UNITEDSTATES
SECURITIESAND EXCHANGE COMMISSION
Washington,D.C. 20549
FORM
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Forthe quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Forthe transition period from ________ to ________
CommissionFile Number
(Exactname of Registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Addressof principal executive offices)
(Registrant’stelephone number, including area code)
Securitiesregistered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. ☒
Indicateby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantwas required to submit such files). ☒
Indicateby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reportingcompany or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | Smaller reporting company | Emerging growth company | |
| ☐ | ☐ | ☒ |
Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complyingwith any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicateby check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Asof August 12, 2025, shares of the Issuer’s common stock, $ par value per share, were issued and outstanding.
SANARAMEDTECH INC.
Form10-Q
QuarterEnded June 30, 2025
Sanara,Sanara MedTech, our logo and our other trademarks or service marks appearing in this report are the property of Sanara MedTech Inc. Tradenames, trademarks and service marks of other companies appearing in this report are the property of their respective owners. Solely forconvenience, the trademarks, service marks and trade names included in this report are without the ®, ™ or other applicablesymbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicablelaw, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.
Unlessotherwise indicated, “Sanara MedTech,” “Sanara,” the “Company,” “our,” “us,”or “we,” refer to Sanara MedTech Inc. and its consolidated subsidiaries.
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PartI - Financial Information
ITEM1. FINANCIAL STATEMENTS
SANARAMEDTECH INC. AND SUBSIDIARIES
CONSOLIDATEDBALANCE SHEETS
| June 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable – related parties | ||||||||
| Inventory, net | ||||||||
| Convertible loan receivable | ||||||||
| Prepaid and other assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Investment in equity securities | ||||||||
| Right of use assets – operating leases | ||||||||
| Property and equipment, net | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Accrued bonuses and commissions | ||||||||
| Accrued royalties and expenses | ||||||||
| Earnout liabilities – current | ||||||||
| Operating lease liabilities – current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Long-term debt | ||||||||
| Earnout liabilities – long-term | ||||||||
| Operating lease liabilities – long-term | ||||||||
| Other long-term liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Shareholders’ equity | ||||||||
| Common Stock: $ par value, shares authorized; issued and outstanding as of June 30, 2025 and issued and outstanding as of December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Sanara MedTech shareholders’ equity | ||||||||
| Equity attributable to noncontrolling interest | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
Theaccompanying notes are an integral part of these unaudited consolidated financial statements.
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SANARAMEDTECH INC. AND SUBSIDIARIES
CONSOLIDATEDSTATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Change in fair value of earnout liabilities | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Share of losses from equity method investments | ( | ) | ( | ) | ||||||||||||
| Interest income | ||||||||||||||||
| Gain on disposal of property and equipment | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Sanara MedTech shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share of common stock, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
Theaccompanying notes are an integral part of these unaudited consolidated financial statements.
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SANARAMEDTECH INC. AND SUBSIDIARIES
CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
Common Stock $0.001 par value | Additional Paid-In | Accumulated | Noncontrolling | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Interest | Equity | |||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Net settlement and retirement of equity-based awards | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Net settlement and retirement of equity-based awards | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
Common Stock $0.001 par value | Additional Paid-In | Accumulated | Noncontrolling | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Interest | Equity | |||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Change in noncontrolling interest | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance at March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Net settlement and retirement of equity-based awards | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
Theaccompanying notes are an integral part of these unaudited consolidated financial statements.
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SANARAMEDTECH INC. AND SUBSIDIARIES
CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on disposal of property and equipment | ( | ) | ||||||
| Credit loss expense | ||||||||
| Inventory obsolescence | ||||||||
| Share-based compensation | ||||||||
| Noncash lease expense | ||||||||
| Share of losses from equity method investments | ||||||||
| Back-end fee | ||||||||
| Paid-in-kind interest | ||||||||
| Accretion of finance liabilities | ||||||||
| Amortization and write-off of debt issuance costs | ||||||||
| Change in fair value of earnout liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Accounts receivable – related parties | ( | ) | ||||||
| Inventory, net | ( | ) | ||||||
| Prepaid and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accounts payable – related parties | ||||||||
| Accrued royalties and expenses | ||||||||
| Accrued bonuses and commissions | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Purchases of intangible assets | ( | ) | ||||||
| Investment in equity securities | ( | ) | ||||||
| CarePICS acquisition | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Loan proceeds, net of debt issuance costs of $ | ||||||||
| Pay off line of credit | ( | ) | ||||||
| Pay off debt assumed in CarePICS acquisition | ( | ) | ||||||
| Net settlement of equity-based awards | ( | ) | ( | ) | ||||
| Cash payment of finance and earnout liabilities | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Supplemental noncash investing and financing activities: | ||||||||
| Non-monetary exchange to acquire intangible assets | $ | $ | ||||||
| Conversion of note receivable into equity method investment | ||||||||
| Earnout liability generated by CarePICS acquisition | ||||||||
Theaccompanying notes are an integral part of these unaudited consolidated financial statements.
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SANARAMEDTECH INC. AND SUBSIDIARIES
NOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE1 – NATURE OF BUSINESS AND BACKGROUND
SanaraMedTech Inc. (together with its wholly owned and majority owned subsidiaries on a consolidated basis, the “Company”) is amedical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reducehealthcare expenditures in the surgical, chronic wound and skin markets. Each of the Company’s products, services and technologiesare designed to achieve the Company’s goal of providing better clinical outcomes at a lower overall cost for patients, regardlessof where they receive care. Through its two operating segments, Sanara Surgical and Tissue Health Plus (“THP”), the Companystrives to be one of the most innovative and comprehensive providers of effective surgical, wound and skin solutions and is continuallyseeking to expand its offerings for patients requiring treatments across the entire continuum of care in the United States.
Asfurther discussed in Note 12, the Company historically managed its business on the basis of
Asa result of the change in reportable segments, certain prior period amounts have been recast to conform to the current period presentation.Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity reflect reclassifications related tothe Company’s change in reportable segments. The change in reportable segments had no impact on the Company’s previouslyreported Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows or Consolidated Statementsof Shareholders’ Equity.
SanaraSurgical
TheSanara Surgical segment primarily markets and sells soft tissue repair and bone fusion products for use in the operating room or othersterile environments. Sanara Surgical’s soft tissue repair products include, among other products, the Company’s lead product,CellerateRX Surgical Activated Collagen (“CellerateRX Surgical”), a hydrolyzed collagen that aids in the management of surgical wounds, and BIASURGE Advanced Surgical Solution, a sterile no-rinse, advancedsurgical solution used for wound irrigation. Sanara Surgical’s bone fusion products include, among other products, BiFORM, an osteoconductive,bioactive, porous implant that allows for bony ingrowth across the graft site, and ALLOCYTE Plus, a human allograft cellular bone matrixcontaining bone-derived progenitor cells and conformable bone fibers.
SanaraSurgical also includes an in-house research and development team, Rochal Technologies, with an extensive pipeline of innovative productsunder development.
TissueHealth Plus
Throughthe Company’s subsidiary, Tissue Health Plus, LLC, the Company is seeking to simplify skin health, starting with wound care, througha unique strategy. Through THP, the Company plans to offer a first of its kind value-based wound care program to payers and risk-bearingentities such as accountable care organizations and value-based primary care companies.
THP’sprograms are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient qualityof life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community-based care spansa variety of settings including physician offices, skilled nursing facilities, assisted living facilities and senior living facilities.THP’s programs are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment.The Company launched its first pilot program with a wound care provider group during the second quarter of 2025.
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NOTE2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principlesof Consolidation and Basis of Presentation
Theaccompanying unaudited consolidated financial statements include the accounts of Sanara MedTech Inc. and its wholly owned and majority-ownedsubsidiaries, as well as other entities in which the Company has a controlling financial interest. All significant intercompany profits,losses, transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conformto the current year presentation.
Theaccompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principlesfor interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not includeall the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In theopinion of management of the Company, all adjustments (consisting of normal accruals) considered necessary for a fair presentation havebeen included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the fullyear period. These financial statements and notes should be read in conjunction with the financial statements for each of the two yearsended December 31, 2024 and 2023, which are included in the Company’s most recent Annual Report on Form 10-K.
Useof Estimates
Thepreparation of financial statements in conformity with generally accepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dateof the consolidated financial statements, and the reported revenue and expenses during the reporting period. However, actual resultscould differ from those estimates and there may be changes to the Company’s estimates in future periods.
Cashand Cash Equivalents
TheCompany considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
TheCompany computes income/loss per share in accordance with Accounting Standards Codification (“ASC”) Topic 260, Earnings perShare, which requires the Company to present basic and diluted income per share when the effect is dilutive. Basic income/loss per shareis computed by dividing income/loss attributable to common shareholders by the weighted average number of shares of common stock outstanding.Diluted income/loss per share is computed similarly to basic income/loss per share, except that the denominator is increased to includethe number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issuedand if the additional shares of common stock were dilutive. All common stock equivalents were excluded from the calculations for theperiods presented as their inclusion would have been anti-dilutive during the six months ended June 30, 2025 and 2024 due to the Company’snet loss.
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| As of June 30, | ||||||||
| 2025 | 2024 | |||||||
| Stock options(a) | ||||||||
| Warrants(b) | ||||||||
| Unvested restricted stock | ||||||||
| (a) | ||
| (b) |
RevenueRecognition
TheCompany recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Revenuesare recognized when a purchase order is received from the customer and control of the promised goods or services is transferred to thecustomer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for transferring thosegoods or services. Revenue is recognized based on the following five-step model:
-Identification of the contract with a customer
-Identification of the performance obligations in the contract
-Determination of the transaction price
-Allocation of the transaction price to the performance obligations in the contract
-Recognition of revenue when, or as, the Company satisfies a performance obligation
Detailsof this five-step process are as follows:
Identificationof the contract with a customer
Customerpurchase orders are generally considered to be contracts under ASC 606. Purchase orders typically identify the specific terms of productsto be delivered, create the enforceable rights and obligations of both parties and result in commercial substance. No other forms ofcontract revenue recognition, such as the completed contract or percentage of completion methods, were utilized by the Company in either2025 or 2024.
Performanceobligations
TheCompany’s performance obligation is generally limited to delivery of the requested items to its customers at the agreed upon quantitiesand prices.
Determinationand allocation of the transaction price
TheCompany has established prices for its products. These prices are effectively agreed to when customers place purchase orders with theCompany. Rebates and discounts, if any, are recognized in full at the time of sale as a reduction of net revenue. Allocation of transactionprices is not necessary where only one performance obligation exists. For certain sales transactions, we incur group purchasing organizationfees that are based on a contractual percentage of applicable sales and are recorded as a reduction of the revenue for those transactions.
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Recognitionof revenue as performance obligations are satisfied
Productrevenues are recognized when a purchase order is received from the customer, the products are delivered, and control of the goods andservices passes to the customer.
Disaggregationof Revenue
Revenuestreams from product sales, software as a service (“SaaS”), and royalties for the three and six monthsended June 30, 2025 and 2024 are summarized below.
Three Months Ended June 30, | SixMonths Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Soft tissue repair products | $ | $ | $ | $ | ||||||||||||
| Bone fusion products | ||||||||||||||||
| SaaS | ||||||||||||||||
| Royalties | ||||||||||||||||
| Total Net Revenue | $ | $ | $ | $ | ||||||||||||
Forthe three and six months ended June 30, 2025 and 2024, revenue from soft tissue repair products, bone fusion products and royaltieswas generated from the Sanara Surgical segment. The Company launched the first THP pilot program with a wound care provider groupduring the second quarter of 2025; however, the pilot program is in its early stages and has not generated any revenue to date. Forthe three and six months ended June 30, 2025, the SaaS revenue shown was generated from the THP segment and relates to contractsacquired in the CarePICS Acquisition (defined in Note 3 below).
AccountsReceivable Allowances
Accountsreceivable are typically due within 30 days of invoicing. The Company establishes an allowance for credit losses to provide for an estimateof accounts receivable which are not expected to be collectible. The Company bases the allowance on an assessment of customer creditworthiness,historical payment experience, the age of outstanding receivables and other information as applicable and will record its allowance basedon the estimated credit losses. The Company’s accounts receivable balance, net was $, $, and $ asof June 30, 2025, December 31, 2024, and December 31, 2023, respectively. The Company recorded credit loss expense of $
Inventories
Inventoriesare stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist primarilyof finished goods, and also include an immaterial amount of raw materials and related packaging components. The Company recorded inventoryobsolescence expense of $
| 10 |
Propertyand Equipment
Propertyand equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimateduseful lives of the related assets, ranging from two to ten years. Below is a summary of property and equipment for the periods presented:
Useful Life | June 30, 2025 | December 31, 2024 | ||||||||
| Computers | $ | $ | ||||||||
| Office equipment | ||||||||||
| Furniture and fixtures | ||||||||||
| Leasehold improvements | ||||||||||
| Developed technology | ||||||||||
| Internal use software (in development) | ||||||||||
| Property and equipment, gross | ||||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||||
| Property and equipment, net | $ | $ | ||||||||
Depreciationexpense related to property and equipment was $
InternalUse Software
TheCompany accounts for costs incurred to develop or acquire computer software for internal use in accordance with ASC Topic 350-40, Intangibles– Goodwill and Other (“ASC 350-40”). The Company capitalizes costs incurred during the application development stage,which generally includes employee compensation and benefits costs as well as third-party developer fees to design the software configurationand interfaces, coding, installation and testing.
TheCompany begins capitalization of qualifying costs when the preliminary project stage is completed, management has authorized furtherfunding for the completion of the project, and it is probable that the project will be completed and the software will be used toperform the function intended. Costs incurred during the preliminary project stage along with post implementation stages of internaluse computer software are expensed as incurred. The Company also capitalizes costs related to specific upgrades and enhancementswhen it is probable the expenditures would result in additional functionality.
