Company Performance - Sanara MedTech Inc. reported a quarterly loss of $0.23 per share, better than the Zacks Consensus Estimate of a loss of $0.33, and an improvement from a loss of $0.41 per share a year ago, representing an earnings surprise of +30.30% [1] - The company posted revenues of $25.83 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.70%, and showing an increase from $20.16 million in the same quarter last year [2] - Over the last four quarters, Sanara MedTech has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Sanara MedTech shares have declined approximately 17.3% since the beginning of the year, contrasting with the S&P 500's gain of 9.6% [3] - The current Zacks Rank for Sanara MedTech is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.32 on revenues of $26.65 million, and for the current fiscal year, it is -$1.56 on revenues of $106.93 million [7] - The trend of estimate revisions for Sanara MedTech was mixed ahead of the earnings release, which could change following the recent report [6] Industry Context - The Medical - Products industry, to which Sanara MedTech belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides the basic identification details for Sanara MedTech Inc.'s quarterly report, including the filing period, state of incorporation, and contact information - Registrant: **SANARA MEDTECH INC.**[2](index=2&type=chunk) - Quarterly Period Ended: **June 30, 2025**[2](index=2&type=chunk) [Securities Information](index=1&type=section&id=Securities%20Information) Details regarding the company's registered securities, including the trading symbol and exchange, are provided | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.001 par value | SMTI | The Nasdaq Capital Market | [Filer Status and Shares Outstanding](index=1&type=section&id=Filer%20Status%20and%20Shares%20Outstanding) The company confirms its compliance with SEC filing requirements and discloses its filer status and the number of common shares issued and outstanding as of a recent date - The registrant has filed all required reports during the preceding 12 months and has been subject to filing requirements for the past 90 days[4](index=4&type=chunk) | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | | :---------------------- | :---------------- | :-------------------- | :------------------------ | :---------------------- | | ☐ | ☐ | ☒ | ☒ | ☐ | - As of August 12, 2025, **8,902,351 shares** of the Issuer's common stock, $0.001 par value per share, were issued and outstanding[5](index=5&type=chunk) [Table of Contents](index=3&type=section&id=Table%20of%20Contents) [Part I – Financial Information](index=4&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Sanara MedTech Inc.'s unaudited consolidated financial statements, including the balance sheets, statements of operations, changes in shareholders' equity, and cash flows for the periods ended June 30, 2025, along with detailed notes explaining significant accounting policies, recent acquisitions, debt, equity, and segment reporting [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------- | :------------------------ | :------------------ | | Total Assets | $98,767,645 | $88,091,992 | | Total Liabilities | $63,375,699 | $49,180,030 | | Total Shareholders' Equity | $35,391,946 | $38,911,962 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenue | $25,830,834 | $20,158,823 | $49,264,930 | $38,695,461 | | Gross Profit | $23,893,552 | $18,150,137 | $45,492,681 | $34,796,729 | | Operating Loss | $(31,348) | $(2,884,856) | $(2,111,377) | $(4,416,563) | | Net Loss Attributable to Shareholders | $(2,014,362) | $(3,504,014) | $(5,541,539) | $(5,268,198) | | Net Loss Per Share (Basic & Diluted) | $(0.23) | $(0.41) | $(0.64) | $(0.62) | [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) | Metric | Balance at December 31, 2024 | Balance at June 30, 2025 | | :----------------------------------- | :--------------------------- | :----------------------- | | Common Stock (Shares) | 8,753,773 | 8,903,662 | | Common Stock (Amount) | $8,754 | $8,904 | | Additional Paid-In Capital | $77,179,211 | $78,678,081 | | Accumulated Deficit | $(37,784,392) | $(43,287,572) | | Total Shareholders' Equity | $38,911,962 | $35,391,946 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Net Cash Provided by (Used in) Operating Activities | $665,127 | $(3,006,300) | | Net Cash Used in Investing Activities | $(9,107,823) | $(124,580) | | Net Cash Provided by Financing Activities | $9,523,145 | $4,134,039 | | Net Increase in Cash | $1,080,449 | $1,003,159 | | Cash, End of Period | $16,958,744 | $6,150,375 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the unaudited consolidated financial statements, covering the company's business segments, significant accounting policies, recent acquisitions, equity investments, debt obligations, and related party transactions [NOTE 1 – NATURE OF BUSINESS AND BACKGROUND](index=9&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20BUSINESS%20AND%20BACKGROUND) Sanara MedTech Inc. is a medical technology company focused on surgical, chronic wound, and skin markets, operating through two reportable segments: Sanara Surgical and Tissue Health Plus (THP), with a strategic shift in 2024 to reflect the growing importance of value-based wound care - Sanara MedTech Inc. is a medical technology company focused on developing and commercializing transformative technologies in surgical, chronic wound, and skin markets[20](index=20&type=chunk) - The Company operates through two reportable segments: Sanara Surgical and Tissue Health Plus (THP), a change implemented in Q2 2024 to reflect the growing investment in value-based wound care strategy[21](index=21&type=chunk)[22](index=22&type=chunk) - Sanara Surgical markets soft tissue repair (e.g., CellerateRX Surgical, BIASURGE) and bone fusion products (e.g., BiFORM, ALLOCYTE Plus) for sterile environments, and includes an in-house R&D team[23](index=23&type=chunk)[24](index=24&type=chunk) - THP aims to simplify skin health, starting with wound care, by offering a value-based wound care program to payers and risk-bearing entities, coordinating community and home-based care, and launched its first pilot program in Q2 2025[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting principles, including consolidation, use of estimates, revenue recognition, and policies for assets like accounts receivable, inventory, property, goodwill, and intangibles, as well as equity investments, fair value measurements, and recently adopted and issued accounting pronouncements - The company's unaudited consolidated financial statements include Sanara MedTech Inc. and its wholly-owned and majority-owned subsidiaries, with all significant intercompany transactions eliminated[27](index=27&type=chunk) - Revenue is recognized when control of promised goods or services is transferred to the customer, primarily from product sales (soft tissue repair, bone fusion), with SaaS revenue starting in Q2 2025 from the THP segment[33](index=33&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk) | Revenue Stream (Three Months Ended June 30) | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Soft tissue repair products | $22,661,457 | $17,641,318 | | Bone fusion products | $3,142,795 | $2,516,599 | | SaaS | $26,582 | $- | | Royalties | $- | $906 | | **Total Net Revenue** | **$25,830,834** | **$20,158,823** | - The company capitalizes costs for internal use software during the application development stage, particularly for the THP platform, with approximately **$3.4 million capitalized** as of June 30, 2025, to be depreciated over five years once placed in service[44](index=44&type=chunk)[46](index=46&type=chunk) - Goodwill, primarily from the Scendia acquisition within the Sanara Surgical segment, is tested annually for impairment and was not impaired as of June 30, 2025 or 2024[47](index=47&type=chunk)[80](index=80&type=chunk) | Intangible Assets (June 30, 2025) | Cost | Accumulated Amortization | Net | | :-------------------------------- | :----------- | :----------------------- | :----------- | | Patents and Other IP | $38,056,240 | $(6,171,366) | $31,884,874 | | Customer relationships and other | $7,971,752 | $(3,594,886) | $4,376,866 | | Licenses | $6,784,278 | $(2,053,450) | $4,730,828 | | **Total** | **$52,812,270** | **$(11,819,702)** | **$40,992,568** | - The company adopted ASU 2023-07 (Segment Reporting) effective for its annual report for FY2024 and interim filings beginning Q1 2025, which did not materially impact its financial position, results, or cash flows[66](index=66&type=chunk) [NOTE 3 – CAREPICS ACQUISITION](index=18&type=section&id=NOTE%203%20%E2%80%93%20CAREPICS%20ACQUISITION) On April 1, 2025, Sanara MedTech acquired CarePICS, LLC, a mobile and web app platform for vascular and wound care clinicians, for $2.0 million cash consideration plus $1.65 million to satisfy existing debt, and potential earnout payments up to $20 million, with the acquisition accounted for as an asset acquisition - On April 1, 2025, Sanara MedTech acquired CarePICS, LLC, a mobile and web app platform for clinicians treating vascular and wound care patients, which will be utilized in the THP platform[69](index=69&type=chunk)[70](index=70&type=chunk) | CarePICS Acquisition Consideration | Amount | | :------------------------------- | :----------- | | Cash consideration | $2,000,000 | | Contingent consideration | $1,355,603 | | Direct transaction costs | $122,146 | | **Total purchase consideration** | **$3,477,749** | - The acquisition included potential earnout payments up to **$10 million** for the first two earnout periods (ending March 31, 2027) based on SaaS P&L EBITDA, and up to an additional **$10 million** over 10 years based on patient volume, payable in cash or Class A-2/B Units[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - The CarePICS Acquisition was accounted for as an asset acquisition, with the purchase consideration primarily allocated to developed technology (**$5,127,749**) and assumed debt (**$(1,650,000)**)[76](index=76&type=chunk)[77](index=77&type=chunk) [NOTE 4 – CONVERTIBLE LOAN RECEIVABLE](index=19&type=section&id=NOTE%204%20%E2%80%93%20CONVERTIBLE%20LOAN%20RECEIVABLE) The company's $1.0 million convertible loan to Biomimetic Innovations Limited (BMI), including accrued interest, was converted into equity of BMI on January 16, 2025, resulting in a zero loan balance as of June 30, 2025 - A **$1,079,391** convertible loan to Biomimetic Innovations Limited (BMI), including accrued interest, was converted into equity of BMI on January 16, 2025[78](index=78&type=chunk) - The convertible loan receivable balance was **$0** as of June 30, 2025, down from **$1,101,478** as of December 31, 2024[78](index=78&type=chunk) [NOTE 5 – GOODWILL AND INTANGIBLES, NET](index=20&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLES%2C%20NET) Goodwill remained stable at $3.6 million, entirely within the Sanara Surgical segment, with no impairment recorded. Total net intangible assets were $41.0 million as of June 30, 2025, slightly down from $41.0 million at December 31, 2024, with a weighted-average amortization period of 14.2 years | Metric | December 31, 2023 | December 31, 2024 | June 30, 2025 | | :----- | :------------------ | :------------------ | :------------ | | Goodwill | $3,601,781 | $3,601,781 | $3,601,781 | - Goodwill is entirely within the Sanara Surgical segment and was not impaired as of June 30, 2025 or 2024[80](index=80&type=chunk) | Intangible Assets (Net) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Patents and Other IP | $31,884,874 | $33,000,384 | | Customer relationships and other | $4,376,866 | $4,941,181 | | Licenses | $4,730,828 | $3,065,211 | | **Total Net Intangible Assets** | **$40,992,568** | **$41,006,776** | - The weighted-average amortization period for finite-lived intangible assets was **14.2 years** as of June 30, 2025[81](index=81&type=chunk) [NOTE 6 – INVESTMENTS IN EQUITY SECURITIES](index=21&type=section&id=NOTE%206%20%E2%80%93%20INVESTMENTS%20IN%20EQUITY%20SECURITIES) The company holds nonmarketable equity investments in privately held companies, including DirectDerm (cost method), and ChemoMouthpiece, SI Technologies, and BMI (equity method), with significant changes including the Pixalere Redemption in January 2025 converting an investment into an intangible asset and increased ownership in BMI to 9.678% by July 1, 2025 - The company's equity investments include nonmarketable securities in privately held companies, reported at cost or using the equity method based on influence[82](index=82&type=chunk) - In January 2025, the Pixalere investment was reclassified from a cost method investment (**$2,084,278**) to an intangible asset for an amended license agreement, and Pixalere Canada's equity in Pixalere USA was redeemed[85](index=85&type=chunk)[86](index=86&type=chunk)[96](index=96&type=chunk) - The company uses the equity method for investments in ChemoMouthpiece (**6.59% ownership**), SI Healthcare Technologies (**50% ownership**), and Biomimetic Innovations Limited (BMI), where its ownership increased to approximately **9.678%** by July 1, 2025, following additional capital contributions[88](index=88&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) | Investment (June 30, 2025) | Carrying Amount | Economic Interest | | :------------------------- | :-------------- | :---------------- | | ChemoMouthpiece, LLC | $5,017,758 | 6.59% | | SI Healthcare Technologies, LLC | $47,976 | 50.00% | | Biomimetic Innovations Limited | $4,450,078 | 6.67% | | Direct Dermatology Inc. | $1,000,000 | ~8.1% (as of Dec 31, 2024) | | **Total Investments** | **$10,515,812** | | | Share of Losses from Equity Method Investments (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------------------------------- | :----------- | :----------- | | ChemoMouthpiece, LLC | $(154,484) | $- | | SI Healthcare Technologies, LLC | $7,273 | $- | | Biomimetic Innovations Limited | $(191,879) | $- | | **Total** | **$(339,090)** | **$-** | [NOTE 7 – OPERATING LEASES](index=24&type=section&id=NOTE%207%20%E2%80%93%20OPERATING%20LEASES) The company holds two material