Sanara MedTech(SMTI) - 2021 Q2 - Quarterly Report

General Information Filing Details and Company Status 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] - Registrant: SANARA MEDTECH INC.[1] - Filer Status: Non-accelerated filer, Smaller reporting company[4] - Common Stock Outstanding (as of August 16, 2021): 7,626,705 shares[4] Part I – Financial Information ITEM 1. Financial Statements 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 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 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 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] - 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] - 1,265,000 shares of common stock were issued in an equity offering, contributing to the increase in paid-in capital[14] Unaudited Consolidated Statements of Cash Flows 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 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 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] - 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] NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][38] 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] - 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] - 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] NOTE 3 – INTANGIBLE ASSETS 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] - Amortization Expense (Six Months Ended June 30): $156,358 in 2021, up from $94,499 in 2020[67] - Weighted-Average Amortization Period: 12.4 years as of June 30, 2021[67] NOTE 4 - COMMITMENTS AND CONTINGENCIES 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][70] - 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] - 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][83] - 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] NOTE 5 - OPERATING LEASES 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] - Operating Lease Liabilities: $419,052 as of June 30, 2021[89] - Weighted Average Remaining Lease Term: 3.0 years as of June 30, 2021[90] - Weighted Average Discount Rate: 6.25% as of June 30, 2021[90] NOTE 6 – SHAREHOLDERS' EQUITY 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][13] - 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] - Public Offering: 1,265,000 shares issued in February 2021, generating $28.9 million in net proceeds[94][95] - Share-based Compensation Expense (Six Months Ended June 30): $623,440 in 2021, compared to $491,069 in 2020[99] - 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] NOTE 7 – DEBT AND CREDIT FACILITIES 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] - Interest Rate: 0.75% plus the 'Prime Rate'[103] - 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] - 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] - Compliance: The company was in compliance with all financial covenants as of June 30, 2021[107] NOTE 8 – INVESTMENT IN EQUITY SECURITIES 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] - 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][111] - Share of Loss from Equity Method Investment (Precision Healing): $(278,904) for the six months ended June 30, 2021[111][115] - 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][113] Total Investments | Period | Carrying Amount | | :----- | :-------------- | | June 30, 2021 | $4,005,374 | | December 31, 2020 | $1,100,000 | NOTE 9 - RELATED PARTIES 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][118] - Rochal Asset Purchase (July 14, 2021): Acquired assets for approximately $1,000,000 ($500,000 cash and 14,369 shares of common stock)[119] - Related Party Influence: Ronald T. Nixon (Executive Chairman) and Ann Beal Salamone (Director) hold significant interests in Rochal[120] NOTE 10 – SUBSEQUENT EVENTS 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] - Purchase Price: Approximately $1,000,000, consisting of $500,000 in cash and 14,369 shares of common stock[121] - 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] - 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] 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 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 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] - Product Portfolio: Currently markets seven products and has multiple products in its pipeline, licensed from various partners[132] - 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] - 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] - 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] Recent Developments 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][139] - 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] - 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] - 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] - 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] Components of Results of Operations 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][149] 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] - 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][152] Results of Operations 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] 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] - 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] 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] Liquidity and Capital Resources 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] - 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][163][164] - Use of Proceeds: Expected to fund salesforce expansion, product development, clinical studies, working capital, and acquisitions[161] - Investments: Made additional investments in Precision Healing ($1.1 million in H1 2021) and Pixalere ($2.08 million in June 2021)[165][167] - Rochal Asset Acquisition: Acquired assets for approximately $1 million ($500,000 cash, $500,000 in common stock) effective July 1, 2021[168] Cash Flow Analysis 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] - Investing Cash Flow Increase: Higher cash used in investing activities in 2021 due to investments in Precision Healing and Pixalere[170] - Financing Cash Flow Surge: Significant cash provided by financing activities in 2021 due to proceeds from the underwritten public offering[171] Material Transactions with Related Parties 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][173] - 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][176] - 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][178] - Related Party Influence: Ronald T. Nixon (Executive Chairman) and Ann Beal Salamone (Director) have significant interests in Catalyst and Rochal, respectively[174][179] Critical Accounting Policies 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][191] - 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] - 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] - 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] - 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] Impact of Inflation and Changing Prices 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] Off-Balance Sheet Arrangements 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] 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 - Disclosure Exemption: Not required to provide market risk disclosures as a smaller reporting company[190] ITEM 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] Part II. Other Information ITEM 1. Legal Proceedings 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] ITEM 1A. Risk Factors 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] - 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] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] ITEM 3. Defaults upon Senior Securities The company states that there were no defaults upon senior securities - No Defaults: There were no defaults upon senior securities[200] ITEM 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable: This item is not applicable to the company[201] ITEM 5. Other Information 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] ITEM 6. Exhibits 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] Signatures Report Signature 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] - Date: August 16, 2021[208]