Texas
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59-2219994
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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1200
Summit Ave, Suite 414, Fort Worth, Texas 76102
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(Address
of principal executive offices) (Zip
Code)
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Large
accelerated filer
☐
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Accelerated
filer
☐
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Non-accelerated
filer
☐
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Smaller
reporting company
☑
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Emerging
growth company
☐
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Page
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(i)
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3
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11
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11
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11
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11
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12
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13
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13
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15
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16
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38
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38
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38
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39
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41
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43
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44
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45
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46
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YEAR
|
QUARTER
ENDING
|
HIGH
|
LOW
|
2018
|
March 31,
2018
|
$0.750
|
$0.041
|
|
June 30,
2018
|
$0.076
|
$0.043
|
|
September 30,
2018
|
$0.100
|
$0.057
|
|
December 31,
2018
|
$0.074
|
$0.020
|
2017
|
March 31,
2017
|
$0.100
|
$0.038
|
|
June 30,
2017
|
$0.100
|
$0.058
|
|
September 30,
2017
|
$0.078
|
$0.048
|
|
December 31,
2017
|
$0.070
|
$0.046
|
Report of Independent Registered Public Accounting
Firm
|
17
|
|
|
Consolidated Balance Sheets
|
18
|
|
|
Consolidated Statements of Operations
|
19
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity
(Deficit)
|
20
|
|
|
Consolidated Statements of Cash Flows
|
21
|
|
|
Notes to the Consolidated Financial Statements
|
22
|
|
December 31,
|
December 31,
|
|
2018
|
2017
|
Assets
|
|
|
Current assets
|
|
|
Cash
|
$731,849
|
$463,189
|
Accounts
receivable, net of allowance for bad debt of $40,550 and
$28,910
|
164,459
|
786,250
|
Royalty
receivable
|
50,250
|
50,250
|
Inventory,
net of allowance for obsolescence of $0 and $144,996
|
-
|
711,397
|
Prepaid
and other assets
|
31,926
|
26,274
|
Total current assets
|
978,484
|
2,037,360
|
|
|
|
Long-term assets:
|
|
|
Property,
plant and equipment, net of accumulated depreciation of $70,116 and
$56,951
|
52,827
|
63,211
|
Intangible
assets, net of accumulated amortization of $500,023 and
$434,999
|
52,266
|
117,291
|
Equity
method investment (Cellerate, LLC)
|
1,958,463
|
-
|
Total long-term assets
|
2,063,556
|
180,502
|
|
|
|
Total assets
|
$3,042,040
|
$2,217,862
|
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
Current liabilities
|
|
|
Accounts
payable
|
$54,179
|
$225,462
|
Accounts payable - Related
Parties
|
63,288
|
60,000
|
Accrued
royalties and payables
|
34,214
|
244,422
|
Accrued
bonus and commissions
|
241,849
|
46,534
|
Deferred
rent
|
10,474
|
13,920
|
Accrued
interest
|
-
|
324,986
|
Convertible
notes payable - Related Parties
|
-
|
1,200,000
|
Total current liabilities
|
404,004
|
2,115,324
|
|
|
|
Long-term liabilities
|
|
|
Convertible
notes payable
|
1,500,000
|
-
|
Accrued interest
|
25,978
|
-
|
Total long-term liabilities
|
1,525,978
|
-
|
|
|
|
Total liabilities
|
1,929,982
|
2,115,324
|
|
|
|
Shareholders' equity
|
|
|
Series C Convertible Preferred Stock,
$10 par value, 100,000 shares authorized; none issued and
outstanding as of December 31, 2018 and 85,646 issued and
outstanding as of December 31, 2017
|
-
|
855,610
|
Common Stock: $.001 par value;
250,000,000 shares authorized; 236,646,512 issued and 236,642,423
outstanding as of December 31, 2018 and 113,427,943 issued and
113,423,854 outstanding as of December 31, 2017
|
236,647
|
113,428
|
Additional
paid-in capital
|
48,356,467
|
46,013,982
|
Treasury
stock
|
(12,039)
|
(12,039)
|
Accumulated
deficit
|
(47,469,017)
|
(46,868,443)
|
Total
shareholders' equity
|
1,112,058
|
102,538
|
|
|
|
Total liabilities and shareholders' equity
|
$3,042,040
|
$2,217,862
|
|
|
|
|
Years
Ended
|
|
|
December
31,
|
|
|
2018
|
2017
|
|
|
|
Revenues
|
$5,837,839
|
$6,304,741
|
|
|
|
Cost of goods sold
|
507,418
|
806,038
|
|
|
|
Gross profit
|
5,330,421
|
5,498,703
|
|
|
|
Operating expenses
|
|
|
Selling,
general and administrative expense
|
5,735,833
|
5,275,402
|
Depreciation
and amortization
|
83,890
|
80,648
|
Bad
debt expense
|
12,558
|
22,207
|
Total operating expenses
|
5,832,281
|
5,378,257
|
|
|
|
Operating income / (loss)
|
(501,860)
|
120,444
|
|
|
|
Other income / (expense)
|
|
|
Income
from equity method investment – Cellerate, LLC
|
9,951
|
-
|
Gain
on settlement of debt
|
-
|
286,873
|
Debt
forgiveness
|
-
|
50,646
|
Change
in fair value of derivative liability
|
-
|
44
|
Other
income (expense)
|
(22,078)
|
125
|
Interest
expense
|
(86,587)
|
(126,825)
|
Total other income / (expense)
|
(98,714)
|
210,863
|
|
|
|
Net income / (loss)
|
(600,574)
|
331,309
|
|
|
|
Series C Preferred
stock inducement dividends
|
(103,197)
|
-
|
Series
C preferred stock dividends
|
(28,061)
|
(139,006)
|
|
|
|
Net income/(loss) available to common shareholders
|
$(731,832)
|
$192,303
|
|
|
|
Basic
net loss per share of common stock
|
$(0.00)
|
$0.00
|
|
|
|
Diluted net loss
per share of common stock
|
$(0.00)
|
$0.00
|
|
|
|
Weighted
average number of common shares outstanding, basic
|
217,163,538
|
111,381,832
|
|
|
|
Weighted
average number of common shares outstanding, diluted
|
217,163,538
|
208,645,538
|
|
Preferred Stock
Series C Shares
|
$10.00 Par
Value Amount
|
Common Stock Shares
|
$0.001 Par
Value Amount
|
Additional Paid-In Capital
|
Treasury Stock Shares
|
Treasury Stock Amount
|
Accumulated Deficit
|
Total Stockholders' Equity (Deficit)
|
Balance
at December 31, 2016
|
85,646
|
856,460
|
109,690,387
|
$109,690
|
$45,822,570
|
(4,089)
|
$(12,039)
|
$(47,199,752)
|
$(423,071)
|
Issuance
of Common stock for:
|
|
|
|
|
|
|
|
|
|
Services
|
-
|
-
|
1,600,000
|
1,600
|
58,650
|
-
|
-
|
-
|
60,250
|
Conversion
of Series C Preferred Stock
|
(800)
|
(8,000)
|
800,000
|
800
|
7,200
|
-
|
-
|
-
|
-
|
Series
C Dividend
|
-
|
-
|
137,556
|
138
|
(138
|
-
|
-
|
-
|
-
|
Common
stock issued for settlement of debt
|
-
|
-
|
1,200,000
|
1,200
|
82,800
|
-
|
-
|
-
|
84,000
|
Issuance
of Preferred stock for:
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Cash
|
715
|
7,150
|
-
|
-
|
42,900
|
-
|
-
|
-
|
50,050
|
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
331,309
|
331,309
|
Balance
at December 31, 2017
|
85,561
|
855,610
|
113,427,943
|
$113,428
|
$46,013,982
|
(4,089)
|
$(12,039)
|
$(46,868,443)
|
$102,538
|
Issuance
of Common stock for:
|
|
|
|
|
|
|
|
|
|
Services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Conversion
of Series C Preferred Stock
|
(85,561)
|
(855,610)
|
85,560,522
|
85,561
|
770,049
|
-
|
-
|
-
|
-
|
Series
C Dividend
|
|
|
15,006,691
|
15,007
|
(15,007
|
-
|
-
|
-
|
-
|
Common
stock issued for conversion of debt
|
|
|
22,651,356
|
22,651
|
1,562,943
|
-
|
-
|
-
|
1,585,594
|
Recognition
of stock option expense
|
-
|
-
|
-
|
-
|
24,500
|
-
|
-
|
-
|
24,500
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(600,574)
|
(600,574)
|
Balance
at December 31, 2018
|
-
|
-
|
236,646,512
|
236,647
|
48,356,467
|
(4,089)
|
$(12,039)
|
$(47,469,017)
|
$1,112,058
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
2018
|
2017
|
|
|
|
Cash flows from operating activities:
|
|
|
Net
income/(loss)
|
$(600,574)
|
$331,309
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
Depreciation
and amortization
|
83,891
|
80,648
|
Additional
interest expense on convertible debt
|
60,608
|
-
|
Gain
on forgiveness of debt
|
-
|
(50,646)
|
Gain
on settlement of debt
|
-
|
(286,873)
|
Recognition
of vesting stock option expense
|
24,500
|
-
|
Income
from equity method investment
|
(9,951)
|
-
|
Bad
debt expense
|
12,558
|
22,207
|
Inventory
obsolescence
|
-
|
57,483
|
Common
stock issued for services
|
-
|
60,250
|
