Creative Medical Technology Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company is a commercial-stage biotechnology business; current commercial sales are primarily CaverStem and FemCelz disposable kits, while several therapeutic platforms remain in development.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $6,000 | $55,000 | $6,000 | $70,000 |
| Gross profit | $3,600 | $39,000 | $3,600 | $47,209 |
| Operating expenses | $1,546,785 | $1,059,422 | $3,851,893 | $4,013,644 |
| Operating loss | $(1,543,185) | $(1,020,422) | $(3,848,293) | $(3,966,435) |
| Net loss | $(1,453,952) | $(982,339) | $(3,608,000) | $(3,928,352) |
| Net loss per share, basic and diluted | $(1.02) | $(0.70) | $(2.55) | $(3.98) |
Gross margin was 60% in both 2023 periods, compared with approximately 71% for Q3 2022 and 67% for the first nine months of 2022. Interest income was $89,233 for Q3 and $240,293 for the nine months, up from $38,083 in each comparable 2022 period.
At September 30, 2023, cash was $4.51 million and certificates of deposit were $7.47 million, totaling $11.97 million in available cash and CDs. Working capital was approximately $11.62 million. Total assets were $12.51 million, total liabilities $421,159, and stockholders’ equity $12.09 million. The company reported no outstanding loans or debt issuances.
Net cash used in operating activities was $6.13 million for the nine months, versus $4.21 million in 2022. Investing activities provided $2.32 million, including net CD redemptions; financing activities provided no cash. Cash declined from $8.32 million at year-end 2022 to $4.51 million. Accounts payable fell to $367,045 from $3.27 million at December 31, 2022.
Material changes and developments
- Revenue fell sharply: management attributed the decline to reassessing marketing and distribution options for CaverStem and FemCelz. The products were available through physicians at eight U.S. locations.
- Q3 research and development expense rose 330% to $992,722, mainly from StemSpine IND work, Type 1 diabetes trial costs, and other R&D. Nine-month R&D increased 80% to $1.62 million. Nine-month SG&A declined 29% to $2.16 million.
- Despite lower nine-month operating expenses overall, Q3 operating and net losses widened year over year. Nine-month net loss improved, partly reflecting higher interest income and lower SG&A.
- The company paid $100,000 in August 2023 to an affiliate under the StemSpine patent agreement in connection with filing an IND. It also repurchased 40,000 shares for $191,780 under a board-authorized program of up to $2 million.
- In September, the FDA cleared a Phase I/II StemSpine trial using AlloStem (CELZ-201-DDT) for lower back pain; the company reported IRB approval in October. Recruitment for the CELZ-201 Type 1 diabetes trial began in September 2023.
Outlook, risks, and contingencies
The filing provides no quantitative financial guidance or specific revenue outlook. Management describes ongoing product-development and clinical-trial efforts, but commercialization and revenue generation remain uncertain. The company reports limited operating history, minimal revenue, limited sales and marketing capacity, and competition from better-resourced companies. It also cites technology, financing, economic, and supply-chain risks.
- A former employee’s claims for breach of contract, wrongful termination, and related matters are pending in arbitration; the filing does not state a potential loss amount.
- Management says previously identified material weaknesses in internal controls—related to disclosure of a $5 million research-tools purchase from an entity affiliated with a former director/current consultant and insufficient segregation of duties—were remediated as of September 30, 2023. Disclosure controls were assessed as effective.
- The company regained Nasdaq’s minimum bid-price compliance in June 2023 after a 1-for-10 reverse stock split. Cash deposits exceeded FDIC insurance limits at two of its four financial institutions.
- There were no material subsequent events reported. Management did not provide a specific cash runway estimate.
Key facts for investors to verify
- Whether the company can restore product sales and generate meaningful recurring revenue, given the steep year-over-year decline.
- Cash consumption and remaining liquidity, including the pace of clinical and R&D spending and the absence of a disclosed runway estimate.
- Clinical-trial progress, recruitment, regulatory milestones, and the evidence supporting management’s reported research findings.
- Potential dilution: 2,284,932 warrants remained outstanding at September 30, 2023, alongside 11,183 options; the filing says equivalents were anti-dilutive for loss-per-share calculations.
- Status and potential financial exposure of the employee arbitration, and any continuing obligations under related-party licensing agreements.