Sanara MedTech(SMTI) - 2025 Q2 - Quarterly Report

FORM 10-Q Cover Page Registrant Information This section provides the basic identification details for Sanara MedTech Inc.'s quarterly report, including the filing period, state of incorporation, and contact information - Registrant: SANARA MEDTECH INC.[2] - Quarterly Period Ended: June 30, 2025[2] Securities Information Details regarding the company's registered securities, including the trading symbol and exchange, are provided | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.001 par value | SMTI | The Nasdaq Capital Market | Filer Status and Shares Outstanding The company confirms its compliance with SEC filing requirements and discloses its filer status and the number of common shares issued and outstanding as of a recent date - The registrant has filed all required reports during the preceding 12 months and has been subject to filing requirements for the past 90 days[4] | Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | | :---------------------- | :---------------- | :-------------------- | :------------------------ | :---------------------- | | ☐ | ☐ | ☒ | ☒ | ☐ | - As of August 12, 2025, 8,902,351 shares of the Issuer's common stock, $0.001 par value per share, were issued and outstanding[5] Table of Contents Part I – Financial Information ITEM 1. FINANCIAL STATEMENTS This section presents Sanara MedTech Inc.'s unaudited consolidated financial statements, including the balance sheets, statements of operations, changes in shareholders' equity, and cash flows for the periods ended June 30, 2025, along with detailed notes explaining significant accounting policies, recent acquisitions, debt, equity, and segment reporting Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------- | :------------------------ | :------------------ | | Total Assets | $98,767,645 | $88,091,992 | | Total Liabilities | $63,375,699 | $49,180,030 | | Total Shareholders' Equity | $35,391,946 | $38,911,962 | Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenue | $25,830,834 | $20,158,823 | $49,264,930 | $38,695,461 | | Gross Profit | $23,893,552 | $18,150,137 | $45,492,681 | $34,796,729 | | Operating Loss | $(31,348) | $(2,884,856) | $(2,111,377) | $(4,416,563) | | Net Loss Attributable to Shareholders | $(2,014,362) | $(3,504,014) | $(5,541,539) | $(5,268,198) | | Net Loss Per Share (Basic & Diluted) | $(0.23) | $(0.41) | $(0.64) | $(0.62) | Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance at December 31, 2024 | Balance at June 30, 2025 | | :----------------------------------- | :--------------------------- | :----------------------- | | Common Stock (Shares) | 8,753,773 | 8,903,662 | | Common Stock (Amount) | $8,754 | $8,904 | | Additional Paid-In Capital | $77,179,211 | $78,678,081 | | Accumulated Deficit | $(37,784,392) | $(43,287,572) | | Total Shareholders' Equity | $38,911,962 | $35,391,946 | Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :----------- | :----------- | | Net Cash Provided by (Used in) Operating Activities | $665,127 | $(3,006,300) | | Net Cash Used in Investing Activities | $(9,107,823) | $(124,580) | | Net Cash Provided by Financing Activities | $9,523,145 | $4,134,039 | | Net Increase in Cash | $1,080,449 | $1,003,159 | | Cash, End of Period | $16,958,744 | $6,150,375 | Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures and explanations for the unaudited consolidated financial statements, covering the company's business segments, significant accounting policies, recent acquisitions, equity investments, debt obligations, and related party transactions NOTE 1 – NATURE OF BUSINESS AND BACKGROUND Sanara MedTech Inc. is a medical technology company focused on surgical, chronic wound, and skin markets, operating through two reportable segments: Sanara Surgical and Tissue Health Plus (THP), with a strategic shift in 2024 to reflect the growing importance of value-based wound care - Sanara MedTech Inc. is a medical technology company focused on developing and commercializing transformative technologies in surgical, chronic wound, and skin markets[20] - The Company operates through two reportable segments: Sanara Surgical and Tissue Health Plus (THP), a change implemented in Q2 2024 to reflect the growing investment in value-based wound care strategy[21][22] - Sanara Surgical markets soft tissue repair (e.g., CellerateRX Surgical, BIASURGE) and bone fusion products (e.g., BiFORM, ALLOCYTE Plus) for sterile environments, and includes an in-house R&D team[23][24] - THP aims to simplify skin health, starting with wound care, by offering a value-based wound care program