UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

Or

 

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________________to___________________________

 

Commission File Number: 000-53500

 

Creative Medical Technology Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   87-0622284
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
2017 W Peoria Avenue, Phoenix, AZ   85029
(Address of principal executive offices)   (Zip Code)

 

(602) 680-7439

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports).

Yes x No ¨

 

Indicate by check mark whether the registrant has been subject to such filing requirements for the past 90 days.

Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer ¨ Accelerated filer ¨  
  Non-accelerated filer ¨ Smaller reporting company x  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

 

The number of shares outstanding of the registrant’s common stock on November 10, 2016, was 102,113,750.

 

 

 

 

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION  3
   
Item 1. Financial Statements  3
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  10
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk  12
   
Item 4. Controls and Procedures  13
   
PART II—OTHER INFORMATION  14
   
Item 1A. Risk Factors  14
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 14
   
Item 6. Exhibits  14
   
SIGNATURES  15

 

  2  

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

    September 30, 2016     December 31, 2015  
ASSETS                
CURRENT ASSETS                
Cash   $ 33,456     $ 100  
Stock subscription receivable     -       49,500  
Total Current Assets     33,456       49,600  
                 
OTHER ASSETS                
Licenses, net of  amortization     103,281       -  
TOTAL ASSETS   $ 136,737     $ 49,600  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 44,849     $ -  
Notes payable - related party - current     100,000       -  
Accrued expenses     2,822       -  
Management fee payable - related party     280,000       -  
Notes payable     15,686       -  
Advances from related party     2,600       100  
Total Current Liabilities     445,957       100  
                 
LONG TERM LIABILITIES                
Notes payable - related party, net of current portion     25,000       -  
Accrued expenses, net of current portion     935       -  
TOTAL LIABILITIES     471,892       100  
                 
Commitments and contingencies                
                 
STOCKHOLDERS' (DEFICIT) EQUITY                
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding     -       -  
Common stock, $0.001 par value, 600,000,000 shares authorized; 101,313,750 and 32,010,000 shares issued and outstanding, respectively     101,314       32,010  
Additional paid-in capital     135,637       17,990  
Accumulated deficit     (572,106 )     (500 )
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY     (335,155 )     49,500  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY   $ 136,737     $ 49,600  

 

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

 

  3  

 

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Three
Months Ended
September 30, 2016 		    For the Nine
Months Ended
September 30, 2016 		 
             
REVENUES   $ -     $ -  
                 
OPERATING EXPENSES                
Research and development     45,174       67,566  
General and administrative     164,732       493,484  
Amortization of patent costs     2,637       6,719  
TOTAL EXPENSES     212,543       567,769  
                 
OTHER INCOME/(EXPENSE)                
Interest expense     (1,971 )     (3,837 )
OPERATING LOSS     (214,514 )     (571,606 )
                 
NET LOSS   $ (214,514 )   $ (571,606 )
                 
BASIC AND DILUTED LOSS PER SHARE   $ (0.00 )   $ (0.01 )
                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED     100,621,359       90,866,349  

 

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

 

  4  

 

 

CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

    For the Nine
Months Ended 		 
    September 30, 2016  
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss   $ (571,606 )
Adjustments to reconcile net loss to net cash from operating activities:        
Stock based compensation     735  
Amortization     6,719  
Changes in assets and liabilities:        
Accounts payable     20,565  
Accrued expenses     3,757  
Management fee payable     280,000  
Net cash (used) by operating activities     (259,830 )
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of licenses     (10,000 )
Net cash (used) by investing activities     (10,000 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash received from notes payable - related party     125,000  
Cash paid on note payable     (4,314 )
Cash received from subscription receivable     50,000  
Proceeds from sale of common stock     130,000  
Related party advances     2,500  
Net cash provided from financing activities     303,186  
         
NET INCREASE IN CASH     33,356  
BEGINNING CASH BALANCE     100  
ENDING CASH BALANCE   $ 33,456  
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
Cash payments for interest   $ -  
Cash payments for income taxes   $ -  
         
NON-CASH FINANCING ACTIVITIES:        
Purchase of patents by issuance of common stock   $ 100,000  
Accounts payable assumed in reverse merger   $ 24,284  
Note payable assumed in reverse merger   $ 20,000  
Fair value of warrants issued in private placement   $ 8,197  

 

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

 

  5  

 

 

  CREATIVE MEDICAL TECHNOLOGY HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016  

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization  -  Creative Medical Technologies, Inc. (the “ Company ” or “ CMT ”) was incorporated in the State of Nevada on December 30, 2015, and, subject to the reverse merger discussed below, elected December 31 as the Company’s year-end. The Company’s activities to date have consisted of developing a business plan, raising capital through the issuance of equity instruments and notes payable from a related party, and obtaining the rights via a license agreement to certain medical technology.

 

On May 18, 2016, the Company was acquired by a public company, Creative Medical Technology Holdings, Inc. (formerly Jolley Marketing, Inc.) in a “reverse merger” wherein the Company was recapitalized via the common stock of Jolley.

 

Creative Medical Technology Holdings, Inc., formerly Jolley Marketing, Inc. (the “ Public Company ” or “ CMTH ”) was incorporated on December 3, 1998, in Nevada. On May 18, 2016, the Public Company consummated an Agreement and Plan of Merger to acquire all of the outstanding capital stock of CMT in a transaction which has been accounted for as a recapitalization of the Public Company as follows:

 

  a. CMT advanced $25,000 for payment of accounts payable and an outstanding note payable at the closing;
  b. The Public Company exchanged 97,000,000 newly issued shares of common stock for all CMT outstanding common stock (at the ratio of 6.466666 shares of Public Company common stock for each share of CMT);
  c. As part of the acquisition, the Public Company purchased 15,100,000 shares of its previously outstanding common stock from an officer and director for $5,000, which shares were immediately cancelled following the purchase;
  d. The shareholders of CMT acquired voting and operating control of the Public Company after the recapitalization; and
  e. The financial operations of the Public Company, as reported after the merger, are the historical information of CMT.

 

On September 14, 2016, CMT filed a certificate of organization for Amniostem LLC, a Nevada limited liability company and wholly owned subsidiary of CMT. Amniostem, LLC was formed to create and/or license intellectual property in the area of amniotic fluid derived stem cells for therapeutic applications.  With this company management intends to address what it believes are unmet medical needs through development and commercialization of amniotic fluid stem cell based technologies. Management intends to seek in licensing opportunities as well as create intellectual property in-house for this newly created entity.

 

Use of Estimates -  The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 / Liquidity - The accompanying unaudited condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2016, and for the three and nine month periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The operations for the three and nine-month periods ended September 30, 2016, are not necessarily indicative of the operating results for the full year.

 

Going Concern - The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, during the nine months ended September 30, 2016, the Company incurred a net loss of $571,606, had negative cash flows from operating activities, had a working capital deficit of $412,501 and had no revenue-generating activities. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Concentration of Credit Risks - The Federal Deposit Insurance Corporation ("FDIC") insures cash deposits in most general bank accounts for up to $250,000 per institution.  The Company did not have cash deposits that exceeded insured amounts.

 

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 Instruments   - 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.  

 

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.  

 

  6  

 

 

Revenue - The Company will recognize revenue as it is earned as defined by US Generally Accepted Accounting Principles ("GAAP"). During the nine months ended September 30, 2016, there were no sales and revenue was not recognized. For the next several months, until clinical trials have successfully been completed, the Company does not anticipate there will be revenue to report.

 

Research and Development  - Research and development will be the principal function of the Company. Research and development costs will be expensed as incurred.  Expenses in the accompanying unaudited condensed consolidated financial statements include certain costs which are directly associated with the Company’s research and development:

 

  1. Erectile Dysfunction Technology based upon the use of stem cells. These costs, which consist primarily of monies paid for clinical trial expenses, materials and supplies and compensation costs amounted to $45,174 and $67,566 for the three and nine month periods ended September 30, 2016, respectively;
  2. Infertility Treatment based upon implanting stem cells in the female reproductive system. The costs of acquiring an exclusive license of $12,640 paid to LABIOMED in April 2016 have been expensed during the nine months ended September 30, 2016.

 

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 follows ASC 505-50, Equity-Based Payments to Non-Employees, for stock options and warrants issued to consultants and other non-employees. In accordance with ASC 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument, which is revalued at each reporting period, is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered.

 

Income Taxes – The Company has no provision for income taxes at September 30, 2016, as it has no taxable income and no recognizable tax asset.   The Company will recognize the amount of income taxes payable or refundable at the end of the current year and will recognize any deferred tax assets and liabilities for operating loss carryforwards and for the future tax consequences attributable to differences between the consolidated financial statement amounts of certain assets and liabilities and their respective tax basis. Deferred tax assets and deferred liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent that uncertainty exists as to whether the deferred tax assets will ultimately be realized.

 

Basic and Diluted Loss Per Share – The Company follows Financial Accounting Standards Board ("FASB") ASC 260 Earnings per Share to account for earnings per share. Basic earnings per share (“EPS”) calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. During the three and nine month periods ended September 30, 2016, the Company had 500,000 options and 130,000 warrants to purchase common stock outstanding, however, the effect were anti-dilutive due to net loss.

 

Recent Accounting Pronouncements –  The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 

NOTE 2 – LICENSING AGREEMENTS

 

ED Patent – The Company acquired a patent from Creative Medical Health, Inc. (“CMH”) a related company on February 2, 2016, in exchange for 64,666,667 shares of CMTH restricted common stock valued at $100,000. CMH holds a significant amount of the Public 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 $2,521 and $6,603 was recorded for the three and nine month periods ended September 30, 2016, respectively.

 

Male Infertility License Agreement - The Company has acquired a royalty license from Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center (“LABIOMED”) granting the exclusive license to the products and services of a LABIOMED patent.

 

The license was acquired for a cash payment of $5,000, issuance of 50,000 shares of restricted common stock of the Company (valued at $500, which is the par value of $0.01 per share), and an agreement to reimburse LABIOMED up to $1,800 for expenses incurred by LABIOMED in reviving and defending their patent. The Company has expensed the cash paid, the value of the stock issued, and the expected reimbursement of $1,800 for a total intangible royalty expense – license fees of $7,300.

  

The Company is subject to a 6% royalty payment to LABIOMED on net sales of any products under this license and 25% on any non-royalty sublicense income. Commencing three years after the date of the agreement, and each subsequent year thereafter, the Company is required to pay to LABIOMED annual maintenance royalties of $20,000, unless during the prior one-year period the Company paid $50,000 or more in actual royalty payments. Finally, the Company agreed to pay LABIOMED certain milestone payments upon achieving the milestones set forth in the agreement. As of September 30, 2016, no amounts are currently due to LABIOMED.

 

  7  

 

 

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 September 30, 2016, 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 $116 and $116 was recorded for the three and nine month periods ended September 30, 2016, respectively.

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

The Company has incurred $315,000 to a related corporation to reimburse the cost of services provided to the Company (management and consulting) through September 30, 2016. Each of the Company’s executive officers is employed by the parent company, CMH and will continue to receive his or her salary or compensation from CMH. The Company has an agreement with CMH which obligates the Company to reimburse CMH $35,000 per month for such services beginning January 2016. The compensation paid by CMH will include an allocation of services performed for CMH and for the Company. The amounts are presented as a “management fee payable - related party” on the accompanying unaudited condensed consolidated balance sheets. The liability is non-interest bearing, unsecured, and will be due upon the Company successfully raising at least $1,000,000 through the sale of equity. As of September 30, 2016, amounts due to CMH under the arrangement were $280,000.

 

During the nine months ended September 30, 2016, the Company paid $3,000 in consulting fees to an officer of the Company for services rendered. The payment is included in general and administrative expenses.

 

Through September 30, 2016, the Company has entered into three note payable agreements with CMH in which the proceeds were used in operations. The notes payable were dated February 2, 2016, May 1, 2016 and May 18, 2016 and resulted in borrowings of $50,000, $50,000 and $25,000, respectively. Notes payable of $50,000 mature on April 30, 2017, $50,000 on July 31, 2017 and $25,000 on May 18, 2018. The notes incur interest at 8% per annum on the outstanding balance of the notes. As of September 30, 2016, accrued interest was $3,757.

 

During the nine month ended September 30, 2016, CMH has advanced the Company $2,000 for operations. The amount is due on demand and doesn't incur interest.

 

During the nine months ended September 30, 2016, the Company issued 300,000 shares of common stock and 30,000 warrants to CMH for $30,000 in cash proceeds, see Note 5 for additional information.

 

See Note 2 for discussion of an additional related party transaction with CMH.

 

NOTE 4 – STOCK BASED COMPENSATION

 

The Public Company has reserved 2,000,000 shares under its 2016 Stock Incentive Plan (the “Plan”). The Plan was adopted by the board of directors on May 18, 2016, as a vehicle for the recruitment and retention of qualified employees and consultants. The Plan is administered by the Board of Directors. The Public Company may issue, to eligible employees or contractors, restricted common stock, options, stock appreciation rights and restricted stock units. The terms and conditions of awards under the Plan will be determined by the Board of Directors.

 

In July and September 2016, the Company granted 10-year options to two parties for accepting appointment to the Company’s scientific advisory board. Each award consisted of options to purchase up to 250,000 shares at $0.175 per share. The options vest at a rate of 50,000 on each anniversary date of the respective grants. One of the advisory board members has also agreed to furnish to the Company access to laboratory facility for 10,000 shares of restricted common stock per month; however, a formal agreement for the laboratory facility has not been agreed to. The options are accounted for as non-employee stock options and thus revalued for reporting purposes at the end of each quarter.

 

  8  

 

 

The fair value of each option award is estimated using the Black-Scholes valuation model. Assumptions used in calculating the fair value at September 30, 2016 were as follows:

 

    Weighted
Average
Inputs Used 		 
         
Annual dividend yield   $ -  
Expected life (years)     7.40  
Risk-free interest rate     1.42 %
Expected volatility     87.60 %
Common stock price   $ 0.10  

 

Since the expected life of the options was greater than the Public Company's historical stock information available, the Public Company determined the expected volatility based on price fluctuations of comparable public companies.

 

Stock based compensation for the three and nine months ended September 30, 2016 was $735 and $735, respectively, and included with general and administrative expenses on the accompanying unaudited condensed consolidated statement of operations. As of September 30, 2016, future estimated stock based compensation to be recorded was $34,756 which will be recognized through 2021.

 

NOTE 5 – STOCKHOLDERS’ DEFICIT

 

In August 2016, the Company commenced a non-public offering of up to 10,000,000 shares of common stock at $0.10 per share, and at no additional cost, one warrant to purchase another share of common stock at $0.10 per share for each ten shares purchased in the offering. The securities offered have not been and will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. From August 6, 2016 to September 30, 2016, the Company sold 1,300,000 shares in this offering. resulting in proceeds of $130,000 and the issuance of warrants to purchase 130,000 shares of common stock. Of this amount $30,000 was received from CMH, a related party. The fair value of the warrants of $8,197 was estimated using the Black-Scholes valuation model. The warrants were classified as equity as they were issued in connection with a capital raise. Assumptions used in calculating the fair value of the warrants upon issuance were as follows:

 

    Inputs Used  
         
Annual dividend yield   $ -  
Expected life (years)     3.00  
Risk-free interest rate     0.86 %
Expected volatility     102.59 %
Common stock price   $ 0.10  

 

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 6 – SUBSEQUENT EVENTS

 

In accordance with ASC 855, management reviewed all material events through November 10, 2016, for these financial statements and there are no material subsequent events to report, except as follows:

 

Subsequent to September 30, 2016, the Company sold 800,000 shares of common stock under the offering disclosed in Note 5, resulting in proceeds of $80,000 and the issuance of a warrant to purchase 80,000 shares of common stock.

