Management's Discussion and Analysis of Financial Condition and Results of
Operations analyzes the major elements of our balance sheets and statements of
operations. This section should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2021, and our interim financial
statements and accompanying notes to these financial statements included in this
report. All amounts are in U.S. dollars.
Forward-Looking Statement Notice
This quarterly report on Form 10-Q contains forward-looking statements about our
expectations, beliefs or intentions regarding, among other things, our product
development efforts, business, financial condition, results of operations,
strategies or prospects. In addition, from time to time, we or our
representatives have made or may make forward-looking statements, orally or in
writing. Forward-looking statements can be identified by the use of
forward-looking words such as "believe," "expect," "intend," "plan," "may,"
"should" or "anticipate" or their negatives or other variations of these words
or other comparable words or by the fact that these statements do not relate
strictly to historical or current matters. These forward-looking statements may
be included in, but are not limited to, various filings made by us with the SEC,
press releases or oral statements made by or with the approval of one of our
authorized executive officers. Forward-looking statements relate to anticipated
or expected events, activities, trends or results as of the date they are made.
Because forward-looking statements relate to matters that have not yet occurred,
these statements are inherently subject to risks and uncertainties that could
cause our actual results to differ materially from any future results expressed
or implied by the forward-looking statements. Many factors could cause our
actual activities or results to differ materially from the activities and
results anticipated in forward-looking statements, including, but not limited
to, those set forth in our most recent annual report referenced below.
This report identifies important factors which could cause our actual results to
differ materially from those indicated by the forward-looking statements.
All forward-looking statements attributable to us or persons acting on our
behalf speak only as of the date of this report and are expressly qualified in
their entirety by the cautionary statements included in this report. We
undertake no obligations to update or revise forward-looking statements to
reflect events or circumstances that arise after the date made or to reflect the
occurrence of unanticipated events. In evaluating forward-looking statements,
you should consider these risks and uncertainties.
Overview
We are a commercial stage biotechnology company focused on immunology, urology,
neurology and orthopedics using adult stem cell treatments and interrelated
regenerative technologies for the treatment of multiple indications. Our
existing and pipeline of therapies and products include of the following:
[[Image Removed: celz_10qimg1.jpg]]
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 I diabetes, and heart, liver, kidney and other diseases using
various types of stem cells through our ImmCelz, Inc., StemSpine, Inc. and
AmnioStem LLC subsidiaries. However, neither ImmCelz Inc., StemSpine Inc. nor
AmnioStem LLC have commenced commercial activities.
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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 addition to our CaverStem® and FemCelz® products, we are currently in the
process of recruiting clinical sites for our StemSpine® Regenerative Stem Cell
Procedure for the Treatment of Degenerative Disc Disease. Our
StemSpine® treatment is an autologous procedure that utilizes a patient's own
stem cells to treat lower back pain.
In 2020, through our ImmCelz Inc. subsidiary, we began exploring the development
of 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. We believe this process endows the immune cells with
regenerative properties that may be suitable for the treatment of stroke
victims, among other 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.
We are currently primarily focused on expanding the commercial sale and use of
our CaverStem® and FemCelz® products by physicians in the United States and
Europe, and commercializing our StemSpine® treatment for lower back pain. We
also recently filed an Investigational New Drug (IND) application with the FDA
to treat stroke utilizing our ImmCelzTM technology. In the future, subject to
the availability of capital, we will seek to further develop additional
therapeutic products that utilize our proprietary intellectual property.
Results of Operations - For the Three-month Periods Ended March 31, 2022 and
2021
Gross Revenue. We generated $15,000 in revenue for the three-month period ended
March 31, 2022, in comparison with no revenue for the comparable quarter a year
ago. The increase of $15,000 reflects the restart of commercial sales following
a reduction in the ongoing negative impacts of the COVID-19 pandemic.
Cost of Goods Sold. We generated $6,791 of goods sold for the three-month period
ended March 31, 2022, in comparison with no cost of goods sold for the
comparable quarter a year ago. The increase of $6,791 reflects the restart of
commercial sales following a reduction in the ongoing negative impacts of the
COVID-19 pandemic.
