U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 (Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2017March 31, 2020

 

 

WOUND MANAGEMENT TECHNOLOGIES,SANARA MEDTECH INC.

 

 

1200 Summit Ave,

(Address of principal executive offices)

 

(817) 529-2300

(Registrant’s telephone number, including area code)

 

 

 

 

 

 

 

As of November 16, 2017, 112,227,943May 12, 2020, the Company had 6,203,402 shares of the Issuer'sCommon Stock, $.001 par value common stock were issued and 112,223,854 shares wereper share outstanding.

SANARA MEDTECH INC. AND SUBSIDIARIES

 

Form 10-Q

 

Quarter Ended September 30, 2017March 31, 2020

 

 

 

Part I – Financial Information

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

 

 

On August 28, 2018, the Company consummated definitive agreements that continued the Company’s operations to market its principal products, CellerateRX® Surgical Activated Collagen® Peptides and CellerateRX® Hydrolyzed Collagen wound fillers (CellerateRX), through a 50% ownership interest in a newly formed Texas limited liability company, Cellerate, LLC which began operations on September 1, 2018. The accompanying consolidated balance sheetremaining 50% ownership interest was held by an affiliate of The Catalyst Group, Inc. (Catalyst), which acquired an exclusive world-wide license to distribute CellerateRX products. Cellerate, LLC conducts operations with an exclusive sublicense from the Catalyst affiliate to distribute CellerateRX products into the wound care and surgical markets in the United States, Canada and Mexico.

On May 9, 2019, the Company organized Sanara Pulsar, LLC, a Texas limited liability company, which is owned 60% by the Company’s wholly owned subsidiary Cellerate, LLC, and is included for comparison purposes40% owned by Wound Care Solutions, Limited, an unaffiliated company registered in the accompanying balance sheet. Certain prior year amounts have been reclassifiedUnited Kingdom (WCS). Net profits and losses and distributions are shared by the members in proportion to conform to current year presentation.their respective membership interests. The Company consolidates the operations and financial position of Sanara Pulsar.

 

 

The accompanyingunaudited consolidated financial statements include the accounts of WMTSanara MedTech Inc. and its wholly-owned subsidiaries:wholly owned subsidiaries Wound Care Innovations, LLC a Nevada limited liability company, (“WCI”); Resorbable Orthopedic Products,and Cellerate, LLC a Texas limited liability company. The consolidated financial statements also include the accounts of Sanara Pulsar, LLC, a Texas limited liability company (“Resorbable);which is owned 60% by the Company’s wholly owned subsidiary Cellerate, LLC, and Innovate OR, Inc. “InnovateOR” formerly referred40% owned by Wound Care Solutions, Limited, an unaffiliated company registered in the United Kingdom (WCS).

Revenue streams from product sales and royalties are summarized below for the three months ended March 31, 2020 and 2019. All intercompany accountsrevenue was generated in the United States; therefore, no geographical disaggregation is necessary.

The Company recognizes royalty revenue from a licensing agreement between BioStructures, LLC and transactionsthe 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. Under the terms of the development and license agreement the Company executed with BioStructures, LLC in 2011, royalties of 2.0% are recognized on sales of products containing the Company’s patented resorbable bone hemostasis. The minimum annual royalty due to the Company is $201,000 per year throughout the life of the patent which expires in 2023. These royalties are payable in quarterly installments of $50,250. To date, royalties related to this licensing agreement have been eliminated.not exceeded the annual minimum of $201,000 ($50,250 per quarter).

 

 

 

 

As defined in Accounting Standards Codification (“ASC”)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.

 

 

The Company computes income (loss) per share in accordance with Accounting Standards Codification “ASC”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 stockholdersshareholders by the weighted average number of common shares available.outstanding. 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. All convertible instruments were excluded from the current and prior period calculations as their inclusion would have been anti-dilutive during both the three months and nine months ended September 30, 2017 and the nine months ended September 30, 2016. The dilutive effect of the outstanding convertible preferred stock for the three months ended September 30, 2016 was 85,689,772 sharesMarch 31, 2020 and an adjustment to net income of $75,032.March 31, 2019.

On June 20, 2018, the FASB issued Accounting Standards Update (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 did not have a material impact that it will have on the Company’s financial position, operations or cash flows.