 

  9  

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets and statements of income. This section should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015, the Current Report on Form 8-K filed on May 19, 2016, 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, particularly those set forth under Item 1A – Risk Factors as disclosed in the Current Report on Form 8-K, as filed with the Securities and Exchange Commission on May 19, 2016.

 

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

 

On May 18, 2016, Creative Medical Technology Holdings, Inc., formerly known as Jolley Marketing, Inc., a Nevada corporation (the “ Company ”, “ we ”, “ our ”, or “ us ”), closed (the “ Closing ”) the Agreement and Plan of Merger (the “ Merger Agreement ”) with Creative Medical Technologies, Inc., a Nevada corporation (“ CMT ”), Steven L. White, the principal shareholder and the sole officer and director of the Company (“ Mr. White ”), and Jolley Acquisition Corp., a Nevada corporation and wholly owned subsidiary of the Company (the “ Merger Sub ”). As a result of the Closing of the Merger Agreement, the Merger Sub was merged with and into CMT with CMT being the surviving corporation and CMT became a wholly-owned subsidiary of the Company. Upon completion of the transaction, we acquired CMT (which is now our wholly-owned subsidiary) and became a company engaged in stem cell research and applications for use to treat ED, infertility and other issues. In June 2016, we filed a patent application containing novel data suggesting that specialized cells obtained from adipose (fat) tissue are capable of preventing recurrent miscarriages in an animal model with data supporting our entry into the field of reproductive immunology, which aims to address issues such as recurrent miscarriages and preterm labor. CMT was incorporated in the State of Nevada on December 30, 2015. All references to the Company after the Closing refer to Creative Medical Technology Holdings, Inc. and Creative Medical Technologies, Inc., collectively.

 

We are considered to be a clinical stage company, since we are devoting substantially all of our efforts to establishing our business and because our planned principal operations have not commenced. Our fiscal year end is December 31 st . We have acquired the licensing rights for our infertility treatments, purchased the patent for our ED treatments, and filed patent applications for our female sexual dysfunction treatment and treatment for recurrent miscarriages.

 

  10  

 

 

Funds for our operations have been provided by our parent company, Creative Medical Health, Inc. (“ CMH ”). In February 2016 and September 2016, CMH purchased shares of our common stock for cash consideration of $49,500 and $30,000, respectively. In addition, CMH has loaned operating funds to CMT in the form of lines of credit evidenced by promissory notes. As of September 30, 2016, total amounts received from CMT in connection with three promissory notes is $125,000. Each promissory note representing the loans bears interest at 8% per annum from the date funds were received. The first promissory note is dated February 2, 2016, and principal and interest under the note are due on or before April 30, 2017. This promissory note is fully funded in the principal amount of $50,000. The second promissory note is dated May 1, 2016, and principal and interest under the note is due on or before July 31, 2017. In addition, CMH loaned $25,000 to CMT to pay a portion of the approximately $45,000 in outstanding payables of the Company at closing of the reverse merger on May 18, 2016. The loan is evidenced by a promissory note dated May 18, 2016, which bears interest at 8% and which matures on May 18, 2018. In addition, CMH has committed to loan $20,000 to satisfy the balance of the accounts payable at closing which will be payable upon receipt of approval of DTC eligibility for our common stock.

 

As of September 30, 2016, we have accrued interest of $3,757 arising from the related party notes of $125,000.

 

Plan of Operations

 

We anticipate that if our clinical studies on our ED stem cell treatment are successful, we can commence marketing kits for the treatment in 2017. For the next 12 months our plan of operations is to complete these clinical trials and commence marketing of the kits. We estimate the costs to complete the clinical trials will be approximately $600,000, excluding overhead and other costs associated with maintaining our company structure. We believe that our current cash on hand would meet our cash flow requirements for only a few more months. If we are unable to obtain further financing, we may seek alternative sources of funding or revise our business plan. We currently have no alternative sources for funding.

 

Results of Operations – For the Three and Nine months Ended September 30, 2016

 

Because CMT was not incorporated until December 30, 2015, we had no comparable operations for the prior 2015 quarters and no comparative information is available. Prior to May 18, 2016, we were an inactive shell company with no business operations, which was recapitalized via a reverse merger. Following the Closing we incorporated the business plans and operations of CMT (a clinical stage company).

 

Gross Revenue . We generated no gross revenue for the three and nine months ended September 30, 2016.

 

General and Administrative Expenses . General and administrative expenses for the three and nine months ended September 30, 2016, totaled $164,732, and $493,484, respectively. For the three months ended September 30, 2016, general and administrative consisted primarily of management fees of $105,000 and professional fees of $51,056. For the nine months ended September 30, 2016, general and administrative consisted primarily of management fees of $318,000 and professional fees of $151,975. We anticipate that the expense for the three-month period ended September 30, 2016, will be more indicative of future expenses.

 

Research and Development Expenses. Research and development expenses for the three and nine months ended September 30, 2016, totaled $45,174 and $67,566, respectively. We anticipate that the expense for the three-month period ended September 30, 2016, will be more indicative of future expenses. Research and development expenses primarily consist of monies paid for clinical trial expenses, materials and supplies and compensation costs.

 

  11  

 

 

Net Loss . For the reasons stated above, our net loss for the three and nine months ended September 30, 2016 were $214,514 and $571,606, respectively. Because our current clinical stage operations did not commence until April 2016. We anticipate that the three-month period September 30, 2016 will be more reflective of future net losses.

 

Liquidity and Capital Resources

 

Because CMT was not incorporated until December 30, 2015, we had no comparable operations for the prior 2015 quarters and no comparative information is available.

 

As of September 30, 2016, our principal source of liquidity was the initial capital contribution of $49,500 paid by CMH for founder’s shares of CMT, an additional purchase of common stock of $30,000 by CMH, and $125,000 borrowed under promissory notes from CMH for which was used to pay operating expenses and to satisfy CMTH payables as of the closing of the reverse merger with CMT. In addition, we have raised an additional $100,000 through September 30, 2016 through the sale of the Company's common stock. Going forward, our short-term funding needs are expected to be satisfied by funds to be loaned to us by CMH. Our long-term liquidity needs are expected to be satisfied through offerings of our equity securities. We do not have any arrangements, agreements, or sources for long-term funding.

 

Our only commitments for expenditures relate to the completion of the clinical studies for the ED stem cell treatment and general and administrative costs, including reimbursements to our parent company for services performed by their executive officers on our behalf. During the next 12 months we also anticipate commencing marketing activities for our ED treatment in conjunction with the anticipated completion of the clinical trials.

 

Basis of Presentation / Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.   As of September 30, 2016, the Company had $33,456 of available cash and a working capital deficit of $412,501.  For the nine months ended September 30, 2016, the Company had no revenue, no operating income and used net cash for operating activities of $259,830. As of December 31, 2015, the Company was newly formed and had not begun operating.  These factors, among others, indicate that the Company may be unable to continue as a going concern for the next twelve months. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing as may be required, and ultimately to attain sufficient cash flow from operations to meet its obligations on a timely basis. Management is in the process of negotiating various financing plans including access to ongoing credit facilities and possible sale of capital stock either in private of in public offerings and believes these steps may generate sufficient cash flow for the Company to continue as a going concern. If the Company is unsuccessful in these efforts, it may be required to substantially curtail or terminate its operations.

 

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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

 

  12  

 

 

Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

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 not 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.

 

The specific material weaknesses which was first identified by the Company’s management and independent accountants during the quarter ended June 30, 2016 related to the initial treatment of the reverse merger (recapitalization) which was initially reported as of the date the initial stock of the Company was issued, rather than as of the origination date of the Corporation and therefore the restatement (arising from the reverse merger) of the equity section was required to be changed from January 2016 to December 30, 2015. In addition, a second weakness was noted in the original disclosure of our financial information provided to our independent accountants, wherein the recording date of the patent acquired from a related party was not updated to recognize the change in the terms of the acquisition arising from the reverse merger. Although these errors were addressed and corrected within the June 30, 2016 10-Q, as of September 30, 2016 the material weakness related to the Company not having the ability to provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements and related disclosures in accordance with U.S. generally accepted accounting principles still remains.

 

To address these material weaknesses, we have engaged a third party that specializes in technical accounting and financial reporting to assist us in preparation of our quarterly and annual financial statements and to assist us in documenting our internal controls. However, we will have these material weaknesses for the foreseeable future due to time it will take us to document and implement our internal controls. We are not aware of significant weaknesses in addition to the items noted above.

   

Changes in internal control over financial reporting

 

Other than disclosed above, there were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

  13  

 

 

PART II—OTHER INFORMATION

 

Item 1A. Risk Factors

 

See “Item 1A – Risk Factors” as disclosed in the Current Report on Form 8-K, as filed with the Securities and Exchange Commission on May 19, 2016.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

From August through October 2016, we sold 2,100,000 shares of common stock for gross proceeds of $210,000, and issued at no additional cost, three-year warrants to purchase 210,000 shares at $0.10 per share. Of the total sales, $30,000 was received from Creative Medical Health, Inc., a related company. Sales of these securities were made pursuant to Rule 506(b) of Regulation D promulgated by the SEC under the Securities Act. Each of the purchasers of the securities was an “accredited investor” as defined in Rule 501(a) of Regulation D. The purchasers acknowledged appropriate investment representations with respect to the sales of the shares and consented to the imposition of restrictive legends upon the certificates representing the shares and warrants. Each of the purchasers had a significant preexisting relationship to us prior to the transaction and did not purchase the shares from us as a result of any general solicitation. Each purchaser was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the investment. No selling commissions or other remuneration was paid in connection with the sales of these securities.

 

Item 6. Exhibits

 

SEC Ref. No.   Title of Document
10.1   License Agreement dated August 25, 2016, between Creative Medical Technologies, Inc. and UCSD (portions of this exhibit have been omitted pursuant to a request for confidential treatment)
10.2   Master Services Agreement dated November 15, 2015, with Professional Research Consulting, Inc.
10.3   Clinical Trial Agreement dated September 19, 2016 between Creative Medical Technologies, Inc. and LABIOMED
10.4   Consulting Agreement between Creative Medical Health, Inc. and Dr. Patel
31.1   Rule 13a-14(a) Certification by Principal Executive Officer
31.2   Rule 13a-14(a) Certification by Principal Financial Officer
32.1   Section 1350 Certification of Principal Executive Officer
32.2   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

 

SIGNATURE PAGE FOLLOWS

 

  14  

 

 

SIGNATURES

 

Pursuant to the requirements 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: November 10, 2016 By /s/ Timothy Warbington
    Timothy Warbington, Chief Executive Officer
     
Date: November 10, 2016 By /s/ Donald Dickerson
    Donald Dickerson, Chief Financial Officer
    (Principal Financial Officer)

 

  15  

 

 

Exhibit 10.1

 

  [Material marked with an asterisk has been omitted from this document pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.]

 

LICENSE AGREEMENT

 

This agreement (“Agreement”) is entered into as of August 25, 2016, (the “Effective Date”) by and between Creative Medical Technologies, Inc., a Nevada corporation having an address at 2007 W. Peoria Avenue, Phoenix, Arizona 85029 (“LICENSEE”) and The Regents of the University of California, a California public corporation having its statewide administrative offices at 1111 Franklin Street, Oakland, California 94607-5200 (“UNIVERSITY”), represented by its San Diego campus having an address at University of California, San Diego, Office of Innovation and Commercialization, Mail Code 0910, 9500 Gilman Drive, La Jolla, California 92093-0910 (“UCSD”).

 

BACKGROUND

 

A. The invention disclosed in UCSD Disclosure Docket No. SD2005-04 l and titled “Multipotent Amniotic Fetal Stem Cells” (“Invention”), was made in the course of research at UCSD by Dr. Martin Haas (hereinafter the “Inventor”) and is covered by Patent Rights as defined below.

 

B. LICENSEE is desirous of obtaining an exclusive license to Patent Rights from UNIVERSITY for commercial development, use, and sale of the Invention, and the UNIVERSITY is willing to grant such rights.

 

The parties agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

The terms, as defined herein, have the same meanings in both their singular and plural forms.

 

1.1             “Affiliate” means any corporation, firm, limited liability company, partnership or other entity that directly or indirectly Controls or is Controlled by or is under common control with LICENSEE. “Control” means (i) having the actual, present capacity to elect a majority of the directors of such entity; (ii) having the power to direct at least forty percent (40%) of the voting rights entitled to elect directors; or (iii) in any country where the local law will not permit foreign equity participation of a majority, ownership or control, directly or indirectly, of the maximum percentage of such outstanding stock or voting rights permitted by local law.

 

1.2 “Field” means Field 1 and Field 2.

“Field l” means treatment of degenerative, inflammatory and immunological disease conditions in humans and other mammals.

“Field 2” means cellular banking.

 

1.3             “Licensed Method” means any method that is claimed in Patent Rights the use of which would constitute, but for the license granted to LICENSEE under this Agreement, an infringement, an inducement to infringe or contributory infringement, of any pending or issued claim within Patent Rights.

 

 

 

 

1.4             “Licensed Product” means any service, composition or product which is composed of or incorporates, or is directly or indirectly discovered, developed and/or identified using, the Invention or that is claimed in Patent Rights, or the manufacture, use, sale, offer for sale, or importation of which would constitute, but for the license granted to LICENSEE under this Agreement, an infringement, an inducement to infringe or contributory infringement, of any pending or issued claim within the Patent Rights.

 

1.5             “Net Sales” means the total of the gross invoice prices of Licensed Products sold or leased by LICENSEE, Sublicensee, Affiliate, or any combination thereof, less the sum of the following actual and customary deductions where applicable and separately listed: cash, trade, or quantity discounts or rebates (as allowed under applicable law); sales tax, use tax, tariff, import/export duties or other excise taxes imposed on particular sales (except for value-added and income taxes imposed on the sales of Licensed Product in foreign countries); transportation charges; or credits to customers because of rejections or returns. For purposes of calculating Net Sales, transfers to a Sublicensee or an Affiliate of Licensed Product under this Agreement for (a) end use (but not resale) by the Sublicensee or Affiliate shall be treated as sales by LICENSEE at list price of LICENSEE, or (b) resale by a Sublicensee or an Affiliate shall be treated as sales at the list price of the Sublicensee or Affiliate.

 

1.6             “Patent Costs” means all out-of-pocket expenses for the preparation, filing, prosecution, and maintenance of all United States and foreign patents included in Patent Rights. Patent Costs include out-of-pocket expenses for patentability opinions, inventorship determination, preparation and prosecution of patent application, re-examination, re-issue, interference, post- grant review and other administrative proceedings in patent offices, and opposition activities, and the like, related to patents or applications in Patent Rights.

 

1.7 “Patent Rights” means UNIVERSITY’s rights in the claims of any of the following:

the U.S. patent serial number 7,569,385; and continuing applications thereof including divisions, substitutions, and continuations-in-part (but only to the extent the claims thereof are entirely supported in the specification and entitled to the priority date of the parent application); any patents issuing on said applications including reissues, reexaminations and extensions; and any corresponding foreign applications or patents.

 

1.8             “Sublicense” means an agreement into which LICENSEE enters with a third party that is not an Affiliate for the purpose of (a) granting certain rights; (b) granting an option to certain rights; or (c) forbearing the exercise of any rights, granted to LICENSEE under this Agreement. “Sublicensee” means a third party with whom LICENSEE enters into a Sublicense.

 

1.9             “Term” means the period of time beginning on the Effective Date and ending on the expiration date of the longest-lived Patent Rights.

 

1.10 “Territory” means worldwide, to the extent Patent Rights exist.

 

ARTICLE 2. GRANTS

 

2.1       License. Subject to the limitations set forth in this Agreement and to the extent that it may lawfully do so, UNIVERSITY hereby grants to LICENSEE an exclusive license under Patent Rights to make, use, sell, offer for sale, and import Licensed Products in the Field within the Territory and during the Term. LICENSEE may extend such license to its AFFILIATES, provided that LICENSEE will be responsible for such AFFILIATES.

 

 

 

 

 

  [Material marked with an asterisk has been omitted from this document pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.]

 

2.2 Sublicense.

 

(a)    The license granted in Paragraph 2.1 includes the right of LICENSEE to grant Sublicenses to third parties during the Term but only for as long as the license to Patent Rights is exclusive.

 

(b) With respect to Sublicense granted pursuant to Paragraph 2.2(a), LICENSEE shall:

(i)   not receive, or agree to receive, anything of value in lieu of cash as consideration from a third party under Sublicense without the express written consent of UNIVERSITY;

(ii)   to the extent applicable, include all of the rights of and obligations due to UNIVERSITY (and, if applicable, the sponsor’s rights) and contained in this Agreement;

(iii) promptly provide UNIVERSITY with a copy of each Sublicense issued; and

(iv)   collect and guarantee payment of all payments due, directly or indirectly, to UNIVERSITY from Sublicensees and summarize and deliver all reports due, directly or indirectly, to UNIVERSITY from Sublicensees.

 

(c)    Upon termination of this Agreement for any reason, UNIVERSITY, at its sole discretion, shall determine whether LICENSEE shall cancel or assign to UNIVERSITY any and all Sublicenses. For the avoidance of doubt, AFFILIATES’ rights extended by LICENSEE also terminate upon termination of this Agreement.

 

2.3 Reservation of Rights. UNIVERSITY reserves the right to:

 

(a)    use the Invention and Patent Rights for educational and research purposes;

(b)    publish or otherwise disseminate any information about the Invention and Patent Rights at any time; and

(c)    allow other nonprofit institutions to use, publish, or otherwise disseminate any information about Invention and Patent Rights for educational and research purposes.

 

ARTICLE 3.

CONSIDERATION

 

3.1      Fees and Royalties. The parties hereto understand that the fees and royalties payable by LICENSEE to UNIVERSITY under this Agreement are partial consideration for the license granted herein to LICENSEE under Patent Rights. LICENSEE shall pay UNIVERSITY:

 

(a) a license issue fee of * dollars (US$*), within thirty ((30) days after the Effective Date;

 

This Paragraph 3.l (a) will survive the termination, expiration or assignment of this Agreement.

 

(b)     license maintenance fees of * dollars (US$*) payable on the first anniversary of the Effective Date and * dollars (US$*) per year and payable on the second anniversary of the Effective Date and annually thereafter on each anniversary; provided however, that such maintenance fees will be creditable against earned royalties in any given payment period;

 

 

 

 

  [Material marked with an asterisk has been omitted from this document pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.]

 

(c) LICENSEE shall pay UNIVERSITY the following milestone payments for Field 1:
(i) IND submission for Licensed Product                               $*
(ii) First patient dosed in Phase I Clinical Trial for Licensed Product $*
(iii) First patient dosed in Phase II Clinical Trial for Licensed Product

$*

(iv) First patient dosed in Phase III Clinical Trial for Licensed Product

$*

(v) BLA (or NDA) submission to the FDA for Licensed Product $*

 

LICENSEE shall pay UNIVERSITY the following milestone payments for Field 2:

(i) Completion of in vivo characterization and optimization of cell production for Licensed Product $*
(ii) First commercial sale of Licensed Product $*

 

(d)    For Field 1: an earned royalty of * percent (*%) on Net Sales of Licensed Products For Field 2: an earned royalty of * percent (*%) on Net Sales of Licensed Products

 

by LICENSEE, Sublicensees, and/or Affiliates, provided, however, that in the event LICENSEE is required to pay royalties to one or more third parties for patent rights necessary to make, use or sell Licensed Products, LICENSEE may deduct $* from the earned royalties payable to UNIVERSITY for every $* LICENSEE actually pays to said third parties; provided, however, in no event shall the amount payable to UNIVERSITY be less than * percent (*%) of the amount otherwise due; and

 

(e) * percent (*%) of all Sublicense fees received by LICENSEE from its Sublicensees that are not earned royalties.

 

All fees and royalty payments specified in Paragraphs 3.l (a) through 3.l (e) above shall

be paid by LICENSEE pursuant to Paragraph 4.3 and shall be delivered by LICENSEE to UNIVERSITY as noted in Paragraph 10.1.

 

3.2      Patent Costs. LICENSEE shall reimburse UNIVERSITY all future (on or after the Effective Date) Patent Costs incurred during the Term and in the Territory within thirty (30) days following the date an itemized invoice is sent from UNIVERSITY to LICENSEE.

 

3.3 Due Diligence.

 

(a)     LICENSEE shall, either directly or through its Affiliate(s) or Sublicensee(s):

(i) diligently develop, manufacture, and sell Licensed Products; and
(ii) achieve the described in Exhibit A:

 

(b)    If LICENSEE fails to perform any of its obligations specified in Paragraphs 3.3(a)(i)- (ii), then UNIVERSITY shall have the right and option to either terminate this Agreement or change LICENSEE’s exclusive license under Patent Rights to a nonexclusive license. This right, if exercised by UNIVERSITY, supersedes the rights granted in Article 2.

 

 

 

 

 

ARTICLE 4. REPORTS, RECORDS AND PAYMENTS

 

4.1 Reports.

 

(a) Progress Reports.

 

Beginning six (6) months after the Effective Date and within sixty (60) days after the end of each of LICENSEE’s fiscal years, Licensee shall furnish UNIVERSITY with a written report on the progress of its efforts during the immediately preceding fiscal year to develop and commercialize Licensed Products. The report shall provide a discussion, to UNIVERSITY’s satisfaction, of intended efforts and sales projections for the Licensed Products for the year in which the report is submitted. LICENSEE’s fiscal year begins on January l 51•

 

(b) Royalty Reports.

After the first commercial sale of a Licensed Product anywhere in the world, LICENSEE shall submit to UNIVERSITY annual royalty reports on or before February 28 of each year. Each royalty report shall cover LICENSEE’s (and each Affiliate’s and Sublicensee’s) most recently completed calendar year and shall show:

 

(i)    the date of first commercial sale of a Licensed Product in each country;

(ii)    the gross sales, deductions as provided in Paragraph 1.4 (Net Sales), and Net Sales during the most recently completed calendar year and the royalties, in US dollars, payable with respect thereto;

(iii) the number of each type of Licensed Product sold;

(iv)     Sublicense fees and royalties received during the most recently completed calendar year in US dollars, payable with respect thereto;

(v) the method used to calculate the royalties; and
(vi) the exchange rates used.

 

If no sales of Licensed Products have been made and no Sublicense revenue has been received by LICENSEE during any reporting period, LICENSEE shall so report. The reports referred to in this Paragraph 4.1(b) should be marked with the following title and case number: “License Agreement between UCSD and Creative Medical Technology, Inc. for case SD2005-041.” Reports shall be submitted as an attachment to UCSD’s email address: oic-reports@ucsd.edu.

 

4.2 Records & Audits.

 

(a)   LICENSEE shall keep, and shall require its Affiliates and Sublicensees to keep, accurate and correct records of all Licensed Products manufactured, used, sold, offered for sale, and imported and Sublicense fees received under this Agreement. Such records shall be retained by LICENSEE for at least five (5) years following a given reporting period.

 

(b)   All records shall be available during normal business hours for inspection at the expense of UNIVERSITY by UNIVERSITY’s Internal Audit Department or by a Certified Public Accountant selected by UNIVERSITY and in compliance with the other terms of this Agreement for the sole purpose of verifying reports and payments or other compliance issues. Such inspector shall not disclose to UNIVERSITY any information other than information relating to the accuracy of reports and payments made under this Agreement or other compliance issues. In the event that any such inspection shows an under reporting and underpayment in excess of five percent (5%) for any twelve-month (12-month) period, then LICENSEE shall pay the cost of the audit as well as any additional sum that would have been payable to UNIVERSITY had the LICENSEE reported correctly, plus an interest charge at a rate of ten percent (I0%) per year. Such interest shall be calculated from the date the correct payment was due to UNIVERSITY up to the date when such payment is actually made by LICENSEE. For underpayment not in excess of five percent (5%) for any twelve (12)-month period, LICENSEE shall pay the difference within thirty (30) days without interest charge or inspection cost.

 

 

 

 

 

4.3 Payments.

 

(a)  All fees, reimbursements and royalties due UNIVERSITY shall be paid in United States dollars and all checks shall be made payable to “The Regents of the University of California’’, referencing “UC San Diego Office of Innovation and Commercialization”, and sent to UNIVERSITY according to Paragraph 10.1 (Correspondence).

 

(b) Royalty Payments.

 

(i)   Royalties shall accrue when Licensed Products are invoiced, or if not invoiced, when delivered to a third party or Affiliate.

(ii)   LICENSEE shall pay earned royalties annually on or before February 28 of each calendar year. Each such payment shall be for earned royalties accrued within LICENSEE’s most recently completed calendar quarter.

 

(c)   Late Payments. In the event royalty, reimbursement and/or fee payments are not received by UNIVERSITY when due, LICENSEE shall pay to UNIVERSITY interest charges at a rate of ten percent (10%) per year. Such interest shall be calculated from the date payment was due until actually received by UNIVERSITY.

 

(d)   Taxes. Taxes imposed by any governmental agency on any payments to be made to UNIVERSITY by LICENSEE hereunder shall be paid by LICENSEE without deduction from any payment due to UNIVERSITY hereunder.

 

ARTICLE 5. PATENT MATTERS

 

5.1 Patent Prosecution and Maintenance.

 

(a)    Provided that LICENSEE has reimbursed UNIVERSITY for Patent Costs pursuant to Paragraph 3.2, UNIVERSITY shall diligently prosecute and maintain the United States and, if available, foreign patents, and applications in Patent Rights using counsel of its choice. For purposes of clarity, if LICENSEE is not current in reimbursing UNIVERSITY for such Patent Costs, UNIVERSITY shall have no obligation to incur any new Patent Costs under this Agreement or to further prosecute Patent Rights or file any new patent applications under Patent Rights. UNIVERSITY shall provide LICENSEE with copies of all relevant documentation relating to such prosecution and LICENSEE shall keep this documentation confidential. The counsel shall take instructions only from UNIVERSITY, and all patents and patent applications in Patent Rights shall be assigned solely to UNIVERSITY. UNIVERSITY shall take into consideration any actions recommended by LICENSEE to protect the Licensed Products contemplated to be sold by LICENSEE under this Agreement. UNIVERSITY shall in any event control all patent filings and all patent prosecution decisions and related filings (e.g., responses to office actions) shall be at UNIVERSITY’s final discretion (prosecution includes, but is not limited to, interferences, oppositions and any other inter partes or ex parte matters originating in a patent office).

 

 

 

 

 

(b)    Should LICENSEE elect to terminate its reimbursement obligations with respect to any patent application or patent in Patent Rights, LICENSEE shall have no further license with respect to such Patent Rights under this Agreement. Non-payment of any portion of Patent Costs with respect to any application or patent may be deemed by UNIVERSITY as an election by LICENSEE to terminate its reimbursement obligations with respect to such application or patent. UNIVERSITY is not obligated at any time to file, prosecute, or maintain Patent Rights in a country, where, for that country’s patent application or patent LICENSEE is not paying Patent Costs, or to file, prosecute, or maintain Patent Rights to which LICENSEE has terminated its license hereunder.

 

5.2 Patent Infringement.

 

(a)    If UCSD (based on actual knowledge of the licensing professional responsible for administering this Invention) or LICENSEE learns of potential infringement of commercial significance of any patent licensed under this Agreement, the knowledgeable party promptly will inform the other party of the infringement and provide evidence of infringement available to the knowledgeable party (“Infringement Notice”). In a jurisdiction where LICENSEE has exclusive rights under this Agreement, neither UNIVERSITY nor LICENSEE will notify a third party (including the infringer) of infringement or put such third patty on notice of the existence of any Patent Rights without first obtaining consent of the other. UNIVERSITY and LICENSEE agree to discuss and determine how best to proceed. If LICENSEE notifies a third patty of infringement or puts such third party on notice of the existence of any Patent Rights regarding such infringement without first obtaining the written consent of UNIVERSITY and UNIVERSITY is sued for declaratory judgment (or its equivalent), UNIVERSITY will have the right to terminate this Agreement immediately, notwithstanding Paragraph 7.1. UNIVERSITY and LICENSEE will use diligent efforts to cooperate with each other to terminate such infringement without litigation. If such infringement has not ended within ninety (90) days of the effective date of the Infringement Notice, then LICENSEE may initiate suit; and, if such infringement has not ended within one hundred and twenty (120) days of the effective date of the Infringement Notice, and LICENSEE has not initiated suit, then UNIVERSITY may initiate suit.

 

(b)    Notwithstanding the foregoing: (1) UNIVERSITY may not be joined in any suit without its prior written consent; (2) LICENSEE may not admit liability or wrongdoing on behalf of UNIVERSITY without its prior written consent; (3) Each party will cooperate with the other in litigation initiated under Paragraph 5.2, but at the expense of the party who initiated the suit; (4) If UNIVERSITY is joined in any suit under Paragraph 5.2, LICENSEE will pay all of UNIVERSITY’s costs; (5) If UNIVERSITY is a party to a suit under Paragraph 5.2, then the recovery to UNIVERSITY will be greater than or equal to fifteen percent (15%) of net recoveries; (6) Any agreement made by LICENSEE for purposes of settling litigation or other dispute regarding Patent Rights will comply with the requirements of Paragraph 2.2 (Sublicense); and (7) If LICENSEE or UCSD (but not both) sues a third party for infringement of Patent Rights, then the non-suing patty may not thereafter sue such infringer for the acts of infringement raised in the suit.

 

5.3       Patent Marking.

 

LICENSEE shall mark all Licensed Products made, used, sold, offered for sale, or imported under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. LICENSEE shall be responsible for all monetary and legal liabilities arising from or caused by (a) failure to abide by applicable patent marking laws and (b) any type of incorrect or improper patent marking.

 

 

 

 

ARTICLE 6. EXPORT CONTROL AND REGISTRATION

 

6.1          Export Control. LICENSEE shall observe all applicable United States and foreign laws with respect to the transfer of Licensed Products, and related technical data to foreign countries, including, without limitation, the International Traffic in Arms Regulations and the Export Administration Regulations.

 

6.2           Governmental Approval or Registration. If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, LICENSEE shall assume all legal obligations to do so. LICENSEE shall make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

 

ARTICLE 7. TERMINATION OR EXPIRATION OF THE AGREEMENT

 

7.1        Termination by UNIVERSITY.

 

(a)    UNIVERSITY may terminate this agreement if LICENSEE:

 

(i) is delinquent on any report or payment;
(ii) is not diligently developing and commercializing Licensed Product;
(iii) misses a milestone described in Exhibit B;
(iv) is in breach of any provision;
(v) provides any false report; or
(vi) files a claim including in any way the assertion that any portion of UNIVERSITY’ s Patent Rights is invalid or unenforceable.

 

(b)    Termination under this Paragraph 7.1 will take effect thirty (30) days after written notice by UNIVERSITY unless LICENSEE remedies the problem in that thirty (30)-day period.

