Sanara MedTech Inc. (NASDAQ:SMTI) Q1 2023 Earnings Conference Call May 16, 2023 9:00 AM ET Company Participants Callon Nichols - Director, Investor Relations Ron Nixon - Chairman Zach Fleming - Chief Executive Officer Mike McNeil - Chief Financial Officer Conference Call Participants Ross Osborn - Cantor Fitzgerald Ian Cassel - IFCM Operator Good morning. And welcome to the Sanara MedTech Inc. First Quarter 2023 Results and Business Update Conference Call. [Operator Instructions] I’d now like to turn the ca ...

[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including balance sheets, operations, equity changes, cash flows, and detailed explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202023%20(Unaudited)%20and%20December%2031%2C%202022) Total assets and shareholders' equity slightly decreased from December 2022 to March 2023, mainly due to reduced current assets Consolidated Balance Sheets | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :----------------------------- | :------------- | :---------------- | | Cash | $7,286,437 | $8,958,995 | | Total Current Assets | $19,007,678 | $20,616,509 | | Total Assets | $59,967,354 | $61,035,386 | | Total Current Liabilities | $10,601,797 | $12,806,309 | | Total Liabilities | $18,488,584 | $19,315,411 | | Total Shareholders' Equity | $41,478,770 | $41,719,975 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202023%20and%202022) Net revenue increased 99% year-over-year, reducing net loss from $3.2 million to $1.2 million despite higher operating expenses Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net Revenue | $15,521,917 | $7,811,223 | | Cost of goods sold | $2,125,659 | $805,081 | | Gross profit | $13,396,258 | $7,006,142 | | Total operating expenses | $14,612,581 | $9,783,014 | | Operating loss | $(1,216,323) | $(2,776,872) | | Net loss attributable to Sanara MedTech shareholders | $(1,177,900) | $(3,129,324) | | Net loss per share, basic and diluted | $(0.14) | $(0.41) | [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20(Unaudited)%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202023%20and%202022) Shareholders' equity slightly decreased due to net loss, partially offset by share-based compensation and equity offering proceeds Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance at December 31, 2022 ($) | Balance at March 31, 2023 ($) | | :-------------------------------- | :--------------------------- | :-------------------------- | | Total Shareholders' Equity | $41,719,975 | $41,478,770 | | Share-based compensation | - | $597,305 | | Net settlement and retirement of equity-based awards | - | $(655,942) | | Issuance of common stock in equity offering | - | $1,033,761 | | Net loss | - | $(1,216,329) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202023%20and%202022) Operating cash outflow decreased year-over-year, while financing activities provided cash, resulting in a net decrease in cash Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(1,741,313) | $(2,112,478) | | Net cash used in investing activities | $(27,055) | $(294,352) | | Net cash provided by (used in) financing activities | $95,810 | $(102,931) | | Net decrease in cash | $(1,672,558) | $(2,509,761) | | Cash, end of period | $7,286,437 | $16,143,080 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Detailed notes explain business, accounting policies, acquisitions, intangible assets, equity investments, leases, commitments, and related party transactions [NOTE 1 – Nature of Business and Background](index=9&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20BUSINESS%20AND%20BACKGROUND) This note describes Sanara MedTech Inc.'s business as a medical technology company focused on improving clinical outcomes and reducing healthcare costs - Sanara MedTech Inc. is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical, chronic wound, and skincare markets[18](index=18&type=chunk) - The company's overall goal is to achieve better clinical outcomes at a lower overall cost for patients across the United States[18](index=18&type=chunk) [NOTE 2 — Summary of Significant Accounting Policies](index=9&type=section&id=NOTE%202%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting policies, including revenue recognition, goodwill, intangible assets, and recent accounting standard updates - Revenue is recognized in accordance with ASC Topic 606, when control of promised goods or services is transferred to the customer[25](index=25&type=chunk)[29](index=29&type=chunk) Revenue Streams (Three Months Ended March 31) | Revenue Type | 2023 ($) | 2022 ($) | | :------------- | :----------- | :----------- | | Product sales | $15,471,667 | $7,760,973 | | Royalty revenue | $50,250 | $50,250 | | Total Net Revenue | $15,521,917 | $7,811,223 | - Goodwill, primarily from the Scendia acquisition, has an indefinite useful life and is tested