 

 

On June 15, 2015,As part of the aforementioned transaction with Catalyst to form Cellerate, LLC, the Company entered into term loan agreements with The James W. Stuckert Revocable Trust (“SRT) and The S. Oden Howell Revocable Trust (“HRT”), pursuantissued a 30-month convertible promissory note to which SRT madeCatalyst in the principal amount of $1,500,000, bearing interest at a loan5% annual interest rate, compounded quarterly. Interest was payable quarterly but could be deferred at the Company’s election 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 affiliatesmaturity of the Company. The Notes each carry an interest rate of 10% per annum, and (subject to various default provisions) all unpaidpromissory note. Outstanding principal and accrued but unpaid interest under the Notes is due and payable on June 15, 2018. The Notes may be prepaid in whole or in part upon ten days’ written notice, and all unpaid principal and accrued interest under the Notes may be converted,were convertible at theCatalyst’s option of SRT and HRT, into shares of the Company’s Series C Convertible PreferredCommon Stock at a conversion price of $70.00$9.00 per share at any time prior to maturity.”). The Company’s obligations under the two notes are secured by all the assetsshare.

On February 7, 2020, Catalyst converted its promissory note, including accrued interest of $111,911, into 179,101 shares of the Company and its subsidiaries.Company’s common stock. As of March 31, 2020, there were no promissory notes or accrued interest outstanding.

 

 

 

The Company has an exclusive sublicense to distribute CellerateRX® Activated Collagen® products into separate exclusive license agreements withthe wound care and surgical markets in the United States, Canada and Mexico. The Company pays specified royalties to Applied Nutritionals, LLC based on annual net sales of CellerateRX. 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. The Company pays royalties based on its 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.

The foregoing summary of the ABF License Agreement does not purport to be complete and thereafter, ifis qualified in its entirety by reference to the royalty payments made do not meet or exceed that amount.ABF License Agreement. The totalCompany filed a copy of unpaid royaltiesthe ABF License Agreement as of December 31, 2016, was $276,916,an exhibit to its Quarterly Report on Form 10-Q filed on November 14, 2019.

 

On September 29, 2009,July 7, 2019, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”executed a license agreement with Rochal Industries, LLC (“Rochal”), by and among whereby the Company RSIACQ, LLC, a wholly-owned subsidiaryacquired an exclusive world-wide license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications (the “License Agreement”). Currently, the products covered by the License Agreement are BIAKŌS™ Antimicrobial Wound Gel, and FDA cleared BIAKŌS™ Antimicrobial Skin and Wound Cleanser. The Executive Chairman of the Company (RSI), 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.

Resorbable Orthopedic Products, LLC (“Resorbable”)Bone Hemostat

At the original patent holders, (including Mr. Barry Constantine) and/or their heirs. The royalty expense was $12,060 for eachtime of the nine-months ended September 30, 2017,formation of Sanara Pulsar, it and September 30, 2016, and $4,020 for each of the three-months ended September 30, 2017 and September 30, 2016. Mr. Constantine resigned effective October 1, 2017, as a contract employee of the Company in which he held the position of Director of R&D.

 

 

The total amountCompany periodically enters into operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine whether such arrangements constitute a lease. In accordance with the transition guidance of the consulting fee and warrant expense was $818,665 and is recognizedASC 842, such arrangements are included in 2016our balance sheet as “Other administrative expenses” in the Consolidated Statement of Operations.January 1, 2019.

 

In March of 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 and relocated our corporate offices there76102. On July 1, 2019, the Company amended the office lease agreement which became effective on AprilAugust 22, 2017. The lease is effective May 1, 2017, and ends on2019 upon completion by the last daylandlord of certain leasehold improvements. Under the terms of the fiftieth (50th) full calendar month followingamended lease agreement, the effective date, (JuneCompany leased an additional 1,682 rentable square feet of office space which brought the total square footage leased to 5,877. The amended lease agreement extends the original term of the lease for a period of 36 months through June 30, 2021). Monthly2024. The monthly base rental payments under the amended lease agreement are as follows: months 1-2, $0; months 3-14, $7,250; months 15-26, $7,401; months 27-38, $7,552; and months 39-50, $7,703. Rent expense

In accordance with ASC 842, the Company has recorded lease assets of $556,533 and a related lease liability of $570,582 as of September 30, 2017.March 31, 2020. Cash paid for amounts included in measurement of operating lease liabilities as of March 31, 2020 was $37,354 . The present value of our operating lease liabilities is shown below.

