Sanara MedTech(SMTI) - 2025 Q1 - Quarterly Report

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