Financial Data and Key Metrics Changes - In Q4 2021, the company generated $7 million in revenue with a net loss of $3.6 million. For the full year, revenues reached $24.1 million, marking a 55% increase from the previous year. The net loss for 2021 was $8 million, compared to a net loss of $4.4 million in 2020 [6][14][17]. Business Line Data and Key Metrics Changes - The surgical team achieved record sales in both Q4 and the full year, with Cellerate being sold in 471 hospitals and ASCs across 26 states by the end of Q4 2021. The company was approved to sell in approximately 1,100 facilities during the year [10][11]. - Two new products, FORTIFY TRG Tissue Repair Graft and FORTIFY FLOWABLE Extracellular Matrix, were launched, with initial sales of FORTIFY TRG occurring in Q4 [11]. Market Data and Key Metrics Changes - The company reported strong demand for its products, with December 2021 being a record sales month. The expansion of geographic coverage and penetration into more hospitals contributed to this performance [11][28]. Company Strategy and Development Direction - The company is focusing on expanding its sales force and distribution network in both new and existing U.S. markets. The WounDerm platform is being integrated with Homecare Homebase, the largest EHR provider in the home health market [12][14]. - The Precision Healing Imager is being prepared for FDA submission, with a strategic decision made to file with the commercial unit design [12]. Management's Comments on Operating Environment and Future Outlook - Management indicated that the operating environment is returning to normal, with no unusual disruptions affecting business operations. The strategy is being executed effectively, and the company is optimistic about future growth [31][32]. Other Important Information - The company made leadership changes, promoting Zach Fleming to CEO and adding new board members to strengthen the team [7][8]. - Cash on hand at the end of 2021 was $18.7 million, with cash used in operating activities for the full year amounting to $4.8 million [17]. Q&A Session Summary Question: Was there anything abnormal about Q4 that positively skewed the results? - Management confirmed there was nothing unusual, attributing the performance to an increase in surgeries as COVID-related restrictions eased [24]. Question: What is the normal cadence in the year regarding sales? - Management noted that Q4 tends to be strong due to patients reaching their deductibles, while Q3 is typically weaker due to vacations [26]. Question: Did COVID impact January's performance? - Management stated that they did not see any significant disruptions in January, indicating business as usual [29]. Question: Can you explain the expansion of the WounDerm pilot? - An agency refers to the location of a home healthcare company, typically covering a 50-mile radius for patient populations [34]. Question: Can you comment on January, February, March trends? - Management avoided giving forward-looking statements but reiterated that they are continuing to execute their strategy without disruptions [37]. Question: How does Precision Healing fit into the long-term strategy? - Precision Healing is seen as critical for developing precise treatment protocols and is expected to be reimbursed under existing codes [42]. Question: Is there potential for licensing Precision Healing internationally? - Management indicated that they have not explored licensing yet but see potential opportunities for partnerships [44]. Question: Can you explain the partnership with Scendia Biologics? - The partnership aims to offer complementary products that enhance surgical outcomes, with a joint venture established for growth [46]. Question: Which product in development excites you the most? - Management expressed excitement about both BIASURGE and Precision Healing, viewing them as potential game changers in their respective markets [48][49]. Question: How does the acquisition of a home health provider by a major insurer affect your business? - Management sees every home healthcare provider as a potential partner, and the trend of vertical integration is viewed positively for their strategy [52].