annually for impairment[38](index=38&type=chunk) - Intangible assets are amortized on a straight-line basis over their estimated useful lives, generally the life of related patents/licenses, **seven years for customer relationships**, and **five years for assembled workforces**[39](index=39&type=chunk) - The company adopted ASU 2016-13 (Credit Losses) effective January 1, 2023, with **no material impact** on its financial statements[55](index=55&type=chunk) [NOTE 3 – Precision Healing Merger](index=15&type=section&id=NOTE%203%20%E2%80%93%20PRECISION%20HEALING%20MERGER) This note details the April 2022 acquisition of Precision Healing, including merger consideration, contingent earnouts, and accounting treatment - In April 2022, Sanara MedTech acquired Precision Healing, which is developing a diagnostic imager and lateral flow assay for wound and skin conditions[57](index=57&type=chunk)[58](index=58&type=chunk) - The merger consideration included **$125,966 in cash**, **165,738 shares** of common stock, and the assumption of **144,191 stock options** and **16,725 warrants**[59](index=59&type=chunk)[60](index=60&type=chunk) - Securityholders are entitled to receive up to **$10.0 million** in contingent earnout payments based on performance thresholds, payable in cash or stock[62](index=62&type=chunk) - The merger was accounted for as an asset acquisition, with the purchase consideration primarily allocated to finite-lived intellectual property and assembled workforce[64](index=64&type=chunk)[65](index=65&type=chunk) [NOTE 4 – Scendia Purchase Agreement](index=17&type=section&id=NOTE%204%20%E2%80%93%20SCENDIA%20PURCHASE%20AGREEMENT) This note describes the July 2022 acquisition of Scendia Biologics, including consideration, earnout payments, and resulting goodwill - In July 2022, the Company acquired **100% of Scendia Biologics, LLC**, gaining a full line of regenerative and orthobiologic technologies and full ownership of Sanara Biologics, LLC[66](index=66&type=chunk)[67](index=67&type=chunk) - The closing consideration included approximately **$1.6 million in cash** and **291,686 shares of common stock**, with **94,798 shares** withheld as Indemnity Holdback Shares[68](index=68&type=chunk) - The seller is entitled to two potential earnout payments, not exceeding **$10.0 million in aggregate**, based on net revenue targets, payable in cash or stock[69](index=69&type=chunk) - The acquisition was recorded as a business combination, resulting in **$3,601,781 in goodwill**[71](index=71&type=chunk) [NOTE 5 – Intangible Assets](index=18&type=section&id=NOTE%205%20%E2%80%93%20INTANGIBLE%20ASSETS) This note provides details on the company's amortizable intangible assets, including product licenses, patents, customer relationships, and amortization expense Amortizable Intangible Assets (Net) | Asset Type | March 31, 2023 ($) | December 31, 2022 ($) | | :-------------------------- | :------------- | :---------------- | | Product Licenses | $3,740,785 | $3,813,296 | | Patents and Other IP | $20,136,762 | $20,443,523 | | Customer relationships and other | $6,961,232 | $7,253,161 | | Total | $30,838,779 | $31,509,980 | Amortization Expense (Three Months Ended March 31) | Metric | 2023 ($) | 2022 ($) | | :--------------- | :------- | :------- | | Amortization Expense | $671,201 | $110,023 | - The weighted-average amortization period for finite-lived intangible assets was **14.3 years** as of March 31, 2023[73](index=73&type=chunk) [NOTE 6 – Investments in Equity Securities](index=19&type=section&id=NOTE%206%20%E2%80%93%20INVESTMENTS%20IN%20EQUITY%20SECURITIES) This note outlines the company's nonmarketable equity investments and the cessation of its equity method investment in Precision Healing Inc - The company holds nonmarketable equity securities in Direct Dermatology Inc. (**$1,000,000 carrying amount**) and Pixalere Healthcare Inc. (**$2,084,278 carrying amount**), accounted for at cost[75](index=75&type=chunk)[78](index=78&type=chunk)[80](index=80&type=chunk) - The equity method investment in Precision Healing Inc. ceased in April 2022 due to the merger, with a **$379,633 loss** recorded in Q1 2022[77](index=77&type=chunk)[80](index=80&type=chunk) [NOTE 7 - Operating Leases](index=20&type=section&id=NOTE%207%20-%20OPERATING%20LEASES) This note details the company's operating lease liabilities, right-of-use assets, and key lease terms, including a recent office lease amendment Operating Lease Liabilities | Metric | March 31, 2023 ($) | | :-------------------------------- | :------------- | | Right of Use Assets | $2,099,021 | | Present Value of Lease Liabilities | $2,112,570 | | Operating lease liabilities – current | $253,381 | | Operating lease liabilities – long-term | $1,859,189 | - The company amended its primary office lease in March 2023 to obtain additional space and extend the term[82](index=82&type=chunk) - As of March 31, 2023, the weighted average remaining lease term was **6.6 years** with a weighted average discount rate of **7.49%**[84](index=84&type=chunk) [NOTE 8 - Commitments and Contingencies](index=21&type=section&id=NOTE%208%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note describes the company's royalty obligations, license agreements, contingent earnout payments, and the dissolution of Sanara Pulsar, LLC - The company pays royalties for CellerateRX Surgical and HYCOL products (**3-5% of net sales**), with royalty expense of **$520,814** in Q1 2023[85](index=85&type=chunk)[86](index=86&type=chunk) - License agreements with Rochal for BIAKŌS, CuraShield, and a debrider product involve royalties (**2-4% of net sales**) and minimum annual royalty commitments[88](index=88&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - Contingent earnout payments of up to **$10.0 million each** are associated with the Precision Healing merger and Scendia acquisition[99](index=99&type=chunk)[101](index=101&type=chunk) - Sanara Pulsar, LLC was dissolved in December 2022, with an accrued payment of **$242,000** related to fiscal 2022[102](index=102&type=chunk) [NOTE 9 – Shareholders' Equity](index=24&type=section&id=NOTE%209%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) This note details common stock outstanding, LTIP plan shares, equity offering proceeds, and share-based compensation expense Common Stock Outstanding | Date | Shares Outstanding | | :----------- | :----------------- | | March 31, 2023 | 8,385,027 | | December 31, 2022 | 8,299,957 | - The company has an LTIP Plan with **1,445,551 shares** available for issuance as of March 31, 2023[103](index=103&type=chunk) - In Q1 2023, the company sold **26,143 shares** of common stock through a Controlled Equity Offering for approximately **$1.0 million** in net proceeds[112](index=112&type=chunk) - Share-based compensation expense was **$597,305** for the three months ended March 31, 2023, with **$4,803,372** of total unrecognized expense remaining[114](index=114&type=chunk) [NOTE 10 - Related Parties](index=27&type=section&id=NOTE%2010%20-%20RELATED%20PARTIES) This note outlines significant transactions and agreements with related parties, including sublicense, license, and consulting agreements - The company has an exclusive sublicense with CGI Cellerate RX (an affiliate of Catalyst, where the Executive Chairman is a managing partner) for CellerateRX products, which comprise the **substantial majority of sales**[118](index=118&type=chunk)[119](index=119&type=chunk) - Multiple license agreements exist with Rochal Industries, LLC (where the Executive Chairman and another director are significant shareholders/directors) for antimicrobial and debrider products[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - A consulting agreement with Ann Beal Salamone (a director) provides for an annual fee of **$177,697**[123](index=123&type=chunk) Related Party Balances | Metric | March 31, 2023 ($) | December 31, 2022 ($) | | :-------------------------- | :------------- | :---------------- | | Related Party Receivables | $23,946 | $98,548 | | Related Party Payables | $23,289 | $34,036 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, and capital resources for Q1 2023, emphasizing revenue growth, acquisitions, and future outlook [Cautionary Statement Regarding Forward-Looking Statements](index=29&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section warns that the report contains forward-looking statements subject to various risks and uncertainties, including revenue and strategy execution - The report contains forward-looking statements subject to various risks and uncertainties, including shortfalls in revenue growth, ability to implement strategy, capital requirements, competition, market acceptance, and intellectual property protection[128](index=128&type=chunk) [Overview](index=31&type=section&id=Overview) This section provides an overview of Sanara MedTech's business, its focus on medical technology, and recent strategic acquisitions and partnerships - Sanara MedTech is a medical technology company focused on developing and commercializing transformative technologies in surgical, chronic wound, and skincare markets[131](index=131&type=chunk) - The company expanded through the acquisition of Precision Healing (diagnostic imager, LFA) in April 2022 and Scendia (regenerative/orthobiologic technologies) in July 2022[134](index=134&type=chunk)[135](index=135&type=chunk) - A partnership with InfuSystem Holdings, Inc. was established in November 2022 to deliver complete wound care solutions[136](index=136&type=chunk) [Comprehensive Value-Based Care Strategy](index=31&type=section&id=Comprehensive%20Value-Based%20Care%20Strategy) This section outlines the company's strategy to offer comprehensive wound and skincare solutions through diagnostics, virtual consults, products, and EMR - The company's strategy, through its subsidiary WounDerm, aims to offer a comprehensive wound and skincare solution to value-based care providers[137](index=137&type=chunk) - The solution consists of four key components: diagnostics (Precision Healing imager/LFA), virtual consult services (Direct Dermatology affiliation), proprietary products (**six focus areas**), and a specialized EMR/mobile application[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Recent Acquisitions](index=33&type=section&id=Recent%20Acquisitions) This section summarizes the Precision Healing merger and Scendia acquisition, detailing the consideration and contingent earnout payments for each - The Precision Healing merger (April 2022) involved cash, common stock, assumed options/warrants, and up to **$10.0 million** in contingent earnout payments[144](index=144&type=chunk)[145](index=145&type=chunk) - The Scendia acquisition (July 2022) involved **$1.6 million cash**, **291,686 shares of common stock**, and up to **$10.0 million** in contingent earnout payments[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Recent Developments](index=33&type=section&id=Recent%20Developments) This section highlights the dissolution of Sanara Pulsar, LLC in December 2022 due to limited product adoption, resulting in a noncash loss - Sanara Pulsar, LLC was dissolved effective December 2022 due to limited adoption of its wound debridement products, resulting in a **$1.0 million noncash loss** on disposal of investment in Q4 2022[151](index=151&type=chunk) [Components of Results of Operations](index=35&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the key components of the company's results of operations, including revenue sources, cost of goods sold, and operating expenses - Revenue is primarily derived from sales of surgical products, with a substantial majority from CellerateRX surgical powder, and royalty revenue from a development and licensing agreement[152](index=152&type=chunk)[154](index=154&type=chunk) - Cost of goods sold includes acquisition costs, raw materials, and royalties[155](index=155&type=chunk) - Operating expenses comprise Selling, General and Administrative (SG&A), Research and Development (R&D), Depreciation and Amortization, and Change in fair value of earnout liabilities[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the three months ended March 31, 2023, detailing revenue, expenses, and net loss Key Financial Results (Three Months Ended March 31) | Metric | 2023 | 2022 | Change (YoY) | | :------------------------------------- | :----------- | :----------- | :----------- | | Net Revenues | $15.5 million | $7.8 million | 99% increase | | Scendia Sales Contribution | $3.0 million | - | - | | Cost of goods sold | $2.1 million | $0.8 million | 162.5% increase | | Gross Margins | 86% | 90% | -4 percentage points | | SG&A expenses | $13.0 million | $9.4 million | 38.3% increase | | R&D expenses | $1.3 million | $0.2 million | 550% increase | | Depreciation and amortization expense | $0.8 million | $0.2 million | 300% increase | | Change in fair value of earnout liabilities | $0.5 million benefit | $0 | - | | Net loss | $1.2 million | $3.2 million | 62.5% decrease | - Supply issues with the ALLOCYTE product line negatively impacted sales in Q4 2022 and Q1 2023, with resolution anticipated in the **second half of 2023**[161](index=161&type=chunk) - Higher SG&A expenses were primarily due to increased sales commissions (**$2.9 million**) and sales force expansion (**$0.5 million**)[163](index=163&type=chunk) - Increased R&D expenses were mainly due to costs related to the Precision Healing diagnostic imager and LFA development[164](index=164&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, equity offering, and ability to fund operations and growth for the next twelve months Cash on Hand | Date | Amount ($ millions) | | :----------- | :----------- | | March 31, 2023 | $7.3 million | | December 31, 2022 | $9.0 million | - The company entered into a Controlled Equity Offering Sales Agreement for up to **$75.0 million**, selling **26,143 shares** for **$1.0 million** net proceeds in Q1 2023[168](index=168&type=chunk)[170](index=170&type=chunk) - Expected cash on hand and cash flows from operations are believed to be sufficient to fund growth and operating expenses for at least the **next twelve months**[171](index=171&type=chunk) - The first potential earnout payment for the Scendia acquisition is anticipated in **October 2023**, while the Precision Healing earnout is not expected before **January 2025**[175](index=175&type=chunk)[178](index=178&type=chunk) [Cash Flow Analysis](index=39&type=section&id=Cash%20Flow%20Analysis) This section analyzes net cash flows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Net Cash Flow Activities (Three Months Ended March 31) | Activity | 2023 ($ millions) | 2022 ($ millions) | | :------------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(1.7) million | $(2.1) million | | Net cash used in investing activities | $(27,055) | $(294,352) | | Net cash provided by (used in) financing activities | $0.1 million | $(0.1) million | - The lower use of cash in investing activities in 2023 was primarily due to **no cash investments in equity securities**[180](index=180&type=chunk) - Cash provided by financing activities in 2023 was due to net proceeds from common stock sales, partially offset by equity-based award settlements[181](index=181&type=chunk) [Material Transactions with Related Parties](index=39&type=section&id=Material%20Transactions%20with%20Related%20Parties) This section details significant transactions with related parties, including sublicense agreements, consulting fees, and advisory services - The company has an exclusive sublicense with CGI Cellerate RX (an affiliate of Catalyst, where the Executive Chairman is a managing partner) for CellerateRX products, with royalty expense of **$520,814** in Q1 2023[182](index=182&type=chunk)[183](index=183&type=chunk) - A consulting agreement with Ann Beal Salamone (a director) provides for an annual fee of **$177,697**[184](index=184&type=chunk) - A Transaction Advisory Services Agreement with Catalyst was entered in March 2023; **no expenses were incurred** in Q1 2023[185](index=185&type=chunk)[186](index=186&type=chunk) [Impact of Inflation and Changing Prices](index=40&type=section&id=Impact%20of%20Inflation%20and%20Changing%20Prices) This section assesses the historical and anticipated impact of inflation and changing prices on the company's financial results - Inflation and changing prices have not had a material impact on historical results and are **not anticipated to have a material impact** on future results[188](index=188&type=chunk) [Critical Accounting Estimates](index=40&type=section&id=Critical%20Accounting%20Estimates) This section identifies the company's critical accounting estimates, including revenue accruals, fair value measurements, and purchase price allocations - Significant accounting estimates include revenue and expense accruals, fair value measurement of assets and liabilities, and allocation of purchase price to acquired assets[189](index=189&type=chunk) - **No significant changes** to critical accounting policies have occurred since December 31, 2022[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Sanara MedTech Inc. is exempt from providing market risk disclosures - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a **smaller reporting company**[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated on March 31, 2023 - The company's disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2023[191](index=191&type=chunk) [Changes in Internal Control over Financial Reporting](index=40&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section states that no material changes occurred in internal control over financial reporting during the quarter ended March 31, 2023 - **No material changes** in internal control over financial reporting occurred during the quarter ended March 31, 2023[192](index=192&type=chunk) [Part II – Other Information](index=32&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) This section provides other required information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=32&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**[195](index=195&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the Risk Factors previously disclosed in the Annual Report on Form 10-K for 2022 - **No material changes** to the Risk Factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during Q1 2023 that were not previously reported - There were **no sales of unregistered securities** during the quarter ended March 31, 2023, that were not previously reported on a Current Report on Form 8-K[197](index=197&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities - **No defaults** upon senior securities[198](index=198&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is **not applicable** to the company[199](index=199&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) No other information to report under this item - **No other information** to report[200](index=200&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference, including agreements, organizational documents, and certifications - Exhibits include the Controlled Equity Offering Sales Agreement, Asset Purchase Agreement, Merger Agreement, Membership Interest Purchase Agreement, organizational documents, and various certifications[203](index=203&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report is signed by Michael D. McNeil, Chief Financial Officer of Sanara MedTech Inc., on May 15, 2023 - The report was signed by Michael D. McNeil, Chief Financial Officer of Sanara MedTech Inc., on **May 15, 2023**[209](index=209&type=chunk)

Financial Data and Key Metrics Changes - The company generated $45.8 million in net revenue for 2022, representing a 90% increase from $24.1 million in 2021 [58][89] - The net loss for 2022 was $8.1 million, slightly higher than the $8 million loss in 2021, impacted by increased SG&A costs and R&D expenses [21][64][90] Business Line Data and Key Metrics Changes - Cellerate sales continued to show strong growth, contributing significantly to the revenue increase [18][66] - Sales at Scendia remained flat from Q3 to Q4 due to supply issues with the Allocyte product [21][82] Market Data and Key Metrics Changes - CellerateRX was sold in 700 hospitals and ASCs across 29 states, with approval to be sold in over 1700 facilities [2] - The company is focusing on existing accounts rather than new facility approvals to maximize product introduction [3] Company Strategy and Development Direction - The company aims to raise capital for acquisitions and partnerships, enhance liquidity, and fund product development and clinical studies [1] - A strategic focus on comprehensive wound care solutions is being pursued, with partnerships being sought to enhance offerings [5][7] Management's Comments on Operating Environment and Future Outlook - Management expects improvements in supply issues for the Allocyte product in the second half of 2023 [4][19] - The company believes it will be the first to market with its comprehensive wound care strategy, which is anticipated to be well received [30][67] Other Important Information - The company dissolved Sanara Pulsar in December 2022 due to minimal sales and lack of reimbursement code [22][63] - R&D expenses increased significantly to $3.4 million in 2022, primarily due to costs related to the Precision Healing diagnostic imager [62] Q&A Session Summary Question: Can you provide insights on cross-selling abilities in Q4? - Management noted that cross-selling is going well, with products being complementary and gaining traction [70] Question: What is the commercialization plan for Precision? - The company anticipates a lease program for marketing Precision and highlighted its differentiation from the predicate device [72][73] Question: How does the company view private market valuations for acquisitions? - Management indicated that valuations do not significantly impact their acquisition strategy, focusing instead on alignment of interests [76][78] Question: What are the challenges to continuing growth for Cellerate? - Challenges include ensuring field presence and establishing a research base to support product efficacy [26] Question: What is the status of clinical studies with Cellerate? - The company has several studies underway, with positive results expected to be published soon [125][126]

Medical Technology Development - The company focuses on developing transformative medical technologies aimed at improving clinical outcomes and reducing healthcare costs in surgical, chronic wound, and skincare markets [20]. - The company has a robust pipeline of products under development, including next-generation CellerateRX Surgical and a sterile antimicrobial wound solution [37]. - The company is actively developing proprietary products and technologies, with a focus on patent protection to safeguard innovations in the surgical and chronic wound markets [69]. - The company is developing an autolytic debrider product and a sterile antimicrobial surgical wash product, with discussions ongoing regarding the best path for seeking clearance and approval [105]. - The company plans to launch WounDerm services to gather patient data, aiming to improve product effectiveness and reduce healthcare costs [79]. Market Opportunities - The annual treatment cost for all wounds in the U.S. is approximately $28 billion, with surgical site infections costing between $3.5 billion and $10 billion annually [32]. - Approximately 15% of the Medicare beneficiary population has chronic nonhealing wounds, indicating a significant market opportunity for wound care products [49]. - Over 34 million people in the U.S., or approximately 10% of the population, suffer from diabetes, which can lead to diabetic foot ulcers (DFUs) that are difficult to heal [50]. - Venous leg ulcers (VLUs) affect approximately 600,000 people annually in the U.S., highlighting a substantial patient base for targeted treatments [51]. - Annually, 2.5 million pressure ulcers are treated in acute care facilities in the U.S., representing a critical area for intervention [52]. Acquisitions and Partnerships - The company acquired Precision Healing Inc. in April 2022, which is developing a diagnostic imager and lateral flow assay for wound assessment, with 510(k) submissions planned for 2023 [23]. - Following the acquisition of Scendia in July 2022, the company expanded its product offerings to include regenerative and orthobiologic technologies [24]. - The company plans to establish partnerships with Medicare Advantage and other healthcare at-risk models to improve outcomes and lower wound care costs [43]. - The company acquired certain assets from Rochal in July 2021, including eight issued U.S. patents and over 100 issued patents in foreign jurisdictions, expanding its patent portfolio significantly [70]. Regulatory Compliance - The company’s operations are subject to comprehensive federal, state, and local laws and regulations, which are frequently changing and may impact profitability [97]. - The FDA has 180 days to complete its review of a PMA application, although the review often takes significantly longer [104]. - The company must comply with federal truth-in-advertising laws enforced by the FTC, which can result in penalties for non-compliance [112]. - The PMA process requires extensive data, including preclinical studies and clinical trials, to demonstrate that a device is safe and effective [104]. - Non-compliance with regulatory requirements can lead to severe consequences, including fines, product seizures, and injunctions against manufacturing or distributing products [195]. Financial Performance and Risks - The company has a history of losses, which may continue as it expands its selling efforts [134]. - Revenue growth for a particular period is difficult to predict, and a shortfall in forecasted revenues may harm operating results [134]. - The company relies heavily on research and development partners to design, manufacture, and supply licensed products, and any failure could incur significant costs and delays [135]. - Economic conditions, including inflation and changes in reimbursement rates, could affect the ability of surgical facilities to purchase products, impacting revenue [142]. - The company faces competition from larger companies in the wound care market, including Smith & Nephew plc and 3M Company, which have greater financial resources [80]. Intellectual Property and Licensing - The company relies on patents and other legal protections for its technologies, but these may not provide sufficient competitive advantages or prevent competitors from entering the market [174]. - The company relies heavily on licensed technologies and products from third parties, and failure to comply with licensing agreements could halt the development and commercialization of its products [180]. - There is no assurance that existing licensing agreements will be extended on reasonable terms, which could impact the company's ability to generate revenue and meet payment obligations [181]. - CellerateRX Surgical currently has no patent protection, which may expose the company to competition from equivalent products, potentially adversely affecting its business and financial condition [179]. Telehealth and Virtual Services - The U.S. teledermatology market is projected to grow from $5 billion in 2019 to $45 billion by 2027 [32]. - The anticipated launch of wound and skincare virtual consult services may face competition from other telehealth providers, impacting financial performance [146]. - The company's telehealth business expansion is dependent on maintaining relationships with affiliated professional entities, and disruptions in these relationships could adversely affect operations [171]. - Recent state legislative changes regarding telemedicine may impose additional compliance costs and operational impacts, potentially affecting service availability [173]. Supply Chain and Manufacturing - The company experienced supply issues with the ALLOCYTE product line during Q3 2022, which negatively impacted sales, but anticipates resolution in the second half of 2023 [76]. - The company relies on contract manufacturing to avoid high capital outlays and fixed costs associated with establishing its own manufacturing facilities [75]. - Disruptions in the supply of tissues are negatively impacting the inventory of ALLOCYTE, which could materially affect the company's financial condition and results of operations [163]. - Increased prices or unavailability of raw materials could adversely affect profitability, as the company may not be able to pass on cost increases to customers [168]. Employee and Operational Structure - As of December 31, 2022, the company had a total of 101 full-time employees and 2 part-time employees [130]. - As of December 31, 2022, the company employed 39 field sales representatives and continuously evaluates new markets and sales opportunities [72]. - The company plans to increase the scope of operations rapidly, which may strain internal resources and require effective management of growth [144].

Sanara Medtech, Inc. (NASDAQ:SMTI) Q3 2022 Earnings Conference Call November 15, 2022 9:00 AM ET Company Participants Callon Nichols - Director, IR Ronald Nixon - Executive Chairman Zachary Fleming - CEO Michael McNeil - CFO & Corporate Secretary Conference Call Participants Christopher Plahm - Tall Pines Capital Ian Cassel - MicroCapClub Operator Good day, ladies and gentlemen, and welcome to the Sanara MedTech Inc. Q3 2022 Earnings and Business Update. [Operator Instructions]. It is now my pleasure to tur ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or For the transition period from ________ to ________ Commission File Number 001-39678 SANARA MEDTECH INC. (Exact name of Registrant as specified in its charter) | Texas | 59-2219994 | | --- | --- | | (St ...

Financial Data and Key Metrics Changes - In Q2 2022, Sanara generated $9.7 million in revenue, a 54% increase from $6.3 million in Q2 2021, marking a record revenue quarter [8][21] - For the six months ended June 30, 2022, net revenues totaled $17.5 million, up 55% from $11.3 million in the same period last year [21] - The company reported a net loss of $3.3 million in Q2 2022, compared to a net loss of $1.2 million in Q2 2021 [24] - SG&A expenses for Q2 2022 were $10.4 million, up from $6.6 million in Q2 2021, primarily due to increased sales and marketing expenses [23][24] Business Line Data and Key Metrics Changes - The surgical team showed strong sales growth, with CellerateRX sold in 590 hospitals and ambulatory surgery centers across 27 states [12][13] - The acquisition of Scendia Biologics is expected to enhance the product portfolio and expand market reach [10][15] - Scendia's unaudited trailing 12-month revenue was $11 million as of May 31, 2022, with Sanara products generating $1.5 million in sales to Scendia [15] Market Data and Key Metrics Changes - The company is focused on expanding its geographic footprint for all products across all 50 states [15] - The Precision Healing platform is expected to improve wound healing efficacy and reduce healing time while lowering overall costs [18] Company Strategy and Development Direction - Sanara aims to integrate Precision Healing and Scendia into its operations while advancing its comprehensive wound and skin strategy [28] - The company is developing a multispectral imager and biomarker assay to enhance wound diagnosis and treatment [17] - The strategy includes expanding the independent distribution network in both new and existing U.S. markets [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory, citing record revenue quarters driven by the surgical wound strategy [28] - The company anticipates a significant decrease in losses and aims to achieve cash flow neutrality by the end of Q1 2023 [85] - Management highlighted the importance of securing payer contracts to validate their model and improve healing rates [60] Other Important Information - The initial purchase price for Scendia was $7.4 million, with additional earn-out payments based on sales growth [15][16] - The Precision Healing Imager 510(k) submission is expected to be filed early in Q4 2022 [18] Q&A Session Summary Question: What drove the sharp growth in hospital admissions in Q2? - Management attributed the growth to increased hiring and activity in new markets, along with the addition of a seasoned national accounts manager [36] Question: How did Scendia's portfolio perform in June? - Management did not disclose specific performance for June but indicated they would hold off on that information [38] Question: What is the expected operating expense profile post-Scendia acquisition? - Management stated that no additional personnel would be needed at Scendia, focusing on leveraging existing products [39] Question: What caused the delay in the Precision Healing filing? - The delay was attributed to supply chain issues affecting electronic components and software [40] Question: What is the potential of the ecosystem in the next three to five years? - Management emphasized a continuous growth strategy without a defined end game, focusing on market share and customer satisfaction [61]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-39678 SANARA MEDTECH INC. (Exact name of Registrant as specified in its charter) Texas 59-2219994 (State or other jurisdiction o ...

Sanara MedTech Inc. (NASDAQ:SMTI) Q1 2022 Earnings Conference Call May 17, 2022 9:00 AM ET Company Participants Callon Nichols - Director, Investor Relations Ron Nixon - Executive Chairman Zach Fleming - Chief Executive Officer Mike McNeil - Chief Financial Officer Conference Call Participants Ian Cassel - IFCM Operator Good morning, ladies and gentlemen, and welcome to the Sanara MedTech Inc. First Quarter 2022 Results and Business Update Conference Call. At this time, all participants have been placed on ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-39678 SANARA MEDTECH INC. (Exact name of Registrant as specified in its charter) Washington, D.C. 20549 (State or other jurisdiction of incorporation ...