 

7.2 Termination by LICENSEE.

 

(a)    LICENSEE shall have the right at any time and for any reason to terminate this Agreement upon a ninety (90)-day written notice to UNIVERSITY. Said notice shall state LICENSEE’s reason for terminating this Agreement.

 

(b)    Any termination under Paragraph 7.2(a) shall not relieve LICENSEE of any obligation or liability accrued under this Agreement prior to termination or rescind any payment made to UNIVERSITY or action by LICENSEE prior to the time termination becomes effective. Termination shall not affect in any manner any rights of UNIVERSITY arising under this Agreement prior to termination.

 

7.3      Survival on Termination or Expiration. The rights and obligations under Paragraphs and Articles 3.l (a) (license issue fee), 4 (Reports, Records and Payments), 8 (Limited Warranty and Indemnification), 9 (Use of Names and Trademarks), 10.2 (Secrecy), and 10.5 (Failure to Perform) shall survive the termination or expiration of this Agreement.

 

 

 

 

ARTICLE 8. LIMITED WARRANTY AND INDEMNIFICATION

 

8.1 No Warranty.

 

(a)   The license granted herein provided “AS IS” and without WARRANTY OF MERCHANTABILITY or WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE or any other warranty, express or implied. UNIVERSITY makes no representation or warranty that the Licensed Product or the use of Patent Rights will not infringe any other patent or other proprietary rights.

 

UNIVERSITY WILL NOT BE LIABLE FOR ANY LOST PROFITS, COSTS OF PROCURING SUBSTITUTE GOODS OR SERVICES, LOST BUSINESS, ENHANCED DAMAGES FOR INTELLECTUAL PROPERTY INFRINGEMENT, OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR OTHER SPECIAL DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, OR AFFILIATES ARISING OUT OF OR RELATED TO THIS AGREEMENT FOR ALL CAUSES OF ACTION OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH OF WARRANTY) EVEN IF UNIVERSITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ALSO, UNIVERSITY WILL NOT BE LIABLE FOR ANY DIRECT DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, OR AFFILIATES ARISING OUT OF OR RELATED TO PATENT RIGHTS TO THE EXTENT ASSIGNED, OR OTHERWISE LICENSED, BY UNIVERSITY’S INVENTORS TO THIRD PARTIES.

 

(b) Nothing in this Agreement shall be construed as:

 

(i)   a warranty or representation by UNIVERSITY as to the validity, enforceability, or scope of any Patent Rights;

(ii)   a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or shall be free from infringement of patents of third parties;

(iii) an obligation to bring or prosecute actions or suits against third parties for patent infringement except as provided in Paragraph 5.2 hereof;

(iv)   conferring by implication, estoppel or otherwise any license or rights under any patents of UNIVERSITY other than Patent Rights, or any technology, regardless of whether those patents are dominant or subordinate to Patent Rights;

(v) an obligation to furnish any know-how not provided in Patent Rights.

 

8.2 Indemnification and Insurance.

 

(a)   LICENSEE will, and will require Sublicensees to, indemnify, hold harmless, and defend UNIVERSITY and its officers, employees, and agents; the sponsors of the research that led to the Invention under Patent Rights, and their employers; against any and all claims, suits, losses, damages, costs, fees, and expenses resulting from, or arising out of, the exercise of this license or any Sublicense. This indemnification will include, but will not be limited to, any product liability.

 

 

 

 

(b)   LICENSEE, at its sole cost and expense, shall insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain insurance as follows:

 

(i) commercial general liability insurance (contractual liability included) with limits of at least:

(A) each occurrence, five million dollars (US$5,000,000); (B) products/completed operations aggregate, ten million dollars (US$10,000,000);

(C) personal and advertising injury, five million dollars (US$5,000,000); and (D) general aggregate ten million dollars (US$10,000,000). If the above insurance is written on a claims-made form, it shall continue for three (3) years following termination or expiration of this Agreement. The insurance shall have a retroactive date of placement prior to or coinciding with the Effective Date;

(ii)   Worker’s Compensation as legally required in the jurisdiction in which the LICENSEE is doing business; and

(iii)   the coverage and limits referred to above shall not in any way limit the liability of LICENSEE.

 

(c)    LICENSEE shall furnish UNIVERSITY with certificates of insurance showing compliance with all requirements. Such certificates shall: (i) provide for thirty (30) days’ advance written notice to UNIVERSITY of any modification; (ii) indicate that UNIVERSITY has been endorsed as an additionally insured party under the coverage referred to above; and (iii) include a provision that the coverage shall be primary and shall not participate with nor shall be excess over any valid and collectable insurance or program of self-insurance carried or maintained by UNIVERSITY.

 

(d)    UNIVERSITY shall notify LICENSEE in writing of any claim or suit brought against UNIVERSITY in respect of which UNIVERSITY intends to invoke the provisions of this Article. LICENSEE shall keep UNIVERSITY informed on a current basis of its defense of any claims under this Article. LICENSEE will not settle any claim against UNIVERSITY without UNIVERSITY’s written consent, where (a) such settlement would include any admission of liability or wrongdoing on the part of UNIVERSITY or other indemnified party, (b) such settlement would impose any restriction on UNIVERSITY/indemnified party’s conduct of any of its activities, or (c) such settlement would not include an unconditional release of UNIVERSITY/indemnified party from all liability for claims that are the subject matter of the settled claim.

 

ARTICLE 9. USE OF NAMES AND TRADEMARKS

 

9.1          Nothing contained in this Agreement confers any right to use in advertising, publicity, or other promotional activities any name, trade name, trademark, or other designation of UNIVERSITY by LICENSEE without prior written approval by UNIVERSITY (including contraction, abbreviation or simulation of any of the foregoing).

 

9.2          LICENSEE hereby grants permission for UNIVERSITY (including UCSD) to include LICENSEE’s name and a link to LICENSEE’s website in UNIVERSITY’s and UCSD’s annual reports and on UNIVERSITY’s (including UCSD’s) websites that showcase innovation and commercialization stories.

 

ARTICLE 10. MISCELLANEOUS PROVISIONS

 

10.1          Correspondence. Any notice or payment required to be given to either party under this Agreement shall be deemed to have been properly given and effective:

 

 

 

 

(a) on the date of delivery if delivered in person,
(b) five (5) days after mailing if mailed by first-class or ce11ified mail, postage paid, to the respective addresses given below, or to such other address as is designated by written notice given to the other party, or
(c) upon confirmation by recognized national overnight courier, confirmed facsimile transmission, or confirmed electronic mail, to the following addresses or facsimile numbers of the parties.

 

If sent to LICENSEE:

Creative Medical Technologies, Inc.

2007 W. Peoria Avenue

Phoenix, Arizona 85029

Attention: Timothy

Warbington, President, CEO

Phone: 602-680-7439

e-mail: ceo@creativemedicalhealth.com

 

If sent to UNIVERSITY by mail:

University of California, San Diego

Office of Innovation and Commercialization

9500 Gilman Drive, Mail Code 0910

La Jolla, CA 92093-0910

Attention: Director

 

If sent to UNIVERSITY by overnight delivery:

University of California, San Diego

Office of Innovation and Commercialization

10300 North Torrey Pines Road

Torrey Pines Center North, Third Floor

La Jolla, CA 92037

Attention: Director

 

10.2 Secrecy.

 

(a)     “Confidential Information” shall mean information relating to the Invention and disclosed by UNIVERSITY to LICENSEE during the term of this Agreement, which if disclosed in writing shall be marked “Confidential”, or if first disclosed otherwise, shall within thirty (30) days of such disclosure be reduced to writing by UNIVERSITY and sent to LICENSEE.

 

(b) LICENSEE shall:

 

(i)  use the Confidential Information for the sole purpose of performing under the terms of this Agreement;

(ii)   safeguard Confidential Information against disclosure to others with the same degree of care as it exercises with its own data of a similar nature;

(iii)   not disclose Confidential Information to others (except to its employees, agents or consultants who are bound to LICENSEE by a like obligation of confidentiality) without the express written permission of UNIVERSITY, except that LICENSEE shall not be prevented from using or disclosing any of the Confidential Information that:

 

 

 

 

(A) LICENSEE can demonstrate by written records was previously known to it;
(B) is now, or becomes in the future, public knowledge other than through acts or omissions of LICENSEE;
(C) is lawfully obtained by LICENSEE from sources independent of UNIVERSITY; or
(D) is required to be disclosed by law or a court of competent jurisdiction.

 

(c)   The secrecy obligations of LICENSEE with respect to Confidential Information shall continue for a period ending five (5) years from the termination date of this Agreement.

 

(d)   Notwithstanding the foregoing, UNIVERSITY may disclose to the Inventors, senior administrators employed by UNIVERSITY, and individual Regents the terms and conditions of this Agreement upon their request. If such disclosure is made, UNIVERSITY shall request the individuals not disclose such terms and conditions to others. UNIVERSITY may acknowledge the existence of this Agreement and the extent of the grant in Article 2 to third parties, but UNIVERSITY shall not disclose the negotiable financial terms of this Agreement to third parties, except where UNIVERSITY is required by law to do so, such as under the California Public Records Act.

 

10.3           Assignability. This Agreement may be assigned by UNIVERSITY, but is personal to LICENSEE and assignable by LICENSEE only with the written consent of UNIVERSITY.

 

I 0.4          No Waiver. No waiver by either party of any breach or default of any agreement set forth in this Agreement shall be deemed a waiver as to any subsequent and/or similar breach or default.

 

I 0.5           Failure to Perform. In the event of a failure of performance due under this Agreement and if it becomes necessary for either party to undertake legal action against the other on account thereof, then the prevailing party shall be entitled to reasonable attorneys’ fees in addition to costs and necessary disbursements.

 

I 0.6           Governing Laws. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application shall be governed by the applicable laws of the country of the patent or patent application.

 

10.7           Force Majeure. A party to this Agreement may be excused from any performance required herein if such performance is rendered impossible or unfeasible due to any catastrophe or other major event beyond its reasonable control, including, without limitation, war, riot, and insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes, lockouts, or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events have abated, the non-performing party’s obligations herein shall resume.

 

I 0.8           Headings. The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

I 0.9           Entire Agreement. This Agreement, including Exhibits A and B, embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings , either oral or written, between the parties relating to the subject matter hereof.

 

 

 

 

10.10         Amendments. No amendment or modification of this Agreement shall be valid or binding on the parties unless made in writing and signed on behalf of each party.

 

10.11         Severability. In the event that any of the provisions contained in this Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it.

 

CREATIVE MEDICAL TECHNOLOGIES, INC.   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
     
By: /s/ Timothy Warbington   By: /s/ Ruben Flores, Ph.D.
Signature   Signature
     
Name:  Timothy Warbington   Ruben Flores, Ph.D.
     
Title:  President, CEO   Director
     
Date:  August 25, 2016   Date:  August 24, 2016

 

 

 

 

  [Material marked with an asterisk has been omitted from this document pursuant to a request for confidential treatment and has been filed separately with the Securities and Exchange Commission.]

 

Exhibit A -Due Diligence Milestones

 

For Field 1 and Field 2:

 

1.  diligently proceed with the development, manufacture, and if successful and upon receipt of requisite regulatory approvals, sale of Licensed Products and/or Licensed Methods;

 

2.  annually spend not less than * dollars (US$*) for the development of Licensed Products and/or Licensed Methods during the first three years of this Agreement.

 

3.  market Licensed Products and/or Licensed Methods in the United States within six (6) months after receiving all regulatory approvals and other approvals, clearances or licenses necessary, to market such Licensed Products and/or Licensed Method in the United States;

 

4.  fill the market demand for Licensed Products following commencement of marketing at any time during the term of this Agreement; and

 

5.  obtain all necessary governmental approvals for the manufacture, use and sale of Licensed Products and/or Licensed Methods.

 

For Field 1:

 

1.  Complete in vitro characterization and optimization of cell production for Licensed Product within twelve (12) months from the Effective Date;

 

2.  Initiate GLP toxicology and dose escalation studies for Licensed Product within twenty four (24) months from the Effective Date;

 

3.  Submit IND for Licensed Product to the FDA within thirty (30) months from the Effective Date;

 

4.  Initiate the first Phase I clinical trial for Licensed Product within thirty six (36) months from the Effective Date;

 

5.  LICENSEE shall provide additional diligence milestones to UNIVERSITY for the Phase II, Phase Ill, and NOA submission timelines for the Licensed Product within forty (40) months from the Effective Date.

 

For Field 2:

 

1 .  Complete in vitro characterization and optimization of cell production for Licensed Product within twelve (12) months from the Effective Date;

 

2.  First commercial sales of Licensed Product, either as a product or services. Within 24 months from the Effective Date.

 

 

 

 

Exhibit 10.2

 

MASTER SERVICES AGREEMENT

 

This Master Services Agreement (the "Agreement") is made this 15 th day of November, 2015 by and between Professional Research Consulting, Inc. d/b/a PRC Clinical, a California Corporation with offices at 1111 Bayhill Drive, Suite 290, San Bruno, California 94066 ("PRC Clinical or PRC") and Creative Medical Health, Inc., a Delaware Corporation with business office at 2007 W Peoria Ave., Phoenix, AZ 85029 ("Sponsor").

 

WHEREAS, Sponsor is in the business of developing, manufacturing and/or distributing pharmaceutical products, medical devices and/or biotechnology products; and

 

WHEREAS, PRC is a contract research organization engaged in the business of managing clinical research programs and providing clinical development services and other services for the pharmaceutical, medical device and biotechnology industries; and

 

WHEREAS, Sponsor and PRC desire to enter into this Agreement to provide the terms and conditions upon which Sponsor may engage PRC from time to time to provide clinical development services in connection with certain clinical research studies of Sponsor's proprietary products (each, a "Project"), in which case the terms and conditions for each such Project shall be set forth in one or more written work orders to be agreed upon and signed and attached to this Agreement and incorporated herein by reference (a "Work Order''); and

 

NOW, THEREFORE, for good and valuable consideration contained herein, the exchange, receipt and sufficiency of which are acknowledged, the parties agree as follows:

 

9. Services.

 

9.4 Work Orders. In the event that the parties reach agreement with respect to the provision of Services for a Project, PRC and Sponsor shall execute a Work Order with respect to such Services. Each Work Order shall set forth the nature and scope of the Services to be performed and other specific details relating to the Services for each Project to be performed by PRC. Such Work Order shall include, but not be limited to, an estimate of PRC's fees, pass-through costs, and third party vendor costs for such Services, the deliverables (if any) for the Project, and such other terms and conditions as shall be deemed appropriate or necessary for the performance of the Services. Sponsor agrees that the Work Order shall be executed by both parties before PRC commences work under the Work Order, unless the parties otherwise agree in writing. Each fully executed Work Order shall be deemed to be attached hereto and incorporated herein. The applicable Work Order and this Agreement shall constitute the entire agreement for each Project. To the extent any terms set forth in a Work Order conflict with the terms set forth in this Agreement, the terms of this Agreement shall control unless otherwise specifically set forth in the Work Order. As required by 21 C.F.R. § 312.52, the specific obligations relating to each Project that are being transferred to PRC by Sponsor shall be listed in the applicable Work Order. Sponsor shall retain responsibility for all other activities related to the Project. Sponsor shall at all times be considered the sponsor of the Project for the purpose of all laws, regulations, and regulatory authority requirements applicable to the conduct of clinical trials. Sponsor shall be solely responsible for review, approval, and adoption of the clinical study protocol for each Project.

