CELZ 10-K
Creative Medical Technology Holdings, Inc. (CELZ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
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As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates was $
As of March 22, 2024, there were
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for the registrant’s 2023 Annual Meeting of Stockholders which will be filed with the Commission no later than 120 days after the registrant’s fiscal year ended December 31, 2023, are incorporated by reference into Part III of this report.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this Annual Report on Form 10-K contains certain forward-looking statements. All statements other than statements of historical facts contained or incorporated by reference in this Annual Report, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “will,” “may,” “future,” “plan,” “intend” and “expect” and similar expressions generally identify forward-looking statements. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Although we believe that our plans, intentions and expectations reflected in the forward-looking statements are reasonable, we cannot be sure that they will be achieved. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: our history of losses; our inability to receive regulatory approval for our products; later discovery of previously unknown problems; reliance on third parties; competition between us and other companies in the industry; delays in the development of products; our ability to raise additional capital; continued services of our executive management team; and statements of assumption underlying any of the foregoing, as well as other factors set forth under the caption “Risk Factors”. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
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ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2023
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships and Related Transactions and Director Independence |
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Item 1. Business
Overview
We are a commercial stage biotechnology company dedicated to the advancement of identifying and translating novel biological therapeutics in the fields of immunotherapy, endocrinology, urology, neurology and orthopedics. Our platforms, therapies and products include the following:
Our subsidiary, Creative Medical Technologies, Inc. (“CMT”), was originally created to monetize U.S. Patent No. 8,372,797 and related intellectual property related to the treatment of erectile dysfunction (“ED”), which it acquired in February 2016. Subsequently, we have expanded our development and acquisition of intellectual property beyond urology to include therapeutic treatments utilizing “re-programmed” stem cells, and the treatment of neurologic disorders, lower back pain, Type-1 diabetes, and heart, liver, kidney, and other diseases using various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and AlloCelz LLC subsidiaries. However, neither ImmCelz Inc., nor AlloCelz LLC have commenced commercial activities.
We currently conduct substantially all of our commercial operations through CMT, which markets and sells our CaverStem® and FemCelz® disposable kits utilized by physicians to perform autologous procedures that treat erectile dysfunction and female sexual dysfunction, respectively. Our CaverStem® and FemCelz® kits are currently available through physicians at eight locations in the United States.
In 2020, through our ImmCelz Inc. subsidiary, we began developing treatments under our ImmCelz® platform (CELZ-100), that utilize a patient’s own extracted immune cells that are then “reprogrammed/supercharged” by culturing them outside the patient’s body with optimized cell-free factors. The immune cells are then re-injected into the patient from whom they were extracted. We believe this process endows the immune cells with regenerative properties (or “supercharges” them) providing them with the ability to treat multiple indications. We have validated this ability through the third-party studies described below that were independently conducted on selected human donor patient cells for accuracy and reproducibility. In contrast to other stem cell-based approaches, the immune cells are significantly smaller in size than stem cells and are believed to more effectively penetrate areas of the damaged tissues and induce regeneration.
In March 2023, we reported the following results of independent studies:
| · | ImmCelz® (CELZ-100) platform required 75% fewer donor patient cells compared to industry standard. |
| · | The purity of the final ImmCelz® (CELZ-100) product was greater than 95% compared to the industry standard of greater than 80%. |
| · | ImmCelz® (CELZ-100) demonstrated a greater than 200% reduction in functional suppression of effector T cells, which are a critical concern for patients with autoimmune issues, while still possessing a high number of functional T regulatory cells. |
| · | The ability to verify repeated potency of the final ImmCelz®(CELZ-100) product. |
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We believe these results show that we will be able to substantially reduce production costs, while allowing for the manufacture of the best clinical product for patients with immune disorders, which will enable us to accelerate our clinical applications and encourage potential collaborations with respect to our ImmCelz® platform.
In June 2022, we signed an agreement with Greenstone Biosciences Inc. (“Greenstone”) for the development of a human induced pluripotent stem cell (iPSC) pipeline for our ImmCelz® platform. This project was identified as iPScelz™. The efforts by Greenstone are expected to complement and expand our current work on novel therapeutic cell lines. In May 2023, we announced that we had received confirmation that Greenstone had successfully developed a human induced pluripotent stem cell (iPSC). We estimate that the development of this cell line will save the Company two to three years in research and development time along with associated expenses. The final iPScelz™ results in a viral-free cell line which has great potential for differentiation into therapeutic biologics both for the cellular and cell-free programs along with targeted drug discovery. Greenstone’s developments were confirmed by an independent, industry-leading research firm.
In October 2022, we announced the development of our AlloStem™ Clinical Cell Line (CELZ-200), a proprietary allogenic cell line which includes a Master Cell Bank and a Drug Master File. We believe we will able to use this cell line for many of our programs, including our ImmCelz® immunotherapy platform for multiple diseases, OvaStem® for Premature Ovarian Failure, Type I Diabetes (CELZ-201 CREATE-1), AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT), and IPScelz™ inducible pluripotent stem cell program in ongoing development with Greenstone.
In November 2022, we announced that the FDA had cleared the Company’s Type I Diabetes (CELZ-201 CREATE-1) Investigational New Drug (IND) application for the treatment of Type 1 Diabetes utilizing our AlloStem™ Clinical Cell Line, which will allow us to begin a Phase I/II clinical trial. The primary objective of the study will be to evaluate CELZ-201 treatment in patients with newly diagnosed Type 1 Diabetes. The trial has also received Institutional Board Review (IRB) approval for the trial to proceed as well as approval of the patient recruitment material. Patient recruitment was initiated in September 2023.
In February 2023, the Company reported positive three-year follow-up data for its StemSpine® pilot study. The three-year data demonstrates continued efficacy of the StemSpine® procedure for treating chronic lower back pain without any serious adverse effects reported.
In March 2023, the Company announced that it filed an application with the FDA to receive Orphan Drug Designation (“ODD”) for the treatment of Brittle Type 1 Diabetes using its ImmCelz® (CELZ-100) platform. The FDA has responded to the ODD filing with additional clarification requests, which we are in the process of responding.
In April 2023, the Company reported positive one-year follow-up data and significant efficacy using CELZ-001 to treat patients with Type 2 Diabetes. There were no safety concerns related to CELZ-001 at one year follow-up utilizing the same infusion procedure as in the currently U.S. FDA cleared Type I Diabetes (CELZ-201 CREATE-1) clinical trial. There were 30 patients in the study, 15 who received CELZ-001 and the rest received optimized medical therapy. At one year, there was an overall efficacy of 93% in the treated patients demonstrating at least a 50% reduction in insulin requirement.
In September 2023, the Company received FDA clearance to initiate a Phase I/II clinical trial of AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT) using AlloStem™ (CELZ-201-DDT) for the treatment of lower back pain. The first in country study, which will enroll 30 individuals suffering from chronic lower back pain, is designed to evaluate the safety, efficacy, and tolerability of AlloStem™ (CELZ-201-DDT). The minimally invasive procedure uses ultrasound for the targeted delivery of the cell product, and thus prevents radiation exposure to the patient or the injecting physician. This trial, protected by issued patents, is a huge milestone for the Company and for patients suffering from this debilitating problem and their need for opioids for pain.
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In October, 2023 the Company filed for and received approval from an institutional review board (IRB) to proceed with the Phase I/II clinical trial. The clinical trial is registered on www.clinicaltrials.gov. We are currently vetting Contract Research Organizations for a planned trial enrollment commencing in early 2024.
We were incorporated on December 3, 1998, in the State of Nevada under the name Jolley Marketing, Inc. On May 18, 2016, we completed a reverse merger transaction under which Creative Medical Technologies, Inc. became our wholly owned subsidiary. In connection with this merger, we changed our name to Creative Medical Technologies Holdings, Inc. to reflect our current business.
On May 3, 2022, the Company completed the sale of (i) 299,167 shares of common stock, and pre-funded warrants to purchase 456,389 shares of common stock (the “Pre-Funded Warrants”), and (ii) accompanying warrants to purchase 1,511,112 shares of common stock (the “Common Warrants”), at a combined offering price of $22.50 per share of common stock/Pre-Funded Warrant and related Common Warrant, to a group of institutional investors (the “Purchasers”), pursuant to a Securities Purchase Agreement between the Company and the Purchasers dated as of April 28, 2022 (the “Purchase Agreement”), resulting in gross proceeds to the Company of approximately $17,000,000. The transaction was effected pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended and Rule 506(b) promulgated thereunder.
The Common Warrants have a five-year term, and an exercise price of $20.00 per share. The Pre-Funded Warrants did not have an expiration date and had an exercise price of $0.001 per share. As of December 31, 2023, all of the Pre-Funded Warrants had been exercised.
The Pre-Funded Warrants were classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, did not embody an obligation for the Company to repurchase its shares, and permitted the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Pre-Funded Warrants did not provide any guarantee of value or return.
Roth Capital Partners (“Roth”) acted as sole placement agent for the offering. The Company paid Roth a placement agent fee in the amount of $1,360,000 and issued Roth a warrant to purchase 113,334 shares of Common Stock with the same terms as the Common Warrants issued to the Purchasers.
Our principal executive offices are located at 211 E Osborn Road, Phoenix, AZ 85012.
Our Products
AlloStem™ (CELZ-201-DDT) - Allogenic Human Perinatal Tissue Derived Cell Program (Clinical Phase)
AlloStem™ (CELZ-201-DDT) leverages a unique approach to harnessing the power of Perinatal Tissue Derived Cells® (PRDC) to multi-potentialities, including self-renewal ability, low antigenicity, reduced toxicity, and large-scale clinical expansion. Drug Master Files, registered with the FDA, are a highly valuable tool in cross referencing data in Orphan Drug Development of interventional drug products, Investigational New Drug Development and Investigational Device Exemptions to the FDA. Drug Master Files do not expire and are utilized by many pharmaceutical and biotechnology giants as well as many other industries for their products, dating back to the 1940s, Additionally, the treatment does not require people to take immunosuppressant drugs, minimizing the risk for various side effects. We believe AlloStem™ (CELZ-201-DDT) has the following additional benefits and characteristics:
| · | Immediately available, scalable “Universal” recipient product |
| · | Immunomodulatory properties to help treat immune and endocrine based disorders |
| · | Supports ImmCelz® (CELZ-100), Alova®, Type I Diabetes (CELZ-201 CREAT-1) and AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT) programs and others |
| · | Supports FDA cleared clinical trials for rapid translation |
| · | Designated and proprietary Master Cell Bank and Drug Master File for US FDA |
| · | 8 billion manufactured and validated cells available for clinical trials and further research |
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ImmCelz™ (CELZ-100) - Personalized Supercharged Immune Therapy Platform (Pre-Clinical Trials)
We are developing our ImmCelz™ (CELZ-100) technology for the treatment of multiple indications.
ImmCelz™ (CELZ-100) utilizes a patient’s own extracted immune cells that are then “reprogrammed” by culturing them outside the patient’s body with optimized secreted factors. The immune cells are then re-injected into the patient from whom they were extracted. In contrast with other stem cell-based approaches, the immune cells are significantly smaller in size than stem cells and are believed to more effectively penetrate areas of the damaged tissues and induce regeneration.
Unlike our CaverStem®, FemCelz® and StemSpine® procedures, because the patient’s cells are reprogrammed/supercharged prior to reinjection, we will require FDA approval before we can market or sell products that use our ImmCelz™ (CELZ-100) technology.
We developed ImmCelz™ (CELZ-100) initially using co-culture techniques which have now been advanced to a cell-free culture system. We have also utilized certain cell-free factors pursuant to a license agreement we entered into with Jadi Cell LLC, which is owned and controlled by Dr. Patel, a former director of the Company. We have been granted the right to exploit Jadi Cell’s patent rights (including U.S. Patent Number 9,803,176 and similar patents issued by other countries) and proprietary know how in connection with the enhancement of autologous cells. However, based on our current development of the ImmCelz™ (CELZ-100) platform, we have engineered the next generation of cell-free secreted factors which are independent of the Jadi Cell LLC license. We continue to have the previously licensed platform from Jadi Cells LLC for the first generation ImmCelz™ (CELZ-100).
Type I Diabetes (CELZ-201 CREATE-1) – Type I Diabetes
The proposed study is a Phase I/IIa randomized, controlled clinical trial to evaluate CELZ-201 therapy as an intervention for the treatment of recent onset Type 1 Diabetes. The objective is to determine the safety and efficacy of CELZ-201 administration, based on the timing and dose of CELZ-201 treatment. Subjects who meet eligibility criteria will be randomized to treatment or control groups, in a 2:1 ratio. Subjects in the Group I (Treatment Group, n=12) will receive standard of care for type 1 diabetes and CELZ-201 within 1 month from enrollment (within 180 days of diagnosis). Subjects in Group II (Control Arm, n=6) and will receive enhanced standard of care for type 1 diabetes.
AlloStemSpine® Chronic Lower Back Pain (CELZ 201 ADAPT)
This study is a double-blinded, randomized, placebo-controlled, dose escalation Phase 1/2a study. The objective is to determine the safety, tolerability, and efficacy of CELZ-201-DDT administered as an intramuscular injection for the treatment of lower back pain in patients with Degenerative Disc Disease. Subjects who meet all criteria for inclusion will be enrolled and randomized into either low, medium or high dose of CELZ-201-DDT versus Placebo, with a total of 30 subjects enrolled. Each dosing cohort will contain ten subjects (n=10), with eight subjects (n=8) receiving the investigational product and two subjects (n=2) randomized to receive placebo. Each subject will receive six paraspinal intramuscular injections (three injections per side) of either CELZ-201-DDT or placebo into the lumbar musculature under direct ultrasound guidance.
Alova
The Alova program utilizes the AlloStem™ platform to treat infertility as a result of premature ovarian failure.
CaverStem® - Erectile Dysfunction Treatment
CaverStem® is a clinically proven, patented procedure (U.S. Patent No. 8,372,797) that utilizes a patient’s own stem cells to treat erectile dysfunction (ED). The procedure has been demonstrated safe and effective in clinical trials and is geared to the estimated nine million men in the United States that suffer from ED and do not respond to PDE5 inhibitors in drugs such as Viagra and Cialis due to damage to smooth muscle and blood vessels.
Our CaverStem® stem cell treatment consists of a one-hour out-patient visit in a physician’s office. The physician harvests a patient’s stem cells from bone marrow in the hip using a local anesthetic. The extraction device is designed to harvest only the stem cells, while filtering out the red blood cells, thereby eliminating the need for any centrifugation. The stem cells are then injected into the patient’s corpus cavernosum (erectile tissue) to stimulate muscle and blood vessel regeneration. Clinical research data concludes that our CaverStem® treatment results in a marked increase in duration and frequency of erections and the ability to sustain erections until orgasm, with no known treatment-associated adverse events.
We generate revenues through the sale of disposable bone marrow aspiration kits to physicians who use the kits to perform the CaverStem® procedure. We contract with physicians to purchase kits and, in turn, provide exclusivity in their market through our patent protection, marketing support and training.
Our CaverStem® technology is protected by U.S. Patent No. 8,372,797, entitled “Treatment of Erectile Dysfunction by Stem Cell Therapy” which was issued to CMH by the United States Patent and Trademark Office (“USPTO”) on February 12, 2013. We acquired this patent and related know-how and technology from CMH in May 2016. CaverStem® is also a U.S. registered trademark (Reg. No. 5716528).
