[General Information](index=1&type=section&id=General%20Information) [Filing Details and Company Status](index=1&type=section&id=Filing%20Details) This section provides the basic identification of Sanara MedTech Inc., the filing type (Form 10-Q) for the quarter ended June 30, 2021, and confirms its status as a non-accelerated filer and smaller reporting company - Filing Type: **Quarterly Report on Form 10-Q** for the period ended **June 30, 2021**[1](index=1&type=chunk) - Registrant: **SANARA MEDTECH INC.**[1](index=1&type=chunk) - Filer Status: **Non-accelerated filer**, **Smaller reporting company**[4](index=4&type=chunk) - Common Stock Outstanding (as of **August 16, 2021**): **7,626,705 shares**[4](index=4&type=chunk) [Part I – Financial Information](index=2&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, significant transactions, and financial position [Unaudited Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of the company's financial position, showing a significant increase in total assets and shareholders' equity, primarily driven by a substantial increase in cash, as of June 30, 2021, compared to December 31, 2020 Total Assets | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :-------------- | :------------------ | | Total Assets | $38,784,660 | $9,826,221 | | Total Liabilities | $4,127,197 | $3,985,985 | | Total Shareholders' Equity | $34,657,463 | $5,840,236 | | Cash | $24,389,004 | $455,366 | [Unaudited Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) The consolidated statements of operations show a substantial increase in net revenue and gross profit for both the three and six months ended June 30, 2021, compared to the prior year, leading to a reduced operating and net loss for the six-month period Three Months Ended June 30 | Metric | 2021 | 2020 | Change (%) | | :--------------------------------- | :----------- | :----------- | :--------- | | Net Revenue | $6,277,133 | $2,967,183 | 112% | | Gross Profit | $5,740,728 | $2,618,508 | 119% | | Operating Loss | $(1,026,204) | $(1,079,740) | (5%) | | Net Loss | $(1,205,973) | $(1,129,557) | 7% | | Net Loss per Share (Basic & Diluted) | $(0.16) | $(0.18) | (11%) | Six Months Ended June 30 | Metric | 2021 | 2020 | Change (%) | | :--------------------------------- | :----------- | :----------- | :--------- | | Net Revenue | $11,286,569 | $6,491,514 | 74% | | Gross Profit | $10,275,731 | $5,812,651 | 77% | | Operating Loss | $(2,109,734) | $(2,875,640) | (27%) | | Net Loss | $(2,389,349) | $(2,970,569) | (20%) | | Net Loss per Share (Basic & Diluted) | $(0.33) | $(0.54) | (39%) | [Unaudited Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This statement illustrates the significant increase in total shareholders' equity from December 31, 2020, to June 30, 2021, primarily driven by a substantial increase in additional paid-in capital resulting from equity offerings and common stock issuances for asset acquisitions - Total Shareholders' Equity increased from **$5,840,236** at **December 31, 2020**, to **$34,657,463** at **June 30, 2021**[14](index=14&type=chunk) - Additional Paid-In Capital increased from **$13,176,576** at **December 31, 2020**, to **$44,487,958** at **June 30, 2021**, largely due to a public equity offering[14](index=14&type=chunk) - **1,265,000 shares** of common stock were issued in an equity offering, contributing to the increase in paid-in capital[14](index=14&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows reflect a significant net increase in cash for the six months ended June 30, 2021, primarily due to substantial cash provided by financing activities, offsetting increased cash used in investing activities Cash Flow Activity | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Used in Operating Activities | $(1,595,895) | $(2,732,191) | | Net Cash Used in Investing Activities | $(3,209,724) | $(1,157,456) | | Net Cash Provided by Financing Activities | $28,739,257 | $583,000 | | Net Increase (Decrease) in Cash | $23,933,638 | $(3,306,647) | | Cash, End of Period | $24,389,004 | $3,305,281 | [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information regarding the figures presented in the consolidated financial statements, covering the company's business, accounting policies, intangible assets, commitments, leases, equity, debt, investments, related party transactions, and subsequent events [NOTE 1 – NATURE OF BUSINESS AND BACKGROUND](index=7&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20BUSINESS%20AND%20BACKGROUND) This note describes Sanara MedTech Inc.'s core business as a medical technology company focused on wound and skin care, aiming to improve clinical outcomes and reduce healthcare expenditures. It also addresses the fluctuating impact of the COVID-19 pandemic on its sales and operations - Business Focus: Developing and commercializing transformative technologies for surgical and chronic **wound and skin care** markets to **improve clinical outcomes and reduce healthcare expenditures**[19](index=19&type=chunk) - **COVID-19 Impact**: Experienced a reduction in demand for surgical products and limited SNF access in **Q2 2020**, followed by a **strong rebound in product sales** during **H2 2020** and **H1 2021** as restrictions eased[22](index=22&type=chunk) [NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%202%20--%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting policies, including revenue recognition, income/loss per share, inventory valuation, and treatment of long-lived assets and equity investments. It also states that the COVID-19 pandemic did not materially impact accounting estimates as of June 30, 2021 - Revenue Recognition: Follows **ASC Topic 606**, recognizing revenue when control of promised goods or services is transferred to the customer[31](index=31&type=chunk)[38](index=38&type=chunk) Revenue Disaggregation (Six Months Ended June 30) | Revenue Type | 2021 | 2020 | | :------------------ | :----------- | :----------- | | Product sales revenue | $11,186,069 | $6,391,014 | | Royalty revenue | $100,500 | $100,500 | | **Total Revenue** | **$11,286,569** | **$6,491,514** | - Income/Loss Per Share: Common stock equivalents were excluded from diluted EPS calculation due to their **anti-dilutive effect** from the company's net loss[28](index=28&type=chunk) - Inventory Valuation: Inventories are stated at the **lower of cost or net realizable value (FIFO basis)**; inventory obsolescence expense was **$29,834** for **H1 2021** and **$75,422** for **H1 2020**[42](index=42&type=chunk) - **COVID-19 Impact on Estimates**: Management determined **no material impact** on estimates and assumptions used in preparing the unaudited consolidated financial statements for the six months ended **June 30, 2021**[26](index=26&type=chunk) [NOTE 3 – INTANGIBLE ASSETS](index=11&type=section&id=NOTE%203%20%E2%80%93%20INTANGIBLE%20ASSETS) This note details the carrying values and amortization of the company's finite-lived intangible assets, which include product licenses, patents, and software. It highlights a significant increase in product licenses due to a milestone payment made in common stock and confirms no impairment loss due to COVID-19 Intangible Assets (June 30, 2021) | Asset Type | Cost | Accumulated Amortization | Net | | :--------------- | :----------- | :----------------------- | :----------- | | Product Licenses | $4,193,879 | $(417,519) | $3,776,360 | | Patent | $510,310 | $(510,310) | $0 | | Software and Other | $64,464 | $(55,637) | $8,827 | | **Total** | **$4,768,653** | **$(983,466)** | **$3,785,187** | - Milestone