operating leases for office space, with ROU assets of $1.09 million and related lease liabilities of $1.23 million as of June 30, 2025, and a weighted average remaining lease term of 5.6 years - As of June 30, 2025, the company had two material operating leases for office space, with one renewed for an additional three-year term in August 2025[98](index=98&type=chunk) | Operating Lease Metrics (June 30, 2025) | Amount | | :------------------------------------ | :----------- | | Right of Use Assets | $1,088,149 | | Lease Liabilities | $1,234,225 | | Weighted Average Remaining Lease Term | 5.6 years | | Weighted Average Discount Rate | 13.2% | | Operating Lease Expense (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------------- | :----------- | :----------- | | Lease Expense | $260,197 | $277,596 | | Cash Paid for Operating Lease Liabilities | $259,786 | $267,223 | [NOTE 8 – DEBT AND CREDIT FACILITIES](index=25&type=section&id=NOTE%208%20%E2%80%93%20DEBT%20AND%20CREDIT%20FACILITIES) The company's CRG Term Loan facility provides up to $55.0 million, with $42.75 million drawn as of June 30, 2025, and $12.25 million remaining available. The loan bears 13.25% interest (8% cash, 5.25% PIK) and matures in May 2029, with the company in compliance with all debt covenants - The company has a CRG Term Loan facility for up to **$55.0 million**, with **$42.75 million** principal outstanding as of June 30, 2025, and **$12.25 million** available for future borrowing[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk)[112](index=112&type=chunk)[225](index=225&type=chunk) - The CRG Term Loan bears interest at **13.25%** per annum (**8.00% cash, 5.25% paid-in-kind**) and has a maturity date of **May 30, 2029**[106](index=106&type=chunk)[105](index=105&type=chunk) | Debt Components (June 30, 2025) | Amount | | :------------------------------ | :----------- | | CRG Term Loan (Principal) | $42,750,000 | | Paid-in-kind interest | $1,834,210 | | Back-end fee | $735,576 | | Less: Unamortized debt issuance costs | $(1,103,124) | | **Long-term debt, net** | **$44,216,662** | - The company was in compliance with all debt covenants as of June 30, 2025, including maintaining liquidity above **$3.0 million** and meeting annual minimum revenue targets (e.g., **$75.0 million** for FY2025)[113](index=113&type=chunk)[230](index=230&type=chunk) [NOTE 9 - COMMITMENTS AND CONTINGENCIES](index=27&type=section&id=NOTE%209%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note details various license agreements for antimicrobial products (BIAKŌS, ABF, Debrider) with Rochal, including royalty commitments, and the BMI License Agreement for trauma products with associated royalties and milestone payments. It also covers earnout liabilities from the Precision Healing merger and Applied Asset Purchase, and a new license agreement with Tufts University for collagen peptides - The company has exclusive worldwide license agreements with Rochal for antimicrobial products (BIAKŌS, BIASURGE, CuraShield) and a debrider, with royalty payments ranging from **2-4% of net sales** and minimum annual royalties[115](index=115&type=chunk)[116](index=116&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) | Royalty Expense (Six Months Ended June 30) | 2025 | 2024 | | :----------------------------------------- | :----------- | :----------- | | BIAKŌS License Agreement | $85,435 | $77,305 | - The BMI License Agreement grants exclusive U.S. marketing and distribution rights for OsStic and ARC trauma products, requiring **3% royalties** on OsStic net sales and annual minimum royalties starting at **$100,000** after regulatory approval[123](index=123&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - The Applied Asset Purchase includes an earnout of up to **$10.0 million** based on net sales of a collagen-based product, with installment payments of **$625,000** made in August 2024 and August 2025[131](index=131&type=chunk)[132](index=132&type=chunk) - A license agreement with Tufts University for 18 unique collagen peptides involves a new subsidiary (SCP) and royalties of **1.5% or 3%** on net sales, with minimum annual royalties starting at **$50,000**[135](index=135&type=chunk) [NOTE 10 – SHAREHOLDERS' EQUITY](index=31&type=section&id=NOTE%2010%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) The company's 2014 LTIP terminated in September 2024, replaced by the 2024 LTIP which authorized 1,000,000 shares for awards. During the six months ended June 30, 2025, 170,842 restricted stock awards were issued, resulting in $2.74 million in share-based compensation expense, with $7.35 million unrecognized - The 2014 Omnibus Long Term Incentive Plan (LTIP) terminated on September 3, 2024, with no future awards. The 2024 LTIP was approved, authorizing **1,000,000 shares** for awards[137](index=137&type=chunk)[138](index=138&type=chunk) - During the six months ended June 30, 2025, **170,842 restricted stock awards** (net of forfeitures) were issued under the 2024 LTIP, with a fair value of **$5,825,941**[139](index=139&type=chunk) | Share-based Compensation Expense (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------------------- | :----------- | :----------- | | Total Share-based Compensation Expense | $2,740,343 | $2,214,931 | - As of June 30, 2025, there was **$7,350,817** of total unrecognized share-based compensation expense, expected to be recognized over a weighted-average period of **1.4 years**[141](index=141&type=chunk) | Stock Options (June 30, 2025) | Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Life | Aggregate Intrinsic Value | | :---------------------------- | :-------- | :------------------------------ | :--------------------------------------- | :------------------------ | | Outstanding | 31,013 | $10.57 | 5.3 years | $552,803 | | Exercisable | 31,013 | $10.57 | 5.3 years | $552,803 | [NOTE 11 – RELATED PARTIES](index=32&type=section&id=NOTE%2011%20%E2%80%93%20RELATED%20PARTIES) The company has ongoing product license agreements with Rochal Industries, a related party, for antimicrobial and debrider products, and a consulting agreement with Ann Beal Salamone (a director of both companies). It also has a transaction advisory services agreement with Catalyst, another related party, for which it incurred $30,000 in costs during the six months ended June 30, 2025 - The company has exclusive product license agreements with Rochal Industries, a related party, for antimicrobial products (BIAKŌS, BIASURGE, CuraShield) and a debrider[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Ann Beal Salamone, a director of the company and a significant shareholder/Chair of Rochal, has a consulting agreement with the company for an annual fee of **$177,697**[148](index=148&type=chunk) - The company incurred **$30,000** in costs during the six months ended June 30, 2025, under a Transaction Advisory Services Agreement with Catalyst, a related party, for various advisory and corporate development services[149](index=149&type=chunk)[150](index=150&type=chunk) | Related Party Balances | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Accounts receivable – related parties | $9,081 | $40,566 | | Accounts payable – related parties | $32,355 | $30,913 | [NOTE 12 – SEGMENT REPORTING](index=34&type=section&id=NOTE%2012%20%E2%80%93%20SEGMENT%20REPORTING) The company reports two segments: Sanara Surgical (soft tissue repair and bone fusion products) and Tissue Health Plus (THP) (value-based wound care services), a change implemented in Q2 2024. Segment Adjusted EBITDA is the primary profitability measure, with THP showing a significant net loss and negative Segment Adjusted EBITDA due to buildout costs - The company changed its reportable segments in Q2 2024 to Sanara Surgical and Tissue Health Plus (THP), reflecting the growing importance of value-based wound care[152](index=152&type=chunk)[159](index=159&type=chunk) - Sanara Surgical focuses on soft tissue repair and bone fusion products, while THP is dedicated to value-based wound care services, aiming to reduce hospitalizations and improve patient quality of life[154](index=154&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Segment Adjusted EBITDA is the primary profitability measure used by the CEO (CODM) for assessing financial performance and resource allocation[153](index=153&type=chunk) | Segment Adjusted EBITDA (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------------- | :----------- | :----------- | | Sanara Surgical | $7,414,885 | $2,532,145 | | THP | $(4,092,077) | $(1,628,543) | | **Total Segment Adjusted EBITDA** | **$3,322,808** | **$903,602** | - THP segment does not include **$3.4 million** of internal use software costs capitalized during the six months ended June 30, 2025, which are part of its buildout[163](index=163&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=37&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and operational results for the quarter ended June 30, 2025, highlighting revenue growth, segment performance, recent strategic developments, and liquidity, while also discussing forward-looking statements and key accounting estimates [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](index=37&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns readers that the report contains forward-looking statements about future events and financial performance, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements regarding future events or financial/operating performance, including value-based wound and skin services and THP platforms[165](index=165&type=chunk) - These statements are subject to risks and uncertainties, such as shortfalls in revenue growth, ability to implement strategies, capital requirements, debt compliance, product development, market acceptance, competition, and regulatory changes[165](index=165&type=chunk)[171](index=171&type=chunk) [OVERVIEW](index=38&type=section&id=OVERVIEW) Sanara MedTech is a medical technology company focused on surgical, chronic wound, and skin markets, operating through two segments: Sanara Surgical (products for sterile environments) and Tissue Health Plus (THP) (value-based wound care services). The company aims to expand its offerings and has initiated a formal process to evaluate strategic alternatives for THP - Sanara MedTech is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in surgical, chronic wound, and skin markets[167](index=167&type=chunk) - The company operates through two reportable segments, Sanara Surgical and THP, a change implemented in Q2 2024 due to the growing importance of the value-based wound care program[168](index=168&type=chunk) - Sanara Surgical markets soft tissue repair (e.g., CellerateRX Surgical, BIASURGE) and bone fusion products (e.g., BiFORM, ALLOCYTE Plus) and includes an in-house R&D team[169](index=169&type=chunk)[170](index=170&type=chunk) - THP focuses on value-based wound care services, planning to offer programs to payers and risk-bearing entities to divest wound care spend risk, reduce hospitalizations, and improve patient quality of life[172](index=172&type=chunk)[173](index=173&type=chunk) - THP's comprehensive approach includes a Care Hub for virtual patient monitoring, a Managed Services Organization (MSO) Network of third-party providers, and a Technology Platform leveraging AI/ML for workflow automation and integration[183](index=183&type=chunk)[184](index=184&type=chunk) - The company has initiated a formal process to evaluate a full range of strategic alternatives for THP to maximize shareholder value[184](index=184&type=chunk) [RECENT DEVELOPMENTS](index=41&type=section&id=RECENT%20DEVELOPMENTS) Recent developments include the CRG Term Loan amendment, allowing additional borrowings up to $12.25 million by December 31, 2025, and the third borrowing of $12.25 million used for acquisitions and working capital. The company also made an initial €3.0 million cash investment in BMI, converted a €1.0 million loan to equity, and acquired CarePICS for $2.0 million cash plus $1.65 million debt satisfaction and potential earnouts - The CRG Term Loan Agreement was amended to allow up to two additional borrowings, with a third borrowing of **$12.25 million** made on March 31, 2025, for acquisitions (like CarePICS) and working capital. An additional **$12.25 million** can be drawn by December 31, 2025[187](index=187&type=chunk) - The company made an initial **€3.0 million** cash investment in Biomimetic Innovation Limited (BMI) and converted a **€1.0 million** convertible loan into BMI equity, resulting in approximately **6.67% ownership**, increasing to **9.678%** by July 1, 2025, after additional milestone payments[189](index=189&type=chunk) - On April 1, 2025, the company acquired CarePICS, LLC for **$2.0 million cash**, paid **$1.65 million** to satisfy existing debt, and agreed to potential earnout payments[190](index=190&type=chunk) [COMPONENTS OF RESULTS OF OPERATIONS](index=42&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) The company's revenue primarily comes from sales of soft tissue repair and bone fusion products, with SaaS revenue from the THP segment starting in Q2 2025. Cost of goods sold includes acquisition costs and royalties, while operating expenses comprise SG&A, R&D (expected to increase), depreciation and amortization, and changes in earnout liabilities - Revenue is primarily derived from sales of soft tissue repair and bone fusion products to hospitals and acute care facilities, with CellerateRX Surgical being the substantial majority[191](index=191&type=chunk) | Revenue Stream (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Soft tissue repair products | $43,193,897 | $33,723,610 | | Bone fusion products | $6,044,451 | $4,970,945 | | SaaS | $26,582 | $- | | Royalties | $- | $906 | | **Total Net Revenue** | **$49,264,930** | **$38,695,461** | - Cost of goods sold includes acquisition costs from manufacturers, raw material costs, and royalties. Operating expenses include SG&A, R&D (expected to increase), depreciation and amortization, and changes in fair value of earnout liabilities[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [RESULTS OF OPERATIONS](index=44&type=section&id=RESULTS%20OF%20OPERATIONS) For