(Gain)
loss on change in fair value of derivative liabilities
|
-
|
(44)
|
Changes
in assets and liabilities:
|
|
|
(Increase)
decrease in accounts receivable
|
609,233
|
(64,413)
|
(Increase)
decrease in royalties receivable
|
-
|
-
|
(Increase)
decrease in inventory
|
262,886
|
(420,423)
|
(Increase)
decrease in prepaids and other assets
|
(5,652)
|
(6,492)
|
Increase
(decrease) in accrued royalties and dividends
|
(223,109)
|
(32,494)
|
Increase
(decrease) in accounts payable
|
(171,283)
|
26,942
|
Increase
(decrease) in accounts payable related parties
|
3,288
|
(33,655)
|
Increase
(decrease) in accrued liabilities
|
204,770
|
60,454
|
Increase
(decrease) in accrued interest payable
|
25,978
|
115,885
|
Net cash flows provided by (used in) operating
activities
|
277,142
|
(139,862)
|
|
|
|
Cash flows from investing activities:
|
|
|
Purchase
of property and equipment
|
(8,482)
|
(43,895)
|
Purchase
of intangible assets
|
-
|
(41,980)
|
Net
cash flows used in investing activities
|
(8,482)
|
(85,875)
|
|
|
|
Cash flows from financing activities:
|
|
|
Payments
on capital lease obligation
|
-
|
(3,766)
|
Payments
on debt
|
-
|
(190,838)
|
Cash
proceeds from sale of series C preferred stock
|
-
|
50,050
|
Net cash flows (used in) provided by financing
activities
|
-
|
(144,554)
|
|
|
|
Net increase (decrease) in cash
|
268,660
|
(370,291)
|
Cash and cash equivalents, beginning of period
|
463,189
|
833,480
|
Cash and cash equivalents, end of period
|
$731,849
|
$463,189
|
|
|
|
Cash paid during the period for:
|
|
|
Interest
|
$-
|
$10,937
|
Income
taxes
|
-
|
-
|
|
|
|
Supplemental non-cash investing and financing
activities:
|
|
|
Equity
method investment
|
$1,948,511
|
$-
|
Common
stock issued for Series C dividends
|
15,007
|
137
|
Common
stock issued for conversion of Series C Preferred
Stock
|
85,561
|
8,000
|
Common
stock issued for conversion of related party debt and
interest
|
1,585,594
|
-
|
|
2018
|
2017
|
Basic
net income (loss) per share:
|
|
|
Numerator:
|
|
|
Net
income (loss)
|
$(600,574)
|
$331,309
|
Denominator:
|
|
|
Weighted-average
common shares outstanding
|
217,163,538
|
111,381,832
|
|
|
|
Basic
net income (loss) per share
|
$(0.00)
|
$0.00
|
|
|
|
Diluted
net income (loss) per share:
|
|
|
Numerator:
|
|
|
Net
income (loss)
|
$(600,574)
|
$331,309
|
Series
C dividends
|
|
(139,006)
|
Diluted
net income (loss)
|
$-
|
$192,303
|
Denominator:
|
|
|
Weighted-average
common shares outstanding
|
217,163,538
|
111,381,832
|
Common
stock warrants
|
-
|
694,834
|
Convertible
debt
|
-
|
-
|
Preferred
shares
|
-
|
96,568,871
|
Weighted
average shares used in computing diluted net income (loss) per
share
|
217,163,538
|
208,645,538
|
|
|
|
Diluted
net income (loss) per share
|
$(0.00)
|
$0.00
|
|
2018
|
2017
|
Convertible
debt
|
16,666,667
|
19,890,414
|
|
Twelve
months Ended
|
|
|
December 31
|
|
|
2018
|
2017
|
Product sales
revenue
|
$5,636,839
|
$6,103,741
|
Royalty
revenue
|
201,000
|
201,000
|
Total Revenue
|
$5,837,839
|
$6,304,741
|
|
|
|
|
|
|
|
|
|
Accrued
Interest
|
|
||||||
Related
Party
|
|
Nature of
Relationship
|
|
Term of the
agreement
|
|
Principal
amount
|
|
|
2018
|
|
|
2017
|
|
|||
S. Oden
Howell Revocable Trust ("HRT")
|
|
Mr. S.
Oden Howell, Jr. became a member of the Board of Directors in June
of 2015
|
|
The
note is secured, bears interest at 10% per annum, matures June 15,
2018, and is convertible into shares of the Company's Series C
Convertible Preferred Stock at a conversion price of $70.00 per
share at any time prior to maturity. As of December 31, 2018, the
note is paid in full.
|
|
$
|
-
|
|
|
$
|
0
|
|
|
$
|
162,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
James
W. Stuckert Revocable Trust ("SRT")
|
|
Mr.
James W. Stuckert became a member of the Board of Directors in
September of 2015
|
|
The
note is secured, bears interest at 10% per annum, matures June 15,
2018, and is convertible into shares of the Company's Series C
Convertible Preferred Stock at a conversion price of $70.00 per
share at any time prior to maturity. As of December 31, 2018, the
note is paid in full.
|
|
$
|
-
|
|
|
$
|
0
|
|
|
$
|
162,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total
|
|
|
|
|
|
$
|
-
|
|
|
$
|
0
|
|
|
$
|
324,986
|
|
|
|
Principal Amount
|
Accrued Interest
|
||
Note Payable
|
Terms of the agreement
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
August 27, 2018
Promissory Note
|
A $1,500,000 note
payable (i) interest accrues at 5% per annum and compounds
quarterly (ii) original maturity date of March 1, 2021
|
$1,500,000
|
-
|
$25,978
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$1,500,000
|
$-
|
$25,978
|
$-
|
Cost
|
Patent
|
Software
|
Total
|
Balance
at December 31, 2017
|
$510,310
|
$41,980
|
$552,290
|
Implementation
costs
|
|
|
|
Balance
at December 31, 2018
|
$510,310
|
$41,980
|
$552,290
|
Accumulated amortization
|
|
|
|
Balance
at December 31, 2017
|
$421,006
|
$13,993
|
$434,999
|
Amortization
expense
|
51,032
|
13,993
|
65,025
|
Balance
at December 31, 2018
|
$472,038
|
$27,986
|
$500,024
|
Net carrying amount
|
|
|
|
Balance
at December 31, 2017
|
$89,304
|
$27,987
|
$117,291
|
Balance
at December 31, 2018
|
$38,272
|
$13,994
|
$52,266
|
For the Year Ended December 31, 2018
|
||
|
Shares
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
5,100,000
|
$0.06
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Expired
|
(5,100,000)
|
0.06
|
Outstanding
at end of period
|
-
|
$-
|
For the Year Ended December 31, 2017
|
||
|
Shares
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
67,246,300
|
$0.12
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Forfeited
|
(60,051,300)
|
0.12
|
Expired
|
(2,095,000)
|
0.13
|
Outstanding
at end of period
|
5,100,000
|
$0.06
|
Warrants Outstanding
|
Warrants
Exercisable
|
||||
Range of Exercise Prices
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
4,500,000
|
1
|
$0.06
|
4,500,000
|
$0.06
|
0.08
|
200,000
|
1
|
0.08
|
200,000
|
0.08
|
0.09
|
400,000
|
1
|
0.09
|
400,000
|
0.09
|
$0.06 - 0.09
|
5,100,000
|
1
|
$0.06
|
5,100,000
|
$0.06
|
For the Year Ended December 31,
2018
|
||
|
Options
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
1,150,000
|
$0.06
|
Granted
|
400,000
|
0.06
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding
at end of period
|
1,550,000
|
$0.06
|
For the Year Ended December 31,
2017
|
||
|
Options
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
1,093,500
|
$0.15
|
Granted
|
1,150,000
|
0.06
|
Exercised
|
-
|
-
|
Forfeited
|
(150,000)
|
(a)
|
Expired
|
(943,500)
|
0.15
|
Outstanding
at end of period
|
1,150,000
|
$0.06
|
As of December 31, 2018
|
As of December 31, 2018
|
||||
Stock Options Outstanding
|
Stock Options Exercisable
|
||||
Exercise Price
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
1,550,000
|
4.39
|
$0.06
|
383,333
|
$0.06
|
As of December 31,
2017
|
As of December 31, 2017
|
||||
Stock Options Outstanding
|
Stock Options Exercisable
|
||||
Exercise Price
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
1,150,000
|
5
|
$0.06
|
-
|
$-
|
|
2018
|
2017
|
Net
operating loss carry forwards, (21% as of December 31, 2018 and 21%
as of December 31, 2017
|
$7,320,390
|
$7,295,315
|
Valuation
allowance
|
(7,320,390)
|
(7,295,315)
|
Net
non-current deferred tax asset
|
$-
|
$-
|
|
2018
|
2017
|
Expected
federal income tax benefit
|
$124,448
|
$(112,645)
|
Goodwill
amortization
|
87,944
|
142,386
|
Gain
on settlement of debt
|
-
|
114,757
|
NOL
carryover reduced by settlement of debt
|
-
|
(114,403)
|
Change
in valuation allowance
|
(13,959)
|
(11,807)
|
Expired
capital loss carryover
|
-
|
(9,227)
|
NOL
carryover reduced by expiration
|
(151,658)
|
-
|
Other
– M&E
|
(7,888)
|
(9,061)
|
Reserve
for obsolete inventory
|
(20,357)
|
-
|
Pass
through entity income allocation
|
(10,033)
|
-
|
Reserve
for bad debt
|
(3,971)
|
-
|
Stock-based
compensation
|
(4,526)
|
-
|
Income
tax expense (benefit)
|
$-
|
$-
|
NAME
|
|
AGE
|
|
POSITION
|
|
YEAR FIRST
ELECTED
|
S. Oden
“Denny” Howell Jr.
|
|
79
|
|
Director
|
|
2015
|
James
W. Stuckert
|
|
81
|
|
Director
|
|
2015
|
Ronald
T. Nixon
|
|
63
|
|
Director
|
|
2019
|
NAME
|
|
AGE
|
|
POSITION
|
J.
Michael Carmena
|
|
63
|
|
Chief
Executive Officer
|
Michael
D. McNeil
|
|
53
|
|
Chief
Financial Officer
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-equity
incentive compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All other
compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
J.
Michael Carmena (b)
|
2017
|
175,000
|
-
|
-
|
30,000
|
-
|
-
|
-
|
205,000
|
|
2018
|
207,107
|
-
|
-
|
-
|
-
|
-
|
-
|
207,107
|
|
|
|
|
|
|
|
|
|
|
Deborah J.
Hutchinson (c)
|
2017
|
170,000
|
-
|
-
|
-
|
-
|
-
|
-
|
170,000
|
|
2018
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Michael D.