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In August 2017, we completed recruitment on a clinical trial of the CaverStem® procedure conducted by the Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center. Following completion of recruitment and treatment of the study subjects, an independent Institutional Review Board (IRB) overseeing the study validated the procedure as safe. In the same time frame, other worldwide, peer-reviewed and published clinical trials using the same procedure validated the efficacy of the ED treatment. As a result of these two developments, management concluded the CaverStem® procedure is both safe and effective and commenced marketing activities in November of 2017. From November 2017, through September 2020, the data from 40 patients in the clinical trial was combined with data from a 100-patient clinical registry and analyzed. The results were then submitted to the Journal of Translational Medicine for peer-review and publication and subsequently published in its January 2020 edition. The peer-reviewed results validated 100% safety and 85% efficacy of the CaverStem® procedure. This marked the largest ever study of the safety and efficacy of bone marrow stem cells used to treat erectile dysfunction.
FemCelz® - Female Sexual Function Treatment
In September 2018, we launched our proprietary FemCelz® procedure for the treatment of the loss of genital sensitivity and dryness experienced by women. The FemCelz® procedure uses the patient’s own stem cells to improve female sexual function, and is similar to the CaverStem® procedure. Management has determined that FemCelz® is exempt from the FDA premarket review and approval process under Section 361 of the PHS Act, as the procedure involves the autologous treatment of a patient with her own cells during the same surgical procedure without intervening processing steps.
Our FemCelz® stem cell treatment consists of a one-hour out-patient visit in a physician’s office. The physician harvests a patient’s stem cells from bone marrow in the hip using a local anesthetic. The extraction device is designed to harvest only the stem cells, while filtering out the red blood cells, thereby eliminating the need for any centrifugation. The cells are then injected into the pubocervical fascia (peri-G-spot), skene’s glands, and around the peri-clitoral to stimulate muscle and blood vessel regeneration.
We generate revenues through the sale of disposable bone marrow aspiration kits to physicians who use the kits to perform the FemCelz® procedure. We contract with physicians to purchase kits and, in turn, provide exclusivity in their market through our patent protection, marketing support and training. However, to date, we have generated no revenues from this treatment.
FemCelz® is a U.S. registered trademark (Reg. No. 6107881).
StemSpine® - Regenerative Stem Cell Procedure for the Treatment of Degenerative Disc Disease (Clinical Trials)
Our StemSpine® procedure uses the patient’s own stem cells to reverse the effects of atherosclerosis and treat chronic lower back pain. A recent study reported that an estimated 2.6 million patients in the U.S. will have suffered from degenerative disc disease in 2021, with the number increasing to close to four million patients in 2028.
Management has determined that StemSpine® is exempt from the FDA premarket review and approval process under Section 361 of the PHS Act, as the procedure involves the autologous treatment of a patient with his or her own cells during the same surgical procedure without intervening processing steps.
Our StemSpine® stem cell treatment consists of a one-hour out-patient visit in a physician’s office. The physician harvests a patient’s stem cells from bone marrow in the hip using a local anesthetic. The extraction device is designed to harvest only the stem cells, while filtering out the red blood cells, thereby eliminating the need for any centrifugation. The cells are then administered into muscles surrounding the area of lower back pain, such as the psoas major muscle to stimulate blood vessel regeneration. New blood vessels increase circulation around the disc and thus stimulates regeneration of the disc.
Lower back pain is the single leading cause of disability worldwide, affecting mobility, functionality, and the emotional state. To date, treatment options have ranged from prescription medication, to physical therapy and even acupuncture. Unfortunately, in patients whose lower back pain originates from disc degeneration, existing approved treatments do not address the underlying cause, but only symptoms.
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Recent U.S. clinical trials using stem cells administered directly into the disc have shown promise in regenerating injured discs, and by this means reducing pain in some patients. Companies such as Mesoblast Limited have patient follow-ups as long as three years post injection and show some degree of pain reduction and disc regeneration without adverse effects.
A significant number of patients suffering from lower back pain have deficient circulation in the areas surrounding the discs, which is believed by some to be the initial cause of disc degeneration. Our StemSpine® technology utilizes biologicals to stimulate a process termed angiogenesis, which overcomes the deficient circulation causing disc degeneration.
In May 2017, we formed StemSpine, LLC for the purpose of using stem cells to treat back pain under a patent we acquired from CMH. In June 2017, we filed an additional patent application covering the synergy between intradiscal stem cell injection subsequent to stimulation of perispinal angiogenesis.
In October 2019, we announced the successful completion of a pilot study of 15 patients with over 12 months of data showing safety and efficacy. Evaluation of patients at 30, 60 90, 180, and 360 days revealed significant improvement in mobility and reduction in pain score. The mean pain score (on a scale of 1 to 10, with 10 being most severe), changed from 8.9 at baseline to 4.3 at 30 days, and sustained to 1.8 at 6 months and 1.3 at 12 months, with a gradual reduction in overall pain medication utilization guided by patients’ healthcare teams. No serious adverse effects were noted, with some short-term bruising in two patients at the harvest site. No long-term adverse events were reported related to the procedure.
On February 14, 2023, we announced positive three-year follow-up data for the Company's StemSpine® pilot study. The three-year data demonstrate continued efficacy of the StemSpine® procedure for treating chronic lower back pain without any serious adverse effects reported. There were no safety related concerns at up to three years, and the StemSpine® procedure resulted in a continued efficacy rate of 87% of patients that participated in the pilot study. No patients required re-dosage or surgical intervention since the last follow-up at two years.
StemSpine® is a U.S. registered trademark (Reg. No. 5997521).
We have filed an application with the USPTO to trademark ImmCelzTM (Ser. No. 88829362).
OvaStem™ - Stem Cell Therapy for Premature Ovarian Failure
We are developing our OvaStem™ technology for the treatment of female infertility. Our treatment is intended to treat women suffering from infertility induced by factors such as chemotherapy and other non-natural causes, as well as age-associated infertility, and infertility with unexplained causes. In these cases, IVF treatment may not be appropriate as the woman’s ovaries are not able to generate eggs capable of being fertilized. Studies have shown that the introduction of stem cells into dysfunctional ovaries induce fertility, reduce ovarian fibrosis, accelerate maturation of immature oocytes, and restore growth factor production damaged by aging and cancer interventions. Accordingly, we believe that our OvaStem™ procedure may be a suitable treatment for these women with damaged ovaries.
The OvaStem™ stem cell treatment will consist of a one-hour out-patient visit in a physician’s office. The physician will harvest a patient’s stem cells from bone marrow in the hip using a local anesthetic. The extraction device will harvest only the stem cells, while filtering out the red blood cells, thereby eliminating the need for any centrifugation. The cells would then be administered into the dysfunctional ovaries.
Like our CaverStem® and FemCelz® procedures, because OvaStem™ will utilize a patient’s own extracted immune cells, management has determined that OvaStem™ will be exempt from the FDA premarket review and approval process under Section 361 of the PHS Act, as the procedure involves the autologous treatment of a patient with her own cells during the same surgical procedure without intervening processing steps.
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On July 28, 2022, we announced positive three-year follow up data for the Company's OvaStem® pilot study. The data shows significant efficacy of the OvaStem® procedure for the treatment of medical refractory Primary Ovarian Insufficiency (POI) without any serious adverse effects and the successful birth of healthy babies.
Other Products and Services
Additional Indications
We are also exploring the use of our technologies and/or have filed patents covering treatments for
| · | Preventing the rejection of transplanted organs |
| · | Kidney failure |
| · | Liver failure |
| · | Heart attack |
| · | Parkinson’s Disease |
Marketing
We market our CaverStem® and FemCelz® procedures using a multifaceted marketing approach that includes:
| · | A robust web site for each of these products (CaverStem.com and FemCelz.com) designed to attract and educate both physicians and patients |
| · | Publishing results of clinical studies demonstrating the efficacy of our products and therapies, and building clinical registries accessible to medical professionals that include the results of such studies |
| · | Online advertising |
| · | Social Media – Twitter, Facebook |
| · | In-office flyers and banners |
| · | Patient testimonials |
| · | Informative videos |
The first product we marketed was the CaverStem® procedure to treat erectile dysfunction, which was initiated in November 2017. We subsequently initiated marketing of FemCelz® in March 2020. The two procedures are now offered in the following eight markets:
| · | Arkansas – Martinsburg |
| · | California |
| o | Roseville |
| o | San Francisco |
| · | Florida – Orlando |
| · | Ohio - Dublin |
| · | Texas |
| o | Austin |
| o | San Antonio |
| · | West Virginia - Fayetteville |
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To-date, we have recruited physicians by partnering with independent sales representatives who represent the Company to physicians across the United States. Going forward, management plans to continue to partner with independent sales representatives.
Intellectual Property
We have developed and acquired a robust intellectual property portfolio related to the utilization of stem cells to improve patient lives in the areas of urology, neurology, and orthopedics. Our patent portfolio is currently composed of four issued patents and fifty pending patent applications filed in the United States with the USPTO as follows:
Issued Patents
Title | Application Number | Application Filing Date | Patent Number |
Treatment of Erectile Dysfunction by Stem Cell Therapy | 12305589 | 06/22/2007 | 8,372,797 |
Treatment Of Disc Degenerative Disease | 12301597 | 09/30/2009 | 9,598,673 |
Methods For Treatment Of Premature Ovarian Failure And Ovarian Aging Using Regenerative Cells | 15652213 | 07/17/2017 | 10,792,310 |
Paraspinal Perfusion by Administration of T regulatory Cells Alone or in Combination with Angiogenic Cell Therapies | 16009982 | 06/15/2018 | 10,842,815 |
Pending Patent Applications
Area | Application/Patent # | Description |
Immunology | 15/617,813 | Adipose Derived Immunomodulatory Cells for Immunotherapy of Recurrent Spontaneous Abortions |
Immunology | 10,792,310 | Methods for Treatment of Premature Ovarian Failure and Ovarian Aging Using Regenerative Cells |
Immunology | 15/702,735 | Inducing and Accelerating Post-stroke Recovery by Administration of Amniotic Fluid Derived Stem Cells |
Immunology | 15/987,739 | Generation of Autologous Immune Modulatory Cells for Treatment of Neurological Conditions |
Immunology | 63/123,380 | Induction of Infectious Tolerance by Ex Vivo Reprogrammed Immune Cells |
Immunology | 63/248,324 | Suppression of Diabetes Using Exosomes From Stem Cell Programmed Myeloid Cells |
Immunology | 63/270,678 | Regenerative T Regulatory Cells |
Immunology | 63/297,876 | Chimeric Antigen Receptor Regenerative Gamma Delta T Cells |
Immunology | 63/297,883 | Regenerative Car-T Cells |
Immunology | 63/302,228 | Regenerative Cell Therapy for Viral Induced Sexual Dysfunction |
Immunology | 63/313,313 | Methods for Quantifying Potency of Regenerative Immunotherapies |
StemSpine | 63/331,179 | Enhancement of Cartilage Regenerative Activity of Stem Cell Populations Based on Reduction of Intra-articular Cellular Material |
StemSpine | 63/331,183 | Enhancement of Stem Cell Therapy for Cartilage Degeneration by Anti-oxidant Pre-conditioning |
Immunology | 63/331,186 | Treatment of Cartilage Degeneration Using Treatment of Cartilage Degeneration Using Myeloid Suppressor Cells and Exosomes Derived Thereof |
Immunology | 63/338,416 | Cytokine Based Assessment of Recipient Ability to Respond to Stem Cell Therapy for Cartilage Regeneration |
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Endocrinology | 63/338,417 | Prevention of Menopause Associated Osteoporosis by Intra-ovarian Administration of Regenerative Cells |
Immunology | 63/340,447 | Stimulation of Ovarian Function Subsequent to Chemotherapy and/or Radiation Therapy Using Natural Killer Cells |
Immunology | 63/340,450 | Protection from Ovarian Failure by Low Dose Interleukin-2 Administration |
Immunology | 63/340,454 | Immunological Enhancement of Stem Cell Activity in Treatment of Ovarian Failure |
Immunology | 63/340,828 | Exosome Based Assays for Determining Candidates for Osteoarthritis Stem Cell Therapy |
Immunology | 63/343,832 | Cytokine Primed Regenerative Cells for Treatment of Ovarian Failure |
Immunology | 63/343,841 | Degenerating Ovarian Microenvironment Resistant Mesenchymal Stem Cells |
Immunology | 63/343,846 | Repair of Ovarian Damage and Dampening of Inflammatory Microenvironment by Administration of Monisytic-Granulocytic Progenitors with Immunomodulatory Activities |
Immunology | 63/349,297 | Gene Therapeutics for Enhancement/Restoration of Endometrial Function |
Endocrinology | 63/349,976 | Cellular Regenerative Therapeutics for Enhancement/Restoration of Endometrial Function |
Immunology | 63/351,330 | Generation of Conditioned Media from Inducible Pluripotent Stem Cell Derived Endothelian Progenitor Cells |
Immunology | 63/351,332 | Generation of Conditioned Media from Inducible Pluripotent Stem Cell Derived Mesenchymal Stem Cells |
Immunology | 63/353,011 | Inducible Pluripotent Stem Cell Derived Regenerative T Cells |
Immunology | 63/389,091 | Overcoming TNF-Alpha Blockade Resistance in Rheumatoid Arthritis by Regenerative T Regulatory Cell Therapy |
Immunology | 63/390,759 | Treatment of Limb Ischemia by Bone Marrow Stem Cells and Modification of Diseased Microenvironment |
Immunology | 63/391,865 | Potentiation of Bone Marrow Cell Activity by Co-administration with Oxytocin |
Immunology | 63/395,252 | Prevention and Treatment of Reproductive Failure by Regenerative Cells and Adjuvants |
StemSpine | 63/395,834 | Prevention of Space Travel Associated Bone Density Loss by Regenerative Cell Populations |
Immunology | 63/395,836 | Prevention and Treatment of Hair Loss |
Immunology | 63/395,839 | Prophylaxis and Treatment of Orthopox Viruses Using Regenerative Cells and Products Thereof |
Immunology | 63/414,823 | Treatment of Diabetes by Enhancement of Pancreatic Islet Engraftment Through Regenerative Immune Modulation |
Immunology | 63/455,965 | Artificial Intelligence Systems and Processes for In Silico Discovery of Immune Modulators and T Regulatory Cell Screening Methodologies |
Immunology | 63/458,423 | Artificial Intelligence Guided Production of Cells and Organs from Pluripotent Stem Cells |
Immunology | 63/460,543 | Three-Dimensional Printing of Organs, Organoids, and Chimeric Immuno-Evasive Organs |
Immunology | 63/463,993 | Artificial Intelligence Enhanced Real Time Biological Optimization and Health Monitoring for Space Travel |
Immunology | 63/465,616 | Induction of Antigen Specific Immunological Tolerance Using Inducible Pluripotent Stem Cell Derived Veto Cells |
Immunology | 63/510,877 | Enhanced Mobility of Inducible Pluripotent Stem Cell Derived T Regulatory Cells |
Immunology | 63/514,240 | Creation of Inducible Pluripotent Stem Cell Derived T Regulatory Cells by In Vitro Recapitulation of Thymic Development |
Immunology | 63/518,386 | Treatment of Spinal Cord Injury with T Regulatory Cells |
Immunology | 63/518,424 | Prevention of Immunological Rejection Using Mesenchymal Stem Cells and Derivatives Thereof |
Endocrinology | 63/580,657 | In Vitro and In Vivo Generation of Insulin Producing Cells |
Immunology | 63/580,669 | Orthopedic Regeneration by Inducible Pluripotent Stem Cell Derived Mesenchymal Stem Cells |
Endocrinology | 63/588,034 | Treatment of Lower Back Pain and Disc Degenerative Disease Using Inducible Pluripotent Stem Cell Derived Mesenchymal Stem Cells and T Regulatory Cells |
Endocrinology | 16/759,671 | Augmentation of Fertility by Platelet Rich Plasma |
Immunology | 18/183,900 | Therapeutic Regenerative Cells |
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Patent Purchase and License Agreements
Lower Back Pain Patent Purchase. We acquired U.S. Patent No. 9,598,673 covering the use of various stem cells for the treatment of lower back pain from our affiliate CMH pursuant to a Patent Purchase Agreement dated May 17, 2017, which was amended in November 2017. The inventors of the patent were Thomas Ichim, PhD and Amit Patel, MD, former directors of ours, and Annette Marleau, PhD. As amended, the Patent Purchase Agreement includes the following terms:
| · | We were required to pay CMH $100,000 within 30 days of demand as an initial payment. |
| · | Upon the determination to pursue the technology via use of autologous cells, we were required to pay CMH: |
| o | $100,000 upon the signing agreement with a university for the initiation of an IRB clinical trial. |
| o | $200,000, upon completion of the IRB clinical trial. |
| o | $300,000 in the event we commercialize the technology via use of autologous cells by a physician without a clinical trial. |
· | In the event we determine to pursue the technology via use of allogenic cells, we are required to pay CMH: |
| o | $100,000 upon filing an IND with the FDA. |
| o | $200,000 upon dosing of the first patient in a Phase 1-2 clinical trial. |
o | $400,000 upon dosing the first patient in a Phase 3 clinical trial. |
| · | Each payment may be made in cash or shares of our common at a discount of 30% to the recent trading price. |
| · | In the event our shares of common stock trade below $0.01 per share for two or more consecutive trading days, the number of any shares issuable as payment doubles. |
| · | For a period of five years from the date of the first sale of any product derived from the patent, we are required to make royalty payments of 5% from gross sales of products, and 50% of sale price or ongoing payments from third parties for licenses granted under the patent to third parties. |
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The Company paid CMH the $100,000 obligation of the initial payment due under this agreement, by a $50,000 cash payment and the issuance of 667 shares of common stock on December 12, 2020. On December 31, 2020, following the Company’s announcement with respect to the clinical commercialization of the StemSpine technology, the Company paid CMH $50,000 of the $300,000 obligation due under this agreement through the issuance of 14 shares of common stock. On September 30, 2021, the Company paid CMH an additional $40,000 of the $300,000 obligation due under this agreement through the issuance of 8,466 shares of common stock, and in January 2021 the Company paid CMH an additional $50,000 of the $300,000 obligation due under this agreement through the issuance of 8,929 shares of common stock. The remaining portion of the $300,000 obligation was paid in cash in 2020. In August 2023, the Company paid CMH $100,000 related to the filing of an IND with the FDA per the terms of the agreement.