the six months ended June 30, 2025, net revenue increased by 27% to $49.3 million, driven by higher sales of soft tissue repair and bone fusion products. Gross profit rose 31% to $45.5 million, while SG&A and R&D expenses also increased, leading to a net loss of $5.5 million. Segment Adjusted EBITDA improved to $3.3 million, despite a significant negative contribution from the THP segment due to platform buildout costs | Financial Metric (Six Months Ended June 30) | 2025 | 2024 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Net Revenue | $49,264,930 | $38,695,461 | 27% | | Gross Profit | $45,492,681 | $34,796,729 | 31% | | Selling, General and Administrative | $42,993,804 | $35,149,867 | 22% | | Research and Development | $2,371,613 | $1,931,949 | 23% | | Net Loss | $(5,545,781) | $(5,328,245) | 4% | | Segment Adjusted EBITDA | $3,322,808 | $903,602 | 268% | - Net revenue increase was primarily due to increased sales of soft tissue repair products (CellerateRX Surgical, BIASURGE) and bone fusion products, driven by increased market penetration and geographic expansion[202](index=202&type=chunk) - Higher gross margins were realized due to increased sales of soft tissue repair products and lower manufacturing costs for CellerateRX Surgical[203](index=203&type=chunk)[204](index=204&type=chunk) - SG&A increased due to higher direct sales and marketing expenses (**$3.7 million**) and additional SG&A in the THP segment (**$3.1 million**). R&D increased, with **$3.4 million** capitalized for the THP technology platform buildout[205](index=205&type=chunk)[206](index=206&type=chunk) - The net loss for the six months ended June 30, 2025, included **$5.4 million** related to the THP segment, primarily due to buildout costs and increased interest expense[210](index=210&type=chunk) - Segment Adjusted EBITDA for THP was **$(4.1) million** for the six months ended June 30, 2025, reflecting higher costs related to its platform buildout[216](index=216&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=47&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cash on hand was $17.0 million at June 30, 2025. The company expects to invest $5.5-$6.5 million in THP during H2 2025 and anticipates sufficient liquidity for the next 12 months from cash, operations, and $12.25 million available under the CRG Term Loan. Recent financing activities include the CRG Term Loan amendment and third borrowing, the BMI investment, and the CarePICS acquisition | Cash and Liquidity | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Cash on hand | $16,958,744 | $15,878,295 | | Available CRG Term Loan | $12,250,000 | (Not applicable) | - The company expects to invest between **$5.5 million** and **$6.5 million** in the THP strategy during the second half of 2025, with no material cash investments anticipated after year-end[217](index=217&type=chunk) - The CRG Term Loan Agreement was amended, and a third borrowing of **$12.25 million** was made, with **$12.25 million** still available for future borrowing until December 31, 2025[223](index=223&type=chunk)[224](index=224&type=chunk) - The company made an initial **€3.0 million** cash investment in BMI and converted a **€1.0 million** loan to equity, with additional **€4.0 million** committed upon milestones[234](index=234&type=chunk) - The CarePICS Acquisition involved **$2.0 million** cash consideration and **$1.65 million** to satisfy existing debt, plus potential earnout payments[235](index=235&type=chunk) - Net cash provided by operating activities was **$0.7 million** for the six months ended June 30, 2025, an increase from **$3.0 million used** in the prior year, due to revenue growth and improved receivables collection[240](index=240&type=chunk) - Net cash used in investing activities was **$9.1 million**, primarily for the CarePICS acquisition (**$2.1 million**), BMI investment (**$3.5 million**), and THP technology platform capitalization (**$3.4 million**)[241](index=241&type=chunk) - Net cash provided by financing activities was **$9.5 million**, mainly from CRG Term Loan proceeds, partially offset by CarePICS debt payoff[242](index=242&type=chunk) [MATERIAL TRANSACTIONS WITH RELATED PARTIES](index=52&type=section&id=MATERIAL%20TRANSACTIONS%20WITH%20RELATED%20PARTIES) The company has a consulting agreement with Ann Beal Salamone (a director and significant shareholder of Rochal) for an annual fee of $177,697, and a Transaction Advisory Services Agreement with Catalyst, a related party, incurring $30,000 in costs during the six months ended June 30, 2025 - Ann Beal Salamone, a director of the company and a significant shareholder/Chair of Rochal, has a consulting agreement for **$177,697 annually**, renewed for successive one-year terms[243](index=243&type=chunk) - The company incurred **$30,000** in costs during the six months ended June 30, 2025, under a Transaction Advisory Services Agreement with Catalyst, a related party, for advisory and corporate development services[244](index=244&type=chunk)[245](index=245&type=chunk) | Related Party Balances | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Accounts receivable – related parties | $9,081 | $40,566 | | Accounts payable – related parties | $32,355 | $30,913 | [IMPACT OF INFLATION AND CHANGING PRICES](index=53&type=section&id=IMPACT%20OF%20INFLATION%20AND%20CHANGING%20PRICES) Inflation and changing prices have not had a material impact on the company's historical results of operations and are not anticipated to have a material impact in the future - Inflation and changing prices have not materially impacted historical results and are not anticipated to materially impact future results[247](index=247&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=53&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) The company's critical accounting estimates, including revenue and expense accruals, fair value measurements, and purchase price allocation, have not significantly changed since December 31, 2024 - Critical accounting estimates, such as revenue and expense accruals, fair value measurement of assets and liabilities, and purchase price allocation, have not significantly changed since December 31, 2024[248](index=248&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=53&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Sanara MedTech Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Sanara MedTech Inc. is not required to provide quantitative and qualitative disclosures about market risk[249](index=249&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=53&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025, and there were no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025[250](index=250&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[251](index=251&type=chunk) [Part II – Other Information](index=55&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [ITEM 1. LEGAL PROCEEDINGS](index=55&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not aware of any material pending legal proceedings - To the company's knowledge, there are no material pending legal proceedings to which it is a party or of which any of its property is the subject[253](index=253&type=chunk) [ITEM 1A. RISK FACTORS](index=55&type=section&id=ITEM%201A.%20RISK%20FACTORS) There were no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[254](index=254&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=55&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities during the quarter. The company repurchased 20,755 shares of common stock in April and May 2025, primarily for tax withholding obligations related to restricted stock vesting - No sales of unregistered securities were reported during the quarter ended June 30, 2025[255](index=255&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :----------------------------- | :--------------------------- | | 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** | | - Shares purchased were transferred from employees to satisfy tax withholding obligations associated with the vesting of restricted stock awards[256](index=256&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=55&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities - No defaults upon senior securities[257](index=257&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=55&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - This item is not applicable to the company[258](index=258&type=chunk) [ITEM 5. OTHER INFORMATION](index=55&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted, modified, or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[259](index=259&type=chunk) [ITEM 6. EXHIBITS](index=56&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the report, including various agreements (asset purchase, merger, unit purchase), organizational documents, and certifications - The exhibits include various agreements such as the Asset Purchase Agreement (Rochal, Applied), Agreement and Plan of Merger (Precision Healing), Membership Interest Purchase Agreement (Scendia Biologics), and Unit Purchase Agreement (CarePICS)[261](index=261&type=chunk) - Organizational documents like the Amended and Restated Certificate of Formation and Bylaws are also filed[261](index=261&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are included, as required by the Sarbanes-Oxley Act[261](index=261&type=chunk) [SIGNATURES](index=58&type=section&id=SIGNATURES) [Report Signature](index=58&type=section&id=Report%20Signature) The report is signed on behalf of Sanara MedTech Inc. by Elizabeth B. Taylor, Chief Financial Officer, on August 13, 2025 - The report was signed by Elizabeth B. Taylor, Chief Financial Officer, on August 13, 2025[266](index=266&type=chunk)

Financial Data and Key Metrics Changes - The company reported net revenue of $25.8 million for the second quarter, representing a 28% year-over-year growth [5] - Gross profit increased by $5.7 million or 32% to $23.9 million, with gross margin rising approximately 250 basis points to 93% of net revenue [29] - The net loss for the second quarter was $2 million or $0.23 per diluted share, compared to a net loss of $3.5 million or $0.42 per diluted share in the previous year [31] - Adjusted EBITDA for the second quarter was $2.7 million, an increase of $2.1 million or 350% year-over-year [33] Business Line Data and Key Metrics Changes - The Surgical segment generated net revenue of $25.8 million, with soft tissue product sales increasing 28% year-over-year to $22.7 million [5][6] - Bone Fusion products saw a 25% year-over-year increase in sales to $3.1 million [6] - The Surgical segment achieved a net income of approximately $500,000, an improvement of $2.7 million year-over-year [6] - The Tissue Health Plus (THP) segment reported a net loss of $2.5 million, compared to a net loss of $1.3 million last year [32] Market Data and Key Metrics Changes - The company expanded its distributor network to over 400 distributors, up from more than 300 the previous year [18] - The customer base grew to over 1,400 healthcare facilities, compared to more than 1,100 in the prior year [19] - The number of surgeons using the company's products in existing facilities increased significantly, indicating strong growth potential [20] Company Strategy and Development Direction - The company is focused on preserving capital while driving sustainable growth and long-term value creation [14] - A formal process has been initiated to evaluate strategic alternatives for the THP segment, aiming to maximize shareholder value [12][13] - The company plans to reduce cash investment in the THP segment in the second half of 2025 to preserve capital [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial resources available to support key growth initiatives, including cash flow from the Surgical segment and available borrowing capacity [35] - The company does not anticipate a material impact from tariffs on operations in 2025 [35] - Management highlighted the importance of expanding clinical evidence for key products to educate the market on their benefits [8] Other Important Information - The company completed the acquisition of CarePix, which is integral to the THP technology platform [22] - The THP pilot program began with a provider group, aiming to validate and optimize the THP technology platform [23][24] - The company achieved two product development milestones under its exclusive license agreement with Biomimetic Innovations Limited [35] Q&A Session Summary Question: How long does it typically take for a new distributor to become productive? - The timeline varies based on market conditions and existing approvals, ranging from days to months [39][40] Question: What is the expected cadence of operating expenses moving into 2026? - The company anticipates THP segment investments between $5.5 million and $6.5 million for the second half of the year [41] Question: Can you provide details on the growth of specific products like CELERATE and BioSurg? - CELERATE and BioSurg are key growth drivers, with both products showing steady growth and significant market potential [48] Question: What are the main drivers for seeking strategic alternatives for THP? - The company is looking for strategic partners to complement its investments and expand the THP product line [52][53]

