XML 53 R9.htm IDEA: XBRL DOCUMENT
v3.19.2

3. COMMITMENTS AND CONTINGENCIES | 6 Months Ended
--- | ---
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | Royalty agreements Effective January 3, 2008, a subsidiary of the Company entered into separate exclusive license agreements with both Applied Nutritionals, LLC (“Applied”) and its founder George Petito, pursuant to which the Company obtained the exclusive world-wide license to market products incorporating intellectual property covered by a patent related to CellerateRX products. Although the term of these licenses expired on February 27, 2018, the agreements permitted the Company to continue to sell and distribute products through August 27, 2018. Subsequent to the expiration of the license agreement between the Company and Applied, a new exclusive license was acquired by a Catalyst affiliate to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico. The Company and Catalyst entered into definitive agreements on August 27, 2018 that continued operations to market CellerateRX under a new sublicense granted by the Catalyst affiliate to Cellerate, LLC, a newly formed entity in which the Company and Catalyst each had a 50% ownership interest. 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 royalties to Catalyst based on Cellerate, LLC’s annual net sales of CellerateRX consisting of 3% of all collected net sales each year up to $12,000,000, 4% of all collected net sales each year that exceed $12,000,000 up to $20,000,000, and 5% of all collected net sales each year that exceed $20,000,000. Minimum royalties of $400,000 per year are payable for the first five years of the sublicense agreement. Office leases In March 2017, and as amended in March 2018, the Company executed a new office lease effective April 1, 2019 for office space located at 1200 Summit Ave., Suite 414, Fort Worth, TX 76102. The lease expires 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. On July 1, 2019, the Company amended its office lease agreement effective upon completion by landlord of certain leasehold improvements which were expected to be completed in late August 2019. See Note 8 – Subsequent Events for more information. Payables to Related Parties In addition to the convertible promissory note to Catalyst discussed in Note 2, the Company had outstanding payables to related parties totaling $143,510 at June 30, 2019, and $36,203 at December 31, 2018. Advances to Related Parties In the normal course of business, the Company may advance payments to its suppliers, inclusive of Wound Care Solutions, Limited, a related party due to its interest in Sanara Pulsar, LLC which is partly owned by the Company (see “Other commitments” below). As of June 30, 2019, and December 31, 2018, the balance due from the related party for future shipments was $144,587 and $0, respectively. Other commitments On May 7, 2019, the Company formed Sanara Pulsar, LLC (Sanara Pulsar), a Texas limited liability company. On May 9, 2019, (the Execution Date) the Company, through its wholly owned subsidiary Cellerate, LLC (Cellerate), and Wound Care Solutions, Limited, a company registered in the United Kingdom (WCS), the two members of Sanara Pulsar, executed a Company Agreement, (the Company Agreement). The Company Agreement includes the Sanara Pulsar ownership structure, operating framework, and members’ rights, responsibilities, and voting power. Simultaneously with the execution of the Company Agreement, Sanara Pulsar and WCS entered into a supply agreement whereby Sanara Pulsar would become the exclusive distributor in the United States of certain wound care products (the WCS Products) that utilize intellectual property developed and owned by WCS. Per the terms of the Company Agreement, Cellerate owns sixty-percent (60%) of the initial membership interests in Sanara Pulsar, while WCS owns forty-percent (40%). Net profits and losses will be shared by the initial members in proportion to their respective membership interests. The agreement includes customary terms and conditions regarding profit distributions and the sale or transfer of membership interests. The Company will consolidate the operations and financial position of Sanara Pulsar with Sanara MedTech Inc. The Company expects to see first sales begin at Sanara Pulsar in the third quarter of 2019. The Company Agreement provides that Cellerate advance to WCS $100,000 sixty days from the Execution Date and an additional $100,000 one hundred twenty days from the Execution Date. All distributions made by Sanara Pulsar to its members, not including tax distributions, shall be made exclusively to Cellerate until such time as Cellerate has received an amount of distributions equal to the advances. In the event WCS’s Form K-l for the year 2020 does not allocate to WCS net income in an amount of $200,000 ("Target Net Income") or more, then Cellerate shall, within 30 days after such determination, pay WCS the amount of funds representing the difference between Target Net Income and the actual amount of net income shown on WCS’s Form K-1 for the year 2020. For the years 2021 through 2024 Target Net Income will increase by 10% each year and in the event WCS’s Form K-1 for any of those years does not allocate to WCS net income in an amount of the Target Net Income or more for such year, then Cellerate shall, within 30 days after such determination, pay WCS the amount of funds representing the difference between Target Net Income and the actual amount of net income shown on WCS’s Form K-1 for the respective year.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration