Texas
|
|
59-2219994
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(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification Number)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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|
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☒
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Smaller reporting company
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☒
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Emerging
growth company
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☐
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Page
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Part I – Financial Information
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3
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3
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4
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5
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6
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7
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18
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20
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21
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Part II. Other Information
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22
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22
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22
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22
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22
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22
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22
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23
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Successor
|
Successor
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|
September
30,
|
December 31,
|
Assets
|
2019
(unaudited)
|
2018
|
Current assets
|
|
|
Cash
|
$160,711
|
$176,421
|
Accounts
receivable, net of allowance for bad debt of $94,150 and
$0
|
1,049,628
|
1,022,500
|
Royalty
receivable
|
50,250
|
-
|
Inventory, net of
allowance for obsolescence of $66,119 and $484
|
799,818
|
465,314
|
335,876
|
-
|
|
Prepaid
and other assets
|
92,656
|
26,446
|
Total current assets
|
2,488,939
|
1,690,681
|
|
|
|
Long-term assets:
|
|
|
Property, plant and
equipment, net of accumulated depreciation of $66,937 and
$511
|
205,110
|
18,777
|
Right
of use assets – operating leases
|
613,531
|
-
|
Intangible assets,
net of accumulated amortization of $569,332 and $0
|
1,005,442
|
-
|
Total long-term assets
|
1,824,083
|
18,777
|
|
|
|
Total assets
|
$4,313,022
|
$1,709,458
|
|
|
|
Liabilities and shareholders' equity (deficit)
|
|
|
Current liabilities
|
|
|
Accounts
payable
|
$216,976
|
$156,727
|
Accounts
payable – related party
|
188,228
|
36,203
|
Accrued
royalties and expenses
|
481,598
|
228,606
|
Accrued
bonus and commissions
|
1,148,123
|
701,125
|
Operating
lease liability - current
|
112,611
|
-
|
Line
of credit
|
2,000,000
|
-
|
Total current liabilities
|
4,147,536
|
1,122,661
|
|
|
|
Long-term liabilities
|
|
|
Operating
