Creative Medical Technology Holdings, Inc. — Form 10-Q Summary
Business context and reporting period
For the quarter and nine months ended September 30, 2022. Creative Medical Technology Holdings is a commercial-stage biotechnology company. Its current commercial activity is primarily through CMT, which sells physician-use CaverStem and FemCelz kits for sexual dysfunction procedures; the company said the kits were available at eight U.S. locations. Its other stem-cell and regenerative-medicine programs had not commenced commercial activity.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $55,000 | $10,000 | $70,000 | $20,000 |
| Gross profit | $39,000 | $6,000 | $47,209 | $11,500 |
| Gross margin | 70.9% | 60.0% | 67.4% | 57.5% |
| Operating loss | $(1,020,422) | $(833,436) | $(3,966,435) | $(1,653,222) |
| Net income (loss) | $(982,339) | $(1,843,596) | $(3,928,352) | $23,087,241 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(4,205,732) | $(1,054,446) |
At September 30, 2022, cash was $16.97 million and certificates of deposit were $5.02 million, totaling approximately $21.99 million in cash and short-term investments. Working capital was approximately $21.61 million; current liabilities were $396,957. The company reported no outstanding loans or derivative liabilities. Total assets were $22.47 million and stockholders’ equity was $22.07 million.
Changes versus prior comparable periods
- Quarterly revenue increased by $45,000, or 450%, which management attributed primarily to new physician recruitment. Nine-month revenue increased by $50,000, or 250%.
- Quarterly research and development expense rose to $230,940 from $59,180; nine-month R&D expense rose to $900,635 from $59,180. Management cited spending on regulatory, research, laboratory and manufacturing resources.
- Nine-month selling, general and administrative expense increased 98% to $3.04 million. Management cited staffing and compensation, insurance, board costs, marketing and consulting, partly offset by lower stock-based compensation.
- Nine-month net income in 2021 included a $26.03 million gain from the change in fair value of derivative liabilities and a $585,601 gain on extinguishment of convertible notes. These non-cash/financing-related items drove the large year-over-year swing to a 2022 loss.
- The company raised approximately $17 million gross in a May 2022 equity and warrant offering, receiving $15.47 million net of issuance costs. Financing cash flow for the first nine months was $15.47 million.
Outlook, risks and unusual items
- No quantified financial guidance was provided. Management described continued investment in product development and commercialization.
- After quarter-end, the company announced an AlloStem cell line and, on November 3, 2022, FDA clearance of its IND application for a Type 1 diabetes trial. Patient recruitment was expected to begin in Q1 2023; this was a stated expectation, not a completed milestone.
- Nasdaq notified the company on July 8, 2022 that its share price had been below $1 for 30 consecutive business days. The stated initial compliance period ran through January 4, 2023. The company cautioned that failure to regain compliance could lead to delisting and impair share liquidity and future fundraising.
- The company reported a limited operating history, low revenue, reliance on external capital, development and commercialization uncertainty, competition, and continuing potential effects from COVID-19 and economic conditions. It also disclosed that deposits exceeded FDIC insurance limits at both of its two financial institutions.
- The May financing included 4,563,887 pre-funded warrants and warrants to purchase 15,111,112 shares; total warrants outstanding were 22,849,272 at September 30. These securities represent potential dilution. Common shares outstanding were 14,076,246 on November 10, 2022.
- The filing reports no legal proceedings as of September 30, 2022. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the progress, enrollment timetable, regulatory requirements and funding needs of the AlloStem Type 1 diabetes trial and other pipeline programs.
- Assess whether physician recruitment and the eight-location commercial footprint can produce meaningful, recurring revenue relative to operating costs and cash burn.
- Review the terms and potential dilution from outstanding warrants and options, and the company’s share-count disclosures.
- Track Nasdaq minimum-bid compliance and the implications of any extension, reverse split or delisting.
- Note a filing inconsistency: the statements of operations report Q3 2021 net loss of $1,843,596, while MD&A describes a comparative-quarter loss of $1,010,160. The financial statements show the latter amount as total other expense, not net loss.