to payers and risk-bearing entities, coordinating community and home-based care, and launched its first pilot program in Q2 2025[25][26] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's key accounting principles, including consolidation, use of estimates, revenue recognition, and policies for assets like accounts receivable, inventory, property, goodwill, and intangibles, as well as equity investments, fair value measurements, and recently adopted and issued accounting pronouncements - The company's unaudited consolidated financial statements include Sanara MedTech Inc. and its wholly-owned and majority-owned subsidiaries, with all significant intercompany transactions eliminated[27] - Revenue is recognized when control of promised goods or services is transferred to the customer, primarily from product sales (soft tissue repair, bone fusion), with SaaS revenue starting in Q2 2025 from the THP segment[33][38][40] | Revenue Stream (Three Months Ended June 30) | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Soft tissue repair products | $22,661,457 | $17,641,318 | | Bone fusion products | $3,142,795 | $2,516,599 | | SaaS | $26,582 | $- | | Royalties | $- | $906 | | Total Net Revenue | $25,830,834 | $20,158,823 | - The company capitalizes costs for internal use software during the application development stage, particularly for the THP platform, with approximately $3.4 million capitalized as of June 30, 2025, to be depreciated over five years once placed in service[44][46] - Goodwill, primarily from the Scendia acquisition within the Sanara Surgical segment, is tested annually for impairment and was not impaired as of June 30, 2025 or 2024[47][80] | Intangible Assets (June 30, 2025) | Cost | Accumulated Amortization | Net | | :-------------------------------- | :----------- | :----------------------- | :----------- | | Patents and Other IP | $38,056,240 | $(6,171,366) | $31,884,874 | | Customer relationships and other | $7,971,752 | $(3,594,886) | $4,376,866 | | Licenses | $6,784,278 | $(2,053,450) | $4,730,828 | | Total | $52,812,270 | $(11,819,702) | $40,992,568 | - The company adopted ASU 2023-07 (Segment Reporting) effective for its annual report for FY2024 and interim filings beginning Q1 2025, which did not materially impact its financial position, results, or cash flows[66] NOTE 3 – CAREPICS ACQUISITION On April 1, 2025, Sanara MedTech acquired CarePICS, LLC, a mobile and web app platform for vascular and wound care clinicians, for $2.0 million cash consideration plus $1.65 million to satisfy existing debt, and potential earnout payments up to $20 million, with the acquisition accounted for as an asset acquisition - On April 1, 2025, Sanara MedTech acquired CarePICS, LLC, a mobile and web app platform for clinicians treating vascular and wound care patients, which will be utilized in the THP platform[69][70] | CarePICS Acquisition Consideration | Amount | | :------------------------------- | :----------- | | Cash consideration | $2,000,000 | | Contingent consideration | $1,355,603 | | Direct transaction costs | $122,146 | | Total purchase consideration | $3,477,749 | - The acquisition included potential earnout payments up to $10 million for the first two earnout periods (ending March 31, 2027) based on SaaS P&L EBITDA, and up to an additional $10 million over 10 years based on patient volume, payable in cash or Class A-2/B Units[72][73][74] - The CarePICS Acquisition was accounted for as an asset acquisition, with the purchase consideration primarily allocated to developed technology ($5,127,749) and assumed debt ($(1,650,000))[76][77] NOTE 4 – CONVERTIBLE LOAN RECEIVABLE The company's $1.0 million convertible loan to Biomimetic Innovations Limited (BMI), including accrued interest, was converted into equity of BMI on January 16, 2025, resulting in a zero loan balance as of June 30, 2025 - A $1,079,391 convertible loan to Biomimetic Innovations Limited (BMI), including accrued interest, was converted into equity of BMI on January 16, 2025[78] - The convertible loan receivable balance was $0 as of June 30, 2025, down from $1,101,478 as of December 31, 2024[78] NOTE 5 – GOODWILL AND INTANGIBLES, NET Goodwill remained stable at $3.6 million, entirely within the Sanara Surgical segment, with no impairment recorded. Total net intangible assets were $41.0 million as of June 30, 2025, slightly down from $41.0 million at December 31, 2024, with a weighted-average amortization period of 14.2 years | Metric | December 31, 2023 | December 31, 2024 | June 30, 2025 | | :----- | :------------------ | :------------------ | :------------ | | Goodwill | $3,601,781 | $3,601,781 | $3,601,781 | - Goodwill is entirely within the Sanara Surgical segment and was not impaired as of June 30, 2025 or 2024[80] | Intangible Assets (Net) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Patents and Other IP | $31,884,874 | $33,000,384 | | Customer relationships and other | $4,376,866 | $4,941,181 | | Licenses | $4,730,828 | $3,065,211 | | Total Net Intangible Assets | $40,992,568 | $41,006,776 | - The weighted-average amortization period for finite-lived intangible assets was 14.2 years as of June 30, 2025[81] NOTE 6 – INVESTMENTS IN EQUITY SECURITIES The company holds nonmarketable equity investments in privately held companies, including DirectDerm (cost method), and ChemoMouthpiece, SI Technologies, and BMI (equity method), with significant changes including the Pixalere Redemption in January 2025 converting an investment into an intangible asset and increased ownership in BMI to 9.678% by July 1, 2025 - The company's equity investments include nonmarketable securities in privately held companies, reported at cost or using the equity method based on influence[82] - In January 2025, the Pixalere investment was reclassified from a cost method investment ($2,084,278) to an intangible asset for an amended license agreement, and Pixalere Canada's equity in Pixalere USA was redeemed[85][86][96] - The company uses the equity method for investments in ChemoMouthpiece (6.59% ownership), SI Healthcare Technologies (50% ownership), and Biomimetic Innovations Limited (BMI), where its ownership increased to approximately 9.678% by July 1, 2025, following additional capital contributions[88][92][93][94] | Investment (June 30, 2025) | Carrying Amount | Economic Interest | | :------------------------- | :-------------- | :---------------- | | ChemoMouthpiece, LLC | $5,017,758 | 6.59% | | SI Healthcare Technologies, LLC | $47,976 | 50.00% | | Biomimetic Innovations Limited | $4,450,078 | 6.67% | | Direct Dermatology Inc. | $1,000,000 | ~8.1% (as of Dec 31, 2024) | | Total Investments | $10,515,812 | | | Share of Losses from Equity Method Investments (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------------------------------- | :----------- | :----------- | | ChemoMouthpiece, LLC | $(154,484) | $- | | SI Healthcare Technologies, LLC | $7,273 | $- | | Biomimetic Innovations Limited | $(191,879) | $- | | Total | $(339,090) | $- | NOTE 7 – OPERATING LEASES The company holds two material operating leases for office space, with ROU assets of $1.09 million and related lease liabilities of $1.23 million as of June 30, 2025, and a weighted average remaining lease term of 5.6 years - As of June 30, 2025, the company had two material operating leases for office space, with one renewed for an additional three-year term in August 2025[98] | Operating Lease Metrics (June 30, 2025) | Amount | | :------------------------------------ | :----------- | | Right of Use Assets | $1,088,149 | | Lease Liabilities | $1,234,225 | | Weighted Average Remaining Lease Term | 5.6 years | | Weighted Average Discount Rate | 13.2% | | Operating Lease Expense (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------------- | :----------- | :----------- | | Lease Expense | $260,197 | $277,596 | | Cash Paid for Operating Lease Liabilities | $259,786 | $267,223 | NOTE 8 – DEBT AND CREDIT FACILITIES The company's CRG Term Loan facility provides up to $55.0 million, with $42.75 million drawn as of June 30, 2025, and $12.25 million remaining available. The loan bears 13.25% interest (8% cash, 5.25% PIK) and matures in May 2029, with the company in compliance with all debt covenants - The company has a CRG Term Loan facility for up to $55.0 million, with $42.75 million principal outstanding as of June 30, 2025, and $12.25 million available for future borrowing[102][103][105][112][225] - The CRG Term Loan bears interest at 13.25% per annum (8.00% cash, 5.25% paid-in-kind) and has a maturity date of May 30, 2029[106][105] | Debt Components (June 30, 2025) | Amount | | :------------------------------ | :----------- | | CRG Term Loan (Principal) | $42,750,000 | | Paid-in-kind interest | $1,834,210 | | Back-end fee | $735,576 | | Less: Unamortized debt issuance costs | $(1,103,124) | | Long-term debt, net | $44,216,662 | - The company was in compliance with all debt covenants as of June 30, 2025, including maintaining liquidity above $3.0 million and meeting annual minimum revenue targets (e.g., $75.0 million for FY2025)[113][230] NOTE 9 - COMMITMENTS AND CONTINGENCIES This note details various license agreements for antimicrobial