CELZ US Equity☆

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 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:

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.

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.

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Results of Operations – For the Year Ended December 31, 2021, and for the Year Ended December 31, 2020

Gross Revenue. We generated $87,754 in gross revenue for the year ended December 31, 2021 in comparison with $164,500 for the comparable period a year ago. The decrease of $76,746 or 46.7% is primarily due to the continued effects of the COVID-19 pandemic. Prior to the pandemic, we were experiencing an upward trend in sales. However, starting in 2020 and continuing through 2021, most elective procedures were halted in the U.S. This resulted in a near cessation of Caverstem® and FemCelz® procedures in those time frames. Additionally, in the fourth quarter of 2021 we field tested an alternative sales and marketing program for CaverStem® whereby we marketed directly to the patient, collected the procedure fees from the patient and paid the physicians for their services. While this effort resulted in an increase in the number of procedures and gross revenues per procedure, gross margins were greatly reduced. As a result, we have reverted to our model of contracting with physicians, who resell our kits and bill their patients directly.

Cost of Goods Sold. We generated $47,949 in cost of goods sold for the year ended December 31, 2021 in comparison with $50,596 for the comparable period a year ago. The decrease of $2,647 or 5.2% was less than the related 46.7% decrease in revenues due to reduced gross margins in the fourth quarter of 2021 as described above.

Gross Profit/(Loss). We generated $39,805 in gross profit for the year ended December 31, 2021 in comparison with $113,904 in gross profit for the comparable period a year ago. The decrease of $74,099 or 65.1% is due to the lower sales associated with the COVID-19 pandemic identified above, lower per-unit revenue from new physician promotions and lower fourth quarter margins from the temporary shift to a direct-to-patient model.

Selling, General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2021, totaled $2,964,490, in comparison with $1,161,947 for the comparable period a year ago. The increase of 1,802,543, or 155.1% is primarily due to a $707,116 expense accrual related to a vendor dispute, $493,299 in stock-based compensation, $180,936 in board member consulting services, $132,164 of increased marketing expenses tied to the direct-to-patient program, and $96,152 in director and officer insurance, which we did not carry in 2020.

Research and Development Expenses. Research and development expenses for the years ended December 31, 2021 totaled $109,180 in comparison to $0 for the comparable period a year ago. The increase was due to laboratory research associated with providing a response to the FDA on the ImmCelzTM IND application.

Operating Loss. For the reasons stated above, our operating losses for the year ended December 31, 2021 were $3,125,949 in comparison with $1,114,835 for the comparable period a year ago.

Other Expense. Other income for the year ended December 31, 2021 totaled $22,337,717 in comparison with an expense of $35,210,395 for the comparable period a year ago. The increased income of $57,548,112, is primarily due to a decrease of $60,011,354 in the in the fair value of derivative liabilities, a $585,601 gain upon the extinguishment of convertible notes, offset by an increase of $3,048,843 in interest expense for the comparable period a year ago. We incurred interest expense calculated on our promissory notes. We recorded the amortization of various debt discounts associated with our promissory notes. The discounts are the result of a combination of on-issuance discounts and fees, warrants issued with promissory notes, and derivative liabilities which are recorded due to the variability of the notes conversion price. The derivative liabilities are re-measured as of each reporting date.

Net Loss. For the reasons stated above, our net income for the year ended December 31, 2021 was $19,211,768 in comparison with a loss of $36,325,230 for the comparable period a year ago.

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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.

Amortization expense of $92,084 was recorded for the year ended December 31, 2021, 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 $66,792 of amortization expense recorded for the period ended December 31, 2020.

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, 2021, we had $10,723,870 of available cash and positive working capital of approximately $9,814,709. In comparison, as of December 31, 2020, we had approximately $98,000 of available cash and a working capital deficit of approximately $40,423,000.

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 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 to our 2021 public offering and smaller private convertible note and preferred stock financing transactions we completed in the last two years, in August 2021, we completed the sale of 15% Original Issue Discount Senior Notes ( “Bridge Notes”) in the aggregate principal amount of $4,456,176. In connection with the sale of the Bridge Notes, holders of shares of our preferred stock issued earlier in 2021 exchanged such preferred stock for additional Bridge Notes in the aggregate principal amount of $690,000. We also issued to the purchasers of our Bridge Notes five-year warrants to purchase an aggregate of 363,046 shares of our common stock at an initial exercise price of $14.175 per share, subject to anti-dilution adjustment in the event of future sales of equity by us below the then exercise price, stock dividends, stock splits and other specified events.