 

As of September 30, 2017,March 31, 2020, our operating leases have a weighted average remaining lease term of 4.2 years and December 31, 2016, the Company had outstanding payables to related parties totaling $21,842 and $93,655, respectively. The payables are unsecured, bear no interest and due on demand.a weighted average discount rate of 6.25%.

 

 

There are currently 5,000,000On March 13, 2019, the Company established a new series of preferred stock consisting of 1,200,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock currently issued or outstanding.

 

On March 9, 2017,May 10, 2019 the Company effected a 1-for-100 reverse stock split of the Company’s issued 150,000and outstanding shares of Common Stock. Concurrent with the reverse stock split, the Company changed its corporate name from Wound Management Technologies, Inc. to Sanara MedTech Inc.

On February 21, 2020, the Company filed a Form S-8 registration statement which registered an aggregate of 2,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), that may be issued under the Sanara MedTech Inc. 2014 Omnibus Long-Term Incentive Plan. Pursuant to eachRule 416 of the Company’s four Board Directors, (a totalSecurities Act of 600,000 shares valued at $42,000).1933, as amended, this registration statement also covers such additional and indeterminate number of securities as may become issuable pursuant to the provisions of the plan relating to adjustments for changes resulting from a share dividend, share split or similar change.

During the nine months ended September 30, 2017, 61,326,300first quarter of 2020, the Company issued a total of 180,100 shares of restricted common stock to Company employees, directors, and certain consultants of the 67,246,300 warrants outstanding atCompany. The restricted share awards were issued under the beginning of the period were either forfeited or expired, leaving a balance of 5,920,000 outstanding on September 30, 2017. A summary of the status of the warrants granted for the nine months ended September 30, 2017,Company’s 2014 Long Term Incentive Plan and changes during the period then ended is presented below:are subject to certain vesting provisions and other terms and conditions set forth in each recipient’s restricted stock agreement.

The aggregate intrinsicfair value of each award is based on the exercisable warrants as of September 30, 2017, was $45,000.

Below is a summary of restricted stock activity for the Company’s issuancethree months ended March 31, 2020:

On December 31, 2017, the Company granted a total of Common Stock (the “Shares”). As the11,500 options to five employees. The aggregate fair value of the surrendered warrants exceededawards was determined to be $61,322 and was to be expensed over a three-year vesting period. On April 13, 2018, the Company granted a total of 2,000 options to one employee and one contractor. The aggregate fair value of the Shares, there is no expense associated with this transaction.awards was determined to be $8,943 and was to be expensed over a three-year vesting period. The aggregate fair value of the awards was determined to be $16,405 and was to be expensed over a three-year vesting period.

 

 

 

 

In December 2014,2018, Cellerate, LLC executed agreements with Cadence Bank, N.A. (“Cadence”) which provided Cellerate, LLC access to a revolving line of credit up to a maximum principal amount of $1,000,000. The line of credit supports short-term working capital requirements of Cellerate, LLC. The line of credit is secured by substantially all of the assets of Cellerate, LLC. The interest rate per annum under this loan is the “Prime Rate” as it varies from time to time and designated in the “Money Rates” section of the Wall Street Journal plus 0.75%.

On June 21, 2019, the Company entered intomodified the Cadence revolving line of credit to increase the maximum principal amount from $1,000,000 to $2,500,000. Most terms of the modification agreement, including security and interest rate, were unchanged from the original loan agreement. Significant changes under the terms of the modification agreement include extending the maturity date from December 16, 2019 to June 19, 2020, and the addition of a Capital Leasefinancial covenant requiring the Company to sell additional equity securities in an amount of at least $5,000,000 no later than December 31, 2019.

During the first quarter of 2020, the Company paid a $500,000 milestone payment to Rochal Industries, LLC (“Rochal”) upon FDA clearance of BIAKŌS™ Antimicrobial Wound Gel pursuant to the terms of the July 8, 2019 license agreement with Rochal. The milestone payment was recorded as an addition to intangible assets.