McNeil (d)
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2018
|
123,625
|
-
|
-
|
6,000
|
-
|
-
|
-
|
129,625
|
Name
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-equity
incentive plan compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All other
compensation
($)
|
Total
($)
|
John C.
Siedhoff
|
-
|
-
|
-
|
-
|
240,000(a)
|
$240,000
|
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||
Name
|
Number of
Securities Underlying Unexercised Options
(Exercisable)
|
Number of
Securities Underlying Unexercised Options
(Unexercisable)
|
Option Exercise
Price ($)
|
Option
Expiration Date
|
Number of Shares
of Stock That Have Not Vested
|
Market Value of
Shares of Stock That Have Not Vested ($)
|
J.
Michael Carmena
|
166,667
|
333,333
|
0.06
|
12/31/2022
|
333,333
|
20,000
|
Michael
D. McNeil
|
-
|
100,000
|
0.06
|
4/13/2023
|
100,000
|
6,000
|
|
167,667
|
433,333
|
|
|
433.333
|
26,000
|
|
Common Stock
|
Series F Preferred Stock
|
||
OFFICERS AND DIRECTORS:
|
Number
of Shares Beneficially Owned
|
Beneficial Ownership Percentage
|
Number of Shares Beneficially Owned
|
Beneficial Ownership Percentage
|
James
W Stuckert (1)
|
76,086,287
|
32.2%
|
—
|
—
|
S.
Oden “Denny” Howell Jr.
|
42,292,429
|
17.9%
|
—
|
—
|
Ronald
T. Nixon (2)
|
244,322,339
|
50.8%
|
1,136,185
|
100
|
J.
Michael Carmena (3)
|
500,000
|
0.2%
|
—
|
—
|
Michael
D. McNeil (4)
|
100,000
|
*
|
—
|
—
|
All directors and executive officers as a group (5
persons)
|
362,901,055
|
75.4%
|
1,136,185
|
100%
|
Related
Party
|
Nature of
Relationship
|
|
Terms of the
Agreement
|
Principal
Amount
|
|
|
Accrued
Interest
|
|
||||
S. Oden Howell Revocable Trust
|
|
Mr. S.
Oden Howell, Jr. became a member of the Board in June of
2015.
|
|
The
Notes each carry interest at 10% per annum. All unpaid and accrued
interest was due and payable on June 15, 2018. The
|
|
|
600,000
|
|
|
|
162,493
|
|
|
|
|
|
|
|
|
|
|
|
|||
James W. Stuckert Revocable Trust
|
|
Mr.
James W. Stuckert became a member of the Board in September of
2015.
|
|
|
|
|
600,000
|
|
|
|
162,493
|
|
Total
|
|
|
|
|
|
$
|
1,200,000
|
|
|
$
|
324,986
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
Share
Exchange Agreement between CGI CellerateRX, LLC and WNDM Medical
Inc. (Incorporated by reference to Exhibit 2.1 to the
Company’s Current Report on Form 8-K dated March 21,
2019).
|
|
|
|
|
|
Articles of Incorporation (Incorporated by reference to Exhibit 3.1
to the Company’s Registration Statement on Form S-1 filed
April 11, 2008)
|
|
|
|
|
|
Articles of Amendment to Articles of Incorporation (Incorporated by
reference to Exhibit A to the Company’s Information Statement
filed with the Commission on May 13, 2008)
|
|
|
|
|
3.1.2
|
|
Articles of Amendment to Articles of Incorporation, effective
February 20, 2015
|
|
|
|
|
Bylaws (Incorporated by reference to Exhibit 3.2 to the
Company’s Registration Statement on Form S-1 filed April 11,
2008)
|
|
|
|
|
|
Certificate of Designations, of Series F Convertible Preferred
Stock (Incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K filed March 21,
2019)
|
|
|
|
|
|
Wound Management Technologies, Inc. 2010 Omnibus Long-Term
Incentive Plan dated March 12, 2010 effective subject to
shareholder approval on or before March 11, 2011 (Incorporated by
reference to Exhibit 4.1 to the Company’s Quarterly Report on
Form 10-Q filed August 16, 2010)
|
|
|
|
|
|
Letter Agreement dated April 26, 2016 by and between Wound
Management Technologies, Inc., Evolution Venture Partners, LLC and
Middlebury Securities, LLC (Incorporated by reference to Exhibit
10.1 to the Company’s Form 8-K filed May 2,
2016)
|
|
|
|
|
|
Consulting Agreement dated April 25, 2016 by and between Wound
Management Technologies, Inc. and John Siedhoff (Incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K filed
April 29, 2016)
|
|
|
|
|
|
Amendment
to Consulting Agreement dated March 10, 2017, by and between the
Company and John Siedhoff (Incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K dated March 10,
2017)
|
|
|
|
|
|
Termination Agreement effective September 29, 2017, by and between
the Company and Evolution Venture Partners LLC (Incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K dated October 11,
2017)
|
|
|
|
|
|
Contribution
Agreement dated August 27, 2018 between Wound Care Innovations, LLC
and CGI Cellerate RX, LLC (Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed November 14,
2018)
|
|
|
|
|
|
Operating
Agreement dated August 27, 2018 between Wound Care Innovations, LLC
and CGI Cellerate RX, LLC (Incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q filed November 14,
2018)
|
|
|
|
|
|
Sublicense
Agreement dated August 27, 2018 between CGI Cellerate RX, LLC and
Cellerate, LLC (Incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report
on Form 10-Q filed November 14, 2018)
|
|
|
|
|
|
Professional
Services Agreement dated August 27, 2018 between Wound Management
Technologies, Inc., CGI Cellerate RX, LLC and Cellerate, LLC
(Incorporated by reference to Exhibit
10.4 to the Company’s Quarterly Report on Form 10-Q filed
November 14, 2018)
|
|
|
|
|
|
Convertible
Promissory Note to CGI Cellerate RX, LLC (Incorporated by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q filed November 14,
2018)
|
|
|
|
|
21.1
|
|
List of
Subsidiaries*
|
|
|
|
|
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*
|
|
|
|
|
|
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*
|
|
|
|
|
|
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*
|
|
|
|
|
|
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*
|
|
|
|
|
99.1
|
|
Cellerate, LLC unaudited Balance Sheet and Statement of Operations
for the four-month period ending December 31,
2019
|
|
|
|
101
|
|
Interactive Data Files pursuant to Rule 405 of Regulation
S-T
|
|
WOUND MANAGEMENT TECHNOLOGIES, INC.
|
|
|
|
|
|
|
April
1, 2019
|
By:
|
/s/ Michael
McNeil
|
|
|
|
Michael
McNeil
|
|
|
|
Chief
Financial Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ J.
Michael Carmena
|
|
CEO
(Principal Executive Officer)
|
|
April
1, 2019
|
J. Michael Carmena
|
|
|
|
|
|
|
|
|
|
/s/ Michael
McNeil
|
|
Chief
Financial Officer (Principal Financial and Accounting
Officer)
|
|
April
1, 2019
|
Michael
McNeil
|
|
|
|
|
|
|
|
|
|
/s/ James
W. Stuckert
|
|
Director
|
|
April
1, 2019
|
James
W. Stuckert
|
|
|
|
|
|
|
|
|
|
/s/ Mr.
Ronald T. Nixon
|
|
Director
|
|
April
1, 2019
|
Mr.
Ronald T. Nixon
|
|
|
|
|
|
|
|
|
|
/s/ Oden
Howell, Jr.
|
|
Director
|
|
April
1, 2019
|
Oden
Howell, Jr.
|
|
|
|
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Apr. 01, 2019 |
Jun. 30, 2018 |
|
Document And Entity Information | |||
Entity Registrant Name | WOUND MANAGEMENT TECHNOLOGIES, INC. | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Entity Central Index Key | 0000714256 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 7,449,324 | ||
Entity Common Stock, Shares Outstanding | 236,646,512 |
Statement - CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Series C Preferred Stock Par Value | $ 10 | $ 10 |
Series C Preferred Stock shares authorized | 100,000 | 100,000 |
Series C Preferred Stock shares issued | 0 | 85,561 |
Series C Preferred Stock shares outstanding | 0 | 85,561 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 250,000,000 | 250,000,000 |
Common Stock, shares issued | 236,646,512 | 113,427,943 |
Common Stock, shares outstanding | 236,646,512 | 113,423,854 |
1. NATURE OF OPERATIONS |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Wound Management Technologies, Inc. was incorporated in the State of Texas in December 2001 as MB Software, Inc. In May 2008, MB Software, Inc. changed its name to Wound Management Technologies, Inc. The Company distributes collagen-based wound care products to healthcare providers such as physicians, clinics and hospitals. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
BASIS OF PRESENTATION
The terms “the Company,” “we,” “us” “WMTI” and “WNDM” are used in this report to refer to Wound Management Technologies, Inc. and its wholly owned subsidiaries, unless the context suggests otherwise. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of WMTI and its wholly-owned subsidiaries: WCI, LLC a Nevada limited liability company (“WCI”); Resorbable Orthopedic Products, LLC, a Texas limited liability company (“ROP”); and Innovate OR, Inc. (“IOR”) formerly referred to as BioPharma Management Technologies, Inc., a Texas corporation (“BioPharma”). All intercompany accounts and transactions have been eliminated. ROP and IOR were dissolved during the third quarter of 2018. All rights and obligations of each were assigned to its parent company WMTI.
WCI’s exclusive license to sell and distribute CellerateRX products in the human health care market (excluding dental and retail) expired on February 27, 2018. The license agreements permitted WCI to continue to sell and distribute products through August 27, 2018. Subsequent to the expiration of the license agreement between the Company and Applied, Nutritionals, LLC (“Applied”) an exclusive license was acquired by an affiliate of The Catalyst Group, Inc. (“CGI”) to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico. The Company and CGI entered into definitive agreements on August 27, 2018, that continued operations to market CellerateRX through Cellerate, LLC, a newly formed Texas Limited Liability Company in which the Company and CGI each have a 50% ownership interest.