Payment: In **March 2021**, **20,834 shares** of common stock were issued to **Rochal Industries, LLC** for a **$750,000** milestone payment, recorded as an addition to intangible assets[66](index=66&type=chunk) - Amortization Expense (Six Months Ended June 30): **$156,358** in **2021**, up from **$94,499** in **2020**[67](index=67&type=chunk) - Weighted-Average Amortization Period: **12.4 years** as of **June 30, 2021**[67](index=67&type=chunk) [NOTE 4 - COMMITMENTS AND CONTINGENCIES](index=12&type=section&id=NOTE%204%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's various license agreements and royalty obligations for its wound care products, including CellerateRX, BIAKŌS, CuraShield, and a Debrider, as well as a patent for a resorbable bone hemostat. It also details other commitments related to a supply agreement with Wound Care Solutions - **CellerateRX Sublicense**: Royalties of **3-5%** of annual net sales, with a minimum of **$400,000** per year for the first five years. Accrued royalty expense was **$404,220** (**2021**) and **$210,220** (**2020**) for the **six months ended June 30**[69](index=69&type=chunk)[70](index=70&type=chunk) - **BIAKŌS License Agreement (Rochal)**: Royalty of **2-4%** of net sales, minimum annual royalty of **$100,000** (**2020**), increasing **10%** annually up to **$150,000**. A **$750,000** milestone payment was made in common stock in **March 2021**[72](index=72&type=chunk) - Resorbable Bone Hemostat: Receives **3% royalty** on product sales (minimum **$201,000 annually**) and pays **8% of net revenues** or minimum royalties to two unrelated third parties (**$16,080 annually**)[80](index=80&type=chunk)[83](index=83&type=chunk) - **Sanara Pulsar / WCS Supply Agreement**: Company paid **WCS** **$200,000** in **March 2021** due to **WCS** not meeting **Target Net Income** for **2020**, with increasing targets for **2021-2024**[84](index=84&type=chunk) [NOTE 5 - OPERATING LEASES](index=14&type=section&id=NOTE%205%20-%20OPERATING%20LEASES) This note describes the company's operating lease arrangements for office space and equipment, detailing the recognition of right-of-use (ROU) assets and lease liabilities in accordance with ASC Topic 842 - Operating Lease ROU Assets: **$406,024** as of **June 30, 2021**[89](index=89&type=chunk) - Operating Lease Liabilities: **$419,052** as of **June 30, 2021**[89](index=89&type=chunk) - Weighted Average Remaining Lease Term: **3.0 years** as of **June 30, 2021**[90](index=90&type=chunk) - Weighted Average Discount Rate: **6.25%** as of **June 30, 2021**[90](index=90&type=chunk) [NOTE 6 – SHAREHOLDERS' EQUITY](index=15&type=section&id=NOTE%206%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) This note provides details on changes in shareholders' equity, including the conversion of preferred stock and promissory notes into common stock, the issuance of common stock for asset acquisitions and a public offering, and restricted stock awards and stock option activity - Common Stock Issuance: **2,452,731 shares** issued in **February 2020** from conversion of preferred stock and a promissory note[91](index=91&type=chunk)[13](index=13&type=chunk) - Common Stock Issuance for Acquisition: **29,536 shares** issued for **Woundyne Medical, LLC** acquisition (software platform) in **January 2021**, valued at **$1,000,000**[93](index=93&type=chunk) - Public Offering: **1,265,000 shares** issued in **February 2021**, generating **$28.9 million** in net proceeds[94](index=94&type=chunk)[95](index=95&type=chunk) - Share-based Compensation Expense (Six Months Ended June 30): **$623,440** in **2021**, compared to **$491,069** in **2020**[99](index=99&type=chunk) - Unrecognized Share-based Compensation Expense: **$1,001,684** at **June 30, 2021**, expected to be recognized over a weighted-average period of **0.8 years**[99](index=99&type=chunk) [NOTE 7 – DEBT AND CREDIT FACILITIES](index=16&type=section&id=NOTE%207%20%E2%80%93%20DEBT%20AND%20CREDIT%20FACILITIES) This note details the company's $2.5 million revolving line of credit with Cadence Bank, including its maturity, security, interest rate, and financial covenants. The company was in compliance with all covenants as of June 30, 2021, following a modification to certain terms - Revolving Line of Credit: **$2.5 million** facility with **Cadence Bank**, maturing **January 13, 2023**, secured by substantially all of the company's assets[103](index=103&type=chunk) - Interest Rate: **0.75%** plus the '**Prime Rate**'[103](index=103&type=chunk) - Activity: An **$800,000** draw was made on **February 11, 2021**, and fully paid down on **February 19, 2021**. No outstanding amounts as of **June 30, 2021**[106](index=106&type=chunk) - Financial Covenants (as of **June 30, 2021**): Required minimum **Tangible Net Worth** of **$10,000,000** (temporarily raised) and a minimum cash balance of **$3,000,000**. The initial measurement period for the **Interest Coverage Ratio** was changed to **March 2022**[107](index=107&type=chunk) - Compliance: The company was **in compliance** with all financial covenants as of **June 30, 2021**[107](index=107&type=chunk) [NOTE 8 – INVESTMENT IN EQUITY SECURITIES](index=17&type=section&id=NOTE%208%20%E2%80%93%20INVESTMENT%20IN%20EQUITY%20SECURITIES) This note provides an overview of the company's equity investments in privately held companies, including Direct Dermatology Inc., Precision Healing Inc., and Pixalere Healthcare, Inc., detailing ownership stakes, investment amounts, and accounting methods - **Direct Dermatology Inc.**: **$500,000** investment (**July 2020**) for **2.9%** ownership, granting exclusive rights to technology in acute and post-acute care settings. Accounted for at cost[109](index=109&type=chunk) - **Precision Healing Inc.**: Initial **$600,000** investment (**Nov 2020**) for **12.6%** ownership; additional **$600,000** (**Feb 2021**) increased ownership to **22.4%**, leading to equity method accounting; further **$500,000** (**June 2021**) increased ownership to **29.0%**[110](index=110&type=chunk)[111](index=111&type=chunk) - Share of Loss from Equity Method Investment (**Precision Healing**): **$(278,904)** for the six months ended **June 30, 2021**[111](index=111&type=chunk)[115](index=115&type=chunk) - **Pixalere Healthcare, Inc.**: **$2,084,278** investment (**June 2021**) for **28.6%** convertible preferred shares. Granted subsidiary a royalty-free exclusive license to **Pixalere** software in the US, in exchange for **27.3%** equity in the subsidiary. Accounted for at cost due to liquidation preferences[112](index=112&type=chunk)[113](index=113&type=chunk) Total Investments | Period | Carrying Amount | | :----- | :-------------- | | June 30, 2021 | $4,005,374 | | December 31, 2020 | $1,100,000 | [NOTE 9 - RELATED PARTIES](index=18&type=section&id=NOTE%209%20-%20RELATED%20PARTIES) This note details transactions and relationships with related parties, primarily Rochal Industries, LLC, including outstanding payables, manufacturing and technical services agreements (since terminated), and the asset purchase agreement. It also highlights the influence of key company directors in Rochal Payables to Related Parties | Period | Amount | | :----- | :------- | | June 30, 2021 | $57,507 | | December 31, 2020 | $223,589 | - Manufacturing and Technical Services Agreements with **Rochal**: Incurred **$234,153** for technical services in **H1 2021**; both agreements were terminated on **August 12, 2021**[117](index=117&type=chunk)[118](index=118&type=chunk) - **Rochal