Sanara Medtech Inc. — Filing Summary
Registrant identity: The supplied filing is Wound Management Technologies, Inc. (WMT), not Sanara Medtech Inc. It reports that WMT adopted “WNDM Medical Inc.” as a trade name in April 2018. Verify that this is the intended filing.
Business context and reporting period
This unaudited Form 10-Q covers the quarter ended March 31, 2018, compared with the quarter ended March 31, 2017. WMT’s business centers on advanced wound-care products, particularly CellerateRX, and HemaQuell, a resorbable bone hemostat. The company also receives royalty income from licensed technology.
Financial performance and condition
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $1,961,787 | $1,605,246; up 22% |
| Gross profit | $1,750,875; 89.2% gross margin | $1,431,544; 89.2% gross margin |
| Operating income | $66,708; 3.4% operating margin | $58,259; 3.6% operating margin |
| Net income | $6,209 | $53,058 |
| Net income (loss) available to common shareholders | $(125,049) | $40,122 |
| Operating cash flow | $(200,446) | $(163,844) |
| Cash at quarter-end | $261,446 | $463,189 at December 31, 2017 |
- Cost of goods sold was $210,912, versus $173,702. SG&A was $1,654,361, up 22%, which management attributed mainly to commissions, payroll, and consulting costs.
- Interest expense was $60,608, versus $44,803. The 2017 quarter included $39,709 of debt-forgiveness income; these items contributed to lower 2018 net income.
- Investing cash outflow was $1,297; financing cash flow was zero. Cash declined by $201,743 during the quarter.
- At March 31, current assets were $2,011,793 and current liabilities $479,003, giving working capital of $1,532,790 and a current ratio of about 4.2. Total liabilities were $479,003, with no long-term liabilities reported.
- Related-party convertible notes totaling $1.2 million, plus $385,594 accrued interest, were converted to common stock in February 2018. Management reported zero debt on the balance sheet after conversion.
Material changes and notable items
- Revenue growth was led by CellerateRX Powder, which generated $1,788,276 versus $1,442,938. CellerateRX Gel revenue was $121,164; HemaQuell revenue was $6,600. Royalty and other revenue were also reported.
- Reported common shares outstanding increased from 113,423,854 at December 31, 2017 to 236,642,901 at March 31, 2018. The increase primarily reflected conversion of related-party debt and Series C preferred stock and dividends into common shares.
- Series C preferred stock was fully converted by quarter-end. The company recorded $103,197 of inducement dividends associated with encouraging early conversion, in addition to $28,061 of preferred dividends. These reduced income available to common shareholders.
- WMT adopted revenue-recognition Topic 606 on January 1, 2018 using the modified retrospective method; it reported no impact on opening accumulated deficit or first-quarter revenue.
Outlook, risks, and contingencies
- Management cited sales-force expansion, new surgical customers, renewed focus on long-term care, and clinical support as growth initiatives. It gave no quantified financial guidance; it described plans to continue investing in sales, marketing, product development, and clinical support.
- The CellerateRX licenses expired February 27, 2018, but allow continued sales and distribution for up to six months after termination. Post-termination sales remain subject to a 3% royalty. The filing does not clarify the status of any renewal or longer-term arrangement.
- The company has royalty obligations, including a stated $375,000 minimum annual aggregate royalty when percentage-based payments do not meet that amount, and an 8% royalty on net revenues from certain products using acquired Resorbable technology.
- Two related lawsuits concerning alleged usurious loan transactions had been consolidated and tried. The jury found no fraud on the counterclaim; the filing does not clearly state the complete status or final disposition of all claims.
- Management characterized the quarter as profitable and said the company was positioned to pursue growth, while cautioning that interim results are not necessarily indicative of full-year results. The filing provides no specific liquidity forecast.
Important facts for investors to verify
- Confirm that this WMT/WNDM filing is the intended filing for Sanara Medtech Inc.
- Verify the status and terms of the expired CellerateRX licenses, including the post-expiration sales window and any replacement agreement.
- Assess the effect of the substantial common-share issuance and preferred-stock inducement on dilution and future per-share results.
- Review the company’s cash burn, collections, and ability to fund planned growth; operating cash use exceeded $200,000 in the quarter while ending cash was $261,446.
- Check the final status of the consolidated litigation and the company’s ongoing royalty commitments.