While the Company had significant influence over the operations of Cellerate, LLC, the Company did not have a controlling interest. CGI had the controlling vote in the event of a deadlocked vote by the Board of Managers of Cellerate, LLC. Therefore, the Company’s investment in Cellerate, LLC is reported using the equity method of accounting. Beginning September 1, 2018, the Company’s 50% share of Cellerate, LLC’s net income or loss is presented as a single line item on WMTI’s Statement of Operations. Cellerate, LLC’s unaudited Balance Sheet and unaudited Statement of Operations is included as an exhibit to the Financial Statements of WMTI (see Exhibit 99.1).
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
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, the disclosures of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses during the reporting period. On a regular basis, management evaluates these estimates and assumptions. Actual results could differ from those estimates.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid debt investments purchased with an original maturity of three months or less to be cash equivalents. Marketable securities include investments with maturities greater than three months but less than one year. For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities.
INCOME / LOSS PER SHARE
The Company computes income/loss per share in accordance with Accounting Standards Codification “ASC” Topic No. 260, “Earnings per Share,” which requires the Company to present basic and dilutive income/loss per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss available to common stockholders by the weighted average number of common shares available. Diluted income/loss per share is computed similar to basic income/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The calculation of basic and diluted net loss per share for the years ended December 31, 2018 and 2017 are as follows:
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2018 and 2017 as such shares would have had an anti-dilutive effect:
REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018 using the modified retrospective method. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
Product revenues are recognized when the products are delivered and title passes to the customer. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns. Shipping charges billed to members are included in net sales.
The Company recognizes royalty revenue from a licensing agreement between BioStructures, LLC and the Company. The Company records revenue each calendar quarter as earned per the terms of the agreement which stipulates the Company will receive quarterly royalty payments of at least $50,250. To date, royalties related to this licensing agreement have not exceeded the annual minimum of $201,000 ($50,250 per quarter).
The Company’s investment in Cellerate, LLC is reported using the equity method of accounting. Accordingly, Cellerate, LLC revenues are not recognized by the Company in its consolidated financial statements. Rather, the Company’s 50% share of Cellerate, LLC’s net income or loss is presented as a single line item on WMTI’s Statement of Operations. Cellerate, LLC’s unaudited Balance Sheet and unaudited Statement of Operations is included as an exhibit to the Financial Statements of WMTI (see Exhibit 99.1). Management has evaluated the carrying amount of the Company’s equity investment in Cellerate, LLC and has determined there has been no triggering event that would require impairment of this investment.
Under the terms of the development and license agreement the Company executed with BioStructures, LLC (BioStructures) in 2011, royalties of 2.0% are recognized on sales of products containing the Company’s patented resorbable bone hemostasis. However, the minimum annual royalty due to the Company shall be $201,000 throughout the life of the patent which expires in 2023. These royalties are payable in quarterly installments of $50,250.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company establishes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectible accounts. Bad debt reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company recorded bad debt expense of $12,558 and $22,207 in 2018 and 2017, respectively. The allowance for doubtful accounts at December 31, 2018 was $40,550 and the amount at December 31, 2017 was $28,910. Accounts receivable written-off during 2018 totaled $918.
INVENTORIES
As part of the formation of Cellerate, LLC, all WCI inventory was contributed to Cellerate, LLC on August 28, 2018. During 2017 and through August 28, 2018, inventories were stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist of finished goods, powders, gels and the related packaging supplies. The Company recorded inventory obsolescence expense of $0 in 2018 and $57,483 in 2017. The allowance for obsolete and slow-moving inventory had a balance of $0 and $144,996 at December 31, 2018 and December 31, 2017, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed utilizing the straight-line method over the estimated economic life of the assets, which ranges from five to ten years. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. As of December 31, 2018, fixed assets consisted of $122,943 including furniture and fixtures, computer equipment, phone equipment and the Company’s websites. As of December 31, 2017, fixed assets consisted of $120,162 including furniture and fixtures, computer equipment, phone equipment and the Company’s websites. The depreciation expense recorded in 2018 was $18,866 and the depreciation expense recorded in 2017 was $15,623. The balance of accumulated depreciation was $70,116 and $56,951 at December 31, 2018 and December 31, 2017, respectively. The Company paid $8,482 to acquire fixed assets during 2018.
INTANGIBLE ASSETS
As of December 31, 2018, intangible assets include a patent acquired in 2009 with a historical cost of $510,310. The patent is being amortized over its estimated useful life of 10 years using the straight-line method. In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years. Amortization expense recognized was $65,024 during each of the years 2018 and 2017.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, undiscounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. There was no impairment recorded during the years ended December 31, 2018 and 2017.
FAIR VALUE MEASUREMENTS
As defined in Accounting Standards Codification (“ASC”) Topic No. 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
The three levels of the fair value hierarchy defined by ASC Topic No. 820 are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Our intangible assets have also been valued using the fair value accounting treatment and a description of the methodology used, including the valuation category, is described below in Note 6 “Intangible Assets.”
DERIVATIVES
The Company infrequently enters into derivative financial instruments to manage its funding of current operations. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. There were no derivative liabilities as of December 31, 2017 or 2018.
INCOME TAXES
Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all, of the deferred tax asset will not be realized.
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE
The convertible feature of certain notes payable provides for a rate of conversion that is below the market value of the Company’s common stock. Such a feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). In accordance with ASC Topic No. 470-20-25-4, the intrinsic value of the embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the debt equal to the intrinsic value of that feature to additional paid in capital. When applicable, the Company records the estimated fair value of the BCF in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are accreted to interest expense over the term of the notes using the effective interest method.
ADVERTISING EXPENSE
In accordance with ASC Topic No. 720-35-25-1, the Company recognizes advertising expenses the first time the advertising takes place. Such costs are expensed immediately if such advertising is not expected to occur.
SHARE-BASED COMPENSATION
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to current period presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers which is to be effective for reporting periods beginning after December 15, 2017. The Company adopted ASC 606 effective January 1, 2018 and the adoption had no impact on the Company’s financial position, operations or cash flows.
In February 2016, the FASB issued ASC 842 Leases which is to be effective for reporting periods beginning after December 15, 2018. The Company adopted the pronouncement effective January 1, 2019 and the adoption is not expected to have a material impact on the Company’s financial position, operations or cash flows. As a result of the adoption, the Company will record lease assets of approximately $245,000 and a corresponding lease liability of the same amount in January 2019.
In March 2016, the FASB issued ASU 2016-07, which eliminates a requirement for the retroactive adjustment on a step by step basis of the investment, results of operations, and retained earnings as if the equity method had been effective during all previous periods that the investment had been held when an investment qualifies for equity method accounting due to an increase in the level of ownership or degree of influence. The cost of acquiring the additional interest in the investee is to be added to the current basis of the investor’s previously held interest and the equity method of accounting should be adopted as of the date the investment becomes qualified for equity method accounting. The presentation of the Company’s financial statements is consistent with this guidance.
On June 20, 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company adopted the pronouncement effective January 1, 2019 and the adoption is not expected to have a material impact on the Company’s financial position, operations or cash flows.
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3. ASC Topic 606, Revenue from Contracts with Customers |
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ASC Topic 606, Revenue from Contracts with Customers | The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018 using the modified retrospective method. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
Details of this five-step process are as follows:
Identification of the contract with a customer
Customer purchase orders are generally considered to be contracts under ASC 606. Purchase orders typically identify specific terms of products to be delivered, create the enforceable rights and obligations of both parties, and result in commercial substance.
No other forms of contract revenue recognition, such as the completed contract or percentage of completion methods, were utilized by the Company in either 2017 or 2018.
Performance obligations
The Company has established prices for its products. These prices are effectively agreed to when customers place purchase orders with the Company. Rebates and discounts, if any, are recognized in full at the time of sale as a reduction of net revenue. Allocation of transaction prices is not necessary where one performance obligation exists.
Determination and allocation of the transaction price
The Company has established prices for its products these prices are effectively agreed to when customers place purchase orders with the Company. Allocation of transaction prices is not necessary where one performance obligation exists.
Recognition of revenue as performance obligations are satisfied
Product revenues are recognized when the products are delivered and title passes to the customer.
Disaggregation of Revenue
Revenue streams from product sales and royalties are summarized below for the twelve-months ended December 31, 2018 and 2017. All revenue was generated in the United States; therefore, no geographical disaggregation is necessary.
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4. OTHER SIGNIFICANT TRANSACTIONS |
12 Months Ended |
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Dec. 31, 2018 | |
Other Significant Transactions | |
OTHER SIGNIFICANT TRANSACTIONS | Evolution Partners LLC Letter Agreement and Termination Agreement
On October 10, 2017, Wound Management Technologies, Inc. (the “Company”) and Evolution Venture Partners LLC (“EVP”) entered into a termination agreement (the “Termination Agreement”) terminating, effective as of September 29, 2017, that certain letter agreement dated April 26, 2016, (the “Agreement”), by and between the Company, EVP, and Middlebury Securities, LLC (“Middlebury”). Middlebury terminated its charter on or about July 27, 2016, and therefore is not a party to the Termination Agreement. The Agreement had an initial term of one year (with an automatic six-month renewal term) and provided for:
· A $60,000 consulting fee payable upon execution of the Agreement, refundable only upon cancellation of the Agreement by EVP during the initial one-year term.
· A success fee in an amount equal to 5% of the transaction value of any strategic transaction.
· A selling fee equal to 3% of the gross proceeds of any debt financing transaction or 5% of the gross proceeds of any equity financing transaction.
· The issuance to EVP of a warrant (the “Warrant”) for the purchase of 60,000,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at an exercise price of $0.12 per share.
The total amount of the consulting fee and warrant expense was $818,665 and is recognized in 2016 as “Other administrative expenses” in the Consolidated Statement of Operations.
As of the termination date, there were no Financing Transactions or Strategic Transactions (as defined in the Agreement) being considered by the Company and no such transactions occurred.
Pursuant to the Termination Agreement, EVP canceled the Warrant in exchange for the Company’s issuance to EVP of 750,000 shares of the Company’s Common Stock. There was no incremental increase in the fair value of the modified stock-based compensation award as of the modification date and accordingly, no additional compensation cost was recognized.