Asset Purchase** (**July 14, 2021**): Acquired assets for approximately **$1,000,000** (**$500,000** cash and **14,369 shares** of common stock)[119](index=119&type=chunk) - Related Party Influence: **Ronald T. Nixon** (Executive Chairman) and **Ann Beal Salamone** (Director) hold significant interests in **Rochal**[120](index=120&type=chunk) [NOTE 10 – SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2010%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note describes significant events occurring after the reporting period, primarily the asset purchase agreement with Rochal Industries, LLC, and a concurrent consulting agreement with Ann Beal Salamone, detailing the acquired assets, purchase price, and future commitments - **Rochal Asset Purchase** (**Effective July 1, 2021**): Acquired intellectual property, **FDA 510(k) clearances**, development rights, equipment, and supplies from **Rochal**[121](index=121&type=chunk) - Purchase Price: Approximately **$1,000,000**, consisting of **$500,000** in cash and **14,369 shares** of common stock[121](index=121&type=chunk) - Future Considerations: **Rochal** is entitled to consideration for new products based on its science team's inventions and **25%** of grant proceeds for **three years** post-acquisition[125](index=125&type=chunk) - Consulting Agreement with **Ann Beal Salamone** (**July 14, 2021**): Annual consulting fee of **$177,697** for **three years**, for services including patent writing and grant reporting[127](index=127&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&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 results of operations for the quarter ended June 30, 2021, including an overview of the business, recent developments, detailed analysis of revenues and expenses, liquidity, cash flows, and critical accounting policies [Overview](index=20&type=section&id=Overview) This overview describes Sanara MedTech's core business as a medical technology company in wound and skin care, its product portfolio, strategic initiatives like virtual consult services, and the impact of the COVID-19 pandemic, noting a rebound in sales - Business: **Medical technology company** focused on developing and commercializing transformative technologies for **surgical and chronic wound and skin care markets**[131](index=131&type=chunk) - Product Portfolio: Currently markets **seven products** and has multiple products in its pipeline, licensed from various partners[132](index=132&type=chunk) - Strategic Initiatives: Formed **United Wound and Skin Solutions LLC (UWSS)** for wound and skin care virtual consult services, with initial offerings anticipated in **late 2021**[133](index=133&type=chunk) - **Rochal Asset Acquisition** (**July 2021**): Expanded pipeline with product candidates for mitigation of **opportunistic pathogens and biofilm**, **wound re-epithelialization and closure**, necrotic tissue debridement, and **cell compatible substrates**[134](index=134&type=chunk) - **COVID-19 Impact**: Experienced a **strong rebound in product sales** during the **second half of 2020** and the **first half of 2021**, following a decline in **Q2 2020** due to elective surgery suspensions[135](index=135&type=chunk) [Recent Developments](index=21&type=section&id=Recent%20Developments) This section highlights key corporate and financial activities, including a successful public offering that generated significant net proceeds, strategic investments in healthcare technology companies, and an asset acquisition from a related party, Rochal Industries, LLC, along with associated consulting agreements - **February 2021 Public Offering**: Issued **1,265,000 shares** of common stock at **$25.00 per share**, resulting in **$28.9 million** in net proceeds[138](index=138&type=chunk)[139](index=139&type=chunk) - **Pixalere Investment** (**June 2021**): Invested **$2,084,278** to purchase **28.6%** convertible preferred shares in **Pixalere Healthcare, Inc.**, and secured a royalty-free exclusive license for its cloud-based wound care software in the United States[140](index=140&type=chunk) - **Rochal Asset Purchase** (**July 2021**): Acquired intellectual property, **four FDA 510(k) clearances**, development rights, equipment, and supplies from **Rochal** for approximately **$1,000,000** (**$500,000** cash and **14,369 shares** of common stock)[141](index=141&type=chunk) - Expected Operating Expenses from **Rochal Acquisition**: Anticipates approximately **$1.2 million to $1.5 million** in additional operating expenses in the **first 12 months** following the acquisition[141](index=141&type=chunk) - Consulting Agreement: Entered into a consulting agreement with **Ann Beal Salamone** for an annual fee of **$177,697** for **three years**, for services including patent writing and grant reporting[145](index=145&type=chunk) [Components of Results of Operations](index=22&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the primary sources of the company's revenues, which include surgical and chronic wound care product sales and royalty income, and details the composition of its cost of goods sold, operating expenses (SG&A, R&D), and other income/expense - Revenue Sources: Primarily derived from sales of **surgical products** to hospitals and acute care facilities, **chronic wound care products** to post-acute settings, and **royalty revenue** from a development and licensing agreement[147](index=147&type=chunk)[149](index=149&type=chunk) Revenue Disaggregation by Category (Six Months Ended June 30) | Revenue Type | 2021 | 2020 | | :------------------ | :----------- | :----------- | | Surgical | $10,732,431 | $6,000,376 | | Wound Care | $453,638 | $390,638 | | Royalty revenue | $100,500 | $100,500 | | **Total Revenue** | **$11,286,569** | **$6,491,514** | - Cost of Goods Sold: Consists of **acquisition costs from manufacturers**, raw material costs for certain components, and **related royalties**[150](index=150&type=chunk) - Operating Expenses: Include **Selling, General and Administrative (SG&A) expenses** (salaries, commissions, benefits, corporate expenses) and **Research and Development (R&D) expenses** (product enhancements, pipeline investments)[151](index=151&type=chunk)[152](index=152&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2021, versus 2020, highlighting significant increases in net revenue and gross profit, and a reduction in net loss for the six-month period, driven by sales force expansion and new development projects Net Revenue Comparison | Period | 2021 | 2020 | Change (%) | | :---------------------- | :----------- | :----------- | :--------- | | Three Months Ended June 30 | $6,277,133 | $2,967,183 | 112% | | Six Months Ended June 30 | $11,286,569 | $6,491,514 | 74% | - Reason for Revenue Increase: Primarily due to increased sales of surgical wound care products resulting from **sales force expansion** and the **easing of COVID-19 restrictions**[154](index=154&type=chunk) Cost of Goods Sold Comparison | Period | 2021 | 2020 | | :---------------------- | :----------- | :----------- | | Three Months Ended June 30 | $536,405 | $348,675 | | Six Months Ended June 30 | $1,010,838 | $678,863 | - Selling, General and Administrative (SG&A) Expenses (Six Months Ended June 30): Increased to **$11,971,874** in **2021** from **$8,514,662** in **2020**, primarily due to increased payroll costs from **sales force expansion** (**8 additional field sales managers**, totaling **26**) and higher sales commissions[156](index=156&type=chunk) - Research and Development (R&D) Expenses (Six Months Ended