TheCompany has been developing internal use software in conjunction with the development and future release of the THP platform. The developmentphase of this internal use software began at the beginning of January 2025, and it was still in the development phase as of June 30,2025. Therefore, under ASC 350-40 the project includes capitalizable costs of employees and external vendors who are developing the applicationwhich is expected to continue during the third quarter of 2025. To date, this includes approximately $
| 11 |
Goodwill
Theexcess of purchase price over the fair value of identifiable net assets acquired in business combinations is recorded as goodwill. Asof June 30, 2025 and December 31, 2024, all of the Company’s goodwill relates to the acquisition of Scendia Biologics, LLC (“Scendia”),which is included in the Sanara Surgical segment. Goodwill has an indefinite useful life and is not amortized. Goodwill is tested annuallyas of December 31 for impairment, or more frequently if circumstances indicate impairment may have occurred. The Company may first performa qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than the respectivecarrying value. If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carryingvalue, then the Company will determine the fair value of the reporting unit and record an impairment charge for the difference betweenfair value and carrying value (not to exceed the carrying amount of goodwill).
IntangibleAssets
Intangibleassets are stated at cost of acquisition less accumulated amortization and impairment loss, if any. Cost of acquisition includes thepurchase price and any cost directly attributable to bringing the asset to its working condition for the intended use. The Company amortizesits finite-lived intangible assets on a straight-line basis over the estimated useful life of the respective assets which is generallythe life of the related patents or licenses, seven years for customer relationships and five years for assembled workforces. See Note5 for more information on intangible assets.
Impairmentof Long-Lived Assets
Long-livedassets, including certain identifiable intangibles held and to be used by the Company, are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company continuously evaluatesthe recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-livedassets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-livedassets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the differencebetween the carrying value and fair value. Fair values are determined based on quoted market values, undiscounted cash flows or internaland external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated fair value lesscost to sell.
Investmentsin Equity Securities
TheCompany’s equity investments consist of nonmarketable equity securities in privately held companies without readily determinablefair values. Unless accounted for under the equity method of accounting, the investments are reported at cost minus impairment, if any,plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in thesame issuer.
TheCompany applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in theinvestee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownershipinterest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.As discussed further in Note 6, as of June 30, 2025, the Company had three investments that were recorded applying the equity methodof accounting. The Company did not have any investments recorded applying the equity method of accounting as of June 30, 2024 other thanthe investment in SI Technologies (as defined and described in Note 6), which had not yet commenced activities. The Company’sproportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “Shareof losses from equity method investments” in the Company’s Consolidated Statements of Operations. The Company’s equitymethod investments are adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, ifany. The Company classifies distributions received from its equity method investments using the cumulative earnings approach in the Company’sConsolidated Statements of Cash Flows.
TheCompany has reviewed the carrying value of its investments and has determined there was no impairment or observable price changes asof or for the six months ended June 30, 2025 and 2024.
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FairValue Measurement
Asdefined in ASC Topic 820, Fair Value Measurement (“ASC 820”), fair value is the price that would be received to sell an assetor paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Companyutilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions aboutrisk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, orgenerally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchygives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) andthe lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both the initial andsubsequent measurement.
Thethree levels of the fair value hierarchy defined by ASC 820 are as follows:
Level1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active marketsare those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information onan ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities andlisted equities.
Level2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectlyobservable 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 economicmeasures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can bederived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instrumentsin this category generally include nonexchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be usedwith internally developed methodologies that result in management’s best estimate of fair value.
Thecarrying amounts of cash, accounts receivable, accounts payable and accrued expenses, other than acquisition-related expenses, approximatefair value because of the short-term nature of these instruments. The fair value of acquisition-related accrued expenses is categorizedas Level 2 of the fair value hierarchy. The value of these instruments has been estimated using discounted cash flow analysis based onthe Company’s incremental borrowing rate. The fair value of the contingentearnout considerations and the acquisition date fair value of goodwill and intangibles related to the acquisitions discussed in Notes3, 5 and 9 are based on Level 3 inputs.
Liabilitiesfor contingent consideration related to the acquisition of assets from The Hymed Group Corporation (“Hymed”) and AppliedNutritionals, LLC (“Applied”) in August 2023 (the “Applied Asset Purchase”) and the CarePICS Acquisition inApril 2025 are measured at fair value each reporting period, with the acquisition-date fair value included as part of theconsideration transferred. The contingent consideration for the Scendia acquisition was settled as of September 30, 2024, and thefinal earnout payment of approximately $
| Balance at December 31, 2024 | $ | |||
| Additions | ||||
| Revaluation of earnout liabilities | ||||
| Balance at June 30, 2025 | $ |
| 13 |
FinancialInstruments Not Measured at Fair Value
Theestimated fair value of the Company’s borrowings under the CRG Term Loan (defined below) was $
IncomeTaxes
Incometaxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences betweenfinancial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the taxrates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if itis more likely than not that some or all the deferred tax asset will not be realized.
TheCompany accounts for share-based compensation to employees and nonemployees in accordance with ASC Topic 718, Compensation – StockCompensation. Share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expenseover the stipulated vesting period, if any. The Company estimates the fair value of share-based payments using the Black-Scholes option-pricingmodel for common stock options and warrants, and the closing price of the Company’s common stock for grants of common stock, includingrestricted stock awards.
Researchand Development Costs
Researchand development (“R&D”) expenses consist of personnel-related expenses, including salaries, share-based compensationand benefits for all personnel directly engaged in R&D activities, contracted services, materials, prototype expenses and allocatedoverhead, which is comprised of compensation and benefits, lease expense and other facilities-related costs. R&D expenses includecosts related to enhancements to the Company’s currently available products and additional investments in the product and platformdevelopment pipeline. The Company expenses R&D costs as incurred.
| 14 |
RecentlyAdopted Accounting Pronouncements
InNovember 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”)2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosureof incremental segment information on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company adopted thenew guidance effective for its annual report for the fiscal year ended December 31, 2024, and for interim filings beginning with theinterim period ended March 31, 2025. The adoption did not have a material impact on the Company’s consolidated financial position,results of operations or cash flows. See Note 12 for segment reporting disclosures.
RecentlyIssued Accounting Pronouncements
InDecember 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”),which expands the disclosure required for income taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024,with early adoption permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
InNovember 2024, FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense DisaggregationDisclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires newdisclosures providing further detail of a company’s income statement expense line items. ASU 2024-03 is effective for fiscalyears beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption ispermitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
NOTE3 – CAREPICS ACQUISITION
OnApril 1, 2025 (the “CarePICS Closing Date”), the Company, entered into a Unit Purchase Agreement (the “CarePICSPurchase Agreement”), by and among the Company, Tissue Health Plus, LLC, a Delaware limited liability company and wholly ownedsubsidiary of the Company (the “Purchaser”), CarePICS, LLC (“CarePICS”), the holders of CarePICS’soutstanding units (each, a “Seller” and collectively, the “Sellers”) and Paul Schubert, in his capacity asthe representative of the Sellers, pursuant to which the Purchaser purchased all of the issued and outstanding equity interests ofCarePICS (the “Units”) from the Sellers (the “CarePICS Acquisition”). On the CarePICS Closing Date, theparties to the CarePICS Purchase Agreement completed the CarePICS Acquisition and CarePICS became an indirect wholly ownedsubsidiary of the Company.
CarePICSdesigned and maintained a mobile and web app for clinicians to perform certain activities related to treating vascular and wound carepatients, including (i) requesting and providing specialty consultations, (ii) creating and sending clinical reports, (iii) schedulingand performing telehealth visits with patients and (iv) signing and fulfilling medical supply orders. The CarePICS virtual platform enabledHIPAA-compliant communication sharing of video, voice, text and images for all activities between users. The CarePICS virtual platformis expected to be utilized in the THP platform.
CashConsideration
Pursuantto the CarePICS Purchase Agreement, cash consideration for the CarePICS Acquisition was $
EarnoutConsideration
TheCarePICS Purchase Agreement also provides that the Sellers are entitled to receive potential earnout payments. Pursuant to the CarePICSPurchase Agreement, for each of
Eachearnout payment, if any, is due within 90 days following the First Earnout Period and Second Earnout Period, as applicable, and ispayable in cash or, at the Purchaser’s election, is payable to Sellers who qualify as “accredited investors” (assuch term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended) in a combination of
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Inaddition, for a period ending 10 years following the CarePICS Closing Date (the “Purchaser Value Earnout Period”), each Selleris entitled to receive annual earnout payments based on the census of patient volume for the previous year and be based upon a rate of$
Asthe contingent consideration was negotiated as part of the CarePICS Acquisition, the contingent obligation was included in the totalpurchase consideration transferred and classified as a liability.
Thetotal purchase consideration for the CarePICS Acquisition was as follows:
| Consideration | Amount | |||
| Cash consideration | $ | |||
| Contingent consideration | ||||
| Direct transaction costs | ||||
| Total purchase consideration | $ | |||
Basedon guidance provided by ASC 805, Business Combinations, the Company recorded the CarePICS Acquisition as an asset acquisition due tothe determination that substantially all the fair value of the assets acquired was concentrated in the CarePICS developedtechnology.
Thepurchase consideration was allocated to the acquired assets and liabilities based on their relative fair value as follows:
| Description | Amount | |||
| Developed technology | $ | |||
| Debt assumed | ( | ) | ||
| Net assets acquired | $ | |||
Subsequentrevaluations of cash settlements related to contingent consideration are recognized as adjustments to the developed technology and theearnout liability, with cumulative catch-up depreciation adjustments. Subsequent revaluations of equity settlements related to the contingentconsideration are remeasured at each reporting date, and are recognized as adjustments to the earnout liability with changes in fairvalue recognized in earnings.
NOTE4 – CONVERTIBLE LOAN RECEIVABLE
Inconnection with an equity investment in Biomimetic Innovations Limited (“BMI”), an unaffiliated entity engaged in the developmentof certain surgical technologies, the Company entered into a convertible loan agreement in July 2024 pursuant to which the Company loaned$
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NOTE5 – GOODWILL AND INTANGIBLES, NET
Thechanges in the carrying amount of the Company’s goodwill were as follows:
| Total | ||||
| Balance as of December 31, 2023 | $ | |||
| Acquisitions | ||||
| Balance as of December 31, 2024 | ||||
| Acquisitions | ||||
| Balance as of June 30, 2025 | $ | |||
Inconnection with the change in reportable operating segments in the second quarter of 2024, the Company reassessed goodwill as thesegments are presented in this report. Goodwill was recorded in connection with the acquisition of Scendia and is included entirelywithin the Sanara Surgical segment. The Company’s assessment determined that these changes, or any other matters noted, didnot alter the Company’s conclusion that goodwill was not impaired as of June 30, 2025 or 2024.
Thecarrying values of the Company’s intangible assets were as follows for the periods presented:
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | |||||||||||||||||||
| Amortizable Intangible Assets: | ||||||||||||||||||||||||
| Patents and Other IP | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Customer relationships and other | ( | ) | ( | ) | ||||||||||||||||||||
| Licenses | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Asof June 30, 2025, the weighted-average amortization period for finite-lived intangible assets was
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ |
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NOTE6 – INVESTMENTS IN EQUITY SECURITIES
TheCompany’s equity investments consist of nonmarketable equity securities in privately held companies without readily determinablefair values. Unless accounted for under the equity method of accounting, the investments are reported at cost minus impairment, if any,plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of thesame issuer.
DirectDerm
InJuly 2020, the Company made a $long-term investment to purchase certain nonmarketable securities consisting of Series B-2 Preferred Shares of Direct Dermatology Inc. (“DirectDerm”), representing approximately %ownership of DirectDerm at that time. Through this investment, the Company received exclusive rights to utilize DirectDerm’stechnology in all acute and post-acute care settings such as skilled nursing facilities, home health and wound clinics. In 2021, theCompany purchased an additional shares of DirectDerm’s Series B-2 Preferred for $.In March 2022, the Company purchased an additional shares of DirectDerm’s Series B-2 Preferred for $.The Company’s ownership of DirectDerm was approximately
Pixalere
InJune 2021, the Company invested $ to purchase Class A Preferred Shares (the “Pixalere Shares”) of Canada-basedPixalere Healthcare Inc. (“Pixalere Canada”). The Pixalere Shares were convertible into approximately % of the outstandingequity of Pixalere Canada. Pixalere Canada provides a cloud-based wound care software tool that empowers nurses, specialists and administratorsto deliver better care for patients. In connection with the Company’s purchase of the Pixalere Shares, Pixalere Canada grantedPixalere Healthcare USA, LLC (“Pixalere USA”), a subsidiary of the Company, a royalty-free exclusive license to use the PixalereCanada software and platform (the “Pixalere System”) in the United States. In conjunction with the grant of the license,the Company issued Pixalere Canada a
EffectiveJanuary 2, 2025, the Company entered into a series of agreements whereby Pixalere Canada redeemed the Company’s Pixalere Sharesand, in exchange, the Company received additional rights related to the Pixalere System to be utilized in the THP technology platform(the “Pixalere Redemption”). Specifically, the Company’s exclusive license agreement for the Pixalere System was amendedto provide the Company (i) possession, control and ability to modify a copy of the source code used in the Pixalere System, (ii) theability to use, license, sublicense or sell the licensed software in additional territories outside of the United States and (iii) allde-identified patient data owned by Pixalere Canada. In addition, as part of the Pixalere Redemption, Pixalere USA redeemed PixalereCanada’s equity ownership in Pixalere USA.
TheCompany determined that the fair value of assets exchanged in the Pixalere Redemption was not determinable with reliability. Therefore,the Company recorded the transaction as a non-monetary exchange of assets and reclassified the $ carrying value of its investmentin the Pixalere Shares as an intangible asset for the amended license agreement. The Company also eliminated the
ChemoMouthpiece
InSeptember 2024, the Company, through its wholly owned subsidiary, Sanara CMP LLC (“Sanara CMP”), entered into a Unit PurchaseAgreement (the “Unit Purchase Agreement”) with ChemoMouthpiece, LLC (“CMp”), pursuant to which Sanara CMP purchased common units in CMp for an aggregate purchase price of $
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TheCompany reviewed the characteristics of Sanara CMP’s investment in CMp in accordance with ASC Topic 323, Investments — Equity Methodand Joint Ventures (“ASC 323”), and determined that Sanara CMP made a non-controlling investment in a limited liability company.According to the guidance provided in ASC 323-30-S99-1, investments in limited liability companies whereby an investor holds more thana 3% to 5% ownership interest would generally be accounted for under the equity method of accounting. Therefore, the Company utilizedthe equity method of accounting for this investment and recorded its initial investment at cost plus transaction costs. Sanara CMP’sshare of the earnings or losses of CMp is recorded in the Company’s Consolidated Statements of Operations.