ImmCelz™ (CELZ-100) - On December 28, 2020, ImmCelz, Inc. (“ImmCelz”), a newly formed Nevada corporation and wholly owned subsidiary of the Company, entered into a Patent License Agreement dated December 28, 2020 (the “Agreement”), with Jadi Cell, LLC. (“Jadi”), a company owned and controlled by Dr. Amit Patel, a former director of the Company. The Agreement grants to ImmCelz™ the patent rights under U.S. Patent# 9,803,176 B2, “Methods and compositions for the clinical derivation of an allogenic cell and therapeutic uses”. The contract grants ImmCelz™ access to proprietary process of expanding the master cell bank of Jadi Cell LLC, as currently practiced by Licensor, and as documented in standard operating procedures (SOPs) and other written documentation to augment autologous cells. The terms of the agreement are as follows:
| · | Licensee shall pay Licensor a license fee of $250,000 (the “Upfront Royalty”), which can also be paid in CELZ stock at a discount of 25% of the closing price of $0.0037, which is based on the date of this agreement |
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| · | Within thirty (30) days of the end of each calendar quarter during the term of this Agreement, Licensee will pay Licensor five percent (5%) of the Net Income of ImmCelz™. during such calendar quarter (the “Continuing Royalty”) |
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| · | in one or a series of related transactions, of all or substantially all of the business or assets of Licensee ImmCelz, Inc. (“Sale of Assets”) will result in a one-time ten-percent allocation to the licensor, the Continuing Royalty will be calculated at five percent (5%) of the Net Income of Licensee in any calendar quarter in which the Net Income in such calendar quarter reflects the receipt of any consideration from such Sale of Assets. |
To date, the Company has not made any payments to Jadi Cell under this agreement, other than the $250,000 initial license fee, which was paid by the issuance of 18,018 shares of common stock to Jadi Cell in February 2022.
Trademarks
We have obtained trademark registration for CaverStem®, StemSpine®, AlloStemSpine® and FemCelz®, and have trademark applications pending for ImmCelz™, OvaStem™, iPScelz™, AlloStem™, AlloStem Perinatal Tissue Derived Cells™, and Alova™.
Competition
We compete with many pharmaceutical, biotechnology and medical device companies, as well as other private and public stem cell companies involved in the development and commercialization of cell-based medical technologies and therapies. Many of our competitors and potential competitors have substantially greater financial, technological, research and development, marketing and personnel resources than we do. We cannot forecast when or if these companies are likely to bring their products and therapies to market in competition with our products and therapies or those that we are pursuing. Regenerative medicine is rapidly progressing, in large part through the development of cell-based therapies or devices designed to isolate cells from human tissues. Most efforts involve cell sources, such as bone marrow, adipose tissue, embryonic and fetal tissue, umbilical cord and peripheral blood and skeletal muscle.
While there are a number of public and private companies that market and sell treatments for erectile dysfunction, our CaverStem® procedure is targeted at men who, due to damage to the blood vessels and smooth muscle tissue in the penis, do not respond to PDE5 inhibitors such as Viagra or Cialis. For these men, the only widely available treatment is invasive, non-reversible rod or pump implantation into the penis, or the painful injection into the penis of drugs containing alprostadil. Currently, we believe there are fewer than a dozen private clinics in the U.S. that offer autologous stem cell treatments for erectile dysfunction. None of these firms is believed to have filed for patent protection or conducted clinical trials using bone marrow to validate safety and efficacy as we have.
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Similarly, while there are many treatments available for female sexual dysfunction, we are not aware of any competitor for our FemCelz® procedure that uses or proposes to use autological stem cells to treat female sexual dysfunction, nor are we aware of any potential competitor for OvaStem™ that uses or proposes to use autologous stem cells to treat women with damaged ovaries who do not respond to available medications.
Companies working in the area of regenerative medicine with regard to the disc and spine include, among others, Mesoblast, Longeveron, BioRestorative Therapies, and DiscGenics. Companies working in the area of regenerative medicine to treat back pain inject into the disc, and our treatment is injected around the disc.
Government Regulation
U.S. Government Regulation
The health care industry is highly regulated in the United States. The federal government, through various departments and agencies, state and local governments, and private third-party accreditation organizations, regulate and monitor the health care industry, associated products, and operations. The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, approval, manufacture, distribution, and marketing of medical products, including drugs, biologics, and medical devices. These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, post-approval monitoring, advertising, promotion, sampling and import and export of medical products. The following is a general overview of the laws and regulations pertaining to our business.
FDA Regulation of Stem Cell Treatment and Products
The FDA regulates the manufacture of human stem cell treatments and associated products under the authority of the Public Health Service Act (or PHS Act), and the Federal Food, Drug, and Cosmetic Act (or FDCA). Stem cells can be regulated under the FDA’s Human Cells, Tissues, and Cellular and Tissue-Based Products Regulations, referred to as HCT/Ps, or may also be subject to the FDA’s drug, biologic, or medical device regulations, each as discussed below.
Human Cells, Tissues, and Cellular and Tissue-Based Products Regulation
Under Section 361 of the PHS Act, the FDA issued specific regulations governing the use of HCT/Ps in humans. Pursuant to Part 1271 of Title 21 of the Code of Federal Regulations, or CFR, or the HCT/P Regulations, the FDA established a unified registration and listing system for establishments that manufacture and process HCT/Ps. The regulations also include provisions pertaining to donor eligibility determinations; current good tissue practices covering all stages of production, including harvesting, processing, manufacture, storage, labeling, packaging, and distribution; and other procedures to prevent the introduction, transmission, and spread of communicable diseases.
The HCT/P Regulations define HCT/Ps as articles “containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion or transfer into a human recipient.” The HCT/P Regulations strictly constrain the types of products that may be regulated solely as an HCT/P. Factors considered include the degree of manipulation, whether the product is intended for a homologous function, whether the product has been combined with noncellular or non-tissue components, and the product’s effect or dependence on the body’s metabolic function. In those instances where cells, tissues, and cellular and tissue-based products have been only minimally manipulated, are intended strictly for homologous use, have not been combined with noncellular or nontissue substances, and do not depend on or have any effect on the body’s metabolism, the manufacturer is only required to register with the FDA, submit a list of manufactured products, and adopt and implement procedures for the control of communicable diseases. If one or more of the above factors has been exceeded, the product would be regulated as a drug, biological product, or medical device rather than an HCT/P.
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In addition, pursuant to the “Same Surgical Procedure Exception” under Section 1271.15(b) of the HCT/P Regulations, the FDA has provided guidance that exempts HCT/Ps from Section 361 of the PHS Act where autologous cells are removed from an individual and implanted into the same individual during a single surgical procedure without intervening processing steps. The FDA’s rationale is that this type of procedure raises no additional risks beyond that typically associated with surgery. Management has determined that our CaverStem® and FemCelz® procedures and therapies are exempt from the FDA premarket review and approval process and other HCT/P Regulations under the Same Surgical Procedure Exception, and that our StemSpine® and OvaStem™ procedures and therapies will be similarly exempt. Conversely, because our ImmCelz™ therapy will treat a patient’s stem cells with Jadi Cells before being injected back into the patient, we will need to obtain FDA regulatory approval for ImmCelz™ in the same manner as a standard drug, as described below.
If the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions including public warning letters, fines, consent decrees, orders of retention, recall or destruction of product, orders to cease manufacturing, and criminal prosecution. If any of these events were to occur, it could materially adversely affect us.
Drug and Biological Product Regulation
An HCT/P product that does not meet the criteria for being solely regulated under Section 361 of the PHS Act will be regulated as a drug, device or biological product under the FDCA and/or Section 351 of the PHS Act, and applicable FDA regulations. The FDA has broad regulatory authority over drugs and biologics marketed for sale in the United States. The FDA regulates the research, clinical testing, manufacturing, safety, effectiveness, labeling, storage, recordkeeping, promotion, distribution, and production of drugs and biological products. The FDA also regulates the export of drugs and biological products manufactured in the United States to international markets in certain situations.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following:
| · | completion of non-clinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practice (or GLP), or other applicable regulations; |
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| · | submission of an IND, which allows clinical trials to begin unless the FDA objects within 30 days; |
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| · | performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologic for its intended use or uses conducted in accordance with FDA regulations and Good Clinical Practices (or GCP), which are international ethical and scientific quality standards meant to ensure that the rights, safety and well-being of trial participants are protected and that the integrity of the data is maintained; |
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| · | registration of clinical trials of FDA-regulated products and certain clinical trial information; |
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| · | preparation and submission to the FDA of a new drug application (or NDA), in the case of a drug or biologics license application (or BLA) in the case of a biologic; |
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| · | review of the product by an FDA advisory committee, where appropriate or if applicable; |
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| · | satisfactory completion of pre-approval inspection of manufacturing facilities and clinical trial sites at which the product, or components thereof, are produced to assess compliance with Good Manufacturing Practice, or cGMP, requirements and of selected clinical trial sites to assess compliance with GCP requirements; and |
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| · | FDA approval of an NDA or BLA which must occur before a drug or biologic can be marketed or sold. |
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Approval of an NDA requires a showing that the drug is safe and effective for its intended use and that the methods, facilities, and controls used for the manufacturing, processing, and packaging of the drug are adequate to preserve its identity, strength, quality, and purity. To obtain a BLA, a manufacturer must show that the proposed product is safe, pure, and potent and that the facility in which the product is manufactured, processed, packed, or held meets established quality control standards.
For purposes of an NDA or BLA approval by the FDA, human clinical trials are typically conducted in the following phases (which may overlap):
| · | Phase 1: The investigational product is initially given to healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution, and excretion. These trials may also provide early evidence on effectiveness. During Phase 1 clinical trials, sufficient information about the investigational product’s pharmacokinetics and pharmacologic effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
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| · | Phase 2: These clinical trials are conducted in a limited number of human subjects in the target population to identify possible adverse effects and safety risks, to determine the efficacy of the investigational product for specific targeted diseases and to determine dosage tolerance and dosage levels. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials. |
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| · | Phase 3: Phase 3 clinical trials are undertaken after Phase 2 clinical trials demonstrate that a dosage range of the investigational product appears effective and has a tolerable safety profile. The Phase 2 clinical trials must also provide sufficient information for the design of Phase 3 clinical trials. Phase 3 clinical trials are conducted to provide statistically significant evidence of clinical efficacy and to further test for safety risks in an expanded human subject population at multiple clinical trial sites. These clinical trials are intended to further evaluate dosage, effectiveness, and safety, to establish the overall benefit-risk profile of the investigational product and to provide an adequate basis for product labeling and approval by the FDA. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of an investigational drug or biologic. |
All clinical trials must be conducted in accordance with FDA regulations, GCP requirements and their protocols in order for the data to be considered reliable for regulatory purposes. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. These government regulations may delay or prevent approval of product candidates for a considerable period of time and impose costly procedures upon our business operations.
The FDA may require, or companies may pursue, additional clinical trials, referred to as Phase 4 clinical trials, after a product is approved. Such trials may be made a condition to be satisfied for continuing drug approval. The results of Phase 4 clinical trials can confirm the effectiveness of a product candidate and can provide important safety information. In addition, the FDA has authority to require sponsors to conduct post-marketing trials to specifically address safety issues identified by the agency.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes or facilities, require submission and FDA approval of a new NDA or BLA, or an NDA or BLA supplement, before the change can be implemented. An NDA or BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA and BLA supplements as it does in reviewing NDAs and BLAs.
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Drug and biological products must also comply with applicable requirements, including monitoring and recordkeeping activities, manufacturing requirements, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling, or off-label use, limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet. Although physicians may, in their independent professional medical judgment, prescribe legally available drugs for off-label uses, manufacturers typically may not market or promote such off-label uses. Modifications or enhancements to the product or its labeling, or changes of the site of manufacture, are often subject to the approval of the FDA and other regulators, who may or may not grant approval or may include a lengthy review process.
In the event that the FDA does not regulate our product candidates in the United States solely under the HCT/P regulation, our products and activities could be regulated as drug or biological products under the FDCA. If regulated as drug or biological products, we will need to expend significant resources to ensure regulatory compliance. If an IND and NDA or BLA are required for any of our product candidates, there is no assurance as to whether or when we will receive FDA approval of the product candidate. The process of designing, conducting, compiling, and submitting the non-clinical and clinical studies required for NDA or BLA approval is time-consuming, expensive, and unpredictable. The process can take many years, depending on the product and the FDA’s requirements.
