Creative Medical Technology Holdings, Inc. - 8-K Summary
Business Context and Reporting Period
This Form 8-K was filed on January 4, 2018, reporting events occurring through December 29, 2017. The registrant, Creative Medical Technology Holdings, Inc., is an emerging growth company incorporated in Nevada. The filing primarily addresses unregistered sales of equity securities and convertible debt instruments issued during the quarter ended December 31, 2017.
Key Financial Metrics and Capital Structure
The filing details the issuance of three convertible promissory notes and the conversion of existing debt into equity during the reporting period.
- Convertible Note 1: Issued October 23, 2017, to Morningview Financial, LLC. Face amount: $30,250; Gross proceeds: $27,500. Interest: 10% per annum. Maturity: October 23, 2018.
- Convertible Note 2: Issued November 27, 2017, to Power Up Lending Group Ltd. Face amount: $58,000; Gross proceeds: $58,000. Interest: 12% per annum (22% upon default). Maturity: November 27, 2018.
- Convertible Note 3: Issued December 29, 2017, to Power Up Lending Group Ltd. Face amount: $30,000; Gross proceeds: $30,000. Interest: 12% per annum (22% upon default). Maturity: December 29, 2018.
- Equity Issuance: Between October 1 and December 31, 2017, the company issued an aggregate of 6,985,976 shares of common stock upon the conversion of outstanding notes.
The filing does not provide specific values for revenue, net profit, operating cash flow, gross margins, total debt balance, or liquidity ratios.
Material Changes and Terms
The primary material change is the increase in debt obligations and the dilution of existing shareholders through the issuance of nearly 7 million shares via conversion. The new notes feature aggressive conversion discounts and prepayment penalties:
- Conversion Terms: Notes are convertible at prices ranging from 60% to 61% of the lowest trading prices or a fixed floor of $0.12, depending on the specific note.
- Prepayment Penalties: The company has the option to prepay notes within 180 days of issuance at premiums ranging from 115% to 140% of the principal and interest, depending on the timing of the prepayment. After 180 days, the right of prepayment expires.
Guidance, Risks, and Contingencies
The filing does not contain forward-looking guidance, management commentary on future operations, or specific risk factors beyond the terms of the debt instruments. The securities were sold pursuant to Rule 506(b) of Regulation D to accredited investors without general solicitation. No selling commissions were paid.
Investor Verification Checklist
- Verify the total outstanding debt balance and the impact of the 6,985,976 newly issued shares on total share count and earnings per share.
- Confirm the current trading price of the common stock to assess the likelihood of conversion given the 60-61% discount terms.
- Review the company's cash position to determine its ability to service the 10-12% interest payments or meet the high prepayment penalties (up to 140%) if liquidity is available.
- Check for any events of default that would trigger the interest rate increase to 22% on the Power Up Lending Group notes.