this agreement, by a $50,000 cash payment and the issuance of 6,667 shares of common stock on December 12, 2020. On January 8, 2021, following the Company’s announcement with respect to the clinical commercialization of the StemSpine technology, the Company paid CMH $50,000 of the $300,000 obligation due under this agreement through the issuance of 133 shares of common stock. On September 30, 2020, the Company paid CMH an additional $40,000 of the $300,000 obligation due under this agreement through the issuance of 84,656 shares of common stock, and in January 2021 the Company paid CMH an additional $50,000 of the $300,000 obligation due under this agreement through the issuance of 89,286 shares of common stock. The remaining portion of the $300,000 obligation has been paid in cash.

 

 
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Insider Loans

 

On May 28, 2021, Timothy Warbington, who is our CEO and Chairman; and Dr. Amit Patel, who was formerly a director of ours, advanced the Company $50,000 and $150,000 respectively. The two notes were repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 5% per annum.

 

NOTE 4 – DEBT

 

As-of September 30, 2022, the Company had no outstanding loans and there was no loan activity during the Nine-Months ended September 30, 2022.

 

On August 11, 2021, we completed the sale of 15% Original Issue Discount Senior Notes (“Bridge Notes”) in the aggregate principal amount of $4,456,176 to a group of institutional investors (the “Purchasers”). In connection with the sale of the Bridge Notes, holders of our shares of Series B Preferred Stock and Series C Preferred Stock exchanged such preferred stock for additional Bridge Notes in the aggregate principal amount of $690,000. The Bridge Notes were scheduled to mature on February 11, 2022, subject to the requirement that we redeem the Bridge Notes prior to such date with the net proceeds of any future offering of our securities. The notes were redeemed in full as a result of the securities offering on December 7, 2021. The Notes did not bear interest other than upon an event of default, and were not convertible into the Company’s common stock. In addition, the Notes were subject to covenants, events of defaults and other terms and conditions customary in transactions of this nature. The Company amortized the on-issuance discount and financing fees totaling $758,426 to interest expense with respect to these notes.

 

The Company also issued to the purchasers of the Bridge Notes five-year warrants to purchase an aggregate of 363,046 shares of our common stock at an initial exercise price of $14.175 per share, subject to anti-dilution adjustment in the event of future sales of our equity below the then exercise price, stock dividends, stock splits and other specified events.

 

Roth Capital Partners (“Roth”), acted as sole placement agent for the offering. Pursuant to terms of an engagement letter with Roth, the Company paid Roth a placement agent fee in the amount $312,750. The Company also issued Roth a warrant to purchase 20,189 shares of common stock with the same terms as the warrants issued to the Purchasers.

 

During the nine-months ended September 30, 2021, we also issued $498,800 in convertible notes to accredited investors with net proceeds of $435,040, which have since been repaid in full. The notes were to mature during February and July of 2022 and bore interest at a rate of 8%. The notes were convertible into shares of the Company’s common stock at conversion prices ranging from 60% to 71% of the average of the two lowest traded prices or the lowest trade price of the Company’s common stock during the previous 15 trading days preceding the conversion date. The Company amortized the discount due to derivative liabilities and on-issuance discount totaling $443,905 to interest expense with respect to these notes.

 

On May 28, 2021, Mr. Timothy Warbington, who is our CEO and Chairman; and Dr. Amit Patel, who is a director of ours, advanced the company $50,000 and $150,000 respectively. The two notes were repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 5% per annum.

 

 
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On June 21, 2021, we issued a $105,000, non-convertible note to an accredited investor with net proceeds of $100,000. The note was repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 10% per annum.

 

During the nine-months ended September 30, 2022 there was no amortization to interest expense. During the nine-months ended September 30, 2021, the Company amortized $1,755,104 to interest expense. As of September 30, 2022, total discounts were $0.

 

During the nine-months ended September 30, 2021, the Company issued an aggregate of 789,727 shares upon the conversion of $1,383,331 of outstanding principal, interest and fees on outstanding notes, and 37,870 shares upon the cashless exercise of 43,167 warrants.