In the normal course of business, the Company may advance payments to its suppliers, inclusive of Rochal, a related party. As of March 31, 2020, the Company paid $200,000 to Rochal as a deposit towards the initial payment of a phone system. Thepending product license agreement. In the event this license agreement required a down paymentis not executed by the end of $2,105 and 36 monthlythe 2020 calendar year, Rochal will be obligated to refund the advance deposit payments of $375. The Company recorded an asset of $13,512 and a capital lease obligation of $13,512. Aggregate payments under the lease$200,000 to Sanara. At December 31, 2019, there were $3,423 for the nine months ended September 30, 2017. At September 30, 2017, a total lease liability of $344 remained which is due in full in 2017.no prepaid balances to related parties.

 

On November 1, 2017,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 Ken Link entered intoEconomic 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 binding settlement agreement, which will result in dismissal with prejudicefixed rate of all claims1.00% per annum and counterclaims asserted in Cause No. 342-256486-11, in exchange for which the Company will deliver to Ken Link 1,200,000 sharesmatures on April 22, 2022. The Loan requires monthly payments of Wound Management Technologies, Inc. common stock in total satisfaction of all obligations between the parties. As a result of this settlement the Note Payable to Mr. Linkprincipal and interest in the amount of $223,500$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 cancelled.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.

 

 

The following discussion of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 20162018 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

 

 

SomeThis Form 10-Q Report contains forward-looking statements concerning the impact of theCOVID-19 among other matters. These statements contained in this reportmay discuss expectations as to future expectations, contain projections oftrends, plans, events, results of operations or financial condition, or state other "forward-looking" information. Theinformation relating to the Company. Forward-looking statements generally will be accompanied by words "believe," "intend," "plan," "expect," "anticipate," "estimate," "project," "goal" andsuch as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar expressions identify such a statement was made.words, phrases or expressions. These statements should be used with caution and are subject to knownvarious risks and unknown risks, uncertainties, and othermany of which are outside of the Company’s control. The following factors that could cause the actual results to differ materially from those contemplated byin the statements.forward-looking statements: unanticipated changes in the markets for the Company’s business; unanticipated downturns in business relationships with customers or their purchases from us; the potential effects on our businesses from natural disasters; the availability of credit to customers and suppliers; competitive pressures on sales and pricing; unanticipated changes in the cost of inventory and other operating costs; the introduction of competing products; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; new laws and governmental regulations; stock market and currency fluctuations; war, civil or political unrest or terrorism; the course of the COVID-19 pandemic and government responses thereto, and unanticipated deterioration of economic and financial conditions in the United States and around the world. The forward-looking information is based on various factors and is derived using numerous assumptions. Factors that might cause or contribute to such a discrepancy include, but areCompany does not limited to the risks discussed in this and our other SEC filings. We do not promiseassume any obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements. Future events and actual results could differ materially from those expressed in, contemplated by, or underlying suchthese forward-looking statements.

 

The following discussion and analysis of our financial condition is as of September 30, 2017.  OurMarch 31, 2020.  The discussion of our results of operations and cash flows should be read in conjunction with our unaudited financial statements and notes thereto included elsewhere in this report and the audited financial statements and the notes thereto included in our Form 10-K for the year ended December 31, 2016.2019.

 

 

CellerateRX products are primarily purchased by hospitals and ambulatory surgical centers for use by surgeons on surgical wounds. HYCOL products are available through its wholly-owned subsidiary, Wound Care Innovations, LLC (WCI), markets and sells the patented CellerateRX® Activated Collagen® products in the expanding advancedskilled nursing facilities, wound care market. CellerateRX’s activated collagen, which is approximately 1/100th the size of native collagen, delivers the essential benefits of collagen to a wound immediately—clinics and other forms of native, intact collagen in commercially available products require timemedical facilities, and are intended for the body to prepare the collagen for use in the wound healing process. CellerateRX is cleared by the FDA as a medical device for use on all acutemanagement of full and chronicpartial thickness wounds except third degree burns,including pressure ulcers, venous and are offered in both gelarterial leg ulcers and powder form. CellerateRXdiabetic foot ulcers. HYCOL is currently approved for reimbursement under Medicare Part B and no prescription is required.

The Company’s advanced wound care products are primarily distributed to the post-acute care settings including long-term care facilities, home health, wound care centers, and professional medical offices. We believe our products are unique in composition, superior to other products in clinical performance, and demonstrate the ability to reduce costs associated with standard wound management. Our wound care products are sold by Company representatives supplemented by major medical-surgical distributors, independent distributors, and durable medical equipment (DME) distributors.