[Executive Summary & Key Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Key%20Highlights) Sanara MedTech reported strong net revenue growth for both the second quarter and first six months of 2025, primarily driven by its Sanara Surgical segment, with significant improvements in Adjusted EBITDA and a reduced net loss in Q2, despite THP segment losses [Overall Financial Performance (Q2 & YTD 2025)](index=1&type=section&id=Overall%20Financial%20Performance%20(Q2%20%26%20YTD%202025)) Sanara MedTech reported strong net revenue growth for both the second quarter and first six months of 2025, primarily driven by its Sanara Surgical segment. The company also saw significant improvements in Adjusted EBITDA for both periods, and a reduced net loss in Q2, though the THP segment continued to incur losses Key Financial Highlights (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--------------- | :------------- | :------------- | :------------- | | Net Revenue | $25.8 million | $20.2 million | +28% | | Net Loss | $(2.0) million | $(3.5) million | -42.9% (Improvement) | | Adjusted EBITDA | $2.7 million | $0.6 million | +350% | | Sanara Surgical Net Income (Loss) | $0.5 million | $(2.2) million | N/A (Improvement) | | Sanara Surgical Segment Adjusted EBITDA | $4.7 million | $1.4 million | +235.7% | | THP Net Loss | $(2.5) million | $(1.3) million | +92.3% (Worsening) | | THP Segment Adjusted EBITDA | $(2.1) million | $(0.8) million | +162.5% (Worsening) | Key Financial Highlights (First Six Months 2025 vs. 2024) | Metric | YTD 2025 | YTD 2024 | Change (%) | | :--------------- | :------------- | :------------- | :------------- | | Net Revenue | $49.3 million | $38.7 million | +27% | | Net Loss | $(5.5) million | $(5.3) million | +3.8% (Worsening) | | Adjusted EBITDA | $3.3 million | $0.9 million | +266.7% | | Sanara Surgical Net Loss | $(0.1) million | $(2.7) million | -96.3% (Improvement) | | Sanara Surgical Segment Adjusted EBITDA | $7.4 million | $2.5 million | +196% | | THP Net Loss | $(5.4) million | $(2.6) million | +107.7% (Worsening) | | THP Segment Adjusted EBITDA | $(4.1) million | $(1.6) million | +156.3% (Worsening) | [Management Commentary & Strategic Initiatives](index=1&type=section&id=Management%20Commentary%20%26%20Strategic%20Initiatives) Management expressed satisfaction with the Sanara Surgical segment's impressive revenue growth, driven by commercial strategy execution and product demand. Concurrently, the company initiated a formal process to evaluate strategic alternatives for its Tissue Health Plus (THP) subsidiary to maximize shareholder value, despite launching a pilot program for THP and planning continued investment in the near term - Sanara Surgical segment delivered **28% year-over-year revenue growth in Q2 2025**, fueled by sales of CellerateRX Surgical, BIASURGE, and bone fusion products. This performance was driven by expanding the distributor network, adding new healthcare facilities, and penetrating existing accounts[4](index=4&type=chunk) - The Sanara Surgical segment enhanced gross margins and realized significant operating expense leverage, generating **$0.5 million of net income** and **$4.7 million of Segment Adjusted EBITDA in Q2 2025**, with strong year-over-year improvements[4](index=4&type=chunk) - For the THP segment, a pilot program with a wound care provider group was launched in late June 2025. The company initiated a formal process to evaluate strategic alternatives for Tissue Health Plus, LLC, with the goal of maximizing shareholder value, engaging a strategic advisor. Cash investment in THP is projected to be between **$5.5 million and $6.5 million in the second half of 2025**[6](index=6&type=chunk) [Second Quarter 2025 Financial Performance](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Net revenue for the second quarter of 2025 increased by 28% year-over-year, primarily driven by strong sales growth in both soft tissue repair products and bone fusion products [Revenue Analysis (Q2 2025)](index=2&type=section&id=Revenue%20Analysis%20(Q2%202025)) Net revenue for the second quarter of 2025 increased by 28% year-over-year, primarily driven by strong sales growth in both soft tissue repair products and bone fusion products Q2 2025 Revenue Streams | Revenue Stream | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :--------- | | Soft tissue repair products | $22,661,457 | $17,641,318 | $5,020,139 | +28% | | Bone fusion products | $3,142,795 | $2,516,599 | $626,196 | +25% | | SaaS | $26,582 | $- | $26,582 | N/A | | Royalties | $- | $906 | $(906) | -100% | | **Total Net Revenue** | **$25,830,834** | **$20,158,823** | **$5,672,011** | **+28%** | - The increase in soft tissue repair product sales was primarily due to increased demand for CellerateRX Surgical Activated Collagen and BIASURGE Advanced Surgical Solution, resulting from increased penetration of existing medical facilities, expansion into additional facilities, and development of the independent distribution network[8](index=8&type=chunk) [Gross Profit and Margin (Q2 2025)](index=2&type=section&id=Gross%20Profit%20and%20Margin%20(Q2%202025)) Gross profit increased by 32% year-over-year in Q2 2025, with gross margin improving to 93% of net revenue, driven by higher sales of soft tissue repair products and reduced manufacturing costs Q2 2025 Gross Profit and Margin | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :----------- | :------------- | :------------- | :----------- | :--------- | | Gross Profit | $23.9 million | $18.2 million | $5.7 million | +32% | | Gross Margin | 93% | 90% | +3 pp | N/A | - The higher gross margin in Q2 2025 was attributed to increased sales of soft tissue repair products and lower manufacturing costs related to CellerateRX Surgical[9](index=9&type=chunk) [Operating Expenses (Q2 2025)](index=2&type=section&id=Operating%20Expenses%20(Q2%202025)) Operating expenses for Q2 2025 increased by 14% year-over-year, primarily due to higher selling, general and administrative (SG&A) expenses, particularly in direct sales and marketing and the THP segment, alongside increased research and development (R&D) investments Q2 2025 Operating Expenses | Expense Category | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :---------------------------- | :------------- | :------------- | :----------- | :--------- | | Total Operating Expenses | $23.9 million | $21.0 million | $2.9 million | +14% | | Selling, General and Administrative (SG&A) | $21.6 million | $19.0 million | $2.6 million | +14% | | Research and Development (R&D) | $1.3 million | $1.0 million | $0.3 million | +28% | - The increase in SG&A was primarily driven by a **$1.5 million increase in direct sales and marketing expenses** and **$1.3 million of additional SG&A in the THP segment**, partially offset by **$0.2 million of lower costs in the Sanara Surgical segment**[10](index=10&type=chunk) - The increase in R&D was due in part to the development of enhancements to the Sanara Surgical product portfolio[10](index=10&type=chunk) [Operating Loss, Other Expense, and Net Loss (Q2 2025)](index=3&type=section&id=Operating%20Loss%2C%20Other%20Expense%2C%20and%20Net%20Loss%20(Q2%202025)) The company significantly reduced its operating loss and net loss in Q2 2025 compared to the prior year, with the Sanara Surgical segment achieving net income. However, other expenses increased due to higher interest costs Q2 2025 Operating Loss, Other Expense, and Net Loss | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :----------- | :--------- | | Operating Loss | $(31) thousand | $(2.9) million | $2.8 million | -98.9% (Improvement) | | Other Expense | $(2.0) million | $(0.6) million | $(1.4) million | +233.3% (Worsening) | | Net Loss | $(2.0) million | $(3.5) million | $1.5 million | -42.9% (Improvement) | | Sanara Surgical Net Income (Loss) | $0.5 million | $(2.2) million | $2.7 million | N/A (Improvement) | | THP Net Loss | $(2.5) million | $(1.3) million | $(1.2) million | +92.3% (Worsening) | - Other expense for Q2 2025 primarily included higher interest expense and fees related to the CRG Term Loan Agreement[11](index=11&type=chunk) [Adjusted EBITDA (Q2 2025)](index=3&type=section&id=Adjusted%20EBITDA%20(Q2%202025)) Adjusted EBITDA for Q2 2025 saw substantial growth, driven by strong performance in the Sanara Surgical segment, while the THP segment continued to report negative Adjusted EBITDA Q2 2025 Adjusted EBITDA by Segment | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :----------- | :--------- | | Adjusted EBITDA (Consolidated) | $2.7 million | $0.6 million | $2.1 million | +350% | | Sanara Surgical Segment Adjusted EBITDA | $4.7 million | $1.4 million | $3.3 million | +235.7% | | THP Segment Adjusted EBITDA | $(2.1) million | $(0.8) million | $(1.3) million | +162.5% (Worsening) | [Cash Flow and Balance Sheet Snapshot (Q2 2025)](index=3&type=section&id=Cash%20Flow%20and%20Balance%20Sheet%20Snapshot%20(Q2%202025)) The company generated positive cash flow from operating activities in Q2 2025, a significant improvement from the prior year. Cash balance increased, but long-term debt also rose, with available borrowing capacity noted Q2 2025 Cash Flow from Operating Activities | Metric | Q2 2025 | Q2 2024 | Change ($) | | :----------------------------------- | :------------- | :------------- | :----------- | | Cash flow from operating activities | $2.7 million provided | $1.4 million used | $4.1 million (Improvement) | Balance Sheet Snapshot (as of June 30, 2025) | Metric | June 30, 2025 | Dec 31, 2024 | Change ($) | | :--------------- | :------------- | :------------- | :----------- | | Cash | $17.0 million | $15.9 million | $1.1 million | | Long-term debt | $44.2 million | $30.7 million | $13.5 million | | Available borrowing capacity | $12.25 million | N/A | N/A | - The **$12.25 million of available borrowing capacity** must be borrowed prior to December 31, 2025, if at all[14](index=14&type=chunk) [First Six Months 2025 Financial Performance](index=3&type=section&id=First%20Six%20Months%202025%20Financial%20Performance) Net revenue for the first six months of 2025 increased by 27% year-over-year, driven by strong sales growth in both soft tissue repair products and bone fusion products [Revenue Analysis (YTD 2025)](index=3&type=section&id=Revenue%20Analysis%20(YTD%202025)) Net revenue for the first six months of 2025 increased by 27% year-over-year, driven by strong sales growth in both soft tissue repair products and bone fusion products YTD 2025 Revenue Streams | Revenue Stream | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :--------- | | Soft tissue repair products | $43,193,897 | $33,723,610 | $9,470,287 | +28% | | Bone fusion products | $6,044,451 | $4,970,945 | $1,073,506 | +22% | | SaaS | $26,582 | $- | $26,582 | N/A | | Royalties | $- | $906 | $(906) | -100% | | **Total Net Revenue** | **$49,264,930** | **$38,695,461** | **$10,569,469** | **+27%** | [Net Loss (YTD 2025)](index=3&type=section&id=Net%20Loss%20(YTD%202025)) The company's consolidated net loss for the first six months of 2025 slightly increased year-over-year, primarily due to increased losses in the THP segment, despite improved performance in the Sanara Surgical segment YTD 2025 Net Loss by Segment | Metric | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :----------- | :--------- | | Net Loss (Consolidated) | $(5.5) million | $(5.3) million | $(0.2) million | +3.8% (Worsening) | | Sanara Surgical Net Loss | $(0.1) million | $(2.7) million | $2.6 million | -96.3% (Improvement) | | THP Net Loss | $(5.4) million | $(2.6) million | $(2.8) million | +107.7% (Worsening) | [Adjusted EBITDA (YTD 2025)](index=3&type=section&id=Adjusted%20EBITDA%20(YTD%202025)) Adjusted EBITDA for the first six months of 2025 showed substantial improvement, driven by the Sanara Surgical segment, while the THP segment's negative Adjusted EBITDA widened YTD 2025 Adjusted EBITDA by Segment | Metric | YTD 2025 | YTD 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :----------- | :--------- | | Adjusted EBITDA (Consolidated) | $3.3 million | $0.9 million | $2.4 million | +266.7% | | Sanara Surgical Segment Adjusted EBITDA | $7.4 million | $2.5 million | $4.9 million | +196% | | THP Segment Adjusted EBITDA | $(4.1) million | $(1.6) million | $(2.5) million | +156.3% (Worsening) | [Cash Flow from Operations (YTD 2025)](index=3&type=section&id=Cash%20Flow%20from%20Operations%20(YTD%202025)) The company generated positive cash flow from operating activities for the first six months of 2025, a significant improvement from cash used in the prior year period YTD 2025 Cash Flow from Operating Activities | Metric | YTD 2025 | YTD 2024 | | :----------------------------------- | :------------- | :------------- | | Net cash provided by (used in) operating activities | $0.7 million provided | $(3.0) million used | | Net cash used in investing activities | $(9.1) million used | $(0.1) million used | | Net cash provided by financing activities | $9.5 million provided | $4.1 million provided | | Net increase in cash | $1.1 million | $1.0 million | | Cash, end of period | $17.0 million | $6.2 million | - Significant investing activities in YTD 2025 included purchases of property and equipment (**$3.48 million**), investment in equity securities (**$3.54 million**), and the CarePICS acquisition (**$2.12 million**)[30](index=30&type=chunk) - Financing activities in YTD 2025 were primarily driven by loan proceeds, net of debt issuance costs, totaling **$12.02 million**[30](index=30&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) This section provides background on Sanara MedTech Inc., details of its Q2 2025 conference call, information regarding forward-looking statements, and investor relations contact details [About Sanara MedTech Inc.](index=4&type=section&id=About%20Sanara%20MedTech%20Inc.) Sanara MedTech Inc. is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic wound, and skin markets. The company offers a diverse portfolio of surgical, wound, and skin products, primarily in North America, and maintains a pipeline of innovative product candidates - Sanara MedTech Inc. is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic wound and skin markets[21](index=21&type=chunk) - The company markets and distributes surgical products including CellerateRX Surgical, FORTIFY TRG, FORTIFY FLOWABLE, ACTIGEN, ALLOCYTE Plus, BiFORM, TEXAGEN, and BIASURGE. Wound care products include BIAKŌS® Antimicrobial Skin and Wound Cleanser, Wound Gel, and Irrigation Solution[21](index=21&type=chunk) - Sanara's pipeline includes product candidates for mitigation of opportunistic pathogens and biofilm, wound re-epithelialization and closure, necrotic tissue debridement, and cell compatible substrates. The company actively seeks long-term strategic partnerships for products that improve outcomes at a lower overall cost[21](index=21&type=chunk) [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) Sanara MedTech hosted a conference call on August 13, 2025, to discuss its second quarter 2025 financial results, with options