 

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1.2         Change O rders. If Sponsor requests any changes to the scope of the Services for a particular Project from those set forth in the applicable Work Order, or if the assumptions set forth in the budget for such Project contained in the applicable Work Order change, PRC shall prepare a written change order reflecting such changes, including an estimate of any resulting adjustment to the timeline for the performance of the Services under the Work Order and to the compensation schedule (a "Change Order"). Once a Change Order is executed by both parties, such Change Order shall constitute an amendment to the applicable Work Order and the Services shall thereafter constitute those Services set forth in the Work Order as amended by the Change Order. Both parties agree to act in good faith and promptly when considering a Change Order requested by the other party. Without limiting the foregoing, Sponsor agrees that it will not unreasonably withhold approval of a Change Order, even if it involves a fixed price contract, if the proposed changes in budgets or time lines result from, among other appropriate reasons, forces outside the reasonable control of PRC or changes in the assumptions upon which the initial budget or time lines were based, including, but not limited to, the assumptions set forth in the budget or timelines. PRC reserves the right to postpone effecting material changes in the Project's scope until such time as the parties agree to and execute the corresponding Change Order. For any Change Order that affects the scope of the regulatory obligations that have been transferred to PRC, PRC and Sponsor shall execute a corresponding amendment to the Transfer of Obligations Form. Sponsor shall file such amendment where appropriate, or as required by law or regulation.

 

1.3         Timelines and Delays . PRC shall use commercially reasonable efforts to perform the Services within any timelines specified in the applicable Work Order. However, Sponsor acknowledges that such timelines are estimates and assume the full cooperation of Sponsor, regulatory authorities, Ethics Committees or Institutional Review Boards, investigative sites and investigators, and other third parties not under PRC's control, and shall be subject to adjustment (including an adjustment in the fees and costs for the performance of Services) if the work for the Services is delayed due to circumstances not attributable to PRC, such as the following: (a) a failure by Sponsor to perform Sponsor's obligations with respect to the Study in a timely fashion, (b) a delay by Sponsor in providing information or feedback requested by PRC, (c) amendments to the protocol for the Project that occur after the execution of the applicable Work Order, (d) enrollment rates that are lower than anticipated, © changes in applicable regulatory requirements, suspensions or other delays imposed by regulatory authorities, or (f) delays in obtaining required approvals from regulatory authorities, Ethics Committees or Institutional Review Boards. Sponsor acknowledges that, if it materially delays or suspends performance of the Services for more than fifteen (15) calendar days and such delay or suspension is unrelated to any act or omission by PRC in violation of this Agreement, then the personnel and/or resources originally allocated to the delayed or suspended portion of the Services may be re- allocated, and PRC will not be responsible for delays due to required re-staffing or re-allocation of resources.

 

If a Project is delayed or suspended for more than 15 calendar days, Sponsor shall have the right to keep, at its expense, some or all of the PRC personnel assigned to the Project assigned to the Project for the duration of the delay or suspension period. Sponsor shall pay a fee for each such individual that remains assigned to the Project at Sponsor's request. Said personnel fees shall be invoiced by PRC, and shall be due and payable by Sponsor upon receipt of invoice. If a Sponsor does not wish to retain any PRC personnel for the duration of the delay or suspension, PRC shall have the right to reallocate any and all such personnel to other projects, and Sponsor shall bear the costs, if any, of providing Project-specific training to replacement personnel assigned to the Project once it resumes. If a Project is delayed or suspended for more than 90 days, either party may terminate the Work Order for such Project upon written notice to the other party.

 

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1.4   Sponsor Cooperation . Sponsor shall forward to PRC in a timely manner all documents, materials and information in Sponsor's possession or control necessary for PRC to conduct the Services. PRC shall not be liable to Sponsor nor be deemed to have breached this Agreement for errors, delays or other consequences arising from Sponsor's failure to timely provide documents, materials or information or to otherwise cooperate with PRC in order for PRC to timely and properly perform its obligations. Sponsor shall provide PRC with all information available to it regarding known or potential hazards associated with the use of any substances supplied to PRC by Sponsor, and Sponsor shall comply with all current legislation and regulations concerning the shipment of substances by the land, sea or air.

 

Sponsor will cooperate with PRC in providing information to PRC and taking such actions (including, If applicable, executing documents), as are appropriate to achieve the objectives of this Agreement. Sponsor acknowledges and agrees that PRC's performance under this Agreement is dependent on Sponsor's timely and effective cooperation with PRC. Accordingly, Sponsor acknowledges that any delay by Sponsor may result in PRC being released from an obligation or schedule deadline or in Sponsor having to pay extra fees in order for PRC to meet a specific obligation or deadline despite the delay. Sponsor shall comply with all applicable laws, rules and regulations governing the performance of its obligations hereunder and the subject matter of this Agreement.

 

2. Compensation and Payment.

 

2.1          Charges for Servic es. Sponsor shall pay PRC for all Services performed under this Agreement in accordance with the budget and payment schedule for such Services set forth in the applicable Work Order (the "Budget"). Unless otherwise specified in a Work Order, the Budget for each Project shall consist of line items specifying the work to be completed by PRC for the Project and the rates for such work.

 

2.2          Pass-Through Costs. The Budget for each Project shall include an itemized breakdown of the estimated out-of-pocket costs that will be incurred by PRC in connection with the performance of Services for such Project including, without limitation, travel expenses (collectively, the "Pass-Through Costs"). Sponsor shall reimburse PRC for all Pass-Through Costs, incurred in accordance with the Budget, provided that such Pass-Through Costs are supported by written receipts or other documentation reasonably acceptable to Sponsor. Sponsor acknowledges that some or all of the Pass-Through Costs set forth in any Work Order are an estimate based on the scope of the Project, timelines, and information supplied by third parties, and that such costs cannot be predicted with complete certainty at the outset of a

Project.

 

2.3         Third Party Vendors. If applicable, PRC will provide a third party vendor budget in each Work Order. All third party vendor costs and associated management fees invoiced to Sponsor shall be approved by Sponsor in advance and shall include documentation reasonably acceptable to Sponsor.

 

PRC Clinical MSA/Sponsor

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2.4         Invoices. Unless otherwise provided in the Work Order, PRC shall invoice Sponsor on a monthly basis for Services and Pass-Through Costs incurred and associated overhead and handling charges via electronic invoice sent to the Financial/Accounts Payable contact designated in the applicable Work Order. Each such invoice shall itemize the Services performed and all Pass-Through Costs with supporting documentation where indicated. Unless otherwise specified in the applicable Work Order, and subject to Section 2.5 below, Sponsor shall pay each monthly invoice for Services and Pass-Through Costs within 25 days of receipt. PRC shall invoice Sponsor for third party vendor costs and associated management fees separately, and all such invoices shall be paid by Sponsor within 5 days of receipt. PRC reserves the right to charge interest in the amount of 1.5% per month for any undisputed invoiced amounts that have not been paid within 25 days of Sponsor's receipt of the applicable invoice.

 

2.5          Disputed I nvoices. Sponsor will notify PRC within 10 days of its receipt of an invoice submitted under Section 2.4 if it disputes such invoice or any portion thereof. Sponsor shall provide, in writing, queries for PRC to address to allow full payment of any such disputed invoice or disputed portion thereof within the original 25 day payment period. The parties will promptly discuss such queries and formulate an action plan to resolve the issues. Billing queries generated by Sponsor will be addressed to the contact person at PRC referenced in the applicable Work Order, and Sponsor and PRC will negotiate in a timely, good faith manner to resolve billing queries. Any undisputed amounts shall be paid without delay pursuant to section 2.4

 

2.6         Exchange Rate. All payments due hereunder in accordance with the Budget of the applicable Work Order shall be made by Sponsor in United States Dollars ("USO"). The parties acknowledge and agree that all amounts set forth in the Work Orders shall be in USD. If PRC incurs Pass-Through Costs or third party vendor costs under a Work Order in a currency other than USO, such costs shall be invoiced to Sponsor and reimbursed to PRC at the USO equivalent of the expense paid by PRC. The hourly labor fees contained in the Budget for each Work Order shall be fixed in USO, and will require no conversion.

 

2.7          T axes. The fees payable under any Work Order shall not, and shall not be construed to, include local, state, federal or foreign sales and use taxes, such as Value Added Tax, if any, and any such taxes shall be assumed and paid by Sponsor.

 

2.8          Advance and Fixed Fee P ayments. If indicated in the applicable Work Order, Sponsor shall provide advance funding for certain projects. The repayment schedule will be specified in the Work Order. This advance funding is needed to cover the cost of hiring staff and making commitments with other vendors to service the Project. As such, should the Project terminate prematurely, the amount of such advance payments would be forfeit by Sponsor. In the event that all Services are completed early relative to the timeline described in the applicable Work Order, all remaining Fixed Fees will be immediately invoiced to and paid by Sponsor in accordance with this Section 2.

 

2.9          Advance Payment of Pass-Through Costs and Vendor Expenses . If indicated in the Work Order, and upon execution of a Work Order which anticipated pass-through and/or third party vendor expenses, PRC will issue to Sponsor an invoice in an amount equal to an agreed percentage of the total estimated Pass-Through Costs and third party vendor costs set forth in the Budget, including those Pass-Through Costs consisting of payments to be made to investigators and investigative sites (such amount, the "Advance Payment"). Sponsor shall pay to PRC such Advance Payment within 20 days after its receipt of such invoice. For clarity, Sponsor shall pay PRC for Pass-Through Costs and third party vendor expenses incurred on a Project in accordance with the Budget for such Project on a pass-through basis and in accordance with the payment terms set forth in Sections 2.2 and 2.3. The amount of the Advance Payment paid by Sponsor to PRC for a Project will be held by PRC until the completion or termination of the applicable Project and credited against that portion of the final invoice(s) under the applicable Work Order that consist of Pass-Through Costs and third party vendor expenses. In the event that the amount of the Advance Payment paid by Sponsor to PRC exceeds the amount due by Sponsor to PRC for actual Pass-Through Costs and third party vendor expenses under the final invoice(s) under the applicable Work Order, PRC shall refund to Sponsor an amount equal to the amount by which the Advance Payment exceeds the amount due by Sponsor for actual Pass-Through Costs and third party vendor expenses under such final invoice(s).

 

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2.10          Inflationary A djustments. PRC shall be entitled upon 30 days' written notice to increase the rates applicable to the performance of Services to include inflationary adjustments, which inflationary adjustments shall not exceed 5% of the labor rates applicable for the prior calendar year under the Work Order. In the event that any such increase is made, the parties shall enter into a Change Order to reflect such revised fees.

 

3. Term and Termination.

 

3.1          T erm. The term of this Agreement shall commence on the Effective Date and shall continue for three (3) years unless extended in a written amendment to this Agreement signed by authorized representatives of both parties. Each Work Order shall be effective upon the date signed by the last signatory thereto and shall terminate upon the completion of Services to be provided thereunder, unless earlier terminated in accordance with this Section 3.

 

3.2          Termination by Either P arty. Either party may terminate this Agreement or any individual Work Order for any reason upon 30 days' prior written notice to the other party. Termination of a Work Order shall terminate the corresponding Project.

 

3.3          Termination for Material B reach. Either party may terminate this Agreement or a Work Order if the other party materially breaches the terms of this Agreement or of such Work Order and such breaching party fails to cure the breach within 15 days after receipt of written notice from the non-breaching party specifying the nature of such breach. The parties agree that non-payment by Sponsor of an undisputed invoice shall be deemed a material breach of this Agreement. If PRC determines, in that its continued performance of the Services contemplated by one or more Work Orders would constitute a potential or actual violation of regulatory or scientific standards of integrity, then PRC may terminate the applicable Work Order(s) by giving written notice stating the effective date (which may be less than thirty (30) days from the notice date) of such termination. Either party may terminate this Agreement or any Work Orders immediately upon provision of written notice if the other party becomes insolvent or files for bankruptcy. Any written termination notice shall identify the specific Work Order or Work Orders that are being terminated.

 

3.4          Effect of Termin ation. The termination of this Agreement by either party shall automatically terminate all Work Orders, unless otherwise agreed in writing. Upon the receipt or provision of a notice of termination of this Agreement or a Work Order, PRC shall cooperate with Sponsor to provide for an orderly wind-down and/or transition of the Services provided by PRC hereunder. Upon termination of this Agreement, Sponsor shall promptly pay PRC in full for all fees for Services performed, Pass-Through Costs and third party vendor expenses, and associated administrative overhead and handling fees, incurred up through the termination date as calculated in accordance with the provisions of this Agreement and the Budget in the applicable Work Order. In addition, Sponsor shall reimburse PRC for all reasonable, future non cancelable obligations to third parties for Pass-Through Costs and third party vendor expenses to be incurred in accordance with the Budget for the applicable Work Order. Promptly after the date of termination or completion of a Work Order or this Agreement, PRC will submit to Sponsor an itemized accounting of Services performed for the applicable Project, the Pass- Through Costs and third party vendor expenses incurred as calculated in accordance with the provisions of this Agreement and the Budget in the applicable Work Order, the amount of any non-cancellable obligations to third parties for Pass-Through Costs and third party vendor expenses that were to be incurred by PRC in accordance with the Budget for each terminated Work Order, and the amount of payments received from Sponsor in order to determine the amount of the balance owed by, or the overpayment to be refunded to, Sponsor. Any balance owed by, or any overpayment to be refunded to, Sponsor will be paid or refunded within 25 days of receipt of such an itemized accounting. Sponsor shall pay for all actual costs, including time spent by PRC personnel, incurred to complete activities associated with the termination and close-out of affected Projects, including the fulfillment of any regulatory requirements.

 

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3.5   Provisions Surviving Termin ation. The obligations of the parties contained in Sections 2, 3.4, 3.5, 4, 5, 7, 8.2, 9.2, 9.4, 9.5, 9.6, 9.8, 9.9, and 9.12 hereof shall survive termination of this Agreement.

 

4. Confidentiality.

 

4.1          Confidential I n formation. Subject to the limitations set forth in Section 4.3, all information that (a) is provided by Sponsor to PRC relating to a Project, (b) relates to a Project and is developed, generated, or obtained by PRC as a result of performing Services under this Agreement, including, without limitation, Inventions (as defined in Section 5.2), shall, in each case, be deemed to be "Sponsor Confidential Information". Subject to the limitations set forth in Section 4.3, (i) all information pertaining to PRC's proposals, pricing, and quotations (except to the extent that such information incorporates Sponsor Confidential Information), methods, standard operating procedures, and subcontractor information, including materials or technology owned or licensed by PRC, that is disclosed to Sponsor or Sponsor's representatives, and (ii) all information regarding PRC's operations, methods, and pricing, and all information that is or has been previously independently developed by PRC without the benefit of any information provided by Sponsor, including PRC Property, and that is identified as confidential at the time of disclosure to Sponsor, shall be deemed to be "PRC Confidential Information" under this Agreement. Sponsor Confidential Information and PRC Confidential Information may be referred to herein individually and collectively as "Confidential Information". For purposes of this Agreement, each party is the "Disclosing Party'' with respect to its own Confidential Information, and a "Receiving Party" with respect to the Confidential Information of the other party.

