Reverse Mergers & Low Float Plays

[Potse]

HLTT...yesterday's 8-K presents two interesting scenarios......

On August 18, 2023, Healthtech Solutions, Inc. (the “Company”), together with its subsidiaries Healthtech Wound Care, Inc. (“HTWC”) and World Reach Health, LLC (“WR Health”), entered into a binding term sheet (the “Term Sheet”) with HLLT Acquired, LLC (the “Purchaser”), pursuant to which (i) the Company agreed to grant the Purchaser an option to purchase HLTT’s rights in and to certain patents (the “Patents”) relating to HLTT’s would care business (the “HLTT Option”), for a purchase price of $15,500,000, and (ii) HTWC agreed to grant the Purchaser an option to purchase certain assets of HTWC (the “HTWC Assets”) relating to HTWC’s production of would care products (the “HTWC Option,” and, together with the HLTT Option, the “Options”), for a purchase price of $2,000,000.

The 8-K filed yesterday disclosed that HLTT and an unidentified company have signed a binding term sheet regarding the potential acquisition of the rights/assets/IP of HLTT's wound care business, or a manufacturing agreement between the two companies. The filing presents two scenarios -- one where HLTT sells the business and becomes a distributor, and one where HLTT manufactures product for the other company. I don't know which of these scenarios I prefer. They both have benefits/drawbacks. But one thing seems to be clear, based on the terms of this deal: HLTT's wound care business is set to experience some pretty explosive revenue growth beginning around November/December of this year.

The two scenarios......

1) HLTT sells the business to the purchaser for a net $17M (spread out over 15 equal monthly payments, and factors in a $500K equipment financing the other company is providing), and HLTT's subsidiary becomes a distributor of the wound care products for the purchaser. It is difficult to guess at this point what the revenue number for HLTT might be in this scenario because it would be possible that HLTT would be a non-exclusive distributor. There is a section in the agreement that mentions HLTT's subsidiary would retain 65% of revenue in a distributor situation. Based on some information in the filing there is a possibility that HLTT and the other company expect the DermaBind product to generate a minimum of $65-87M of revenue during fiscal 2024.

2) HLTT retains ownership of the business and contract manufactures the wound care products for the other company. Beginning around November 18 the contract manufacturing revenue for HLTT would be a minimum of $1.5M per month ($4.5M per quarter). Again, that is just the minimum level agreed upon between the two parties. Apparently if HLTT could ramp up production quickly, the other company would be willing to accept by November 18 an amount of product that would generate $2M per month in manufacturing revenue for HLTT.

On August 18, 2023 (the “Effective Date”), concurrently with the execution of the Term Sheet, HTWC entered into a Manufacturing Agreement (the “Agreement”) with the Purchaser, pursuant to which HTWC will, on a non-exclusive basis, manufacture and deliver certain human placental allograft tissue products (“Products”) to the Purchaser. The initial term of the Agreement commenced on the Effective Date and, unless sooner terminated in accordance with the terms of the Agreement, will continue for a period of 15 months. Thereafter, the Agreement will renew automatically for additional 3 month periods unless either party provides written notice of non-renewal to the other party at least 10 business days prior to the expiration of the then-current term.

Pursuant to the terms of the Agreement, the Purchaser will purchase at least (i) 3,000cm2 of Products within 30 days of the Effective Date and (ii) 5,000cm2 of Products within 60 days of the Effective Date. The Purchaser also agreed, commencing as of the 3rd monthly anniversary of the Effective Date, to purchase at least 7,500cm2 of Products per month (the “Monthly Minimum”), subject to rollover provisions for any purchases in excess of the Monthly Minimum in the preceding month. Furthermore, provided that HTWC has not breached its obligations under the Agreement, the Purchaser will order sufficient quantities of Products over the term of the Agreement such that the aggregate amount of manufacturing fees due and payable to HTWC over the term equals at least $21,100,000.

ii. Monthly Minimum; Desired Product Quantities. Unless Customer notifies HTWC in writing (email is sufficient) to request quantities in excess of those noted in Section 4(a)(i) sooner in time, commencing as of the third (3rd) monthly anniversary of the Effective Date of this Agreement, Customer ultimately desires for HTWC to manufacture and deliver to Customer approximately Ten Thousand square centimeters (10,000cm2) of the Product on average per calendar month during the Term. However, Customer understands and acknowledges that a ramp up period to achieve such quantities may be applicable for up to one hundred eighty (180) days from the Effective Date of this Agreement, as HTWC will require additional equipment and raw materials, and lead times apply. Commencing as of the third (3rd) monthly anniversary of the Effective Date of this Agreement, HTWC shall commit to manufacturing and delivering to Customer, and Customer shall pay for, a variety of Product sizes collectively amounting to not less than Seven Thousand Five Hundred centimeters squared (7,500cm2) per month (the “Monthly Minimum”).

https://www.otcmarkets.com/filing/html?id=16916886&guid=qTg-kKa3gJI-B3h