UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
For the quarterly period ended March 31, 2026
or
For the transition period from ________ to ________
Commission File Number 001-39678
SANARA MEDTECH INC.
(Exact name of Registrant as specified in its charter)
(Address of principal executive offices)
(817)529-2300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 8, 2026, 9,163,969 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.
Form 10-Q
Quarter Ended March 31, 2026
Sanara, Sanara MedTech, our logo and our other trademarks or service marks appearing in this report are the property of Sanara MedTech Inc. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names included in this report are without the ®, ™ or other applicable symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.
Unless otherwise indicated, “Sanara MedTech,” “Sanara,” the “Company,” “our,” “us,” or “we,” refer to Sanara MedTech Inc. and its consolidated subsidiaries.
PART I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
SANARA MEDTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
Common Stock
$0.001 par value
Additional
Paid-In
Total
Shareholders’
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF BUSINESS AND BACKGROUND
Sanara MedTech Inc. (together with its wholly owned and majority owned subsidiaries on a consolidated basis, the “Company”) is a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical market. Each of the Company’s products are designed to achieve the Company’s goal of providing better clinical outcomes at a lower overall cost for healthcare systems. The Company strives to be one of the most innovative and comprehensive providers of effective surgical solutions and is continually seeking to expand its offerings for patients requiring surgical treatments in the United States.
Since the second quarter of 2024, the Company had managed its business on the basis of two operating and reportable segments: Sanara Surgical and Tissue Health Plus (“THP”). As a result of the discontinuation of THP as detailed in Note 2 under the heading “Discontinued Operations” and in Note 3 below, the Company determined that continuing operations is comprised of a 1 single reportable segment. This determination was made in accordance with Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting.
The Company primarily markets and sells soft tissue repair and bone fusion products for use in the operating room or other sterile environments. The Company’s soft tissue repair products include, among other products, the lead product, CellerateRX Surgical Powder, a hydrolyzed collagen that aids in the management of surgical wounds, BIASURGE Advanced Surgical Solution, a sterile no-rinse, advanced surgical solution used for wound irrigation and TEXAGEN Amniotic Membrane Allograft, a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed. The Company’s bone fusion products include, among other products, BiFORM Bioactive Moldable Matrix, an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site, ACTIGEN Verified Inductive Bone Matrix, a naturally derived, differentiated allograft matrix with robust handling properties, and ALLOCYTE Plus Advanced Viable Bone Matrix, a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers.
The Company also utilizes an in-house research and development team, Rochal Technologies. The Company is advancing a strong pipeline of next-generation products that supports and extends the Company’s surgical strategy of “Prepare, Promote and Protect.”
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Sanara MedTech Inc. and its wholly owned and majority-owned subsidiaries, as well as other entities in which the Company has a controlling financial interest. All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period. These financial statements and notes should be read in conjunction with the financial statements for each of the two years ended December 31, 2025 and 2024, which are included in the Company’s most recent Annual Report on Form 10-K.
Reclassifications
Certain prior period amounts have been reclassified to conform to current year presentation.
Discontinued Operations
During the third quarter of 2025, following authorization from the Board of Directors of the Company, management initiated a review of strategic options for THP. To facilitate this review, the Company engaged an investment bank to search for potential investors or purchasers. Despite such efforts, by mid-September 2025, the Company concluded that these efforts were unlikely to succeed and ended its engagement with the investment bank. Persistent losses in the THP segment and a lack of interest from investors led management and the Board of Directors to decide to discontinue THP’s operations as of mid-September 2025. In line with this decision, the THP segment met the accounting requirements to be classified under discontinued operations as of September 30, 2025. The process of winding down THP was substantially complete as of December 31, 2025. A minimal amount of costs related to the winding down procedures were incurred through March 31, 2026 and are expected to continue being incurred through the second and third quarters of 2026.
In accordance with generally accepted accounting principles in the United States (“GAAP”), the consolidated balance sheets and consolidated statements of operations of the THP segment are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect only the positions and activity from continuing operations of Sanara Surgical unless otherwise noted. See Note 3 for additional information regarding discontinued operations.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the revenue and expenses during the reporting period. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Income/Loss Per Share
The Company computes income/loss per share in accordance with ASC Topic 260, Earnings per Share, which requires the Company to present basic and diluted income/loss per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss attributable to common shareholders by the weighted average number of shares of common stock outstanding. Diluted income/loss per share is computed similarly to basic income/loss per share, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if the additional shares of common stock were dilutive. All common stock equivalents were excluded from the calculations of income/loss per share during the three months ended March 31, 2025, as their inclusion would have been anti-dilutive due to the Company’s net loss during that period.