 

4.2          Use and Non-Disclosure of Confidential In formation. The Receiving Party shall: (a) use the Disclosing Party's Confidential Information solely for the purposes contemplated by this Agreement and for no other purpose without the prior written consent of the Disclosing Party; (b) not disclose the Disclosing Party's Confidential Information to any third party except as necessary in connection with the performance of activities under this Agreement without first obtaining the written consent of the Disclosing Party; and (c) protect the confidentiality of the Disclosing Party's Confidential Information with at least the same degree of care used to protect its own confidential and/or proprietary information from unauthorized use or disclosure, but in no event with less than reasonable care. The Receiving Party will be permitted to furnish and otherwise disclose the other party's Confidential Information to those of its employees, agents, contractors, and consultants who need to know such Confidential Information in order to accomplish the purposes of this Agreement, provided that such personnel are bound by obligations of confidentiality with respect to such Confidential Information substantially similar to those provided herein. If the Receiving Party discloses the Disclosing Party's Confidential Information to a third party with the Disclosing Party's permission as permitted herein, the Receiving Party shall ensure that all Confidential Information disclosed to such third party is identified as confidential at the time of disclosure.

 

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4.3          Exceptions to Confidential In formation. The obligations of confidentiality set forth in Section 4.2 shall not apply to that part of the Disclosing Party's Confidential Information which the Receiving Party is able to demonstrate by competent proof:

 

(9) was already known to the Receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the Disclosing Party;

 

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

© later became part of the public domain through no act or omission of the Receiving Party;

 

(d) was disclosed to the Receiving Party without obligations of confidentiality with respect thereto, by a third party who had no obligation to the Disclosing Party not to disclose such information to others without restriction; or

 

© was independently developed by employees of the Receiving Party without use of or reference to the Disclosing Party's Confidential Information.

 

4.4          Disclosure Required by L aw. The Receiving Party may disclose the Disclosing Party's Confidential Information without violating the obligations of this Agreement to the extent that such disclosure is (a) required by a valid order of a court or other governmental body having jurisdiction, (b) required by applicable law or regulation, (c) is necessary for filings with regulatory or governmental agencies including, without limitation, the U.S. Securities & Exchange Commission and the FDA, or (d) in connection with prosecuting, defending, or providing testimony in litigation, provided that the Receiving Party provides the Disclosing Party with reasonable prior written notice of such disclosure when possible and, at the Disclosing Party's request and expense, makes a reasonable effort to obtain, or to assist the Disclosing Party in obtaining, a protective order or other appropriate remedy preventing or limiting the disclosure and/or requiring that the Disclosing Party's Confidential Information so disclosed be used only for the purposes for which the law or regulation requires, for which the order was issued, for the applicable regulatory or governmental filing, or for the applicable litigation.

 

4.5.          Return of Confidential Information. At the Disclosing Party's request, the Receiving Party shall return all Confidential Information provided by the Disclosing Party in documentary form or, at the Disclosing Party's request, destroy all or such parts of the Disclosing Party's Confidential Information as the Disclosing Party shall direct, including any copies thereof made by the Receiving Party. Notwithstanding the foregoing, the Receiving Party may retain one (1) copy of the Disclosing Party's Confidential Information solely for archival purposes, subject to the ongoing obligation to maintain the confidentiality of such information.

 

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5. Intellectual Property.

 

5.1          No L icense. Each party agrees that neither party transfers to the other party by operation of this Agreement any patent right, copyright right, trademark right or other intellectual property right of such party, except as may be specifically provided herein.

 

5.2          Sponsor P roperty. PRC will promptly disclose to Sponsor all improvements, inventions, formulae, processes, techniques, work product, know-how and data, whether or not patentable, that is generated, conceived, discovered or reduced to practice by PRC, its employees, agents, or subcontractors, whether solely or jointly with others in the course of or as a direct result of the performance of the Services under this Agreement, together with all intellectual property rights arising therefrom (collectively, "Inventions"). All Inventions and all deliverables will be the sole and exclusive property of Sponsor and shall be Sponsor Confidential Information; provided that, the term "Inventions" does not include PRC Property (as such term is defined in Section 5.3) and improvements thereto. PRC hereby assigns and transfers to Sponsor all of PRC's right, title and interest in any and all Inventions and agrees to take, at Sponsor's request and expense, all further acts reasonably required to convey full title in the Inventions to Sponsor. Further, PRC will cause all of its personnel that perform Services hereunder to assign and transfer to Sponsor all such personnel's right, title and interest in Inventions to Sponsor, and to take, at Sponsor's request and expense, all further acts reasonably required to convey title in any such Invention to Sponsor.

 

5.3          PRC Prooertv. "PRC Property" means inventions, processes, technology, know-how, trade secrets, and other assets (including, without limitation, those related to data collection processes, data management processes, laboratory analyses procedures and techniques, analytical methods, procedures and techniques, computer technical expertise and software (including codes) that have been or are independently developed by PRC without the benefit of or access to any information provided by or on behalf of Sponsor and that do not relate to the composition of matter, method of using, making or administering the drug that is the subject of a Project. All PRC Property is the sole and exclusive property of PRC, and shall be PRC Confidential Information.

 

6. Representations and W arranties.

 

6.1          No Inconsistent Obligations or Constraints. Each party represents and warrants that it is qualified and permitted to enter into this Agreement and that the terms of this Agreement are not inconsistent with its other contractual arrangements. PRC warrants that it is not constrained by any existing agreement in providing the Services to be performed under this Agreement. Sponsor agrees that it will not enter into an agreement with a third party that would alter or affect the regulatory obligations delegated to PRC in any Project without providing prior written notice to PRC.

 

6.2          Due Authoriz ation. The persons executing this Agreement represent and warrant that they have the full power and authority to enter into this Agreement on behalf of each respective party.

 

6.3         Required Licenses. Each party represents and warrants that, if applicable to a Project, it possesses all necessary licenses for use of the MedDRA and WHO-Drug dictionaries in connection with such Project, and that it shall maintain all such licenses in full force and effect during the term of this Agreement.

 

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6.4          Compli ance with Applicabl e L aws. Each party represents and warrants that it shall comply with all laws and regulations applicable to such party in connection with its activities under this Agreement.

 

6.5          No Debarred P erson. PRC represents and warrants that it and its personnel who perform any Services hereunder are not presently debarred by the FDA pursuant to 21 U.S.C. § 335a. In addition, PRC represents and warrants that, to the best of its knowledge, it has not engaged in any conduct or activity which could lead to debarment actions. If, during the term of this Agreement, PRC discovers or receives notice that it or any personnel employed or retained by it to perform Services comes under investigation by the FDA for a debarment action or is debarred, PRC shall promptly notify Sponsor of same.

 

6.6          Disclaimer of Warranties . EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER SPONSOR NOR PRC MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTI ES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTI ES OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE.

 

7. Indemnification.

 

7.1          Sponsor I ndemnit y. Sponsor shall indemnify, defend and hold harmless PRC and its employees, affiliates, directors, officers, and agents (collectively, the "PRC lndemnitees") from and against any and all damages, liabilities, losses, costs and expenses of any kind or nature whatsoever, including, without limitation, reasonable attorney's fees, expert witness and court costs (collectively, "Losses"), incurred in connection with any claim, demand, action, or proceeding brought by a third party (each, a "Claim") arising from (a) any substance dispensed or procedure administered in the course of a Project, or any other person's use, consumption, sale, distribution or marketing of the drug that is the subject of a Project, including the harmful or otherwise unsafe effect of such drug, (b) the performance of Services by PRC hereunder in compliance with the terms of this Agreement, (c) the infringement or misappropriation of a third party's intellectual property rights by reason of the performance of the Services using the information supplied by Sponsor or the Sponsor's drug, (d) a breach of the Sponsor's representations, warranties or obligations under this Agreement, or © the negligence, gross negligence or intentional misconduct on the part of Sponsor lndemnitees (as such term is defined in Section 7.2 below) in connection with this Agreement; provided however, that Sponsor shall have no obligation of indemnity hereunder with respect to a Claim to the extent that such Claim arises from (i) the negligence, gross negligence, or intentional misconduct on the part of PRC or its employees, affiliates, or agents, or (ii) a breach of any of PRC's obligations, representations or warranties under this Agreement.

 

7.2          PRC lndemnitv. PRC shall indemnify, defend, and hold harmless Sponsor and its employees, affiliates, directors, officers, and agents (collectively, the "Sponsor lndemnitees") from and against any and all Losses incurred in connection with any Claim arising from (a} the negligence, gross negligence, or intentional misconduct on the part of any of the PRC lndemnitees in connection with this Agreement, or (b) a breach of any of PRC's obligations, representations or warranties under this Agreement; provided, however, that PRC shall have no obligation of indemnity hereunder with respect to any Claim to the extent that such Claim arises from (i) the negligence, gross negligence, or intentional misconduct on the part of Sponsor or its agents or representatives, or (ii) a breach of any of Sponsor's obligations, representations, or warranties under this Agreement.

 

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7.3          Indemnification P rocedure. Each party's agreement to indemnify, defend, and hold harmless the other party and its respective indemnitees is conditioned upon the indemnified party: (a) providing written notice to the indemnifying party of any claim, demand, or action arising out of the indemnified activities within 30 days after the indemnified party has knowledge of such claim, demand, or action; provided, however, that any failure on the part of an indemnified party to notify the indemnifying party of receipt of notice of a claim shall relieve the notified party of its obligation to indemnify the notifying party for such claim under this Agreement only to the extent that the notified party has been prejudiced by the lack of timely and adequate notice; (b) permitting the indemnifying party to assume full responsibility and authority to investigate, prepare for, settle, and defend against any such claim, demand, or action; (c) assisting the indemnifying party, at the indemnifying party's reasonable expense, in the investigation of, preparation for and defense of any such claim, demand, or action; and (d) not compromising or settling such claim, demand, or action without the indemnifying party's written consent.

 

7.4          limitation of liability. In no event shall the liability of either party arising out of this Agreement exceed an amount equal to the total Budget for the relevant Project. Further, in no event will either party be entitled to, nor shall either party be responsible for, whether in contract or in tort, any incidental, indirect, special or consequential losses or damages (including lost profits) arising out of this Agreement or with respect to a party's performance or non- performance of this Agreement. However, the foregoing limitations of liability and exclusions of damages recoverable in this Section 7.4 shall not (a) apply to breaches of confidentiality obligations under Section 4, or (b) limit in any way a party's indemnification obligations with respect to third-party claims under Sections 7.1 or 7.2, as applicable.

 

7.5          Insurance. Sponsor hereby represents and warrants that it will maintain adequate clinical trial and product liability insurance coverage for each Project consistent with industry standards, through a reputable insurance carrier, to cover all subjects screened or treated as part of a clinical trial for personal injury suffered as a result of the participation in the trial or the trial screening process. PRC represents and warrants that it will maintain an insurance policy or program of self-insurance at commercially reasonable levels during the term of this Agreement. Each party shall, at the other party's request, provide to the other party proof of its insurance coverage.

 

8. Record Storage; Inspections.

 

8.1          Record Maintenance During P roject. During the term of this Agreement, PRC shall maintain all materials and all other data obtained or generated by PRC in the course of providing the Services hereunder. including all computerized records and files (collectively, "Records") . PRC shall cooperate with any reasonable internal review or audit by Sponsor and make available to Sponsor for examination and duplication, during normal business hours and at mutually agreeable times, all Records relating to a Project.

 

8.2          Record Maintenance After Completion or Termination of P roject. Unless otherwise stated in the applicable Work Order, all Records for a Project shall be transferred to Sponsor by PRC upon the Project completion or termination. At Sponsor's option, the Records shall be either (a) delivered to the location designated by Sponsor at Sponsor's expense, or (b) disposed of at Sponsor's expense. If PRC is required or requested to maintain and/or store the Records for a Project for a period beyond the completion or termination of the applicable Project, Sponsor shall reimburse PRC for its reasonable maintenance and storage costs. In no event shall PRC dispose of Records without first giving Sponsor 60 days' prior written notice of its intent to dispose of the Records and, if Sponsor so requests, PRC shall transfer such Records to Sponsor at Sponsor's expense. PRC shall be entitled at its sole expense to retain copies of the Records reasonably necessary for regulatory purposes or to demonstrate the satisfaction of its obligations hereunder, all subject to the confidentiality obligations set forth in Section 4 above.

 

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8.3          Regulatory I nspections. If any governmental regulatory authority of appropriate jurisdiction conducts, or gives notice of intent to conduct, an inspection at PRC directly related to the Services or takes any other regulatory action directly related to the Services, PRC shall promptly give Sponsor notice thereof and supply to Sponsor all information pertinent thereto. PRC shall cooperate with all regulatory authorities and permit such inspections relating to the Services. To the extent not prohibited by law, Sponsor shall have the right, but not the obligation, to be present at any such inspection and to review and comment on any responses required. If Sponsor receives notice of such an inspection to be conducted at PRC, Sponsor shall inform PRC of said inspection and cooperate with PRC by providing any information requested by the inspecting authority.

 

8.4          Audits. Sponsor shall have the right, for the duration of this Agreement and at reasonable times during PRC's normal business hours, to examine PRC's standard operating procedures, PRC's facilities where Services are performed, and Records to confirm that the Services are being performed in accordance with this Agreement, the relevant Work Order, the relevant Protocol, and applicable laws and regulations. PRC shall provide reasonable assistance, including making available members of its staff, to facilitate such inspections and audits. Sponsor agrees that it shall not disclose to any third party any information ascertained by Sponsor in connection with any such audit or examination, except to the extent required by law or regulation.

 

8.5         Sponsor shall reimburse PRC for its time and expenses (including reasonable attorney fees and the costs of responding to findings) associated with any inspection, audit or investigation relating to the Services instigated by Sponsor or by a governmental authority, unless such inspection, audit or investigation finds that PRC breached this Agreement or any applicable law or regulation.

 

9. Miscellaneous.

 

9.1          Independent Contractor Relationship . The parties hereto are independent contractors, and nothing contained in this Agreement is intended, and shall not be construed, to place the parties in the relationship of partners, principal and agent, employer/employee or joint enture. Neither party shall have any right, power or authority to bind or obligate the other, nor shall either hold itself out as having such right, power or authority. Any investigators or institutions used in connection with the clinical investigation to which the Work Order relates shall be independent contractors exercising independent judgment and shall not be deemed to

be employees, subcontractors or agents of PRC.

 

9.2          Nonsoli c itation. During the term of this Agreement and for 12 months following its termination (the "Restricted Period"), Sponsor will not, without PRC's prior written consent, directly or indirectly, solicit or encourage any employee or contractor of PRC to terminate employment with, or cease providing services to, PRC. However, the parties agree that if Sponsor hires an employee or contractor of PRC in violation of this Section 9.2, Sponsor shall pay PRC a fee of 30% of such person's annualized salary or contractor rates for the first year of services.

 

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9.3          Force M ajeure. If either party shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strike, lockouts, labor troubles, restrictive governmental or judicial orders or decrees, riots, insurrection, war, acts of God, inclement weather or other reason or cause reasonably beyond such party's control (each a "Force Majeure"), then performance of such act shall be excused for the period of such Force Majeure. Any timelines affected by a Force Majeure shall be extended for a period equal to that of the Force Majeure. The party incurring the Force Majeure shall provide notice to the other of the commencement and termination of the Force Majeure, and shall take reasonable, diligent efforts to remove the condition constituting such Force Majeure or to avoid its affects so as to resume performance as soon as practicable. Notwithstanding the foregoing, this Section 9.3 shall not excuse any delay or failure by Sponsor to pay any amounts owed to PRC hereunder.

