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, 2014, our Quarterly Report on Form 10-Q for the three months ended March 31, 2015 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

 

Forward-Looking Statements

 

Some of the statements contained in this report discuss future expectations, contain projections of results of operations or financial condition, or state other "forward-looking" information. The words "believe," "intend," "plan," "expect," "anticipate," "estimate," "project," "goal" and similar expressions identify such a statement was made. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. 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 are not limited to the risks discussed in this and our other SEC filings. We do not promise 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 such forward-looking statements.

 

The following discussion and analysis of our financial condition is as of June 30, 2015.March 31, 2016.  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, 2014 and our Quarterly Report on Form 10-Q for the three-months ended March 31, 2015.

 

Business Overview

 

Unless otherwise indicated, we use “WMT,” “the Company,” “we,” “our” and “us” in this report to refer to the businesses of Wound Management Technologies, Inc.

 

Wound Management Technologies, Inc., (“WMT” or the “Company”) was organized on December 14, 2001, as a Texas corporation under the name eAppliance Innovations, Inc.  In June of 2002, MB Software Corporation.Corporation, a public corporation formed under the laws of Colorado, merged with the Company (which at the time was a wholly owned subsidiary of MB Software Corporation), and the Company changed its name to MB Software Corporation as part of the merger.  In MarchMay of 2008, the Company changed its name to Wound Management Technologies, Inc.

The Company, through its wholly-owned subsidiary, Wound Care Innovations, LLC (WCI), markets and sells the patented CellerateRX® products in the expanding advanced 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—other forms of native, intact collagen in commercially available products require time 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 acute and chronic wounds, except third degree burns, and is ready for distribution in both gel and powder form. CellerateRX is currently approved for reimbursement under Medicare Part B and no prescription is required.

 

We believe that these products are unique in composition, applicability and clinical performance, and demonstrate the ability to reduce costs associated with standard wound management. The Company is focused on delivering the CellerateRX® product line to the diabetic care and long term care markets as well as to hospitals and operating rooms. Additionally, the Company is studying the feasibility of three other markets where CellerateRX formulas may have great sales potential: dental, dermatology/plastic surgery and sunburn relief.

 

 

Management Letter

 

Wound Management Technologies, Inc. is pleased to report revenues of $745,117 for the secondfirst time in the history of the company a net income.  The Net Income amounted to $90,275 in the first quarter of 2015,2016.  To obtain this milestone, revenues were $1,095,223 for the first quarter of 2016, a gain of approximately 37%55% from $544,350$707,469 over the secondprevious quarter of 2014.2015. Approximately 93%95% of revenues were from the CellerateRX product line and the other 7%5% of revenues were fromrevenue occurred in royalties from the Resorbable Orthopedic Products, LLC subsidiary (ROP).

The CellerateRX secondfirst quarter revenue increase isrevenues increased as the result of the development ofdeveloping and carrying out our strategic initiatives to expandwith expanding our surgical product sales, adding todeveloping our sales force and continued sales to existing customers (i.e. DME, Home Care, Hospitals, Long Term Care, Physicians, DME and Wound Care Clinics) along with establishing new accounts.  Our 2015 YTD revenuesRegional Sales Managers are $1,759,104,working closely with our distributors to increase our customer base. We are also increasing our market presence with focused product websites and continuing case studies by key opinion leaders.

ROP received FDA 510(k) clearance for ROP Bone Hemostasis Material (resorbable bone wax) on February 17, 2016. The product has been named HemaQuell. We are now finalizing the product, marketing materials and manufacturing for first cases by June or July, with a gain of $532,460 or 43% over 2014.

In closing, Wound Management Technologies is well positioned to execute on its strategic growth initiatives with a solid infrastructurego-to-market plan in place.  The Company looks forward to capitalizing on the traction it has built in the market thus far with additional investments in a full time sales force along with the sales and marketing of CellerateRX ® product and the emergence of the ROP subsidiary.HemaQuell™.

Results of Operations

 

For the three and six months ended June 30, 2015,March 31, 2016, compared with the three and six months ended June 30, 2014:March 31, 2015:

 

 

 

 

 

 

Liquidity and Capital Resources

 

As of June 30, 2015,March 31, 2016, we had total current assets of $1,204,138,$1,306,764, including cash of $364,497$283,322 and inventories of $524,913.$541,527.  As of December 31, 2014, we had total2015, our current assets of $1,210,527, including$1,268,170 included cash of $523,441$182,337 and inventories of $402,530.$409,778.

 

As of June 30, 2015,March 31, 2016, we had total current liabilities of $1,376,676$1,198,175 including $687,120$553,800 of notes payable.payable and convertible notes payable due to related party. Our current liabilities also include $187,500$93,750 of current year royalties payable.  As of December 31, 2014, we had total2015, our current liabilities of $2,315,115 including $1,592,920$1,459,094 included $614,700 of notes payable and convertible notes payable due to related party and prior year accrued royalties payable of $375,000.$323,062.