The following is a reconciliation of the numerator and denominator of basic and diluted net income (loss) per share for the three months ended March 31, 2026 and 2025:
SCHEDULE OF NUMERATOR AND DENOMINATOR OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Three Months Ended March 31,
The following table summarizes the shares of common stock that were potentially issuable but were excluded from the computation of diluted net loss per share of common stock for the periods presented, as such shares would have had an anti-dilutive effect:
SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when a purchase order is received from the customer and control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for transferring those goods or services. Revenue is recognized based on the following five-step model:
Details of this five-step process are as follows:
Identification of the contract with a customer
Customer purchase orders are generally considered to be contracts under ASC 606. Purchase orders typically identify the specific terms of products to be delivered, create the enforceable rights and obligations of both parties and result in commercial substance. No other forms of contract revenue recognition, such as the completed contract or percentage of completion methods, were utilized by the Company in either 2026 or 2025.
Performance obligations
The Company’s performance obligation is generally limited to delivery of the requested items to its customers at the agreed upon quantities and prices.
Determination and allocation of the transaction price
The Company has established prices for its products. These prices are effectively agreed to when customers place purchase orders with the Company. Rebates and discounts, if any, are recognized in full at the time of sale as a reduction of net revenue. Allocation of transaction prices is not necessary where only one performance obligation exists. For certain sales transactions, we incur group purchasing organization fees that are based on a contractual percentage of applicable sales and are recorded as a reduction of the revenue for those transactions.
Recognition of revenue as performance obligations are satisfied
Product revenues are recognized when a purchase order is received from the customer, the products are delivered, and control of the goods and services passes to the customer.
Disaggregation of Revenue
Revenue streams from product sales are summarized below for the periods presented:
SCHEDULE OF REVENUE FROM PRODUCT SALES AND ROYALTIES
For the three months ended March 31, 2026 and 2025, revenue generated from the THP segment was $16,358 and zero, respectively. The revenue from the THP segment is related to contracts acquired in the CarePICS Acquisition (defined in Note 4 below) and is included in net income (loss) from discontinued operations in the Consolidated Statements of Operations (see Note 3).
Accounts Receivable Allowances
Accounts receivable are typically due within 30 days of invoicing. The Company establishes an allowance for credit losses to provide for an estimate of accounts receivable which are not expected to be collectible. The Company bases the allowance on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other information as applicable and will record its allowance based on the estimated credit losses. Credit loss reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company’s accounts receivable balance, net was $13,617,407, $11,998,075, and $12,408,819 as of March 31, 2026, December 31, 2025, and December 31, 2024, respectively. The Company recorded credit loss expense of $75,000 and $179,034 for the three months ended March 31, 2026 and 2025, respectively. The allowance for credit losses was $1,447,000at March 31, 2026 and $1,372,000 at December 31, 2025. The Company also establishes other allowances to provide for estimated customer rebates and other expected customer deductions. These allowances totaled $6,690 at March 31, 2026 and zero at December 31, 2025.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist primarily of finished goods and also include an immaterial amount of raw materials and related packaging components. The Company recorded inventory obsolescence expense of $62,800 and $199,278 during the three months ended March 31, 2026 and 2025, respectively. The allowance for obsolete and slow-moving inventory had a balance of $508,313 at March 31, 2026 and $623,835 at December 31, 2025.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from two2to ten years. Below is a summary of property and equipment for the periods presented:
SCHEDULE OF PROPERTY AND EQUIPMENT
Useful
Life
Depreciation expense related to property and equipment was $41,853 and $46,258 during the three months ended March 31, 2026 and 2025, respectively.
Internal Use Software
The Company had been developing internal use software in conjunction with the development of the now discontinued THP platform. The development phase of this internal use software started at the beginning of January 2025, and it was in the development phase until the discontinuation of THP in mid-September 2025. The Company accounted for costs incurred to develop or acquire computer software for internal use in accordance with ASC Topic 350-40, Intangibles – Goodwill and Other (“ASC 350-40”). The Company capitalized costs incurred during the application development stage, which generally included employee compensation and benefits costs as well as third-party developer fees to design the software configuration and interfaces, coding, installation and testing. Therefore, under ASC 350-40, the project included capitalizable costs of employees and external vendors who were developing the application. Capitalized development costs were classified as “Property and equipment, net” in the Consolidated Balance Sheets prior to the discontinuation of THP. The project included approximately $4,372,847 in capitalized costs which were fully impaired in mid-September 2025.