 

9.4          Notic es. Any notice required or permitted to be given hereunder by either party hereto shall be in writing and shall be deemed given on the date delivered if delivered (a) personally, (b) by recognized overnight courier, (c) via facsimile (with confirmation of receipt generated by the transmitting machine) or (d) by certified mail, return receipt requested, postage prepaid. All notices to each party shall be sent to the address for said party set forth in the applicable Work Order. If no address is provided in the Work Order, then notices shall be sent to the following address:

 

If to Sponsor:

 

    Correspondence to:   Finance/Accounts Payable:
Sponsor:   Creative Medical Health, Inc.   Creative Medical Health, Inc.
Contact:   Donald Dickerson   TimothyWarbington
Address:   2007 W Peoria Ave., Phoenix,   2007 W Peoria Ave., Phoenix, AZ
    AZ. 85029   85029
         
Phone:   972-822-9192   480-789-9939
Fax:   -    
Ema ii:   coo@creativemedicalhealth.con   ceo@creativemedi calhealth.con
         
lf to PRC:        
         
Contact:   Curtis Head, CEO   Tony Taricco, President, COO
Address:   1111 Bayhill Dr., Ste 290   1111 Bayhill Dr., Ste 290
    San Bruno, CA 94066   San Bruno, CA 94066
Phone:   877.519.6001 x 701   877.519.6001 x 702
Email:   chead@prcclinical.com   ttaricco@prcclinical . com

 

Either party may change its notice address by notice to the other party hereto in the form and manner provided in this Section 9.4.

 

9.5         Severance. If any one or more provisions of this Agreement shall be found to be illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, provided the surviving agreement materially comports with the parties' original intent. The parties shall make a good faith effort to replace any such provision with a valid and enforceable one such that the objectives contemplated by the parties when entering this Agreement may be realized.

 

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9.6          W aiver. Waiver or forbearance by either party hereto of any of its rights under this Agreement or applicable law in any one or more instances must be in writing and signed by the waiving party and shall not be deemed to constitute a waiver or forbearance of any other right or a further or continuing waiver of such rights.

 

9.7          Amendments; Assig nment. No amendment, change or modification to this Agreement or any Work Order shall be effective unless in writing and executed by authorized representatives of the parties hereto. This Agreement and any Work Order may not be assigned by either party without the other party's prior written consent.

 

9.8.          Arbitration and Equitable Reli e f.

 

A. Arbitration. Sponsor and PRC agree that any and all controversies, claims or disputes with anyone (including without limitation, Sponsor and Sponsor's heirs, successors and assigns, PRC and any employee, officer, director, shareholder or benefit plan of PRC, in its capacity as such or otherwise} arising out of, relating to or resulting from Sponsor's performance of the Services under this Agreement or the termination of this Agreement, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the "Rules"} and pursuant to California law. Sponsor AND PRC AGREE TO ARBITRATE, AND THEREBY AGREE TO WAIVE ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO, ALL DISPUTES ARISING FROM OR RELATED TO THIS AGREEMENT. Sponsor understands that this Agreement to arbitrate also applies to any disputes that PRC may have with Sponsor.

 

B.          Procedure. Sponsor and PRC agree that any arbitration will be administered by the American Arbitration Association ("AAA"), and that a neutral arbitrator will be selected in a manner consistent with its Commercial Rules. Sponsor and PRC agree that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including discovery motions, motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Sponsor and PRC agree that the arbitrator will issue a written decision on the merits. Sponsor and PRC also agree that the arbitrator will have the power to award any remedies, including attorneys' fees and costs, available under applicable law. Sponsor and PRC agree that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that, to the extent that the AAA's Commercial Rules conflict with the Rules, the Rules will take precedence.

 

C.          Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between PRC and Sponsor. Accordingly, except as provided for by the Rules, neither PRC nor Sponsor will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding the foregoing, the arbitrator will not have the authority to disregard or refuse to enforce any lawful PRC policy, and the arbitrator shall not order or require PRC to adopt a policy not otherwise required by law which PRC has not adopted.

 

D.          Availability of Injunctive Relief. The parties shall retain all rights to seek injunctive relief, as provided under Section 1281.8 of the California Code of Civil Procedure.

 

9.9          Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, without giving effect to any choice of law principles that would require the application of the laws of a different slate.

 

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9.10          Counterparts and Facsimile Signatures. This Agreement, and any subsequent amendment(s), may be executed in counterparts and the counterparts, together, shall constitute a single agreement. A facsimile transmission of this signed Agreement or a Work Order bearing a signature on behalf of a party shall be legal and binding on such party.

 

9.11          Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes, as of the Effective Date, all prior negotiations, representations or agreements, either written or oral, with respect to the subject matter hereof.

 

9.12          Testimony. Should PRC be obligated to provide testimony or records regarding a Protocol or a drug that is the subject of any Project in any legal or administrative proceeding, then Sponsor shall reimburse PRC for its reasonable, documented, out-of-pocket costs therefor, plus an hourly fee for the time spent by its employees or consultants in providing such testimony or records equal to the internal fully-burdened cost to PRC of such employee or consultant. However, the foregoing shall not apply (a) to litigation between the parties arising under this Agreement, or (b) to legal or administrative proceedings that result, in whole or in part, from (i) the negligence, gross negligence or wilful misconduct of PRC or its personnel, or (ii) PRC's breach of its obligations, representations or warranties hereunder.

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto by their duly authorized officers as of the Effective Date.

 

PROFESSIONAL RESEARCH CONSULTING, INC.   (SPONSOR]
0/8/A PRC CLINICAL      
       
By:     By:  
         
Name:     Name: Donald Dickerson
         
Title:     Title: Chief Operating Officer
         
Date:     Date: 11/15/2015

 

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Exhibit 10.3

 

Clinical Trial Agreement

 

This Clinical Trial Agreement (“Agreement”) is made as of this 19th day of September, 2016 (“Effective Date”) by and between Creative Medical Technologies, Inc. with a place of business at 2017 W. Peoria Avenue, Phoenix, AZ, 85029 (“CMT”) and Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center , a non-profit biomedical research and education institute located at 1124 W. Carson Street, Building N-14, Torrance, CA 90502 (“Institution”).

 

CMT desires to have Institution conduct a clinical trial to be supervised by its member Jacob Rajfer, M.D., (“Principal Investigator”) under the CMT patented intellectual property and protocol entitled, “ Feasibility Study of Intra-cavernosal Administration of Non-Expanded Autologous Bone Marrow Cells in Treatment of Erectile Dysfunction ”, (“Study”). CMT wishes to provide certain support for the Study, as is more fully described in Section 4 of this Agreement.

 

The Institution and CMT are hereinafter each individually referred to as a “Party” and collectively referred to as the “Parties”.

 

Accordingly, the Parties agree as follows:

 

1. Investigators and Re se arch Staff

 

1.1 Principal Investigator. The Study will be supervised and completed by Principal Investigator at Institution.

 

1.2 Obligations. Institution will ensure that Principal Investigator and any other personnel who participate in the conduct of the Study abide by all applicable terms of this Agreement. Institution is responsible to CMT for compliance by all personnel, including the Principal Investigator, with the terms of this Agreement.

 

 

 

 

 

1.3 Delegation of Duties by Principal Investigator. Principal Investigator may delegate duties and responsibilities to sub-investigators or research staff only to the extent permitted by Food and Drug Administration (FDA) regulations governing the conduct of clinical investigations.

 

1.4 Compliance with Institutional Policies. Institution will ensure that Principal Investigator complies with Institution’s policies and procedures, including applicable financial policies. Institution will notify CMT promptly of any conflict between the terms of this Agreement and any such policy or procedure, and the parties will attempt to reach an appropriate accommodation.

 

2. Protocol

 

2.1 Protocol. The Study will be conducted in accordance with a protocol developed by CMT (“Protocol”).

 

2.2 Ame ndme nts. If CMT modifies the IRB-approved final Protocol, CMT will inform Principal Investigator in writing and seek approval from IRB for any such amendments.

 

3. Study Conduct

 

3.1 Sponsorship. This is a sponsored study, CMT has designed the study and CMT is funding the Study.

 

3.2 Regulatory. CMT is solely responsible for any and all safety reporting and regulatory obligations associated with the conduct of the Study.

 

3.3 Standards. Principal Investigator will conduct the Study in accordance with the Protocol, International Conference on Harmonization Good Clinical Practice (ICHGCP) guidelines, and all applicable governmental laws, rules, and regulations.

 

 

 

 

 

3.4 IRB Approval. If required, Principal Investigator will ensure that the Study is approved by and subject to continuing oversight by an appropriate Institutional Review Board (IRB). Institution will provide CMT with documentation of both the initial IRB approval and annual renewals of that approval. Institution will notify CMT promptly of any withdrawal or suspension of IRB approval during the term of this Agreement.

 

3.5 Informed Consent. Principal Investigator will obtain informed consent for each Study subject in accordance with 21 Code of Federal Regulations Part 50 and will Inform Study subjects that CMT is providing support for the Study. CMT has no obligation to participate in the development of, or to review or comment on, the informed consent form.

 

3.6 Monitoring and Data Collection. CMT may monitor the Study and receive any subject-level Study data, excluding the identity of any patients involved with the Study. During and for a period of at least two years after the completion of the Study, CMT shall promptly report to the Investigator any information that could directly affect the health or safety of past or current Study subjects or influence the conduct of the study, including but not limited to the Study results and information in site monitoring reports and data safety monitoring committee reports as required by the Protocol. In each case, the Investigator and Institution shall be free to communicate these findings to each Study subject and the IRB.

 

3.7 Duration of Study . Principal Investigator expects to complete Study conduct by April 30, 2018. If required, the Study must be approved by CMT should an extension past April 30, 2018 to complete the Study is needed.

 

 

 

 

 

3.8 Status Updates. Principal Investigator will provide CMT with an update of Study status at least once per quarter during the term of this Agreement, or more frequently if mutually agreed by the Parties. Each status update will include subject enrollment, publication plans, any adjustments in estimated study completion date, and any other information reasonably requested by CMT.

 

4. Research Support. CMT will provide funding in support of the Study in accordance with the payment schedule and budget in Attachment A. This funding constitutes the CMT Financial Support for this Study. In addition, CMT shall provide the Institution with all equipment and supplies necessary to conduct the Study as required hereby, the sufficiency and adequacy of the equipment and supplies to be reasonably determined by the Institution. The provision of the equipment and supplies so described and the CMT Financial Support constitutes the Research Support for this Study.

 

4.1 Basis of Support. This financial support is not conditioned on any pre-existing or future research or business relationship between the Principal Investigator and CMT or Institution and CMT. It is also not conditioned on any business, research or other decisions the Principal Investigator or Institution has made, or may make, relating to CMT or CMT Products.

 

4.2 Use of Financial Support. The Principal Investigator and Institution will use the financial support solely for purposes of the Study.

 

4.3 Study Budget. Institution represents that the Institution-provided study budget upon which the support is based reflects an informed estimate of all funds required to complete the Study.

 

4.4 Disclosure by CMT. In the interest of transparency relating to its financial relationships with investigators and study sites, CMT may publicly disclose the funding associated with this Agreement. Any such report by CMT will clearly differentiate between payments made to institutions and payments made to individuals.

 

 

 

 

 

5. Study Data. Principal Investigator and Institution are free to publish the results of the Study, subject to the provisions in Section 7 (Publications), and to use data generated from the Study for their own research and educational purposes and programs. However, in consideration of the CMT support, Principal Investigator and Institution shall not use or permit others to use Study data for the commercial benefit of any third party.

 

6. Study Report. No later than ninety (90) days after the final examination and follow-up review of any patient included within the Study, Principal Investigator will provide CMT with a written report of the Study results (“Study Report”). The Study Report may take the form of a manuscript for publication (see Section 7, Publications). If the Agreement is terminated early, the Study Report shall include, at minimum, the results of the Study up until the date of termination.

 

7. Publications. CMT supports the exercise of academic freedom and encourages Principal Investigator to publish the results of the Study, whether or not the results are favorable to CMT or any CMT product.

 

7.1 Pre-Publication Review. Principal Investigator will provide CMT an opportunity (a minimum of 30 days before submission or other public disclosure) to prospectively review any proposed publication, abstract, or other type of disclosure that reports the results of the Study (collectively, “Publication”). CMT further recognizes and accepts that under Institution’s mission as a non-profit, responsible medical center, Institution and its investigators must have a meaningful right to publish research results without CMT’s approval or editorial control, regardless of the Study’s outcome; provided, however, that if reasonably requested by CMT, Institution shall not publish or publicly disclose any confidential information belonging to CMT. If CMT reasonably determines that the proposed publication or public disclosure contains patentable subject matter which requires protection, CMT may request the delay of publication or public disclosure for a period of time not to exceed ninety (90) days for the purpose of filing patent applications. If no written response is received from CMT within the applicable review period, it may be conclusively presumed that publication or public disclosure may proceed without delay.

 

 

 

 

7.2 Standards. For all Publications, Principal Investigator will comply with recognized ethical standards concerning publications and authorship, including the Uniform Requirements for Manuscripts Submitted to Biomedical Journals , established by the International Committee of Medical Journal Editors.

 

7.3 Disclosure of Support. Principal Investigator will disclose CMT support of the Study in any Publication of Study results.

 

8. Indemnification; Insurance ; Subject Injury.

 

8.1 CMT will indemnify and hold harmless the County of Los Angeles, the Institution, Site, Principal Investigator, and Institution and Site’s trustees, directors, officers members and employees (collectively, “Indemnified Parties”) against any and all liabilities, losses, damages, costs, and expenses including reasonable attorneys’ fees and costs (collectively, “Losses”) they may suffer in connection with any claim or lawsuit brought by a third party: (a) for bodily injury, including death, arising out of the conduct of the Study in accordance with the Protocol and the Agreement, (b) that arises out of CMT’s use of the Study results, or (c) that arises out of the negligence, recklessness, or willful misconduct of CMT or its directors, officers, employees, or agents. Notwithstanding the foregoing, CMT will not be obligated to indemnify the Institution Indemnitees to the extent that such Losses arise from (i) negligence, recklessness, or willful misconduct on the part of any of the Institution Indemnitees or the Study Personnel, or (ii) a breach of the Institution’s obligations, representations, or certifications under this Agreement.

 

8.2 Institution agrees to indemnify, defend, and hold harmless CMT and CMT’s (the “ CMT Indemnitees ”) from any and all Losses they may suffer in connection with any claim or lawsuit brought by a third party arising out of: (a) the negligence, recklessness, or willful misconduct on the part of the Institution or Institution’s officers, employees, agents, and subcontractors (including Study Personnel), or (b) a breach of the Institution’s obligations, representations, or certifications under this Agreement. Notwithstanding the foregoing, Institution will not be obligated to indemnify the Sponsor Indemnitees to the extent that such Losses arise from (i) the negligence, recklessness, or willful misconduct on the part of any of the Sponsor Indemnitees, or (ii) a breach of the Sponsor’s obligations, representations, or certifications under this Agreement.

 

 

 

 

8.3 Each party’s agreement to indemnify, defend, and hold the other party and its respective indemnitees harmless is conditioned upon the indemnified party: (a) providing written notice to the indemnifying party of any claim, demand, or action arising out of the indemnified activities within thirty (30) days after the indemnified party has knowledge of such claim, demand, or action, provided that any failure on the part of an indemnified party to notify the indemnifying party of receipt of notice of a claim will relieve the indemnifying party of its obligation to indemnify the indemnified party for such claim under this Agreement only to the extent that the indemnifying party has been prejudiced by the lack of timely and adequate notice; (b) permitting the indemnifying party to assume full responsibility and authority to investigate, prepare for, defend against, and settle any such claim or demand; and (c) assisting the indemnifying party, at the indemnifying party’s reasonable expense, in the investigation of, preparation for, and defense of any such claim or demand. If the indemnifying party assumes the defense of a third party claim, the indemnifying party will not be subject to any liability for any settlement of such claim made by the indemnified party without the indemnifying party’s consent, which consent may not be unreasonably withheld or delayed.