In addition, even if a product candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages, or might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictions on distribution or use, or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product, including safety labeling or imposition of a Risk Evaluation and Mitigation Strategy, or REMS, the requirement to conduct post-market studies or clinical trials or even complete withdrawal of the product from the market. Delay in obtaining, or failure to obtain, regulatory approval for our products, or obtaining approval but for significantly limited use, would harm our business. Further, we cannot predict what adverse governmental regulations may arise from future United States or foreign governmental action.
If the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions from public warning letters, fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals, seizure of our products, total or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us.
FDA Expedited Review Programs
The FDA is authorized to expedite the review of NDAs and BLAs in several ways. Under the Fast Track program, the sponsor of a drug or biologic product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND. Drug and biologic products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied.
In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track NDA or BLA before the application is complete, a process known as rolling review.
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Any product submitted to the FDA for marketing, including under a Fast Track program, may also be eligible for the following other types of FDA programs intended to expedite development and review:
| · | Breakthrough therapy designation. To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious or life-threatening disease or condition, and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives intensive guidance on an efficient drug development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative, and cross-disciplinary review, and rolling review. |
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| · | Priority review. A product candidate is eligible for priority review if it treats a serious condition and, if approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious condition compared to marketed products. The FDA aims to complete its review of priority review applications within six months as opposed to ten months for standard review. |
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| · | Accelerated approval. Drug or biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval. Accelerated approval means that a product candidate may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biologic product candidate receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials. |
Fast Track designation, breakthrough therapy designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Further, with the passage of the 21st Century Cures Act, or the Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine advanced therapy, or RMAT (which may include a cell therapy), that is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition. The benefits of a RMAT designation include early interactions with the FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.
Medical Device Regulation
The FDA also has broad authority over the regulation of medical devices marketed for sale in the United States. The FDA regulates the research, clinical testing, manufacturing, safety, labeling, storage, recordkeeping, premarket clearance or approval, promotion, distribution, and production of medical devices. The FDA also regulates the export of medical devices manufactured in the United States to international markets.
Under the FDCA, medical devices are classified into one of three classes, Class I, Class II, or Class III, depending upon the degree of risk associated with the medical device and the extent of control needed to ensure safety and effectiveness. Class I devices are subject to the lowest degree of regulatory scrutiny because they are considered low risk devices and need only comply with the FDA’s General Controls. The General Controls include compliance with the registration, listing, adverse event reporting requirements, and applicable portions of the Quality System Regulation as well as the general misbranding and adulteration prohibitions.
Class II devices are subject to the General Controls as well as certain Special Controls such as 510(k) premarket notification. Class III devices are subject to the highest degree of regulatory scrutiny and typically include life supporting and life sustaining devices and implants. They are subject to the General Controls and Special Controls that include a premarket approval application, or PMA. “New” devices are automatically regulated as Class III devices unless they are shown to be low risk, in which case they may be subject to de novo review to be moved to Class I or Class II. Clinical research of an investigational device is subject to the FDA’s Investigational Device Exemption, or IDE, regulations. Nonsignificant risk devices are subject to abbreviated requirements that do not require a submission to the FDA but must have Institutional Review Board (IRB) approval and comply with other requirements pertaining to informed consent, labeling, recordkeeping, reporting, and monitoring. Significant risk devices require the submission of an IDE application to the FDA and the FDA’s approval of the IDE application.
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The FDA premarket clearance and approval process can be lengthy, expensive, and uncertain. It generally takes three to twelve months from submission to obtain 510(k) premarket clearance, although it may take longer. Approval of a PMA could take one to four years, or more, from the time the application is submitted and there is no guarantee of ultimate clearance or approval. Securing FDA clearances and approvals may require the submission of extensive clinical data and supporting information to the FDA. Additionally, the FDA actively enforces regulations prohibiting marketing and promotion of devices for indications or uses that have not been cleared or approved by the FDA. In addition, modifications or enhancements of products that could affect the safety or effectiveness or effect a major change in the intended use of a device that was either cleared through the 510(k) process or approved through the PMA process may require further FDA review through new 510(k) or PMA submissions.
In the event we develop processes, products or services which qualify as medical devices subject to FDA regulation, we intend to comply with such regulations. If the FDA determines that our products are regulated as medical devices and we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions from public warning letters, application integrity proceedings, fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals, seizure of our products, total or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us.
Current Good Manufacturing Practices and other FDA Regulations of Cellular Therapy Products
Products that fall outside of the HCT/P regulations and are regulated as drugs, biological products, or devices must comply with applicable cGMP regulations. These cGMPs and related quality standards are designed to ensure the products that are processed at a facility meet the FDA’s applicable requirements for identity, strength, quality, sterility, purity, and safety. In the event that our domestic United States operations are subject to the FDA’s drug, biological product, or device regulations, we intend to comply with the applicable cGMPs and quality regulations.
If the FDA determines that we have failed to comply with applicable regulatory requirements, it can impose a variety of enforcement actions from public warning letters, fines, injunctions, consent decrees and civil penalties to suspension or delayed issuance of approvals, seizure of our products, total or partial shutdown of our production, withdrawal of approvals, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us.
Health Insurance Portability and Accountability Act—Protection of Patient Health Information
We may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The Health Insurance Portability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information on certain types of individuals and organizations. In addition, certain state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other and from HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts. Further, we may need to also comply with additional federal or state privacy laws and regulations that may apply to certain diagnoses, such as HIV/AIDS, to the extent that they apply to us.
The Department of Health and Human Services, or HHS, through its Office for Civil Rights, investigates breach reports and determines whether administrative or technical modifications are required and whether civil or criminal sanctions should be imposed. Companies failing to comply with HIPAA and the implementing regulations may also be subject to civil money penalties or in the case of knowing violations, potential criminal penalties, including monetary fines, imprisonment, or both. In some cases, the State Attorneys General may seek enforcement and appropriate sanctions in federal court.
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Other Applicable U.S. Laws
In addition to the above-described regulation by United States federal and state government, the following are other federal and state laws and regulations that could directly or indirectly affect our ability to operate the business:
| · | state and local licensure, registration, and regulation of the development of pharmaceuticals and biologics; |
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| · | state and local licensure of medical professionals; |
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| · | state statutes and regulations related to the corporate practice of medicine; |
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| · | other laws and regulations administered by the FDA; |
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| · | other laws and regulations administered by HHS; |
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| · | state and local laws and regulations governing human subject research and clinical trials; |
| · | the federal physician self-referral prohibition, also known as Stark Law, and any state equivalents to Stark Law; |
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| · | the federal False Claims Act, or FCA; |
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| · | the federal Anti-Kickback Statute, or AKS, and any state equivalent statutes and regulations; |
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| · | federal and state coverage and reimbursement laws and regulations; |
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| · | state and local laws and regulations for the disposal and handling of medical waste and biohazardous material; |
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| · | Occupational Safety and Health Administration, or OSHA, regulations, and requirements; |
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| · | the Physician Payments Sunshine Act (in the event that our products are classified as drugs, biologics, devices, or medical supplies and are reimbursed by Medicare, Medicaid, or the Children’s Health Insurance Program); |
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| · | state and other federal laws addressing the privacy of health information; and |
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| · | state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare professionals and other potential referral sources, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare professionals or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. |
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Violation of any of the laws described above or any other governmental laws and regulations may result in penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare programs and imprisonment. Furthermore, efforts to ensure that business activities and business arrangements comply with applicable healthcare laws and regulations can be costly for manufacturers of branded prescription products.
Foreign Government Regulation
In general, we will need to comply with the government regulations of each individual country in which our products are to be distributed and sold. These regulations vary in complexity and can be as stringent, and on occasion even more stringent, than FDA regulations in the United States. Due to the fact that there are new and emerging cell therapy regulations that have recently been drafted and/or implemented in various countries around the world, the application and subsequent implementation of these new and emerging regulations have little to no precedence. Therefore, the level of complexity and stringency is not always precisely understood for each country, creating greater uncertainty for the international regulatory process. Furthermore, government regulations can change with little to no notice and may result in up-regulation of our product(s), thereby creating a greater regulatory burden for our cell processing technology products. We have not yet thoroughly explored the applicable laws and regulations that we will need to comply with in foreign jurisdictions. It is possible that we may not be permitted to expand our business into one or more foreign jurisdictions.
Employees
We currently employ four people on a full-time basis and multiple consultants on a part-time basis. None of our employees belong to a union. We believe relations with our employees are good.
Research and Development
Research and development expenses for the year ended December 31, 2023, totaled $1,970,639. This reflects expenses associated with the development of our drug master file, laboratory research in preparation of our master cell bank submittal to the FDA, the approval of our FDA application for a Type I Diabetes Phase I/II and Lower Back Pain Phase I/II clinical trials, the manufacturing and testing of our ImmCelz™ cell line, and the development of our iPSC cell line in partnership with Greenstone Biosciences Inc. Research and development expenses for the year ended December 31, 2022 totaled $6,268,854.
Item 1A. Risk Factors
RISK FACTORS
Risks Related to our Financial Position and Capital Needs
We have incurred recent losses and our future profitability is uncertain.
We have incurred an operating loss of approximately $5.6 million for the year ended December 31, 2023, and a loss of approximately $10.0 million (which included a $5.0 million investment for the research tools referenced in Note 3) for the year ended December 31, 2022, respectively. We expect our operating losses to continue until such time, if ever, that product sales, licensing fees, royalties and other sources generate sufficient revenue to fund our operations. We cannot predict when, if ever, we might achieve profitability and cannot be certain that we will be able to sustain profitability, if achieved.
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Even with the proceeds from our recent securities offerings, we will need additional capital to fund our operations as planned.
For the year ended December 31, 2023, our operations used approximately $8.0 million in cash. Cash used in operations consisted primarily of cash on hand and cash raised in our December 2021 public offering and our May 2022 private offering. At December 31, 2023, we had a combined cash, certificates of deposit and short-term U.S. Treasuries balance of approximately $10.0 million. Although we generated gross proceeds in excess of $30 million from our 2021 and 2022 securities offerings, we will need additional capital to maintain our operations, continue our research and development programs, conduct clinical trials, seek regulatory approvals and manufacture and market our products. We will seek such additional funds through public or private equity or debt financings and other sources. We cannot be certain that adequate additional funding will be available to us on acceptable terms, if at all. If we cannot raise the additional funds required for our anticipated operations, we may be required to reduce the scope of or eliminate our research and development programs, delay our clinical trials and the ability to seek regulatory approvals, downsize our general and administrative infrastructure, or seek alternative measures to avoid insolvency. If we raise additional funds through future offerings of shares of our common stock or other securities, such offerings would cause dilution of current stockholders’ percentage ownership in the Company, which could be substantial. Future offerings could also have a material and adverse effect on the price of our common stock.
We have generated minimal revenues from our products. We will not achieve profitability unless we generate increased revenues from our current or proposed products or therapies.
Revenues generated from sales of our CaverStem® and FemCelz® kits were only $9,000 and $88,600 for the years ended December 31, 2023, and December 31, 2022, respectively. To sustain our operating costs and generate profits, we will need to significantly increase revenues from our CaverStem® and FemCelz® products or from our other products or therapies that have not yet been commercialized.
We expect to continue to incur significant financial losses in the future as we seek to proceed with our Type I Diabetes (CELZ-201 CREATE-1) clinical trial, our AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT) clinical trial, and our other planned clinical trials.
We have received the necessary regulatory approval for our Type I Diabetes (CELZ-201 CREATE-1) clinical trial and our AlloStemSpine® Chronic Lower Back Pain (CELZ-202 ADAPT) clinical trial. In addition, we are further developing our cell platforms, and file INDs for additional indications that utilize our cell platforms. We anticipate that our expenses will increase substantially as we:
| · | initiate, conduct, and complete ongoing, anticipated, or future preclinical studies and clinical trials for our current and future product candidates; |
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| · | seek marketing approvals for product candidates that successfully complete clinical trials; and |
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| · | establish a sales, marketing, and distribution infrastructure to commercialize products for which we may obtain marketing approval. |
Risks Related to Product Development, Regulatory Approval and Commercialization
Our product candidates’ commercial viability remains subject to current and future preclinical studies, clinical trials, regulatory approvals, and the risks generally inherent in the development of biopharmaceutical products. If we are unable to successfully advance or develop our product candidates, our business will be materially harmed.
In the near term, failure to successfully advance the development of our proposed products may have a material adverse effect on us. To date, other than limited sales generated from our CaverStem® and FemCelz® products, we have not successfully developed or commercially marketed, distributed, or sold any product candidate. The success of our business may depend upon our ability to successfully advance the development of our current and future product candidates through preclinical studies and clinical trials, where applicable, have the product candidates approved for sale by the FDA or regulatory authorities in other countries, and ultimately have the product candidates successfully commercialized by us or a commercial partner. We cannot assure you that the results of our ongoing preclinical studies or clinical trials will support or justify the continued development of our product candidates, or that we will receive the necessary approvals from the FDA, or similar regulatory authorities in other countries, to advance the development of our product candidates.
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We may not be successful in our commercialization efforts for our proposed products and therapies, which may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
To the extent we possess or obtain the necessary regulatory approval for our proposed products and therapies, we still may not be successful in our commercialization efforts or in gaining sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community. Market acceptance will require us to build and maintain strong relationships with healthcare professionals that treat the indications our therapies are intended to address. A failure to build or maintain these important relationships with these healthcare professionals and treatment centers could result in lower market acceptance. Our efforts to educate physicians, patients, third-party payors, and others in the medical community on the benefits of our products and therapies may require significant resources and may never be successful. The degree of market acceptance of our products and therapies will depend on a number of factors, including:
| · | their efficacy; |
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| · | limitations or warnings or any restrictions on use, and the prevalence and severity of any side effects; |
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| · | the availability and efficacy of alternative treatments; |
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| · | the effectiveness of sales and marketing efforts and the strength of marketing and distribution support; |
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| · | their cost-effectiveness compared to alternative therapies; and |
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| · | availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors. |
The results of our clinical trials may not support our product claims or may result in the discovery of adverse side effects.
Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product claims or that any regulatory authority whose approval we will require in order to market and sell our products in any territory will agree with our conclusions regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that clinical trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our regulatory submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.
We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals.
We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including FDA approval. Our CaverStem® and FemCelz® products are exempt from the FDA premarket review and approval process as these autologous therapies involve treating the patient with his or her own cells. However, we will require FDA approval of CELZ-201 CREATE-1 for the treatment of Type I diabetes, AlloStemSpine (CELZ 201 – ADAPT) treatment for chronic lower back pain, and other indications. We have only limited experience in filing the applications necessary to gain regulatory approvals and have relied, and expect to continue to rely, in part, on consultants and third-party contract research organizations, or CROs, with expertise in this area to assist us in this process. Securing FDA approval requires the submission of extensive non-clinical and clinical data and supporting information to the FDA for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication. If third parties we rely on fail to perform satisfactorily, or do not adequately fulfill their obligations under the terms of our agreements with them, our efforts to secure regulatory approval of our product candidates may be delayed or prove unsuccessful.
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Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.
