3. SIGNIFICANT TRANSACTIONS

6 Months Ended

Jun. 30, 2013

Second Quarter 2012 Convertible Notes at 9% per annum

SIGNIFICANT TRANSACTIONS

Distribution Agreement

As disclosed in our Form 8-K filing on April 14, 2011, Juventas, LLC (“Juventas”) purchased the exclusive right to sell the CellerateRX powder products in North America for an ‘upfront’ non-refundable payment of $500,000. The multi-year agreement had escalating sales requirements for Juventas to retain such exclusive rights.

On November 23, 2011, the Distribution Agreement was amended and the Company and WCI issued to Juventas a Convertible Secured Promissory Note in the amount of $500,000. The Company, WCI, and certain of their affiliates also entered into a security agreement with Juventas, pursuant to which the Promissory Note was secured by all inventory of the Company and WCI (together with any proceeds of such inventory). Additionally, certain affiliates of the Company entered into guaranty agreements with Juventas with respect to amounts owed under the Promissory Note (the “Guarantees” and, collectively with the Distribution Agreement, the Promissory Note, the Security Agreement and the Guarantees, the “Juventas Agreements”).

On March 20, 2012, the Company, Juventas, and certain other parties entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”). Under the Settlement Agreement, the Company reacquired its North American Distributions rights as well as certain sub-distribution agreements for WCI’s CellerateRX powder product and the Juventas Agreements were effectively terminated and all amounts owed and other claims thereunder were settled.

In connection with the Settlement Agreement, the Company, WCI and certain of their affiliates (collectively, the “Company Parties”) issued to Juventas a Secured Promissory Note in the principal amount of $930,000. The note was secured by all inventory of the Company Parties (together with any proceeds of such inventory), and certain affiliates of the Company entered into guaranty agreements with Juventas with respect to amounts owed under the note. In July 2012, the Company reached agreement with Juventas that upon payment of $880,000, all remaining principal of and accrued interest on the Juventas secured promissory note would be forgiven. The Company made such payment in July of 2012, at which point the note was cancelled.

SEC Complaint

On or about June 4, 2012, the United States Securities and Exchange Commission filed a Complaint against the Company and Scott A. Haire, a former officer and director of the Company, in the United States District Court for the Southern District of Florida. The Complaint alleges that from at least July through November 2009 the Company and Haire engaged in a fraudulent scheme and market manipulation involving the Company’s stock. The Complaint alleges that (a) Haire arranged to sell Company restricted stock to an FBI agent posing as the trustee of a pension fund and to pay that person a kickback for engaging in the transaction; and (b) Haire arranged to make payments to a fictitious person, putatively a broker, in exchange for the broker’s trading in company stock timed with Company press releases. The Complaint asserts claims for violations of Section 17(a) (1) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder. The Complaint seeks (a) a declaration that the Company and Haire committed those violations; (b) an injunction against the further commission of such violations; (c) disgorgement; (d) civil money penalties; (e) an order barring Haire from participating in any offering of a penny stock; and (f) an order barring Haire from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Securities Exchange Act or that is required to file reports pursuant to Section 15(d) of the Securities Exchange Act.

The Company, separate from Mr. Haire, engaged in settlement discussions with the Securities and Exchange Commission concerning a potential settlement of the action against the Company. On September 14, 2012, the Company filed a Consent of Defendant with the SEC. On January 15, 2013, The Company received a final judgment resolving claims against the Company, delivered by the United States District Court for the Southern District of Florida. Under the judgment, the Company paid a civil penalty of $20,000 and has been permanently enjoined from violations of Section 18(a) of the Securities Act and Section 10(b) of the Securities Exchange Act involving the payment of undisclosed compensation to investment advisors, managers, trustees, or any associated person thereof or the manipulation of the price or volume of any security.

Litigation

On November 14, 2011, Ken Link instituted litigation against the Company and Scott A. Haire in the District Court of Tarrant County Texas, 342nd Judicial District alleging default under the terms of a certain promissory note executed by Wound Management Technologies, Inc., and guaranteed by Scott A. Haire. Ken Link asserts that the unpaid balance of the note, including accrued interest as of December 4, 2011, is the sum of $255,292 plus 200,000 shares of the Company’s common stock. We have disputed the claim and have asserted a counter claim that the transaction described in the Plaintiff’s original petition is usurious in violation of the provisions of the Texas Finance Code. Furthermore, we have filed an action for recovery of damages related to a note previously executed by the Company and Ken Link, which we believe is also usurious under the Texas Finance Code. We further claim that the Plaintiff, who placed $223,500 of orders in 2011, is in breach of a Distribution Agreement with WCI. While we believe the claims made against the Company are without merit, and will vigorously defend against them, we are unable at this time to determine the ultimate outcome of this matter or determine the effect it may have on our business, financial condition or results of operations.

Forbearance Agreement

On July 13, 2012, Tonaquint, Inc., (“Tonaquint”) filed suit against the Company and certain of its affiliates in connection with a Securities Purchase Agreement by and between Tonaquint and the Company under which Tonaquint purchased a Secured Convertible Promissory Note in the original principal amount of $560,000 (the “Note”). The suit alleges, among other things, a failure of the Company to make certain payments and to honor a conversion notice delivered pursuant to the Note. On August 17, 2012, Tonaquint and the Company entered into a forbearance agreement, pursuant to which Tonaquint agreed:

(i)	To refrain from exercising its rights under the Note through October 16, 2012, which date can, at the Company’s option, be extended for two consecutive periods of 30 days each,
(ii)	To convert $20,000 in principal amount owed under the Note into shares of the Company’s Common Stock, the number of such shares to be determined as set forth in the Forbearance Agreement; and

(iii) To accept as payment in full of the Note (in conjunction with the issuance of the Conversion Shares) a cash payment of $200,000 on or before October 16, 2012 (as such date may be extended at the Company’s option).

On August 21, 2012, the Company issued to Tonaquint, pursuant to the forbearance agreement, 166,667 shares of Common Stock in conversion of $20,000 of note principal. An additional 43,382 shares of Common Stock were issued on October 20, 2012, also in relation to the $20,000 conversion. On October 8, 2012, the Company paid Tonaquint $5,000 to extend the Forbearance Period to November 15, 2012. On November 6, 2012, the Company paid $5,000 and issued 68,531 shares of common stock to extend the Forbearance Period to December 15, 2012. In January of 2013 the Company issued 74,993 shares of Common Stock according to the terms of the Forbearance agreement. Seven additional payments of $5,000 each were made on December 6, 2012, January 10, March 13, April 17, May 15, June 14, and July 15, 2013, to extend the Forbearance Period to August 15, 2013. The July 15 and August 15 extensions also required the issuance of Common Stock valued at $2,500. As of June 30, 2013 the Company has recorded stock subscriptions payable in the amount of $2,500 related to the July 15 extension. As of the date of this filing the Company has issued the 102,459 shares of Common Stock required by the July 15 and August 15 extensions.

Federal Payroll Tax Settlement Negotiation

The Company was delinquent in the payment of 2004-2005 tax liabilities with the Internal Revenue Service (the “IRS”). A tax lien was filed against the Company in December 2009. In January of 2012 the Company made payment to the IRS for the balance due for the payroll tax liabilities. As of December 31, 2012, unpaid penalties and interest related to the payroll tax liabilities totaled $208,142. In February of 2013, the Company’s offer of Compromise was accepted by the IRS and on March 20, 2013, the Company paid the final $16,000 due under the compromise.