Market Opportunity - Approximately 8.2 million patients in the U.S. suffer from surgical and chronic wounds annually, with total treatment costs estimated at $28 billion[20] - The U.S. teledermatology market is projected to grow from $5 billion in 2019 to $45 billion by 2027, indicating significant market expansion opportunities[20] - Chronic wounds affect approximately 15% of the Medicare beneficiary population, highlighting a significant target market for the company's products[31] - Over 34 million people in the U.S., approximately 10% of the population, suffer from diabetes, leading to complications such as diabetic foot ulcers (DFUs)[32] Product Development and Pipeline - The company focuses on developing transformative technologies for surgical and chronic wound care, aiming to improve clinical outcomes and reduce healthcare costs[16] - The company is developing a robust pipeline of products for chronic and surgical wound care, including antimicrobial skin protectants and next-generation offerings[25] - The company acquired assets from Rochal, including four FDA 510(k) clearances, enhancing its product pipeline for wound care[19] - The company plans to fully commercialize three products with Cook Biotech in 2022, which are already cleared for surgical wound care[24] - The product pipeline includes candidates for mitigating opportunistic pathogens, wound re-epithelialization, and necrotic tissue debridement[144] Clinical Efficacy - A study showed that using CellerateRX Surgical powder resulted in a 0% rate of wound dehiscence or infection in neurosurgery cases, compared to infection rates as high as 24% in similar surgeries[35] - The BIAKŌS system demonstrated a >99.99% reduction in biofilm burden within 24 hours, outperforming commercial controls[42] Regulatory Compliance - The company’s medical products are regulated by the FDA, requiring marketing clearance or approval before introduction into the U.S. market[80] - The PMA process requires manufacturers to demonstrate safety and effectiveness through extensive data, including preclinical studies and clinical trials, with a review period that can take up to several years[85] - Compliance with FDA's current good manufacturing practices (cGMP) is essential, and any failure could jeopardize product commercialization[141] - The company is subject to comprehensive federal, state, and local laws and regulations, which are subject to frequent change[79] Financial Performance and Risks - The company has a history of losses, which may continue as it expands its selling efforts[116] - The company’s revenue growth is difficult to predict, and a shortfall in forecast revenues may harm its operating results[116] - The company has incurred net losses in most years since 2004 and plans to continue significant investments in its sales force and clinical programs, which will increase operating expenses[120] - The company may need to seek additional financing to meet capital requirements[125] Competition and Market Challenges - The company faces competition from large, established medical device manufacturers and telehealth providers, which could adversely affect its financial condition[116] - The company faces significant competition in the wound care sector, with many competitors having greater resources and established collaborations[148] - The company’s planned expansion into wound and skin care virtual consult services will require entering markets with little or no experience[117] Telehealth and Technology Integration - A pilot program for telehealth services conducted in Q4 2021 showed positive results, with plans to expand to six more agencies in Q1 2022[30] - The company is developing a comprehensive service offering through WounDerm, which includes an EMR software platform and virtual consultation services, expected to be commercially available in mid-2022[49][50] - The Precision Healing product platform, designed for wound assessment, is anticipated to be commercially available in 2023 and will integrate with the WounDerm EMR[53] Compliance and Legal Risks - The company is subject to various healthcare fraud and abuse laws, and failure to comply could result in substantial penalties[121] - Non-compliance with healthcare fraud and abuse laws could result in substantial penalties for the company[191] - The company must comply with HIPAA regulations regarding the protection of personally identifiable information (PII) and protected health information (PHI), with mandatory penalties for violations[197] Operational and Management Challenges - The company’s ability to manage growth effectively is critical, as future expansion efforts may strain internal resources[128] - The company may face challenges in attracting and retaining key personnel, which could adversely affect its business[127] - Effective management of product inventory is crucial, as products have a shelf life of 18 months to three years, impacting profitability[150] Reimbursement and Financial Viability - A significant portion of the company's wound care products are reimbursed under Medicare Part B, making reimbursement policies critical for market opportunities[184] - Changes in reimbursement policies by third-party payors could adversely affect the company's ability to market products and generate revenue[183] Future Outlook and Strategic Initiatives - The company is exploring new indications of use and improved formulas for next-generation products, including CellerateRX and HYCOL[86] - The company’s comprehensive wound and skin care strategy involves growth through acquisitions and investments, which requires incurring substantial costs[116]

Sanara MedTech Inc. (NASDAQ:SMTI) Q3 2021 Earnings Conference Call November 15, 2021 9:00 AM ET Company Participants Callon Nichols - Director of IR Ron Nixon - Chairman of our Board Zachary Fleming - President of Surgical Mike McNeil - CFO Conference Call Participants Ian Cassel - MicroCapClub Evan Claar - CBI Capital Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio s ...

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, 2021 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) (State or other jurisdiction of incorporat ...

Sanara MedTech Inc. (NASDAQ:SMTI) Q2 2021 Earnings Conference Call August 17, 2021 9:00 AM ET Company Participants Callon Nichols - Director of Investor Relations Ron Nixon - Chairman of our Board Mike McNeil - Chief Financial Officer Zack Fleming - President of Surgical Conference Call Participants Brandon Folkes - Cantor Fitzgerald Neil Cataldi - Blueprint Capital Management Operator Good day, ladies and gentlemen, and welcome to the Sanara MedTech Inc. Second Quarter 2021 Results and Business Update Con ...

[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 ...