for live teleconference, replay, and webcast - A conference call was held on Wednesday, August 13, 2025, at **8:00 a.m. Eastern Time** to discuss Q2 2025 results[19](index=19&type=chunk) - A telephonic replay was available through Wednesday, August 27, 2025, and a live webcast and online replay are available on the Company's Investor Relations website[19](index=19&type=chunk)[20](index=20&type=chunk) [Information about Forward-Looking Statements](index=4&type=section&id=Information%20about%20Forward-Looking%20Statements) The press release contains forward-looking statements, which are subject to various risks, contingencies, and uncertainties that could cause actual results to differ materially. The company disclaims any obligation to revise these statements unless required by applicable securities laws - Statements in the press release that do not constitute historical facts are 'forward-looking statements' under the Private Securities Litigation Reform Act of 1995, identifiable by terms such as 'aims,' 'anticipates,' 'believes,' 'expect,' etc[22](index=22&type=chunk) - These statements involve risks and uncertainties, including those related to new product development and regulatory approval, executive team building, utilization of loan proceeds, product demand, market acceptance, economic conditions, competition, pricing, acquisitions, and other risks detailed in SEC filings[22](index=22&type=chunk) - All forward-looking statements are made as of their date, and the Company undertakes no obligation to revise them to reflect future circumstances or unanticipated events, except as required by applicable securities laws[23](index=23&type=chunk) [Investor Relations Contact](index=4&type=section&id=Investor%20Relations%20Contact) Contact information for investor relations inquiries is provided - Investor Relations Contact: Jack Powell or Mike Piccinino, CFA, ICR Healthcare, via email at IR@sanaramedtech.com[24](index=24&type=chunk) [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, and statements of cash flows, for Sanara MedTech Inc [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show an increase in total assets and total liabilities as of June 30, 2025, compared to December 31, 2024, primarily driven by higher long-term debt, while total shareholders' equity decreased Consolidated Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash | $16,958,744 | $15,878,295 | | Total current assets | $33,669,456 | $33,305,988 | | Total long-term assets | $65,098,189 | $54,786,004 | | **Total assets** | **$98,767,645** | **$88,091,992** | | Total current liabilities | $14,875,844 | $15,290,071 | | Long-term debt | $44,216,662 | $30,689,290 | | Total long-term liabilities | $48,499,855 | $33,889,959 | | **Total liabilities** | **$63,375,699** | **$49,180,030** | | Total shareholders' equity | $35,391,946 | $38,911,962 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations show improved net revenue and gross profit for both the three and six months ended June 30, 2025. Operating loss and net loss decreased significantly in Q2 2025, but the net loss for the six-month period slightly increased year-over-year Consolidated Statements of Operations Highlights | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :----------------------------------- | :------------- | :------------- | :------------- | :------------- | | Net Revenue | $25,830,834 | $20,158,823 | $49,264,930 | $38,695,461 | | Gross profit | $23,893,552 | $18,150,137 | $45,492,681 | $34,796,729 | | Total operating expenses | $23,924,900 | $21,034,993 | $47,604,058 | $39,213,292 | | Operating loss | $(31,348) | $(2,884,856) | $(2,111,377) | $(4,416,563) | | Total other income (expense) | $(1,987,050) | $(644,346) | $(3,434,404) | $(911,682) | | Net loss | $(2,018,398) | $(3,529,202) | $(5,545,781) | $(5,328,245) | | Net loss attributable to Sanara MedTech shareholders | $(2,014,362) | $(3,504,014) | $(5,541,539) | $(5,268,198) | | Net loss per share, basic and diluted | $(0.23) | $(0.41) | $(0.64) | $(0.62) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows for the first six months of 2025 show a significant improvement in cash provided by operating activities, moving from a net cash used position in the prior year. However, cash used in investing activities increased substantially, while cash provided by financing activities also rose Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | YTD 2025 | YTD 2024 | | :----------------------------------- | :------------- | :------------- | | Net cash provided by (used in) operating activities | $665,127 | $(3,006,300) | | Net cash used in investing activities | $(9,107,823) | $(124,580) | | Net cash provided by financing activities | $9,523,145 | $4,134,039 | | Net increase in cash | $1,080,449 | $1,003,159 | | Cash, end of period | $16,958,744 | $6,150,375 | - Significant investing activities in YTD 2025 included purchases of property and equipment (**$3.48 million**), investment in equity securities (**$3.54 million**), and the CarePICS acquisition (**$2.12 million**)[30](index=30&type=chunk) - Financing activities in YTD 2025 were primarily driven by loan proceeds, net of debt issuance costs, totaling **$12.02 million**[30](index=30&type=chunk) [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) This section explains Sanara MedTech's use of non-GAAP financial measures and provides detailed reconciliations to their most directly comparable GAAP financial measures [Explanation of Non-GAAP Measures](index=8&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Sanara MedTech utilizes non-GAAP financial measures, Adjusted EBITDA and Segment Adjusted EBITDA, to provide investors with a clearer view of its core business operations and facilitate consistent comparisons across periods. These measures exclude specific non-cash or non-recurring items, but the company emphasizes they are not a substitute for GAAP measures and have inherent limitations - Adjusted EBITDA and Segment Adjusted EBITDA are non-GAAP financial measures used by management to assess and communicate the Company's financial performance, facilitating comparisons of core business operations across periods on a consistent basis[32](index=32&type=chunk)[33](index=33&type=chunk) - Adjusted EBITDA is defined as net income (loss) excluding interest expense/income, income taxes, depreciation and amortization, non-cash share-based compensation, change in fair value of earnout liabilities, share of losses from equity method investments, executive separation costs, legal and diligence expenses related to acquisitions, and gains/losses on property disposal[32](index=32&type=chunk) - These non-GAAP measures are not in accordance with, nor an alternative for, GAAP, may differ from other companies' measures, and should not be considered in isolation. The company provides reconciliations to the most directly comparable GAAP financial measures[34](index=34&type=chunk) [Reconciliation of Net Income (Loss) to Segment Adjusted EBITDA and Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Segment%20Adjusted%20EBITDA%20and%20Adjusted%20EBITDA) The company provides detailed reconciliations of Net Income (Loss) to Adjusted EBITDA and Segment Adjusted EBITDA for the three months, six months, and trailing twelve months ended June 30, 2025 and 2024, outlining the specific adjustments made from GAAP figures Q2 2025 Reconciliation of Net Income (Loss) to Segment Adjusted EBITDA and Adjusted EBITDA | Metric | Sanara Surgical | THP | Total | | :----------------------------------- | :-------------- | :-------------- | :-------------- | | Net Income (Loss) | $507,280 | $(2,525,678) | $(2,018,398) | | Adjustments: | | | | | Interest expense | $1,791,568 | $- | $1,791,568 | | Depreciation and amortization | $681,525 | $432,706 | $1,114,231 | | Noncash share-based compensation | $1,278,871 | $26,394 | $1,305,265 | | Change in fair value of earnout liabilities | $- | $- | $- | | Share of losses from equity method investments | $195,482 | $- | $195,482 | | Executive separation costs | $260,275 | $- | $260,275 | | Acquisition costs | $4,826 | $11,591 | $16,417 | | **Segment Adjusted EBITDA / Adjusted EBITDA** | **$4,719,827** | **$(2,054,987)** | **$2,664,840** | | Net revenue | $25,804,252 | $26,582 | $25,830,834 | | Net Income (Loss) as a % of Net Revenue | 2.0% | (9501.5)% | (7.8)% | | Segment Adjusted EBITDA as a % of Net Revenue | 18.3% | (7730.7)% | 10.3% | YTD 2025 Reconciliation of Net Income (Loss) to Segment Adjusted EBITDA and Adjusted EBITDA | Metric | Sanara Surgical | THP | Total | | :----------------------------------- | :-------------- | :-------------- | :-------------- | | Net Loss | $(107,825) | $(5,437,956) | $(5,545,781) | | Adjustments: | | | | | Interest expense | $3,108,660 | $- | $3,108,660 | | Depreciation and amortization | $1,370,096 | $868,545 | $2,238,641 | | Noncash share-based compensation | $2,454,367 | $155,802 | $2,610,169 | | Change in fair value of earnout liabilities | $- | $- | $- | | 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 | $260,275 | $- | $260,275 | | Acquisition costs | $4,826 | $320,274 | $325,100 | | **Segment Adjusted EBITDA / Adjusted EBITDA** | **$7,414,885** | **$(4,092,077)** | **$3,322,808** | | Net revenue | $49,238,348 | $26,582 | $49,264,930 | | Net Loss as a % of Net Revenue | (0.2)% | (20457.3)% | (11.3)% | | Segment Adjusted EBITDA as a % of Net Revenue | 15.1% | (15394.2)% | 6.7% | Trailing Twelve Months Ended June 30, 2025 Reconciliation of Net Income (Loss) to Segment Adjusted EBITDA and Adjusted EBITDA | Metric | Sanara Surgical | THP | Total | | :----------------------------------- | :-------------- | :-------------- | :-------------- | | Net (Income) Loss | $646,391 | $(10,775,824) | $(10,129,433) | | Adjustments: | | | | | Interest expense | $5,325,373 | $- | $5,325,373 | | Depreciation and amortization | $2,759,016 | $2,191,922 | $4,950,938 | | Noncash share-based compensation | $4,623,438 | $207,847 | $4,831,285 | | Change in fair value of earnout liabilities | $- | $(1,859,000) | $(1,859,000) | | Share of losses from equity method investments | $429,097 | $- | $429,097 | | (Gain) loss on disposal of property and equipment | $(10,932) | $1,258 | $(9,674) | | Interest income | $(25,650) | $- | $(25,650) | | Executive separation costs | $319,960 | $- | $319,960 | | Acquisition costs | $(35,234) | $1,312,850 | $1,277,616 | | **Segment Adjusted EBITDA / Adjusted EBITDA** | **$14,031,459** | **$(8,920,947)** | **$5,110,512** | | Net revenue | $97,215,313 | $26,582 | $97,241,895 | | Net Income (Loss) as a % of Net Revenue | 0.7% | (40538.0)% | (10.4)% | | Segment Adjusted EBITDA as a % of Net Revenue | 14.4% | (33560.1)% | 5.3% |

Core Insights - Sanara MedTech Inc. reported a 28% year-over-year increase in net revenue for Q2 2025, reaching $25.8 million, driven by strong sales in its Sanara Surgical segment [5][8] - The company is evaluating strategic alternatives for its subsidiary, Tissue Health Plus, LLC, to maximize shareholder value while continuing to invest in its technology platform [4][12] Financial Performance - Q2 2025 net revenue increased to $25.8 million from $20.2 million in Q2 2024, a growth of $5.7 million or 28% [5][8] - For the first six months of 2025, net revenue rose 27% year-over-year to $49.3 million, compared to $38.7 million in the same period of 2024 [15] - The company reported a net loss of $2.0 million in Q2 2025, an improvement from a net loss of $3.5 million in Q2 2024 [12][16] - Adjusted EBITDA for Q2 2025 was $2.7 million, compared to $0.6 million in Q2 2024 [13] Segment Performance - The Sanara Surgical segment achieved a net income of $0.5 million in Q2 2025, a significant improvement from a net loss of $2.2 million in Q2 2024 [12] - The Tissue Health Plus segment reported a net loss of $2.5 million in Q2 2025, compared to a net loss of $1.3 million in Q2 2024 [12] - For the first six months of 2025, the Sanara Surgical segment generated Segment Adjusted EBITDA of $7.4 million, up from $2.5 million in the same period of 2024 [17] Revenue Breakdown - Sales of soft tissue repair products contributed $22.7 million in Q2 2025, up from $17.6 million in Q2 2024, marking a 28% increase [7][8] - Bone fusion products sales increased to $3.1 million in Q2 2025, a 25% rise from $2.5 million in Q2 2024 [7][8] Operating Expenses - Operating expenses for Q2 2025 were $23.9 million, an increase of 14% from $21.0 million in Q2 2024, primarily due to higher selling, general, and administrative expenses [10] - The gross profit for Q2 2025 was $23.9 million, reflecting a gross margin of 93%, up from 90% in Q2 2024 [9] Cash Flow and Debt - Cash flow from operating activities in Q2 2025 was $2.7 million, compared to cash used in operating activities of $1.4 million in Q2 2024 [14] - As of June 30, 2025, the company had $17.0 million in cash and $44.2 million in long-term debt, compared to $15.9 million and $30.7 million, respectively, at the end of 2024 [14]

Core Viewpoint - Sanara MedTech Inc. is set to report its second quarter 2025 financial results on August 13, 2025, focusing on transformative technologies in the medical field to enhance clinical outcomes and reduce healthcare costs [1][4]. Financial Results Announcement - The financial results for the quarter ending June 30, 2025, will be discussed in a conference call and webcast scheduled for August 13, 2025, at 8:00 a.m. Eastern Time [2]. - A toll-free number for the teleconference is provided, along with details for international callers and a replay option available until August 27, 2025 [2]. Company Overview - Sanara MedTech Inc. specializes in developing and commercializing technologies aimed at improving clinical outcomes in surgical, chronic wound, and skin markets [4]. - The company markets a range of products including CellerateRX Surgical Activated Collagen and FORTIFY TRG Tissue Repair Graft, primarily in the North American advanced wound care and surgical tissue repair markets [4]. - Sanara's product pipeline includes innovative candidates targeting opportunistic pathogens, wound healing, and tissue debridement, with a commitment to meeting quality and regulatory standards [4].