lease liability – long term
|
511,829
|
-
|
Convertible
notes payable – related party
|
1,500,000
|
-
|
Accrued
interest – related party
|
83,760
|
-
|
Total long-term liabilities
|
2,095,589
|
-
|
|
|
|
Total liabilities
|
6,243,125
|
1,122,661
|
|
|
|
Shareholders' equity (deficit)
|
|
|
Series F
Convertible Preferred Stock: $10 par value, 1,200,000 shares
authorized; 1,136,815 issued and outstanding as of September 30,
2019 and 1,136,815 issued and outstanding as of December 31,
2018
|
11,368,150
|
11,368,150
|
Common Stock:
$0.001 par value, 20,000,000 shares authorized; 2,366,181 issued
and outstanding as of September 30, 2019 and none issued and
outstanding as of December 31, 2018
|
2,366
|
-
|
Additional
paid-in capital
|
(12,080,629)
|
(10,919,639)
|
Retained
earnings (accumulated deficit)
|
(1,212,679)
|
138,286
|
Total Sanara MedTech shareholders' equity (deficit)
|
(1,922,792)
|
586,797
|
Equity
attributable to noncontrolling interest
|
(7,311)
|
-
|
Total shareholders' equity (deficit)
|
(1,930,103)
|
586,797
|
|
|
|
Total liabilities and shareholders' equity
|
$4,313,022
|
$1,709,458
|
|
Successor
|
Predecessor
|
Successor
|
Predecessor
|
||
|
Three Months Ended
|
Nine Months Ended
|
||||
|
September 30,
|
September 30,
|
||||
|
2019
|
August 28, 2018-September 30, 2018
|
July 1, 2018-August 27, 2018
|
2019
|
August 28, 2018-September 30, 2018
|
January 1, 2018-August 27, 2018
|
|
|
|
|
|
|
|
Revenues
|
$2,909,282
|
$672,844
|
$1,549,675
|
$8,413,667
|
$672,844
|
$5,773,552
|
|
|
|
|
|
|
|
Cost of goods sold
|
285,164
|
93,027
|
111,809
|
909,333
|
93,027
|
480,703
|
|
|
|
|
|
|
|
Gross profit
|
2,624,118
|
579,817
|
1,437,866
|
7,504,334
|
579,817
|
5,292,849
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
3,315,575
|
551,727
|
1,423,989
|
8,649,186
|
551,727
|
5,126,650
|
Depreciation
and amortization
|
45,762
|
50
|
14,349
|
72,644
|
50
|
56,425
|
Bad
debt expense
|
60,000
|
-
|
-
|
60,000
|
-
|
12,558
|
Total operating expenses
|
3,421,337
|
551,777
|
1,438,338
|
8,781,830
|
551,777
|
5,195,633
|
|
|
|
|
|
|
|
Operating income (loss)
|
(797,219)
|
28,040
|
(472)
|
(1,277,496)
|
28,040
|
97,216
|
|
|
|
|
|
|
|
Other income / (expense)
|
|
|
|
|
|
|
Other
income (expense)
|
-
|
23,367
|
268
|
145
|
23,367
|
570
|
Interest
expense
|
(46,014)
|
-
|
-
|
(80,925)
|
-
|
(60,608)
|
Total other income / (expense)
|
(46,014)
|
23,367
|
268
|
(80,780)
|
23,367
|
(60,038)
|
|
|
|
|
|
|
|
Net income (loss)
|
(843,233)
|
51,407
|
(204)
|
(1,358,276)
|
51,407
|
37,178
|
|
|
|
|
|
|
|
Less:
Net income (loss) attributable to noncontrolling
interest
|
(6,257)
|
-
|
-
|
(7,311)
|
-
|
-
|
|
|
|
|
|
|
|
Net income (loss) attributable to Sanara MedTech, Inc.
|
(836,976)
|
51,407
|
(204)
|
(1,350,965)
|
51,407
|
37,178
|
|
|
|
|
|
|
|
Series
C Preferred Stock dividends
|
-
|
-
|
-
|
-
|
-
|
(28,061)
|
Series
C Preferred Stock inducement dividends
|
-
|
-
|
-
|
-
|
-
|
(103,197)
|
|
|
|
|
|
|
|
Net income (loss) attributable to Sanara MedTech common
stockholders
|
$(836,976)
|
$51,407
|
$(204)
|
$(1,350,965)
|
$51,407
|
$(94,080)
|
|
|
|
|
|
|
|
Basic
income per share of Common stock
|