 

NOTE 5 – DERIVATIVE LIABILITIES

 

Derivative Liabilities

 

As-of September 30, 2022, the Company had no outstanding derivative liabilities and there was no derivative activity during the Nine-Months ended September 30, 2022.

 

 In connection with convertible notes payable, the Company records derivative liabilities for the conversion feature. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the nine-months ended September 30, 2021, the Company recorded initial derivative liabilities of $1,077,757 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $0.0106 to $0.0248 our stock price on the date of grant of $0.0340 to $0.0806, expected dividend yield of 0%, expected volatility of 75.03% to 98.14%, risk free interest rate of 0.10% and expected terms of 1.0 year. Upon initial valuation, the derivative liabilities exceeded the face values certain of the convertible notes payable by approximately $697,602, which was recorded as a day one loss in derivative liability.

 

In August 2021, we completed the sale of 15% Original Issue Discount Senior Notes (“Bridge Notes”) in the aggregate principal amount of $4,456,176 to a group of institutional investors (the “Purchasers”). A portion of the proceeds were used to repay the principal, accrued interest, pre-payment fees and other premiums of all the outstanding convertible notes as well as all previously outstanding warrants with re-pricing and anti-dilutive features. The result was $0 in derivative liabilities as-of the period ended September 30, 2021. 

 

NOTE 6 – STOCK-BASED COMPENSATION

 

On September 6, 2021, the Company’s Board of Directors and holders of a majority of the voting power of the Company’s stockholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), and reserved 600,000 shares of common stock for the issuance of awards thereunder. The 2021 Plan provides for the granting to our employees, officers, directors, consultants and advisors of performance awards payable in shares of common stock, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”), restricted share units (“RSUs”) and other stock-based awards. The purpose of the 2021 Plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by eligible participants who are expected to contribute to the Company’s future growth and success.

 

During the Nine-Months ended September 30, 2022, Messrs. Warbington and Dickerson received 10-year options to purchase an aggregate of 111,187 shares of common stock with an exercise price of $1.69. The options vested immediately as to 25% of the shares subject to the option, and will vest in three equal installments of 25% of the shares subject to the option on each of the next three annual anniversary dates of the grant date. The value of the options was determined to be $145,525 based upon the Black-Scholes method, see variables used below.

 

 

 

Inputs

Used

 

 

 

 

 

Annual dividend yield

 

$-

 

Expected life (years)

 

 

10.0

 

Risk-free interest rate

 

 

0.81%

Expected volatility

 

 

92.95%

Common stock price

 

$1.69

 

 

 
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During the Nine-Months ended September 30, 2021, the fair market value of the options was insignificant to the financial statements.

 

Since the expected life of the options was greater than the Company’s historical stock information available, the Company determined the expected volatility based on price fluctuations of comparable public companies.

 

There were no options issued during the Nine-Months ended September 30, 2021.

 

Option activity for the Nine-Months ended September 30, 2022 consists of the following:

 

 

 

Stock

 Options

 

 

Weighted

Average

Exercise

 Price

 

 

Weighted

Average

 Life

 Remaining

 

Outstanding, December 31, 2021

 

 

7

 

 

$7,500

 

 

 

4.64

 

Issued

 

 

111,817

 

 

 

 

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding, September 30, 2022

 

 

111,824

 

 

$2.16

 

 

 

9.32

 

Vested, September, 30, 2022

 

 

27,961

 

 

$3.57

 

 

 

9.32

 

 

NOTE 7 – STOCKHOLDERS’ EQUITY

 

On May 3, 2022, the “Company” completed the sale of (i) 2,991,669 shares of common stock, and pre-funded warrants to purchase 4,563,887 shares of common stock (the “Pre-Funded Warrants”), and (ii) accompanying warrants to purchase 15,111,112 shares of common stock (the “Common Warrants”), at a combined offering price of $2.25 per share of common stock/Pre-Funded Warrant and related Common Warrant, to a group of institutional investors (the “Purchasers”), pursuant to a Securities Purchase Agreement between the Company and the Purchasers dated as of April 28, 2022 (the “Purchase Agreement”), resulting in gross proceeds to the Company of approximately $17,000,000. The transaction was effected pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended and Rule 506(b) promulgated thereunder.