Clinical trials are expensive and complex, can take many years and have uncertain outcomes. We cannot predict whether we will encounter problems with any of our completed, ongoing, or planned clinical trials that will cause us or regulatory authorities to delay or suspend clinical trials or delay the analysis of data from completed or ongoing clinical trials. We estimate that clinical trials of Type I Diabetes (CELZ-201 CREATE-1) and AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT) will continue for several years, but they may take significantly longer to complete. Failure can occur at any stage of the testing, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent commercialization of our current or future therapeutic candidates, including but not limited to:
| · | delays in securing clinical investigators or trial sites for the clinical trials; |
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| · | delays in obtaining institutional review board and other regulatory approvals to commence a clinical trial; |
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| · | slower than anticipated patient recruitment and enrollment; |
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| · | negative or inconclusive results from clinical trials; |
| · | unforeseen safety issues; |
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| · | uncertain dosing issues; |
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| · | an inability to monitor patients adequately during or after treatment; and |
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| · | problems with investigator or patient compliance with the trial protocols |
A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. We do not know whether any clinical trials we conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market ImmCelzTM (CELZ-100).
Our autologous products are currently not eligible for reimbursement from public or private insurers.
Currently, our CaverStem® and FemCelz® products and related medical procedures are paid for by patients and are not eligible for reimbursement from public or private insurers. As a general rule, reimbursement is available only for products and therapies that have been approved by the FDA. Our CaverStem® and FemCelz® products were exempt from the FDA premarket review and approval process as these autologous therapies involve treating the patient with his or her own cells. While we believe that the requirement that patients directly pay the cost for our CaverStem® and FemCelz® products and procedures make these procedures more attractive to doctors, these treatments are only available to patients that can afford to pay for them. Our success and the extent of our growth will depend in part on the extent to which reimbursement for the costs of our products and related treatments will be available from third party payers, such as public and private insurers and health systems.
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The pharmaceutical business is subject to increasing government regulation and reform, including with respect to price controls, reimbursement, and access to therapies, which could adversely affect our future revenues and profitability.
Our existing and proposed products may not be considered cost-effective, and third-party or government reimbursement might not be available or sufficient. Globally, governmental, and other third-party payors are becoming increasingly aggressive in attempting to contain health care costs by strictly controlling, directly or indirectly, pricing and reimbursement and, in some cases, limiting or denying coverage altogether on the basis of a variety of justifications, and we expect pressures on pricing and reimbursement from both governments and private payors inside and outside the U.S. to continue.
Our existing and proposed products are and will be subject to substantial pricing, reimbursement, and access pressures from state Medicaid programs, private insurance programs and pharmacy benefit managers, and the implementation of U.S. health care reform legislation that is increasing these pricing pressures. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, instituted comprehensive health care reform, and includes provisions that, among other things, reduce and/or limit Medicare reimbursement, and impose new and/or increased taxes. The future of the Affordable Care Act and its constituent parts are uncertain at this time.
The continuing efforts of government and insurance companies, health maintenance organizations, and other payors of health care costs to contain or reduce costs of health care may affect our future revenues and profitability or those of our potential customers, suppliers, and collaborative partners, as well as the availability of capital.
United States federal and state privacy laws, and equivalent laws of other nations, may increase our costs of operation and expose us to civil and criminal sanctions.
Regulation of data processing is evolving, as federal, state, and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and security, and the collection, processing, storage, transfer, and use of data. These new or proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data. These and other requirements could require us or our collaborators to incur additional costs to achieve compliance, limit our competitiveness, necessitate the acceptance of more onerous obligations in our contracts, restrict our ability to use, store, transfer, and process data, impact our or our collaborators’ ability to process or use data in order to support the provision of our products, affect our or our collaborators’ ability to offer our products in certain locations, or cause regulators to reject, limit or disrupt our clinical trial activities.
We and our collaborators may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state personal information laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws and regulations that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH. Depending on the facts and circumstances, we could be subject to civil or criminal penalties if we knowingly use or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
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Later discovery of previously unknown problems could limit our ability to market or sell our products or therapies and can expose us to product liability claims.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with any third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
| · | refusals or delays in the approval of applications or supplements to approved applications; |
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| · | refusal of a regulatory authority to review pending market approval applications or supplements to approved applications; |
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| · | restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls or seizures; |
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| · | fines, warning letters, or holds on clinical trials; |
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| · | injunctions or the imposition of civil or criminal penalties; |
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| · | restrictions on product administration, requirements for additional clinical trials, or changes to product labeling requirements; or |
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| · | recommendations by regulatory authorities against entering into governmental contracts with us. |
Discovery of previously unknown problems or risks relating to our product could also subject us to potential liabilities through product liability claims.
If we do not obtain required approvals in other countries in which we aim to market our products, we will be limited in our ability to export or sell the products in those markets.
Our lack of experience in conducting clinical trials in foreign jurisdictions may negatively impact the approval process in those jurisdictions. If we are unable to obtain and maintain required approval from one or more foreign jurisdictions where we would like to sell our products or therapies, we will be unable to market products as intended, our international market opportunity will be limited, and our results of operations will be harmed.
We rely in part on third parties for research and clinical trials for our products and therapies.
We rely on contract research organizations (“CROs”), academic institutions, corporate partners, and other third parties to assist us in managing, monitoring, and otherwise carrying out clinical trials and research activities. We rely or will rely heavily on these parties for the execution of our clinical studies and control only certain aspects of their activities. Accordingly, we may have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own. Although we rely on these third parties to manage the data from clinical trials, we will be responsible for confirming that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. Our failure, or the failure of third parties on which we rely, to comply with the strict requirements relating to conducting, recording, and reporting the results of clinical trials, or to follow good clinical practices, may delay the regulatory approval process or cause us to fail to obtain regulatory approval for our proposed products and therapies.
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We currently have a very limited marketing and sales organization and may have to invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products and therapies, we may not be able to generate sufficient revenues to support our operations.
Our current sales, marketing and distribution capabilities consist of independent contractors who promote the sale of our CaverStem® and FemCelz® products to medical doctors. To generate sufficient revenues to support our operations, we will have to seek collaborators, especially for marketing and sales outside of the United States or invest significant amounts of financial and management resources to develop internal sales, distribution, and marketing capabilities. We may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing, and distribution functions on acceptable financial terms, or at all. In addition, our product revenues, and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. Even if we determine to perform sales, marketing, and distribution functions ourselves, we could face a number of additional related risks, including:
| · | we may not be able to attract and build an effective marketing department or sales force; |
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| · | the cost of establishing a marketing department or sales force may exceed our available financial resources and the revenue generated by our product candidates that we may develop, in-license or acquire; and |
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| · | our direct sales and marketing efforts may not be successful. |
We rely upon third parties for the manufacture of our CaverStem® and FemCelz® disposable kits and are dependent on their quality and effectiveness.
We rely upon third parties for the manufacture of our CaverStem® and FemCelz® disposable kits. The failure to achieve and maintain high manufacturing standards, or to detect or control anticipated or unanticipated manufacturing errors or the frequent occurrence of such errors, could result in cost overruns, product recalls or withdrawals, patient injury or death, and other problems that could seriously hurt our business.
We may be unable to compete effectively with marketed therapies or drugs targeting similar indications to our products and therapies.
We face competition generally from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize any products that are safer, more effective, have fewer side effects or are less expensive than our products and therapies. These potential competitors may also compete with us in establishing clinical trial sites, and patient enrollment for clinical trials.
Our business and operations would suffer in the event of computer system failures or security breaches.
In the ordinary course of our business, we collect, store and transmit confidential information, including intellectual property, and proprietary business information. Despite the implementation of security measures, our internal computer systems, and those of our contract research organizations, or CROs, and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyberattacks, natural disasters, fire, terrorism, war and telecommunication and electrical failures. Cyberattacks are increasing in their frequency, sophistication, and intensity. Cyberattacks could include the deployment of harmful malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. Significant disruptions of our information technology systems or security breaches could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property and proprietary business information and personal information), and could result in financial, legal, business and reputational harm to us. If such disruptions were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Further, the COVID-19 pandemic has resulted in a significant number of our employees and partners working remotely, which increases the risk of a data breach or issues with data and cybersecurity. To the extent that any disruption or security breach results in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our future product candidates could be delayed.
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We are subject to risks arising from the global outbreak of the COVID-19 coronavirus.
The outbreak of the COVID-19 coronavirus has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, CROs, suppliers, manufacturers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns that may be requested or mandated by governmental authorities. Another significant, outbreak of COVID-19, a communicable disease, could disrupt our clinical trials, supply chain and the manufacture or shipment of our products, and other related activities, which could have a material adverse effect on our business, financial condition and results of operations, and may also have an adverse impact on global economic conditions which could impair our ability to raise capital when needed.
We are subject to risks arising from the wars in Ukraine and the Gaza Strip.
Although we believe we do not have any exposure to the wars in Ukraine and the Gaza Strip, we cannot predict how global supply chain activities, or the economy at large may be impacted by prolonged wars in those or other regions, or whether global conflicts, if any, may in the future adversely affect our results of operations.
Risks Related to Our Intellectual Property
We may not be able to protect our proprietary rights.
Our commercial success will depend in large part upon our ability to protect our proprietary rights. There is no assurance, for example, that any additional patents will be issued based on our or our pending applications or, if issued, that such patents will not become the subject of a re-examination, will provide us with competitive advantages, will not be challenged by any third parties, or that the patents of others will not prevent the commercialization of products and services incorporating our technology. Furthermore, there can be no guarantee that others will not independently develop similar products and services, duplicate any of our products and services, or design around any patents we obtain.
Our commercial success will also depend upon our ability to avoid infringing patents issued to others. If we were judicially determined to be infringing on any third-party patent, we could be required to pay damages, alter our products, services or processes, obtain licenses, or cease certain activities. If we are required in the future to obtain any licenses from third parties for some of our products and/or services, there can be no guarantee that we would be able to do so on commercially favorable terms, if at all. United States and foreign patent applications are not immediately made public, so we might be surprised by the grant to someone else of a patent on a technology we are actively using.
In addition to patents, we rely on unpatented trade secrets and proprietary technological expertise, and confidentiality agreements with our partners, employees, advisors, vendors, and consultants to protect our trade secrets and proprietary technological expertise. There can be no guarantee that these agreements will not be breached, or that we will have adequate remedies for any breach, or that our unpatented trade secrets and proprietary technological expertise will not otherwise become known or be independently discovered by competitors.
Failure to obtain or maintain patent protection or to protect our trade secrets could have a substantial negative effect on our results of operations and financial condition.
We are susceptible to intellectual property suits that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our product candidates.
There is a substantial amount of litigation over patent and other intellectual property rights in the biotechnology industry. Whether or not a product infringes a patent involves complex legal and factual considerations, the determination of which is often uncertain. Our competitors or other parties may assert that our product candidates and the methods employed may be covered by patents held by them. If any of our products infringes a valid patent, we could be prevented from manufacturing or selling such product unless we are able to obtain a license or able to redesign the product in such a manner as to avoid infringement. A license may not always be available or may require us to pay substantial royalties. We also may not be successful in any attempt to redesign our product to avoid infringement, nor does a later redesign protect the Company from prior infringement.
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We may need to initiate lawsuits to protect or enforce our intellectual property rights, which could be expensive and, if we lose, could cause us to lose some of our intellectual property rights, which would harm our ability to compete in the market.
In order to protect or enforce our intellectual property rights, we may need to initiate patent, trademark and related litigation against third parties, such as infringement suits or requests for injunctive relief. Our ability to establish and maintain a competitive position may be achieved in part by prosecuting claims against others who we believe to be infringing its rights. Any lawsuits or administrative proceedings in patent offices that we initiate or that are initiated against us could be expensive, take significant time and divert our management’s attention from other business concerns and the outcome of litigation to enforce our intellectual property rights in patents, trade secrets or trademarks is highly unpredictable. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, or adversely affect our ability to distribute any products that are subject to such litigation. In addition, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits or administrative proceedings that we initiate, and the damages or other remedies awarded, including attorney fees, if any, may not be commercially valuable.
Risks Related to Employee Matters
We are dependent on our executive officers, and we may not be able to pursue our current business strategy effectively if we lose them.
Our success to date has largely depended on the efforts and abilities of Timothy Warbington, our Chief Executive Officer and Don Dickerson, our Chief Financial Officer. Our ability to manage our operations and meet our business objectives could be adversely affected if, for any reason, such officers do not remain with us.
Our employees, clinical trial investigators, CROs, consultants, vendors and any potential commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards.
We are exposed to the risk of fraud or other misconduct by our employees, clinical trial investigators, CROs, consultants, vendors and any potential commercial partners. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) U.S. laws and regulations or those of foreign jurisdictions, including those laws that require the reporting of true, complete and accurate information, (ii) manufacturing standards, (iii) federal and state health and data privacy, security, fraud and abuse, government price reporting, transparency reporting requirements, and other healthcare laws and regulations in the United States and abroad or (iv) laws that require the true, complete and accurate reporting of financial information or data. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct applicable to our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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If we fail to comply with the U.S. federal Anti-Kickback Statute and similar state and foreign country laws, we could be subject to criminal and civil penalties and exclusion from federally funded healthcare programs including the Medicare and Medicaid programs and equivalent third country programs, which would have a material adverse effect on our business and results of operations.
A provision of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration, directly or indirectly, in cash or in kind, to induce or reward the referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable, in whole or in part, by Medicare, Medicaid or any other federal healthcare program. The federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, many states have adopted laws similar to the federal Anti-Kickback Statute that apply to activity in those states, and some of these laws are even broader than the federal Anti-Kickback Statute in that their prohibitions may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply regardless of the source of payment. Violations of the federal Anti-Kickback Statute may result in substantial criminal, civil or administrative penalties, damages, fines and exclusion from participation in federal healthcare programs.
While we believe our operations will be in compliance with the federal Anti-Kickback Statute and similar state laws, we cannot be certain that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the federal Anti-Kickback Statute or similar state laws, the consequences of such violations would likely have a material adverse effect on our business, results of operations and financial condition.
Risks Related To Our Common Stock
The market price of our common stock is highly volatile, and you could lose all or part of your investment.
The trading price of our common stock has been volatile. This volatility may prevent you from being able to sell your securities at or above the price you paid for your securities. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:
| · | whether we achieve our anticipated corporate objectives; |
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| · | termination of lock-up agreements or other restrictions on the ability of our stockholders and other security holders to sell shares; and |
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| · | general economic or political conditions in the United States or elsewhere. |
In addition, the stock market in general, and the stock of clinical stage biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
If our shares of common stock are delisted from The Nasdaq Capital Market and become subject to the penny stock rules, it will be more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not maintain a listing on Nasdaq and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
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Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our securities.
During 2023 we effected a 1-for-10 reverse stock split in order to increase the trading price of our common stock and comply with NASDAQA’s $1.00 minimum bid price requirement. Although we are currently in compliance with Nasdaq’s minimum bid price requirement, if we again fail to satisfy this or any other continued listing requirement, Nasdaq may take steps to delist our securities. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Nevada law.
Our bylaws provide that we will indemnify and hold harmless our officers and directors against claims arising from our activities, to the maximum extent permitted by Nevada law. If we were called upon to perform under our indemnification agreement, then the portion of our assets expended for that purpose would reduce the amount otherwise available for our business.
Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase shares of common stock.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors seeking cash dividends should not purchase our shares.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C Cybersecurity
Risk Management and Strategy
We periodically assess risks from cybersecurity threats, and monitor our information systems for potential vulnerabilities. However, to date, given the small size of our company and the nature of our operations, our reliance on information systems has been limited to the use of standard off-the-shelf software (such as Microsoft Office) and the use by our employees of standard personal computers. Accordingly, management has not implemented any formal process for assessing, identifying, and managing risks from cybersecurity threats.
Risks from cybersecurity threats have, to date, not materially affected us, our business strategy, results of operations or financial condition. We discuss how cybersecurity incidents could materially affect us in our risk factor disclosures in Item 1A of this Annual Report on Form 10-K.
Governance
As discussed above, given the nature of our current operations and our experience to date, we do not currently perceive cybersecurity as a particularly significant risk to our business. Accordingly, we have not tasked our Board of Directors with any additional cybersecurity oversight duties, or designated any committee of the Board of Directors to specifically oversee cybersecurity risks to our business.
Item 2. Properties
We do not currently own any real property. Our corporate office is located at 211 East Osborn Road, Phoenix, Arizona, which we lease on a month-to-month basis. Management believes that this space is adequate to meet our current and foreseeable needs.
Item 3. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II – OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
On June 12, 2023, we announced that our Board of Directors authorized a share repurchase program for the repurchase of up to $2 million of our common stock (the “Repurchase Plan). Purchases under the Repurchase Plan commenced in August 2023. The following table provides information about our monthly share repurchases for the year ended December 31, 2023, which consisted solely of repurchases on the open market under the Repurchase Plan.
ISSUER PURCHASES OF EQUITY SECURITIES | ||||||||||||||||
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Period |
| Total Number of Shares Purchased |
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| Average Price Paid per Share |
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| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
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| Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
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July 1 - July 31, 2023 |
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| - |
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| $ | - |
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| 0 |
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| $ | 2,000,000 |
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August 1 - August 31, 2023 |
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| 11,500 |
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| 4.57 |
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| 11,500 |
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| 1,947,462 |
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September 1 - September 30, 2023 |
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| 28,500 |
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| 4.89 |
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| 40,000 |
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| 1,755,682 |
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October 1 – October 31, 2023 |
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| 6,500 |
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| 4.68 |
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| 46,500 |
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| 1,725,269 |
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November 1 – November 31, 2023 |
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| 8,000 |
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| 4.41 |
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| 54,500 |
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| 1,689,959 |
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December 1 – December 31, 2023 |
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| 3,000 |
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| 4.48 |
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| 57,500 |
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| 1,676,510 |
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Total |
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| 57,500 |
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| 4.71 |
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the Nasdaq Capital Market under the symbol “CELZ”.
Holders
As of March 22, 2024, the number of holders of record of shares of common stock, excluding the number of beneficial owners whose securities are held in street name, was approximately 75.
Dividends
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock at any time in the foreseeable future. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our Board and will depend on, among other factors, our financial condition, operating results, capital requirements, general business conditions, the terms of any future credit agreements and other factors that our Board may deem relevant.
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Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth as of the most recent fiscal year ended December 31, 2023, certain information with respect to compensation plans (including individual compensation arrangements) under which our common stock is authorized for issuance:
Plan Category |
| Number of securities to be issued upon exercise of outstanding options, warrants and Rights (a) |
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| Weighted- average exercise price of outstanding options, warrants and rights (b) |
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| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) and (b)) (c) |
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Equity compensation plans approved by security holders |
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| 11,182 | (1) |
| $ | 16.90 |
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| 48,818 | (1) |
Equity compensation plans not approved by security holders |
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| 9,813 | (2) |
| $ | 107.10 |
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| 3 | (3) |
Total |
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| 20,995 |
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| $ | 56.70 |
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| 48,821 |
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_________________
(1) | Represents 5,858 shares of common stock issuable to Timothy Warbington, the Company’s Chief Executive Officer, under a ten-year option issued on February 9, 2022 with an exercise price of $16.90 per share, and 5,324 shares of common stock issuable to Donald Dickerson, the Company’s Chief Financial Officer, under a ten-year option issued on February 9, 2022 with an exercise price of $16.90 per share, and shares available for issuance under the Company’s 2021 Equity Incentive Plan. |
(2) | Represents (i) 2,000 shares of common stock issuable to Donald Dickerson, the Company’s Chief Financial Officer, under a ten-year warrant issued on December 28, 2020 with an exercise price of $20.00 per share, (ii) 1,000 shares of common stock issuable to Donald Dickerson under a ten-year warrant issued on July 15, 2021 with an exercise price of $150.00 per share, (iii) 2,000 shares of common stock issuable to Amit Patel, a former director of the Company, under a ten-year warrant issued on December 28, 2020 with an exercise price of $20.00 per share, (iv) 1,000 shares of common stock issuable to Amit Patel under a ten-year warrant issued on July 15, 2021 with an exercise price of $150.00 per share, (v) 1,000 shares of common stock issuable to Thomas Ichim, a former director of the Company, under a ten-year warrant issued on July 15, 2021 with an exercise price of $150.00 per share, (vi) 2,802 shares of common stock issuable to various consultants of the Company under three-year warrant issued in April and May 2021 with an exercise price of $150.00 per share; (vii) 10 shares of common stock issuable to a consultant of the Company under three-year warrant issued September 2020 with an exercise price of $14.50 per share, and (viii) 1 share of common stock issuable under options granted under the Company’s 2016 Stock Incentive Plan. |
(3) | Represents 3 shares available under the Company’s 2016 Stock Incentive Plan. |
2021 Equity Incentive Plan
On September 6, 2021, the Company’s Board of Directors, and holders of a majority of the voting power of the Company’s stockholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”). The essential features of the 2021 Plan are outlined below:
Purpose. The 2021 Plan provides for the granting to our employees, officers, directors, consultants, and advisors of performance awards payable in shares of common stock, stock options (non-statutory and incentive), restricted stock awards, stock appreciation rights (“SARs”), restricted share units (“RSUs”) and other stock-based awards. The purpose of the 2021 Plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by eligible participants who are expected to contribute to the Company’s future growth and success. To date, we have not granted any awards under the 2021 Plan.
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Administration. The 2021 Plan is administered by the compensation committee of the Board (the “Committee”). Subject to the terms of the 2021 Plan, the Committee has the authority to determine the individuals to whom, and the time or times at which, awards are made, the size of each award, and the other terms and conditions of each award (which need not be identical across participants). The Committee also has the authority, subject to the express provisions of the 2021 Plan, to construe the respective agreements under the plan, proscribe, amend and rescind rules and regulations relating to the plan, accelerate or extend the dates options may be exercised or accelerate the vesting of other stock awards, and make all other determinations which are in the Committee’s judgment necessary or desirable for the administration of the plan.
Stock Subject to 2021 Plan. Subject to certain adjustment provisions described below, the number of shares of common stock which are set aside and reserved for issuance under the 2021 Plan is 60,000 shares.
Eligible Participants. Subject to certain limitations, awards under the 2021 Plan may be granted to any employee, officer, director, consultant or advisor to the Company and its subsidiaries, provided that only employees of the Company and its subsidiaries may be granted ISOs under the 2021 Plan.
Plan Amendments and Termination. The Board may at any time, and from time to time, modify or amend the 2021 Plan in any respect, provided that without stockholder approval, no such modification or amendment may (i) modify the prohibitions against repricing in the 2021 Plan; (ii) materially increase benefits accruing to participants; (iii) increase the aggregate number of shares of common stock issued or issuable under the 2021 Plan; (iv) increase any limitation set forth in the 2021 Plan on the number of shares of common stock which may be issued or the aggregate value of awards which may be made, in respect of any type of award to any single participant during any specified period; (v) modify the eligibility requirements for participants in the 2021; or (vi) reduce the minimum exercise price or grant price as set forth in the 2021 Plan.
The Board may at any time suspend or terminate the Plan, provided that any such suspension or termination shall not adversely affect the rights of a participant under any stock award previously granted while the Plan is in effect except with the consent of the participant.
Transferability. Unless otherwise approved by the Committee, awards under the 2021 Plan are not assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the participant, shall be exercisable only by the participant.
Item 6. Selected Financial Data
As a Smaller Reporting Company, we are not required to furnish information under this Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “Risk Factors” in Annual Report. The following should be read in conjunction with our audited financial statements included elsewhere herein.
Overview
We are a commercial stage biotechnology company dedicated to the advancement of identifying and translating novel biological therapeutics in the fields of immunotherapy, endocrinology, urology, neurology and orthopedics. Our platforms, therapies and products include the following:
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Our subsidiary, Creative Medical Technologies, Inc. (“CMT”), was originally created to monetize U.S. Patent No. 8,372,797 and related intellectual property related to the treatment of erectile dysfunction (“ED”), which it acquired in February 2016. Subsequently, we have expanded our development and acquisition of intellectual property beyond urology to include therapeutic treatments utilizing “re-programmed” stem cells, and the treatment of neurologic disorders, lower back pain, Type-1 diabetes, and heart, liver, kidney, and other diseases using various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and AlloCelz LLC subsidiaries. However, neither ImmCelz Inc. nor AlloCelz LLC have commenced commercial activities.
We currently conduct substantially all of our commercial operations through CMT, which markets and sells our CaverStem® and FemCelz® disposable kits utilized by physicians to perform autologous procedures that treat erectile dysfunction and female sexual dysfunction, respectively. Our CaverStem® and FemCelz® kits are currently available through physicians at eight locations in the United States.
In 2020, through our ImmCelz Inc. subsidiary, we began developing treatments under our ImmCelz® platform (CELZ-100), that utilize a patient’s own extracted immune cells that are then “reprogrammed/supercharged” by culturing them outside the patient’s body with optimized cell-free factors. The immune cells are then re-injected into the patient from whom they were extracted. We believe this process endows the immune cells with regenerative properties (or “supercharges” them) providing them with the ability to treat multiple indications. We have validated this ability through the third-party studies described below that were independently conducted on selected human donor patient cells for accuracy and reproducibility. In contrast to other stem cell-based approaches, the immune cells are significantly smaller in size than stem cells and are believed to more effectively penetrate areas of the damaged tissues and induce regeneration.
In June 2022, we signed an agreement with Greenstone Biosciences Inc. (“Greenstone”) for the development of a human induced pluripotent stem cell (iPSC) pipeline for our ImmCelz® platform. This project was identified as iPScelz™. The efforts by Greenstone are expected to complement and expand our current work on novel therapeutic cell lines. In May 2023, we announced that that we had received confirmation that Greenstone had successfully developed a human induced pluripotent stem cell (iPSC). We estimate that the development of this cell line will save the Company two to three years in research and development time along with associated expenses. The final iPScelz™ results in a viral-free cell line which has great potential for differentiation into therapeutic biologics both for the cellular and cell-free programs along with targeted drug discovery. Greenstone’s developments were confirmed by an independent, industry-leading research firm.
In October 2022, we announced the development of our AlloStem™ Clinical Cell Line (CELZ-201), a proprietary allogenic cell line which includes a Master Cell Bank and a Drug Master File. We believe we will able to use this cell line for many of our programs, including our ImmCelz® immunotherapy platform for multiple diseases, OvaStem® for Premature Ovarian Failure, Type I Diabetes (CELZ-201 CREATE-1), AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT), and IPScelz™ inducible pluripotent stem cell program in ongoing development with Greenstone Biosciences.
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In November 2022, we announced that the FDA had cleared the Company’s Type I Diabetes (CELZ-201 CREATE-1) Investigational New Drug (IND) application for the treatment of Type 1 Diabetes utilizing our AlloStem™ (CELZ-201) Clinical Cell Line, which will allow us to begin a Phase I/II clinical trial. The primary objective of the study will be to evaluate AlloStem™ (CELZ-201) in patients with newly diagnosed Type 1 Diabetes. The trial has also received Institutional Board Review (IRB) approval for the trial to proceed as well as approval of the patient recruitment material. Patient recruitment was initiated in September 2023.
In February 2023, the Company reported positive three-year follow-up data for its StemSpine® pilot study. The three-year data demonstrates continued efficacy of the StemSpine® procedure for treating chronic lower back pain without any serious adverse effects reported.
In March 2023, we reported the following results of independent studies:
| · | ImmCelz® (CELZ-100) platform required 75% fewer donor patient cells compared to industry standard. |
| · | The purity of the final ImmCelz® (CELZ-100) product was greater than 95% compared to the industry standard of greater than 80%. |
| · | ImmCelz® (CELZ-100) demonstrated a greater than 200% reduction in functional suppression of effector T cells, which are a critical concern for patients with autoimmune issues, while still possessing a high number of functional T regulatory cells. |
| · | The ability to verify repeated potency of the final ImmCelz®(CELZ-100) product. |
We believe these results show that we will be able to substantially reduce production costs, while allowing for the manufacture of the best clinical product for patients with immune disorders, which will enable us to accelerate our clinical applications and encourage potential collaborations with respect to our ImmCelz® platform.
In March 2023, the Company announced that it filed an application with the FDA to receive Orphan Drug Designation (“ODD”) for the treatment of Brittle Type 1 Diabetes using its ImmCelz® (CELZ-100) platform. The FDA has responded to the ODD filing with additional clarification requests, which we are in the process of responding.
In April 2023, the Company reported positive one-year follow-up data and significant efficacy using AlloStem™ (CELZ-201) to treat patients with Type 2 Diabetes. There were no safety concerns related to AlloStem™ (CELZ-101) at one year follow-up utilizing the same infusion procedure as in the currently U.S. FDA cleared Type I Diabetes (CELZ-201 CREATE-1) clinical trial. There were 30 patients in the study, 15 who received AlloStem™ (CELZ-201) and the rest received optimized medical therapy. At one year, there was an overall efficacy of 93% in the treated patients demonstrating at least a 50% reduction in insulin requirement.
In September 2023, the Company received FDA clearance to initiate a Phase I/II clinical trial of AlloStemSpine® (CELZ-202 ADAPT) using AlloStem™ (CELZ-201-DDT) for the treatment of lower back pain. The study is designed to evaluate the safety, efficacy, and tolerability of AlloStem™ (CELZ-201-DDT). The study will enroll 30 individuals suffering from chronic lower back pain. Using an ultrasound guided, non-surgical procedure, AlloStem™ (CELZ-101-DDT) is injected in areas surrounding the diseased disc(s), thereby potentially repairing, remodeling, and improving the blood supply around the disc and lower back area, without exposing the patient to radiation or any other cell-based procedures. In October, 2023 we filed for and received approval from an institutional review board (IRB) to proceed with this trial.
In October, 2023 the Company filed for and received approval from an institutional review board (IRB) to proceed with the Phase I/II clinical trial. The clinical trial is registered on www.clinicaltrials.gov. We are currently vetting Contract Research Organizations for a planned trial enrollment commencing in early 2024.
In addition to our clinical research efforts, we are currently seeking to expand the commercial sale and use of our CaverStem® and FemCelz® products by physicians in the United States.
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Results of Operations – For the Year Ended December 31, 2023, and for the Year Ended December 31, 2022
Gross Revenue. We generated $9,000 in gross revenue for the year ended December 31, 2023, in comparison with $88,600 for the comparable period a year ago. The decrease of $79,600 or 89.8% is due to a decrease in Caverstem sales. Management is currently re-evaluating the marketing strategy for the Caverstem® and FemCelz® products. We are exploring options to achieve market penetration and product profitability with a number of potential partners. However, there can be no assurance that the Company will be successful in that regard.