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 $2,215,782 for the year-ended ended December 30, 2021 in comparison to $434,556 for the comparable period a year ago, an increase of $1,781,226 or 410%. The increase in cash used in operations was primarily related to a $299,900 increase in payments made to CMH and a $100,669 decrease in accrued expenses.

Net Cash used in Investing Activities. Cash used in investing activities was $0 for the year ended December 31, 2021 related to the purchase of licenses in comparison to $250,000 for the year ended December 31, 2020.

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Net Cash from Financing Activities. In the year ended December 31, 2021, we received $14,758,488 in net proceeds from the sale of common stock and warrants in our December 2021 public offering, along with $4,784,790 from the issuance of convertible debt, preferred stock and short-term, non-convertible notes. We spent $6,925,032 on re-payment of notes, redemption of preferred stock, and payment of debt issuance and offering costs. In the year ended December 31, 2020, we raised $710,920 primarily through the issuance of convertible debt and repaid $17,000 of convertible notes. The $12,147,720 or 1,751% increase in cash flows from financing activities were primarily related to our December 2021 public offering.

We have continued to realize losses from operations. However, as a result of our December 2021 public offering, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements through at least March 2023. 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.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. There are certain specified reduced reporting and other regulatory requirements that are available to public companies that are emerging growth companies. These provisions include:

4. reduced disclosure about our executive compensation arrangements.

We have elected to take advantage of the exemption from the adoption of new or revised financial accounting standards until they would apply to private companies. As a result of this election, our financial statements may not be comparable to public companies required to adopt these new requirements.

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.

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Item 8. Financial Statements and Supplementary Data.

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

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Report of Independent Registered Public Accounting Firm – Haynie & Company F-2

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-3

Notes to Consolidated Financial Statements F-7

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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, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Haynie & Company

Haynie & Company

Salt Lake City, Utah

March 30, 2022

We have been the Company’s auditor since 2016

PCAOB ID 0457

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CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

CURRENT ASSETS

Accounts receivable 2,485 -

OTHER ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

Management fee and patent liabilities - related parties 250,000 468,782

Commitments and contingencies

STOCKHOLDERS' EQUITY (DEFICIT)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 11,268,181 $ 717,775

The accompanying notes are an integral part of these consolidated financial statements

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CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2021 For the Year Ended December 31, 2020

OPERATING EXPENSES

Research and development 109,180 -

OTHER INCOME/(EXPENSE)

Gain on extinguishment of convertible notes 585,601 -

Provision for income taxes - -

BASIC NET INCOME (LOSS) PER SHARE $ 7.37 $ (62.69 )

DILUTED NET INCOME (LOSS) PER SHARE $ 5.61 $ (62.69 )

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 2,605,057 579,461

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED 3,248,619 579,461

The accompanying notes are an integral part of these consolidated financial statements

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CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Differences in shares from reverse stock split - - - - - - 3 - - - -

Dividends on preferred stock - - - - - - - - (27,725 ) - (27,725 )

Cashless exercise of warrants - - - - - - 37,870 38 (38 ) - -

Warrants issued with notes payable - - - - - - - - 2,097,629 - 2,097,629

Differences in shares from reverse stock split - - - - - - 5,621 6 (6 ) - -

The accompanying notes are an integral part of these consolidated financial statements.

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CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31, 2021 For the Year Ended December 31, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Gain on extinguishment of convertible notes (585,601 ) -

Changes in assets and liabilities:

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of licenses - (250,000 )

Net cash used in investing activities - (250,000 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from note payable 3,887,750 -

Payments on notes payable (5,251,176 ) -

Payment of debt issuance costs (443,239 ) -

Payment of deferred offering costs (3,281 ) -

Payments on convertible notes payable - (17,000 )

Proceeds from sale of preferred stock 462,000 -

Proceeds from sale of common stock 14,758,488 -

Payment of offering costs (105,180 ) -

Preferred stock redemption (196,751 ) -

Related party advances 223,394 -

Repayment of related party advances (220,000 ) -

Payments to settle convertible notes payable and warrants (705,405 ) -

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash payments for interest $ 9,186 $ 6,000

Cash payments for income taxes $ - $ -

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Accrued dividends on preferred stock $ 27,725 $ -

Warrants issued with notes payable and as a service fee $ 2,097,629 $ -

Exchange of preferred stock for notes payable $ 572,275 $ -

Warrants issued for ratchet provision adjustment $ 989,346 $ -

The accompanying notes are an integral part of these consolidated financial statements.

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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 focused on immunology, urology, orthopedics and neurology using adult stem cell treatments. 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 AmnioStem LLC subsidiaries. However, neither ImmCelz Inc., StemSpine Inc. nor AmnioStem 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 addition to its CaverStem® and FemCelz® products, the Company is currently in the process of recruiting clinical sites for its StemSpine® Regenerative Stem Cell Procedure for the Treatment of Degenerative Disc Disease, an autologous procedure that utilizes a patient’s own stem cells to treat lower back pain.