 

The Common Warrants have a five-year term, and an exercise price of $2.00 per share. The Pre-Funded Warrants do not expire, and have an exercise price of $0.0001 per share.

 

The Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Pre-Funded Warrants do not provide any guarantee of value or return.

 

Roth Capital Partners (“Roth”), acted as sole placement agent for the offering. The Company paid Roth a placement agent fee in the amount $1,360,000, and issued Roth a warrant to purchase 1,133,333 shares of Common Stock with the same terms as the Common Warrants issued to the Purchasers.

 

The issuances and exercises during the Nine-Months ended September 30, 2022, are as follows:

 

Outstanding at December 31, 2021

 

 

6,604,820

 

Issuances

 

 

20,808,332

 

Exercises

 

 

(4,563,887

)

Outstanding at September 30, 2022

 

 

22,849,272

 

Weighted Average Price at September 30, 2022

 

$

2.66

 

 

NOTE 8 – SUBSEQUENT EVENTS

 

In accordance with ASC 855, management reviewed all material events through November 15, 2022, for these financial statements. The material subsequent events are as follows:

 

On October 20, 2022 the Company announced it has produced an allogenic Cell Line called AlloStem™, which includes a Master Cell Bank and a Drug Master File which shall be submitted for FDA registration. The importance of the company creating and developing such assets, as opposed to licensing agreements with third parties, provides further de-risking of an important component to many of our programs, including, but not limited to, the ImmCelz® immunotherapy platform for multiple diseases, OvaStem® for Premature Ovarian Failure, AlloStem™ for Type 1 diabetes, StemSpine® for lower back pain, and IPSCelz ™ inducible pluripotent stem cell program in ongoing development with Greenstone Biosciences.

 

On November 3, 2022 the Company announced he U.S. Food and Drug Administration has cleared the Company's Investigational New Drug (IND) application, enabling the Company to proceed with initiating a clinical trial for Type 1 Diabetes using AlloStem™ AlloStem™ leverages a unique approach to harnessing the power of Perinatal Tissue Derived Cells® (PRDC) to multi-potentialities, including self-renewal ability, low antigenicity, reduced toxicity, and large-scale clinical expansion. The primary objective of the study (CELZ-201) is to evaluate AlloStem™ in patients with newly diagnosed Type 1 Diabetes. Patient recruitment is expected to begin in Q1 2023 with trial commencement updates to follow.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets and statements of operations. This section should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, and our interim financial statements and accompanying notes to these financial statements included in this report. All amounts are in U.S. dollars.

 

Forward-Looking Statement Notice

 

This quarterly report on Form 10-Q contains forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,” “should” or “anticipate” or their negatives or other variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, those set forth in our most recent annual report referenced below.

 

This report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements.

 

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in this report. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.

 

 
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Overview

 

We are a commercial stage biotechnology company focused on immunology, urology, neurology and orthopedics using adult stem cell treatments and interrelated regenerative technologies for the treatment of multiple indications. Our existing and pipeline of therapies and products include of the following:

 

celz_10qimg1.jpg

Our subsidiary, Creative Medical Technologies, Inc. (“CMT”), was originally created to monetize U.S. Patent No. 8,372,797 and related intellectual property related to the treatment of erectile dysfunction (“ED”), which it acquired in February 2016. Subsequently, we have expanded our development and acquisition of intellectual property beyond urology to include therapeutic treatments utilizing “re-programmed” stem cells, and the treatment of neurologic disorders, lower back pain, type I diabetes, and heart, liver, kidney and other diseases using various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and AmnioStem LLC subsidiaries. However, neither ImmCelz Inc., StemSpine Inc. nor AmnioStem LLC have commenced commercial activities.