Goodwill
The excess of purchase price over the fair value of identifiable net assets acquired in business combinations is recorded as goodwill. As of March 31, 2026 and December 31, 2025, all of the Company’s goodwill relates to the acquisition of Scendia Biologics, LLC. Goodwill has an indefinite useful life and is not amortized. Goodwill is tested annually as of December 31 for impairment, or more frequently if circumstances indicate impairment may have occurred. The Company may first perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than the respective carrying value. If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value, then the Company will determine the fair value of the reporting unit and record an impairment charge for the difference between fair value and carrying value (not to exceed the carrying amount of goodwill). No impairment was recorded during the three months ended March 31, 2026 or 2025.
Intangible Assets
Intangible assets are stated at cost of acquisition less accumulated amortization and impairment loss, if any. Cost of acquisition includes the purchase price and any cost directly attributable to bringing the asset to its working condition for the intended use. The Company amortizes its finite-lived intangible assets on a straight-line basis over the estimated useful life of the respective assets which is generally the life of the related patents or licenses, seven years for customer relationships and five years for assembled workforces. See Note 5 for more information on intangible assets.
Impairment of Long-Lived Assets
Long-lived assets, including certain identifiable intangibles held and used by the Company, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company regularly evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated fair value less cost to sell. No impairment was recorded during the three months ended March 31, 2026 or 2025.
Investments in Equity Securities
The Company’s equity investments consist of nonmarketable equity securities in privately held companies without readily determinable fair values. Unless accounted for under the equity method of accounting, the investments are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in the same issuer.
The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. As discussed further in Note 6, as of March 31, 2026 and December 31, 2025, the Company had three investments that were recorded applying the equity method of accounting. The Company’s proportionate share of the net loss resulting from these investments is reported under the line item captioned “Share of losses from equity method investments” in the Company’s Consolidated Statements of Operations. The Company’s equity method investments are adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company classifies distributions received from its equity method investments using the cumulative earnings approach in the Company’s Consolidated Statements of Cash Flows.
The Company has reviewed the carrying value of its investments and has determined there was no impairment or observable price changes as of or for the three months ended March 31, 2026 and 2025.
Fair Value Measurement
As defined in ASC Topic 820, Fair Value Measurement (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies to both the initial and subsequent measurement.
The three levels of the fair value hierarchy defined by ASC 820 are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include nonexchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses, other than acquisition-related expenses, approximate fair value because of the short-term nature of these instruments. Acquisition-related accrued expenses were recorded based on Level 2 inputs. The value of these instruments has been estimated using discounted cash flow analysis based on the Company’s incremental borrowing rate. The fair value of the contingent earnout considerations and the acquisition date fair value of goodwill and intangibles related to the acquisitions discussed in Notes 4, 5 and 9 are based on Level 3 inputs. The estimates of fair value are uncertain and changes in any of the estimated inputs used as of the date of this report could result in significant adjustments to fair value.
The liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred. Liabilities for contingent consideration are comprised of (i) the acquisition of assets from the Applied Asset Purchase (defined in Note 9 below) in August 2023 and (ii) the CarePICS Acquisition in April 2025.
Due to the Applied Asset Purchase being accounted for as an asset acquisition and given that this transaction did not include contingent shares, subsequent revaluations of contingent consideration for the Applied Asset Purchase have resulted in adjustments to the contingent consideration liability and the intellectual property intangible asset, with cumulative catch-up amortization adjustments. Following the closing of the Applied Asset Purchase, the Company worked to advance the collagen product related to the incentive payment contemplated under the asset purchase agreement. Despite such efforts, the Company did not receive 510(k) clearance, a U.S. patent was not issued and no net sales were collected for this product contemplated under the asset purchase agreement and the Petito Services Agreement (defined in Note 9 below). After a review of the status of such initiatives, related expenses and the substantial additional expense that would need to be incurred for an uncertain result, and in light of the Company’s refocus in strategy to prioritize expanding existing product platforms, in March 2026, the Company determined not to renew the Petito Services Agreement. On April 20, 2026, the Company delivered written notice to Dr. George D. Petito that the Petito Services Agreement will not be renewed beyond its initial term and will terminate effective August 1, 2026 pursuant to its terms. Since the contingent consideration liability relating to the Applied Asset Purchase is associated with the Petito Services Agreement, the Company determined that the thresholds necessary to trigger a payment on the earnout would not be met and reduced the contingent consideration liability to zero as of March 31, 2026.