Cellerate, LLC
Effective August 28, 2018, the Company consummated definitive agreements that continued operations to market the Company’s principal products, CellerateRX® Hydrolyzed Collagen (CellerateRX), through a 50% ownership interest in a newly formed Texas limited liability company, Cellerate, LLC. The remaining 50% ownership interest is held by an affiliate of The Catalyst Group Inc. (CGI), which recently acquired an exclusive license to distribute CellerateRX products. Cellerate, LLC will conduct operations with an exclusive sublicense from a CGI affiliate to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico.
While the Company has significant influence over the operations of Cellerate, LLC, the Company does not have a controlling interest. CGI has the controlling vote in the event of a deadlocked vote by the Board of Managers of Cellerate, LLC. Therefore, the Company reports its investment in Cellerate, LLC using the equity method of accounting. The Company’s 50% share of Cellerate, LLC’s net income or loss is presented as a single line item on WMTI’s Statement of Operations beginning September 1, 2018.
The definitive agreements related to the Cellerate, LLC transaction are summarized below. The full agreements are attached as exhibits to this filing.
Contribution Agreement
WCI, LLC (“WCI”), a wholly-owned subsidiary of the Company, transferred to Cellerate, LLC all of its existing inventories and certain trademarks and UPC numbers in exchange for its 50% ownership interest in Cellerate, LLC. The inventories had a net book value of $448,511 at the time of closing. Additionally, as part of the transaction, the Company issued a 30-month promissory note to CGI in the principal amount of $1,500,000, bearing interest at a 5% annual interest rate, compounded quarterly. Interest is payable quarterly, but may be deferred at the Company’s election to the maturity of the Note. Outstanding principal and interest are convertible at CGI’s option into shares of WNDM common stock at a conversion price of $.09 per share.
The Company recorded its initial investment in Cellerate, LLC at cost, which was $1,948,511 as of the closing date. This included the $1,500,000 promissory note to CGI and inventories valued at $448,511 net of obsolescence. The trademarks and UPC numbers contributed to Cellerate, LLC had zero book value. For the four months ending December 31, 2018, the Company recognized $9,951 of income from its equity method investment in Cellerate, LLC, resulting in an investment balance of $1,958,463 as of December 31, 2018.
CGI transferred to Cellerate, LLC in exchange for its 50% ownership interest an exclusive sublicense to distribute CellerateRX into the wound care and surgical markets in the United States, Canada and Mexico. The term of the sublicense extends through August 2028, with automatic one-year renewals through December 31, 2049, subject to termination at the end of any renewal term by CGI or WCI on six-months' notice.
The foregoing summary of the Contribution Agreement does not purport to be complete and is qualified in its entirety by reference to the Contribution Agreement.
Operating Agreement
Cellerate, LLC’s Operating Agreement provides for the business and affairs of Cellerate, LLC to be managed by a Board of Managers consisting of two persons. CGI and WCI each has the right to appoint one person to the Board of Managers who serve indefinite terms until their resignation, removal or death. The Board of Managers act by a vote of the Managers, but in the event of a deadlocked vote, the vote of the CGI designated manager will be controlling, except (i) in the case of a transaction with a related party or affiliate (other than Cellerate, LLC) of the CGI designee or (ii) CGI transfers any portion of its ownership interest in Cellerate, LLC to a third party or more that 50% of CGI’s ownership is transferred to a third party. The initial Board of Managers is Mr. Ron Nixon as the CGI designee, and Mr. Michael Carmena as the WCI designee. The Board of Managers manages the general operations of Cellerate, LLC, subject however to a vote by members of Cellerate, LLC holding two-thirds of the membership interests in Cellerate, LLC to approve major actions of Cellerate, LLC.
When sufficient cash is available, distributions to Cellerate, LLC’s owners will be made at times and in amounts determined by a vote of the Board of Managers. Cellerate, LLC, however, will make distributions on an annual basis sufficient for each owner to pay such owner’s income taxes arising from its ownership interest in Cellerate, LLC.
The Operating Agreement contains restrictions on transfer of ownership interests with customary rights of first refusal, co-sale and buy/sell provisions applicable to each owner.
The foregoing summary of Cellerate, LLC’s Operating Agreement does not purport to be complete and is qualified in its entirety by reference to the Operating Agreement.
Sublicense Agreement
Cellerate, LLC has an exclusive sublicense to distribute CellerateRX® Activated Collagen® products into the wound care and surgical markets in the United States, Canada and Mexico. The wound care market comprises the care for external wounds, including the treatment of external, tunneled or undermined wounds. This would include pressure ulcers (Stages I-IV), venous stasis ulcers, diabetic ulcers, ulcers resulting from arterial insufficiency, surgical wounds, traumatic wounds, first and second-degree burns, superficial wounds, cuts, scrapes, skin tears, skin flaps and skin grafts. The term of the sublicense extends through August 2028, with automatic one-year renewals through December 31, 2049, subject to termination at the end of any renewal term by either party on six-months' notice. Cellerate, LLC pays specified royalties to Applied based on Cellerate, LLC’s annual net sales of CellerateRX.
The foregoing summary of the Sublicense Agreement does not purport to be complete and is qualified in its entirety by reference to the Sublicense Agreement.
Professional Services Agreement
The Company and CGI agreed to provide Cellerate, LLC with certain professional services needed to conduct the affairs of Cellerate, LLC through December 31, 2018. The Company and CGI were reimbursed on a monthly basis by Cellerate, LLC for services performed, consistent with historical costs to provide the services. The Company also received reimbursement for office lease and other overhead costs dedicated to supporting Cellerate, LLC’s activities. These reimbursements from Cellerate, LLC are recognized by the Company as reductions of selling, general and administrative expenses.
The foregoing summary of the Professional Services Agreement does not purport to be complete and is qualified in its entirety by reference to the Professional Services Agreement.
Promissory Note
As part of the transaction to form Cellerate, LLC, the Company issued a 30-month convertible promissory note to CGI in the principal amount of $1,500,000, bearing interest at a 5% annual interest rate, compounded quarterly. Interest is payable quarterly, but may be deferred at the Company’s election to the maturity of the Note. Outstanding principal and interest are convertible at CGI’s option into shares of WNDM common stock at a conversion price of $.09 per share.
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5. NOTES PAYABLE |
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NOTES PAYABLE | CONVERTIBLE NOTES PAYABLE – RELATED PARTIES
Funds are advanced to the Company from various related parties as necessary to meet working capital requirements. Below is a summary of outstanding convertible notes due to related parties, including accrued interest separately recorded, as of December 31, 2018 and 2017:
On June 15, 2015, the Company entered into term loan agreements with The James W. Stuckert Revocable Trust (“SRT) and The S. Oden Howell Revocable Trust (“HRT”), pursuant to which SRT made a loan to the Company in the amount of $600,000 and HRT made a loan to the Company in the amount of $600,000 under Senior Secured Convertible Promissory Notes (the “Notes”). Both SRT and HRT are controlled by affiliates of the Company. The Notes each carried an interest rate of 10% per annum, and (subject to various default provisions) all unpaid principal and accrued but unpaid interest under the Notes were due and payable on June 15, 2018. The Notes provided that the Notes could be prepaid in whole or in part upon ten days’ written notice, and all unpaid principal and accrued interest under the Notes could be converted, at the option of SRT and HRT, into shares of the Company’s Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity.”). The Company’s obligations under the two notes were secured by all the assets of the Company and its subsidiaries.
On February 19, 2018, both Notes totaling $1,200,000 plus $385,594 of accrued interest were converted to 22,651,356 common shares of the Company's Common Stock. The accrued interest included $60,608 of additional interest expense recognized during the first quarter of 2018.
The following is a summary of amounts due to unrelated parties, including accrued interest separately recorded, as of December 31, 2018 and 2017:
During 2017, the WMTI reached an agreement to settle an outstanding payable with WellDyne Health, LLC, (“WellDyne”), a third party that had provided shipping and consulting services on behalf of the Company effective through September 19, 2015. As part of that settlement, WellDyne forgave $39,709 of the outstanding payable.
During 2017, the Company paid a total of $190,838 principal to three non-related party note holders and reached an agreement with them to forgive $10,937 in accrued interest. As a result, all three notes were paid in full. The Company also settled $223,500 note payable and $147,373 accrued interest in Common Stock, see note 11.
On August 27, 2018, as part of the partnership transaction with CGI to form Cellerate, LLC, the Company issued a 30-month promissory note to CGI in the principal amount of $1,500,000, bearing interest at a 5% annual interest rate, compounded quarterly. Interest is payable quarterly but may be deferred at the Company’s election to the maturity of the Note. Outstanding principal and interest are convertible at CGI’s option into shares of WNDM common stock at a conversion price of $.09 per share.
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6. INTANGIBLE ASSETS |
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INTANGIBLE ASSETS | Patent
On September 29, 2009, the Company entered into an Asset Purchase Agreement (the “Agreement”), whereby the Company acquired a patent in exchange for 500,000 shares of the Company’s common stock and the assumption of a legal fee payable in the amount of $47,595 which is related to the patent. Based on the guidance in ASC Topic No. 350-30, the patent was recorded as an intangible asset of $462,715, or approximately $.93 per share plus $47,595 for the assumed liability. The intangible asset is being amortized over an estimated ten-year useful life.
Software Implementation
In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years.
The activity for the intangible assets is summarized below:
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7. CUSTOMERS AND SUPPLIERS |
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Dec. 31, 2018 | |
Notes to Financial Statements | |
CUSTOMERS AND SUPPLIERS | The Company had three significant customers with annual sales over $500,000 which accounted for approximately 10%, 9% and 6% of the Company’s sales in 2018 and had one significant customer which accounted for approximately 16% of the Company’s sales in 2017. The loss of the sales generated by these customers would have a significant effect on the operations of the Company.