 

We currently conduct substantially all of our commercial operations through CMT, which markets and sells our CaverStem® and FemCelz® disposable kits utilized by physicians to perform autologous procedures that treat erectile dysfunction and female sexual dysfunction, respectively. Our CaverStem® and FemCelz® kits are currently available through physicians at eight locations in the United States.

 

The Company has produced an allogenic Cell Line called AlloStem™, which includes a Master Cell Bank and a Drug Master File which shall be submitted for FDA registration. This is an important component to many of our programs, including, but not limited to, the ImmCelz® immunotherapy platform for multiple diseases, OvaStem® for Premature Ovarian Failure, AlloStem™ for Type 1 diabetes, StemSpine® for lower back pain, and IPSCelz ™ inducible pluripotent stem cell program in ongoing development with Greenstone Biosciences.

 

The Company is working with Greenstone Biosciences Inc. in Palo Alto, CA to develop a human induced pluripotent stem cell (iPSC) pipeline for the Company's ImmCelz® platform. The project is identified as iPScelzTM. Human iPSc's are genetically reprogrammed to differentiate into a wide array of human cell and tissue types, possess the ability to proliferate almost indefinitely in culture, and represent a single source of cells that could be used to replace those lost to damage or disease. Beyond the therapeutic benefits offered by iPSC, the next generation iPScelzTM pipeline for ImmCelz® will enable the ability for large scale production and sustainability, while helping to reduce long term costs of manufacturing.

 

On November 3, 2022 the Company announced he U.S. Food and Drug Administration has cleared the Company's Investigational New Drug (IND) application, enabling the Company to proceed with initiating a clinical trial for Type 1 Diabetes using AlloStem™ AlloStem™ leverages a unique approach to harnessing the power of Perinatal Tissue Derived Cells® (PRDC) to multi-potentialities, including self-renewal ability, low antigenicity, reduced toxicity, and large-scale clinical expansion. The primary objective of the study (CELZ-201) is to evaluate AlloStem™ in patients with newly diagnosed Type 1 Diabetes. Patient recruitment is expected to begin in Q1 2023 with trial commencement updates to follow.

 

Results of Operations – For the Three-month Periods Ended September 30, 2022 and 2021

 

Gross Revenue. We generated $55,000 in revenue for the three-month period ended September 30, 2022, in comparison with $10,000 for the comparable quarter a year ago. The increase of $45,000 or 450% was primarily due to new physician recruitment.

 

 
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Cost of Goods Sold. We generated $16,000 of cost of goods sold for the three-month period ended September 30, 2022, in comparison with $4,000 cost of goods sold for the comparable period a year ago.  The increase of $12,000 or 300% was due to the increased sales.

 

Gross Profit/(Loss). We generated a gross profit of $39,000 for the three-month period ended September 30, 2022, in comparison with $6,000 gross profit for the comparable period a year ago. The increase of $33,000 or 550% was due to the increased sales.

 

General and Administrative Expenses. General and administrative expenses for the three-month period ended September 30, 2022, totaled $805,461 in comparison with $757,235, for the comparable quarter a year ago. The increase of $48,226 or 6% is primarily due to approximately $87,000 in director and officer insurance premiums that began in September 2021, an increase of approximately $164,000 in increased net salary expenses from terminating the management service agreement in September 2021 and entering into direct employment arrangements with our CEO, CFO and the hiring of other key leaders of the management team, an increase of approximately $58,000 in marketing expenses as we ramp-up our commercial activity, and an increase of $139,000 in outside consulting expenses focused on moving key elements of our programs forward along with investments in intellectual property, offset by a reduction of $374,000 in stock-based compensation.

 

Amortization Expenses. Amortization expenses for the three-month periods ended September 30, 2022 and 2021, totaled $23,021.

 

Research and Development Expenses. Research and development expenses for the three-month period ended September 30, 2022, totaled $230,940 in comparison with $59,180, for the comparable quarter a year ago. The increase of $171,760 or 290% reflects investments in in regulatory, research, laboratory and manufacturing resources required to move our programs forward.