Due to the CarePICS Acquisition being accounted for as an asset acquisition and given that the transaction included contingent shares, subsequent revaluations of cash settlements related to contingent consideration were recognized as adjustments to the developed technology and the earnout liability, with cumulative catch-up depreciation adjustments. The CarePICS Acquisition contingent liability, which at the date of acquisition was deemed to have a fair value of $1,355,603, was subsequently determined to have a value of zero as of September 30, 2025 due to the discontinuation of THP and related assets. Management concluded that the targets necessary to trigger a payment would not be met and therefore a payment is not expected.
The current year revaluation of earnout liabilities below is a result of the full write-down of the estimated liability established at the time of the Applied Asset Purchase. The following table sets forth a summary of the changes in fair value for the Level 3 contingent earnout considerations:
SCHEDULE OF CHANGES IN FAIR VALUE FOR CONTINGENT EARNOUT CONSIDERATION
Financial Instruments Not Measured at Fair Value
The estimated fair value of the Company’s borrowings under the CRG Term Loan (defined below) was $58.4 million as of March 31, 2026, compared to the carrying amount, net of debt issuance costs, of $46.2 million. The estimated fair value of the CRG Term Loan was $59.0million as of December 31, 2025, compared to the carrying amount, net of debt issuance costs, of $46.0 million. The estimate of fair value is generally based on the quoted market prices for similar issuances of long-term debt with the same maturities, which is classified as a Level 2 input. Given the discontinuation of THP, the Company’s credit rating is now determined by only continuing operations; as such, the Company’s credit rating improved, resulting in an increase in the fair value of the CRG Term Loan.
Income Taxes
Income taxes are accounted for under the asset and liability method; whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax asset will not be realized.
Share-based Compensation
The Company accounts for share-based compensation to employees and nonemployees in accordance with ASC Topic 718, Compensation – Stock Compensation. Share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the stipulated vesting period, if any. The Company estimates the fair value of share-based payments using the Black-Scholes option-pricing model for common stock options and the closing price of the Company’s common stock for grants of common stock, including restricted stock awards.
Research and Development Costs
Research and development (“R&D”) expenses consist of personnel-related expenses, including salaries, share-based compensation and benefits for all personnel directly engaged in R&D activities, contract services, materials, prototype expenses and allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities-related costs. R&D expenses include costs related to enhancements to the Company’s currently available products and additional investments in the product development pipeline. The Company expenses R&D costs as incurred.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires new disclosures providing further detail of a company’s income statement expense line items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
NOTE 3 – DISCONTINUED OPERATIONS
During the third quarter of 2025, following authorization from the Board of Directors, management initiated a review of strategic options for THP. To facilitate this review, the Company engaged an investment bank to search for potential investors or purchasers. By mid-September 2025, the Company concluded that these efforts were unlikely to succeed and ended its engagement with the investment bank. Persistent losses in the THP segment and a lack of interest from investors led management and the Board of Directors to decide to dispose of THP and terminate a majority of the workforce related to THP operations as of mid-September 2025. In line with this decision, the THP segment met the accounting requirements to be classified under discontinued operations as of September 30, 2025. The process of winding down THP was substantially complete as of December 31, 2025. A minimal amount of costs related to the winding down procedures were incurred through March 31, 2026 and are expected to continue being incurred through the second and third quarters of 2026.
Discontinued operations comprise activities that were disposed of, discontinued, or held for sale at the end of the period, representing a strategic business shift having a major effect on the Company’s operations and financial results according to ASC 205, “Presentation of Financial Statements.” In accordance with GAAP, the statements of operations from THP are reported in net income (loss) from discontinued operations in the accompanying Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025, and the related assets and liabilities are classified as discontinued operations as of March 31, 2026 and December 31, 2025 in the accompanying Consolidated Balance Sheets. Assets remaining in continuing operations consist of the Company’s cost method investment in Direct Dermatology, Inc. (“DirectDerm”) and computers.