June 30): Increased to **$222,193** in **2021** from **$45,903** in **2020**, mainly due to the initiation of new studies and development projects for licensed products[157](index=157&type=chunk) Net Loss Comparison | Period | 2021 | 2020 | | :---------------------- | :----------- | :----------- | | Three Months Ended June 30 | $(1,205,973) | $(1,129,557) | | Six Months Ended June 30 | $(2,389,349) | $(2,970,569) | - Reason for Net Loss Improvement (Six Months): Primarily due to **higher sales revenues** in **2021** compared to the same period in **2020**[159](index=159&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's strong cash position, its primary financing strategies through equity sales and a revolving line of credit, and its plans to use these resources to fund growth, including salesforce expansion, product development, and strategic acquisitions. It also confirms compliance with debt covenants Cash on Hand | Period | Amount | | :----- | :----------- | | June 30, 2021 | $24,389,004 | | December 31, 2020 | $455,366 | - Financing: Primarily from the sale of equity securities, including **$28.9 million** net proceeds from a **February 2021** public offering[161](index=161&type=chunk) - Revolving Line of Credit: A **$2.5 million** facility with **Cadence Bank**, with no outstanding balance as of **June 30, 2021**. Financial covenants were modified in **June 2021**, and the company was **in compliance**[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - Use of Proceeds: Expected to fund salesforce expansion, product development, clinical studies, working capital, and acquisitions[161](index=161&type=chunk) - Investments: Made additional investments in **Precision Healing** (**$1.1 million** in **H1 2021**) and **Pixalere** (**$2.08 million** in **June 2021**)[165](index=165&type=chunk)[167](index=167&type=chunk) - **Rochal Asset Acquisition**: Acquired assets for approximately **$1 million** (**$500,000 cash**, **$500,000 in common stock**) **effective July 1, 2021**[168](index=168&type=chunk) [Cash Flow Analysis](index=24&type=section&id=Cash%20Flow%20Analysis) This section analyzes the changes in cash flows from operating, investing, and financing activities for the six months ended June 30, 2021, compared to the same period in 2020, highlighting a significant net increase in cash driven by financing activities Cash Flow Activities (Six Months Ended June 30) | Activity | 2021 | 2020 | | :--------------------------------- | :----------- | :----------- | | Net Cash Used in Operating Activities | $(1,595,895) | $(2,732,191) | | Net Cash Used in Investing Activities | $(3,209,724) | $(1,157,456) | | Net Cash Provided by Financing Activities | $28,739,257 | $583,000 | - Operating Cash Flow Improvement: Lower use of cash in operating activities in **2021** primarily due to **higher sales revenue**[169](index=169&type=chunk) - Investing Cash Flow Increase: Higher cash used in investing activities in **2021** due to investments in **Precision Healing** and **Pixalere**[170](index=170&type=chunk) - Financing Cash Flow Surge: Significant cash provided by financing activities in **2021** due to proceeds from the **underwritten public offering**[171](index=171&type=chunk) [Material Transactions with Related Parties](index=24&type=section&id=Material%20Transactions%20with%20Related%20Parties) This section details significant transactions and agreements with related parties, including the CellerateRX sublicense, the conversion of convertible notes, and manufacturing and technical services agreements with Rochal, emphasizing the financial impact and the influence of key company directors - **CellerateRX Sublicense Agreement**: Exclusive world-wide sublicense with royalties of **3-5%** of net sales and a minimum annual royalty of **$400,000**. Royalty expense accrued was **$404,220** (**2021**) and **$210,220** (**2020**) for the **six months ended June 30**[172](index=172&type=chunk)[173](index=173&type=chunk) - Convertible Notes Payable: A **$1.5 million** promissory note and preferred stock held by **CGI Cellerate RX** (an affiliate of **Catalyst**) were converted into **179,101 shares** of common stock in **February 2020**[175](index=175&type=chunk)[176](index=176&type=chunk) - Manufacturing and Technical Services Agreements with **Rochal**: Incurred **$234,153** for technical services in **H1 2021**; both agreements were terminated on **August 12, 2021**[177](index=177&type=chunk)[178](index=178&type=chunk) - Related Party Influence: **Ronald T. Nixon** (Executive Chairman) and **Ann Beal Salamone** (Director) have significant interests in **Catalyst** and **Rochal**, respectively[174](index=174&type=chunk)[179](index=179&type=chunk) [Critical Accounting Policies](index=25&type=section&id=Critical%20Accounting%20Policies) This section reaffirms the company's critical accounting policies, including revenue recognition, impairment of long-lived assets, investment in equity securities, inventories, and the use of estimates, noting no material impact from COVID-19 on estimates for the reporting period - Revenue Recognition: Follows **ASC Topic 606**, recognizing revenue upon transfer of control of goods or services to the customer[184](index=184&type=chunk)[191](index=191&type=chunk) - Impairment of Long-Lived Assets: Assets are reviewed for impairment when circumstances indicate; **no impairment was recorded** for the six months ended **June 30, 2021**, or **2020**[185](index=185&type=chunk) - Investment in Equity Securities: Non-marketable equity securities are reported at cost minus impairment; **no impairment or observable price changes were determined** as of **June 30, 2021**[186](index=186&type=chunk) - Inventories: Stated at the **lower of cost or net realizable value (FIFO basis)**; inventory obsolescence expense was **$29,834** for **H1 2021** and **$75,422** for **H1 2020**[187](index=187&type=chunk) - Use of Estimates: Management determined **no material impact** from the **COVID-19 pandemic** on its estimates and assumptions for the six months ended **June 30, 2021**[188](index=188&type=chunk) [Impact of Inflation and Changing Prices](index=25&type=section&id=Impact%20of%20Inflation%20and%20Changing%20Prices) This section states that 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 - **No Material Impact**: Inflation and changing prices have **not materially impacted** historical results and are **not anticipated to materially impact** future results of operations[180](index=180&type=chunk) [Off-Balance Sheet Arrangements](index=26&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the company has no off-balance sheet arrangements - **No Off-Balance Sheet Arrangements**: The company does not have **no off-balance sheet arrangements**[189](index=189&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=27&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 - Disclosure Exemption: **Not required to provide market risk disclosures** as a smaller reporting company[190](index=190&type=chunk) [ITEM 4. Controls and Procedures](index=27&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=27&type=section&id=Disclosure%20Controls%20and%20Procedures) Management, with the participation of its Certifying Officers, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2021, and concluded they were effective - Effectiveness: Disclosure controls and procedures were **effective** as of **June 30, 2021**[192](index=192&type=chunk) [Changes in Internal Control over Financial Reporting](index=27&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) The company reported no material changes in its internal control over financial reporting during the quarter ended June 30, 2021 - **No Material Changes**: **No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control over financial reporting** during the quarter ended **June 30, 2021**[193](index=193&type=chunk) [Part II. Other Information](index=28&type=section&id=Part%20II.