 

Other Income/Expense. Other income for the three-month period ended September 30, 2022 was $38,083, in comparison with a loss of $1,010,160, for the comparable quarter a year ago. The increased income of $1,048,243, is driven by the elimination of convertible debt that eliminated interest expense in 2022 compared to $1,305,273 in 2021, a loss of $184,044 on the change of fair value of derivative liabilities in 2021, offset by a gain of $489, 157 from the extinguishment of convertible notes in 2021 and $38,083 in interest income from short-term certificate of deposit investments in 2022.

 

Net Income/Loss. For the reasons stated above, our net loss for the three-month period ended September 30, 2022, totaled $982,339 in comparison to a loss of $1,010,160, for the comparable quarter a year ago.

 

Results of Operations – For the Nine-month Periods Ended September 30, 2022 and 2021

 

Gross Revenue. We generated $70,000 in revenue for the nine-month period ended September 30, 2022, in comparison with $20,000 in revenue for the comparable period a year ago. The increase of $50,000 or 250% was primarily due to new physician recruitment.

 

Cost of Goods Sold. We generated $22,791 of cost of goods sold for the nine-month period ended September 30, 2022, in comparison with $8,500 cost of goods sold for the comparable period a year ago. The increase of $14,291 or 168% was primarily due to new physician recruitment.

 

Gross Profit/(Loss). We generated a gross profit of $47,209 for the nine-month period ended September 30, 2022, in comparison with $11,500 gross profit for the comparable period a year ago. The increase of $35,709 or 311% was due to the increased sales.

 

 
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General and Administrative Expenses. General and administrative expenses for the nine-month period ended September 30, 2022, totaled $3,043,946 in comparison with $1,536,479, for the comparable period a year ago. The increase of $1,507,467 or 98% is primarily due to approximately $392,000 in director and officer insurance premiums that began in September 2021, an increase of approximately $542,000 in increased net salary expenses offset by the termination of the management service agreement in September 2021 and entering into direct employment arrangements with our CEO, CFO and the hiring of other key leaders of the management team, $226,000 in Board of Director expenses as a result of bringing on independent board members, an increase of approximately $337,000 in marketing expenses, and an increase of $381,000 in outside consulting expenses focused on moving key elements of our programs forward along with investments in intellectual property offset by a $536,000 reduction in stock-based compensation.

 

Amortization Expenses. Amortization expenses for the nine-month periods ended September 30, 2022 and 2021, totaled $69,063.

 

Research and Development Expenses. Research and development expenses for the nine-month period ended September 30, 2022, totaled $900,635 in comparison with $59,180, for the comparable period a year ago. The increase of $841,455 or 1,422% reflects investments in in regulatory, research, laboratory and manufacturing resources required to move our programs forward.

 

Other Income/Expense. Other income for the nine-month period ended September 30, 2022 was $38,083, in comparison with 24,740,463, for the comparable period a year ago. The decreased income of $24,702,380, is primarily driven by the 2021 gain of $26,030,549 in the change in the fair value of derivative liabilities and a gain of $585,601 on the extinguishment of convertible notes, offset by interest expense of $1,875,687 in 2021 that was tied to convertible debt.

 

Net Income/Loss. For the reasons stated above, our net loss for the nine-month period ended September 30, 2022, totaled $3,928,352 in comparison to net income of $23,087,241, for the comparable period a year ago.

 

Liquidity and Capital Resources

 

As of September 30, 2022, we had $21,990,370 of available cash and short-term certificates of deposit and positive working capital of approximately $21,609,307. In comparison, as of December 31, 2021, we had approximately $10,723,807 of available cash and positive working capital of approximately $9,686,780.

 

On December 7, 2021, we sold an aggregate of 3,875,000 shares of our common stock, and accompanying warrants to purchase 3,875,000 shares of common stock at an exercise price of $4.13 per share, at a combined public offering price to the public of $4.13 per share of common stock and related Warrant, pursuant to an Underwriting Agreement we entered into with Roth Capital Partners, LLC. We received gross proceeds of $16,003,750, before deducting underwriting discounts and commissions of seven percent (7%) of the gross proceeds and offering expenses. We used a portion of the proceeds from the offering to (i) redeem our Bridge Notes described below, in the aggregate outstanding amount of $5,146,176, and (ii) repurchase the Company’s Series A Preferred Stock from the Company’s Chief Executive Officer for an aggregate purchase price of approximately $195,000.