$(0.35)
|
$
|
$(0.00)
|
$(0.78)
|
$
|
$(0.05)
|
|
|
|
|
|
|
|
Diluted
income per share of Common Stock
|
$(0.35)
|
$
|
$(0.00)
|
$(0.78)
|
$
|
$(0.05)
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding basic
|
2,366,181
|
-
|
2,366,429
|
1,724,848
|
-
|
2,068,941
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding diluted
|
2,366,181
|
-
|
2,366,429
|
1,724,848
|
-
|
2,068,941
|
Predecessor
|
Preferred Stock Series C
|
Common Stock
|
Additional
|
|
|
|
|
Total
|
||
|
$10 par value
|
$0.001 par value
|
Paid-In
|
Treasury Stock
|
Accumulated
|
Noncontrolling
|
Shareholders'
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Income/(Deficit)
|
Interest
|
Equity (Deficit)
|
Balance
at December 31, 2017
|
85,561
|
$855,610
|
1,134,279
|
$1,134
|
$46,114,357
|
(41)
|
$(120)
|
$(46,868,443)
|
$-
|
$102,538
|
Conversion
of Series C Preferred Shares
|
(85,561)
|
(855,610)
|
855,605
|
855
|
854,755
|
-
|
-
|
-
|
-
|
-
|
Series
C Dividend
|
-
|
-
|
150,067
|
150
|
(150)
|
-
|
-
|
-
|
-
|
-
|
Common
Stock issued for conversion of debt
|
-
|
-
|
226,514
|
227
|
1,585,367
|
-
|
-
|
-
|
-
|
1,585,594
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6,209
|
-
|
6,209
|
Balance
at March 31, 2018
|
-
|
$-
|
2,366,465
|
$2,366
|
$48,554,329
|
(41)
|
$(120)
|
$(46,862,234)
|
$-
|
$1,694,341
|
Recognition
of stock option expense
|
-
|
-
|
-
|
-
|
10,967
|
-
|
-
|
-
|
-
|
10,967
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
31,173
|
-
|
31,173
|
Balance
at June 30, 2018
|
-
|
$-
|
2,366,465
|
$2,366
|
$48,565,296
|
(41)
|
$(120)
|
$(46,831,061)
|
$-
|
$1,736,481
|
Recognition
of stock option expense
|
-
|
-
|
-
|
-
|
3,900
|
-
|
-
|
-
|
-
|
3,900
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(204)
|
-
|
(204)
|
Balance
at August 27, 2018
|
-
|
$-
|
2,366,465
|
$2,366
|
$48,569,196
|
(41)
|
$(120)
|
$(46,831,265)
|
$-
|
$1,740,177
|
|
|
|
|
|
|
|
|
|
||
Successor
|
Preferred Stock Series F
|
Common Stock
|
Additional
|
|
|
|
|
Total
|
||
|
$10 par value
|
$0.001 par value
|
Paid-In
|
Treasury Stock
|
Accumulated
|
Noncontrolling
|
Shareholders'
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Income/(Deficit)
|
Interest
|
Equity (Deficit)
|
Issuance of preferred stock upon formation on August 28,
2018
|
1,136,815
|
$11,368,150
|
-
|
$-
|
$(10,919,639)
|
-
|
$-
|
$-
|
$-
|
$448,511
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
51,407
|
-
|
51,407
|
Balance
at September 30, 2018
|
1,136,815
|
$11,368,150
|
-
|
$-
|
$(10,919,639)
|
-
|
$-
|
$51,407
|
$-
|
$499,918
|
|
|
|
|
|
|
|
|
|
||
Successor
|
Preferred Stock Series F
|
Common Stock
|
Additional
|
|
|
|
|
Total
|
||
|
$10 par value
|
$0.001 par value
|
Paid-In
|
Treasury Stock
|
Accumulated
|
Noncontrolling
|
Shareholders'
|
|||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Income/(Deficit)
|
Interest
|
Equity (Deficit)
|
Balance
at December 31, 2018
|
1,136,815
|
$11,368,150
|
-
|
$-
|
$(10,919,639)
|
-
|
$-
|
$138,286
|
$-
|
$586,797
|
Reverse
recapitalization
|
-
|
-
|
2,366,465
|
2,366
|
(1,159,929)
|
(41)
|
-
|
-
|
-
|
(1,157,563)
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(162,572)
|
-
|
(162,572)
