4. OTHER SIGNIFICANT TRANSACTIONS	12 Months Ended
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.

4. OTHER SIGNIFICANT TRANSACTIONS

12 Months Ended

Dec. 31, 2018

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.