Cost of Goods Sold. We generated $3,600 in cost of goods sold for the year ended December 31, 2023, in comparison with $28,491 for the comparable period a year ago. The decrease of $24,891 or 87.4% is due to the reduction in revenue as described above.
Gross Profit/(Loss). We generated $5,400 in gross profit for the year ended December 31, 2023, in comparison with $60,109 in gross profit for the comparable period a year ago. The decrease of $54,709 or 91.0% is due to the reduction in revenue.
Selling, General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2023, totaled $3,560,309, in comparison with $3,943,543 for the comparable period a year ago. The decrease of $383,234, or 9.7% is primarily due to reductions of $259,080 in marketing expenses as we re-evaluate the Caverstem® and FemCelz® marketing strategies, $341,079 in consulting services, $59,885 in Director and Officer insurance, and $53,457 in travel, offset by $308,589 in increased salaries and wages.
Research and Development Expenses. Research and development expenses for the year ended December 31, 2023, totaled $1,970,639 in comparison to $6,268,854 for the comparable period a year ago. The decrease of $4,298,215, or 68.6% was due to a $5,000,000 one-time expense associated with the acquisition of research tools in 2022. This was offset by an increase of $661,785 associated with the development of a drug master file, laboratory research in preparation of our master cell bank submittal to the FDA, the approval of our FDA application for a Lower Back Pain (CELZ 202 – ADAPT) Phase I/II clinical trial, the manufacturing and testing of our ImmCelz™ cell line, and the development of our iPSC cell line in partnership with Greenstone Biosciences Inc.
Operating Loss. For the reasons stated above, our operating loss for the year ended December 31, 2023, was $5,620,132 in comparison with $10,244,372 for the comparable period a year ago.
Other Income. Other income for the year ended December 31, 2023, totaled $333,558 in comparison with $100,328 for the comparable period a year ago. The increased income of $233,230 or 234.5%, is due to increased interest rates on our short-term CD’s and treasuries.
Net Income/Loss. For the reasons stated above, our net loss for the year ended December 31, 2023, was $5,286,574 in comparison with a loss of $10,144,044 for the comparable period a year ago.
Amortization Expense. We acquired a patent (U.S. Patent No. 8,372,797) from CMH on February 2, 2016, in exchange for shares of our restricted common stock valued at $100,000. The patent expires in 2026 and we have elected to amortize the patent over a ten-year period on a straight-line basis. On August 25, 2016, CMT entered into a License Agreement which grants it the exclusive right to all products derived from US Patent No. 7,569,385 for multipotent amniotic fetal stem cells. Under the terms of the license agreement, CMT paid an initial license fee within 30 days of entering into the agreement. The patent expires in 2026 and we have elected to amortize the patent over a ten-year period on a straight-line basis. On May 17, 2017, CMT purchased U.S. Patent No. 9,598,673 covering use of various stem cells for treatment of lower back pain from CMH. Under the terms of the agreement, the Company was required to pay CMH $100,000. The agreement was modified in November 2017 to waive payment of the initial license fee, modify the fee structure, and add the ability to convert the outstanding payable balance into common shares. In November 2020, the Company announced the commercialization of the lower back procedure using a patient’s own cells (“autologous”). This milestone triggered a milestone payment due from the Company to CMH in the amount of $300,000, which was subsequently paid. The patent expires in 2027, and we have elected to amortize the patent over a ten-year period on a straight-line basis. In December 2020, we entered into a Patent License Agreement with Jadi Cells, Inc. Execution of the contract triggered a milestone payment due from the Company to Jadi Cells, Inc. in the amount of $250,000, which was paid with shares of our common stock in February 2022. In August 2023, the Company paid CMH $100,000 related to the filing of an IND with the FDA per the terms of the agreement. We have elected to amortize the patent over a ten-year period on a straight-line basis.
| 38 |
| Table of Contents |
Amortization expense of $94,584 was recorded for the year ended December 31, 2023, representing the amortization of the ED, multipotent amniotic fetal stem cell and lower back pain patents and the Jadi Cell patent license agreement based upon the remaining life of the patents and license agreement. There was $92,084 of amortization expense recorded for the period ended December 31, 2022.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity capital expenditures or capital resources.
Liquidity and Capital Resources
As of December 31, 2023, we had $9,899,504 of available cash and certificates of deposit and positive working capital of approximately $9,899,504. In comparison, as of December 31, 2022, we had approximately $18,399,136 of available cash and positive working capital of approximately $15,425,798.
On May 3, 2022 we received gross proceeds of $17,000,000, before deducting placement agent fees and expenses, upon the closing of an unregistered sale of equity securities of (i) 299,167 shares of our common stock and pre-funded warrants to purchase 456,389 shares of common stock (the “Pre-Funded Warrants”), and (ii) accompanying warrants to purchase 1,511,112 shares of common stock at an exercise price of $20.00 per share (“Warrants”), and, at a combined offering price of $22.50 per share of common stock/Pre-Funded Warrant and related Warrant to a group of institutional investors (the “Purchasers”). The Warrants have a five-year term, and an exercise price of $20.00 per share. The Pre-Funded Warrants do not expire and had an exercise price of $0.0001 per share. Roth Capital Partners acted as sole placement agent for the offering. We paid Roth a placement agent fee in the amount of $1,360,000 and issued Roth a warrant to purchase 113,334 shares of common stock with the same terms as the common warrants issued to the purchasers. Pursuant to the Purchase Agreement, the Company and the Purchasers entered into a Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission to register the resale of the shares of Common Stock issued in the offering and the shares of Common Stock underlying the common stock, Warrants and Pre-Funded Warrants. On May 10, 2022, we filed a Form S-3 registration statement to register the shares, Common Warrants and Pre-Funded Warrants for resale. The registration went effective on May 19, 2022, fulfilling our contractual obligation. In addition, the Company’s directors and officers entered into Lock-Up Agreements under which they agreed not to sell any of their securities of the Company until 90 days following after the earliest of (i) the effective date of the Registration Statement, and (ii) the date all of the securities issued in the offering have been sold under Rule 144, or may be sold under Rule 144 without the Company being in compliance with the current public information requirement under such rule, and without any volume limitation. From June through July 2022, all of the Pre-Funded Warrants were exercised for shares of common stock.
Net Cash used in Operating Activities. We used cash in our operating activities due to our losses from operations. Net cash used in operating activities was $8,027,885 for the year-ended ended December 30, 2023, in comparison to $7,796,966 for the comparable period a year ago, an increase of $230,919 or 3.0%. The increase in cash used in operations was primarily related to an increase of $661,785 in research-related cash outlays associated with personnel and laboratory research in preparation of our master cell bank submittal to the FDA, development, submittal and FDA clearance of our AlloStemSpine® Chronic Lower Back Pain (CELZ-201 ADAPT) phase I/II clinical trial, continued efforts on our Type I Diabetes (CELZ-201CREATE-1) phase I/II trial, the manufacturing and testing of our ImmCelz™ cell line, and the development of our iPSC cell line in partnership with Greenstone Biosciences Inc.
| 39 |
| Table of Contents |
Net Cash used in Investing Activities. Cash provided from investing activities was $3,445,185 for the year ended December 31, 2023, due to $3,558,426 in net certificate of deposit redemptions, offset a $100,000 payment on a patent purchase agreement. In comparison, we used $10,078,617 for the year ended December 31, 2022 related to the investment of $10,000,000 in certificates of deposit in 2022.
Net Cash from Financing Activities.
In the year ended December 31, 2023, we spent $270,953 on stock repurchases. In the year ended December 31, 2022, we received $15,471,775 from the sale of common stock and warrants in our May 2022 private offering.
We have continued to realize losses from operations. However, as a result of our December 2021 and May 2022 offerings, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements through at least March 2025. We anticipate that we will need to raise additional capital in the future to support our ongoing operations and continue our clinical trials. We expect to continue to raise additional capital through the sale of our securities from time to time for the foreseeable future to fund the development of our proposed products through clinical development, manufacturing, and commercialization. Our ability to obtain such additional capital will likely be subject to various factors, including our overall business performance and market conditions. There can be no guarantee that we will be successful in our ability to raise capital to fund future operational and development initiatives.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles accepted in the United States. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a Smaller Reporting Company, we are not required to furnish information under this Item 7A.
| 40 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
| F-1 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Creative Medical Technology Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Creative Medical Technology Holdings, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation and Disclosure of Stock-Based Compensation and Warrants
Description of the Matter:
As discussed in Note 7 of the consolidated financial statements, the Company has a significant number of Warrants outstanding. The disclosure can be complex in nature. Auditing the sufficiency of the Company’s disclosures can be complex, involves judgment, and requires a thorough understanding of award terms.
How We Addressed the Matter in Our Audit:
We confirmed the number of registered warrants with the Company’s transfer agent, we recalculated the converting power of the warrants after the effects of the reverse stock split, and we evaluated the adequacy of the disclosures in the Company’s financial statements.
/s/ Haynie & Company
March 22, 2024
We have served as the Company’s auditor since 2016.
PCAOB ID #
| F-2 |
| Table of Contents |
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
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ASSETS |
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CURRENT ASSETS |
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Cash |
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Investments |
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Inventory |
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Prepaids and other current assets |
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Total Current Assets |
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OTHER ASSETS |
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Other assets |
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Licenses, net of amortization |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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Accrued expenses |
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Advances from related party |
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Total Current Liabilities |
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TOTAL LIABILITIES |
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STOCKHOLDERS' EQUITY |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Treasury stock, at cost, |
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TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
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Revenues |
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Cost of revenues |
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Gross profit |
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OPERATING EXPENSES |
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Research and development |
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Selling, general and administrative |
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Amortization of patent costs |
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TOTAL EXPENSES |
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Operating loss |
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OTHER INCOME/(EXPENSE) |
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Interest income |
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Total other income (expense) |
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LOSS BEFORE PROVISION FOR INCOME TAXES |
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Provision for income taxes |
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NET LOSS |
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NET LOSS PER SHARE - BASIC AND DILUTED |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. | ||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||||||||||
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December 31, 2021 |
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Issuance of common stock and accompanying warrants, net of issuance costs |
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Common stock issued for related party management and patent liabilities |
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Common Stock issued for warrant exercise |
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Stock-based compensation |
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Net loss |
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December 31, 2022 |
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Round-up shares issued in reverse stock split |
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Purchase of common stock |
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Stock-based compensation |
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Net loss |
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December 31, 2023 |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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Adjustments to reconcile net loss to |
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net cash used in operating activities: |
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Amortization |
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Unrealized gain on investments |
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Changes in assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaids and other current assets |
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Accounts payable |
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Accrued expenses |
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Net cash used in operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of investments |
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Redemptions of investments |
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Purchase of patents |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from sale of common stock and warrants, net of issuance costs |
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Proceeds from exercise of warrants |
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Purchase of common stock |
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NET (DECREASE) IN CASH |
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BEGINNING CASH BALANCE |
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ENDING CASH BALANCE |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Cash payments for interest |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Conversion of management fees and patent liability into common stock |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Creative Medical Technologies Holdings, Inc. (the “Company”) is a commercial stage biotechnology company dedicated to the advancement of identifying and translating novel biological therapeutics in the fields of immunotherapy, endocrinology, urology, neurology and orthopedics. The Company was incorporated on December 3, 1998, in the State of Nevada under the name Jolley Marketing, Inc. On May 18, 2016, the Company closed a transaction which was accounted for as a recapitalization, reverse merger, under which Creative Medical Technologies, Inc., a Nevada corporation (“CMT”) became the Company’s wholly owned subsidiary, and Creative Medical Health, Inc. (“CMH”), which was CMT’s sole stockholder prior to the merger, became the Company’s principal stockholder. In connection with this merger, the Company changed its name to Creative Medical Technologies Holdings, Inc. to reflect its current business.
CMT was originally created on December 30, 2015 (“Inception”), as the urological arm of CMH to monetize a patent and related intellectual property related to the treatment of erectile dysfunction (“ED”), which it acquired from CMH in February 2016. Subsequently, the Company has expanded its development and acquisition of intellectual property beyond urology to include therapeutic treatments utilizing “re-programmed” stem cells, and the treatment of neurologic disorders, lower back pain, type I diabetes, and heart, liver, kidney, and other diseases using various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and AlloCelz LLC subsidiaries. However, neither ImmCelz Inc., StemSpine Inc. nor AlloCelz LLC have commenced commercial activities.
The Company currently conducts substantially all of its commercial operations through CMT, which markets and sells the Company’s CaverStem® and FemCelz® disposable kits utilized by physicians to perform autologous procedures that treat erectile dysfunction and female sexual dysfunction, respectively.
In 2020, through the Company’s ImmCelz Inc. subsidiary, the Company began developing treatments that utilize a patient’s own extracted immune cells that are then “reprogrammed” by culturing them outside the patient’s body with optimized stem cells. The immune cells are then re-injected into the patient from whom they were extracted. The Company believes this process endows the immune cells with regenerative properties that may be suitable for the treatment of multiple indications. In contrast to other stem cell-based approaches, the immune cells are significantly smaller in size than stem cells and are believed to more effectively penetrate areas of the damaged tissues and induce regeneration.
Risks and Uncertainties - The Company has a limited operating history and has generated minimal revenues from its operations.
The outbreak of the COVID-19 coronavirus has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, CROs, suppliers, manufacturers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns that may be requested or mandated by governmental authorities. Another significant, outbreak of COVID-19, a communicable disease, could disrupt our clinical trials, supply chain and the manufacture or shipment of our products, and other related activities, which could have a material adverse effect on our business, financial condition and results of operations, and may also have an adverse impact on global economic conditions which could impair our ability to raise capital when needed.
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The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions, including the political environment and acts or threats of war or terrorism. Adverse developments in these general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on the Company’s financial condition and the results of its operations.
The Company has generated minimal sales and has limited marketing and/or distribution capabilities. The Company has limited experience in developing, training, or managing a sales force and will incur substantial additional expenses if it decides to market any of its current and future products and services with an internal sales organization. Developing a marketing and sales force is also time-consuming and could delay the launch of its future products and services. In addition, the Company will compete with many companies that currently have extensive and well-funded marketing and sales operations. The Company’s marketing and sales efforts may be unable to compete successfully against these companies. In addition, the Company has limited capital to devote to sales and marketing.
The Company’s industry is characterized by rapid changes in technology and customer demands. As a result, the Company’s products and services may quickly become obsolete and unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and services, and enhance the Company’s current products and services on a timely and cost-effective basis. Further, the Company’s products and services must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products and services or enhanced versions of existing products and services. Also, the Company may not be able to adapt new or enhanced products and services to emerging industry standards, and the Company’s new products and services may not be favorably received. In addition, the Company may not have the capital resources to further the development of existing and/or new ones.
We cannot predict how global supply chain activities, or the economy at large may be impacted by prolonged global conflicts or sanctions imposed in response to the wars, or whether future conflicts, if any, may adversely affect our results of operations.
Use of Estimates – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Presentation – The consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented.
Concentration Risks – The Federal Deposit Insurance Corporation insures cash deposits in most general bank accounts for up to $
Cash Equivalents – The Company classifies its highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations of each investment as of the balance sheet date for each reporting period. The Company classifies its investments as either short-term or long-term based on each instrument’s underlying contractual maturity date. Investments with maturities of less than 12 months are classified as short-term and those with maturities greater than 12 months are classified as long-term. The cost of investments sold is based upon the specific identification method. Investments include certificates of deposits and United States treasuries. As of December 31, 2023, the Company had an unearned gain of approximately $
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Inventories – Inventories are valued on a cost basis. The cost of inventories is determined on a first-in, first-out basis.
