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WNDM Medical Shareholder Call Transcript of Wednesday, Sept. 19, 2018, 3 p.m. CDT

Speaker:  John Siedhoff, Chairman of the Board

Thank you for joining our call and emailing your questions. 

We will move through your questions as efficiently as possible, and remember to email us any additional questions during this call to ir@wmdn.com.

WNDM’s last shareholder call was four years ago.  We are pleased to have this opportunity now to answer your questions and articulate our plans going forward.

Mike McNeil, our CFO, will be asking the questions from our investor group.

1. I am a new shareholder.  Please give me a brief review of the Company?

Speaker:  John Siedhoff, Chairman of the Board

There has been a significant change in WNDM.  Just under 3 years ago, the WNDM board of directors made a change in management.  The Company was essentially insolvent at that time.  If it wasn’t for Mr. Stuckert and Mr. Howell, two of our three board members, and largest shareholders, agreeing to keep funding the Company, WNDM would have closed at that time with the Company having a $47mm Net Loss Carryforward, meaning the Company had lost $47mm since its inception over a decade ago.

Starting November 1, 2015, there was a new focus on immediate profitability, as the Company had never had a profitable quarter in its history. 

Since January 2016, the company has been profitable for 7 of the last 10 quarters.  2 of those 3 quarterly losses were Non-Cash losses. One had to do with a warrant transaction that has been cancelled, and the second was due to the conversion of preferred shares.

2. In a filing the Company mentioned a three-year strategic plan.  Please update us on that plan.

Speaker:  John Siedhoff, Chairman of the Board

Certainly: Year one of the plan was to - Make the Company profitable with cost reductions and growing revenues.

Year two - Build a corporate infrastructure to support sales efforts.

Year three - Create value for shareholders.

3. What is the current state of the Company? and What assets have been added to the core business and how have they affected topline growth?

Speaker:  John Siedhoff, Chairman of the Board

A brief summary:  As publicly state, it is our intention to strategically reinvest in the Company; introduce new products; and foster increased sales growth, versus choosing to only increase monthly operating profits. 

We intend to stay within our cash generating abilities, and are not planning to ask for additional funds from investors.  FYI, no additional funds have been invested in WNDM for almost 2 and ½ years.

Numbers from our last public financial filing, Q2, 2018 shows:

1. For the first time in its history, the Company has a positive stockholders’ equity.

2. There is no operating debt in the Company.

3. There is no longer a “going concern”, this is a term public auditors use if they have questions in a company’s ability to continue to operating without new sources of funding.

     i. WNDM has not had a “going concern” for seven quarters.

1. All Preferred shares have been converted into common stock, so all shareholders have the same rights.

2. The Company has a limit of 250mm shares of common stock that can be issued.  There are currently approximately 113mm shares ‘in the float’ and 236mm shares issued, along with 1,350,000 employee options to be earned and 4,500,000 warrants that were issued five years ago and are set to expire in 11 days.

3. The current market cap has increased from approximately $5mm to $20mm over the past three years, until a slight move over the past two weeks, (currently at $18mm).  The Company works to build revenues and increase profits, and cannot comment on what “might be” happening in the market.

4. In 2017, the Company was still involved in 3 lawsuits from 6 years prior.  All three of these suits were resolved to the satisfaction of the Board of Directors and are no longer on our books today.

Operationally, the Company:

1. Has undergone a significant upgrade in senior management with all department heads having decades of experience in the acute care (surgical) and post-acute (wound) care marketplace.

2. Has added both human and product assets, with an excellent management infrastructure in place that has the ability to take our company through significant increases in sales revenue.  This human capital is the driving force behind our sales growth.

3. Continues to spend hundreds of thousands of dollars on new product development and has spent significant funds replacing antiquated accounting software and computing infrastructure.

4. I invested in the Private Placement, but cannot deposit my paper certificates.  What is the Company doing about this?

Speaker:  John Siedhoff, Chairman of the Board

This can be done, but it has come to our attention over the past five or six years, new SEC regulations have made it more difficult for those who invest in OTC companies, compared to those companies listed on an exchange.  The Board has a fiduciary responsibility to all shareholders to continue to review options so that those with paper certificates can deposit their shares, and has been working on a strategic plan so all investors can deposit their shares. 