|
Balance
at March 31, 2019
|
1,136,815
|
$11,368,150
|
2,366,465
|
$2,366
|
$(12,079,568)
|
(41)
|
$-
|
$(24,286)
|
$-
|
$(733,338)
|
Treasury
stock retirement
|
-
|
-
|
(41)
|
-
|
-
|
41
|
-
|
-
|
-
|
-
|
Repurchase
and cancellation of fractional shares
|
-
|
-
|
(243)
|
-
|
(1,061)
|
-
|
-
|
-
|
-
|
(1,061)
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(351,417)
|
(1,054)
|
(352,471)
|
Balance
at June 30, 2019
|
1,136,815
|
$11,368,150
|
2,366,181
|
$2,366
|
$(12,080,629)
|
-
|
$-
|
$(375,703)
|
$(1,054)
|
$(1,086,870)
|
Net
income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(836,976)
|
(6,257)
|
(843,233)
|
Balance
at September 30, 2019
|
1,136,815
|
$11,368,150
|
2,366,181
|
$2,366
|
$(12,080,629)
|
-
|
$-
|
$(1,212,679)
|
$(7,311)
|
$(1,930,103)
|
|
Successor
|
Predecessor
|
|
|
Nine Months Ended
|
||
|
September 30,
|
||
|
2019
|
August 28, 2018-September 30, 2018
|
January 1, 2018-August 27, 2018
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
Net
income (loss)
|
$(1,358,276)
|
$51,407
|
$37,178
|
Adjustments
to reconcile net income to net cash used in operating
activities
|
|
|
|
Depreciation
and amortization
|
72,644
|
50
|
56,425
|
Interest
expense on convertible debt
|
42,137
|
-
|
60,608
|
Loss
on disposal of asset
|
13,581
|
-
|
-
|
Bad
debt expense
|
60,000
|
-
|
12,558
|
Recognition
of vesting stock option expense
|
-
|
-
|
14,867
|
Changes
in assets and liabilities:
|
|
|
|
(Increase)
decrease in accounts receivable
|
(38,831)
|
(622,626)
|
(313,969)
|
(Increase)
decrease in inventory
|
(334,504)
|
43,344
|
262,886
|
(Increase)
decrease in prepaid - related parties
|
(335,876)
|
-
|
-
|
(Increase)
decrease in prepaid and other assets
|
(414,993)
|
(39,491)
|
(23,320)
|
Increase
(decrease) in accounts payable
|
(185,564)
|
23,921
|
189,388
|
Increase
(decrease) in accounts payable related parties
|
99,960
|
258,926
|
(36,097)
|
Increase
(decrease) in accrued royalties and expenses
|
235,542
|
51,170
|
(170,467)
|
Increase
(decrease) in accrued liabilities
|
810,302
|
272,203
|
231,313
|
Net cash flows provided by (used in) operating
activities
|
(1,333,878)
|
38,904
|
321,370
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Purchase
of property and equipment
|
(167,259)
|
(6,050)
|
(8,482)
|
Cash
received in reverse acquisition
|
508,973
|
-
|
-
|
Repurchase
and cancellation of fractional shares
|
(1,061)
|
-
|
-
|
Purchase
of intangible assets
|
(1,022,485)
|
-
|
-
|
Net cash flows used in investing activities
|
(681,832)
|
(6,050)
|
(8,482)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Draw
on line of credit
|
2,000,000
|
-
|
-
|
Net cash flows provided by financing activities
|
2,000,000
|
-
|
-
|
|
|
|
|
Net increase (decrease) in cash
|
(15,710)
|
32,854
|
312,888
|
Cash and cash equivalents, beginning of period
|
176,421
|
-
|
463,189
|
Cash and cash equivalents, end of period
|
$160,711
|
$32,854
|
$776,077
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
Interest
|
$30,802
|
$-
|
$-
|
Income
taxes
|
-
|
-
|
-
|
|
|
|
|
Supplemental non-cash investing and financing
activities:
|
|
|
|
Common
stock issued for dividends on Series C Preferred Stock