SITechnologies
InNovember 2022, the Company established a 50/50 strategic alliance, SI Healthcare Technologies, LLC (“SI Technologies”) (formerlyknown as SI Wound Care, LLC), with InfuSystem Holdings, Inc. (“InfuSystem”).
Inconnection with the Unit Purchase Agreement with CMp, the Company, CMp, certain subsidiaries of CMp, InfuSystem and SI Technologies,entered into an Exclusive Distribution Agreement (the “Distribution Agreement”) pursuant to which SI Technologies was appointedas the sole and exclusive U.S. distributor of CMp’s Standard Chemo Regiment Kits.
Theparties to the Distribution Agreement also entered into an Intellectual Property Rights Agreement, pursuant to which SI Technologieswas granted the exclusive right to use CMp’s intellectual property rights to permit resale and use of the CMp product in the UnitedStates.
TheCompany reviewed the characteristics of the Company’s investment in SI Technologies in accordance with ASC 323 and determined thatthe Company made a non-controlling investment in a limited liability company. In accordance with ASC 323-30-S99-1, the Company utilizedthe equity method of accounting for this investment and recorded its initial investment at cost. The Company’s share of the earningsor losses of SI Technologies is recorded in the Company’s Consolidated Statements of Operations.
BMI
OnJanuary 16, 2025, the Company entered into a share subscription and shareholders’ agreement (the “SubscriptionAgreement”), pursuant to which the Company made an initial cash investment in BMI totaling approximately €
TheCompany reviewed the characteristics of the Company’s investment in BMI in accordance with ASC 323 and determined that the Companymade a non-controlling investment in a limited liability company. In accordance with ASC 323-30-S99-1, the Company utilized the equitymethod of accounting for this investment and recorded its initial investment at cost. The Company’s share of the earnings or lossesof BMI is recorded in the Company’s Consolidated Statements of Operations.
Inconnection with the Subscription Agreement, the Company entered into a license and distribution agreement with BMI (the “BMI LicenseAgreement”) pursuant to which the Company acquired the exclusive U.S. marketing, sales and distribution rights to certain BMI products,for use in the treatment of a wound or injury caused by a traumatic incident. Pursuant to the BMI License Agreement, the Company wasappointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distribute and sell certain BMI products fortrauma indications inside the United States and its territories. See Note 9 for more information regarding the BMI License Agreement.
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Thefollowing table summarizes the Company’s investments for the periods presented:
| June 30, 2025 | December 31, 2024 | |||||||||||||||
| Carrying Amount | Economic Interest | Carrying Amount | Economic Interest | |||||||||||||
| Equity Method Investments | ||||||||||||||||
| ChemoMouthpiece, LLC | $ | % | $ | % | ||||||||||||
| SI Healthcare Technologies, LLC | % | % | ||||||||||||||
| Biomimetic Innovations Limited | % | % | ||||||||||||||
| Total Equity Method Investments | $ | $ | ||||||||||||||
| Cost Method Investments | ||||||||||||||||
| Direct Dermatology Inc. | $ | $ | ||||||||||||||
| Pixalere Healthcare Inc. | ||||||||||||||||
| Total Cost Method Investments | $ | $ | ||||||||||||||
| Total Investments | $ | $ | ||||||||||||||
Thefollowing table summarizes the Company’s share of income (loss) from equity method investments reflected in the Company’sConsolidated Statements of Operations for the periods presented:
Three Months Ended June 30, | SixMonths Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Equity Method Investments | ||||||||||||||||
| ChemoMouthpiece, LLC | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| SI Healthcare Technologies, LLC | ||||||||||||||||
| Biomimetic Innovations Limited | ( | ) | ( | ) | ||||||||||||
| Total | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
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NOTE7 – OPERATING LEASES
TheCompany periodically enters operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determinewhether such arrangements constitute a lease. Right of use assets (“ROU assets”) represent the right to use an underlyingasset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating leaseROU assets and liabilities were recognized on the transition date based on the present value of lease payments over the respective leaseterm, with the office space ROU asset adjusted for deferred rent liability.
Asof June 30, 2025, the Company had two material operating leases for office space. The leases had remaining lease terms of
Inaccordance with ASC Topic 842, Leases, the Company has recorded ROU assets of $
Thepresent value of the Company’s operating lease liabilities as of June 30, 2025 is shown below:
Maturityof Operating Lease Liabilities
| June 30, 2025 | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Present Value of Lease Liabilities | $ | |||
| Operating lease liabilities – current | $ | |||
| Operating lease liabilities – long-term | $ | |||
Asof June 30, 2025, the Company’s operating leases had a weighted average remaining lease term of
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NOTE8 – DEBT AND CREDIT FACILITIES
CRGTerm Loan Agreement
OnApril 17, 2024 (the “Closing Date”), the Company entered into a term loan agreement, by and among the Company, as borrower,the subsidiary guarantors party thereto from time to time (collectively, the “Guarantors”), CRG Servicing LLC as administrativeagent and collateral agent (the “Agent”), and the lenders party thereto from time to time (the “CRG Term Loan Agreement”),providing for a senior secured term loan of up to $
OnSeptember 4, 2024, the Company borrowed an additional $
OnMarch 19, 2025, the Company and the Guarantors entered into the First Amendment to the CRG Term Loan Agreement with the Agent and thelenders party thereto from time to time, which amended the CRG Term Loan Agreement to, among other things,
OnMarch 31, 2025, the Company, borrowed an additional $
TheCRG Term Loan bears interest at a per annum rate equal to
Forthe three months ended June 30, 2025, the Company paid $
Subjectto certain exceptions, the Company is required to make mandatory prepayments of the CRG Term Loan with the proceeds of certain assetssales and in the event of a change of control of the Company. In addition, the Company may make voluntary prepayments of the CRG TermLoan, in whole or in part, at any time. All mandatory and voluntary prepayments of the CRG Term Loan are subject to the payment of prepaymentpremiums as follows:
| 22 |
Certainof the Company’s current and future subsidiaries, including the Guarantors, guarantee the obligations of the Company under theCRG Term Loan Agreement. As security for their obligations under the CRG Term Loan Agreement, on the Closing Date, the Company and theGuarantors entered into a security agreement with the Agent pursuant to which the Company and the Guarantors granted to the Agent, ascollateral agent for the lenders, a lien on substantially all of the Company’s and the Guarantors’ assets, including intellectualproperty (subject to certain exceptions).
TheCRG Term Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on theCompany’s and the Guarantors’ abilities, among other things, to incur additional debt, grant or permit additional liens,make investments and acquisitions above certain thresholds, merge or consolidate with others, dispose of assets, pay dividends and distributionsand enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the CRG Term Loan Agreement containsthe following financial covenants requiring the Company and the Guarantors in the aggregate to maintain:
| ● | liquidity in an amount which shall exceed the greater of: (i) $ | |
| ● | annual minimum revenue of at least: (i) $ |
TheCRG Term Loan Agreement contains representations and warranties of the Company and the Guarantors customary for financings of this type,and also includes events of default customary for financings of this type, including, among other things, non-payment, inaccuracy ofrepresentations and warranties, covenant breaches, a material adverse change, bankruptcy and insolvency, material judgments and a changeof control, in certain cases subject to customary periods to cure. The occurrence and continuance of an event of default could resultin the acceleration of the obligations under the CRG Term Loan Agreement.
Thetable below presents the components of the Company’s outstanding debt for the periods presented:
| June 30, 2025 | December 31, 2024 | |||||||
| CRG Term Loan | $ | $ | ||||||
| Paid-in-kind interest | ||||||||
| Back-end fee | ||||||||
| Debt | ||||||||
| Less: unamortized debt issuance costs | ( | ) | ( | ) | ||||
| Debt, net of debt issuance costs | ||||||||
| Less: Current portion of debt | ||||||||
| Long-term debt, net of current portion | $ | $ | ||||||
| 23 |
Thetable below presents the aggregate maturities of the Company’s outstanding debt as of June 30, 2025:
| Year | Total | |||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total debt | $ | |||
Inconnection with the CRG Term Loan, the Company incurred $
NOTE9 - COMMITMENTS AND CONTINGENCIES
LicenseAgreements and Royalties
BIASURGEAdvanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser
InJuly 2019, the Company executed a license agreement with Rochal Industries, LLC (“Rochal”), a related party, pursuant towhich the Company acquired an exclusive world-wide license to market, sell and further develop antimicrobial products for theprevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications (the“BIAKŌS License Agreement”). Currently, the products covered by the BIAKŌS License Agreement are BIASURGEAdvanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser. All threeproducts are 510(k) cleared.
Futurecommitments under the terms of the BIAKŌS License Agreement include:
| ● | The Company pays Rochal a royalty of | |
| ● | The Company may pay additional royalties annually based on specific net profit targets from sales of the licensed products, subject to a maximum of $ |
Unlesspreviously terminated by the parties, the BIAKŌS License Agreement expires with the related patents in December 2031.
Underthis agreement, royalty expense, which is recorded in “Cost of goods sold” in the accompanying Consolidated Statements ofOperations, was $
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CuraShieldAntimicrobial Barrier Film and No Sting Skin Protectant
InOctober 2019, the Company executed a license agreement with Rochal pursuant to which the Company acquired an exclusive world-wide licenseto market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health caremarket utilizing certain Rochal patents and pending patent applications (the “ABF License Agreement”). Currently, the productscovered by the ABF License Agreement are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.
Futurecommitments under the terms of the ABF License Agreement include:
| ● | The Company will pay Rochal a royalty of | |
| ● | The Company will pay additional royalties annually based on specific net profit targets from sales of the licensed products, subject to a maximum of $ |
Unlesspreviously terminated or extended by the parties, the ABF License Agreement will terminate upon expiration of the last U.S. patent inOctober 2033. No commercial sales or royalties have been recognized under this agreement as of June 30, 2025.
DebriderLicense Agreement
InMay 2020, the Company executed a product license agreement with Rochal, pursuant to which the Company acquired an exclusive world-widelicense to market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders,excluding uses primarily for beauty, cosmetic, or toiletry purposes (the “Debrider License Agreement”).
Futurecommitments under the terms of the Debrider License Agreement include:
| ● | Upon FDA clearance of the licensed products, the Company will pay Rochal $ | |
| ● | The Company will pay Rochal a royalty of | |
| ● | The Company will pay additional royalty annually based on specific net profit targets from sales of the licensed products, subject to a maximum of $ |
Unlesspreviously terminated or extended by the parties, the Debrider License Agreement will expire in October 2034. No commercial sales orroyalties have been recognized under this agreement as of June 30, 2025.
ExclusiveLicense and Distribution Agreement With, and Minority Investment in, BMI
BMILicense Agreement
OnJanuary 16, 2025, the Company entered into the BMI License Agreement, by and between the Company and BMI, a privately-held medical devicecompany headquartered in Shannon, Co. Clare Ireland, pursuant to which the Company acquired the exclusive U.S. marketing, sales and distributionrights to OsStic® Synthetic Injectable Structural Bio-Adhesive Bone Void Filler (“OsStic”), as well as an adjunctiveinternal fixation technology featuring novel delivery to promote targeted application of OsStic (“ARC” and together withOsStic, the “Products”), for use in the treatment of a wound or injury caused by a traumatic incident.
| 25 |
Pursuantto the BMI License Agreement, the Company was appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer,distribute and sell the Products for trauma indications inside the United States and its territories for an initial five-year term, whichterm may be automatically renewed for successive two-year periods at the Company’s discretion, provided that the Company is incompliance with its obligations thereunder. From January 16, 2025 until October 13, 2025, the Company has an exclusive option to negotiateexclusive distribution rights for the Products in additional fields and/or additional territories on substantially the same terms asthose set forth in the BMI License Agreement.
TheBMI License Agreement requires that the Company pay BMI royalties of
SubscriptionAgreement
Inconnection with the BMI License Agreement, on January 16, 2025, the Company entered into the Subscription Agreement, pursuant towhich the Company made an initial cash investment in BMI totaling approximately €
Acquisitions
PrecisionHealing Merger Agreement
InApril 2022, the Company closed a merger transaction with Precision Healing pursuant to which Precision Healing became a wholly ownedsubsidiary of the Company. Pursuant to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock,other than the Company, were entitled to receive closing consideration, consisting of $
Uponthe closing of the merger, the Precision Healing outstanding options previously granted under the Precision Healing Inc. 2020 Stock Optionand Grant Plan (the “Precision Healing Plan”) converted, pursuant to their terms, into options to acquire an aggregate of shares of Company common stock with a weighted average exercise price of $ per share. These options expire between August2030 and April 2031. In addition, outstanding and unexercised Precision Healing warrants converted into rights to receive warrants topurchase (i)
| 26 |
AppliedAsset Purchase
OnAugust 1, 2023, the Company closed the Applied Asset Purchase for an initial aggregate purchase price of $
Inaddition to the consideration noted above, the terms of the asset purchase agreement provide that the sellers party thereto are entitledto receive up to an additional $
Inconnection with the Applied Asset Purchase, effective August 1, 2023, the Company entered into a professional services agreement (the“Petito Services Agreement”) with Dr. George D. Petito (the “Owner”), pursuant to which the Owner, as an independentcontractor, agreed to provide certain services to the Company, including, among other things, assisting with the development of productsalready in development and assisting with research, development, formulation, invention and manufacturing of any future products (the“Petito Services”).
ThePetito Services Agreement has an initial term of three years and is subject to automatic successive one-month renewals unless earlierterminated in accordance with its terms. The Petito Services Agreement may be terminated upon the Owner’s death or disability orby the Company or the Owner “For Cause” (as defined in the Petito Services Agreement); provided, however, that the base salarydescribed in (i) of the foregoing paragraph shall survive termination through the three-year initial term and the royalty payments andincentive payments described in (ii)-(v) of the foregoing paragraph shall survive termination of the Petito Services Agreement.
OtherCommitments
OnDecember 20, 2023, the Company signed an exclusive license agreement with Tufts University (“Tufts”) to develop and commercializepatented technology covering
| 27 |
NOTE10 – SHAREHOLDERS’ EQUITY
CommonStock
Atthe Company’s Annual Meeting of Shareholders held in July 2020, the Company approved the Restated 2014 Omnibus Long Term IncentivePlan (the “2014 LTIP”) in which the Company’s directors, officers, employees and consultants are eligible to participate.The 2014 LTIP terminated on September 3, 2024, and no future awards may be granted pursuant to the 2014 LTIP. Previously granted awardsunder the 2014 LTIP will remain outstanding until they expire by their terms or under the terms of the 2014 LTIP.