The Company purchases all raw materials inventory for its principal product from one vendor. If this vendor became unable to provide materials in a timely manner and the Company was unable to find alternative vendors, the Company's business, operating results and financial condition would be materially adversely affected. |
8. COMMITMENTS AND CONTINGENCIES |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
ROYALTY AGREEMENTS
Effective January 3, 2008, WCI entered into separate exclusive license agreements with both Applied and its founder George Petito (“Petito”), pursuant to which WCI obtained the exclusive worldwide license to make products incorporating intellectual property covered by a patent related to CellerateRX products. The licenses were limited to the human health care market, (excluding dental and retail) for external wound care (including surgical wounds) and include any new product developments based on the licensed patent and processes and any continuations. Although the term of these licenses expired on February 27, 2018, the agreements permitted WCI to continue to sell and distribute products through August 27, 2018.
In consideration for the licenses, WCI agreed to pay Applied and Petito, (in the aggregate), the following royalties, beginning January 3, 2008: (a) an advance royalty of $100,000; (b) a royalty of 15% of gross sales occurring during the first year of the license; (c) an additional advance royalty of $400,000 on January 3, 2009; plus (d) a royalty of 3% of gross sales for all sales occurring after the payment of the $400,000 advance royalty. In addition, WCI must maintain a minimum aggregate annual royalty payment of $375,000 for 2009 and thereafter if the royalty percentage payments made do not meet or exceed that amount. Sales of CellerateRX Products by WCI occurring after the termination date were subject to the 3% royalty.
Subsequent to the expiration of the license agreement between the Company and Applied, an exclusive license was acquired by a CGI affiliate to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico. The Company and CGI entered into definitive agreements on August 27, 2018, that continued operations to market CellerateRX through Cellerate, LLC, a newly formed entity in which the Company and CGI each have a 50% ownership interest. The term of the sublicense granted by CGI to Cellerate, LLC extends through August 2028, with automatic one-year renewals through December 31, 2049, subject to termination at the end of any renewal term by either party on six-months' notice. Cellerate, LLC pays specified royalties to Applied at a rate of 3% of net sales of CellerateRX. In addition, Cellerate, LLC must maintain a minimum aggregate annual royalty payment of $400,000 for 2018 and thereafter if the royalty percentage payments made do not meet or exceed that amount.
On September 29, 2009, the Company entered into an Asset Purchase Agreement with Resorbable Orthopedic Products, LLC (“Resorbable”) and Resorbable’s members, pursuant to which, the Company acquired substantially all of Resorbable’s assets, in exchange for (i) 500,000 shares of the Company’s Common Stock, and (ii) a royalty equal to eight percent (8%) of the Company’s net revenues generated from products that utilize the patented technology acquired from Resorbable.
OFFICE LEASE
In March of 2017, and as amended in March 2018, the Company executed a new office lease for office space located at 1200 Summit Ave., Suite 414, Fort Worth, TX 76102. The amended lease is effective May 1, 2018 and ends on June 30, 2021. Monthly base rental payments are as follows: months 1-2, $8,390; months 3-14, $8,565; months 15-26, $8,740; and months 27-39, $8,914. Rent expense is recognized on a straight-line basis over the term of the Lease and the resulting deferred rent liability is $10,474 as of December 31, 2018. The amount of rent expense recognized by the Company will be reduced by the amount billed to Cellerate, LLC under the terms of the Professional Services agreement between the Company and Cellerate, LLC. For the month ending December 31, 2018, the net rent expense recognized by the Company was $926.
PAYABLES TO RELATED PARTIES
As of December 31, 2018, and 2017, the Company had outstanding payables to related parties totaling $63,288 and $60,000, respectively. The payables are unsecured, bear no interest and due on demand. |
9. STOCKHOLDERS EQUITY |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS EQUITY | PREFERRED STOCK
There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock issued or outstanding as of December 31, 2018 and 2017.
Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 7,500 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution. Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate. There were no Series B Shares issued or outstanding as of December 31, 2018 and 2017.
On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00. The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018.
The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon. Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate. Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of December 31, 2018, and December 31, 2017, there were 0 and 85,561 shares of Series C Preferred Stock issued and outstanding, respectively.
On March 10, 2017, the Company issued 715 shares of Series C preferred stock in exchange for cash in the amount of $50,050.
During 2017, one shareholder converted 800 shares of Series C preferred stock and dividend of $9,692 to common stock of 937,556 shares.
During February and March 2018, the Company issued 100,567,691 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends. Dividends were converted at $0.07 per share. As of December 31, 2018, there were no shares of Series C Preferred Stock outstanding and all accrued dividends were converted to Common Stock.
The Series C preferred stock earned dividends of $28,061 and $139,006 for the years ended December 31, 2018 and December 31, 2017, respectively. As an inducement to encourage the Series C Preferred Stock shareholders to convert their Series C Preferred Stock to Common Stock prior to October 10, 2018, the Company offered to apply the full dividend, (accelerated to October 10, 2018) upon the shareholders exercise of their conversion. The fair value of the extra shares of Common Stock issued to Series C Stock shareholders was $103,197 for dividends that would have accrued from the date of their conversion through October 10, 2018.
On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock. Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. On September 3, 2014, the Company increased its authorized common stock to 250,000,000 shares. As a result, all outstanding Series D preferred shares were converted to common stock. As of December 31, 2018, and December 31, 2017 there were no shares of Series D Preferred Stock issued and outstanding.
On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock. Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of December 31, 2018, there were no shares of Series E Preferred Stock issued and outstanding.
The Company evaluated the Series C preferred stock under FASB ASC 815 and determined that they do not qualify as derivative liabilities. The Company then evaluated the Series C preferred stock for beneficial conversion features under FASB ASC 470-30 and determined that none existed.
COMMON STOCK
On September 3, 2014, the Company held a stockholders meeting. The stockholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized shares of common stock of the Company from 100,000,000 to 250,000,000.
On March 9, 2017, the Company issued 150,000 shares of common stock to each of the Company’s then four Board Directors, (a total of 600,000 shares valued at $42,000).
On March 10, 2017, the Company issued 250,000 shares of common stock valued at $18,250 to a contract consultant upon achievement of specified revenue targets which occurred January 31, 2017.
On July 31, 2017, the Company issued 937,556 shares of common stock for the conversion of 800 shares of Series C Convertible Preferred Stock and $9,629 of related Series C dividends
On November 22, 2017, the Company issued 1,200,000 shares of common stock valued at $84,000 for settlement of debt (see NOTE 11 below for a discussion of the settlement).
On November 22, 2017, the Company issued 750,000 shares of common stock valued at $0 to a contract consultant upon termination of contract (see NOTE 3 above for a discussion of the termination).
On March 6, 2018, the Company issued 22,651,356 shares of Common Stock for the conversion of $1,200,000 in Related Party convertible debt and $385,594 in accrued interest.
In February and March 2018, the Company issued 100,567,691 shares of Common Stock for the conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends.
WARRANTS
At December 31, 2018, there were 0 warrants outstanding. At December 31, 2017, there were 5,100,000 warrants outstanding with a weighted average exercise price of $0.06.
A summary of the status of the warrants granted at December 31, 2018 and 2017, and changes during the years then ended is presented below:
The following table summarizes the outstanding warrants as of December 31, 2017:
STOCK OPTIONS
A summary of the status of the stock options granted for the years ended December 31, 2018 and 2017, and changes during the period then ended is presented below:
(a) On January 1, 2015, the Company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result, the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life. As of December 31, 2017, the options were forfeited.
On December 31, 2017, the Company granted a total of 1,150,000 options to five employees. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $61,322 and no expense was recognized.
On April 13, 2018, the Company granted a total of 200,000 options to one employee and one contractor. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $8,943 which will be expensed over the three-year vesting period.
On August 31, 2018 the Company granted a total of 200,000 options to one employee. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $16,405 which will be expensed over the three-year vesting period.
During the twelve-month period ending December 31, 2018 an option expense of $24,500 was recognized.
The following table summarizes the outstanding options as of December 31, 2018:
The following table summarizes the outstanding options as of December 31, 2017:
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10. INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.
A 100% valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain.
The unexpired net operating loss carry forward at December 31, 2018 is approximately $34,859,000 with various expiration dates between 2019 and 2037 if not utilized. All tax years starting with 2015 are open for examination.
Non-current deferred tax asset:
Reconciliations of the expected federal income tax benefit based on the statutory income tax rate of 21% to the actual benefit for the years ended December 31, 2018 and 2017 are listed below.
The Company has no tax positions at December 31, 2018 and 2017 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2018 and 2017, the Company recognized no interest and penalties.
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11. LEGAL PROCEEDINGS |
12 Months Ended |
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Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS |
As of December 31, 2018, and as of this filing date, the Company has no outstanding legal proceedings. |
12. SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | In accordance with applicable accounting standards for the disclosure of events that occur after the balance sheet date but before the financial statements are issued, all significant events or transactions that occurred after December 31, 2018, are outlined below:
Effective January 31, 2019, John Siedhoff resigned as Chairman and member of the Board of Directors of Wound Management Technologies, Inc. (the “Company”). Mr. Siedhoff did not resign as a result of a disagreement with the Company. Mr. Jim Stuckert, a Company Board member since 2015 and retired Chairman and Chief Executive Officer of J.J.B. Hilliard, W.L. Lyons, LLC, assumed the role of Chairman effective February 1, 2019.
On March 13, 2019, the Company established a new series of preferred stock consisting of 1,200,000 shares of Series F Convertible Preferred Stock, par value of $10.00 per share. Each share of Series F Convertible Preferred Stock may be converted at the option of the holder, at any time, into 200 shares of common stock. Additionally, each holder of Series F Convertible Preferred Stock is entitled to vote on all matters submitted for a vote of the Company’s shareholders with votes equal to the number of shares of common stock into which such holder’s Series F shares could then be converted. The Series F Convertible Preferred Stock is senior to the Company’s common stock as to the payment of dividends (if any) and the distribution of assets. Upon liquidation of the Company, holders of Series F Convertible Preferred Stock are entitled to a liquidation preference of $5 per share. See Exhibit 4.6, Certificate of Designations, Voting Power, Preferences and Rights of Series F Convertible Preferred Stock.
