Sanara Medtech Inc. — filing identity and period
The supplied filing is Wound Management Technologies, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2015, not a filing under the Sanara Medtech name. It reports the company’s CellerateRX wound-care business and Resorbable Orthopedic Products subsidiary. Confirm the entity relationship before treating this as a Sanara Medtech filing.
Financial results
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $745,117 | $544,350 | $1,759,104 | $1,226,644 |
| Gross profit | $539,767 | $274,904 | $1,336,668 | $788,475 |
| Gross margin | 72.4% | 50.5% | 76.0% | 64.3% |
| Net loss | $(582,320) | $(775,924) | $(715,716) | $(1,321,887) |
| Net loss available to common stockholders | $(646,504) | $(835,837) | $(843,378) | $(1,431,917) |
| Basic and diluted loss per share | $(0.01) | $(0.01) | $(0.01) | $(0.02) |
Revenue grew 37% in Q2 and 43% year to date, which management attributed to increased surgical sales, a larger sales force, and new and existing customer accounts. About 93% of Q2 revenue came from CellerateRX and 7% from ROP royalties. Q2 2015 included $50,250 in royalty revenue; six-month royalty revenue was $100,665.
Cost of goods sold was $205,350 in Q2 2015 versus $269,446 a year earlier. General and administrative expense was $868,058 versus $1,012,633; six-month expense was $1,746,101 versus $1,925,867. The six-month 2015 loss included a $198,307 loss on issuance of debt for warrants. Interest expense was $77,720 for the first half, down from $205,659.
Cash, liquidity and debt
- At June 30, 2015, cash was $364,497, current assets were $1,204,138, and current liabilities were $1,376,676. The resulting working-capital deficit was about $173,000; the current ratio was approximately 0.87.
- Total liabilities were $2,584,184, compared with total assets of $1,462,882; stockholders’ deficit was $1,121,302. Current liabilities included $687,120 of notes payable and $187,500 of accrued current-year royalties. The balance sheet also reported $1.2 million of long-term related-party convertible notes.
- Six-month operating cash use was $601,312, compared with $1,091,082 in 2014. Investing cash use was $707. Financing provided $443,075, versus $2,185,810 in 2014; cash fell from $523,441 at year-end to $364,497.
- In June, two trusts controlled by company affiliates each lent the company $600,000 under senior secured convertible notes bearing 10% interest, due June 15, 2018, and convertible into Series C preferred stock at $70 per share. Proceeds repaid $1.1 million of the prior Brookhaven related-party debt; the remaining $100,000 was forgiven and treated as a capital transaction.
- A separate $200,000 Tonaquint convertible note issued in exchange for 500,000 warrants bears 5% interest and matures September 26, 2016. Monthly installments begin in December 2015 and may, subject to conditions, be paid in shares at a price based on 90% of the five-day volume-weighted average share price.
Changes, outlook and risks
- Gross margin improved substantially year over year, and net losses narrowed. Management cited higher sales and lower expenses; lower legal and professional fees contributed to the G&A decline.
- Management said it planned to invest in a full-time sales force and expand CellerateRX marketing, while developing ROP. No specific financial guidance was provided. Results for the interim period were stated not to necessarily indicate full-year results.
- The company amended its WellDyne agreement and gave notice terminating it effective September 19, 2015. The filing does not quantify the expected financial effect.
- The filing states that recurring losses, a working-capital deficit, stockholders’ deficit, and reliance on debt and equity funding raise substantial doubt about the company’s ability to continue as a going concern. Continued operations depend on obtaining funding and successful future operations.
- Management concluded disclosure controls were not effective as of June 30, 2015, due to deficiencies in controls over embedded-derivative valuation. No material changes in internal control during the quarter were reported.
- Series C preferred dividends were $127,662 for the first half and had not been declared as of June 30. The company also had a contractual minimum annual royalty obligation of $375,000 under the CellerateRX license; prior-year unpaid royalties were paid in January, and $187,500 of current-year royalties was accrued at quarter-end.
- The company reported no legal proceedings and no off-balance-sheet arrangements. It reported no defaults upon senior securities.
Investor verification priorities
- Verify that this 2015 Wound Management Technologies filing is relevant to the requested Sanara Medtech entity and any subsequent name or corporate changes.
- Assess the company’s funding runway, the terms and security of its related-party debt, and potential dilution from convertible securities and share-settled payments.
- Check whether revenue growth and improved gross margins persisted, and how much revenue and cash generation depended on royalties and customer concentration.
- Review the going-concern disclosure, royalty obligations, and any later developments in the WellDyne termination.
- Verify remediation of the disclosed derivative-valuation control weaknesses.