Gross Profit/(Loss). We generated a gross profit of $8,209 for the three-month
period ended March 31, 2022, in comparison with no gross profit for the
comparable quarter a year ago. The increase of $8,209 reflects the restart of
commercial sales following a reduction in the ongoing negative impacts of the
COVID-19 pandemic.
General and Administrative Expenses. General and administrative expenses for the
three-month period ended March 31, 2022, totaled $1,130,057 in comparison with
$280,293, for the comparable quarter a year ago. The increase of $849,134 or
302% is primarily due to approximately $176,000 in director and officer
insurance premiums that began in September 2021, an increase of approximately
$200,000 in salary expenses from terminating the management service agreement in
September 2021 and entering into direct employment arrangements with our CEO,
CFO and other key leaders of the management team, an increase of approximately
$120,000 in marketing expenses, and an increase of $138,000 in outside
consulting expenses focused on moving key elements of our programs forward.
Amortization Expenses. Amortization expenses for the three-month periods ended
March 31, 2022 and 2021, totaled $23,021.
Research and Development Expenses. Research and development expenses for the
three-month period ended March 31, 2022, totaled $10,000 in comparison with no
expenses, for the comparable quarter a year ago.
Other Income/Expense. There was no other income or expense for the three-month
period ended March 31, 2022, in comparison with $28,139,963 income, for the
comparable quarter a year ago. The decreased income of $28,139,963, is primarily
due to a gain in the fair value of derivative liabilities of $28,476,039, offset
by interest expense of $336,076 for the comparable quarter a year ago.
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Net Income/Loss. For the reasons stated above, our net loss for the three-month
period ended March 31, 2022, totaled $1,154,869 in comparison to net income of
$27,836,019, for the comparable quarter a year ago.
Liquidity and Capital Resources
As of March 31, 2022, we had $9,146,977 of available cash and positive working
capital of approximately $8,846,292. In comparison, as of December 31, 2021, we
had approximately $10,723,870 of available cash and positive working capital of
approximately $9,686,780.
On December 7, 2021, we sold an aggregate of 3,875,000 shares of our common
stock, and accompanying warrants to purchase 3,875,000 shares of common stock at
an exercise price of $4.13 per share, at a combined public offering price to the
public of $4.13 per share of common stock and related Warrant, pursuant to an
Underwriting Agreement we entered into with Roth Capital Partners, LLC. We
received gross proceeds of $16,003,750, before deducting underwriting discounts
and commissions of seven percent (7%) of the gross proceeds and offering
expenses. We used a portion of the proceeds from the offering to (i) redeem our
Bridge Notes described below, in the aggregate outstanding amount of $5,146,176,
and (ii) repurchase the Company's Series A Preferred Stock from the Company's
Chief Executive Officer for an aggregate purchase price of approximately
$195,000.
In addition, following the end of our recent quarter, on May 3, 2022 we
completed that same (i) 2,991,669 shares of common stock and pre-funded warrants
to purchase 4,563,887 shares of common stock, and (ii) accompanying warrants to
purchase 15,111,112 shares of common stock, at a combined offering price of
$2.25 per share of common stock/Pre-Funded Warrant and related Common Warrant,
to a group of institutional investors, resulting in gross proceeds to the
Company of approximately $17,000,000.
Cash Flows
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
$1,576,893 for the three-month period ended March 31, 2022 in comparison to
$441,518 for the comparable period a year ago, an increase of $1,135,375 or
257%. The increase in cash used in operations was primarily related to the
increased expenses mentioned above.
Net Cash used in Investing Activities. There was no cash used in investing
activities in the three-month period ended March 31, 2022 and March 31, 2021,
respectively.
Net Cash From Financing Activities. We did not raise any funds during the
three-month period ended March 31, 2022. We raised $618,640 through the issuance
of convertible debt, preferred stock and a related party advance in the
three-month period ended March 31, 2021.
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.
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