|
-
|
-
|
15,007
|
Common
stock issued for conversion of Series C Preferred
Stock
|
-
|
-
|
85,561
|
Common
stock issued for conversion of Related Party debt and
interest
|
-
|
-
|
1,585,594
|
Preferred
Shares issued for inventory contribution
|
-
|
448,511
|
-
|
Common
stock issued in reverse capitalization; less cash received of
$508,973
|
1,666,537
|
-
|
-
|
|
Successor
|
Predecessor
|
|
|
Nine Months Ended
|
||
|
September 30,
|
||
|
2019
|
August 28, 2018-September 30, 2018
|
January 1, 2018-August 27, 2018
|
Product
sales revenue
|
$8,304,792
|
$672,844
|
$5,639,552
|
Royalty
revenue
|
108,875
|
-
|
134,000
|
Total Revenue
|
$8,413,667
|
$672,844
|
$5,773,552
|
From
|
Through
|
Monthly
Base Rental
|
Commencement
Date
|
June
30, 2020
|
$12,243.75
|
July 1,
2020
|
June
30, 2021
|
$12,488.63
|
July 1,
2021
|
June
30, 2022
|
$12,488.63
|
July 1,
2022
|
June
30, 2023
|
$12,733.50
|
July 1,
2023
|
June
30, 2024
|
$12,978.38
|
|
September
30,
2019
|
2019
|
$34,981
|
2020
|
150,886
|
2021
|
151,317
|
2022
|
151,333
|
Total lease
payments
|
720,658
|
Less imputed
interest
|
(96,219)
|
Present value of
lease liabilities
|
$624,439
|
|
Successor
|
Successor
|
|
September
30,
|
December 31,
|
|
2019
|
2018
|
|
|
|
Computers
|
$82,789
|
$5,147
|
Office
Equipment
|
37,631
|
-
|
Furniture
and fixtures
|
149,598
|
3,328
|
Leasehold
Improvements
|
2,029
|
-
|
Capital
in progress
|
-
|
10,813
|
|
272,047
|
19,288
|
|
|
|
Less
accumulated depreciation
|
(66,937)
|
(511)
|
|
|
|
Property
and equipment, net
|
$205,110
|
$18,777
|
|
Successor
|
Successor
|
||||
|
September 30, 2019
|
December 31,
2018
|
||||
|
|
Accumulated
|
|
|
Accumulated
|
|
|
Cost
|
Amortization
|
Net
|
Cost
|
Amortization
|
Net
|
Patent
|
$510,310
|
$(510,310)
|
$-
|
$-
|
$-
|
$-
|
License
|
1,000,000
|
(20,000)
|
980,000
|
-
|
-
|
-
|
Software
and Other
|
64,465
|
(39,023)
|
25,442
|
-
|
-
|
-
|
Total
|
$1,574,775
|
$(569,333)
|
$1,005,442
|
$-
|
$-
|
$-
|
Remainder of
2019
|
$25,372
|
2020
|
87,495
|
2021
|
87,495
|
2022
|
85,080
|
2023
|
80,000
|
Thereafter
|
640,000
|
Total
|
$1,005,442
|
Exhibit No.
|
|
Description
|
|
|
|
10.1*
|
|
Exclusive
License Agreement dated October 1, 2019 between Sanara MedTech Inc.
and Rochal Industries, LLC
|
|
|
|
31.1*
|
|
Certification
of Principal Executive Officer in accordance with 18 U.S.C. Section
1350, as adopted by Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
|
|
31.2*
|
|
Certification
of Principal Financial Officer in accordance with 18 U.S.C. Section
1350, as adopted by Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
|
|
32.1*
|
|
Certification
of Principal Executive Officer in accordance with 18 U.S.C. Section
1350, as adopted by Section 906 of the Sarbanes-Oxley Act of
2002*
|
|
|
|
32.2*
|
|
Certification
of Principal Financial Officer in accordance with 18 U.S.C. Section
1350, as adopted by Section 906 of the Sarbanes-Oxley Act of
2002*
|
|
|
|
101
|
|
Interactive
Data Files pursuant to Rule 405 of Regulation S-T.
|
|
Sanara MedTech Inc.
|
|
|
|
|
|
|
November
14, 2019
|
By:
|
/s/ Michael
McNeil
|
|
|
|
Michael
McNeil
|
|
|
|
Chief
Financial Officer
|
|