 

8.4. During the term of this Agreement and for at least one (1) year thereafter, Institution will, at its own expense, carry and maintain medical professional liability insurance with limits of not less than one million dollars ($1,000,000) per incident and there million dollars ($3,000,000) per aggregate for each person and entity peforming services under this Agreement, including but not limited to Institution and Investigator. These policies will provide coverage for incidents, claims, and suits arising from activities performed in connection with this Agreement and reported during the term of this Agreement, as well as those incidents, claims, and suits arising from such activities but reported after the expiration or termination of this Agreement.

 

 

 

 

8.5 During the term of this Agreement and for at least one (1) year thereafter, Sponsor will, at its own expense, carry and maintain in full force insurance coverage to support its obligations under the indemnification, liability and related provisions of this Agreement, with limits of not less than one million dollars ($1,000,000) per incident and three million dollars ($3,000,000) per aggregate. These policies will provide coverage for incidents, claims, and suits arising from activities performed in connection with this Agreement and reported during the term of this Agreement, as well as those incidents, claims, and suits arising from such activities but reported after the expiration or termination of this Agreement.

 

Either Party will at the request of other party, have its insurance carrier for such insurance furnish to the requesting party, a certificate that such insurance is in force, such certificate to indicate any deductible and/or self-insured retention and stipulate that such insurance will not be canceled while this Agreement is in effect without at least thirty (30) days prior written notice to requesting party.

 

8.6 CMT will reimburse Institution for reasonable and necessary medical expenses, including hospitalization, it incurs in providing necessary medical treatment to a Study subjects who are injured or have adverse reactions directly resulting from any research procedure performed in accordance with the Protocol, provided that such adverse reactions, or research procedures performed, are in no way attributable to: (a) a failure of the Institution and/or Investigator to adhere to the Protocol, (b) the negligence or misconduct of any agents, contractors, or employees of Site or Institution or, (c) the natural progression of a subject’s underlying, re-existing medical condition or disease. For clarity, CMT will not pay for the treatment of medical complications that are a part of the natural course of the primary disease, but will reimburse Institution for reasonable and necessary medical expenses incurred for the treatment by Institution of aggravations of existing conditions that directly result from any research procedures performed in accordance with the Protocol.

 

 

 

 

 

9. Adverse Experiences. CMT shall promptly notify Investigator of any findings of new and unexpected serious adverse events rising from CMT’s monitoring of the Study that could affect the safety of subjects, and trends or patterns of non-serious or expected adverse events that occur at a specificity or severity that is inconsistent with prior observations all in accordance with the obligations set forth in 21 C.F.R. 312.32(c), 21 C.F.R. 312.55 (b), 21 C.F.R. 56.108 (b) and FDA’s Guidance on Adverse Event Reporting to Institutional Review Boards in Clinical Trials (January 2009). In the event that any adverse reactions associated with the Study Drug indicate the possibility of significant health hazards, Institution and Investigator shall notify Sponsor within twenty-four (24) hours of making such discovery. Institution and Investigator shall at all times have the right to provide information regarding such adverse events to Study subjects if it is determined that such adverse events may have an effect on the Study subject’s health.

 

10. Use of Name. The use by any Party of the name, trademark, trade name, logo or any adaption thereof, of any other Party in any publication, press release, advertisement, announcement, promotional material, or promotional activity relating to the Study requires the prior written consent of the other Party, subject, however, to the following:

 

a. CMT may, without prior consent, identify Institution as the entity conducting the Study, and identify the Principal Investigator as conducting the Study at the Institute. This paragraph does not apply to information of Sub-investigators or other study personnel.

 

b. Institute and Principal Investigator may, without prior consent, disclose their participation in the Study (Including the name of CMT, name of the Study, protocol number, funding amount, and any information available in a public registry) as required by law, court order, or state regulation; or in (1) C.V.s, (2) their website, (3) industry directories, (4) presentations, (7) grant applications to non-commercial funding sources, (8) government reports and filings, and (9) conflict-of-interest reports. This paragraph applies to Sub-investigators and other study personnel.

 

 

 

 

 

c. CMT, as required by law or regulation, may disclose and make public the terms and conditions of this Agreement, including, but not limited to, the name of Institution and Principal Investigator and the amount of payments under this Agreement.

 

11. Intellectual Property. Intellectual Property that either Party owned prior to execution of this Agreement, or develops independently of the Study and other Party’s confidential information is that Party’s separate property. It is not affected by this Agreement. Neither Party has any claims to or rights in such Intellectual Property of other Party.

 

10.1 Inventorship. Inventorship shall be determined under federal patent laws.

 

10.2 Institution Intellectual Property. All individual or collective inventions, improvements or discoveries, whether or not patentable or copyrightable which are conceived or made solely by one or more employees or members of the Institution (“Institution Intellectual Property”) in performance of the Study during the term of this Agreement shall be considered Institution Intellectual Property. All rights and title to Institution Intellectual Property created pursuant to the Study shall belong to Institution and shall be subject to the terms and conditions of this Agreement.

 

Notwithstanding the foregoing, however, Institution acknowledges and agrees that it shall not under any circumstance make commercial use of Institution Intellectual Property in such a way as to compete with any business of CMT, including any of its productions whether existing or prospective, or gain commercial advantage over any such business of CMT as a result thereof. In consideration of CMT's support of Institution in performance of any such clinical testing or other services provided under this Agreement, Institution hereby grants to CMT an option for an exclusive license to said Institution Intellectual Property, which shall expire six months after Institution has provided written notice to CMT of any such invention, improvement or discovery made by Institution ("Option Period"). Upon exercise of the option in writing, the Parties will meet within thirty (30) days to begin negotiating the terms of the license. The Parties agree to negotiate in good faith. In the event a license is not executed within six (6) months from the exercise of the option, or the option is not exercised within the Option Period, the Institution shall be free to license the Institution Intellectual Property to others at the Institution's sole discretion with no further obligation to the CMT.

 

 

 

 

10.3 CMT Intellectual Property. All individual or collective inventions, improvements or discoveries, whether or not patentable or copyrightable which are conceived or made solely by one or more employees of CMT (“CMT Intellectual Property”) in performance of the Study during the term of this Agreement shall be considered CMT Intellectual Property. All rights and title to CMT Intellectual Property created pursuant to the Study shall belong to CMT and shall be subject to the terms and conditions of this Agreement.

 

10.4 Joint Intellectual Property. All individual or collective inventions, improvements or discoveries, whether or not patentable or copyrightable which are conceived and reduced to practice jointly by one or more employees or members of each Party (“Joint Intellectual Property”) in performance of the Study during the term of this Agreement shall be considered Joint Intellectual Property. All rights and title to Joint Intellectual Property created pursuant to the Study shall belong jointly to Institution and CMT and shall be subject to the terms and conditions of this Agreement.

 

a. Each Party will promptly notify the other when Joint Intellectual Property is created. Inventions made jointly by CMT and Institution will be owned jointly by CMT and Institution CMT shall accordingly have the right, at its option and expense, and through patent attorneys or agents of its choice, to make all decisions with respect to, and to otherwise control preparation, filing and prosecution (including any proceedings relating to reissues, reexaminations, protests, interferences, and requests for patent extensions or supplementary protection certificates) of any patent application with respect to any Joint Intellectual Property and to maintain any patents issuing therefrom. CMT shall provide Institution an opportunity to review decisions related to the prosecution of any patent application based upon Joint Intellectual Property.

 

 

 

 

b. CMT shall not retain patent attorneys or agents if such representatives pose a conflict of interest with respect to the Institution’s rights in Institution Intellectual Property and Joint Intellectual Property..

 

c. If CMT elects not to exercise its rights in the Joint Intellectual Property or CMT decides to discontinue or refrain from providing the financial support for the prosecution or maintenance of patents or patent applications claiming Joint Intellectual Property, then CMT shall be deemed to have irrevocably assigned its rights in such patents and patent applications to the Institution and, as a result, the Institution shall be free to file or continue prosecution or maintain any such application(s) and to maintain any protection issuing thereon in the United States of America and in any foreign country at the Institution’s sole expense and all rights in the applicable patent or patent applications shall thereupon be transferred to the Institution.

 

12. Grant of Rights . Institution hereby grants to CMT, an exclusive option at CMT’s sole election, to negotiate for an exclusive license to Institution’s interest in any Joint Intellectual Property. Terms and conditions of these licenses are to be negotiated in good faith and agreed upon between Institution and CMT. CMT shall notify Institution by written notice within ninety (90) days of agreement of the Parties whether or not CMT elects to exercise the option. If CMT either (i) elects not to exercise its option or (ii) fails to provide written notice within such ninety (90) day period, then CMT shall automatically be deemed to have relinquished any rights it may have to any Intellectual Property or license described in this section. If CMT provides Institution written notice of its exercise of the option, the parties shall exclusively negotiate in good faith, for a period of ninety (90) days, a license to the applicable Institution Intellectual Property and Joint Intellectual Property on terms consistent with the terms of this paragraph. If, after good faith negotiations, no agreement is reached by the parties within such ninety (90) day period, Institution shall be free to enter into a license agreement with any third party for any Institution Intellectual Property and to license its rights in any Joint Intellectual Property to any third party.

 

 

 

 

13. Termination.

 

12.1 Termination Events. Termination of this Agreement will be triggered by the earlier of any of the following events.

 

a. Study Completion. The Agreement will terminate with the Study is complete, which means the completion of all Protocol-required activities for all enrolled subjects and receipt, by CMT, of a final Study Report.

 

b. Early Termination by Institution. If Institution terminates the Study early, for any reason, Institution may terminate the Agreement on the conditions that (i) thirty (30) days written notice of termination is provided to CMT, and (ii) in the event that any patients remain enrolled in the Study as of the date of Institution’s decision to termination, then Institution shall, notwithstanding its termination of the Agreement, continue to comply with the requirements of both the IRB and federal regulations affecting clinical study patient follow-up examination and care.

 

c. Early Termination by CM T. CMT may terminate the Agreement early in any of the following circumstances:

 

i. The Protocol is modified in a way unacceptable to CMT (see section 2.2, Amendments);

 

 

 

 

ii. Study conduct is not completed within six months after the target date ( see Section 3.7, Duration of Study);

 

iii. The Study does not start within six months of the Effective Date of this Agreement.

 

iv. The Study design or objectives are no longer scientifically relevant.

 

d. Termination for Cause. Either Party may terminate the Agreement immediately upon notification for cause, including but not limited to uncured material breach of the terms of this Agreement by the other Party.

 

e. Effective Date of Termination. If termination is triggered by events described in Sections 10.1 a. b. or c above, termination will be effective after completion by both parties of any remaining applicable Agreement obligations.

 

f. Payment upon Termination. If the Agreement is terminated early for any reason other than an uncured material breach of this Agreement by Principal Investigator or Institution, CMT will pay a pro rata portion of the total funding, less payments already made.

 

12.2 Miscellaneous

 

a. Debarment and Exclusion. Institution certifies that neither it nor Principal Investigator is debarred under subsections 306(a) or (b) of the Federal Food, Drug, and Cosmetic Act and that it has not and will not use in any capacity the services of any person debarred under such law with respect to services to be performed under this Agreement. Institution also certifies that neither it nor Principal Investigator is excluded from any federal health care program, including but not limited to Medicare and Medicaid. Institution will notify CMT promptly if either of these certifications needs to be amended in light of new information.

 

b. Warranty. INSTITUTION MAKES NO WARRANTIES OR REPRESENTATIONS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY REGARDING THE RESULTS OF THE STUDY.

 

 

 

 

c. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California, without regard for its conflict of law provisions.

 

d. Notice . All notices required under this Agreement will be in writing and be deemed to have been given when hand delivered, sent by overnight courier or certified mail, as follows, provided that all urgent matters, such as safety reports, will be promptly communicated via telephone, and confirmed in writing:

 

  If for Institution: Los Angeles Biomedical Research Institution at
    Harbor-UCLA Medical Center
    Grants and Contracts Administration
    1124 W. Carson St.
    Torrance, CA 90502
    Phone: (424) 571-7631
    Attention: Patrick Rosal
     
  If for CMT: Creative Medical Health, Inc.
    2007 West Peoria Avenue
    Phoenix, Arizona 85029
     
    Phone: (480) 789-9939
    Attention: Timothy Warbington, President & CEO

 

e. Entire Agreement. This agreement and its attachments constitute the entire agreement between the parties with respect to this subject matter. All express or implied representations, agreements and understandings, either oral or written, heretofore made are expressly superseded by this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by both parties.

 

f. Independent contractors . Each party hereby acknowledges that the parties shall be independent contractors and that the relationship between the parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other party, without the prior consent of the other party to do so.

 

 

 

 

g. Waive r. The waiver by a party of any right hereunder, or of any failure to perform or breach by the other party hereunder, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by the other party hereunder whether of a similar nature or otherwise.

 

h. Conflict with Attachments. If there is any conflict between this agreement and any Attachments to it, or between the Agreement and the Protocol, the terms of this Agreement will control.

 

i. Counterparts . This Agreement may be executed in separate counterparts, and by facsimile or electronically as a portable document format (pdf) file or similar electronic file, each of which will be deemed an original, and when executed separately or together, will constitute a single original instrument, effective in the same manner as if the parties had executed one and the same instrument.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

 

CREATIVE MEDICAL HEALTH, INC.   LOS ANGLES BIOMEDICAL RESEARCH
      INSTITUTE AT HARBOR-UCLA MEDICAL CENTER
       
By: /s/ Timothy Warbington   By: /s Allison Weber
Name: Timothy Warbington   Name: Allison Weber
Title: President & Chief Executive Officer   Title: Director, Research Administration
Date:     Date: 9/20/16
       
READ AND ACKNOWLEDGED:    
       
By: /s/ Jacob Rajfer, MD    
Name: Jacob Rajfer, MD    
Title: Principal Investor    
Date: 9/19/2016    

 

 

 

 

Attachment A

 

Payment Schedule

 

Site will send payment requests to:

 

ATTN:

Creative Medical Technologies, Inc.

C/O Timothy Warbington

2017 W. Peoria Ave.

Phoenix, AZ 85029

Email: ceo@creativemedicalhealth.com

 

CMT will send payments to:

 

Payee: Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center
   
Institution: Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center
   
Address: PO Box 60637
  Terminal Annex
  Los Angeles, CA 90060
   
C/O: 021760-01-00/J. Rajer, MD
   
Taxpayer ID: 95-2138184

 

 

 

 

Exhibit 31.1

 

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Timothy Warbington, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Creative Medical Technology Holdings, Inc. for the quarter ended September 30, 2016;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 10, 2016 By: /s/ Timothy Warbington
    Timothy Warbington
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Donald Dickerson, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Creative Medical Technology Holdings, Inc. for the quarter ended September 30, 2016;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 10, 2016 By: /s/ Donald Dickerson
    Donald Dickerson
    Chief Financial Officer
    (Principal Financial Officer)

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with this Quarterly Report of Creative Medical Technology Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Timothy Warbington, Chief Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. Such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2016 fairly presents, in all material respects, the financial condition and results of operations of Creative Medical Technology Holdings, Inc.

 

Date: November 10, 2016 By: /s/ Timothy Warbington
    Timothy Warbington
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

Exhibit 32.2

 

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with this Quarterly Report of Creative Medical Technology Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Donald Dickerson, Chief Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. Such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in such Quarterly Report on Form 10-Q for the period ended September 30, 2016, fairly presents, in all material respects, the financial condition and results of operations of Creative Medical Technology Holdings, Inc.

 

Date: November 10, 2016 By: /s/ Donald Dickerson
    Donald Dickerson
    Chief Financial Officer
    (Principal Financial Officer)