products (BIAKŌS, ABF, Debrider) with Rochal, including royalty commitments, and the BMI License Agreement for trauma products with associated royalties and milestone payments. It also covers earnout liabilities from the Precision Healing merger and Applied Asset Purchase, and a new license agreement with Tufts University for collagen peptides - The company has exclusive worldwide license agreements with Rochal for antimicrobial products (BIAKŌS, BIASURGE, CuraShield) and a debrider, with royalty payments ranging from 2-4% of net sales and minimum annual royalties[115][116][118][120][121][122] | Royalty Expense (Six Months Ended June 30) | 2025 | 2024 | | :----------------------------------------- | :----------- | :----------- | | BIAKŌS License Agreement | $85,435 | $77,305 | - The BMI License Agreement grants exclusive U.S. marketing and distribution rights for OsStic and ARC trauma products, requiring 3% royalties on OsStic net sales and annual minimum royalties starting at $100,000 after regulatory approval[123][126][127] - The Applied Asset Purchase includes an earnout of up to $10.0 million based on net sales of a collagen-based product, with installment payments of $625,000 made in August 2024 and August 2025[131][132] - A license agreement with Tufts University for 18 unique collagen peptides involves a new subsidiary (SCP) and royalties of 1.5% or 3% on net sales, with minimum annual royalties starting at $50,000[135] NOTE 10 – SHAREHOLDERS' EQUITY The company's 2014 LTIP terminated in September 2024, replaced by the 2024 LTIP which authorized 1,000,000 shares for awards. During the six months ended June 30, 2025, 170,842 restricted stock awards were issued, resulting in $2.74 million in share-based compensation expense, with $7.35 million unrecognized - The 2014 Omnibus Long Term Incentive Plan (LTIP) terminated on September 3, 2024, with no future awards. The 2024 LTIP was approved, authorizing 1,000,000 shares for awards[137][138] - During the six months ended June 30, 2025, 170,842 restricted stock awards (net of forfeitures) were issued under the 2024 LTIP, with a fair value of $5,825,941[139] | Share-based Compensation Expense (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------------------- | :----------- | :----------- | | Total Share-based Compensation Expense | $2,740,343 | $2,214,931 | - As of June 30, 2025, there was $7,350,817 of total unrecognized share-based compensation expense, expected to be recognized over a weighted-average period of 1.4 years[141] | Stock Options (June 30, 2025) | Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Life | Aggregate Intrinsic Value | | :---------------------------- | :-------- | :------------------------------ | :--------------------------------------- | :------------------------ | | Outstanding | 31,013 | $10.57 | 5.3 years | $552,803 | | Exercisable | 31,013 | $10.57 | 5.3 years | $552,803 | NOTE 11 – RELATED PARTIES The company has ongoing product license agreements with Rochal Industries, a related party, for antimicrobial and debrider products, and a consulting agreement with Ann Beal Salamone (a director of both companies). It also has a transaction advisory services agreement with Catalyst, another related party, for which it incurred $30,000 in costs during the six months ended June 30, 2025 - The company has exclusive product license agreements with Rochal Industries, a related party, for antimicrobial products (BIAKŌS, BIASURGE, CuraShield) and a debrider[144][145][146] - Ann Beal Salamone, a director of the company and a significant shareholder/Chair of Rochal, has a consulting agreement with the company for an annual fee of $177,697[148] - The company incurred $30,000 in costs during the six months ended June 30, 2025, under a Transaction Advisory Services Agreement with Catalyst, a related party, for various advisory and corporate development services[149][150] | Related Party Balances | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Accounts receivable – related parties | $9,081 | $40,566 | | Accounts payable – related parties | $32,355 | $30,913 | NOTE 12 – SEGMENT REPORTING The company reports two segments: Sanara Surgical (soft tissue repair and bone fusion products) and Tissue Health Plus (THP) (value-based wound care services), a change implemented in Q2 2024. Segment Adjusted EBITDA is the primary profitability measure, with THP showing a significant net loss and negative Segment Adjusted EBITDA due to buildout costs - The company changed its reportable segments in Q2 2024 to Sanara Surgical and Tissue Health Plus (THP), reflecting the growing importance