Creative Medical Technology Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited. The company is a commercial-stage biotechnology business focused on adult stem cell and regenerative treatments.
Business context and performance
Commercial sales primarily come from CaverStem and FemCelz disposable kits used by physicians for procedures addressing erectile and female sexual dysfunction. The company reported that these products were available at eight U.S. locations. StemSpine was recruiting clinical sites, while ImmCelz, StemSpine and AmnioStem had not commenced commercial activities.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $15,000 | $0 |
| Cost of revenue | $6,791 | $0 |
| Gross profit / margin | $8,209 / 54.7% | $0 |
| Research and development | $10,000 | $0 |
| Selling, general and administrative | $1,130,057 | $280,923 |
| Operating loss | $(1,154,869) | $(303,944) |
| Net income (loss) | $(1,154,869) | $27,836,019 |
| Cash used in operating activities | $(1,576,893) | $(441,518) |
Liquidity, debt and balance sheet
- At March 31, cash was $9.15 million, down from $10.72 million at December 31, 2021. Working capital was approximately $8.85 million, compared with $9.69 million at year-end.
- Total current liabilities were $379,795; stockholders’ equity was $9.35 million. The company reported no outstanding loans or derivative liabilities at quarter-end.
- No cash was raised through financing activities during Q1 2022. Cash payments for interest were $9,186.
Material changes and unusual items
- Revenue restarted after the company said COVID-19-related disruption had eased; revenue was still modest. Management cited the resumption of commercial sales as the reason for the year-over-year increase.
- SG&A rose approximately $849,000 year over year. Management attributed the increase primarily to director and officer insurance, direct employment of executives and other leaders after ending a management services agreement, marketing, and consulting costs.
- The prior-year quarter’s $27.84 million net income included a large noncash gain from changes in the fair value of derivative liabilities, as well as interest expense. The company had no comparable other income or expense in Q1 2022; therefore, the reported net-income comparison is not representative of recurring operating performance.
- In February 2022, the company issued 181,818 common shares to satisfy a $250,000 initial license fee under its related-party Jadi Cell agreement.
Outlook, risks and subsequent events
- The filing provides no quantified revenue, earnings or cash-flow guidance. Management said it was focused on expanding CaverStem and FemCelz sales in the U.S. and Europe, commercializing StemSpine, and developing its pipeline. The company also reported filing an IND application with the FDA for an ImmCelz stroke treatment.
- Management noted limited operating history, limited sales and marketing capabilities and capital, competition from better-resourced companies, technology and product-development risks, and continuing uncertainty from COVID-19 and economic conditions. It also disclosed that deposits exceeded the FDIC insurance limit at both of its two financial institutions.
- On May 3, 2022, after quarter-end, the company completed an equity and warrant offering for approximately $17 million gross proceeds. It issued 2,991,669 common shares and pre-funded warrants for 4,563,887 shares, along with warrants for 15,111,112 shares. The placement agent received a $1.36 million fee and a warrant for 1,133,333 shares. These securities create significant potential dilution.
- The company reported no legal proceedings as of March 31, 2022. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether modest kit sales can grow, and the commercial reach and economics of the current physician network.
- Progress, regulatory status, costs and timing for StemSpine and the ImmCelz IND program; the filing gives no quantified development milestones or budget.
- Cash-burn trends and expected runway, including how the May offering proceeds will be used after fees and expenses.
- Potential dilution from the offering’s pre-funded and common warrants, placement-agent warrant, and existing options and warrants.
- Terms and ongoing obligations under related-party licenses and patent arrangements.