Fair Value of Financial Instrument – The Company’s financial instruments consist of cash and cash equivalents, and payables. The carrying amount of cash and cash equivalents and payables approximates fair value because of the short-term nature of these items.
Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy:
Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 – Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
When determining fair value, whenever possible the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. As of December 31, 2023, and 2022, the Company had no outstanding derivative liabilities.
Intangible Assets – Purchased intangible assets with finite lives are amortized over their respective estimated lives and reviewed for impairment whenever events or other changes in circumstances indicate that the carrying amount may not be recoverable. The impairment testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. Impairment charges, if any, are recorded in the period in which the impairment is determined. The costs for intangible assets that are developed internally are expensed as incurred.
Impairment – The Company records impairment losses when indicators of impairment are present and undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Furthermore, the Company will make periodic assessments of technology and clinical testing to determine if it plans to continue to pursue the technology and if the license, patent, or other rights have value. To date no impairment has been recorded.
Derivative Liabilities – A derivative is an instrument whose value is “derived” from an underlying instrument or index such as a future, forward, swap, option contract, or other financial instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities.
As a matter of policy, the Company does not invest in separable financial derivatives or engage in hedging transactions.
Revenue - The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from contracts with customers”. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Deferred revenue represents amounts which still have yet to be earned.
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The Company generates revenue from the sale of disposable stem cell concentration kits. Revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, which is generally on delivery to the customer.
Payments received for which the earnings process is not yet complete are deferred. As of December 31, 2023, and 2022, the Company had $
Research and Development - Research and development will continue to be a significant function of the Company. Research and development costs are expensed as incurred. Expenses in the accompanying financial statements include certain costs which are directly associated with the Company’s two phase I/II clinical trials, research and development of the ImmCelzTM, AlloStem™, and IPSCs™ technology platforms. ImmCelzTM is based upon re-programming T-regulatory cells with cell-free secreted factors. We are conducting laboratory research to validate the core technology and ability to achieve scalable production. These costs, which consist primarily of monies paid for research assets, outsourced research services, laboratory facility expenses, materials and supplies and compensation costs amounted to $
Stock-Based Compensation – The Company accounts for its stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation. The Company accounts for all stock-based compensation using a fair-value method on the grant date and recognizes the fair value of each award as an expense over the requisite vesting period. The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeitures rates.
Income Taxes – The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred income taxes are recognized for differences between financial reporting and tax bases of assets and liabilities at the enacted statutory tax rates in effect for the years in which the temporary differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company evaluates the realizability of deferred tax assets and valuation allowances are provided when necessary to reduce net deferred tax assets to the amounts expected to be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company will recognize interest and penalties related to unrecognized tax benefits in the income tax provision in the accompanying statement of operations.
The Company calculates the current and deferred income tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed income tax returns are recorded when identified. The amount of income taxes paid is subject to examination by U.S. federal and state tax authorities. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.
Basic and Diluted Income (Loss) Per Share – The Company follows Financial Accounting Standards Board (“FASB”) ASC 260 Earnings per Share to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During loss periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. During the year ended December 31, 2023, the Company had
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On June 12, 2023,
Recent Accounting Pronouncements – The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.
NOTE 2 – LICENSING AGREEMENTS
ED Patent – The Company acquired a patent from CMH, a related company on February 2, 2016, in exchange for
Multipotent Amniotic Fetal Stem Cells License Agreement - On August 25, 2016, CMT entered into a License Agreement dated August 25, 2016, with a university. This license agreement grants to CMT the exclusive right to all products derived from a patent for use of multipotent amniotic fetal stem cells composition of matter throughout the world during the period ending on the expiration date of the longest-lived patent rights under the patent. The license agreement also permits CMT to grant sublicenses. Under the terms of the license agreement, CMT is required to diligently develop, manufacture, and sell any products licensed under the agreement. CMT paid the University an initial license fee within 30 days of entering into the agreement. CMT is also required to pay annual license maintenance fees on each anniversary date of the agreement, which maintenance fees would be credited toward any earned royalties for any given period. The License Agreement provides for payment of various milestone payments and earned royalties on the net sales of licensed products by CMT or any sub licensee. CMT is also required to reimburse the University for any future costs associated with maintaining the patent. CMT may terminate the license agreement for any reason upon 90 days’ written notice and the University may terminate the agreement in the event CMT fails to meet its obligations set forth therein, unless the breach is cured within 30 days of the notice from the University specifying the breach. CMT is also obligated to indemnify the University against claims arising due to the exercise of the license by CMT or any sub licensee. As of December 31, 2023, no amounts are currently due to the University.
The Company estimates that the patent expires in February 2026 and has elected to amortize the patent through the period of expiration on a straight-line basis. Amortization expense of $
Lower Back Patent – The Company, through its subsidiary StemSpine, LLC, acquired a patent from CMH, a related company, on May 17, 2017, covering the use of various stem cells for the treatment of lower back pain from pursuant to a Patent Purchase Agreement, which was amended in November 2017. As amended, the agreement provides the following:
| · | The Company is required to pay CMH $ |
| · | In the event the Company determines to pursue the technology via use of autologous cells, the Company will pay CMH: |
| o | $ |
| o | $ |
| o | $ |
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| · | In the event the Company determines to pursue the technology via use of allogenic cells, the Company will pay CMH: |
| o | $ |
| o | $ |
| o | $ |
| · | Payment may be made in cash or shares of our common at a discount of |
| · | In the event the Company’s shares of common stock trade below $ |
| · | For a period of five years from the date of the first sale of any product derived from the patent, the Company is required to make royalty payments of |
The Company paid CMH the $
The patent expires on
The Company has elected to amortize the additional $
ImmCelz™ - On December 28, 2020, ImmCelz, Inc. (“ImmCelz”), a newly formed Nevada corporation and wholly owned subsidiary of the Company, entered into a Patent License Agreement dated December 28, 2020 (the “Agreement”), with Jadi Cell, LLC. (“Jadi”), a company controlled by Dr. Amit Patel, a former director of the Company. The Agreement grants to ImmCelz™ the patent rights under U.S. Patent# 9,803,176 B2, “Methods and compositions for the clinical derivation of an allogenic cell and therapeutic uses”. The contract grants ImmCelz™ access to proprietary process of expanding the master cell bank of Jadi Cell LLC, as currently practiced by Licensor, and as documented in standard operating procedures (SOPs) and other written documentation to augment autologous cells. The terms of the agreement are as follows:
| · | Licensee shall pay Licensor a license fee of $ |
| · | Within thirty (30) days of the end of each calendar quarter during the term of this Agreement, Licensee will pay Licensor five percent ( |
| · | in one or a series of related transactions, of all or substantially all of the business or assets of Licensee ImmCelz, Inc. (“Sale of Assets”) will result in a one-time ten-percent allocation to the licensor, the Continuing Royalty will be calculated at five percent ( |
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To date, the Company has not made any payments to Jadi Cell under this agreement, other than the $
The Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expenses of $
As of December 31, 2023, future expected amortization of these assets is as follows:
For the year ended December 31,
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The following is a rollforward of the Company’s licensing agreements for the year end December 31, 2023.
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NOTE 3 – RELATED PARTY TRANSACTIONS
Narkeshyo Research Tools Purchase
On December 15, 2022, the Company purchased a set of components referred to as “research tools” for $
The vision and pipeline of the Company is based on robust and thorough development of its biological platforms, therapies and products. This acquisition of the research tools aligned with the Company’s priority of advancing and augmenting its suite of cGMP (Current Good Manufacturing Practices) cellular therapy products. The Company believes that the acquired research tools will allow it to protect its intellectual property while complying with regulatory requirements, and accelerate product development. The information contained in the research tools will not only be used to support and fast-track the Company’s regulatory filings (such as IND, NDA, ANDA and export applications), but also, provide clinical and regulatory support to potential partners and collaborators without having to divulge trade secrets and know-how.
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A third-party analysis of this acquisition concluded it would accelerate development time by 3-5 years and result in a substantial reduction in the Company’s research and development expenses over the long term.
The purchased tools included (but were not limited to):
| · | Toxicology |
| · | Screening |
| · | Preclinical Testing |
| · | Assays |
| · | Authorization |
| · | Tools of Biological Transaction |
| · | Tools of Intellectual Property |
Jadi Cell License Agreement
On December 28, 2020, the
StemSpine Patent Purchase
The Company acquired U.S. Patent No. 9,598,673 covering the use of various stem cells for the treatment of lower back pain from its affiliate CMH pursuant to a Patent Purchase Agreement dated May 17, 2017, which was amended in November 2017. The inventors of the patent were Thomas Ichim, PhD and Amit Patel, MD, former directors of the Company, and Annette Marleau, PhD. The Patent Purchase Agreement is described in detail in Note 2 above. Pursuant to the Patent Purchase Agreement, the Company paid CMH the $
NOTE 6 – STOCK-BASED COMPENSATION
On September 6, 2021, the Company’s Board of Directors, and holders of a majority of the voting power of the Company’s stockholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) and reserved
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The Company has also reserved stock options to purchase
During 2023 and 2022, the fair market value of the options was insignificant to the financial statements.
Since the expected life of the options was greater than the Company’s historical stock information available, the Company determined the expected volatility based on price fluctuations of comparable public companies.
There were no options issued during the year-ended December 31, 2023 and
Option activity for the years ended December 31, 2023, and 2022 consists of the following:
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See Note 2 for discussion related to the issuance of common stock in connection with licensing agreements. See Note 7 for warrants issued in connection with our May 2022 private offering.
In February 2022, we granted a total of
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See Note 2 for discussion related to the issuance of common stock in connection with licensing agreements.
See Note 7 for warrant rollforward
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NOTE 7 – STOCKHOLDERS’ EQUITY
May 2022 Private Offering
On May 3, 2022, the Company completed the sale of (i)
The Common Warrants have a five-year term, and an exercise price of $
The Pre-Funded Warrants were classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, did not embody an obligation for the Company to repurchase its shares, and permitted the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Pre-Funded Warrants did not provide any guarantee of value or return.
Roth Capital Partners (“Roth”) acted as sole placement agent for the offering. The Company paid Roth a placement agent fee in the amount of $
Share Repurchase Program
On June 12, 2023 the Company announced that its Board of Directors has approved a share repurchase program. The program authorizes the Company to repurchase up to $
Warrants
In connection with our May 2022 private offering, we issued pre-funded warrants to purchase
Assumptions used in calculating the fair value of the warrants issued in 2022 were as follows:
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As of December 31, 2023, and 2022, warrants to purchase
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Warrant activity for the years ended December 31, 2023 and 2022 consists of the following:
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See Note 2 for discussion related to the issuance of common stock in connection with licensing agreements.
NOTE 8 – SIGNIFICANT RESEARCH AND DEVELOPMENT PURCHASES
On December 15, 2022, the Company purchased a set of components referred to as “research tools” for $
The vision and pipeline of the Company is based on robust and thorough development of its biological platforms, therapies and products. This acquisition of the research tools aligned with the Company’s priority of advancing and augmenting its suite of cGMP (Current Good Manufacturing Practices) cellular therapy products. The Company believes that the acquired research tools will allow it to protect its intellectual property while complying with regulatory requirements, and accelerate product development. The information contained in the research tools will not only be used to support and fast-track the Company’s regulatory filings (such as IND, NDA, ANDA and export applications), but also, provide clinical and regulatory support to potential partners and collaborators without having to divulge trade secrets and know-how.
A third-party analysis of this acquisition concluded it would accelerate development time by 3-5 years and result in a substantial reduction in the Company’s research and development expenses over the long term.
The purchased tools included (but were not limited to):
| · | Toxicology |
| · | Screening |
| · | Preclinical Testing |
| · | Assays |
| · | Authorization |
| · | Tools of Biological Transaction |
| · | Tools of Intellectual Property |
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NOTE 9 – INCOME TAXES
The provision for income tax expense consists for the years ended December 31, 2023, and 2022:
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Income tax provision attributable to: |
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Deferred tax assets consist of the following at December 31, 2023, and 2022:
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The primary difference between the statutory federal rate and the Company’s effective tax rate for the years ended December 31, 2023 and 2022 was due to the
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As of December 31, 2023 the Company had federal and state gross net operating loss carryforwards of approximately $
As of December 31, 2023, and 2022, the Company maintained a full valuation allowance on its net deferred tax assets. The valuation allowance was determined in accordance with the provisions of ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.
The applicable federal and state rates used in calculating the deferred tax provision were
The Company files income tax returns in the U.S. and Arizona. All years presented remain subject to examination for U.S. federal and state purposes. The Company is not currently under examination in federal or state jurisdictions.
NOTE 11 – SUBSEQUENT EVENTS
Management has reviewed subsequent events through the date of the filing noting none.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management assessed our internal control over financial reporting as of December 31, 2023, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO 2013 Criteria). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on our assessment, management has concluded that our internal control over financial reporting was effective, as of December 31, 2023, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarterly period ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
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PART III
Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance.
Information with respect to this item will be set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders (“Proxy Statement”) under the headings “Directors,” “Executive Officers,” “Delinquent Section 16 Reports” and “Corporate Governance” or an amendment to this Annual Report on Form 10-K (“Form 10-K/A”), and is incorporated herein by reference. The Proxy Statement or Form 10-K/A, as the case may be, will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 11. Executive Compensation.
Information with respect to this item will be set forth in the Proxy Statement under the headings “Executive Compensation” and “Director Compensation,” or the Form 10-K/A, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information with respect to this item will be set forth in the Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation—Securities Authorized for Issuance Under Equity Compensation Plans” or the Form 10-K/A, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information with respect to this item will be set forth in the Proxy Statement under the headings “Related Party Transactions” and “Director Independence” and is incorporated herein by reference or the Form 10-K/A.
Item 14. Principal Accountant Fees and Services.
Information with respect to this item will be set forth in the Proxy Statement under the headings “Audit and Non-Audit Related Fees” and “Pre-Approval Policy” and is incorporated herein by reference or the Form 10-K/A.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
The following exhibits are included with this report:
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| Rule 13a-14(a)/15d-14a(a) Certification of Principal Executive Officer* | |
| Rule 13a-14(a)/15d-14a(a) Certification of Principal Financial Officer* | |
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101.INS |
| Inline XBRL Instance Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
________
† Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. |
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Date: March 22, 2024 | By: | /s/ Timothy Warbington |
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| Timothy Warbington, Chief Executive Officer |
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| (Principal Executive Officer) |
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Date: March 22, 2024 | By: | /s/ Donald Dickerson |
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| Donald Dickerson, Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
NAME |
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| DATE |
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/s/ Timothy Warbington |
| Director & Chairman |
| March 22, 2024 |
Timothy Warbington |
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/s/ Donald Dickerson |
| Director |
| March 22, 2024 |
Donald Dickerson |
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/s/ Michael H. Finger |
| Director |
| March 22, 2024 |
Michael H. Finger |
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/s/ Susan Snow |
| Director |
| March 22, 2024 |
Susan Snow |
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/s/ Bruce S. Urdang |
| Director |
| March 22, 2024 |
Bruce S. Urdang |
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