 

As of June 30, 2015,March 31, 2016, our current liabilities also included derivative liabilities of $497 related to 410,000 of the 10,436,844 outstanding stock purchase warrants. As of December 31, 2014, our current liabilities also included derivative liabilities of $1,708$276 related to 910,000 of the 10,936,8449,736,844 outstanding stock purchase warrants.  At December 31, 2015, our derivative liabilities totaled $310 to 910,000 of the 9,736,844 outstanding stock purchase warrants.

 

For the sixthree months ended June 30, 2015,March 31, 2016, net cash used in operating activities was $601,312$136,219 compared to $1,091,082$179,064 used in the first sixthree months of 2014.2015.

 

In the sixthree months ended June 30, 2015,March 31, 2016, net cash used in investing activities was $707$702 compared to $4,689$708 used in the first sixthree months of 2014.2015.

 

Historically, we have financed our operations primarily from the sale of debt and equity securities. In the sixthree months ended June 30, 2015,March 31, 2016, net cash provided byin financing activities was $443,075.$237,906. For the sixthree months ended June 30, 2014,March 31, 2015, financing activities generated $2,185,810.used $2,025.

 

Off-Balance Sheet Arrangements

 

 

 

 

Contractual Commitments

 

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The terms “WMT,” “we,” “the Company,” and “us” as used in this report refer to Wound Management Technologies, Inc.  The accompanying unaudited consolidated balance sheet as of June 30, 2015March 31, 2016 and unaudited consolidated statements of operations for the three and six months ended June 30,March 31, 2016 and 2015 and 2014 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management of WMT, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and six month period ended June 30, 2015,March 31, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015,2016, or any other period.  These financial statements and notes should be read in conjunction with the financial statements for each of the two years ended December 31, 2014,2015, and December 31, 2013,2014, included in the Company’s Annual Report on Form 10-K.  The accompanying consolidated balance sheet as of December 31, 2014,2015, has been derived from the audited financial statements filed in our Form 10-K and is included for comparison purposes in the accompanying balance sheet.  Certain prior year amounts have been reclassified to conform to current year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WMT and its wholly-owned subsidiaries:  Wound Care Innovations, LLC a Nevada limited liability company (“WCI”); Resorbable Orthopedic Products, LLC, a Texas limited liability company (“Resorbable); and Innovate OR, Inc. “InnovateOR” formerly referred to as BioPharma Management Technologies, Inc., a Texas corporation (“BioPharma”). All intercompany accounts and transactions have been eliminated.

Fair Value Measurements

As defined in Accounting Standards Codification (“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.

 

At June 30, 2015,March 31, 2016, the Company’s financial instruments consist of the derivative liabilities related to stock purchase warrants.  The derivative liability on stock purchase warrants was valued using the Black-Scholes Option Pricing Model, a Level 3 input.  The fair value of the conversion features associated with the convertible debt was estimated in accordance with ASC Topic No. 470-20-25-4. The change in fair value of the derivative liabilities is classified in other income (expense) in the statement of operations.

Our intangible assets have also been valued using the fair value accounting treatment and a description of the methodology used, including the valuation category, is described in the Company’s Annual Report on Form 10-K.

NOTE 2 - GOING CONCERN

The Company has current liabilities in excess of current assetscontinuously incurred losses from operations, has a working capital deficit, and has a stockholders’ deficiency.significant accumulated deficit. The Company has had limited operationsappropriateness of using the going concern basis is dependent upon the Company's ability to obtain additional financing or equity capital and, has not been ableultimately, to develop an ongoing, reliable source of revenue to fund its existence.  The Company’s day-to-day expenses have been covered by proceeds obtained and services paid by the issuance of stock and notes payable.  The adverse effect on the Company’s results of operations due to its lack of capital resources can be expected to continue until such time as the Company is able to generate additional capital from other sources.achieve profitable operations. These conditions raise substantial doubt about the Company’sits ability to continue as a going concern.

These unaudited interim consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.  The continuation of the Company as a going concern is dependent upon the success of the Company in obtaining additional funding and the success of its future operations.   The ability of the Company to achieve these objectives cannot be determined at this time.

NOTE 3 – NOTES PAYABLE

During the sixthree months ended June 30, 2015,March 31, 2016, the Company paid a total of $1,800$900 to Quest Capital as part of the furniture purchase agreement in the original amount of $11,700.

On May 28, 2015During the three months ended March 31, 2016, the Company borrowed $96,000 underpaid a one year non-convertible note bearing interest at 10% per annum from Mr. Doug Taylor

NOTE 4 - STOCKHOLDERS’ EQUITY

Preferred Stock

There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock currently issued or outstanding.

The following table sets forth the changes in the fair value of derivative liabilities for the sixthree months ended June 30, 2015:March 31, 2016:

The aggregate lossgain on derivative liabilities for the sixthree months ended June 30, 2015March 31, 2016 was $482.$34.

NOTE 6 – RELATED PARTY TRANSACTIONS

NOTE 7 – CAPITAL LEASE OBLIGATION

 

 

 

 

 

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

 

 

None.

 

 

This item is not applicable.

 

 

None.

 

The following documents are filed as part of this Report:

*  Filed herewith