At September 30, 2025, the Company recognized $26,472,407 of asset impairment charges in connection with the discontinuation of THP, which included $18,327,414 of intangible assets net of accumulated amortization, $3,772,146 of developed technology and $4,372,847 of internal use software. These assets were disposed of and written down to a zero basis as attempts to sell or find investors in the assets failed and there is no salvage value for the individual assets if sold separately. The intangible assets were primarily related to the Pixalere Canada and Precision Healing transactions described below.
Pixalere
In June 2021, the Company invested $2,084,278 to purchase 278,587 Class A Preferred Shares (the “Pixalere Shares”) of Canada-based Pixalere Healthcare Inc. (“Pixalere Canada”). The Pixalere Shares were convertible into approximately 27.3% of the outstanding equity of Pixalere Canada. Pixalere Canada provides a cloud-based wound care software tool that empowers nurses, specialists and administrators to deliver better care for patients. In connection with the Company’s purchase of the Pixalere Shares, Pixalere Canada granted Pixalere Healthcare USA, LLC (“Pixalere USA”), a subsidiary of the Company, a royalty-free exclusive license to use the Pixalere Canada software and platform (the “Pixalere System”) in the United States. In conjunction with the grant of the license, the Company issued Pixalere Canada a 27.3% equity ownership interest in Pixalere USA valued at $93,879.
Effective January 2, 2025, the Company entered into a series of agreements whereby Pixalere Canada redeemed the Company’s Pixalere Shares and, in exchange, the Company received additional rights related to the Pixalere System to be utilized in the THP technology platform (the “Pixalere Redemption”). Specifically, the Company’s exclusive license agreement for the Pixalere System was amended to provide the Company (i) possession, control and ability to modify a copy of the source code used in the Pixalere System, (ii) the ability to use, license, sublicense or sell the licensed software in additional territories outside of the United States and (iii) all de-identified patient data owned by Pixalere Canada. In addition, as part of the Pixalere Redemption, Pixalere USA redeemed Pixalere Canada’s equity ownership in Pixalere USA.
The Company determined that the fair value of assets exchanged in the Pixalere Redemption was not determinable with reliability. Therefore, the Company recorded the transaction as a non-monetary exchange of assets and reclassified the $2,084,278 carrying value of its investment in the Pixalere Shares as an intangible asset for the amended license agreement. The Company also eliminated the 27.3% equity ownership interest in Pixalere USA held by Pixalere Canada and recorded a change in noncontrolling interest in the Company’s Consolidated Statements of Changes in Shareholders’ Equity.
Precision Healing
In April 2022, the Company closed a merger transaction with Precision Healing pursuant to which Precision Healing became a wholly owned subsidiary of the Company. Pursuant to the terms of the merger agreement, holders of Precision Healing common stock and preferred stock, other than the Company, were entitled to receive closing consideration, consisting of $125,966 in cash consideration, which was paid to stockholders who were not accredited investors, 165,738 shares of the Company’s common stock, which was paid only to accredited investors, and the payment in cash of approximately $0.6 million of transaction expenses of Precision Healing. The Company recorded the issuance of the 165,738 shares to accredited investors and cash payments to nonaccredited investors based on the closing price per share of the Company’s common stock on April 4, 2022, which was $30.75.
Upon the closing of the merger, the Precision Healing outstanding options previously granted under the Precision Healing Inc. 2020 Stock Option and Grant Plan (the “Precision Healing Plan”) converted, pursuant to their terms, into options to acquire an aggregate of144,191 shares of Company common stock with a weighted average exercise price of $10.71 per share. These options expire between August 2030 and April 2031. In addition, outstanding and unexercised Precision Healing warrants converted into rights to receive warrants to purchase (i) 4,424 shares of the Company’s common stock with an initial exercise price of $7.32 per share and an expiration date of April 22, 2031, and (ii) 12,301 shares of the Company’s common stock with an initial exercise price of $12.05 per share and an expiration date of August 10, 2030. Concurrent with the assumption of the Precision Healing Plan, the Company terminated the ability to offer future awards under the Precision Healing Plan. As of December 31, 2024, all warrants to purchase shares of the Company’s common stock pursuant to the transaction with Precision Healing were exercised. There are 10,218 stock options remaining to be exercised as of March 31, 2026.
Following the decision to discontinue THP in mid-September 2025, management determined that the Precision Healing and Pixalere intangible assets no longer held value outside of the THP segment. Consequently, the carrying values of the intangible assets were fully impaired and written down to zero as of September 30, 2025.