of value-based wound care[152][159] - Sanara Surgical focuses on soft tissue repair and bone fusion products, while THP is dedicated to value-based wound care services, aiming to reduce hospitalizations and improve patient quality of life[154][156][157] - Segment Adjusted EBITDA is the primary profitability measure used by the CEO (CODM) for assessing financial performance and resource allocation[153] | Segment Adjusted EBITDA (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------------- | :----------- | :----------- | | Sanara Surgical | $7,414,885 | $2,532,145 | | THP | $(4,092,077) | $(1,628,543) | | Total Segment Adjusted EBITDA | $3,322,808 | $903,602 | - THP segment does not include $3.4 million of internal use software costs capitalized during the six months ended June 30, 2025, which are part of its buildout[163] 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 condition and operational results for the quarter ended June 30, 2025, highlighting revenue growth, segment performance, recent strategic developments, and liquidity, while also discussing forward-looking statements and key accounting estimates CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This section warns readers that the report contains forward-looking statements about future events and financial performance, which are subject to various risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements regarding future events or financial/operating performance, including value-based wound and skin services and THP platforms[165] - These statements are subject to risks and uncertainties, such as shortfalls in revenue growth, ability to implement strategies, capital requirements, debt compliance, product development, market acceptance, competition, and regulatory changes[165][171] OVERVIEW Sanara MedTech is a medical technology company focused on surgical, chronic wound, and skin markets, operating through two segments: Sanara Surgical (products for sterile environments) and Tissue Health Plus (THP) (value-based wound care services). The company aims to expand its offerings and has initiated a formal process to evaluate strategic alternatives for THP - Sanara MedTech is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in surgical, chronic wound, and skin markets[167] - The company operates through two reportable segments, Sanara Surgical and THP, a change implemented in Q2 2024 due to the growing importance of the value-based wound care program[168] - Sanara Surgical markets soft tissue repair (e.g., CellerateRX Surgical, BIASURGE) and bone fusion products (e.g., BiFORM, ALLOCYTE Plus) and includes an in-house R&D team[169][170] - THP focuses on value-based wound care services, planning to offer programs to payers and risk-bearing entities to divest wound care spend risk, reduce hospitalizations, and improve patient quality of life[172][173] - THP's comprehensive approach includes a Care Hub for virtual patient monitoring, a Managed Services Organization (MSO) Network of third-party providers, and a Technology Platform leveraging AI/ML for workflow automation and integration[183][184] - The company has initiated a formal process to evaluate a full range of strategic alternatives for THP to maximize shareholder value[184] RECENT DEVELOPMENTS Recent developments include the CRG Term Loan amendment, allowing additional borrowings up to $12.25 million by December 31, 2025, and the third borrowing of $12.25 million used for acquisitions and working capital. The company also made an initial €3.0 million cash investment in BMI, converted a €1.0 million loan to equity, and acquired CarePICS for $2.0 million cash plus $1.65 million debt satisfaction and potential earnouts - The CRG Term Loan Agreement was amended to allow up to two additional borrowings, with a third borrowing of $12.25 million made on March 31, 2025, for acquisitions (like CarePICS) and working capital. An additional $12.25 million can be drawn by December 31, 2025[187] - The company made an initial €3.0 million cash investment in Biomimetic Innovation Limited (BMI) and converted a €1.0 million convertible loan into BMI equity, resulting in approximately 6.67% ownership, increasing to 9.678% by July 1, 2025, after additional milestone payments[189] - On April 1, 2025, the company acquired CarePICS, LLC for $2.0 million cash, paid $1.65 million to satisfy existing debt, and agreed to potential earnout payments[190] COMPONENTS OF RESULTS OF OPERATIONS The company's revenue primarily comes from sales of soft tissue repair and bone fusion products, with SaaS revenue from the THP segment starting