Core Insights - Sanara MedTech Inc. has launched a pilot program through its subsidiary Tissue Health Plus (THP) aimed at providing value-based wound care solutions for chronic wounds across six states [1][2] - The THP technology platform will serve as a Wound Care Operating System for a provider group, utilizing Co-Pilot software to standardize patient care and streamline administrative processes [2] - The pilot program is expected to validate and optimize the THP technology platform through real-world patient encounters, with plans for expansion to additional practitioners and locations [2] Company Overview - Sanara MedTech Inc. focuses on developing and commercializing technologies to improve clinical outcomes and reduce healthcare costs in surgical and chronic wound markets [4] - The company markets a range of surgical and wound care products primarily in the North American market, including CellerateRX Surgical Activated Collagen and various antimicrobial solutions [4][5] - THP aims to transform the $100+ billion wound care market by addressing gaps in chronic wound care, with a goal of improving healing rates to over 85% and reducing total care costs by more than 25% [3] Technology and Innovation - THP's platform combines AI-powered clinical decision support, virtual care coordination, and an integrated provider network to deliver personalized wound care [3] - The pilot program is part of a broader strategy to engage with payers and financial partners to support the implementation of THP's value-based care solutions [2][3]

Company Overview - Sanara MedTech's market capitalization is $2782 million, based on 89 million common shares outstanding as of May 14, 2025, and a share price of $3130[9] - The company's net revenue for the trailing twelve months (TTM) is $916 million, with a net loss of $116 million and an adjusted EBITDA of $30 million[9] - Sanara MedTech operates through two business segments: Sanara Surgical and Tissue Health Plus[9] Sanara Surgical Segment - The relevant surgical solutions market opportunity is $10 billion[7, 13] - Sanara Surgical achieved $867 million in net revenue in 2024, representing a 33% year-over-year growth[23] - The segment has expanded its distribution network to over 350 distributors, a 40% increase year-over-year, and has access to over 4,000 hospital access points, a 33% increase year-over-year[23] Tissue Health Plus Segment - The chronic wound care market represents a $100 billion+ annual expenditure[12, 48] - The Tissue Health Plus segment is targeting a $115-$277 billion total addressable market (TAM) within the Medicare Advantage segment, focusing on 308 million wound patients[52] - The company estimates that 40-66% healing rates for chronic wounds (vs 90%+ potential)[46] Financial Performance - Sanara MedTech's net revenue for Q1 2025 was $234 million, a 26% increase year-over-year compared to $185 million in Q1 2024[56, 57, 72] - Consolidated adjusted EBITDA for Q1 2025 was $07 million, a 111% increase year-over-year[59] - For the full year 2024, Sanara Surgical's adjusted EBITDA increased by 73% year-over-year[62]

Group 1 - Sanara MedTech (SMTI) shares have faced pressure this year despite strong growth and improving profitability in the Surgical segment, primarily due to concerns over rising debt levels [1] - The company operates in a sector that is often under-researched, focusing on small to mid-cap companies with potential asymmetric investment opportunities [1] Group 2 - The article reflects the author's personal investment experience and analysis, emphasizing the importance of thorough research in identifying market-beating returns [1]

Part I – Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Sanara MedTech Inc.'s unaudited consolidated financial statements for the quarter ended March 31, 2025, including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with detailed notes on accounting policies, debt, equity investments, and segment reporting [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20%28Unaudited%29%20and%20December%2031%2C%202024) The Consolidated Balance Sheets show an increase in total assets and liabilities from December 31, 2024, to March 31, 2025, primarily driven by higher cash, intangible assets, and long-term debt, while total shareholders' equity decreased Consolidated Balance Sheets (USD) | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | Change (USD) | % Change | | :-------------------------------- | :------------- | :---------------- | :----- | :------- | | Total Assets | $96,378,581 | $88,091,992 | $8,286,589 | 9.41% | | Total Liabilities | $59,711,004 | $49,180,030 | $10,530,974 | 21.41% | | Total Shareholders' Equity | $36,667,577 | $38,911,962 | $(2,244,385) | -5.77% | | Cash | $20,687,806 | $15,878,295 | $4,809,511 | 30.29% | | Intangible assets, net | $42,013,997 | $41,006,776 | $1,007,221 | 2.46% | | Long-term debt | $43,402,223 | $30,689,290 | $12,712,933 | 41.42% | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20%28Unaudited%29%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) The company reported a significant increase in net revenue and gross profit for Q1 2025 compared to Q1 2024, but also experienced a higher net loss due to increased operating expenses, particularly selling, general and administrative costs, and a substantial rise in interest expense Consolidated Statements of Operations (USD) | Metric | Three Months Ended March 31, 2025 (USD) | Three Months Ended March 31, 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Net Revenue | $23,434,096 | $18,536,638 | $4,897,458 | 26.42% | | Cost of goods sold | $1,834,967 | $1,890,046 | $(55,079) | -2.91% | | Gross profit | $21,599,129 | $16,646,592 | $4,952,537 | 29.75% | | Selling, general and administrative | $21,440,610 | $16,192,259 | $5,248,351 | 32.41% | | Research and development | $1,114,138 | $946,298 | $167,840 | 17.74% | | Operating loss | $(2,080,029) | $(1,531,707) | $(548,322) | 35.79% | | Interest expense | $(1,317,092) | $(267,336) | $(1,049,756) | 392.67% | | Net loss attributable to Sanara MedTech shareholders | $(3,527,177) | $(1,764,184) | $(1,762,993) | 99.93% | | Net loss per share, basic and diluted | $(0.41) | $(0.21) | $(0.20) | 95.24% | [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%28Unaudited%29%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) **Shareholders' equity** **decreased** from **$38.9 million** at **December 31, 2024**, to **$36.7 million** at **March 31, 2025**, **primarily due to** a **net loss** of **$3.5 million**, **partially offset by** **$1.3 million** in **share-based compensation** Consolidated Statements of Changes in Shareholders' Equity (USD) | Metric | Balance at December 31, 2024 (USD) | Balance at March 31, 2025 (USD) | Change (USD) | | :-------------------------------- | :--------------------------- | :------------------------ | :----- | | Total Shareholders' Equity | $38,911,962 | $36,667,577 | $(2,244,385) | | Accumulated Deficit | $(37,784,392) | $(41,311,569) | $(3,527,177) | | Share-based compensation | - | $1,304,904 | $1,304,904 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) **Net cash used** in operating activities **increased** to **$2.0 million** in **Q1 2025** from **$1.6 million** in **Q1 2024**. Investing activities **used** **$5.2 million**, **primarily due to** equity investments and property/equipment, while financing activities **provided** **$12.0 million**, **mainly from** loan proceeds Cash Flow Activity (USD) | Cash Flow Activity | Three Months Ended March 31, 2025 (USD) | Three Months Ended March 31, 2024 (USD) | Change (USD) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(1,998,884) | $(1,594,370) | $(404,514) | | Net cash used in investing activities | $(5,179,855) | $(65,818) | $(5,114,037) | | Net cash provided by (used in) financing activities | $11,988,250 | $(658,794) | $12,647,044 | | Net increase (decrease) in cash | $4,809,511 | $(2,318,982) | $7,128,493 | | Cash, end of period | $20,687,806 | $2,828,234 | $17,859,572 | - **Cash used** in investing activities in **Q1 2025** included **$3.5 million** for a **minority investment** in BMI and **$1.7 million** for **capitalizing** THP technology platform development costs[232](index=232&type=chunk) - The **increase** in **cash** from financing activities in **Q1 2025** was **primarily due to** proceeds from the CRG **Term Loan**[233](index=233&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's accounting policies, financial instruments, debt, equity investments, and segment reporting, offering context to the unaudited consolidated financial statements [Note 1 – Nature of Business and Background](index=9&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20BUSINESS%20AND%20BACKGROUND) Sanara MedTech Inc. is a medical technology company focused on surgical, chronic wound, and skincare markets, operating through two reportable segments: Sanara Surgical and Tissue Health Plus (THP), with a segment change in Q2 2024 to reflect growing investment in value-based wound care - Sanara MedTech operates in surgical, chronic wound, and skincare markets[21](index=21&type=chunk) - The company has two reportable segments: Sanara Surgical and Tissue Health Plus (THP)[22](index=22&type=chunk) - Sanara Surgical markets soft tissue repair and bone fusion products, including CellerateRX Surgical and BIASURGE Advanced Surgical Solution[23](index=23&type=chunk) - THP focuses on a value-based wound care program for payers and risk-bearing entities, with a pilot program launching in **Q2 2025**[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=10&type=section&id=NOTE%202%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting policies, including principles of consolidation, use of estimates, revenue recognition, inventory valuation, and treatment of long-lived assets, goodwill, intangible assets, and equity investments, also detailing recently adopted and issued accounting pronouncements - **Revenue** is recognized when control of goods or services is transferred to the customer, **primarily from** product sales[34](index=34&type=chunk)[38](index=38&type=chunk) Revenue Streams (Three Months Ended March 31) (USD) | Product Category | 2025 (USD) | 2024 (USD) | | :----------------------- | :----------- | :----------- | | Soft tissue repair products | $20,532,440 | $16,082,292 | | Bone fusion products | $2,901,656 | $2,454,346 | | **Total Net Revenue** | **$23,434,096** | **$18,536,638** | - The company **capitalizes costs incurred** during the application development stage for internal use software, specifically for the THP platform, with approximately **$1.7 million** **capitalized** as of **March 31, 2025**[46](index=46&type=chunk)[48](index=48&type=chunk) - **Goodwill**, **primarily from** the Scendia acquisition, is tested annually for impairment; no impairment was recorded in **Q1 2025** or **Q1 2024**[49](index=49&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) **effective** **Q1 2025**, which did not **materially impact** financial position, results of operations, or cash flows[65](index=65&type=chunk) [Note 3 – Convertible Loan Receivable](index=16&type=section&id=NOTE%203%20%E2%80%93%20CONVERTIBLE%20LOAN%20RECEIVABLE) A convertible loan of **$1,101,478** (including accrued interest) to Biomimetic Innovations Limited (BMI) as of **December 31, 2024**, was converted into **equity** of BMI on **January 16, 2025**, resulting in a zero loan balance by **March 31, 2025** - **Convertible loan receivable** to BMI was **$1,101,478** as of **December 31, 2024**[68](index=68&type=chunk) - The loan was converted into **equity** of BMI on **January 16, 2025**, reducing the balance to zero by **March 31, 2025**[68](index=68&type=chunk) [Note 4 – Goodwill and Intangibles, Net](index=16&type=section&id=NOTE%204%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLES%2C%20NET) **Goodwill** remained constant at **$3.6 million**, entirely within the Sanara Surgical segment, with no impairment recorded. **Total amortizable intangible assets increased** to **$42.0 million** as of **March 31, 2025**, from **$41.0 million** at **December 31, 2024**, **primarily due to** an **increase** in licenses Goodwill Carrying Amount (USD) | Date | Amount (USD) | | :----------------------- | :----------- | | December 31, 2023 | $3,601,781 | | December 31, 2024 | $3,601,781 | | March 31, 2025 | $3,601,781 | Intangible Assets, Net (USD) | Category | March 31, 2025 (Net) (USD) | December 31, 2024 (Net) (USD) | Change (USD) | | :----------------------- | :------------------- | :-------------------- | :----- | | Patents and Other IP | $32,439,841 | $33,000,384 | $(560,543) | | Customer relationships and other | $4,647,297 | $4,941,181 | $(293,884) | | Licenses | $4,926,859 | $3,065,211 | $1,861,648 | | **Total** | **$42,013,997** | **$41,006,776** | **$1,007,221** | - **Amortization expense** for intangible assets was **$1,078,152** for **Q1 2025**, **up from** **$972,451** for **Q1 2024**[70](index=70&type=chunk) [Note 5 – Investments in Equity