The following table provides the components of assets and liabilities related to discontinued operations that were included in the Company’s Consolidated Balance Sheets for the periods presented:
SCHEDULE OF DISCONTINUED OPERATIONS
The assets and liabilities included in discontinued operations represent balances that are expected to be collected and expenses to be paid as part of the winding down of THP.
The following table provides the operating results of discontinued operations that were included in the Company’s Consolidated Statements of Operations for the periods presented:
The following table provides operating cash flow information for discontinued operations for the periods presented:
NOTE 4 – CAREPICS ACQUISITION
On April 1, 2025 (the “CarePICS Closing Date”), the Company, entered into a Unit Purchase Agreement (the “CarePICS Purchase Agreement”), by and among the Company, Tissue Health Plus, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (the “Purchaser”), CarePICS, LLC (“CarePICS”), the holders of CarePICS’s outstanding units (each, a “Seller” and collectively, the “Sellers”) and Paul Schubert, in his capacity as the representative of the Sellers, pursuant to which the Purchaser purchased all of the issued and outstanding equity interests of CarePICS (the “Units”) from the Sellers (the “CarePICS Acquisition”). On the CarePICS Closing Date, the parties to the CarePICS Purchase Agreement completed the CarePICS Acquisition and CarePICS became an indirect wholly owned subsidiary of the Company.
CarePICS designed and maintained a mobile and web app for clinicians to perform certain activities related to treating vascular and wound care patients, including (i) requesting and providing specialty consultations, (ii) creating and sending clinical reports, (iii) scheduling and performing telehealth visits with patients and (iv) signing and fulfilling medical supply orders. The CarePICS virtual platform enabled HIPAA-compliant communication sharing of video, voice, text and images for all activities between users.
Cash Consideration
Pursuant to the CarePICS Purchase Agreement, cash consideration for the CarePICS Acquisition was $2.0 million, which included transaction expenses of the Sellers. On the CarePICS Closing Date, the Company also paid $1.65 million to satisfy certain existing indebtedness of CarePICS which was assumed by the Company at the closing of the acquisition.
Earnout Consideration
The CarePICS Purchase Agreement also provided that the Sellers were entitled to receive potential earnout payments. Pursuant to the CarePICS Purchase Agreement, for each of (A) the period beginning on the CarePICS Closing Date and ending on March 31, 2026 (the “First Earnout Period”) and (B) the period beginning on April 1, 2026 and ending on March 31, 2027 (the “Second Earnout Period”), each Seller was entitled to such Seller’s pro rata share of a value equal to (i) $2,000,000 minus (ii) any funding provided by the Purchaser or its affiliates to the SaaS P&L (as defined in the CarePICS Purchase Agreement) during the First Earnout Period and Second Earnout Period, as applicable, in excess of $110,000 per month, minus (iii) any shortfall in the projected SaaS P&L EBITDA (as defined in the CarePICS Purchase Agreement) for the applicable earnout period, plus (iv) 75% of any SaaS P&L EBITDA generated in excess of the projected SaaS P&L EBITDA for the First Earnout Period and the Second Earnout Period, as applicable.
Each earnout payment, if any, was due within 90 days following the First Earnout Period and Second Earnout Period, as applicable, and was payable in cash or, at the Purchaser’s election, was payable to Sellers who qualify as “accredited investors” (as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended) in a combination of 30% cash and 70% of the Purchaser’s Class A-2 Units, with the value of the Class A-2 Units to be determined by an industry recognizable third-party valuation firm. Pursuant to the CarePICS Purchase Agreement, the aggregate value of the amounts paid for the First and Second Earnout Periods would not exceed $10,000,000.
In addition, for a period ending 10 years following the CarePICS Closing Date (the “Purchaser Value Earnout Period”), each Seller was entitled to receive annual earnout payments based on the census of patient volume for the previous year and be based upon a rate of $5.00 enablement value per patient per year (the “Purchaser Value Earnouts”). Each earnout payment, if any, was due 90 days following the end of each fiscal year during the Purchaser Value Earnout Period, and was payable in cash or, at the Purchaser’s election, was payable to Sellers who qualify as accredited investors in a combination of 30% cash and 70% of the Purchaser’s Class B Units, with the value of the Class B Units to be determined by an industry recognizable third-party valuation firm. Pursuant to the CarePICS Purchase Agreement, the aggregate value of the Purchaser Value Earnouts would not exceed $10,000,000.