in Q2 2025. Cost of goods sold includes acquisition costs and royalties, while operating expenses comprise SG&A, R&D (expected to increase), depreciation and amortization, and changes in earnout liabilities - Revenue is primarily derived from sales of soft tissue repair and bone fusion products to hospitals and acute care facilities, with CellerateRX Surgical being the substantial majority[191] | Revenue Stream (Six Months Ended June 30) | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Soft tissue repair products | $43,193,897 | $33,723,610 | | Bone fusion products | $6,044,451 | $4,970,945 | | SaaS | $26,582 | $- | | Royalties | $- | $906 | | Total Net Revenue | $49,264,930 | $38,695,461 | - Cost of goods sold includes acquisition costs from manufacturers, raw material costs, and royalties. Operating expenses include SG&A, R&D (expected to increase), depreciation and amortization, and changes in fair value of earnout liabilities[195][196][197][198] RESULTS OF OPERATIONS For the six months ended June 30, 2025, net revenue increased by 27% to $49.3 million, driven by higher sales of soft tissue repair and bone fusion products. Gross profit rose 31% to $45.5 million, while SG&A and R&D expenses also increased, leading to a net loss of $5.5 million. Segment Adjusted EBITDA improved to $3.3 million, despite a significant negative contribution from the THP segment due to platform buildout costs | Financial Metric (Six Months Ended June 30) | 2025 | 2024 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Net Revenue | $49,264,930 | $38,695,461 | 27% | | Gross Profit | $45,492,681 | $34,796,729 | 31% | | Selling, General and Administrative | $42,993,804 | $35,149,867 | 22% | | Research and Development | $2,371,613 | $1,931,949 | 23% | | Net Loss | $(5,545,781) | $(5,328,245) | 4% | | Segment Adjusted EBITDA | $3,322,808 | $903,602 | 268% | - Net revenue increase was primarily due to increased sales of soft tissue repair products (CellerateRX Surgical, BIASURGE) and bone fusion products, driven by increased market penetration and geographic expansion[202] - Higher gross margins were realized due to increased sales of soft tissue repair products and lower manufacturing costs for CellerateRX Surgical[203][204] - SG&A increased due to higher direct sales and marketing expenses ($3.7 million) and additional SG&A in the THP segment ($3.1 million). R&D increased, with $3.4 million capitalized for the THP technology platform buildout[205][206] - The net loss for the six months ended June 30, 2025, included $5.4 million related to the THP segment, primarily due to buildout costs and increased interest expense[210] - Segment Adjusted EBITDA for THP was $(4.1) million for the six months ended June 30, 2025, reflecting higher costs related to its platform buildout[216] LIQUIDITY AND CAPITAL RESOURCES Cash on hand was $17.0 million at June 30, 2025. The company expects to invest $5.5-$6.5 million in THP during H2 2025 and anticipates sufficient liquidity for the next 12 months from cash, operations, and $12.25 million available under the CRG Term Loan. Recent financing activities include the CRG Term Loan amendment and third borrowing, the BMI investment, and the CarePICS acquisition | Cash and Liquidity | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Cash on hand | $16,958,744 | $15,878,295 | | Available CRG Term Loan | $12,250,000 | (Not applicable) | - The company expects to invest between $5.5 million and $6.5 million in the THP strategy during the second half of 2025, with no material cash investments anticipated after year-end[217] - The CRG Term Loan Agreement was amended, and a third borrowing of $12.25 million was made, with $12.25 million still available for future borrowing until December 31, 2025[223][224] - The company made an initial €3.0 million cash investment in BMI and converted a €1.0 million loan to equity, with additional €4.0 million committed upon milestones[234] - The CarePICS Acquisition involved $2.0 million cash consideration and $1.65 million to satisfy existing debt, plus potential earnout payments[235] - Net cash provided by operating activities was $0.7 million for the six months ended June 30, 2025, an increase from $3.0 million used in the prior year, due to revenue growth and improved receivables collection[240] - Net cash used in investing activities was $9.1 million, primarily for the CarePICS acquisition ($2.1 million), BMI investment ($3.5 million), and THP technology platform capitalization ($3.4 million)[241] - Net cash provided by financing activities was $9.5 million, mainly from CRG Term Loan proceeds, partially