 

In addition, on May 3, 2022 we completed the sale of (i) 2,991,669 shares of common stock and pre-funded warrants to purchase 4,563,887 shares of common stock, and (ii) accompanying warrants to purchase 15,111,112 shares of common stock, at a combined offering price of $2.25 per share of common stock/Pre-Funded Warrant and related Common Warrant, to a group of institutional investors, resulting in gross proceeds to the Company of approximately $17,000,000. 

 

Cash Flows

 

Net Cash used in Operating Activities. We used cash in our operating activities due to our losses from operations. Net cash used in operating activities was $4,205,732 for the nine-month period ended September 30, 2022 in comparison to $1,054,446 for the comparable period a year ago, an increase of $3,151,286 or 299%. The increase in cash used in operations was primarily related to the increased expenses mentioned above.

 

Net Cash used in Investing Activities. There was $5,021,307 cash used to invest in short-term certificates of deposit in the nine-month period ended September 30, 2022 compared to $200,000 used as an advance to a related party for comparable period a year ago.

 

 
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Net Cash From Financing Activities. We raised $15,472,232 during the nine-month period ended September 30, 2022 through the issuance of common stock and pre-paid warrants, net of offering costs. We raised $3,534,364 through the issuance of convertible debt, preferred stock and a related party advance in the nine-month period ended September 30, 2021.

 

Critical Accounting Policies and Estimates

 

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles accepted in the United States. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in internal control over financial reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of September 30, 2022 we were not involved in any legal proceedings.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

In February 2022, we paid the initial Jadi Cell obligation of $250,000 through the issuance of 181,818 shares of common stock.

 

Item 6. Exhibits

 

SEC Ref. No.

 

Title of Document

 

 

 

3.1.1

 

Articles of Incorporation of Creative Medical Technology Holdings, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2021).

3.1.2

 

Certificate of Designation of the Series A Preferred Stock of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2018).

3.1.3

 

Certificate of Amendment to Certificate of Designation of the Series A Preferred Stock Pursuant to NRS 78.1955, filed with the Secretary of State of the State of Nevada on March 11, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 12, 2021).

3.1.4

 

Certificate of Designation of the Series B Preferred Stock of the Company, filed March 30, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 12, 2021).

3.1.5

 

Certificate of Designation of the Series C Preferred Stock of the Company, filed March 30, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 2, 2021).

3.1.6

 

Certificate of Amendment to Articles of Incorporation Pursuant to NRS 78.385 and 78.390, as filed with the Secretary of State of the State of Nevada on November 2, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2021).

3.1.7

 

Certificate of Withdrawal of Certificate of Designation of Series B Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada on November 2, 2021 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2021).

3.1.8

 

Certificate of Withdrawal of Certificate of Designation of Series C Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada on November 2, 2021 (incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2021).

3.1.9

 

Certificate of Change Pursuant to NRS 78.209, as filed with the Secretary of State of the State of Nevada on November 8, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 9, 2021).

3.2

 

Bylaws of Creative Medical Technology Holdings, Inc., a Nevada corporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 10 filed with the Securities and Exchange Commission on November 18, 2008).

31.1

 

Rule 13a-14(a) Certification by Principal Executive Officer

31.2

 

Rule 13a-14(a) Certification by Principal Financial Officer

32.1

 

Section 1350 Certification of Principal Executive Officer

32.2

 

Section 1350 Certification of Principal Financial Officer

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
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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.

 

 

Creative Medical Technology Holdings, Inc.

 

 

 

 

 

Date: November 10, 2022

By

/s/ Timothy Warbington

 

 

 

Timothy Warbington, Chief Executive Officer

 

 

 

(Principal Executive Officer) 

 

 

 

 

 

Date: November 10, 2022

By

/s/ Donald Dickerson

 

 

 

Donald Dickerson, Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

 

 
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