In 2020, through the Company’s ImmCelz Inc. subsidiary, the Company 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. The Company believes 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.

Risks and Uncertainties - The Company has a limited operating history and has only recently started to generate revenues from its planned principal operations.

On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the COVID-19 include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, to-date, the Company is experiencing a reduction in revenues due to the prioritization of medical resources to address the COVID-19 outbreak. In several of our markets, all non-essential (including elective) procedures have been placed on hold. While this has a negative financial impact to our revenues, there have been the same reductions to our costs. Additionally, since the Company maintains no inventory and requires nearly all of customers to pre-pay, there is no risk to receivables or inventory write-downs. The Company expects existing orders temporarily on hold and continued sales, training and patient treatments will resume once the physician’s offices are back to being fully operational.

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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 only recently started to generate sales and we have 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 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.

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 $250,000 per institution. The Company maintains its cash balances at two financial institutions. As of December 31, 2021, the Company’s balance exceeded the limit at both institutions.

Cash Equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

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.

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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, 2021, the Company has level 3 fair value calculations on derivative liabilities. The table below reflects the results of our Level 3 fair value calculations:

Notes Warrants Total

Derivative liability at December 31, 2021 $ - $ - $ -

Intangible Assets - 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.

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. However, the Company entered into certain debt financing transactions in fiscal 2021 and 2020, as disclosed in Notes 4 and 5, containing certain conversion features that have resulted in the instruments being deemed derivatives. We evaluate such derivative instruments to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments indexed to our common shares on a first-in-first-out basis.

The classification of a derivative instrument is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.

Instruments classified as derivative liabilities are remeasured using the Black-Scholes model at each reporting period (or upon reclassification), and the change in fair value is recorded on our consolidated statement of operations.

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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.

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, 2021, the Company had no deferred revenue.

Research and Development - Research and development will continue to be a significant function of the Company. Research and development costs will be expensed as incurred. Expenses in the accompanying financial statements include certain costs which are directly associated with the Company’s research and development of the ImmCelzTM technology platform. ImmCelzTM is based upon re-programming T-regulatory cells with factors expressed by the Jadi cells. 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 laboratory facility expenses, materials and supplies and compensation costs amounted to $109,180 for the year ended December 31, 2021. There were $0 in research costs for the period ended December 31, 2020

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 change, the change in estimate is recorded in the period in which the determination is made.

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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 income (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. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated, based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when an award is settled are assumed to be used to repurchase shares in the current period. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

The following is a summary of outstanding securities which have been included in the calculation of diluted net income per share and reconciliation of net income to net income available to common stockholders for the year-ended December 31, 2021.

For the Year Ended December 31, 2021

Effect of Series B and C preferred stock -

Effect of warrants and options 643,562

Effect of convertible notes payable -

Effect of convertible related party management fee and patent liabilities -

Add - Interest on convertible notes payable

Subtract deemed dividend on warrant reset (989,346 )

Net income available to common stockholders $ 18,222,422

Diluted income per Share $ 5.61

Interest on non-convertible notes 1,151

The Company excluded 7 options and 6,604,819 warrants from the computation of diluted net income per share for the year ended December 31, 2021 as their exercise prices were in excess of the average closing market price of the Company’s common stock during that period.

During the year ended December 31, 2020, the Company had 7 options and 152,738 warrants to purchase common stock outstanding; however, the effects were anti-dilutive due to the net loss.

On November 10, 2021, we effected a 1-for-500 reverse split of our authorized and issued and outstanding shares of common stock. All share references have been restated for this reverse split to the earliest period presented. As a result of the split, the authorized shares of the Company’s common stock decreased to 50,000,000 shares.

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.

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NOTE 2 – LICENSING AGREEMENTS

ED Patent – The Company acquired a patent from CMH, a related company on February 2, 2016, in exchange for 431,111 shares of CMTH restricted common stock valued at $100,000. CMH holds a significant amount of the Company’s common stock. The patent expires in 2025 and the Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $9,972 was recorded for the years ended December 31, 2021 and 2020. As of December 31, 2021, the carrying value of the patent was $40,987. The Company expects to amortize $9,972 annually through 2026 related to the patent costs.

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, 2021, 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 $1,172 was recorded for the years ended December 31, 2021 and 2020. As of December 31, 2021, the carrying value of the patent was $4,084. The Company expects to amortize approximately $1,172 annually through 2026 related to the patent costs.

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:

o $200,000, upon completion of the IRB clinical trial.