On March 15, 2019, the Company acquired the remaining 50% interest in Cellerate, LLC not owned by the Company. The acquisition was made from an affiliate of The Catalyst Group, Inc. (CGI) of Houston, Texas in exchange for the issuance of 1,136,815 shares of the Company’s newly created Series F Convertible Preferred Stock. Based on the closing price of the Company’s common stock on March 15, 2019 and the conversion ratio of the Series F Preferred Stock, the fair value of the preferred shares issued to CGI was approximately $12.5 million. As of the transaction effective date of March 15, 2019, the Company owns 100% of Cellerate, LLC, and as a wholly-owned subsidiary will report its operations and financial results on a consolidated basis. See Exhibit 10.6, Share Exchange Agreement between CGI CellerateRX, LLC and WNDM Medical, Inc.
Following the closing of this transaction, Mr. Ron Nixon, Founder and Managing Partner of CGI, was elected to the Company’s Board of Directors effective March 15, 2019. Mr. Nixon currently serves on the board of directors for publicly traded LHC Group, Inc., Trilliant Surgical, LLC, Rochal Industries, LLC, Triad Life Sciences, Inc. and several other privately held companies. Mr. Nixon holds a bachelor’s degree in mechanical engineering from the University of Texas at Austin and is a registered professional engineer in Texas.
On March 21, 2019, the Company filed SEC Schedule 14C notifying shareholders of common stock that a majority of our capital stock entitled to vote (the “Majority Shareholders”) approved by written consent in lieu of a meeting of shareholders an amendment to the Company’s Certificate of Formation (the “Amendment”) to accomplish the following actions (the “Corporate Actions”):
(1) the effectuation of a 1-for-100 reverse stock split of the Company’s outstanding Common Stock such that every Shareholder shall receive one share of Common Stock for every 100 shares of Common Stock held (the “Reverse Stock Split”);
(2) upon the effectiveness of the Reverse Stock Split, the reduction of the authorized capital stock of the Company to 20,000,000 shares of Common Stock and 2,000,000 shares of preferred stock; and
(3) the change of the name of the Company to: Sanara MedTech, Inc.
The written consent of the Majority Shareholders constitutes the required approval of the Company’s Shareholders and is sufficient under the Texas Business Organizations Code (the “TBOC”) and the Company’s Certificate of Formation and Bylaws to approve the Corporate Actions described above. No further action is required from the remaining Shareholders. Accordingly, the Corporate Actions are not being submitted to these other Shareholders for a vote.
The Company anticipates that these changes will take effect near the end of April or early May, 2019. When it becomes effective, the reverse stock split will not change a shareholder's ownership percentage of the Company's common stock, except for the small effect where the reverse stock split would result in a shareholder owning a fractional share. No fractional shares will be issued as a result of the reverse split. Shareholders who would otherwise be entitled to receive a fractional share will instead receive a cash payment based on the market price of a share of common stock on the day after the reverse stock split becomes effective.
The conversion and voting provisions of the Company's Series F Convertible Preferred Stock will be proportionally adjusted by a factor of 100 to reflect the reverse stock split. All of the Company's outstanding stock options will also be proportionally adjusted to reflect the reverse split, in accordance with the terms of the plans, agreements or arrangements governing such securities.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | The terms “the Company,” “we,” “us” “WMTI” and “WNDM” are used in this report to refer to Wound Management Technologies, Inc. and its wholly owned subsidiaries, unless the context suggests otherwise. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. |
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PRINCIPLES OF CONSOLIDATION | The accompanying consolidated financial statements include the accounts of WMTI and its wholly-owned subsidiaries: WCI, LLC a Nevada limited liability company (“WCI”); Resorbable Orthopedic Products, LLC, a Texas limited liability company (“ROP”); and Innovate OR, Inc. (“IOR”) formerly referred to as BioPharma Management Technologies, Inc., a Texas corporation (“BioPharma”). All intercompany accounts and transactions have been eliminated. ROP and IOR were dissolved during the third quarter of 2018. All rights and obligations of each were assigned to its parent company WMTI.
WCI’s exclusive license to sell and distribute CellerateRX products in the human health care market (excluding dental and retail) expired on February 27, 2018. The license agreements permitted WCI to continue to sell and distribute products through August 27, 2018. Subsequent to the expiration of the license agreement between the Company and Applied, Nutritionals, LLC (“Applied”) an exclusive license was acquired by an affiliate of The Catalyst Group, Inc. (“CGI”) to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico. The Company and CGI entered into definitive agreements on August 27, 2018, that continued operations to market CellerateRX through Cellerate, LLC, a newly formed Texas Limited Liability Company in which the Company and CGI each have a 50% ownership interest.
While the Company had significant influence over the operations of Cellerate, LLC, the Company did not have a controlling interest. CGI had the controlling vote in the event of a deadlocked vote by the Board of Managers of Cellerate, LLC. Therefore, the Company’s investment in Cellerate, LLC is reported using the equity method of accounting. Beginning September 1, 2018, the Company’s 50% share of Cellerate, LLC’s net income or loss is presented as a single line item on WMTI’s Statement of Operations. Cellerate, LLC’s unaudited Balance Sheet and unaudited Statement of Operations is included as an exhibit to the Financial Statements of WMTI (see Exhibit 99.1). |
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USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION | 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, the disclosures of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses during the reporting period. On a regular basis, management evaluates these estimates and assumptions. Actual results could differ from those estimates. |
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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES | The Company considers all highly liquid debt investments purchased with an original maturity of three months or less to be cash equivalents. Marketable securities include investments with maturities greater than three months but less than one year. For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities. |
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INCOME / LOSS PER SHARE | The Company computes income/loss per share in accordance with Accounting Standards Codification “ASC” Topic No. 260, “Earnings per Share,” which requires the Company to present basic and dilutive income/loss per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss available to common stockholders by the weighted average number of common shares available. Diluted income/loss per share is computed similar to basic income/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The calculation of basic and diluted net loss per share for the years ended December 31, 2018 and 2017 are as follows:
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2018 and 2017 as such shares would have had an anti-dilutive effect:
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REVENUE RECOGNITION | The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018 using the modified retrospective method. Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
Product revenues are recognized when the products are delivered and title passes to the customer. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns. Shipping charges billed to members are included in net sales.
The Company recognizes royalty revenue from a licensing agreement between BioStructures, LLC and the Company. The Company records revenue each calendar quarter as earned per the terms of the agreement which stipulates the Company will receive quarterly royalty payments of at least $50,250. To date, royalties related to this licensing agreement have not exceeded the annual minimum of $201,000 ($50,250 per quarter).
The Company’s investment in Cellerate, LLC is reported using the equity method of accounting. Accordingly, Cellerate, LLC revenues are not recognized by the Company in its consolidated financial statements. Rather, the Company’s 50% share of Cellerate, LLC’s net income or loss is presented as a single line item on WMTI’s Statement of Operations. Cellerate, LLC’s unaudited Balance Sheet and unaudited Statement of Operations is included as an exhibit to the Financial Statements of WMTI (see Exhibit 99.1). Management has evaluated the carrying amount of the Company’s equity investment in Cellerate, LLC and has determined there has been no triggering event that would require impairment of this investment.
Under the terms of the development and license agreement the Company executed with BioStructures, LLC (BioStructures) in 2011, royalties of 2.0% are recognized on sales of products containing the Company’s patented resorbable bone hemostasis. However, the minimum annual royalty due to the Company shall be $201,000 throughout the life of the patent which expires in 2023. These royalties are payable in quarterly installments of $50,250. |
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ALLOWANCE FOR DOUBTFUL ACCOUNTS | The Company establishes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectible accounts. Bad debt reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company recorded bad debt expense of $12,558 and $22,207 in 2018 and 2017, respectively. The allowance for doubtful accounts at December 31, 2018 was $40,550 and the amount at December 31, 2017 was $28,910. Accounts receivable written-off during 2018 totaled $918.
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INVENTORIES |
As part of the formation of Cellerate, LLC, all WCI inventory was contributed to Cellerate, LLC on August 28, 2018. During 2017 and through August 28, 2018, inventories were stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist of finished goods, powders, gels and the related packaging supplies. The Company recorded inventory obsolescence expense of $0 in 2018 and $57,483 in 2017. The allowance for obsolete and slow-moving inventory had a balance of $0 and $144,996 at December 31, 2018 and December 31, 2017, respectively. |
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PROPERTY AND EQUIPMENT | Property and equipment are recorded at cost. Depreciation is computed utilizing the straight-line method over the estimated economic life of the assets, which ranges from five to ten years. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. As of December 31, 2018, fixed assets consisted of $122,943 including furniture and fixtures, computer equipment, phone equipment and the Company’s websites. As of December 31, 2017, fixed assets consisted of $120,162 including furniture and fixtures, computer equipment, phone equipment and the Company’s websites. The depreciation expense recorded in 2018 was $18,866 and the depreciation expense recorded in 2017 was $15,623. The balance of accumulated depreciation was $70,116 and $56,951 at December 31, 2018 and December 31, 2017, respectively. The Company paid $8,482 to acquire fixed assets during 2018. |
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INTANGIBLE ASSETS | As of December 31, 2018, intangible assets include a patent acquired in 2009 with a historical cost of $510,310. The patent is being amortized over its estimated useful life of 10 years using the straight-line method. In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years. Amortization expense recognized was $65,024 during each of the years 2018 and 2017. |
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IMPARIMENT OF LONG LIVED ASSETS | Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, undiscounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. There was no impairment recorded during the years ended December 31, 2018 and 2017. |
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FAIR VALUE MEASUREMENTS | As defined in Accounting Standards Codification (“ASC”) Topic No. 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
The three levels of the fair value hierarchy defined by ASC Topic No. 820 are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Our intangible assets have also been valued using the fair value accounting treatment and a description of the methodology used, including the valuation category, is described below in Note 6 “Intangible Assets.” |
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DERIVATIVES | The Company infrequently enters into derivative financial instruments to manage its funding of current operations. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. There were no derivative liabilities as of December 31, 2017 or 2018. |
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INCOME TAXES | Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all, of the deferred tax asset will not be realized. |
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BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE | The convertible feature of certain notes payable provides for a rate of conversion that is below the market value of the Company’s common stock. Such a feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). In accordance with ASC Topic No. 470-20-25-4, the intrinsic value of the embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the debt equal to the intrinsic value of that feature to additional paid in capital. When applicable, the Company records the estimated fair value of the BCF in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are accreted to interest expense over the term of the notes using the effective interest method. |
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ADVERTISING EXPENSE | In accordance with ASC Topic No. 720-35-25-1, the Company recognizes advertising expenses the first time the advertising takes place. Such costs are expensed immediately if such advertising is not expected to occur. |
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SHARE-BASED COMPENSATION | The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances. |
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RECLASSIFICATIONS | Certain prior period amounts have been reclassified to conform to current period presentation. |
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers which is to be effective for reporting periods beginning after December 15, 2017. The Company adopted ASC 606 effective January 1, 2018 and the adoption had no impact on the Company’s financial position, operations or cash flows.
