Creative Medical Technology Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The unaudited consolidated statements are prepared under U.S. GAAP. The company is a commercial-stage biotechnology business; substantially all current commercial activity comes from physician-use CaverStem and FemCelz kits. Other programs, including StemSpine and ImmCelz, had not commenced commercial activity.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $10,000 | $15,000 | $10,000 |
| Gross profit | $0 | $5,500 | $8,209 | $5,500 |
| Research and development | $659,695 | $0 | $669,695 | |
| $0 | ||||
| Selling, general and administrative | $1,108,428 | $498,321 | $2,238,485 | $779,244 |
| Operating loss | $(1,791,144) | $(515,842) | $(2,946,013) | $(819,786) |
| Net income (loss) | $(1,791,144) | $(2,905,182) | $(2,946,013) | $24,930,837 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(3,332,429) | $(663,657) |
Six-month gross margin was approximately 55% (2021: approximately 55%), on very low revenue. The 2021 six-month net income reflected a large non-cash gain from derivative-liability remeasurement; the company reported no such gain or other income/expense in 2022. Thus the year-over-year swing in net income is not a direct comparison of operating performance.
At June 30, 2022, cash was $22.86 million, total current assets were $22.95 million, current liabilities were $389,795, and working capital was approximately $22.56 million. Total assets were $23.43 million and stockholders’ equity was $23.04 million. The company reported no outstanding loans or derivative liabilities. Cash rose from $10.72 million at December 31, 2021, primarily following equity financing. Cash used in operations increased to $3.33 million for the half-year; financing provided $15.47 million. No investing cash flow was reported.
Material changes and capital structure
- Q2 revenue fell to zero from $10,000; six-month revenue increased only $5,000 year over year.
- Six-month SG&A rose 187% and R&D increased from zero to approximately $670,000, reflecting higher insurance, staffing, board, marketing, consulting, regulatory, research, laboratory and manufacturing costs, according to management.
- On May 3, the company completed an equity offering with approximately $17 million gross proceeds; net cash proceeds reported for the six-month period were $15.47 million. The offering included common shares, pre-funded warrants and accompanying warrants. At June 30, 22,969,265 warrants and 111,824 options were outstanding. The filing reported 13,956,238 common shares outstanding at June 30 and 14,070,279 on August 12.
- The company issued 181,818 shares in February to satisfy a $250,000 related-party license fee. Management also disclosed related-party patent and licensing arrangements.
Outlook, risks and unusual items
- No quantified revenue, earnings or cash-flow guidance is provided. Management says it is focused on expanding CaverStem and FemCelz sales, developing StemSpine and OvaStem programs, and advancing ImmCelz; it also reports having recently filed an IND application for an ImmCelz stroke program and recruiting StemSpine clinical sites.
- On July 8, 2022, Nasdaq notified the company that its share price had remained below $1 for 30 consecutive business days. The stated initial cure period runs through January 4, 2023; failure to regain compliance could threaten listing, liquidity and future access to capital.
- The filing cites limited operating history and sales, limited marketing and distribution capacity, product-development and regulatory uncertainty, competition, economic conditions and COVID-19-related revenue effects. Cash balances at both financial institutions exceeded the $250,000 FDIC insurance limit.
- The company reported no legal proceedings as of June 30. Management concluded disclosure controls were effective and reported no material changes to internal control over financial reporting.
Important facts for investors to verify
- Assess the cash runway against operating cash use, planned R&D spending and the absence of meaningful current revenue.
- Review the terms and potential dilution from the offering warrants and options, including the total warrant count and subsequent share count.
- Track Nasdaq bid-price compliance and any effect on the company’s ability to raise capital.
- Verify clinical, regulatory and commercialization milestones for ImmCelz, StemSpine and other pipeline programs; the filing gives no quantified financial outlook.
- Reconcile the subsequent-events note, which says management reviewed events through May 15, 2022, with the August 12 filing date and the separately disclosed July Nasdaq notice.