OnJune 12, 2024, the Company’s shareholders approved the 2024 Omnibus Long-Term Incentive Plan (the “2024 LTIP”), whichwent into effect upon shareholder approval. The maximum number of shares of the Company’s common stock that may be delivered pursuantto awards granted under the 2024 LTIP is , subject to increase by any awards under the 2014 LTIP (i) that were outstanding onor after June 12, 2024, and that, on or after such date, are forfeited, expire or are canceled, and (ii) any shares subject to awardsrelating to common stock under the 2014 LTIP that are settled in cash on or after June 12, 2024 (the “Prior LTIP Awards”).The 2024 LTIP also provides that, to the extent an award under the 2024 LTIP or a Prior LTIP Award is forfeited, expires or is canceled,in whole or in part, the shares subject to such forfeited, expired or canceled award may again be awarded under the 2024 LTIP. As ofJune 30, 2025, a total of shares, net of forfeitures, had been issued under the 2024 LTIP and were available for issuanceunder the 2024 LTIP.
RestrictedStock Awards
Duringthe six months ended June 30, 2025, the Company issued restricted stock awards under the 2024 LTIP which are subject to certain vestingprovisions and other terms and conditions set forth in each recipient’s respective restricted stock agreement. The Company issued shares, net of forfeitures, under the 2024 LTIP, of restricted common stock to employees, directors, and certain advisors ofthe Company during the six months ended June 30, 2025. The fair value of these awards was $
Share-basedcompensation expense of $ and $ was recognized in “Operating expenses” in the accompanying ConsolidatedStatements of Operations during the three months ended June 30, 2025 and 2024, respectively. Share-based compensation expense of $and $ was recognized in “Operating expenses” in the accompanying Consolidated Statements of Operations during thesix months ended June 30, 2025 and 2024, respectively.
AtJune 30, 2025, there was $ of total unrecognized share-based compensation expense related to unvested share-based equity awards.Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of years.
SixMonths Ended June 30, 2025 | ||||||||
| Shares | Weighted Grant Date | |||||||
| Nonvested at beginning of period | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Nonvested at June 30, 2025 | $ | |||||||
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StockOptions
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| Outstanding at beginning of period | $ | |||||||||||||||
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| Outstanding at June 30, 2025 | $ | $ | ||||||||||||||
| Exercisable at June 30, 2025 | $ | $ | ||||||||||||||
NOTE11 – RELATED PARTIES
ProductLicense Agreements
InJuly 2019, the Company executed a license agreement with Rochal, a related party, whereby the Company acquired an exclusive world-widelicense to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizingcertain Rochal patents and pending patent applications. Currently, the products covered by the BIAKŌS License Agreement are BIASURGEAdvanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser. Each of theseproducts are 510(k) cleared. Ronald T. Nixon, the Company’s Chief Executive Officer and Executive Chairman, is a director of Rochal,and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder of Rochal.Another one of the Company’s directors is also a director and significant shareholder of Rochal.
InOctober 2019, the Company executed the ABF License Agreement with Rochal whereby the Company acquired an exclusive world-wide licenseto market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health caremarket utilizing certain Rochal patents and pending patent applications. Currently, the products covered by the ABF License Agreementare CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.
InMay 2020, the Company executed a product license agreement with Rochal, whereby the Company acquired an exclusive world-wide licenseto market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excludinguses primarily for beauty, cosmetic, or toiletry purposes.
SeeNote 9 for more information on these product license agreements.
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ConsultingAgreement
Concurrentwith the Rochal asset purchase, in July 2021, the Company entered into a consulting agreement with Ann Beal Salamone pursuant to whichMs. Salamone agreed to provide the Company with consulting services with respect to, among other things, writing new patents, conductingpatent intelligence, and participating in certain grant and contract reporting. In consideration for the consulting services providedto the Company, Ms. Salamone is entitled to receive an annual consulting fee of $
CatalystTransaction Advisory Services Agreement
InMarch 2023, the Company entered into a Transaction Advisory Services Agreement (the “Catalyst Services Agreement”) effectiveMarch 1, 2023 with Catalyst, a related party. Pursuant to the Catalyst Services Agreement, Catalyst, by and through its directors, officers,employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the “CoveredPersons”), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operationaland strategic planning, relationship access and corporate development services for the Company in connection with any merger, acquisition,recapitalization, divestiture, financing, refinancing, or other similar transaction in which the Company may be, or may consider becoming,involved, and any such additional services as mutually agreed upon in writing by and between Catalyst and the Company (the “CatalystServices”).
Pursuantto the Catalyst Services Agreement, the Company agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any ofthe Covered Persons at a rate no more than a rate consistent with industry practice for the performance of services similar to the CatalystServices, as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliatedthird parties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Catalyst Servicesrendered under the Catalyst Services Agreement, with all reimbursements being contingent upon the prior approval of the Audit Committeeof the Company’s Board of Directors. The Company incurred costs pursuant to the Catalyst Services Agreement of $
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NOTE12 – SEGMENT REPORTING
Asdiscussed in Note 1, the Company historically managed its business as
SegmentAdjusted EBITDA is the primary profitability measure used by the CODM for purposes of assessing financial performance and resource allocation.The Company defines Segment Adjusted EBITDA for the reportable segments as net income (loss) excluding interest expense/income, provision/benefitfor income taxes, depreciation and amortization, non-cash share-based compensation expense, change in fair value of earnout liabilities,share of losses from equity method investments, executive separation costs, legal and diligence expenses related to acquisitions, andgains/losses on disposal of property and equipment, as each are applicable to the periods presented. Segment Adjusted EBITDA, as it relatesto the Company’s reportable segments, is presented in conformity with ASC 280, Segment Reporting, and is excluded from the definitionof non-GAAP financial measures under the Securities and Exchange Commission’s Regulation G and Item 10(e) of Regulation S-K. SegmentAdjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The CODM also reviews budget-to-actualvariances for expenses on a monthly basis when making decisions about allocating resources to the segments. The Company has not includedany disclosure regarding total segment assets, as no segment level asset information is regularly provided to the CODM.
SanaraSurgical
TheSanara Surgical segment primarily markets and sells soft tissue repair and bone fusion products for use in the operating room or othersterile environments. Sanara Surgical’s soft tissue repair products include, among other products, the Company’s lead product,CellerateRX Surgical, a hydrolyzed collagen that aids in the management of surgical wounds, and BIASURGE Advanced Surgical Solution, which is a sterile no-rinse, advanced surgical solution used for wound irrigation.Sanara Surgical’s bone fusion products include, among other products, BiFORM, which is an osteoconductive, bioactive, porous implantthat allows for bony ingrowth across the graft site, and ALLOCYTE Plus, which is a human allograft cellular bone matrix containing bone-derivedprogenitor cells and conformable bone fibers.
SanaraSurgical also includes an in-house research and development team, Rochal Technologies, with an extensive pipeline of innovative productsunder development.
TissueHealth Plus
TheTHP segment is focused on value-based wound care services. Through THP, the Company plans to offer a first of its kind value-based woundcare program to payers and risk-bearing entities such as accountable care organizations and value-based primary care companies.
THP’sprograms are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient qualityof life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community-based care spansa variety of settings including physician offices, skilled nursing facilities, assisted living facilities and senior living facilities.THP programs are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment.
Currently,there are no allocated costs included in the THP segment. All corporate and overhead expenses are included in the Sanara Surgical segment,as the substantial majority of these costs relate to supporting the operations and activities of the Sanara Surgical segment.
Asa result of the change in reportable segments, certain prior period amounts have been recast to conform to the current period presentation.Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity reflect reclassifications related tothe Company’s change in reportable segments. The change in reportable segments had no impact on the Company’s previouslyreported Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows or Consolidated Statementsof Shareholders’ Equity.
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Thefollowing table reflects results of operations including significant segment expenses that are regularly provided to the CODM for theCompany’s reportable segments and Segment Adjusted EBITDA for the periods indicated below:
ThreeMonths Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Change in fair value of earnout liabilities | ( | ) | ( | ) | ||||||||||||||||||||
| Other expense (1) | ||||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Segment Adjusted EBITDA | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
SixMonths Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||
| Selling, general and administrative (2) | ||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Change in fair value of earnout liabilities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Other expense (1) | ||||||||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Segment Adjusted EBITDA | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| (1) | ||
| (2) |
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Thefollowing table provides a reconciliation of net income (loss) to Segment Adjusted EBITDA for the Company’s reportable segments for theperiods indicated below:
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP(3) | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net Income (Loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Adjustments: | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Noncash share-based compensation | ||||||||||||||||||||||||
| Change in fair value of earnout liabilities | ( | ) | ( | ) | ||||||||||||||||||||
| Share of losses from equity method investments | ||||||||||||||||||||||||
| Executive separation costs (1) | ||||||||||||||||||||||||
| Acquisition costs (2) | ||||||||||||||||||||||||
| Segment Adjusted EBITDA | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
SixMonths Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
Sanara Surgical | THP(3) | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Adjustments: | ||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Noncash share-based compensation | ||||||||||||||||||||||||
| Change in fair value of earnout liabilities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Share of losses from equity method investments | ||||||||||||||||||||||||
| (Gain) loss on disposal of property and equipment | ( | ) | ( | ) | ||||||||||||||||||||
| Interest income | ( | ) | ( | ) | ||||||||||||||||||||
| Executive separation costs (1) | ||||||||||||||||||||||||
| Acquisition costs (2) | ||||||||||||||||||||||||
| Segment Adjusted EBITDA | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| (1) | Includes $ and $ of share-based compensation related to executive separation costs for the three and six months ended June 30, 2025 and 2024, respectively. | |
| (2) | Acquisition costs include legal, tax, accounting and other contract services related to prospective acquisitions. | |
| (3) |
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ITEM2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thefollowing discussion and analysis of the financial condition and results of operations of Sanara MedTech Inc. (together with its whollyowned or majority-owned subsidiaries on a consolidated basis, the “Company,” “Sanara MedTech,” “Sanara,”“our,” “us,” or “we”) should be read in conjunction with the “Management’s Discussionand Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and relatednotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 and with the unaudited consolidated financialstatements and related notes thereto presented in this Quarterly Report on Form 10-Q.
CAUTIONARYSTATEMENT REGARDING FORWARD-LOOKING STATEMENTS
ThisQuarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-lookingstatements generally relate to future events or our future financial or operating performance, including topics such as our value-basedwound and skin services and Tissue Health Plus (“THP”) platforms. In some cases, you can identify forward-looking statementsbecause they contain words such as “aims,” “anticipates,” “believes,” “contemplates,”“continue,” “could,” “estimates,” “expects,” “forecast,” “guidance,”“intends,” “may,” “plans,” “possible,” “potential,” “predicts,”“preliminary,” “projects,” “seeks,” “should,” “target,” “will”or “would” or the negative of these words, variations of these words or other similar terms or expressions that concern ourexpectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptionsrelating to factors that could cause actual results to differ materially from those anticipated in such statements, including, withoutlimitation, the following:
| ● | shortfalls in forecasted revenue growth; |
| ● | our ability to implement our value-based wound and skin strategy through acquisitions and investments and our ability to realize the anticipated benefits of such acquisitions and investments; |
| ● | our ability to meet our future capital requirements; |
| ● | our ability to maintain compliance with our debt obligations; |
| ● | our ability to develop and commercialize new products and products under development, including the manufacturing, distribution, marketing and sale of such products; |
| ● | our ability to retain and recruit key personnel; |
| ● | the intense competition in the markets in which we operate and our ability to compete within our markets; |
| ● | the failure of our products to obtain market acceptance; |
| ● | the effect of security breaches and other disruptions; |
| ● | our ability to maintain effective internal controls over financial reporting; |
| ● | our ability to maintain and further grow clinical acceptance and adoption of our products; |
| ● | the impact of competitors inventing products that are superior to ours; |
| ● | disruptions of, or changes in, our distribution model, consumer base or the supply of our products; |
| ● | the failure of third-party assessments to demonstrate desired outcomes in proposed endpoints; |
| ● | our ability to successfully expand into value-based wound, skin and other services; |
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| ● | our ability and the ability of our research and development partners to protect the proprietary rights to technologies used in certain of our products and the impact of any claim that we have infringed on intellectual property rights of others; |
| ● | our dependence on technologies and products that we license from third parties; |
| ● | the effects of current and future laws, rules, regulations and reimbursement policies relating to the labeling, marketing and sale of our products, and our planned launch of value-based wound, skin and other services and our ability to comply with the various laws, rules and regulations applicable to our business; and |
| ● | the effect of defects, failures or quality issues associated with our products. |
Fora more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differmaterially from those anticipated in forward-looking statements, see “Risk Factors” in Part I, Item 1A of our Annual Reporton Form 10-K for the year ended December 31, 2024, and Part II, Item 1A “Risk Factors” and elsewhere in this Quarterly Reporton Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and we do not assume any obligation to updatethese forward-looking statements, except to the extent required by applicable securities laws.
OVERVIEW
Weare a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes andreduce healthcare expenditures in the surgical, chronic wound and skin markets. Our products, services and technologies are designedto achieve our goal of providing better clinical outcomes at a lower overall cost for patients regardless of where they receive care.Through our two operating segments, Sanara Surgical and THP, we strive to be one of the most innovative and comprehensive providers ofeffective surgical, wound and skin solutions and are continually seeking to expand our offerings for patients requiring treatments acrossthe entire continuum of care in the United States.
Changein Reportable Segments
Historically,we managed our business on the basis of one operating and reportable segment. During the second quarter of 2024, we changed our reportablesegments to reflect a change in the way the business is managed. Based on the growing importance of the value-based wound care programto our future outlook and how our chief operating decision maker (“CODM”), the Chief Executive Officer, reviews operatingresults and makes decisions about resource allocation, we have two reportable segments: Sanara Surgical and THP.
SanaraSurgical
OurSanara Surgical segment primarily markets and sells soft tissue repair and bone fusion products for use in the operating room or othersterile environments. Sanara Surgical’s soft tissue repair products include, among other products, our lead product, CellerateRXSurgical Activated Collagen (“CellerateRX Surgical”), a hydrolyzed collagen that aids in the management of surgicalwounds, and BIASURGE Advanced Surgical Solution (“BIASURGE”), a sterile no-rinse,advanced surgical solution used for wound irrigation. Sanara Surgical’s bone fusion products include, among other products, BiFORMBioactive Moldable Matrix (“BiFORM”), an osteoconductive, bioactive, porous implant that allows for bony ingrowth acrossthe graft site, and ALLOCYTE Plus Advanced Viable Bone Matrix (“ALLOCYTE Plus”), a human allograft cellular bone matrix containingbone-derived progenitor cells and conformable bone fibers.
