CELZ

Business Context and Reporting Period

Company: Creative Medical Technology Holdings, Inc. (formerly Jolley Marketing, Inc.)
Filing Date: May 18, 2016
Event: Completion of a reverse merger with Creative Medical Technologies, Inc. (CMT) and a subsequent name change. The company transitioned from a shell company with no operations to a development-stage biotechnology firm focused on stem cell therapies for erectile dysfunction (ED), infertility, and female sexual dysfunction.

Key Financial Metrics

Revenue: $0. The company has generated no revenue to date and does not anticipate income until at least 2017, contingent on successful clinical trials.
Expenses (CMT Period Dec 30, 2015 – Feb 29, 2016):

• Research and Development: $3,864
• General and Administrative: $4,493
• Management Expenses (Accrued reimbursements to parent): $70,000

Cash and Liquidity:

• Total cash investment from incorporation through May 18, 2016: $49,500.
• Line of Credit: $50,000 available from parent company (Creative Medical Health); $40,000 drawn as of May 18, 2016.
• Recent Advances: $25,000 advanced by parent company at closing for obligations and share repurchases, evidenced by an 8% Promissory Note.

Debt:

• Outstanding Promissory Notes: $20,000 (payable upon DTC eligibility).
• Parent Company Debt: $40,000 (under $50k line of credit) + $25,000 (new note at closing).

Capital Structure: Approximately 100,013,750 shares of Common Stock outstanding post-merger. CMT shareholders own approximately 97% of the company.

Material Changes vs. Prior Period

• Change in Control: Steven L. White, the former majority shareholder and sole officer, resigned. He sold 15,100,000 shares back to the company for $5,000, which were subsequently cancelled. New directors and officers were appointed, including Timothy Warbington (CEO) and Donald Dickerson (CFO).
• Business Pivot: The company ceased its previous status as a shell company and acquired CMT, shifting operations to stem cell research and development.
• Asset Acquisition: Acquired a patent for ED treatment (US Patent No. 8,372,797) and a license for infertility treatment from LABIOMED.
• Debt Restructuring: Cancelled all prior outstanding notes payable except for $20,000, which is deferred until DTC eligibility is achieved.

Guidance, Outlook, and Risks

Outlook and Plan of Operations:

• Clinical Trials: Currently conducting a 15-month clinical trial for the ED treatment ("Caverstem") at UCLA with approximately 40 subjects. Completion is expected in Q3 2017.
• Marketing: Plans to market treatment kits to physicians if trials are successful. Marketing staff establishment is planned for Q1 2017.
• Funding Needs: Management estimates approximately $600,000 is required to complete clinical trials. Current cash resources are insufficient to fund operations beyond a few months. Additional financing is critical.

Material Risks:

• Capital Shortage: Failure to secure additional financing could force the company to curtail operations, default on debt, or file for bankruptcy.
• Clinical Failure: The business depends entirely on the success of the ED clinical trial. Negative or inconclusive results would prevent commercialization.
• Regulatory Uncertainty: While management believes an FDA exemption applies to the autologous stem cell procedure, regulatory changes could require full approval.
• Liquidity Restrictions: As a former shell company, shares are subject to Rule 144 restrictions, preventing resale for 12 months following this filing.

Unusual Items:

• Related Party Transactions: Significant reliance on the parent company (Creative Medical Health) for funding, office space (at no cost), and executive services (reimbursed at a flat monthly rate).

Investor Verification Checklist

• Cash Runway: Verify the exact current cash balance and the timeline for the next funding round, given the stated need for $600,000 to complete trials.
• Clinical Trial Status: Confirm the enrollment status and preliminary data of the 40-subject ED trial at UCLA.
• Related Party Dependence: Review the terms of the $50,000 line of credit and the monthly reimbursement agreements with Creative Medical Health to assess financial independence.
• Intellectual Property: Verify the assignment of the ED Patent (US 8,372,797) and the status of the infertility license with LABIOMED.
• Stock Liquidity: Confirm the 12-month holding period restriction under Rule 144 for former shell company securities.