As the contingent consideration was negotiated as part of the CarePICS Acquisition, the contingent obligation was included in the total purchase consideration transferred and classified as a liability.
The total purchase consideration for the CarePICS Acquisition as of the acquisition date was as follows:
SCHEDULE OF TOTAL PURCHASE CONSIDERATION
Based on guidance provided by ASC 805, Business Combinations, the Company recorded the CarePICS Acquisition as an asset acquisition due to the determination that substantially all the fair value of the assets acquired was concentrated in the CarePICS developed technology.
The purchase consideration was allocated to the acquired assets and liabilities based on their relative fair value as follows:
SCHEDULE OF ACQUIRED ASSETS AND LIABILITIES
As of the CarePICS Closing Date, CarePICS was reported within the THP segment. Following the decision to discontinue THP in mid-September 2025, management determined that the technology developed by CarePICS held no value outside of the THP segment. Consequently, the carrying value of the CarePICS technology was fully impaired and written down to zero as of September 30, 2025. Additionally, the earnout liability related to the CarePICS acquisition was assessed and determined to be unattainable, resulting in the reduction of the contingent consideration liability to zero with a corresponding adjustment to the acquired asset as of September 30, 2025.
NOTE 5 – GOODWILL AND INTANGIBLES, NET
The changes in the carrying amount of the Company’s goodwill were as follows:
SCHEDULE OF CHANGES IN CARRYING AMOUNT OF GOODWILL
In connection with the change in reportable operating segments in the second quarter of 2024, the Company reassessed goodwill as the segments are presented in this report. The Company’s assessment determined that these changes, or any other matters noted, including the decision to discontinue THP in mid-September 2025, did not alter the Company’s conclusion that goodwill was not impaired as of March 31, 2026.
The carrying values of the Company’s intangible assets were as follows for the periods presented:
SCHEDULE OF CARRYING VALUE OF INTANGIBLE ASSETS
Accumulated
Amortization
As of March 31, 2026, the weighted-average amortization period for finite-lived intangible assets was 12.5 years. Amortization expense related to intangible assets was $545,399 and $647,774 for the three months ended March 31, 2026 and 2025, respectively. Amortization expense related to intangible assets included in discontinued operations was $430,378 for the three months ended March 31, 2025.
The estimated remaining amortization expense as of March 31, 2026 for finite-lived intangible assets is as follows:
SCHEDULE OF FUTURE AMORTIZATION EXPENSE
NOTE 6 – INVESTMENTS IN EQUITY SECURITIES
The Company’s equity investments consist of nonmarketable equity securities in privately held companies without readily determinable fair values. Unless accounted for under the equity method of accounting, the investments are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.
BMI
On January 16, 2025, the Company entered into a share subscription and shareholders’ agreement (the “Subscription Agreement”), pursuant to which the Company made an initial cash investment in BMI totaling approximately $3.1million (€3.0million). The initial cash investment and the previously disclosed convertible loan to BMI of $1.1 million (€1.0million), were converted into 8,230ordinary shares of BMI, constituting approximately 6.67% of the outstanding equity of BMI as of January 16, 2025. The Company also agreed to contribute an additional €4.0million to BMI through a series of capital contributions in exchange for 8,230additional ordinary shares of BMI upon the achievement of certain milestones expected to occur at various points during 2025 and 2026. In June 2025, BMI achieved two of such milestones, and upon settlement, the Company paid BMI $2.4million (€2.0million) on July 1, 2025 in exchange for 4,116additional ordinary shares of BMI, bringing the Company’s total ownership of BMI’s outstanding equity to approximately 9.678% as of July 1, 2025. In September 2025, BMI achieved the final three milestones, and upon settlement, the Company paid BMI $2.4million (€2.0 million) on October 2, 2025 in exchange for 4,114additional ordinary shares of BMI, bringing the Company’s total ownership of BMI’s outstanding equity to approximately 12.499% for a total cash investment of $9.0million (€8.0million) as of October 2, 2025. In March 2026, additional ordinary shares of BMI were sold to other outside investors, thereby decreasing the Company’s ownership of BMI to approximately 12.141% as of March 31, 2026.
The Company reviewed the characteristics of the Company’s investment in BMI in accordance with ASC Topic 323, Investments — Equity Method and Joint Ventures (“ASC 323”) and determined that the Company made a non-controlling investment in a limited liability company. According to the guidance provided in ASC 323-30-S99-1, investments in limited liability companies whereby an investor holds more than a 3% to 5% ownership interest would generally be accounted for under the equity method of accounting. Therefore, the Company utilized the equity method of accounting for this investment and recorded its initial investment at cost. The Company’s share of the earnings or losses of BMI is recorded in the Company’s Consolidated Statements of Operations.