OurSanara Surgical segment also includes an in-house research and development team, Rochal Technologies, with an extensive pipeline of innovativeproducts under development.
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TissueHealth Plus
Ourvalue-based care segment, THP, is focused on value-based wound care services. Through THP, we plan to offer a first of its kind value-basedwound care program to payers and risk-bearing entities such as accountable care organizations and value-based primary care companies.
THP’sprograms are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient qualityof life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community-based care spansa variety of settings, including physician offices, skilled nursing facilities, assisted living facilities and senior living facilities.THP programs are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment.
Summaryof Our Product, Service and Technology Offerings and Development Programs
SanaraSurgical Products
OurSanara Surgical segment markets and distributes surgical, wound and skin products to physicians, hospitals, clinics, and post-acute caresettings. Our products are primarily sold in the U.S. surgical tissue repair and advanced wound care markets. We believe that we havethe ability to drive our product pipeline from concept to preclinical and clinical development while meeting quality and regulatory requirements.We are constantly seeking long-term strategic partnerships with a focus on products that improve outcomes at a lower overall cost.
CellerateRXSurgical
CellerateRXSurgical is a Type I bovine hydrolyzed collagen indicated for the management of surgical, traumatic, and partial and full-thickness woundsas well as first- and second-degree burns. It is manufactured with a proprietary process. CellerateRX Surgical powder is sterilized,packaged and designed specifically for use in the operating room. CellerateRX Surgical products are primarily purchased by hospitalsand ambulatory surgical centers for use by surgeons to treat surgical wounds. The majority of CellerateRX Surgical products are usedfor a variety of surgical wounds, including those associated with orthopedic, spine, and trauma procedures. Additional surgical woundsthat often benefit from the use of CellerateRX Surgical include general, vascular, plastic/reconstructive, cardiovascular, gynecologic,and urologic related procedures.
CellerateRXSurgical is used in operative cases where patients might have trouble healing normally due to underlying health complications. Thereis always a risk of complication with surgical wounds. This is especially true in patients with certain comorbidities, including obesity,diabetes and hypertension. These complications can include surgical wound infections, dehiscence (where an incision opens after primaryclosure) and necrosis. Surgeons use CellerateRX Surgical to complement the body’s normal healing process. By supporting the bodyto heal normally without complications, improved patient outcomes are achieved, thereby reducing downstream costs related to complications(such as re-operation, longer hospitalization, re-admittance, extended rehabilitative care and other additional treatments). Surgicalwound complications have become increasingly problematic due to the high rates of surgical patient comorbidities and the financial strainon insurance payors as well as hospitals who suffer exorbitant costs for readmission of these patients within 90 days of surgery.
BIASURGE
BIASURGEis a 510(k) cleared sterile no-rinse, advanced surgical solution used for wound irrigation. It contains an antimicrobial preservativeeffective against a broad spectrum of pathogenic microorganisms in the solution. BIASURGE is indicated for use in the mechanical cleansingand removal of debris, including microorganisms, from surgical wounds.
FORTIFYTRG
FORTIFYTRG Tissue Repair Graft (“FORTIFY TRG”) is a freeze-dried, multi-layer small intestinal submucosa extracellular matrix sheet.The graft is 510(k) cleared for implantation to reinforce soft tissue, is terminally sterilized, has a thin profile, is available inmultiple sizes, and can be cut to size to accommodate the patient’s anatomy. FORTIFY TRG is provided sterile and can be hydratedwith autologous blood fluid.
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FORTIFYFLOWABLE
FORTIFYFLOWABLE Extracellular Matrix (“FORTIFY FLOWABLE”) is an advanced wound care device that presents small intestine submucosaextracellular matrix technology in a way that can fill irregular wound shapes and depths. FORTIFY FLOWABLE is indicated for the managementof wounds, including partial and full-thickness wounds, pressure ulcers, venous leg ulcers, diabetic foot ulcers, chronic vascular ulcers,tunneled/undermined wounds, surgical wounds (donor sites/grafts, post-Mohs surgery, post-laser surgery, podiatric, wound dehiscence sites),traumatic wounds (abrasions, lacerations, second-degree burns, and skin tears) and draining wounds. FORTIFY FLOWABLE is provided sterileand is intended for one-time use. It is a 510(k) cleared product.
OtherSurgical Products
TEXAGENAmniotic Membrane Allograft is a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that canbe sutured for securement if needed. BiFORM is an osteoconductive, bioactive, porous implant that allows for bony ingrowth across thegraft site. It can be hydrated and used as a strip or molded into a putty to fill a bone defect. ACTIGEN Verified Inductive Bone Matrixis a naturally derived, differentiated allograft matrix with robust handling properties. ALLOCYTE Plus is a human allograft cellularbone matrices containing bone-derived progenitor cells and conformable bone fibers. These viable cellular allografts are ready to useupon thawing and have fibrous handling properties.
TissueHealth Plus Services and Technology
InJune 2020, we formed a subsidiary, United Wound and Skin Solutions, LLC (formerly known as “WounDerm”), to hold certain investmentsand operations in wound and skin virtual consult services. In 2024, United Wound and Skin Solutions, LLC was renamed to Tissue HealthPlus, LLC. THP is continuing its current mission to simplify skin health, starting with value-based wound care through a refined businessplan. Through THP, we plan to offer a first of its kind value-based wound care program to payers and risk-bearing entities such as accountablecare organizations and value-based primary care companies. We launched the first THP pilot program with a wound care provider group duringthe second quarter of 2025.
Weanticipate that THP’s customer contracts will have three-to-five-year terms. These contracts are expected to incorporate a mixof value-based pricing methodologies including episodic, “per member per month,” and “fee for value” pricing.We believe this approach is aligned with the financial goals of the payers and will help deliver outstanding clinical outcomes for thepatients.
Ourvision for our comprehensive approach consists of three key sets of planned capabilities:
| (a) | Care Hub – This virtual patient monitoring, care coordination and navigation center is expected to help doctors and nurses support their patients throughout their wound care journey, from prevention to treatment. We expect to have Care Hub staffed by wound care certified nurse practitioners (“NPs”) and registered nurses (“RNs”), incorporating care delivery best practices from partnerships with certain physician-led multispecialty wound care groups. With NPs leading Care Hub, RNs are expected to be the wound specialists, providing patients with expert review and support of the overarching plan of care on each patient’s journey through the process. In addition, care navigators are expected to serve as a primary point of contact for patients and their providers, coordinating care, managing appointments and ensuring seamless communication among all team members. | |
| (b) | Managed Services Organization (“MSO”) Network – With respect to patient-side wound care, our plan is that THP’s programs would be performed by a network of third-party providers who will be contracted through managed services agreements. These providers would include podiatrists, wound care provider groups, primary care physicians, and home health agencies. The providers in the THP network are expected to leverage THP’s standard of care, patient education and tools to deliver optimal patient outcomes with high predictability and efficiency. |
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| (c) | Technology Platform – THP’s technology platform will focus on scaling workflows of THP’s Care Hub and MSO Network through automation and integration. We expect the THP technology platform to enable enhanced patient empowerment and self-healthcare. We anticipate that our platform will leverage our technology investments and partnerships with Precision Healing Inc. (“Precision Healing”), Pixalere Healthcare, Inc. (“Pixalere”), CarePICS, LLC (“CarePICS”) and others, by leveraging modern technology including artificial intelligence and machine learning. Our platform technology is expected to manage program economics, standards of care, patient monitoring, wound assessments, network performance monitoring, and revenue cycle management. We expect that each of these components will work in concert with each other, constantly improving economics and care delivery. |
We have initiated a formal process to evaluate a full range of strategic alternatives for THP, with a focus on identifying and pursuingthe best path forward to maximize value for our company and its shareholders.
SIHealthcare Technologies Strategic Alliance
InNovember 2022, we established a 50/50 strategic alliance, SI Healthcare Technologies, LLC (“SI Technologies”) (formerly knownas SI Wound Care, LLC), with InfuSystem Holdings, Inc. (“InfuSystem”) focused on delivering a complete wound care solutiontargeted at improving patient outcomes, lowering the cost of care, and increasing patient and provider satisfaction. The partnershipis expected to enable InfuSystem to offer innovative products, including our advanced wound care product line and Chemo Mouthpiece, a510(k) cleared oral cryotherapy device that SI Technologies currently has the right to distribute and sell in the United States.
TuftsUniversity License Agreement
InDecember 2023, we signed an exclusive license agreement with Tufts University (“Tufts”) to develop and commercialize patentedtechnology covering 18 unique collagen peptides. As part of this agreement, we formed a new subsidiary, Sanara Collagen Peptides, LLC(“SCP”), and issued 10% of SCP’s outstanding units to Tufts. SCP has exclusive rights to develop and commercializenew products based on the licensed patents and patents pending. SCP will pay royalties to Tufts based on net sales of licensed productsand technologies. Pursuant to the exclusive license agreement, royalties will be calculated at a rate of 1.5% or 3%, depending on thetype of product or technology developed. SCP will pay Tufts a minimum annual royalty of $50,000 on January 1 of the year following thefirst anniversary of the first commercial sale of the licensed products or technologies. SCP will pay Tufts a $100,000 minimum annualroyalty on January 1 of each subsequent year during the royalty term specified in the exclusive license agreement.
RECENTDEVELOPMENTS
CRGTerm Loan Amendment and Third Borrowing
OnApril 17, 2024 (the “Closing Date”), we, as borrower, entered into a Term Loan Agreement (the “CRG Term Loan Agreement”)with the subsidiary guarantors party thereto from time to time (collectively, the “Guarantors”), CRG Servicing LLC as administrativeagent and collateral agent (the “Agent”), and the lenders party thereto from time to time, providing for a senior securedterm loan of up to $55.0 million (the “CRG Term Loan”). In April 2024, our first borrowing (the “First Borrowing”)under the CRG Term Loan of $15.0 million was used to repay our then-existing loan with Cadence Bank (the “Cadence Term Loan”)and to pay fees and expenses related to the CRG Term Loan Agreement. In September 2024, we borrowed an additional $15.5 million underthe CRG Term Loan (the “Second Borrowing”), a portion of the proceeds of which were used for the investment in ChemoMouthpiece,LLC (“CMp”). On March 19, 2025, we and the Guarantors entered into the First Amendment to Term Loan Agreement with theAgent and the lenders party thereto from time to time (the “CRG Amendment”) to, among other things (i) entitle us to up totwo additional borrowings following the Second Borrowing under the CRG Term Loan, which must occur on or prior to December 31, 2025,if at all, and (ii) remove the requirement that any borrowing be in whole multiples of $5.0 million. On March 31, 2025, we borrowed anadditional $12.25 million under the CRG Term Loan Agreement (the “Third Borrowing”). The First Borrowing, the Second Borrowingand the Third Borrowing each have a maturity date of May 30, 2029 (the “Maturity Date”), unless earlier prepaid. Pursuantto the CRG Term Loan Agreement, prior to December 31, 2025 and, subject to the satisfaction of certain conditions, we have the rightto draw down a fourth borrowing of up to $12.25 million. The Company used a portion of the proceeds from the Third Borrowing for permittedacquisition opportunities, such as the CarePICS Acquisition (defined below) in April 2025, and for general working capital and corporatepurposes.
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BMIInvestment
OnJanuary 16, 2025, we entered into a Licensing and Distribution Agreement (the “BMI License Agreement”) with Biomimetic InnovationLimited, a privately-held medical device company headquartered in Shannon, Co. Clare Ireland (“BMI”), pursuant to which weacquired the exclusive U.S. marketing, sales and distribution rights to OsStic Synthetic Injectable Structural Bio-Adhesive Bone VoidFiller (“OsStic”), as well as an adjunctive internal fixation technology featuring novel delivery to promote targeted applicationof OsStic (“ARC” and together with OsStic, the “BMI Products”), for use in the treatment of a wound or injurycaused by a traumatic incident. Pursuant to the BMI License Agreement, we were appointed by BMI as the exclusive distributor to promote,market, offer to sell, transfer, distribute and sell the BMI Products for trauma indications inside the United States and its territoriesfor an initial five-year term, which term may be automatically renewed for successive two-year periods at our discretion, provided thatwe are in compliance with our obligations thereunder (the “BMI Term”).
Inconnection with the BMI License Agreement, on January 16, 2025, we entered into a Share Subscription and Shareholders’ Agreement(the “Subscription Agreement”), pursuant to which we made an initial cash investment in BMI totaling approximately €3.0million. Upon our initial cash investment of €3.0 million and the conversion of our previously disclosed €1.0 million convertibleloan to BMI, we were issued 8,230 ordinary shares of BMI, constituting approximately 6.67% of the outstanding equity of BMI as of January16, 2025. Pursuant to the Subscription Agreement, we also agreed to contribute an additional €4.0 million to BMI through a seriesof capital contributions in exchange for 8,230 additional ordinary shares of BMI upon the achievement of certain development, clinical,and regulatory milestones expected to occur at various points during 2025 and 2026. As of June 30, 2025, BMI had achieved two of suchmilestones, and upon settlement, we paid BMI $2.4 million (€2.0 million) on July 1, 2025 in exchange for 4,116 additional ordinary shares of BMI, bringing our total ownership of BMI’s outstandingequity to approximately 9.678% as of July 1, 2025. For more informationregarding the BMI License Agreement and BMI Subscription Agreement, see the “Liquidity and Capital Resources” sectionbelow.
