10. SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

Promissory Note - Paycheck Protection Program

On April 22, 2020, the Company executed an unsecured promissory note to Cadence Bank, N.A. (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Company plans to use the Loan proceeds for covered payroll costs in accordance with the relevant terms and conditions of the CARES Act.

The Loan is in the principal amount of $583,000, bears interest at a fixed rate of 1.00% per annum and matures on April 22, 2022. The Loan requires monthly payments of principal and interest in the amount of $24,546 commencing on November 2, 2020 with a final payment of $174,115 due on April 22, 2022. The Loan may be prepaid at any time prior to maturity without penalty. Under the terms of the PPP, the Company may apply for forgiveness of the amount due on the Loan equal to the sum of payroll costs, covered rent and covered utility payments incurred during the 8-week period commencing on the loan funding date of April 24, 2020.The foregoing summary is qualified in its entirety by reference to the promissory note which is attached as Exhibit 10.1 to the Company’s Form 8-K filed on April 29, 2020.

New Product License Agreement

On May 4, 2020, the Company executed a product license agreement (the “License Agreement”) with Rochal Industries, LLC (“Rochal”) whereby Sanara acquired an exclusive world-wide license to market, sell and further develop certain products for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses primarily for beauty, cosmetic, or toiletry purposes. The Executive Chairman of the Company is also a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants a majority shareholder of Rochal. Another Company director is also a director and significant shareholder of Rochal.

Key terms of the License Agreement include:

1. Sanara will pay to Rochal $600,000 in cash and $750,000 payable at Sanara’s option in cash, Sanara Common Stock, or a combination of cash and Sanara Common Stock.

2. At the time Rochal issues a purchase order to its contract manufacturer for the first good manufacturing practice run of the licensed products Sanara will pay Rochal $600,000 in cash.

3. Upon FDA clearance of the licensed products, Sanara will pay Rochal $500,000 in cash and $1,000,000, which at Sanara’s option, may be in cash or Sanara Common Stock, or a combination of cash and Sanara Common Stock.

4. Sanara will pay Rochal a royalty of:

a. 4% of net sales of licensed products in countries in which patents are registered

b. 2% of net sales of licensed products in countries without patent protection.

c. The minimum annual royalty due to Rochal will be $100,000 beginning with the first full calendar year following the year in which first commercial sales of the licensed products occur and increase by 10% each subsequent calendar year up to a maximum amount of $150,000.

d. Sanara will pay additional royalty annually based on specific net profit targets from sales of the licensed products, subject to a maximum of $1,000,000 during any calendar year.

5. The License Agreement will expire in 2034.

The foregoing summary of the License Agreement does not purport to be complete and is qualified in its entirety by reference to the License Agreement. See Exhibit 10.1 for a full copy of the License agreement.