%20Other%20Information) [ITEM 1. Legal Proceedings](index=28&type=section&id=ITEM%201.%20Legal%20Proceedings) The company states that it is not aware of any material pending legal proceedings - **No Material 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[196](index=196&type=chunk) [ITEM 1A. Risk Factors](index=28&type=section&id=ITEM%201A.%20Risk%20Factors) This section notes that there were no material changes to the previously disclosed risk factors, except for a new risk related to the company's increased responsibility for regulatory approvals and compliance after acquiring assets from Rochal Industries, LLC - New Risk Factor: Following the **Rochal** asset purchase, the company expects to develop certain pipeline candidates in-house, subjecting it to **FDA requirements (cGMP, cGTP, QSR)** and other regulations applicable to medical product manufacturers[198](index=198&type=chunk) - Shift in Regulatory Responsibility: Historically relied on third parties for regulatory approvals, but will now be **responsible for gaining approval for certain product candidates on its own**[198](index=198&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company confirms that there were no unregistered sales of equity securities during the quarter ended June 30, 2021, that were not previously reported - **No Unregistered Sales**: **No unregistered sales of equity securities occurred** during the quarter ended **June 30, 2021**, that were not previously reported on a Current Report on **Form 8-K**[199](index=199&type=chunk) [ITEM 3. Defaults upon Senior Securities](index=28&type=section&id=ITEM%203.%20Defaults%20upon%20Senior%20Securities) The company states that there were no defaults upon senior securities - **No Defaults**: There were **no defaults upon senior securities**[200](index=200&type=chunk) [ITEM 4. Mine Safety Disclosures](index=28&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - **Not Applicable**: This item is **not applicable** to the company[201](index=201&type=chunk) [ITEM 5. Other Information](index=28&type=section&id=ITEM%205.%20Other%20Information) The company states that there is no other information to report under this item - **No Other Information**: **No other information to report** under this item[202](index=202&type=chunk) [ITEM 6. Exhibits](index=29&type=section&id=ITEM%206.%20Exhibits) This section provides a comprehensive list of all documents filed as exhibits to the Form 10-Q, including various agreements, corporate documents, and certifications - Exhibits List: Includes the **Asset Purchase Agreement**, **Articles of Incorporation**, **Bylaws**, **Modification Agreement to Loan Agreement**, **Consulting Agreement**, and various **certifications (31.1, 31.2, 32.1, 32.2)** and **XBRL documents**[203](index=203&type=chunk) [Signatures](index=30&type=section&id=Signatures) [Report Signature](index=30&type=section&id=Report%20Signature) This section contains the signature of the Chief Financial Officer, Michael McNeil, certifying the report on behalf of Sanara MedTech Inc. as of August 16, 2021 - Signed By: **Michael McNeil**, **Chief Financial Officer** (**Principal Financial Officer and duly authorized officer**)[208](index=208&type=chunk) - Date: **August 16, 2021**[208](index=208&type=chunk)

Financial Performance - For the three months ended March 31, 2021, the company generated revenues of $5,009,436, a 42% increase from $3,524,331 for the same period in 2020[122] - Surgical product sales amounted to $4,711,613 for the three months ended March 31, 2021, compared to $3,272,892 in the prior year[116] - The company reported a net loss of $1,183,376 for the three months ended March 31, 2021, an improvement from a net loss of $1,841,012 in the same period of 2020[127] - Cost of goods sold for the three months ended March 31, 2021, was $474,433, up from $330,188 in the same period of 2020, primarily due to higher sales volume[123] - For the three months ended March 31, 2021, net cash used in operating activities was $1,261,604, a decrease from $2,032,019 for the same period in 2020, primarily due to higher sales revenue[134] - Net cash provided by financing activities for the three months ended March 31, 2021 was $28,739,257, compared to $0 for the same period in 2020, driven by proceeds from an underwritten public offering of 1,265,000 shares at $25.00 per share, resulting in gross proceeds of $31,625,000[136] Research and Development - Research and development expenses increased to $118,212 for the three months ended March 31, 2021, from $4,387 in the same period of 2020, due to new studies and development projects[125] - The company has multiple products in its pipeline and intends to begin marketing two biologic products for surgical and wound care applications in 2021[108] Cash and Financing - Cash on hand at March 31, 2021, was $27,328,628, a significant increase from $455,366 at December 31, 2020[129] - The company anticipates using net proceeds from a public offering of 1,265,000 shares at $25.00 per share to expand its salesforce and further develop its product pipeline[129] Expenses and Costs - The company expects SG&A expenses to increase in absolute dollars but decrease as a percentage of revenue as the commercial organization grows[119] - The company incurred $148,521 in costs for technical services provided by Rochal for the three months ended March 31, 2021[142] - The company recorded inventory obsolescence expense of $7,312 for the three months ended March 31, 2021, compared to $20,116 for the same period in 2020[152] Licensing and Agreements - The company has an exclusive world-wide license to market and sell antimicrobial products under the BIAKŌS License Agreement, with a payment of $750,000 made in March 2021 through the issuance of 20,834 shares of common stock[133] - The company amended the CellerateRX sublicense agreement to extend the term to May 17, 2050, with minimum royalties of $400,000 per year for the first five years[137] - The company acquired Catalyst's 50% interest in Cellerate, LLC in exchange for 1,136,815 shares of Series F Convertible Preferred Stock[139] Other Information - Royalties due under the CellerateRX sublicense agreement for the three months ended March 31, 2021 totaled $192,586, up from $100,000 for the same period in 2020[137] - As of March 31, 2021, there were no related party promissory notes or accrued interest outstanding following the conversion of a $1,500,000 promissory note into common stock[140] - The company does not anticipate that inflation and changing prices will have a material impact on future results of operations[145]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ------------------------------------------------------ Commission File Number 001-39678 SANARA MEDTECH INC. (Exact name of Registrant as specified in its charter) | Texas | | 59-2219994 | | --- | --- | --- | | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identificat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2020 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 No. 001-39678 SANARA MEDTECH INC. (Exact name of registrant as specified in its charter) Texas 59-2219994 (State or ot ...

U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (State or other jurisdiction of incorporation or FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2020 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-11808 SANARA MEDTECH INC. (Exact name of registrant as specified in its charter) Texas 59-2219994 organization) (I.R.S. Employer ...

U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-11808 SANARA MEDTECH INC. (Exact name of registrant as specified in its charter) Texas 59-2219994 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Ide ...

[Letter from the Executive Chairman and Vice Chairman](index=3&type=section&id=Letter%20from%20the%20Executive%20Chairman%20and%20Vice%20Chairman) Sanara MedTech achieved significant revenue growth and strategic expansion in 2019, but anticipates a downturn in 2020 due to the COVID-19 pandemic 2019 Performance Highlights | Metric | 2019 | 2018 | Growth | | :--- | :--- | :--- | :--- | | Total Revenues | $11.8 million | $8.8 million | 34% | - The company expanded its Board from three to six directors, adding health care experts Dr. Kenneth E. Thorpe and Ms. Ann Beal Salamone[13](index=13&type=chunk) - Operations were reorganized into two divisions: Surgical and Wound Care, led by newly appointed presidents Zachary B. Fleming and Shawn M. Bowman, respectively, who were later promoted to Co-COOs[14](index=14&type=chunk) - Three new products were introduced in 2019: PULSAR II™ (debridement system), BIAKŌS™ (antimicrobial cleanser), and HYCOL™ (hydrolyzed collagen)[16](index=16&type=chunk)[17](index=17&type=chunk) - The company anticipates a business downturn due to the delay in elective surgeries caused by the COVID-19 pandemic and is taking steps to cut costs and manage cash flow[19](index=19&type=chunk) [PART I](index=5&type=section&id=PART%20I) [Business](index=5&type=section&id=Item%201.%20BUSINESS) Sanara MedTech develops and distributes wound and skin care products in North America, completed a reverse merger with Cellerate, LLC, and faces intense competition - The company's core business is the development and distribution of wound and skin care products for the North American surgical and advanced wound care markets[22](index=22&type=chunk) - Key products include CellerateRX® (Surgical Activated Collagen®), HYCOL™ (Hydrolyzed Collagen), BIAKŌS™ (Antimicrobial Cleanser), and PULSAR II™ (Wound Irrigation System)[22](index=22&type=chunk) - In March 2019, the company acquired the remaining **50%** of Cellerate, LLC, making it a wholly-owned subsidiary; this transaction was accounted for as a reverse merger and recapitalization[24](index=24&type=chunk)[25](index=25&type=chunk) - The company expects to launch BIAKŌS™ Antimicrobial Wound Gel and BIAKŌS™ Antimicrobial Barrier Film in 2020[29](index=29&type=chunk)[30](index=30&type=chunk) - The company competes with large manufacturers like Smith & Nephew, Acelity, Medline, ACell, and Integra LifeSciences, but believes its products offer better efficacy and cost savings[34](index=34&type=chunk) [Risk Factors](index=6&type=section&id=Item%201A.%20RISK%20FACTORS) The company faces significant risks across operations, product obsolescence, intellectual property protection, complex regulatory compliance, and common stock volatility due to concentrated ownership [Risks Related to Business Operations](index=7&type=section&id=RISKS%20RELATED%20TO%20HOW%20WE%20OPERATE%20OUR%20BUSINESS) Operational risks include a history of losses, unpredictable revenue, challenges in market acceptance, potential capital shortfalls, and intense competition from larger, better-resourced companies - The company has a history of net losses and may not maintain profitability due to significant investments in sales and clinical programs[37](index=37&type=chunk) - Future capital requirements are uncertain; if cash flow is insufficient, the company may need to seek additional equity or debt financing, which could dilute ownership or increase debt service obligations[43](index=43&type=chunk)[44](index=44&type=chunk) - The company faces significant competition from large, well-established medical device manufacturers with greater financial resources, distribution networks, and brand recognition[48](index=48&type=chunk)[50](index=50&type=chunk) [Risks Related to Products](index=10&type=section&id=RISKS%20RELATED%20TO%20OUR%20PRODUCTS) Product risks include obsolescence due to competitor innovations and potential product liability claims that may exceed insurance coverage - Competitors may develop more effective technologies, rendering the company's products and technology obsolete[53](index=53&type=chunk) - The company faces exposure to product liability claims; a successful claim in excess of insurance coverage could materially harm the business[54](index=54&type=chunk) [Risks Related to Intellectual Property](index=10&type=section&id=RISKS%20RELATED%20TO%20INTELLECTUAL%20PROPERTY) Intellectual property risks involve limited protection from patents and trademarks, potential challenges to proprietary rights, and costly infringement litigation from third parties - The company relies on patents, trademarks, and trade secrets, but these may not adequately protect its rights or provide a competitive advantage[55](index=55&type=chunk) - The company may be subject to infringement claims from third parties, which could result in costly litigation, require licensing agreements, or force the development of non-infringing technology[56](index=56&type=chunk) [Risks Related to Regulations](index=11&type=section&id=RISKS%20RELATED%20TO%20REGULATIONS) Regulatory risks include extensive and costly FDA compliance, uncertain product clearance processes, adverse changes in reimbursement policies, and severe penalties for non-compliance with anti-kickback and fraud laws - The business is significantly impacted by government regulation from the U.S. FDA and similar foreign agencies, which is time-consuming and expensive[57](index=57&type=chunk) - Obtaining regulatory clearance (510(k)) or approval (PMA) for future medical devices is a costly, time-consuming, and uncertain process that could delay or prevent commercialization[61](index=61&type=chunk) - Changes in reimbursement policies by third-party payers like Medicare and Medicaid could adversely impact the use and pricing of the company's products[66](index=66&type=chunk)[68](index=68&type=chunk) - The company must comply with federal and state anti-kickback, self-referral, and false claims laws, where violations can result in significant monetary fines, penalties, and exclusion from federal healthcare programs[69](index=69&type=chunk)[71](index=71&type=chunk) [Risks Related to Common Stock](index=13&type=section&id=RISKS%20RELATED%20TO%20OUR%20GOVERNING%20DOCUMENTS%20OR%20OUR%20COMMON%20STOCK) Common stock risks include high volatility, low trading volume, no cash dividends, and significant control by a few shareholders, potentially deterring changes in control - The common stock price is highly volatile and trading volume is low, which could lead to substantial losses for purchasers and difficulty in selling shares[72](index=72&type=chunk)[75](index=75&type=chunk) - A few shareholders, including directors and their affiliates, control a large percentage of the voting stock, giving them substantial influence over corporate matters[79](index=79&type=chunk) - The company has never paid cash dividends on its common stock and does not intend to in the foreseeable future[78](index=78&type=chunk) [Unresolved Staff Comments](index=16&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that it has no unresolved staff comments from the SEC - None[83](index=83&type=chunk) [Properties](index=16&type=section&id=ITEM%202.%20PROPERTIES) The company leases office space and equipment, recognizing Right of Use (ROU) assets and lease liabilities on its balance sheet, with its primary office lease extending to June 2024 - The company adopted ASC 842, recognizing operating lease Right of Use (ROU) assets of **$585,251** and a related lease liability of **$598,917** as of December 31, 2019[88](index=88&type=chunk) - The primary property is a leased office space at 1200 Summit Ave., Fort Worth, TX, which was amended in July 2019 to increase space to 5,877 sq. ft. and extend the term through June 30, 2024[87](index=87&type=chunk) Maturity of Operating Lease Liabilities (as of Dec 31, 2019) | Year | Amount | | :--- | :--- | | 2020 | $150,887 | | 2021 | $151,317 | | 2022 | $151,333 | | 2023 | $154,271 | | 2024 | $77,870 | | **Total lease payments** | **$685,678** | | Less imputed interest | ($86,761) | | **Present value of lease liabilities** | **$598,917** | [Legal Proceedings](index=16&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) As of the filing date, the company has no outstanding legal proceedings - As of December 31, 2019, and the filing date of this report, the Company has no outstanding legal proceedings[91](index=91&type=chunk) [Mine Safety Disclosures](index=17&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - This item is not applicable[92](index=92&type=chunk) [PART II](index=18&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20SHAREHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on the OTCQB market, underwent a reverse stock split and name change in 2019, has not paid dividends, and completed a **$10 million** private placement with related parties - On May 10, 2019, the company completed a recapitalization that included a 1-for-100 reverse stock split, a reduction of authorized capital stock, and a name change to Sanara MedTech Inc[94](index=94&type=chunk) - The company has never paid cash dividends and does not plan to in the foreseeable future, intending to retain earnings for operations and expansion[96](index=96&type=chunk) - On October 15, 2019, the company closed a private placement offering of **1,204,820** shares of common stock at **$8.30 per share**, raising **$10 million**; the purchasers were related party entities to three board members[98](index=98&type=chunk) [Selected Financial Data](index=18&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) As a smaller reporting company, Sanara MedTech is not required to provide this information - As a smaller reporting company, we are not required to provide this information[99](index=99&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In 2019, revenues grew **34%** to **$11.8 million**, but increased SG&A expenses led to a **$2.8 million** net loss, while a **$10 million** private placement significantly improved liquidity to **$6.6 million** cash on hand Financial Performance Comparison (2019 vs. 2018) | Metric | 2019 (Successor) | 2018 (Combined) | Change | | :--- | :--- | :--- | :--- | | Revenues | $11,766,763 | $8,779,872 | +34% | | Cost of Goods Sold | $1,209,300 | $852,124 | +42% | | SG&A Expenses | $13,297,520 | $7,715,613 | +72% | | Net Income (Loss) | ($2,814,088) | $175,464 | - | - The increase in SG&A expenses was primarily due to doubling the field sales organization from eight to eighteen representatives in 2019, consistent with the company's growth strategy[115](index=115&type=chunk)[116](index=116&type=chunk) - Cash on hand increased significantly from **$176,421** at year-end 2018 to **$6,611,928** at year-end 2019, largely due to a **$10 million** private placement in October 2019[102](index=102&type=chunk)[103](index=103&type=chunk) Cash Flow Summary (2019 vs. 2018) | Cash Flow Activity | 2019 (Successor) | 2018 (Combined) | | :--- | :--- | :--- | | Net Cash (Used in) / Provided by Operating Activities | ($2,167,401) | $517,079 | | Net Cash Used in Investing Activities | ($1,197,097) | ($27,770) | | Net Cash Provided by Financing Activities | $9,800,005 | $0 | - The company expects a decline in revenue due to the COVID-19 virus causing postponements of elective surgeries, and is proactively cutting costs and managing cash-flow[119](index=119&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Sanara MedTech is not required to provide this information - As a smaller reporting company, we are not required to provide this information[123](index=123&type=chunk) [Financial Statements and Supplementary Data](index=23&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) The audited consolidated financial statements for 2019 reflect a reverse merger, showing **$11.8 million** revenue, a **$2.8 million** net loss, and a significant increase in cash to **$6.6 million** due to a private placement [Consolidated Balance Sheets](index=25&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2019, total assets significantly increased to **$11.1 million** from **$1.7 million**, driven by a rise in cash to **$6.6 million**, while total liabilities grew to **$4.7 million** and equity to **$6.4 million** Consolidated Balance Sheet Highlights (Successor) | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $6,611,928 | $176,421 | | Total current assets | $8,855,764 | $1,690,681 | | Total assets | $11,117,162 | $1,709,458 | | **Liabilities & Equity** | | | | Total current liabilities | $2,639,821 | $1,122,661 | | Total liabilities | $4,724,762 | $1,122,661 | | Total shareholders' equity | $6,392,400 | $586,797 | [Consolidated Statements of Operations](index=26&type=section&id=Consolidated%20Statements%20of%20Operations) For 2019, the company reported **$11.8 million** in revenues and a **$10.6 million** gross profit, but **$13.3 million** in operating expenses resulted in a **$2.8 million** net loss, contrasting with a **$175k** net income in 2018 Consolidated Statement of Operations (Year Ended Dec 31, 2019 - Successor) | Metric | Amount | | :--- | :--- | | Revenues | $11,766,763 | | Gross profit | $10,557,463 | | Total operating expenses | $13,297,520 | | Operating loss | ($2,740,057) | | Net loss attributable to Sanara MedTech Inc. | ($2,814,088) | | Basic and Diluted loss per share | ($1.32) | [Consolidated Statements of Cash Flows](index=28&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In 2019, net cash used in operating activities was **$2.2 million**, investing activities used **$1.2 million**, while financing activities provided **$9.8 million** from a private placement, resulting in a **$6.4 million** net increase in cash Consolidated Statement of Cash Flows (Year Ended Dec 31, 2019 - Successor) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($2,167,401) | | Net cash used in investing activities | ($1,197,097) | | Net cash from financing activities | $9,800,005 | | **Net increase in cash** | **$6,435,507** | | Cash and cash equivalents, end of period | $6,611,928 | [Notes to the Consolidated Financial Statements](index=29&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail the reverse merger accounting, key policies, the **$10 million** private placement, intangible assets, license agreements with Rochal Industries, debt facilities, and subsequent events including debt conversion and the **$8.9 million** NOL carryforward - The Cellerate Acquisition in March 2019 was accounted for as a reverse merger and recapitalization, with Cellerate, LLC deemed the accounting acquirer ('Successor')[145](index=145&type=chunk) - In October 2019, the company closed a **$10 million** private placement of common stock at **$8.30 per share** with related parties[184](index=184&type=chunk)[186](index=186&type=chunk) - The company has exclusive license agreements with Rochal Industries for BIAKŌS™ products, involving upfront payments, milestone payments, and future royalties; the Executive Chairman and a director of Sanara have significant affiliations with Rochal[206](index=206&type=chunk)[210](index=210&type=chunk) - Subsequent to year-end, on February 7, 2020, The Catalyst Group converted its entire holdings of the **$1.5 million** promissory note and Series F Preferred Stock into **2,452,731** shares of common stock, resulting in Catalyst controlling **56.7%** of outstanding shares[240](index=240&type=chunk) - The company has a net operating loss (NOL) carryforward of approximately **$8.9 million** as of December 31, 2019, for which a full valuation allowance has been provided[232](index=232&type=chunk)[233](index=233&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=45&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[243](index=243&type=chunk) [Controls and Procedures](index=45&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were ineffective as of December 31, 2019, due to a material weakness from limited segregation of duties, and is evaluating remediation steps - Management concluded that as of December 31, 2019, the company's disclosure controls and procedures were not effective[244](index=244&type=chunk) - A material weakness was identified due to the small size of the Company and limited segregation of duties[248](index=248&type=chunk) [Other Information](index=45&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) This section details a consulting agreement with former chairman John Siedhoff, outlining monthly compensation for services through December 31, 2020 - The company had a consulting agreement with former chairman John Siedhoff; a new agreement effective February 1, 2019, provides for monthly compensation of **$20,000** for 2019 and **$10,000** for 2020[250](index=250&type=chunk) [PART III](index=47&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=47&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section provides biographical information for the company's six directors and four executive officers, noting that the full Board performs audit, compensation, and nominating functions without standing committees Board of Directors | Name | Age | Position | | :--- | :--- | :--- | | Ronald T. Nixon | 64 | Executive Chairman | | James W. Stuckert | 82 | Director | | S. Oden "Denny" Howell Jr. | 80 | Director | | J. Michael Carmena | 64 | Vice Chairman | | Ann Beal Salamone | 69 | Director | | Kenneth E. Thorpe | 63 | Director | Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Zachary B. Fleming | 45 | Co-Chief Operating Officer and President, Surgical | | Shawn M. Bowman | 44 | Co-Chief Operating Officer and President, Wound Care | | Michael D. McNeil | 54 | Chief Financial Officer | | J. Michael Carmena | 64 | Principal Executive Officer | - The Board of Directors does not have standing audit, compensation, or nominating committees; the entire Board performs these functions[270](index=270&type=chunk) [Executive Compensation](index=52&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) The summary compensation table details 2019 compensation for four named executive officers, with total compensation ranging from **$232,500** to **$295,667**, while directors received no cash or equity compensation 2019 Summary Compensation | Name and Principal Position | Year | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Zachary B. Fleming, Co-COO & President, Surgical | 2019 | 205,667 | 90,000 | 295,667 | | Shawn M. Bowman, Co-COO & President, Wound Care | 2019 | 205,667 | 80,000 | 285,667 | | J. Michael Carmena, Principal Executive Officer | 2019 | 209,600 | 75,000 | 284,600 | | Michael D. McNeil, Chief Financial Officer | 2019 | 169,500 | 63,000 | 232,500 | - Effective June 1, 2019, the company entered into two-year employment agreements with executives Shawn M. Bowman and Zachary B. Fleming, including base salaries of **$225,000** and severance provisions[284](index=284&type=chunk) - During 2019, the company did not pay cash or equity compensation to its Board members for their service as directors[288](index=288&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=53&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) As of February 21, 2020, directors and executive officers beneficially owned approximately **80.5%** of common stock, with Ronald T. Nixon holding **56.7%**, indicating significant control over shareholder matters Beneficial Ownership as of February 21, 2020 | Name / Group | Shares Beneficially Owned | Percentage | | :--- | :--- | :--- | | Ronald T. Nixon | 3,416,587 | 56.7% | | James W Stuckert | 941,584 | 15.6% | | S. Oden "Denny" Howell Jr. | 481,165 | 8.0% | | All directors and executive officers as a group (6 persons) | 4,847,336 | 80.5% | - As of February 21, 2020, there were **6,023,732** shares of common stock issued and outstanding[294](index=294&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=57&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company engaged in significant related-party transactions in 2019, including payments to Catalyst and Rochal Industries for services and product licenses, with key executives having affiliations with these entities - The company paid Catalyst and its affiliate, related to Executive Chairman Ronald T. Nixon, a total of **$229,356** in 2019 for professional services[300](index=300&type=chunk) - The company paid Rochal Industries a total of **$1,663,073** in 2019, including **$1,500,000** for new product license agreements; Executive Chairman Ronald T. Nixon and Director Ann Beal Salamone are affiliated with Rochal[301](index=301&type=chunk)[304](index=304&type=chunk) - Former director John C. Siedhoff received consulting fees under an agreement that provided **$21,947** per month through December 2019 and **$10,000** per month for 2020[305](index=305&type=chunk) [Principal Accounting Fees and Services](index=57&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) For 2019 and 2018, the company incurred audit fees of **$88,000** and **$68,303** respectively from MaloneBailey, LLP, and tax fees of **$24,951** and **$20,903** from Haynie & Company, all pre-approved by the Board Accounting Fees | Fee Type | 2019 | 2018 | | :--- | :--- | :--- | | Audit Fees (MaloneBailey, LLP) | $88,000 | $68,303 | | Tax Fees (Haynie & Company) | $24,951 | $20,903 | [Exhibits, Financial Statement Schedules](index=58&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists key exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and Sarbanes-Oxley Act certifications - Key exhibits filed include the Share Exchange Agreement with Catalyst, the Certificate of Designations for Series F Preferred Stock, employment agreements with executives, and product license agreements with Rochal Industries[310](index=310&type=chunk)[311](index=311&type=chunk)

U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-11808 SANARA MEDTECH INC. (Exact name of registrant as specified in its charter) Texas 59-2219994 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer ...

or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-11808 SANARA MEDTECH INC. (Exact name of registrant as specified in its charter) U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2019 Texas 59-2219994 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer ...

U.S. 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: March 31, 2019 Commission File No. 0-11808 SANARA MEDTECH INC. Formerly named WOUND MANAGEMENT TECHNOLOGIES, INC. Texas 59-2219994 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 1200 Summit Ave Suite 414 Fort Worth, Texas 76102 (Address of principal executive offices) ...