Securities](index=17&type=section&id=NOTE%205%20%E2%80%93%20INVESTMENTS%20IN%20EQUITY%20SECURITIES) The company holds **equity investments** in privately held companies, including DirectDerm (**cost method**), ChemoMouthpiece, SI Technologies, and BMI (**equity method**), with significant changes including the conversion of a BMI loan into **equity** and the reclassification of Pixalere shares as an intangible asset - The company's **investment** in Pixalere Healthcare Inc. shares was reclassified as an intangible asset for an amended license agreement, and Pixalere Canada's **equity** ownership in Pixalere USA was redeemed, **effective** **January 2, 2025**[74](index=74&type=chunk)[75](index=75&type=chunk) - On **January 16, 2025**, the company made an initial cash **investment** of **€3.0 million** in BMI and converted a **€1.0 million** convertible loan, acquiring approximately **6.67% equity**, accounted for using the **equity method**[82](index=82&type=chunk)[83](index=83&type=chunk) Summary of Investments (USD) | Investment Type | March 31, 2025 (Carrying Amount) (USD) | December 31, 2024 (Carrying Amount) (USD) | | :-------------------------- | :------------------------------- | :-------------------------------- | | **Equity Method Investments** | | | | ChemoMouthpiece, LLC | $5,098,210 | $5,172,242 | | SI Healthcare Technologies, LLC | $40,703 | $40,703 | | Biomimetic Innovations Limited | $4,551,370 | $- | | **Total Equity Method** | **$9,690,283** | **$5,212,945** | | **Cost Method Investments** | | | | Direct Dermatology, Inc. | $1,000,000 | $1,000,000 | | Pixalere Healthcare Inc. | $- | $2,084,278 | | **Total Cost Method** | **$1,000,000** | **$3,084,278** | | **Total Investments** | **$10,690,283** | **$8,297,223** | Share of Losses from Equity Method Investments (Three Months Ended March 31) (USD) | Investment | 2025 (USD) | 2024 (USD) | | :-------------------------- | :--------- | :--- | | ChemoMouthpiece, LLC | $(74,032) | $- | | Biomimetic Innovations Limited | $(69,576) | $- | | **Total** | **$(143,608)** | **$-** | [Note 6 – Operating Leases](index=20&type=section&id=NOTE%206%20%E2%80%93%20OPERATING%20LEASES) As of **March 31, 2025**, the company had ROU assets of **$1,173,851** and related lease liabilities of **$1,317,657** for office space, with a **weighted average remaining lease term** of **5.7 years** and a **discount rate** of **13.0%**. Lease expense for **Q1 2025** was **$131,568** - Operating lease ROU assets were **$1,173,851** and lease liabilities were **$1,317,657** as of **March 31, 2025**[89](index=89&type=chunk) - The **weighted average remaining lease term** was **5.7 years** and the **weighted average discount rate** was **13.0%** as of **March 31, 2025**[90](index=90&type=chunk) - Lease expense for the three months ended **March 31, 2025**, was **$131,568**[89](index=89&type=chunk) [Note 7 – Debt and Credit Facilities](index=21&type=section&id=NOTE%207%20%E2%80%93%20DEBT%20AND%20CREDIT%20FACILITIES) The company's **long-term debt**, **primarily from** the CRG **Term Loan**, **increased significantly** to **$43.4 million** as of **March 31, 2025**, from **$30.7 million** at **December 31, 2024**. The CRG **Term Loan**, totaling up to **$55.0 million**, bears **interest** at **13.25%** and has a maturity date of **May 30, 2029**, with **$12.25 million** available for future borrowing - The CRG **Term Loan** Agreement provides for a senior secured **term loan** of up to **$55.0 million**, with **$42.75 million** borrowed as of **March 31, 2025**[91](index=91&type=chunk)[94](index=94&type=chunk)[101](index=101&type=chunk) - The loan bears **interest** at **13.25%** per annum (**8.00%** cash, **5.25%** paid-in-kind) and matures on **May 30, 2029**[95](index=95&type=chunk) Outstanding Debt (Net of Debt Issuance Costs) (USD) | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | Change (USD) | | :-------------------------------- | :------------- | :---------------- | :----- | | CRG Term Loan | $42,750,000 | $30,500,000 | $12,250,000 | | Paid-in-kind interest | $1,250,289 | $838,965 | $411,324 | | Back-end fee | $534,165 | $358,086 | $176,079 | | Less: unamortized debt issuance costs | $(1,132,231) | $(1,007,761) | $(124,470) | | **Debt, net of debt issuance costs** | **$43,402,223** | **$30,689,290** | **$12,712,933** | - The company was in compliance with all debt covenants as of **March 31, 2025**, including maintaining liquidity above **$3.0 million** and meeting annual minimum **revenue** targets[102](index=102&type=chunk)[221](index=221&type=chunk) [Note 8 – Commitments and Contingencies](index=24&type=section&id=NOTE%208%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note details various license agreements for antimicrobial products (BIAKŌS, ABF, Debrider) with Rochal, an **exclusive license** and distribution agreement with BMI for trauma products, and acquisition-related **earnout liabilities**, including the Applied Asset Purchase, also covering a license agreement with Tufts University for collagen peptides - The company has **exclusive worldwide license agreements** with Rochal Industries, LLC for BIASURGE Advanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel, BIAKŌS Antimicrobial Skin and Wound Cleanser, CuraShield Antimicrobial Barrier Film, and a debrider for human medical use[104](index=104&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - Royalty expense under the BIAKŌS License Agreement was **$37,500** for **Q1 2025**, **up from** **$35,000** for **Q1 2024**[106](index=106&type=chunk) - On **January 16, 2025**, the company acquired **exclusive U.S. marketing, sales, and distribution rights** for BMI's OsStic and ARC products for trauma indications, with royalties of **3%** on OsStic **net sales** and annual minimum royalty payments[112](index=112&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - The Precision Healing merger **earnout liability** was reduced to zero as of **December 31, 2024**, as performance thresholds were deemed unachievable[120](index=120&type=chunk) - The Applied Asset Purchase includes an Applied **Earnout** of up to **$10.0 million**, payable in cash upon achievement of certain performance thresholds related to **net sales** of a collagen-based product[122](index=122&type=chunk) [Note 9 – Shareholders' Equity](index=28&type=section&id=NOTE%209%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) The company's 2014 LTIP terminated in **September 2024**, replaced by the 2024 LTIP with **1,000,000 shares** authorized. In **Q1 2025**, **149,857 restricted stock awards** were issued, resulting in **$1.3 million** in **share-based compensation expense**. **Unrecognized share-based compensation** totaled **$8.1 million** as of **March 31, 2025** - The 2014 LTIP terminated on **September 3, 2024**, and the 2024 LTIP was approved with **1,000,000 shares** available for awards[126](index=126&type=chunk)[127](index=127&type=chunk) - **149,857 restricted common stock shares** were issued in **Q1 2025**, with a fair value of **$5,186,608**[128](index=128&type=chunk) - **Share-based compensation expense** was **$1,304,904** for **Q1 2025**, compared to **$803,386** for **Q1 2024**[129](index=129&type=chunk) - **Total unrecognized share-based compensation expense** was **$8,146,923** as of **March 31, 2025**, to be recognized over a weighted-average period of **1.5 years**[129](index=129&type=chunk) [Note 10 – Related Parties](index=29&type=section&id=NOTE%2010%20%E2%80%93%20RELATED%20PARTIES) The company has ongoing material transactions with related parties, including product license agreements with Rochal, a consulting agreement with Ann Beal Salamone, a director of the company and Rochal, and a transaction advisory services agreement with Catalyst - The company has **exclusive worldwide license agreements** with Rochal Industries, LLC for antimicrobial products and a debrider, with key personnel having significant interests in Rochal[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Ann Beal Salamone, a director, provides consulting services for an **annual fee** of **$177,697**, with her agreement renewed for successive one-year terms[136](index=136&type=chunk) - **Costs incurred** under the Catalyst Transaction Advisory Services Agreement were **$20,000** for **Q1 2025**, **down from** **$56,272** for **Q1 2024**[138](index=138&type=chunk) Related Party Balances (USD) | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :------------- | :---------------- | | Accounts receivable – related parties | $42,819 | $40,566 | | Accounts payable – related parties | $41,805 | $30,913 | [Note 11 – Segment Reporting](index=30&type=section&id=NOTE%2011%20%E2%80%93%20SEGMENT%20REPORTING) The company now reports in two segments: Sanara Surgical and Tissue Health Plus (THP), reflecting a strategic shift towards value-based wound care. Segment **Adjusted EBITDA increased** to **$0.7 million** in **Q1 2025** from **$0.3 million** in **Q1 2024**, despite THP's negative contribution - The company changed its reportable segments to Sanara Surgical and Tissue Health Plus (THP) in **Q2 2024**, **driven by** the growing importance of value-based wound care[139](index=139&type=chunk) - Sanara Surgical focuses on soft tissue repair and bone fusion products, while THP is dedicated to value-based wound care services[141](index=141&type=chunk)[143](index=143&type=chunk) Segment Adjusted EBITDA (Three Months Ended March 31) (USD) | Segment | 2025 (USD) | 2024 (USD) | Change (USD) | | :-------------------- | :----------- | :----------- | :----- | | Sanara Surgical | $2,695,058 | $1,228,480 | $1,466,578 | | THP | $(2,037,089) | $(917,059) | $(1,120,030) | | **Total** | **$657,969** | **$311,421** | **$346,548** | - All corporate and overhead expenses are currently included in the Sanara Surgical segment[145](index=145&type=chunk) [Note 12 – Subsequent Events](index=33&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) On **April 1, 2025**, the company acquired CarePICS, LLC for **$2.0 million**, plus **$1.65 million** to satisfy existing indebtedness. CarePICS's mobile and web app for vascular and wound care will be integrated into the THP segment, with potential **earnout payments** to sellers based on future performance - On **April 1, 2025**, the company acquired CarePICS, LLC, a mobile and web app platform for vascular and wound care clinicians, for an aggregate **purchase price** of **$2.0 million**, plus **$1.65 million** to satisfy existing indebtedness[150](index=150&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) - Sellers are entitled to potential **earnout payments** over two periods (ending **March 31, 2026**, and **March 31, 2027**) and annual Purchaser Value Earnouts for **10 years**, capped at **$10.0 million**, based on patient volume[154](index=154&type=chunk)[156](index=156&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2025, highlighting **revenue growth**, segment performance, recent strategic developments, and liquidity, while also outlining forward-looking statements and associated risks [Cautionary Statement Regarding Forward-Looking Statements](index=35&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section advises readers that the report contains forward-looking statements about future events and financial performance, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections, and the company does not undertake to update these statements - Forward-looking statements relate to future events or financial/operating performance, including value-based wound and skincare services and THP platforms[159](index=159&type=chunk) - These statements are subject to risks such as shortfalls in **revenue growth**, ability to implement strategies, capital requirements, debt compliance, product development, market acceptance, and intellectual property protection[159](index=159&type=chunk) - The company does not assume any obligation to update forward-looking statements, except as required by law[160](index=160&type=chunk) [Overview](index=36&type=section&id=OVERVIEW) Sanara MedTech is a medical technology company focused on improving clinical outcomes and reducing healthcare costs in surgical, chronic wound, and skincare markets. It operates through two segments, Sanara Surgical and Tissue Health Plus (THP), with a recent strategic shift to emphasize value-based wound care - Sanara MedTech aims to provide innovative and comprehensive surgical, wound, and skincare solutions[161](index=161&type=chunk) - The company's business is managed through two reportable segments: Sanara Surgical and THP, reflecting a change in **Q2 2024** **due to** the growing importance of value-based wound care[162](index=162&type=chunk) - Sanara Surgical markets soft tissue repair (e.g., CellerateRX Surgical, BIASURGE) and bone fusion products (e.g., BiFORM, ALLOCYTE Plus) for sterile environments[163](index=163&type=chunk) - THP is focused on value-based wound care services, aiming to offer programs to payers and risk-bearing entities to reduce hospitalizations and improve patient quality of life[166](index=166&type=chunk)[167](index=167&type=chunk) [Summary of Our