Business Context and Reporting Period
Creative Medical Technology Holdings, Inc. filed this Form 8-K on July 24, 2019, reporting events occurring on July 24 and July 29, 2019. The company is incorporated in Nevada and is based in Phoenix, Arizona. The filing details the entry into material definitive agreements involving debt financing and equity-linked instruments.
Key Financial Metrics and Transactions
The filing discloses two primary financial transactions:
- Institutional Sale of Notes and Warrants: The Company sold 8% Original Issue Discount Senior Convertible Notes and Common Stock Purchase Warrants to three institutional investors.
- CEO Advance: The Company received an unsecured loan from its Chief Executive Officer.
| Transaction Type | Principal Amount | Interest Rate | Maturity/Expiry | Key Terms |
|---|---|---|---|---|
| Senior Convertible Notes | $81,000 per investor (Total $243,000) | 8% per annum | July 2020 | Convertible at 60% of lowest traded price (15-day lookback); OID structure ($75k purchase price). |
| Common Stock Warrants | 4,807,695 shares per investor | N/A | 5 years | Exercise price $0.0039/share; subject to anti-dilution adjustments. |
| CEO Loan | $50,000 | 2.13% per annum | July 23, 2020 or on demand | Unsecured; payable on earlier of demand or maturity date. |
The filing does not provide specific revenue, profit, cash flow, or margin data for the period.
Material Changes
This filing represents a material change in the Company's capital structure through the issuance of new debt and equity-linked securities. The transaction was conducted pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506(b). No comparative financial data for prior periods is included in this specific report.
Outlook, Risks, and Contingencies
Management Commentary: The Company secured funding through a mix of institutional convertible notes and an internal advance from the CEO to support operations.
Risks and Contingencies:
- Dilution Risk: The Notes are convertible at a significant discount (60% of the lowest traded price), which may result in substantial dilution to existing shareholders upon conversion.
- Debt Obligations: The Company now has fixed interest obligations totaling approximately $293,000 in principal (Notes + CEO loan) due within one year.
- Default Provisions: The Notes are subject to customary covenants and events of default.
Investor Verification Checklist
- Verify the total number of shares outstanding post-transaction to assess the dilution impact of the 14.4 million+ warrant shares and potential note conversions.
- Confirm the Company's current cash position to ensure it can service the $293,000 in debt obligations maturing in July 2020.
- Review the attached Exhibits (10.1, 4.1, 4.2) for specific default triggers and anti-dilution mechanics.
- Check recent trading volumes and price history to understand the potential conversion price floor for the Notes.