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.

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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 6,667 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 133 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 84,656 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 89,286 shares of common stock. The remaining portion of the $300,000 obligation was paid in cash in 2020.

The patent expires on May 19, 2027 and the Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $10,000 was recorded for the years ended December 31, 2021 and 2020. As of December 31, 2021, the carrying value of the initial patent license was $55,000. The Company expects to amortize approximately $10,000 annually through 2027 related to the patent costs.

The Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $45,940 was recorded for the years ended December 31, 2021 and 2020. As of December 31, 2021, the carrying value of the patent was $202,314. The Company expects to amortize approximately $46,000 annually through 2027 related to the patent costs.

ImmCelzTM - 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 ImmCelzTM 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 ImmCelzTM 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. The terms of the agreement are as follows:

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 180,180 shares of common stock to Jadi Cell in February 2022.

The Company has elected to amortize the patent over a ten-year period on a straight-line basis. Amortization expense of $25,000 and $0 were recorded for the years ended December 31, 2021 and 2020. As of December 31, 2021, the carrying value of the patent was $225,000. The Company expects to amortize approximately $25,000 annually through 2030 related to the patent costs.

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As of December 31, 2021, future expected amortization of these assets is as follows:

For the year ended December 31,

The following is a rollforward of the Company’s licensing agreements for the year end December 31, 2021.

Assets AccumulatedAmortization

Addition of new assets -

NOTE 3 – RELATED PARTY TRANSACTIONS

Management Reimbursement Agreement

On November 17, 2017, the Company entered into a Management Reimbursement Agreement with CMH, a related party whose directors and executive officers include the Company’s officers and directors. Pursuant to this agreement, during 2019 and 2020, and until September 16, 2021, the Company reimbursed CMH an aggregate of $45,000 per month for the services of management and consultants employed by CMH (including the Company’s Chief Executive Officer and Chief Financial Officer, and the Company’s former directors Dr. Patel and Dr. Ichim). The agreement provided that at the option of CMH, the reimbursable amounts may be paid from time to time in shares of common stock of the Company at a price equal to a 30% discount to the lowest closing price during the 20 trading days prior to time the notice is given. The Agreement may be terminated by either party upon 30 days’ prior written notice. This agreement was terminated effective September 15, 2021. At December 31, 2020, the Company owed CMH $18,782 under this agreement, and at December 31, 2021, no amounts were owed CMH under this agreement.

Debt Settlement Agreement

On January 12, 2018, the Company entered into a Debt Settlement Agreement with Timothy Warbington, the Company’s Chief Executive Officer, under which the Company issued 3,000,000 shares of super-voting Series A Preferred Stock to Mr. Warbington in exchange for the cancellation of $150,000 of debt owed by the Company to CMH, which CMH in turn was obligated to pay Mr. Warbington. The Series A Preferred Stock previously provided Mr. Warbington with substantial control over all matters subject to a vote of the Company’s shareholders. Mr. Warbington surrendered the Series A Preferred Stock to the Company in December 2021 immediately prior to the closing of the Company’s public offering in exchange for $150,000 plus 8% interest on such amount from January 2018 until the date of surrender.

Jadi Cell License Agreement

On December 28, 2020, the Company entered into a patent license agreement with Jadi Cell, LLC, a company owned and controlled by Dr. Amit Patel, a former director of the Company. The agreement provides Company with an exclusive, worldwide license to U.S. Patent No. 9,803,176 “Methods and compositions for the clinical derivation of an allogenic cell and therapeutic uses” and the proprietary process of expanding the master cell bank of Jadi Cell LLC, in the field of enhancing autologous cells. The agreement is described in detail in Note 2 above. 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 180,180 shares of common stock to Jadi Cell in February 2022.

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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 $100,000 obligation of the initial payment due under this agreement, by a $50,000 cash payment and the issuance of 6,667 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 133 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 84,656 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 89,286 shares of common stock. The remaining portion of the $300,000 obligation has been paid in cash.

Insider Loans

On May 28, 2021, Timothy Warbington, who is our CEO and Chairman; and Dr. Amit Patel, who was formerly a director of ours, advanced the Company $50,000 and $150,000 respectively. The two notes were repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 5% per annum.