Product, Service and Technology Offerings and Development Programs](index=37&type=section&id=Summary%20of%20Our%20Product%2C%20Service%20and%20Technology%20Offerings%20and%20Development%20Programs) This section details Sanara Surgical's product portfolio, including CellerateRX Surgical, BIASURGE, FORTIFY TRG, FORTIFY FLOWABLE, and other surgical products. It also outlines THP's planned value-based wound care services, which include a Care Hub, MSO Network, and a technology platform leveraging AI and machine learning, along with strategic alliances and license agreements - Sanara Surgical products include CellerateRX Surgical (hydrolyzed collagen for surgical wounds), BIASURGE (antimicrobial surgical solution), FORTIFY TRG (tissue repair graft), FORTIFY FLOWABLE (extracellular matrix for irregular wounds), and other bone fusion products[169](index=169&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - THP's comprehensive approach includes a Care Hub (virtual patient monitoring), an MSO Network (third-party providers for patient-side care), and a Technology Platform (scaling workflows with AI/ML, managing program economics and standards of care)[177](index=177&type=chunk)[178](index=178&type=chunk) - The company has a **50/50 strategic alliance** with InfuSystem Holdings, Inc. (SI Healthcare Technologies) for wound care solutions and a license agreement with Tufts University for collagen peptides[179](index=179&type=chunk)[180](index=180&type=chunk) [Recent Developments](index=39&type=section&id=RECENT%20DEVELOPMENTS) **Recent developments** include the amendment and third borrowing of **$12.25 million** under the CRG **Term Loan**, an initial **€3.0 million** cash **investment** and conversion of a **€1.0 million** loan into **equity** in BMI for **exclusive U.S. distribution rights**, and the post-quarter acquisition of CarePICS for **$2.0 million** plus debt satisfaction - On **March 19, 2025**, the CRG **Term Loan** Agreement was amended to allow two additional borrowings, and on **March 31, 2025**, the company borrowed an additional **$12.25 million** (Third Borrowing)[181](index=181&type=chunk) - On **January 16, 2025**, the company invested **€3.0 million** cash and converted a **€1.0 million** loan into BMI **equity**, acquiring **exclusive U.S. marketing and distribution rights** for OsStic and ARC products[182](index=182&type=chunk)[183](index=183&type=chunk) - On **April 1, 2025**, the company acquired CarePICS, LLC for **$2.0 million**, plus **$1.65 million** to satisfy existing indebtedness, integrating its virtual platform into the THP segment[184](index=184&type=chunk) [Components of Results of Operations](index=40&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) This section details the components of the company's financial results, including **revenue** sources **primarily from** soft tissue repair and bone fusion products, **cost of goods sold**, and operating expenses such as selling, general and administrative (SG&A), research and development (R&D), and depreciation and **amortization**. Other income (expense) **primarily covers** **interest** - **Revenue** is **primarily from** sales of soft tissue repair and bone fusion products, with CellerateRX Surgical being the substantial majority[185](index=185&type=chunk) Net Revenue by Product Category (Three Months Ended March 31) (USD) | Product Category | 2025 (USD) | 2024 (USD) | | :----------------------- | :----------- | :----------- | | Soft tissue repair products | $20,532,440 | $16,082,292 | | Bone fusion products | $2,901,656 | $2,454,346 | | **Total Net Revenue** | **$23,434,096** | **$18,536,638** | - **Cost of goods sold** includes acquisition **costs**, raw materials, and royalties, contributing to **gross profit**[188](index=188&type=chunk) - Operating expenses comprise SG&A (salaries, commissions, legal, audit, rent), R&D (personnel, contracted services, materials, pipeline investments), and depreciation and **amortization**[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Results of Operations](index=42&type=section&id=RESULTS%20OF%20OPERATIONS) For **Q1 2025**, **net revenue increased** **26%** to **$23.4 million**, and **gross profit rose** **30%** to **$21.6 million**, **driven by** soft tissue repair product sales. However, **net loss doubled** to **$3.5 million** **due to** a **32% increase** in SG&A, higher R&D, and a significant **increase** in **interest expense** related to the CRG **Term Loan**. Segment **Adjusted EBITDA improved** to **$0.7 million** Key Financial Results (Three Months Ended March 31) (USD) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :----------------------------------- | :----------- | :----------- | :----- | :------- | | Net Revenue | $23,434,096 | $18,536,638 | $4,897,458 | 26% | | Gross Profit | $21,599,129 | $16,646,592 | $4,952,537 | 30% | | Selling, general and administrative | $21,440,610 | $16,192,259 | $5,248,351 | 32% | | Research and development | $1,114,138 | $946,298 | $167,840 | 18% | | Other expense | $1,447,354 | $267,336 | $1,180,018 | 441% | | Net Loss | $(3,527,383) | $(1,799,043) | $(1,728,340) | 96% | | Segment Adjusted EBITDA | $657,969 | $311,421 | $346,548 | 111% | - The **increase** in **net revenue** was **primarily due to increased sales** of soft tissue repair products (CellerateRX Surgical and BIASURGE) and bone fusion products, **driven by** market penetration and distribution network expansion[195](index=195&type=chunk) - Higher **net loss** was **mainly due to increased costs** for the THP platform buildout and higher **interest expense** from the CRG **Term Loan**, **partially offset by** improved **gross profit**[203](index=203&type=chunk) - THP segment contributed **$(2.0) million** to Segment **Adjusted EBITDA** in **Q1 2025**, compared to **$(0.9) million** in **Q1 2024**, reflecting **increased investment** in its platform and infrastructure[207](index=207&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) **Cash on hand increased** to **$20.7 million** at **March 31, 2025**. The company expects to fund future operations and **growth**, including THP **investments** and potential acquisitions, through existing cash, operational cash flows, and available CRG **Term Loan** proceeds. Key activities include the Applied Asset Purchase, CRG **Term Loan** borrowings, BMI **investment**, and the CarePICS acquisition - **Cash on hand** was **$20.7 million** at **March 31, 2025**, **up from** **$15.9 million** at **December 31, 2024**[208](index=208&type=chunk) - The company expects **Q1 2025 cash investment** in THP to be **$7.5 million** to **$8.5 million**, with **Q2 2025 investment** projected at **$4.0 million** to **$5.0 million**[208](index=208&type=chunk) - As of **March 31, 2025**, **$12.25 million** was available for future borrowing under the CRG **Term Loan**[209](index=209&type=chunk) - The Applied Asset Purchase involved an initial **$15.25 million**, including cash and stock, and an additional **$10.0 million** Applied **Earnout** based on sales performance[210](index=210&type=chunk)[212](index=212&type=chunk) - The CRG **Term Loan** has **$42.8 million** principal outstanding as of **March 31, 2025**, with a **13.25% interest rate** and a maturity date of **March 30, 2029**[217](index=217&type=chunk) - The BMI **investment** included an initial **€3.0 million** cash and **€1.0 million** convertible loan conversion for **6.67% equity**, with an agreement for an additional **€4.0 million** upon milestones[225](index=225&type=chunk) - The CarePICS acquisition on **April 1, 2025**, involved a **$2.0 million purchase price** and **$1.65 million** for debt, with potential **earnout payments** to sellers[226](index=226&type=chunk)[227](index=227&type=chunk)[230](index=230&type=chunk) - **Net cash used** in operating activities was **$2.0 million** in **Q1 2025**, **net cash used** in investing activities was **$5.2 million**, and **net cash provided** by financing activities was **$12.0 million**[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) [Material Transactions with Related Parties](index=49&type=section&id=MATERIAL%20TRANSACTIONS%20WITH%20RELATED%20PARTIES) The company has ongoing **material transactions** with related parties, including a consulting agreement with director Ann Beal Salamone for **$177,697** annually, and a transaction advisory services agreement with Catalyst, incurring **$20,000** in **Q1 2025**. Related party **receivables** and **payables** were **$42,819** and **$41,805**, respectively, at **March 31, 2025** - Ann Beal Salamone, a director, has a consulting agreement for **$177,697** annually, renewed for successive one-year terms[234](index=234&type=chunk) - The company incurred **$20,000** in **costs** with Catalyst, a related party, for transaction advisory services in **Q1 2025**[236](index=236&type=chunk) Related Party Balances (USD) | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :------------- | :---------------- | | Accounts receivable – related parties | $42,819 | $40,566 | | Accounts payable – related parties | $41,805 | $30,913 | [Impact of Inflation and Changing Prices](index=50&type=section&id=IMPACT%20OF%20INFLATION%20AND%20CHANGING%20PRICES) **Inflation** and changing prices have not **materially impacted** the company's historical results and are not anticipated to have a **material impact** on future operations - **Inflation** and changing prices have not had a **material impact** on historical results of operations[238](index=238&type=chunk) - The company does not anticipate a **material impact** from **inflation** and changing prices on future results of operations[238](index=238&type=chunk) [Critical Accounting Estimates](index=50&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) The preparation of financial statements requires management to make estimates and assumptions, which could differ from actual results. Significant estimates include **revenue** and expense accruals, fair value measurements of assets and liabilities, and **purchase price** allocation. **No significant changes** to these estimates have occurred since **December 31, 2024** - **Critical accounting estimates** include **revenue** and expense accruals, fair value measurement of assets and liabilities, and allocation of **purchase price** to acquired assets[239](index=239&type=chunk) - **No significant changes** to **critical accounting estimates** have occurred since **December 31, 2024**[239](index=239&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Sanara MedTech Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide market risk disclosures as a smaller reporting company[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were evaluated as **effective** as of **March 31, 2025**. There were **no material changes** in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated as **effective** as of **March 31, 2025**[241](index=241&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended **March 31, 2025**[242](index=242&type=chunk) Part II – Other Information [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any **material pending legal proceedings** - There are **no material pending legal proceedings** to which the company is a party[244](index=244&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) There were **no material changes** to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended **December 31, 2024** - **No material changes** to risk factors were disclosed compared to the Annual Report on Form 10-K for **December 31, 2024**[245](index=245&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) **No unregistered sales** of **equity securities** occurred during the quarter ended **March 31, 2025**, that were not previously reported - **No unregistered sales** of **equity securities** were made during **Q1 2025** that were not previously reported[246](index=246&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported **no defaults** upon senior securities - There were **no defaults** upon senior securities[247](index=247&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[248](index=248&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended **March 31, 2025** - No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during **Q1 2025**[249](index=249&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the report, including various agreements, certificates, and certifications, with details on incorporation by reference and confidentiality - Exhibits include asset **purchase agreements**, merger agreements, **term loan** agreements, share subscription agreements, and certifications[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - Certain schedules and exhibits have been omitted or contain excluded confidential information[253](index=253&type=chunk) Signatures [Signatures](index=54&type=section&id=SIGNATURES) The report was duly signed on behalf of Sanara MedTech Inc. by Elizabeth B. Taylor, Chief Financial Officer, on **May 14, 2025** - The report was signed by Elizabeth B. Taylor, Chief Financial Officer, on **May 14, 2025**[257](index=257&type=chunk)