UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 2019
SANARA MEDTECH INC.
(Exact name of registrant as specified in its charter)
Texas | 000-11808 | 59-2219994 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1200 Summit Avenue, Suite 414 Fort Worth, Texas | 76102 |
(Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code: (817)-529-2300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On October 1, 2019, Sanara MedTech Inc. (“Sanara” or the “Company”) executed an additional license agreement with Rochal Industries, LLC, (“Rochal”) whereby Sanara acquired an exclusive world-wide license to market, sell, distribute, and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing certain Rochal patents and pending patent applications (the “License Agreement”). Currently, the products covered by the License Agreement are BIAKŌS™ Antimicrobial Barrier Film and a skin protectant product with a registered trademark pending. A director and indirect principal shareholder of Sanara is also a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants a majority shareholder. Another director of Sanara is also a director and significant shareholder of Rochal.
Key terms of the License Agreement include:
1.
In consideration for the license, Sanara will pay Rochal $500,000 upon the earlier of December 31, 2019 or the occurrence of specified Sanara financing activities.
2.
Subject to the occurrence of specified Sanara financing conditions in 2020, Sanara will also pay Rochal $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. The minimum royalty applies for all products combined in this license agreement.
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 - $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. Target net profit shall consist of the total net profit from all the products combined in this license agreement.
Unless previously terminated or extended by the parties, the License Agreement will terminate upon expiration of the last U.S. patent in October 2033.
The foregoing summary of the License Agreement does not purport to be complete and is qualified in its entirety by reference to the License Agreement. Sanara expects to file a copy of the License Agreement as an exhibit to its Quarterly Report on Form 10-Q for its quarter ending September 30, 2019.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Sanara MedTech Inc. | |||
Date: October 7, 2019 | By: | /s/ Michael D. McNeil | |
Name: Michael D. McNeil | |||
Title: Chief Financial Officer |