The Companywound care market is focused on delivering the CellerateRX® productserved by a number of large, multi-product line to hospitals and surgery centerscompanies as well as a number of small companies. Our products compete with primary dressings, advanced wound care products, collagen matrices and other biopharmaceutical products. Manufacturers and distributors of competitive products include Smith & Nephew plc, Acelity L.P. Inc., Medline Industries, Inc., ACell Inc., and Integra LifeSciences Holdings Corporation. Many of our competitors are significantly larger than we are and have greater financial and personnel resources. We believe, however, that our products outperform our competitors’ currently available products by improving efficacy, reducing the diabeticcost of patient care, and long-term care markets.replacing numerous products with a single primary dressing.

 

Historically, we have financed our operations primarily from the sale of debt and equity securities. During 2019 and 2020, our principal sources of liquidity have been our cash generated from operations, cash provided through a wholly-owned subsidiarybank line of the Company was organized ascredit, and a Texas limited liability company$10,000,000 private placement offering in October 2019. Cash consists of cash on August 24, 2009, as part of a transaction to acquire a multi-faceted patent for resorbable bone hemostasis products. ROP is both licensing technology from this patent and also developing products itself. In 2014, the Company entered into a commercial license for a bone void filler. The Company began receiving royalties under this agreement in the fourth quarter of 2013. Royalties will continue for the life of the patent which expires in 2023. In 2016 ROP received FDA 510(k) clearance for HemaQuell™ Resorbable Bone Hemostat. HemaQuell™ is a mechanical tamponade for bleeding bone that resorbs within 2-7 days after use. Indeposit with banks.

During the first quarter of 2017, ROP launched HemaQuell® Resorbable Bone Hemostat via2020, the COVID-19 pandemic had a moderate impact on the Company's business. With a large percentage of the Company's revenue derived from elective surgeries that have been or will be postponed, management is expecting a significant decline in revenue during the second quarter of 2020. In April 2020, the Company’s Innovate OR, Inc, subsidiary. Initial sales efforts are focused on orthopedic, cardiovascular,revenues were approximately 50% lower than revenue levels prior to the COVID-19 outbreak. During late April and spine surgeries.early May 2020, we have seen a limited resumption of elective surgical procedures in the Company’s primary markets in Texas and the southeastern United States. In the absence of another widespread suspension of elective surgical procedures, we expect to see gradual improvement in revenues as markets in other areas of the country begin to reopen.

 

Our primary focusAs a result of the COVID-19 situation, the Company has significantly reduced costs in areas such as payroll, consulting, business travel, and other discretionary spending. We will continue to monitor our cash flow and will make additional expenditure adjustments as necessary. If appropriate, we may pursue additional financing including issuing additional stock and incurring additional debt. Although we have successfully funded our past operations through additional bank debt and issuance of equity, there is developing and marketing products for the advanced wound care market, with a focus on surgical products, as pursued throughno assurance that our wholly owned subsidiaries, WCI and ROP, which brings a unique mix of products, procedures and expertisecapital raising efforts will be able to attract additional capital at prices attractive to the wound care arena including surgical wounds. CellerateRX’s patented Activated Collagen fragments (CRa®Company. If we are a fractionunable to obtain additional funding for operations at any time in the future, we may not be able to continue operations as currently planned which would require us to modify various aspects of the size of the native collagen molecules and particles found in other products, which delivers the benefits of collagen to the body immediately.

 

 

 

For the three and nine months ended September 30, 2017,March 31, 2020, net cash provided by financing activities was $0 as compared withto $500,000 provided for the three and nine months ended September 30, 2016:March 31, 2019.

 

 

 

 

 

 

 

 

 

None.

 

 

As a smaller reporting company, we are not required to provide this information.

 

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officerofficers (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures as of September 30, 2017,March 31, 2020, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officeron this assessment, management concluded that as of September 30, 2017, our disclosure controlsMarch 31, 2020, internal control over financial reporting was not effective due to the small size of the Company and procedures were effective.limited segregation of duties. Management is currently evaluating the steps that would be necessary to eliminate this material weakness.

 

There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  We will continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.

 

Part II — Other Information

 

 

 

 

None.

 

This item is not applicable.

 

None.

  

 

The following documents are filed as part of this Report:

 

 

*  Filed herewith