CarePICSAcquisition
OnApril 1, 2025 (the “CarePICS Closing Date”), we entered into a Unit Purchase Agreement (the “CarePICS PurchaseAgreement”), with THP, our wholly owned subsidiary (the “Purchaser”), CarePICS, LLC (“CarePICS”), theholders of CarePICS’s outstanding units (each, a “Seller” and collectively, the “Sellers”) and PaulSchubert, in his capacity as the representative of the Sellers, pursuant to which the Purchaser purchased all of the issued andoutstanding equity interests of CarePICS (the “Units”) from the Sellers (the “CarePICS Acquisition”). On theCarePICS Closing Date, the parties to the CarePICS Purchase Agreement completed the CarePICS Acquisition, and CarePICS became anindirect wholly owned subsidiary of the Company. Pursuant to the CarePICS Purchase Agreement, the cash consideration for theCarePICS Acquisition was $2.0 million, which included transaction expenses of the Sellers. On the CarePICS Closing Date, we alsopaid $1.65 million to satisfy certain existing indebtedness of CarePICS, which was assumed by us at the closing of the acquisition.The CarePICS Purchase Agreement also provides that the Sellers are entitled to receive potential earnout payments. For moreinformation regarding the CarePICS Acquisition, see the “Liquidity and Capital Resources” sectionbelow.
COMPONENTSOF RESULTS OF OPERATIONS
Sourcesof Revenue
Ourrevenue is derived primarily from sales of our soft tissue repair and bone fusion products to hospitals and other acute care facilities.In particular, the substantial majority of our product sales revenue is derived from sales of CellerateRX Surgical. Our revenue is drivenby direct orders shipped by us to our customers, and to a lesser extent, direct sales to customers through delivery at the time of procedureby one of our sales representatives. We generally recognize revenue when a purchase order is received from the customer and our productis received by the customer.
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Revenuestreams from product sales, software as a service (“SaaS”) and royalties for the three and six monthsended June 30, 2025 and 2024 are summarized below.
| Three Months Ended June 30, | SixMonths Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Soft tissue repair products | $ | 22,661,457 | $ | 17,641,318 | $ | 43,193,897 | $ | 33,723,610 | ||||||||
| Bone fusion products | 3,142,795 | 2,516,599 | 6,044,451 | 4,970,945 | ||||||||||||
| SaaS | 26,582 | - | 26,582 | - | ||||||||||||
| Royalties | - | 906 | - | 906 | ||||||||||||
| Total Net Revenue | $ | 25,830,834 | $ | 20,158,823 | $ | 49,264,930 | $ | 38,695,461 | ||||||||
Forthe three and six months ended June 30, 2025 and 2024, revenue from soft tissue repair products, bone fusion products and royalties wasgenerated from the Sanara Surgical segment. We launched the first THP pilot program with a wound care provider group during the secondquarter of 2025; however, the pilot program is in its early stages and has not generated any revenue to date. For the three and six monthsended June 30, 2025, the SaaS revenue shown was generated from the THP segment and relates to contracts acquired in theCarePICS Acquisition.
Costof Goods Sold
Costof goods sold consists primarily of the acquisition costs from the manufacturers of our licensed products, raw material costs for certaincomponents sourced directly by us, and all related royalties due as a result of the sale of our products. Our gross profit representstotal net revenue less the cost of goods sold, and gross margin represents gross profit expressed as a percentage of total revenue.
OperatingExpenses
Selling,general and administrative (“SG&A”) consists primarily of salaries, sales commissions, benefits, bonuses and share-basedcompensation. SG&A also includes outside legal counsel fees, audit fees, insurance premiums, rent and other corporate expenses. Weexpense all SG&A as incurred.
Researchand development (“R&D”) includes costs related to enhancements to our currently available products and additional investmentsin our product, services and technologies development pipeline. This includes personnel-related expenses, including salaries, share-basedcompensation and benefits for all personnel directly engaged in R&D activities, contracted services, materials, prototype expensesand allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities related costs. We expenseR&D costs as incurred. We generally expect that R&D will increase as we continue to support product enhancements and to bringnew products to market.
Depreciationand amortization includes depreciation of fixed assets and amortization of intangible assets that have a finite life, such as productlicenses, patents and intellectual property, customer relationships and assembled workforces.
Changein fair value of earnout liabilities represents our measurement of the change in fair value at the balance sheet date of our earnoutliabilities that were established at the time of our Precision Healing merger and acquisition of Scendia Biologics, LLC (“Scendia”).
OtherIncome (Expense)
Otherincome (expense) is primarily comprised of interest expense and other nonoperating activities.
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RESULTSOF OPERATIONS
Thefollowing table presents certain information about the results and Segment Adjusted EBITDA (as described below) of our reportable businesssegments. See Note 12, Segment Reporting, in Part I, Item 1 of this report for more information on our reportable business segments:
Three Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net revenue | $ | 25,804,252 | $ | 26,582 | $ | 25,830,834 | $ | 20,158,823 | $ | - | $ | 20,158,823 | ||||||||||||
| Cost of goods sold | 1,937,282 | - | 1,937,282 | 2,008,686 | - | 2,008,686 | ||||||||||||||||||
| Selling, general and administrative | 19,634,319 | 1,918,875 | 21,553,194 | 18,349,924 | 607,684 | 18,957,608 | ||||||||||||||||||
| Research and development | 1,056,796 | 200,679 | 1,257,475 | 582,443 | 403,208 | 985,651 | ||||||||||||||||||
| Depreciation and amortization | 681,525 | 432,706 | 1,114,231 | 698,407 | 407,100 | 1,105,507 | ||||||||||||||||||
| Change in fair value of earnout liabilities | - | - | - | 89,330 | (103,103 | ) | (13,773 | ) | ||||||||||||||||
| Other expense (1) | 1,987,050 | - | 1,987,050 | 644,346 | - | 644,346 | ||||||||||||||||||
| Net income (loss) | $ | 507,280 | $ | (2,525,678 | ) | $ | (2,018,398 | ) | $ | (2,214,313 | ) | $ | (1,314,889 | ) | $ | (3,529,202 | ) | |||||||
| Segment Adjusted EBITDA | $ | 4,719,827 | $ | (2,054,987 | ) | $ | 2,664,840 | $ | 1,393,959 | $ | (801,778 | ) | $ | 592,181 | ||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net revenue | $ | 49,238,348 | $ | 26,582 | $ | 49,264,930 | $ | 38,695,461 | $ | - | $ | 38,695,461 | ||||||||||||
| Cost of goods sold | 3,772,249 | - | 3,772,249 | 3,898,732 | - | 3,898,732 | ||||||||||||||||||
| Selling, general and administrative (2) | 38,763,527 | 4,230,277 | 42,993,804 | 34,032,964 | 1,116,903 | 35,149,867 | ||||||||||||||||||
| Research and development | 2,007,155 | 364,458 | 2,371,613 | 1,161,424 | 770,525 | 1,931,949 | ||||||||||||||||||
| Depreciation and amortization | 1,370,096 | 868,545 | 2,238,641 | 1,396,908 | 814,019 | 2,210,927 | ||||||||||||||||||
| Change in fair value of earnout liabilities | - | - | - | (14,451 | ) | (65,000 | ) | (79,451 | ) | |||||||||||||||
| Other expense (1) | 3,433,146 | 1,258 | 3,434,404 | 911,682 | - | 911,682 | ||||||||||||||||||
| Net loss | $ | (107,825 | ) | $ | (5,437,956 | ) | $ | (5,545,781 | ) | $ | (2,691,798 | ) | $ | (2,636,447 | ) | $ | (5,328,245 | ) | ||||||
| Segment Adjusted EBITDA | $ | 7,414,885 | $ | (4,092,077 | ) | $ | 3,322,808 | $ | 2,532,145 | $ | (1,628,543 | ) | $ | 903,602 | ||||||||||
| (1) For the three months ended June 30, 2025, other expense included interest expense and share of losses from equity method investments. For the three months ended June 30, 2024, other expense included interest expense. For the six months ended June 30, 2025, other expense included interest expense and share of losses from equity method investments, offset by interest income and gain on disposal of property and equipment. For the six months ended June 30, 2024, other expense included interest expense. | |
| (2) For the six months ended June 30, 2024, $90,293 of selling, general and administrative expenses were reclassified from the Sanara Surgical segment to the THP segment. |
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NetRevenue. For the three months ended June 30, 2025, we generated net revenue of $25.8 million compared to net revenue of $20.2million for the three months ended June 30, 2024, a 28% increase over the prior year period. For the six months ended June 30, 2025,we generated net revenue of $49.3 million compared to net revenue of $38.7 million for the six months ended June 30, 2024, a 27% increaseover the prior year period. The higher net revenue in the three and six months ended June 30, 2025 was primarily due to increased salesof soft tissue repair products, including CellerateRX Surgical and BIASURGE, and certain bone fusion products as a result of our increasedmarket penetration, geographic expansion and our continuing strategy to expand our independent distribution network in both new and existingU.S. markets.
Costof Goods Sold. Cost of goods sold for the three months ended June 30, 2025 was $1.9 million compared to cost of goods sold of$2.0 million for the three months ended June 30, 2024. Cost of goods sold for the six months ended June 30, 2025 was $3.8 million comparedto cost of goods sold of $3.9 million for the six months ended June 30, 2024. The higher gross margins realized in the three and sixmonths ended June 30, 2025 were due to increased sales of soft tissue repair products and lower manufacturing costs related to CellerateRXSurgical.
GrossProfit. On a consolidated basis, we generated gross profit of $23.9 million for the three months ended June 30, 2025 comparedto gross profit of $18.2 million for the three months ended June 30, 2024, a 32% increase over the prior year period. We generatedgross profit of $45.5 million for the six months ended June 30, 2025 compared to gross profit of $34.8 million for the six months endedJune 30, 2024, a 31% increase over the prior year period. The higher gross profit in the three and six months ended June 30, 2025 wasprimarily due to increased sales of soft tissue repair products, particularly CellerateRX Surgical and BIASURGE, as a result of our increasedmarket penetration and geographic expansion, and our continuing strategy to expand our independent distribution network in both new andexisting U.S. markets.
Selling,general and administrative. SG&A for the three months ended June 30, 2025 was $21.6 million compared to SG&A of $19.0million for the three months ended June 30, 2024. SG&A for the six months ended June 30, 2025 was $43.0 million compared to SG&Aof $35.1 million for the six months ended June 30, 2024. The higher SG&A in the three months ended June 30, 2025 was primarily dueto increased direct sales and marketing expenses, which accounted for approximately $1.5 million of the increase, offset by $0.2 million of lower costs in our Sanara Surgical segment, and approximately $1.3 million of additional SG&A in our THP segment, compared to the prior year period. The higher SG&A in the six months ended June 30,2025 was primarily due to increased direct sales and marketing expenses, which accounted for approximately $3.7 million of the increase, approximately $3.1 million of additional SG&A in our THP segment, and approximately $0.7 millionrelated to the buildout of our corporate infrastructure, compared to the prior year period.
Researchand development. R&D for the three months ended June 30, 2025 was $1.3 million compared to R&D of $1.0 million for thethree months ended June 30, 2024. R&D for the six months ended June 30, 2025 was $2.4 million compared to R&D of $1.9 millionfor the six months ended June 30, 2024. Beginning in the first quarter of 2025, we began capitalizing certain development costs relatedto the buildout of our THP technology platform. During the three and six months ended June 30, 2025, we capitalized approximately $1.7million and $3.4 million, respectively, of such development costs as property, plant and equipment.
Depreciationand amortization. Depreciation and amortization for the three months ended June 30, 2025 was $1.1 million compared to depreciationand amortization of $1.1 million for the three months ended June 30, 2024. Depreciation and amortization for the six months ended June30, 2025 was $2.2 million compared to depreciation and amortization of $2.2 million for the six months ended June 30, 2024.
Changein fair value of earnout liabilities. Change in fair value of earnout liabilities was zero for the three months ended June 30,2025 compared to a benefit of $13,773 for the three months ended June 30, 2024. Change in fair value of earnout liabilities was zerofor the six months ended June 30, 2025 compared to a benefit of $79,451 for the six months ended June 30, 2024. The benefit recognizedin the three and six months ended June 30, 2024 was due to a decrease in the estimated fair value of earnout liabilities associated withthe Precision Healing merger.
Otherexpense. Other expense for the three months ended June 30, 2025 was $2.0 million compared to $0.6 million for the three monthsended June 30, 2024. Other expense for the three months ended June 30, 2025 primarily included higher interest expense and fees relatedto the CRG Term Loan. Other expense for the six months ended June 30, 2025 was $3.4 million compared to $0.9 million for the six monthsended June 30, 2024. Other expense for the six months ended June 30, 2025 primarily included higher interest expense and fees relatedto the CRG Term Loan.
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Netloss. For the three months ended June 30, 2025, we had a net loss of $2.0 million, compared to a net loss of $3.5 million forthe three months ended June 30, 2024. Our net loss included $2.5 million and $1.3 million related to our THP segment for the three monthsended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025, we had a net loss of $5.5 million, compared to anet loss of $5.3 million for the six months ended June 30, 2024. Our net loss included $5.4 million and $2.6 million related to our THPsegment for the six months ended June 30, 2025 and 2024, respectively. The higher net loss for the six months ended June 30, 2025 wasprimarily due to higher costs related to the buildout of our THP platform and infrastructure and increased interest expense related tothe CRG Term Loan, partially offset by higher gross profit.
SegmentAdjusted EBITDA. Segment Adjusted EBITDA is the primary profitability measure used by the CODM for purposes of assessing financialperformance and resource allocation. We define Segment Adjusted EBITDA for the reportable segments as net income (loss) excluding interestexpense/income, provision/benefit for income taxes, depreciation and amortization, non-cash share-based compensation expense, changein fair value of earnout liabilities, share of losses from equity method investments, executive separation costs, legal and diligenceexpenses related to acquisitions, and gains/losses on the disposal of property and equipment, as each are applicable to the periods presented.Segment Adjusted EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss), cashflow and other measures of financial performance reported in accordance with GAAP.
Webelieve Segment Adjusted EBITDA is useful to investors because it facilitates comparisons of our core business operations across periodson a consistent basis. Accordingly, we adjust for certain items, such as change in fair value of earnout liabilities, when calculatingSegment Adjusted EBITDA because we believe that such items are not related to our core business operations. We do not, nor do we suggestthat investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information preparedin accordance with GAAP. Material limitations associated with the use of such measures include that they do not reflect all costs includedin operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, these non-GAAPfinancial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances.We present these non-GAAP financial measures to provide investors with information to evaluate our operating results in a manner similarto how management evaluates business performance. To compensate for any limitations in such non-GAAP financial measures, management believesthat it is useful in understanding and analyzing the results of the business to review both GAAP information and the related non-GAAPfinancial measures.