NOTE 4 – DEBT

On August 11, 2021, we completed the sale of 15% Original Issue Discount Senior Notes (“Bridge Notes”) in the aggregate principal amount of $4,456,176 to a group of institutional investors (the “Purchasers”). In connection with the sale of the Bridge Notes, holders of our shares of Series B Preferred Stock and Series C Preferred Stock exchanged such preferred stock for additional Bridge Notes in the aggregate principal amount of $690,000. The Bridge Notes were set to mature on February 11, 2022, subject to the requirement that we redeem the Bridge Notes prior to such date with the net proceeds of any future offering of our securities. The Notes did not bear interest other than upon an event of default, and were not convertible into the Company’s common stock. In addition, the Notes were subject to covenants, events of defaults and other terms and conditions customary in transactions of this nature. The Company amortized the on-issuance discount and financing fees totaling $758,426 to interest expense with respect to these notes. The notes were repaid in full on December 6, 2021 following the completion of the Company’s public offering (see Note 7).

The Company also issued to the purchasers of the Bridge Notes five-year warrants to purchase an aggregate of 363,046 shares of our common stock at an initial exercise price of $14.175 per share, subject to anti-dilution adjustments in the event of future sales of our equity below the then exercise price, stock dividends, stock splits and other specified events. These warrants were valued based on the Black-Scholes valuation model (see Note 5 for assumptions used), and then recorded as a discount to the Bridge Notes based on their relative fair value of approximately $1,846,000.

Roth Capital Partners (“Roth”), acted as sole placement agent for the offering. Pursuant to terms of an engagement letter with Roth, the Company paid Roth a placement agent fee in the amount $312,750. The Company also issued Roth a warrant to purchase 20,189 shares of common stock with the same terms as the warrants issued to the Purchasers. These warrants were valued based on the Black-Scholes valuation model (see Note 5 for assumptions used), and then recorded as an additional discount in the amount of approximately $252,000 to the Bridge Notes.

The full amount of the discount on the Bridge Notes, including that arising from on-issuance discounts, fees and issuance costs, and warrants totaling approximately $3,299,000 was amortized to interest expense during the year ended December 31, 2021 as the notes were repaid in full on December 6, 2021 as noted above.

During 2021, we also issued $498,800 in convertible notes to accredited investors with net proceeds of $435,040, which were repaid in full during 2021. The notes were to mature during February and July of 2022 and bore interest rate of 8%. The notes were convertible into shares of the Company’s common stock at conversion prices ranging from 60% to 71% of the average of the two lowest traded prices or the lowest trade price of the Company’s common stock during the previous 15 trading days preceding the conversion date. The Company amortized the discount due to derivative liabilities and on-issuance discount totaling $443,905 to interest expense with respect to these notes.

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On May 28, 2021, Mr. Timothy Warbington, who is our CEO and Chairman; and Dr. Amit Patel, who was formerly a director of ours, advanced the Company $50,000 and $150,000 respectively. The two notes were repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 5% per annum.

On June 21, 2021, we issued a $105,000, non-convertible note to an accredited investor with net proceeds of $100,000. The note was repaid during the quarter ended September 30, 2021, did not have any conversion features, and bore interest at the rate of 10% per annum.

During the year ended December 31, 2021, the Company issued an aggregate of 789,727 shares upon the conversion of $1,383,332 of outstanding principal, interest and fees on outstanding notes, and 37,870 shares upon the cashless exercise of 43,167 warrants.

As of December 31, 2021, the Company had no outstanding loans.

During 2020, we issued $831,140 in convertible notes to accredited investors with net proceeds of $710,920. The notes matured from February through December of 2021 and bore interest at a rate of 8%. The notes were convertible into shares of the Company’s common stock at conversion prices ranging from 60% to 71% of the average of the two lowest traded prices of the Company’s common stock during the previous 15 trading days preceding the conversion date, the lowest trade price during the previous 20 trading days, or the volume weighted average price over the prior 15 trading days. The Company amortized the on-issuance discounts of $828,710 to interest expense using the straight-line method over the original terms of the loans. During 2020, the Company amortized $979,959 to interest expense. As of December 31, 2020, a discount of $409,650 remained.

During 2020, we issued an aggregate of 1,363,463 shares upon the conversion of $1,366,705 of outstanding principal, interest and fees on existing, outstanding notes.

NOTE 5 – DERIVATIVE LIABILITIES

Derivative Liabilities

In connection with convertible notes payable, the Company records derivative liabilities for the conversion feature. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During 2021, the Company recorded initial derivative liabilities of $1,077,757 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of $5.30 to $12.40 our stock price on the date of grant of $17.00 to $40.30, expected dividend yield of 0%, expected volatility of 75.03% to 98.14%, risk free interest rate of 0.10% and expected terms of 1.0 year. Upon initial valuation, the derivative liabilities exceeded the face values certain of the convertible notes payable by approximately $697,602, which was recorded as a day one loss in derivative liability.