One way to accomplish this is, is to work on up listing to an exchange.  This would be in the best interest of all shareholders, since most brokerage houses will not allow the purchase of penny stock companies, no matter their financial condition.

5. An Investor Relations Strategy is an important component to every small cap story becoming a much larger one. With the stock languishing off of a public exchange, can you detail any future plans to do a reverse split and up-list to an exchange and to become more engaged with investors going forward? 

Speaker:  John Siedhoff, Chairman of the Board

Our research has shown the Company is on the right path towards up listing.  The NASDAQ, for instance, has numerous conditions to be met for an up listing, but, in general, there are five main points the exchange looks for when reviewing a company that desires to uplist:

1. A current minimum market cap of $15mm. 

2. 300 ‘Lot Shareholders’.  (A lot shareholder is a person owning a minimum of 100 shares.)  WNDM currently has approximately 1,400 lot shareholders.

3. At minimum of three market makers following your company.  WNDM has that.

4. A minimum price of $4 per share.  WNDM would have to reverse its shares to raise the price significantly enough to meet this price level.

5. A minimum of $5mm in in shareholders’ equity.  As stated, until 2018, the Company has never had a positive shareholders’ equity.  As of the end of Q2 2018, the shareholders’ equity of WNDM was just over $1.7mm.  Currently, we are short on this requirement.

The Company has interviewed Investor Relations groups with expertise in our area, and received proposals for their work.  This expense, and its return, is currently under review by the Board.

6. How many hospitals and/or surgery centers are in the U.S. and how many are using our products?

Speaker:  Michael Carmena, Chief Executive Officer

There are approximately 5,500 hospitals and 5,500 Medicare-certified ambulatory surgery centers, (ASCs) in the U.S. We choose not to disclose the number of facilities using our products, and as a shareholder we hope you understand we do not want to reveal our operating details and information which could be considered advantageous to our competitors.

 7. What is the market penetration in terms of both the number of hospitals using our products, but also in terms of percentage of potential patients?

Speaker:  Michael Carmena, Chief Executive Officer

We choose not to comment on this, as it might be beneficial to our competitors.

 8. What percent of business is reorder, how often does a hospital reorder once they become a customer, and what is the reorder rate?

Speaker:  Michael Carmena, Chief Executive Officer

Each hospital is unique, and different specialties in the same hospital can have different ordering behaviors, so there is no general answer.

 9. What percentage of hospitals and /or urgent care centers have used our products and then stopped using it and for what reason?

Speaker:  Michael Carmena, Chief Executive Officer

There are very few hospitals that have stopped using our products and the predominant reason is when a particular surgeon leaves that hospital.

10. Have you seen any sales growth since the merger, and what are the Q3 revenues?

Speaker:  Michael Carmena, Chief Executive Officer

We have entered into a partnership, and as a public company, we cannot comment on current revenues until the Quarter has been closed.  We have made it a point to inform the investor community of the prior quarter’s revenues within three weeks of the quarter’s closing.

11. Please expand on what the opportunities are for WNDM Medical in the partnership, (Cellerate, LLC), what the Catalyst Group is contributing to the partnership, and how soon will we start seeing the benefits from this partnership.

Speaker:  Michael Carmena, Chief Executive Officer

The number one opportunity that The Catalyst Group contributed to the partnership is the license to sell Cellerate® hydrolyzed collagen along with the use of its trademark.

WNDM’s 510(k) application for hydrolyzed collagen is still under review by the Food and Drug Administration, (FDA).

The number one opportunity for WNDM in the new partnership is to continue our momentum in providing our products to patients. We have experienced significant growth over the past two years and felt it was in the best interest of our shareholders to continue this momentum by selling Cellerate and not try to ‘duke it out’ in the marketplace with a new competitor that would be selling the brand that we worked so hard to grow.

Catalyst currently has a deep history of investing in the healthcare industry. These investments include:

Trilliant Surgical, LLC, a Houston based company that manufactures and distributes innovative podiatric implant products for the lower extremity market and Triad Life Sciences Inc., a Memphis based emerging biotechnology company that develops, manufactures and distributes novel bioactive regenerative materials for cost-effective and efficacious therapies to treat acute and chronic wounds.  Both of these companies are experienced in providing expanded distribution for medical device products and will work hand in hand with Cellerate, LLC to distribute our products in new geographic markets within the United States, Canada and Mexico while providing additional cross-selling opportunities through new product introductions in the wound care, skin care, acute and post-acute markets.   Catalyst’s investments also include Rochal Industries, LLC, a San Antonio based research and development company with expertise in wound and skin care,

Mr. Ron Nixon the founder and Chairman of The Catalyst Group has served on the Board of Directors of LHC Group, Inc. for eighteen years and was instrumental in taking them public. The LHC Group is a leading national provider of post-acute healthcare services with approximately 30,000 employees operating more than 780 locations in 37 states. They provide high-quality care to patients through home health, hospice, personal care, and facility-based services.

12. What is the 1 1/2-million-dollar note being use for?  

Speaker:  Michael Carmena, Chief Executive Officer

The 1.5-million-dollar note was issued to an affiliate of the partnership as a partial reimbursement of the Cellerate license, (the full amount of which WNDM is not privy to).

13. Will investors be provided with a proxy shortly detailing the Company's vision for the combined business entity, along with the opportunity to vote on the proposed transaction?

Speaker:  John Siedhoff, Chairman of the Board

No, the transaction has already been approved by the Board of Directors in accordance with the Bylaws of the Company.

14. Can you provide the long-term business model for the combined company?

Speaker:  Michael Carmena, Chief Executive Officer

The long-term business model for the combined company is to:

1. Broaden the evidence we can present to clinicians as to the benefits our products can provide to their patients;

2. Accelerate the expansion of our sales reach in more markets across the Country; and

3. Develop and or acquire efficacious products that are complementary to our current efforts in surgery and chronic wound therapy.

15. Do you expect gross margins to stay near 90%?

Speaker:  Michael Carmena, Chief Executive Officer

90% margins are very rare for medical device companies.  As we expand our product portfolio and sell products into different markets, the gross margin could eventually come down.

16. At what revenue levels will operating margins increase?

Speaker:  Michael Carmena, Chief Executive Officer

Growing sales at a significant rate typically requires an aggressive sales force expansion and sales reps typically take 18 months to pay for themselves.  So, during years of sales force expansions, selling expenses are higher than in non-expansion years.  Also, our current and near-term level of clinical spending as a percent of revenues is higher than average as we broaden our clinical evidence support. Once we achieve a much broader geographic reach in our sales coverage, our operating margins should improve.

17. This would be a good time and opportunity to refer to other deal transaction terms that might be in place if details are finally hammered out (I sense this was not the case in late August) so that shareholders do not have to wait until your next 10-Q for the agreement. 

Speaker:  John Siedhoff, Chairman of the Board

The Company worked diligently for several years to try and extend the license agreement with the holder, but was unable to complete a transaction. 

Please realize that as a public entity, we cannot discuss or disclose any ongoing deals, or their transaction terms, until they are completed and released to the public as a whole.

18. Will you commit to quarterly investor calls or some semblance of outreach?

Speaker:  John Siedhoff, Chairman of the Board

We have a limited number of employees and every one of them is hardworking and fully dedicated to creating shareholder value by helping patients and growing the Company. We also have a working board of directors. 

WNDM has not yet grown to the size of a large public company that can afford a dedicated investor / public relations department.  We will, however, continue investor telephone calls and emails.  Though our corporate charter does not require an annual shareholder meeting, we are working to get the appropriate information released to the public via our filings and press releases.

We will place a transcript of this call on our website in the next few days. 

Additionally, if you have any additional questions, please email them to ir@wndm.com.

 

The employees, management and board of WNDM Medical thanks all of you for your support.