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9. SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

BIAKŌS™ License Agreement

On October 1, 2019, the Company executed an additional license agreement with Rochal Industries, LLC (“Rochal”) whereby the Company acquired an exclusive world-wide license to market, sell and further develop certain antimicrobial barrier film and skin protectant products which currently consist of BIAKŌS™ Antimicrobial Barrier Film and CuraShield™ No Sting Skin Protectant. A Company director and indirect principal shareholder is also a director of Rochal, and indirectly a significant shareholder of Rochal, and through the exercise of warrants a potential majority shareholder. Another Company director is also a director and significant shareholder of Rochal.

Key terms of the license agreement include:

1.	The Company paid Rochal $500,000.

2.	Subject to the occurrence of specified financing conditions in 2020, the Company will pay Rochal an additional $500,000, which at Rochal’s option may be in cash or Sanara Common Stock; or a combination of cash and Sanara Common Stock.

3.	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.

The minimum annual royalty due to Rochal will be $50,000 beginning with the first full calendar year following the year in which first commercial sales of the products occur (the “First Revenue Year”). The annual minimum royalty will increase by 10% each subsequent calendar year up to a maximum amount of $75,000.

4.

Beginning with the First Revenue Year, Sanara will pay an additional royalty based on specific net profit targets related to the licensed products. Net profits for the licensed products are defined as net sales, less cost of goods sold (including royalties) and direct marketing and selling expenses. The additional royalty will be 25% of the amount of actual net profits in excess of the established net profit targets, subject to a maximum of $500,000 for any calendar year. The established net profit targets for each calendar year are:

a.	First Revenue Year - $1,500,000

b.	Second revenue year - 2021 - $5,000,000

c.	Third revenue year - $8,000,000

d.	Fourth revenue year - $10,000,000

e.	Fifth revenue year - $15,000,000

f.

Beginning with the sixth revenue year and for each calendar year thereafter, net profit targets will be equal to the immediately preceding calendar year’s net profit target incremented by the greater of (1) 50% of the U.S. dollar growth in the amount of net profit in the current year over net profit in the immediately preceding calendar year, or (2) the percentage of overall growth of the market for the category by which the licensed products are generally described.

5.	Unless previously terminated or extended by the parties, the License Agreement will terminate upon expiration of the last U.S. patent in October 2033.

Private Placement Offering

On October 15, 2019, the Company closed a private placement offering of 1,204,820 shares of its Common Stock at a price of $8.30 per share. The purchasers were related party entities to three members of the Company’s Board of Directors. The transaction was approved by all of the disinterested Directors of the Company. The price per share was determined by a special committee of the Board comprised of disinterested Directors who considered an independent third-party valuation of the offering price and other relevant information.