In March 2021, the derivatives were re-valued at $2,275,578, producing a gain of $28,476,039 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following average assumptions: an exercise price of $0.0008 to 3.0900, our stock price on the date of valuation ($0.0332), expected dividend yield of 0%, expected volatility of 93.05% to 102.96%, risk-free interest rate of 0.07% to 0.35%, and expected terms ranging from 0.5 to 3.3 years.

In August 2021, we completed the sale of 15% Original Issue Discount Senior Notes (“Bridge Notes”) in the aggregate principal amount of $4,456,176 to a group of institutional investors (the “Purchasers”). A portion of the proceeds were used to repay the principal, accrued interest, pre-payment fees and other premiums of all the outstanding convertible notes as well as all previously outstanding warrants with re-pricing and anti-dilutive features. The result was $0 in derivative liabilities as of December 31, 2021.

During the year ended December 31, 2020, the Company recorded initial derivative liabilities of $2,572,723 based upon the following Black-Scholes option pricing model average assumptions: an exercise price of 0.40 to $0.60 our stock price on the date of grant of $1.70 to $18.25, expected dividend yield of 0%, expected volatility of 103.79% to 131.89%, risk free interest rate of 0.16% to 1.62% and an expected term of 1.0 year. Upon initial valuation, the derivative liability exceeded the face value certain of the convertible note payables by approximately $1,864,233, which was recorded as a day one loss on derivative liability.

On December 31, 2020, the derivative liabilities were revalued at $38,741,832 resulting in a loss of $33,980,805 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following average assumptions: an exercise price of $0.40 to $6.70, our stock price on the date of valuation $13.90, expected dividend yield of 0%, expected volatility of 98.14% to 100.94%, risk-free interest rate of 0.17%, and expected terms ranging from 0.50 to 3.57 years.

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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 600,000 shares of common stock for the issuance of awards thereunder. 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. As of December 31, 2021, no awards had been granted under the 2021 Plan.

The Company has also reserved 27 shares under its 2016 Stock Incentive Plan (the “Prior Plan”). In July and September 2016, the Company granted 10-year options to two parties under the Prior Plan for accepting appointment to the Company’s scientific advisory board. Each award consisted of options to purchase up to 7 shares at $87.50 per share. The options vest at a rate of 1.4 on each anniversary date of the respective grants. The options are accounted for as non-employee stock options and thus revalued for reporting purposes at the end of each quarter. The Company does not expect to make any future awards under the Prior Plan.

During 2021 and 2020, 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 years ended December 31, 2021 and 2020.

Option activity for the years ended December 31, 2021 and 2020 consists of the following:

Stock Options Weighted Average Exercise Price Weighted Average Life Remaining

Issued - - -

Exercised - - -

Expired - - -

Issued - - -

Exercised - - -

Expired - - -

See Note 2 for discussion related to the issuance of common stock in connection with licensing agreements. See Note 4 and 5 for discussion regarding warrants issued with convertible notes payable. See Note 7 for warrants issued in connection with the December 2021 public offering.

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In July 2021, we granted a total of 30,000 warrants to three of our board members at that time, Dr. Ichim, Dr. Patel, and Donald Dickerson (Mr. Dickerson remains a board member) at an exercise price of $15.00. The value of the warrants was determined to be $383,612 based upon the Black-Scholes method, see variables used below. As of December 31, 2021, future estimated stock-based compensation expected to be recorded was estimated to be $0.

Inputs Used

Annual dividend yield $ -

Expected life (years) 3.0

Risk-free interest rate 1.13 %

Expected volatility 93.09 %

Common stock price $ 15.00

From April through September 2020, we granted 23,262 three-year warrants to a vendor for services rendered at exercise prices ranging from $1.45 to $3.50. The value of the warrants was determined to be $35,670 based upon the Black-Scholes method, see variables used below. In December 2020, we granted a total of 60,000 warrants to three of our board members at that time, Dr. Ichim, Dr. Patel, and Donald Dickerson (Mr. Dickerson remains a board member) at an exercise price of $2.00. The value of the warrants was determined to be $102,081 based upon the Black-Scholes method, see variables used below. As of December 31, 2021, future estimated stock-based compensation expected to be recorded was estimated to be $0.

The fair value of each warrant award is estimated using the Black-Scholes valuation model. Assumptions used in calculating the fair value during the year ended December 31, 2020 were as follows:

Weighted Average Inputs Used

Annual dividend yield $ -

Expected life (years) 3.0

Risk-free interest rate 0.11% to 0.94 %

Common stock price $ 1.45 to 9.50

See Note 7 for warrant rollforward.

NOTE 7 – STOCKHOLDERS’ EQUITY (DEFICIT)

December 2021 Public Offering

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. As a result of the offering, the exercise price of our Warrants issued together with our Bridge Notes was reduced to the $4.13.

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Series B Convertible Preferred Stock Equity Financing

On February 11, 2021, the Board of Directors authorized the issuance of up to 350 shares of preferred stock, $0.001 par value per share, designated as Series B Convertible Preferred Stock. Each share of Preferred Stock had a par value of $0.001 per share and a stated value of $1,200. On February 12, 2021, the Company issued 350 shares of the Series B Convertible Preferred Stock to BHP Capital, LLC (“BHP”) for which $326,600 in proceeds were received by the Company. In connection with the closing, the Company issued BHP an additional 3,000 shares of common stock as a service fee. The Company has accounted for the transaction with equity as the proceeds received was considered consideration for all securities issued. In August 2021, the preferred shares were redeemed at 120% of their stated value per the terms of their designations through the issuance of Bridge Notes as described in Note 4. On November 22, 2021, the Company filed a Certificate of Withdrawal of Designation of the Series B Convertible Preferred Stock with the State of Nevada.

Series C Convertible Preferred Stock Equity Financing

On March 30, 2021, the Board of Directors authorized the issuance of up to 150 shares of preferred stock, $0.001 par value per share, designated as Series C Convertible Preferred Stock. Each share of Preferred Stock had a par value of $0.001 per share and a stated value of $1,200. On March 30, 2021, the Company issued 150 shares of Series C Convertible Preferred Stock to Fourth Man, LLC (“FM”) for a purchase price of $150,000, or $1,000 per share, for which $141,049 in proceeds were received by the Company. In connection with the closing, the Company issued FM an additional 642,857 shares of common stock as a service fee. The Company has accounted for the transaction with equity as the proceeds received was considered consideration for all securities issued. In August 2021, the preferred shares were redeemed at 120% of their stated value per the terms of their designations through the issuance of Bridge Notes as described in Note 4. On November 22, 2021, the Company filed a Certificate of Withdrawal of Designation of the Series C Convertible Preferred Stock with the State of Nevada.

Warrants

During 2021, the Company granted ten-year warrants to three board members to purchase an aggregate of 30,000 shares of common stock at a price of $15.00 per share.

In connection with our August 2021 bridge financing, we issued five-year warrants to purchase 383,235 shares of common stock at an exercise price of $4.18 per share.

During April and May of 2021, the Company granted five-year warrants to various employees and scientific board members to purchase an aggregate of 28,020 shares of common stock at exercise prices varying from $14.00 to $15.00.

In connection with our December 2021 public offering, we issued five-year warrants to purchase 5,191,365 shares of common stock at an exercise price of $4.13 per share. In conjunction with the December 2021 public offering we also increased outstanding warrants associated with anti-dilution features of the August 2021 bridge financing to purchase 932,104 shares of common stock at an exercise price of $4.13.

For the year-ended 2021, there were 43,167 warrants converted into common shares through cashless conversions.

As of December 31, 2021, warrants to purchase 6,604,820 shares of common stock were outstanding.

Assumptions used in calculating the fair value of the warrants issued in 2021 were as follows:

Range ofInputs Used

Annual dividend yield $ -

Expected life (years) 2.7 to 10.0

Risk-free interest rate 0.23% to 1.26 %

During 2020, the Company granted ten-year warrants to three board members to purchase an aggregate of 60,000 shares of common stock at a price of $2.00 per share, and three-year warrants to a service provider to purchase an aggregate 23,262 shares of common stock at prices ranging from $1.45 to $3.50 per share. For the year ended December 31, 2020, outstanding warrants were increased from the initial issuance of 291 warrants to 69,063 to reflect the terms of the existing warrant agreements. For the year ended December 31, 2020 there were no warrants converted into common shares through cashless conversions.

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During 2020, the Company entered into convertible loan agreements with third parties that included 242,8415-year warrants to purchase a share of common stock at initial prices ranging from $0.59 to $3.09. On the date of issuance, the Company accounted for the conversion feature on the warrants as derivative liabilities, see Note 5. Derivative accounting applies as the number of warrants and the conversion price were variable and do not have a floor as to the number of common shares in which could be converted. For the year ended December 31, 2020, outstanding warrants were increased by 4,549,975 to reflect the terms of the warrant agreements. For the year ended December 31, 2020, 594,051 warrants were converted into 531,247 common shares through cashless conversions.

As of December 31, 2020, warrants to purchase 152,746 shares of common stock were outstanding.