offset by CarePICS debt payoff[242] MATERIAL TRANSACTIONS WITH RELATED PARTIES The company has a consulting agreement with Ann Beal Salamone (a director and significant shareholder of Rochal) for an annual fee of $177,697, and a Transaction Advisory Services Agreement with Catalyst, a related party, incurring $30,000 in costs during the six months ended June 30, 2025 - Ann Beal Salamone, a director of the company and a significant shareholder/Chair of Rochal, has a consulting agreement for $177,697 annually, renewed for successive one-year terms[243] - The company incurred $30,000 in costs during the six months ended June 30, 2025, under a Transaction Advisory Services Agreement with Catalyst, a related party, for advisory and corporate development services[244][245] | Related Party Balances | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Accounts receivable – related parties | $9,081 | $40,566 | | Accounts payable – related parties | $32,355 | $30,913 | IMPACT OF INFLATION AND CHANGING PRICES Inflation and changing prices have not had a material impact on the company's historical results of operations and are not anticipated to have a material impact in the future - Inflation and changing prices have not materially impacted historical results and are not anticipated to materially impact future results[247] CRITICAL ACCOUNTING ESTIMATES The company's critical accounting estimates, including revenue and expense accruals, fair value measurements, and purchase price allocation, have not significantly changed since December 31, 2024 - Critical accounting estimates, such as revenue and expense accruals, fair value measurement of assets and liabilities, and purchase price allocation, have not significantly changed since December 31, 2024[248] 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 - As a smaller reporting company, Sanara MedTech Inc. is not required to provide quantitative and qualitative disclosures about market risk[249] ITEM 4. CONTROLS AND PROCEDURES The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025, and there were no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025[250] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[251] Part II – Other Information ITEM 1. LEGAL PROCEEDINGS The company is not aware of any material pending legal proceedings - To the company's knowledge, there are no material pending legal proceedings to which it is a party or of which any of its property is the subject[253] ITEM 1A. RISK FACTORS There were no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[254] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities during the quarter. The company repurchased 20,755 shares of common stock in April and May 2025, primarily for tax withholding obligations related to restricted stock vesting - No sales of unregistered securities were reported during the quarter ended June 30, 2025[255] | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :----------------------------- | :--------------------------- | | April 1 - April 30, 2025 | 15,826 | $33.85 | | May 1 - May 31, 2025 | 4,929 | $30.88 | | June 1 - June 30, 2025 | - | $- | | Total | 20,755 | | - Shares purchased were transferred from employees to satisfy tax withholding obligations associated with the vesting of restricted stock awards[256] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities - No defaults upon senior securities[257] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - This item is not applicable to the company[258] ITEM 5. OTHER INFORMATION No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted, modified, or terminated any "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[259] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the report, including various agreements (asset purchase, merger, unit purchase), organizational documents, and certifications - The exhibits include various agreements such as the Asset Purchase Agreement (Rochal, Applied), Agreement and Plan of Merger (Precision Healing), Membership Interest Purchase Agreement (Scendia Biologics), and Unit Purchase Agreement (CarePICS)[261] - Organizational documents like the Amended and Restated Certificate of Formation and Bylaws are also filed[261] - Certifications from the Principal Executive Officer and Principal Financial Officer are included, as required by the Sarbanes-Oxley Act[261] SIGNATURES Report Signature The report is signed on behalf of Sanara MedTech Inc. by Elizabeth B. Taylor, Chief Financial Officer, on August 13, 2025 - The report was signed by Elizabeth B. Taylor, Chief Financial Officer, on August 13, 2025[266]