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Thefollowing table provides a reconciliation of net income (loss) to Segment Adjusted EBITDA for our business segments for the periods indicatedbelow:
ThreeMonths Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP (3) | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net Income (Loss) | $ | 507,280 | $ | (2,525,678 | ) | $ | (2,018,398 | ) | $ | (2,214,313 | ) | $ | (1,314,889 | ) | $ | (3,529,202 | ) | |||||||
| Adjustments: | ||||||||||||||||||||||||
| Interest expense | 1,791,568 | - | 1,791,568 | 644,346 | - | 644,346 | ||||||||||||||||||
| Depreciation and amortization | 681,525 | 432,706 | 1,114,231 | 698,407 | 407,100 | 1,105,507 | ||||||||||||||||||
| Noncash share-based compensation | 1,278,871 | 26,394 | 1,305,265 | 1,046,321 | 36,429 | 1,082,750 | ||||||||||||||||||
| Change in fair value of earnout liabilities | - | - | - | 89,330 | (103,103 | ) | (13,773 | ) | ||||||||||||||||
| Share of losses from equity method investments | 195,482 | - | 195,482 | - | - | - | ||||||||||||||||||
| Executive separation costs (1) | 260,275 | - | 260,275 | 904,780 | - | 904,780 | ||||||||||||||||||
| Acquisition costs (2) | 4,826 | 11,591 | 16,417 | 225,088 | 172,685 | 397,773 | ||||||||||||||||||
| Segment Adjusted EBITDA | $ | 4,719,827 | $ | (2,054,987 | ) | $ | 2,664,840 | $ | 1,393,959 | $ | (801,778 | ) | $ | 592,181 | ||||||||||
SixMonths Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Sanara Surgical | THP(3) | Total | Sanara Surgical | THP | Total | |||||||||||||||||||
| Net Loss | $ | (107,825 | ) | $ | (5,437,956 | ) | $ | (5,545,781 | ) | $ | (2,691,798 | ) | $ | (2,636,447 | ) | $ | (5,328,245 | ) | ||||||
| Adjustments: | ||||||||||||||||||||||||
| Interest expense | 3,108,660 | - | 3,108,660 | 911,682 | - | 911,682 | ||||||||||||||||||
| Depreciation and amortization | 1,370,096 | 868,545 | 2,238,641 | 1,396,908 | 814,019 | 2,210,927 | ||||||||||||||||||
| Noncash share-based compensation | 2,454,367 | 155,802 | 2,610,169 | 1,799,936 | 86,200 | 1,886,136 | ||||||||||||||||||
| Change in fair value of earnout liabilities | - | - | - | (14,451 | ) | (65,000 | ) | (79,451 | ) | |||||||||||||||
| Share of losses from equity method investments | 339,090 | - | 339,090 | - | - | - | ||||||||||||||||||
| (Gain) loss on disposal of property and equipment | (10,932 | ) | 1,258 | (9,674 | ) | - | - | - | ||||||||||||||||
| Interest income | (3,672 | ) | - | (3,672 | ) | - | - | - | ||||||||||||||||
| Executive separation costs (1) | 260,275 | - | 260,275 | 904,780 | - | 904,780 | ||||||||||||||||||
| Acquisition costs (2) | 4,826 | 320,274 | 325,100 | 225,088 | 172,685 | 397,773 | ||||||||||||||||||
| Segment Adjusted EBITDA | $ | 7,414,885 | $ | (4,092,077 | ) | $ | 3,322,808 | $ | 2,532,145 | $ | (1,628,543 | ) | $ | 903,602 | ||||||||||
(1)Includes $130,174 and $328,795 of share-based compensation related to executive separation costs for the three and six months endedJune 30, 2025 and 2024, respectively.
(2) Acquisitioncosts include legal, tax, accounting and other contract services related to prospective acquisitions.
(3) The THP segment does not include $1.7 million and $3.4 million of internal use software costs capitalized during the three and sixmonths ended June 30, 2025, respectively.
Forthe three months ended June 30, 2025, our Segment Adjusted EBITDA was $2.7 million compared to $0.6 million for the three months endedJune 30, 2024. Our Segment Adjusted EBITDA included $(2.1) million and $(0.8) million related to our THP segment for the three monthsended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025, our Segment Adjusted EBITDA was $3.3 million comparedto $0.9 million for the six months ended June 30, 2024. Our Segment Adjusted EBITDA included $(4.1) million and $(1.6) million relatedto our THP segment for the six months ended June 30, 2025 and 2024, respectively. The higher Segment Adjusted EBITDA in 2025 was primarilydue to higher net revenue and gross profit related to the Sanara Surgical segment as discussed above, partially offset by higher costsrelated to the buildout of our THP platform.
LIQUIDITYAND CAPITAL RESOURCES
Cashon hand at June 30, 2025 was approximately $17.0 million, compared to $15.9 million at December 31, 2024. Historically, we have financedour operations primarily from borrowings under our credit facilities and the sale of equity securities. We expect to continue our investment in the THP strategy and project our cash investment during the second half of2025 to be between $5.5 and $6.5 million. We do not anticipate making material cash investments in THP after year-end.
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Weexpect our future needs for cash to include the funding of our additional investment in THP, potential acquisitions, certain milestonepayments related to our BMI investment, further development of our products, services and technologies pipeline, clinical studies, repaymentof debt as it becomes due and for general corporate purposes. We are continuing to pursue financial partners to invest in the executionof our THP strategy.
Ifwe seek to consummate acquisitions in the future, we expect to finance such acquisitions with cash on hand and/or the proceeds from equityor debt issuances. Based on our current plan of operations, we believe our cash on hand, when combined with expected cash flows fromoperations and available proceeds from the CRG Term Loan discussed herein, will be sufficient to fund organic growth and to meet ouranticipated operating expenses, BMI milestone payments and capital expenditures for at least the next 12 months. As of June 30, 2025,there was $12.25 million available for future borrowing under the CRG Term Loan.
AppliedAsset Purchase
OnAugust 1, 2023, we entered into an asset purchase agreement (the “Applied Purchase Agreement”) by and among the Company,Sanara MedTech Applied Technologies, LLC (“SMAT”), The Hymed Group Corporation and Applied Nutritionals, LLC (togetherwith The Hymed Group Corporation, the “Applied Sellers”), and Dr. George D. Petito (the “Owner”), pursuantto which SMAT acquired certain assets of the Applied Sellers and the Owner, including, among others, the Applied Sellers’ andOwner’s inventory, intellectual property, manufacturing and related equipment, goodwill, rights and claims, other than certainexcluded assets (the “Applied Purchased Assets”) and assumed certain Assumed Liabilities (as defined in the AppliedPurchase Agreement) upon the terms and subject to the conditions set forth in the Applied Purchase Agreement. The transaction closedon August 1, 2023. The Applied Purchased Assets were purchased for an initial aggregate purchase price of $15.25 million, consistingof (i) $9.75 million in cash (the “Cash Closing Consideration”), (ii) 73,809 shares of our common stock, with an agreedupon value of $3.0 million (the “Stock Closing Consideration”) and (iii) $2.5 million in cash, to be paid in four equalinstallments on each of the four anniversaries following the Closing (the “Installment Payments”). The first InstallmentPayment of $625,000 was made in August 2024 and the second Installment Payment of $625,000 was paid in August 2025.
Inaddition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreementprovides that the Applied Sellers are entitled to receive up to an additional $10.0 million (the “Applied Earnout”),which is payable to the Applied Sellers in cash, upon the achievement of certain performance thresholds relating to SMAT’scollections from net sales of a collagen-based product currently under development. Upon expiration of the seventh anniversary ofthe Closing, to the extent the Applied Sellers have not earned the entirety of the Applied Earnout, SMAT shall pay the AppliedSellers a pro-rata amount of the Applied Earnout based on collections from net sales of the product, with such amount to be duecredited against any Applied Earnout payments already made by SMAT (the “True-Up Payment”). The Applied Earnout, minusthe True-Up Payment and any Applied Earnout payments already made by SMAT, may be earned at any point in the future, including afterthe True-Up Payment is made.
CRGTerm Loan Agreement
OnApril 17, 2024, we entered into the CRG Term Loan Agreement by and among us, as borrower, the Guarantors, the Agent and the lenders partythereto from time to time, providing for a senior secured term loan of up to $55.0 million. On the Closing Date, the First Borrowingof $15.0 million was made to repay the Cadence Term Loan and to pay certain fees and expenses related to the CRG Loan Agreement. Theremaining proceeds of $4.5 million were distributed to us. As a result, the Cadence Term Loan agreement was terminated and all outstandingamounts under the Cadence Term Loan were repaid in full and all security interest and other liens granted to or held by Cadence Bankwere terminated and released.
OnSeptember 4, 2024, we borrowed an additional $15.5 million under the CRG Term Loan Agreement. We used $5.0 million of the proceedsof the Second Borrowing for the investment in CMp. Prior to the CRG Amendment, pursuant to the CRG Term Loan Agreement, we wereentitled to one additional borrowing, which was required to occur on or prior to June 30, 2025 and be at least $5.0 million or amultiple of $5.0 million. On March 19, 2025, we entered into the CRG Amendment, which amended the CRG Term Loan Agreement to, amongother things, (i) entitle us to two additional borrowings following the Second Borrowing, which borrowings must occur on or prior toDecember 31, 2025, if at all, and (ii) remove the requirement that any borrowing be in whole multiples of $5.0 million. The totalavailable borrowing amount under the facility and the related interest rate and fees were not modified. Any additional borrowingsunder the CRG Term Loan will be subject to the satisfaction of certain conditions, including the Agent having received certainfees.
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OnMarch 31, 2025, we borrowed an additional $12.25 million under the CRG Term Loan Agreement. The First Borrowing, the Second Borrowingand the Third Borrowing each have a maturity date of March 30, 2029, unless earlier prepaid. Pursuant to the CRG Term Loan Agreement,prior to December 31, 2025 and subject to the satisfaction of certain conditions, we have the right to draw down a fourth borrowing ofup to $12.25 million. We used a portion of the proceeds from the Third Borrowing for permitted acquisition opportunities, suchas the CarePICS Acquisition in April 2025, and for general working capital and corporate purposes.
TheCRG Term Loan bears interest at a per annum rate equal to 13.25% (subject to a 4.0% increase during an event of default), of which 8.00%must be paid in cash and 5.25% may, at our election, be deferred through the 19th quarterly Payment Date (defined below) byadding such amount to the aggregate principal loan amount, so long as no default or event of default under the CRG Term Loan Agreementhas occurred and is continuing. We are required to make quarterly interest payments on the final business day of each calendar quarterfollowing the Closing Date, commencing on the first such date to occur at least 30 days after the Closing Date (each, a “PaymentDate”). Interest is payable on each Payment Date in arrears with respect to the time between each Payment Date and upon the paymentor prepayment of the CRG Term Loan, ending on the Maturity Date. In addition, we are required to pay an upfront fee of 1.50% of the principalamount of the CRG Term Loan, which is payable as amounts are advanced under the CRG Term Loan on a pro rata basis. We are also requiredto pay a back-end fee equal to 7.00% of the aggregate principal amount advanced under the CRG Term Loan Agreement. We paid upfront feesof $225,000 on the Closing Date related to the First Borrowing, $232,500 of upfront fees on September 4, 2024 related to the Second Borrowingand $183,750 of upfront fees on March 31, 2025 related to the Third Borrowing. As of June 30, 2025, there was $42.8 million of principaloutstanding and $12.25 million available for future borrowing under the CRG Term Loan.
Subjectto certain exceptions, we are required to make mandatory prepayments of the CRG Term Loan with the proceeds of certain assets sales andin the event of a change of control of the Company. In addition, we may make voluntary prepayments of the CRG Term Loan, in whole orin part, at any time. All mandatory and voluntary prepayments of the CRG Term Loan are subject to the payment of prepayment premiumsas follows: (i) if prepayment occurs on or prior to the date that is one year following the applicable borrowing (the “BorrowingDate”), an amount equal to 10.0% of the aggregate outstanding principal amount of the Loan being prepaid and (ii) if prepaymentoccurs one year after the applicable Borrowing Date and on or prior to two years following the applicable Borrowing Date, an amount equalto 5.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid. No prepayment premium is due on any principalprepaid if prepayment occurs two years or more after the applicable Borrowing Date.
Certainof our current and future subsidiaries, including the Guarantors, guarantee our obligations under the CRG Term Loan Agreement. As securityfor our obligations under the CRG Term Loan Agreement, on the Closing Date, we and the Guarantors entered into a security agreement withthe Agent pursuant to which we and the Guarantors granted to the Agent, as collateral agent for the lenders, a lien on substantiallyall of our and the Guarantors’ assets, including intellectual property (subject to certain exceptions).
TheCRG Term Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on ourand the Guarantors’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investmentsand acquisitions above certain thresholds, merge or consolidate with others, dispose of assets, pay dividends and distributions and enterinto affiliate transactions, in each case, subject to certain exceptions. In addition, the CRG Term Loan Agreement contains the followingfinancial covenants requiring us and the Guarantors in the aggregate to maintain:
| ● | liquidity in an amount which shall exceed the greater of (i) $3.0 million and (ii) to the extent we have incurred certain permitted debt, the minimum cash balance, if any, required of us by the creditors of such permitted debt; and |
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| ● | annual minimum revenue of at least (i) $60.0 million for the twelve-month period beginning on January 1, 2024 and ending on December 31, 2024, (ii) $75.0 million for the twelve-month period beginning on January 1, 2025 and ending on December 31, 2025, (iii) $85.0 million for the twelve-month period beginning on January 1, 2026 and ending on December 31, 2026, (iv) $95.0 million for the twelve-month period beginning on January 1, 2027 and ending on December 31, 2027 and (v) $105.0 million during each twelve-month period beginning on January 1 of a given year thereafter. |
TheCRG Term Loan Agreement contains representations and warranties of the Company and the Guarantors customary for financings of this type,and also includes events of default customary for financings of this type, including, among other things, non-payment, inaccuracy ofrepresentations and warranties, covenant breaches, a material adverse change, bankruptcy and insolvency, material judgments and a changeof control, in certain cases subject to customary periods to cure. The occurrence and continuance of an event of default could resultin the acceleration of the obligations under the CRG Term Loan Agreement.
Asof June 30, 2025, we were in compliance with all debt covenants.
BMIInvestment
OnJanuary 16, 2025, we entered into the BMI License Agreement with BMI, pursuant to which we acquired the exclusive U.S. marketing, salesand distribution rights to OsStic, as well as ARC, for use in the treatment of a wound or injury caused by a traumatic incident.