Assumptions used in calculating the fair value of the warrants issued in 2020 were as follows:

Range ofInputs Used

Annual dividend yield $ -

Expected life (years) 3.0

Risk-free interest rate 0.11% to 0.29 %

Common stock price $ 1.45 to 2.50

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Warrant activity for the years ended December 31, 2021 and 2020 consists of the following:

Warrants Weighted Average Exercise Price Weighted Average Life Remaining

Exercises -

Anti-Dilution Modifications 59,395

Forfeiture/Cancellations - -

Anti-Dilution Modifications 932,104 -

Forfeiture/Cancellations (69,475 ) -

See Note 5 for discussion regarding anti-dilution and modifications related to warrants accounted for as derivative liabilities.

See Note 2 for discussion related to the issuance of common stock in connection with licensing agreements.

See Note 3 for discussion related to the issuance of common stock to a related party for cash.

NOTE 8 – INCOME TAXES

The provision for income tax expense consists of the following at December 31, 2021 and 2020:

Income tax provision attributable to:

Net provision for income tax $ - $ -

Deferred tax assets consist of the following at December 31, 2021 and 2020:

Deferred tax asset attributable to:

Net deferred tax asset $ - $ -

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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, 2021 and 2020 was due to the 100% valuation allowance. The following is a reconciliation of the statutory federal rate and the Company’s effective tax rate for the year ended December 31, 2021 and 2020:

Tax at federal statutory rate 21.0 % 21.0 %

State, net of federal benefit (0.2 )% 0.2 %

Change in temporary differences (0.0 )% (0.0 )%

Permanent differences (23.8 ) (20.2 )%

Valuation allowance 2.2 % (0.9 )%

Provision for taxes -

As of December 31, 2021, the Company had federal and state gross net operating loss carryforwards of approximately $8.3 million. The federal and state net operating losses and tax credits expire in years beginning in 2036. Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. To date, the Company hasn’t experienced “ownership changes” under section 382 of the Code and comparable state tax laws. As of December 31, 2021, the Company estimates that none of the federal and state net operating losses will be limited under Section 382 of the Code.

As of December 31, 2021, and 2020, 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 was 21.0% and 8.9%, respectively.

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 9 – COMMITMENTS AND CONTINGENCIES

In April 2016, we entered into an agreement with Spencer Clarke, LLC to perform banking services. We believe that no banking services were provided under the agreement, and as a result we terminated the agreement in June 2016. Spencer Clarke, LLC subsequently commenced an arbitration proceeding against us asserting that it was entitled to fees under the agreement. Thereafter, in April 2019, Spencer Clarke, LLC was awarded $600,749 by the Commercial Arbitration Tribunal of the American Arbitration Association in the Matter of Arbitration, Case Number 01-18-0003-3441 and confirmed by the Ney York Superior court in May 2020. In 2021, we appealed the award in New York Supreme Court. Throughout the course of the proceedings, our litigation counsel indicated a probability of success on appeal. Therefore, we did not accrue any liability. On December 13, 2021 the appeal was denied.. As a result, we accrued a $707,116 liability for the arbitration award in December 2021, and paid the entire amount in January and March 2022. As a result, this matter is resolved, the award has been paid and there are no obligations from either party.

NOTE 10 – SUBSEQUENT EVENTS

On February 9, 2022, the Company entered into written Employments Agreements with Timothy Warbington, the Company’s Chief Executive Officer; and Donald Dickerson, the Company’s Chief Financial Officer (together, the “Executives”). The Employment Agreements are identical in all material respects other than with respect to base salary, which remains $330,000 per annum for Mr. Warbington, and $300,000 per annum for Mr. Dickerson.

Additional terms of the Employment Agreements include the following:

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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, 2021.

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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed our internal control over financial reporting as of December 31, 2021, 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, 2021, 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, 2021 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 2022 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:

Exhibits

4.5 Description of Registrant’s Securities*

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31.1 Rule 13a-14(a)/15d-14a(a) Certification of Principal Executive Officer*

31.2 Rule 13a-14(a)/15d-14a(a) Certification of Principal Financial Officer*

32.1 Section 1350 Certification of Principal Executive Officer *

32.1 Section 1350 Certification of Principal Financial Officer *

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE 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.

Date: March 30, 2022 By: /s/ Timothy Warbington

Timothy Warbington, Chief Executive Officer

(Principal Executive Officer)

Date: March 30, 2022 By: /s/ Donald Dickerson

Donald Dickerson, Chief Financial Officer

(Principal Financial and Accounting Officer)

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 TITLE DATE

/s/ Timothy Warbington Director & Chairman March 30, 2022

Timothy Warbington

/s/ Donald Dickerson Director March 30, 2022

Donald Dickerson

/s/ Michael H. Finger Director March 30, 2022

Michael H. Finger

/s/ Susan Snow Director March 30, 2022

Susan Snow

/s/ Bruce S. Urdang Director March 30, 2022

Bruce S. Urdang