In February 2016, the FASB issued ASC 842 Leases which is to be effective for reporting periods beginning after December 15, 2018. The Company adopted the pronouncement effective January 1, 2019 and the adoption is not expected to have a material impact on the Company’s financial position, operations or cash flows. As a result of the adoption, the Company will record lease assets of approximately $245,000 and a corresponding lease liability of the same amount in January 2019.
In March 2016, the FASB issued ASU 2016-07, which eliminates a requirement for the retroactive adjustment on a step by step basis of the investment, results of operations, and retained earnings as if the equity method had been effective during all previous periods that the investment had been held when an investment qualifies for equity method accounting due to an increase in the level of ownership or degree of influence. The cost of acquiring the additional interest in the investee is to be added to the current basis of the investor’s previously held interest and the equity method of accounting should be adopted as of the date the investment becomes qualified for equity method accounting. The presentation of the Company’s financial statements is consistent with this guidance.
On June 20, 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company adopted the pronouncement effective January 1, 2019 and the adoption is not expected to have a material impact on the Company’s financial position, operations or cash flows. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Summary Of Significant Accounting Policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share |
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Potential shares excluded |
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3. ASC Topic 606, Revenue from Contracts with Customers (Tables) |
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Asc Topic 606Revenue From Contracts With Customers Tables Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue |
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5. NOTES PAYABLE (Tables) |
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Schedule of notes payable - related parties |
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Schedule of notes payable |
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6. INTANGIBLE ASSETS (Tables) |
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Schedule of intangible assets |
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9. STOCKHOLDERS EQUITY (Tables) |
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A Summary Of The Status Of The Warrants Granted |
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Schedule of warrants by warrant price range |
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Schedule of option activity |
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Schedule of options by option price range |
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10. INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes Tables Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of deferred tax assets |
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Schedule of federal statutory rate |
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Basic net income (loss) per share: | ||
Net income (loss) | $ (600,574) | $ 331,309 |
Weighted-average common shares outstanding | 217,163,538 | 111,381,832 |
Basic net income (loss) per share | $ (0.00) | $ 0.00 |
Diluted net income (loss) per share: | ||
Net income (loss) | $ (600,574) | $ 331,309 |
Series C dividends | 0 | (139,006) |
Diluted net income (loss) | $ 0 | $ 192,303 |
Weighted-average common shares outstanding | 217,163,538 | 111,381,832 |
Common stock warrants | 0 | 694,834 |
Convertible debt | 0 | 0 |
Preferred shares | 0 | 96,568,871 |
Weighted average shares used in computing diluted net income (loss) per share | 217,163,538 | 208,645,538 |
Diluted net income (loss) per share | $ (0.00) | $ 0.00 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Convertible debt | ||
Potential shares excluded | 16,666,667 | 19,890,414 |
3. ASC Topic 606, Revenue from Contracts with Customers (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Summary Of Significant Accounting Policies Details 2Abstract | ||
Product sales revenue | $ 5,636,839 | $ 6,103,741 |
Royalty revenue | 201,000 | 201,000 |
Revenues | $ 5,837,839 | $ 6,304,741 |
5. NOTES PAYABLE (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Notes payable related party | $ 0 | |
Accrued interest related party | 324,986 | |
S. Oden Howell Revocable Trust | ||
Nature of relationship | Mr. S. Oden Howell, Jr. became a member of the Board of Directors in June of 2015 | |
Terms of the agreement | The note is secured, bears interest at 10% per annum, matures June 15, 2018, and is convertible into shares of the Company's Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity. | |
Notes payable related party | $ 0 | |
Accrued interest related party | $ 0 | 162,493 |
James W. Stuckert Revocable Trust | ||
Nature of relationship | Mr. James W. Stuckert became a member of the Board of Directors in September of 2015 | |
Terms of the agreement | The note is secured, bears interest at 10% per annum, matures June 15, 2018, and is convertible into shares of the Company's Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity. | |
Notes payable related party | $ 0 | |
Accrued interest related party | $ 0 | $ 162,493 |
5. NOTES PAYABLE (Details 1) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Principal Amount | $ 1,500,000 | $ 0 |
Accrued Interest | 25,978 | 0 |
August 27, 2018 Promissory Note | ||
Principal Amount | 1,500,000 | 0 |
Accrued Interest | $ 25,978 | $ 0 |
6. INTANGIBLE ASSETS (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Cost, beginning | $ 552,290 |
Cost, ending | 552,290 |
Accumulated amortization, beginning | 434,999 |
Amortization expense | 65,025 |
Accumulated amortization, ending | 500,024 |
Net carrying amount, beginning | 117,291 |
Net carrying amount, ending | 52,266 |
Patents | |
Cost, beginning | 510,310 |
Cost, ending | 510,310 |
Accumulated amortization, beginning | 421,006 |
Amortization expense | 51,032 |
Accumulated amortization, ending | 472,038 |
Net carrying amount, beginning | 89,304 |
Net carrying amount, ending | 38,272 |
Software | |
Cost, beginning | 41,980 |
Cost, ending | 41,980 |
Accumulated amortization, beginning | 13,993 |
Amortization expense | 13,993 |
Accumulated amortization, ending | 27,986 |
Net carrying amount, beginning | 27,987 |
Net carrying amount, ending | $ 13,994 |
9. STOCKHOLDERS' EQUITY (Details) - Warrants - $ / shares |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Number of Warrants | ||
Outstanding beginning balance, Shares | 5,100,000 | 67,246,300 |
Granted | 0 | 0 |
Exercised | 0 | 0 |
Forfeited | 0 | (60,051,300) |
Expired | (5,100,000) | (2,095,000) |
Outstanding ending balance | 0 | 5,100,000 |
Weighted average exercise price | ||
Outstanding beginning balance, Weighted average exercise price | $ 0.06 | $ 0.12 |
Granted, Weighted average exercise price | 0.00 | 0.00 |
Exercised, Weighted average exercise price | 0.00 | 0.00 |
Forfeited, Weighted average exercise price | 0.00 | 0.12 |
Expired, Weighted average exercise price | 0.06 | 0.13 |
Outstanding ending balance, Weighted average exercise price | $ 0.00 | $ 0.06 |
9. STOCKHOLDERS' EQUITY (Details 2) - Stock Options - $ / shares |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Outstanding beginning balance, Shares | 1,150,000 | 1,093,500 |
Number of Options Granted | 400,000 | 1,150,000 |
Number of Options Exercised | 0 | 0 |
Number of Options Forfeited | 0 | (150,000) |
Number of Options Expired | 0 | (943,500) |
Outstanding ending balance | 1,550,000 | 1,150,000 |
Outstanding beginning balance, Weighted average exercise price | $ 0.06 | $ 0.15 |
Weighted Average Exercise Price Granted | 0.06 | 0.06 |
Weighted Average Exercise Price Exercised | 0.00 | 0.00 |
Weighted Average Exercise Price Forfeited | 0.00 | 0.00 |
Weighted Average Exercise Price Expired | 0.00 | 0.15 |
Outstanding ending balance, Weighted average exercise price | $ 0.06 | $ 0.06 |
9. STOCKHOLDERS' EQUITY (Details 3) - Stock Options - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Outstanding ending balance, Weighted average exercise price | $ 0.06 | $ 0.06 |
Outstanding beginning balance, Shares | 1,150,000 | 1,093,500 |
Number of Options Granted | 400,000 | 1,150,000 |
Outstanding ending balance | 1,550,000 | 1,150,000 |
Weighted-Average Remaining Contract Life | 4 years 4 months 20 days | 5 years |
Number Exercisable | 383,333 | 0 |
Stock Options Exercisable Weighted-Average Exercise Price | $ 0.06 | $ 0 |
10. INCOME TAXES (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Non-current deferred tax asset: | ||
34% of net operating loss carry forwards | $ 7,320,390 | $ 7,295,315 |
Valuation allowance non current | (7,320,390) | (7,295,315) |
Net non-current deferred tax asset | $ 0 | $ 0 |
10. INCOME TAXES (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Reconciliation Of Income Tax Rate Abstract | ||
Expected federal income tax benefit | $ 124,448 | $ (112,645) |
Goodwill amortization | 87,944 | 142,386 |
Gain on settlement of debt | 0 | 114,757 |
NOL carryover reduced by settlement of debt | 0 | (114,403) |
Change in valuation allowance | (13,959) | (11,807) |
Expired capital loss carryover | 0 | (9,227) |
NOL carryover reduced by expiration | (151,658) | 0 |
Other | (7,888) | (9,061) |
Reserve for obsolete inventory | (20,357) | 0 |
Pass through entity income allocation | (10,033) | 0 |
Reserve for bad debt | (3,971) | 0 |
Stock-based compensation | (4,526) | 0 |
Income tax expense (benefit) | $ 0 | $ 0 |
10. INCOME TAXES (Details Narrative) |
Dec. 31, 2018
USD ($)
|
---|---|
Income Taxes Details Narrative Abstract | |
Net operating loss carryforward | $ 34,859,000 |
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