Pursuantto the BMI License Agreement, we were appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distributeand sell the BMI Products for trauma indications inside the United States and its territories for the BMI Term, provided that we arein compliance with its obligations thereunder. From January 16, 2025 until October 13, 2025, we have an exclusive option to negotiateexclusive distribution rights for the BMI Products in additional fields and/or additional territories on substantially the same termsas those set forth in the BMI License Agreement.
TheBMI License Agreement requires that we pay BMI royalties of 3% of OsStic net sales (as defined in the BMI License Agreement). Pursuantto the BMI License Agreement, we and BMI agreed to negotiate the applicable percentage of net sales for ARC at a future date. The BMILicense Agreement also requires that we pay BMI annual minimum royalty payments of $100,000, $200,000, and $300,000 for the first, secondand third years, respectively, following the receipt of first regulatory approval for the marketing and sale of a product (as definedin the agreement). No royalties have been paid under this agreement as of June 30, 2025.
Inconnection with the BMI License Agreement, on January 16, 2025, we entered into the Subscription Agreement, by and among theCompany, The Russell Revocable Living Trust, BMI and the existing shareholders of BMI, pursuant to which we made an initial cashinvestment in BMI totaling approximately €3.0 million. The initial cash investment of €3.0 million and our previouslyannounced convertible loan to BMI of €1.0 million were converted into 8,230 ordinary shares of BMI, constituting approximately6.67% of the outstanding equity of BMI as of January 16, 2025. Pursuant to the Subscription Agreement, we also agreed to contributean additional €4.0 million to BMI through a series of capital contributions in exchange for 8,230 additional ordinary shares ofBMI upon the achievement of certain development, clinical, and regulatory milestones expected to occur at various points during 2025and 2026. As of June 30, 2025, BMI had achieved two of such milestones, and upon settlement, the Company paid BMI $2.4 million(€2.0 million) on July 1, 2025 in exchange for 4,116 additional ordinary shares of BMI, bringing our total ownership of BMI’soutstanding equity to approximately 9.678% as of July 1, 2025.
CarePICSAcquisition
Onthe CarePICS Closing Date, we entered into the CarePICS Purchase Agreement with the Purchaser, CarePICS, the Sellers and Paul Schubert,in his capacity as the representative of the Sellers, pursuant to which the Purchaser purchased all of the Units from the Sellers. Onthe CarePICS Closing Date, the parties to the CarePICS Purchase Agreement completed the CarePICS Acquisition and CarePICS became an indirectwholly owned subsidiary of the Company. Pursuant to the CarePICS Purchase Agreement, cash consideration for the CarePICS Acquisitionwas $2.0 million, which included transaction expenses of the Sellers. On the CarePICS Closing Date, the Company also paid $1.65 millionto satisfy certain existing indebtedness of CarePICS, which was assumed by us at the closing of the acquisition.
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Pursuantto the CarePICS Purchase Agreement, for each of (A) the period beginning on the CarePICS Closing Date and ending on March 31, 2026 (the“First Earnout Period”) and (B) the period beginning on April 1, 2026 and ending on March 31, 2027 (the “Second EarnoutPeriod”), each Seller is entitled to such Seller’s pro rata share of a value equal to (i) $2,000,000 minus (ii) anyfunding provided by the Purchaser or its affiliates to the SaaS P&L (as defined in the CarePICS Purchase Agreement) during the FirstEarnout Period in excess of $110,000 per month, minus (iii) any shortfall in the projected SaaS P&L EBITDA (as defined inthe CarePICS Purchase Agreement) for the applicable earnout period, plus (iv) 75% of any SaaS P&L EBITDA generated in excessof the projected SaaS P&L EBITDA for the First Earnout Period and the Second Earnout Period, as applicable.
Eachearnout payment, if any, is due within 90 days following the First Earnout Period and Second Earnout Period, as applicable, and ispayable in cash or, at the Purchaser’s election, is payable to Sellers who qualify as “accredited investors” (assuch term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended) in a combination of30% cash and 70% of the Purchaser’s Class A-2 Units, with the value of the Class A-2 Units to be determined by an industryrecognizable third-party valuation firm. Pursuant to the CarePICS Purchase Agreement, the aggregate value of the amounts paid forthe First and Second Earnout Periods will not exceed $10,000,000.
Inaddition, for a period ending 10 years following the CarePICS Closing Date (the “Purchaser Value Earnout Period”), each Selleris entitled to receive annual earnout payments based on the census of patient volume for the previous year and be based upon a rate of$5.00 enablement value per patient per year (the “Purchaser Value Earnouts”). Each earnout payment, if any, is due 90 daysfollowing the end of each fiscal year during the Purchaser Value Earnout Period, and is payable in cash or, at the Purchaser’selection, is payable to Sellers who qualify as accredited investors in a combination of 30% cash and 70% of the Purchaser’s ClassB Units, with the value of the Class B Units to be determined by an industry recognizable third-party valuation firm. Pursuant to theCarePICS Purchase Agreement, the aggregate value of the Purchaser Value Earnouts will not exceed $10,000,000.
Asthe contingent consideration was negotiated as part of the CarePICS Acquisition, the contingent obligation was included in the totalpurchase consideration transferred and classified as a liability.
CashFlow Analysis
Forthe six months ended June 30, 2025, net cash provided by operating activities was $0.7 million compared to $3.0 million used in operatingactivities for the six months ended June 30, 2024. The increase in cash provided by operating activities during the six months endedJune 30, 2025 was largely due to net revenue growth outpacing the growth of our cash operating expenses and improved timing of collectionof trade receivables.
Forthe six months ended June 30, 2025, net cash used in investing activities was $9.1 million compared to $0.1 million used in investingactivities during the six months ended June 30, 2024. Cash used in investing activities during the six months ended June 30, 2025 primarilyincluded $2.1 million related to the CarePICS Acquisition, $3.5 million for our minority investment in BMI and $3.4 million related tothe capitalization of certain costs related to the buildout of our THP technology platform.
Forthe six months ended June 30, 2025, net cash provided by financing activities was $9.5 million compared to $4.1 million provided by financingactivities for the six months ended June 30, 2024. The increase in cash provided by financing activities during the six months endedJune 30, 2025 was due to the receipt of proceeds from the CRG Term Loan, partially offset by the payoff of the debt assumed in the CarePICSAcquisition.
MATERIALTRANSACTIONS WITH RELATED PARTIES
ConsultingAgreement
InJuly 2021, we entered into an asset purchase agreement with Rochal, a related party. Concurrent with the Rochal asset purchase, we enteredinto a consulting agreement with Ann Beal Salamone pursuant to which Ms. Salamone agreed to provide us with consulting services withrespect to, among other things, writing new patents, conducting patent intelligence and participating in certain grant and contract reporting.In consideration for the consulting services to be provided to us, Ms. Salamone is entitled to receive an annual consulting fee of $177,697,with payments to be paid once per month. The consulting agreement had an initial term of three years. Effective July 13, 2024, the consultingagreement with Ms. Salamone was amended to provide that the initial term shall be automatically renewed for successive one-year termsfor up to three successive years unless earlier terminated by either party without cause at any time, provided that the terminating partyprovides 90 days advance written notice of termination. Ms. Salamone is a director of the Company, and is a significant shareholder andthe current chair of the board of directors of Rochal.
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CatalystTransaction Advisory Services Agreement
InMarch 2023, we entered into a Transaction Advisory Services Agreement (the “Catalyst Services Agreement”) effective March1, 2023 with Catalyst, a related party. Pursuant to the Catalyst Services Agreement, Catalyst, by and through its directors, officers,employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the “CoveredPersons”), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operationaland strategic planning, relationship access and corporate development services for us in connection with any merger, acquisition, recapitalization,divestiture, financing, refinancing, or other similar transaction in which we may be, or may consider becoming, involved, and any suchadditional services as mutually agreed upon in writing by and between Catalyst and us (the “Catalyst Services”).
Pursuantto the Catalyst Services Agreement, we agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any of the CoveredPersons at a rate no more than a rate consistent with industry practice for the performance of services similar to the Catalyst Services,as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliated thirdparties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Catalyst Services renderedunder the Catalyst Services Agreement, with all reimbursements being contingent upon the prior approval of the Audit Committee of ourBoard of Directors. We incurred costs relating to the Catalyst Services Agreement of $10,000 and $57,000 in the three months ended June 30, 2025 and2024, respectively, and $30,000 and $113,272 in the six months ended June30, 2025 and 2024, respectively.
Receivablesand Payables
Wehad outstanding related party receivables totaling $9,081 at June 30, 2025 and $40,566 at December 31, 2024. We had outstanding relatedparty payables totaling $32,355 at June 30, 2025 and $30,913 at December 31, 2024.
IMPACTOF INFLATION AND CHANGING PRICES
Inflationand changing prices have not had a material impact on our historical results of operations. We do not currently anticipate that inflationand changing prices, including the impacts of tariffs, will have a material impact on our future results of operations.
CRITICALACCOUNTING ESTIMATES
Thepreparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimatesand assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Althoughwe base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances,actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in theseestimates could materially affect our consolidated financial position, results of operations or cash flows. Significant items that aresubject to such estimates and assumptions include revenue and expense accruals, the fair value measurement of assets and liabilitiesand the allocation of purchase price to the fair value of assets acquired. Our critical accounting estimates have not significantly changedsince December 31, 2024 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asa smaller reporting company, we are not required to provide this information.
ITEM4. CONTROLS AND PROCEDURES
Evaluationof Disclosure Controls and Procedures
Wemaintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reportsthat we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulatedand communicated to our management, including our principal executive and principal financial officers (whom we refer to in this periodicreport as our “Certifying Officers”), as appropriate to allow timely decisions regarding required disclosure. Our managementevaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of June30, 2025, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as ofJune 30, 2025, our disclosure controls and procedures were effective.
Changesin Internal Control over Financial Reporting
Therewere no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PARTII - Other Information
ITEM1. LEGAL PROCEEDINGS
Fromtime to time, we may be involved in claims and legal actions that arise in the ordinary course of business. To our knowledge, there areno material pending legal proceedings to which we are a party or of which any of our property is the subject.
ITEM1A. RISK FACTORS
Therewere no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 31, 2024. For more information concerning our risk factors, please see “Part I, Item 1A. Risk Factors”in our Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Salesof Unregistered Securities
Therewere no sales of unregistered securities during the quarter ended June 30, 2025 that were not previously reported on a Current Reporton Form 8-K.
IssuerPurchases of Equity Securities
Thefollowing table summarizes our share repurchases during the three months ended June 30, 2025:
| Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or approximate dollar value) of Shares that may yet be Purchased Under the Plans or Programs | ||||||||||||
| April 1 - April 30, 2025 | 15,826 | $ | 33.85 | - | - | |||||||||||
| May 1 - May 31, 2025 | 4,929 | $ | 30.88 | - | - | |||||||||||
| June 1 - June 30, 2025 | - | $ | - | - | - | |||||||||||
| Total | 20,755 | - | $ | - | ||||||||||||
| (1) Shares purchased during the period were transferred to the Company from employees in satisfaction of certain tax withholding obligations associated with the vesting of restricted stock awards during the period. The Sanara MedTech Inc. 2024 Omnibus Long-Term Incentive Plan allows the Company to withhold the number of shares having the fair value equal to the tax withholding due. |
ITEM3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM4. MINE SAFETY DISCLOSURES
Thisitem is not applicable.
ITEM5. OTHER INFORMATION
Duringthe three months ended June 30, 2025, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company
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ITEM6. EXHIBITS
Theexhibits listed below are filed as a part of this report or incorporated herein by reference.
| * | Filed herewith. |
| # | Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission or its staff upon request. If indicated on the first page of such agreement, certain confidential information has been excluded pursuant to Item 601(b)(2)(ii) of Regulation S-K. Such excluded information is not material and is the type that the Company treats as private or confidential. |
| ** | The certifications attached as Exhibit 32.1 and Exhibit 32.2 are not deemed “filed” with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Sanara MedTech Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
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SIGNATURES
Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.
| SANARA MEDTECH INC. | ||
| August 13, 2025 | By: | /s/ Elizabeth B. Taylor |
| Elizabeth B. Taylor | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and duly authorized officer) | ||
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EXHIBIT31.1
CERTIFICATIONOF PRINCIPAL EXECUTIVE OFFICER
INACCORDANCE WITH 18 U.S.C. SECTION 1350,
ASADOPTED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,Ronald T. Nixon, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sanara MedTech Inc. for the period ended June 30, 2025; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date:August 13, 2025
| /s/ Ronald T. Nixon | |
| Ronald T. Nixon, Chief Executive Officer |
EXHIBIT31.2
CERTIFICATIONOF PRINCIPAL FINANCIAL OFFICER
INACCORDANCE WITH 18 U.S.C. SECTION 1350,
ASADOPTED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,Elizabeth B. Taylor, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sanara MedTech Inc. for the period ended June 30, 2025; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date:August 13, 2025
| /s/ Elizabeth B. Taylor | |
| Elizabeth B. Taylor, Chief Financial Officer |
EXHIBIT32.1
CERTIFICATIONOF PRINCIPAL EXECUTIVE OFFICER
INACCORDANCE WITH 18 U.S.C. SECTION 1350,
ASADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Inconnection with the Quarterly Report on Form 10-Q of Sanara MedTech Inc. (the “Company”) for the period ended June 30, 2025as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald T. Nixon, in my capacityas Chief Executive Officer of the Company and not in my individual capacity, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuantto § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
August13, 2025
| /s/ Ronald T. Nixon | |
| Ronald T. Nixon, Chief Executive Officer |
Theforegoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly,is not being filed as part of the Report for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporatedby reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation languagein such filing.
EXHIBIT32.2
CERTIFICATIONOF PRINCIPAL FINANCIAL OFFICER
INACCORDANCE WITH 18 U.S.C. SECTION 1350,
ASADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Inconnection with the Quarterly Report on Form 10-Q of Sanara MedTech Inc. (the “Company”) for the period ended June 30, 2025as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth Taylor, in my capacityas Chief Financial Officer of the Company and not in my individual capacity, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuantto § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
August13, 2025
| /s/ Elizabeth B. Taylor | |
| Elizabeth B. Taylor, Chief Financial Officer |
Theforegoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly,is not being filed as part of the Report for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporatedby reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation languagein such filing.