In connection with the Subscription Agreement, the Company entered into a license and distribution agreement with BMI (the “BMI License Agreement”) pursuant to which the Company acquired the exclusive U.S. marketing, sales and distribution rights to certain BMI products, for use in the treatment of an injury caused by a traumatic incident. Pursuant to the BMI License Agreement, the Company was appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distribute and sell certain BMI products for trauma indications inside the United States and its territories. See Note 9 for more information regarding the BMI License Agreement.
ChemoMouthpiece
In September 2024, the Company, through its wholly owned subsidiary, Sanara CMP LLC (“Sanara CMP”), entered into a Unit Purchase Agreement (the “Unit Purchase Agreement”) with ChemoMouthpiece, LLC (“CMp”), pursuant to which Sanara CMP purchased 100,674.72common units in CMp for an aggregate purchase price of $5.0million, or $49.6649per unit, which represented approximately 6.64% of the issued and outstanding membership interest of CMp immediately following such purchase. Subsequent to the Company’s initial investment in CMp, units of CMp were sold to other investors, thereby decreasing the Company’s ownership of CMp to approximately 6.59% as of March 31, 2026. CMp is a privately held medical device company that develops and commercializes propriety oral cryotherapy products for cancer patients, including, among other things, CMp’s Chemo Mouthpiece oral cryotherapy device, which is a 510(k) cleared cryotherapy device designed to reduce the incidence and severity of chemotherapy induced oral mucositis. In 2025, CMp applied for a Medicare reimbursement code for its Chemo Mouthpiece oral cryotherapy device, and the application was not approved. CMp has the option to re-apply for the reimbursement code in the future. The Company is evaluating the impact of not receiving approval for Medicare reimbursement and will continue to review this investment quarterly for indicators of impairment.
The Company reviewed the characteristics of Sanara CMP’s investment in CMp in accordance with ASC 323 and determined that Sanara CMP made a non-controlling investment in a limited liability company. In accordance with ASC 323-30-S99-1, the Company utilized the equity method of accounting for this investment and recorded its initial investment at cost plus transaction costs. Sanara CMP’s share of the earnings or losses of CMp is recorded in the Company’s Consolidated Statements of Operations.
SI Technologies
In November 2022, the Company established a 50/50 strategic alliance, SI Healthcare Technologies, LLC (“SI Technologies”) (formerly known as SI Wound Care, LLC), with InfuSystem Holdings, Inc. (“InfuSystem”). In connection with the Unit Purchase Agreement with CMp, the Company, CMp, certain subsidiaries of CMp, InfuSystem and SI Technologies, entered into an Exclusive Distribution Agreement (the “Distribution Agreement”) pursuant to which SI Technologies was appointed as the sole and exclusive U.S. distributor of CMp’s Standard Chemo Regiment Kits. The parties to the Distribution Agreement also entered into an Intellectual Property Rights Agreement, pursuant to which SI Technologies was granted the exclusive right to use CMp’s intellectual property rights to permit resale and use of the CMp product in the United States.
The Company reviewed the characteristics of the Company’s investment in SI Technologies in accordance with ASC 323 and determined that the Company made a non-controlling investment in a limited liability company. In accordance with ASC 323-30-S99-1, the Company utilized the equity method of accounting for this investment and recorded its initial investment at cost. The Company’s share of the earnings or losses of SI Technologies is recorded in the Company’s Consolidated Statements of Operations.
DirectDerm
In July 2020, the Company made a $500,000 long-term investment to purchase certain nonmarketable securities consisting of 7,142,857 Series B-2 Preferred Shares of DirectDerm, representing approximately 2.9% ownership of DirectDerm at that time. Through this investment, the Company received exclusive rights to utilize DirectDerm’s technology in all acute and post-acute care settings such as skilled nursing facilities, home health and wound clinics. In 2021, the Company purchased an additional 3,571,430shares of DirectDerm’s Series B-2 Preferred for $250,000. In March 2022, the Company purchased an additional 3,571,429 shares of DirectDerm’s Series B-2 Preferred for $250,000. The Company’s ownership of DirectDerm was approximately 8.1% as of March 31, 2026. The Company does not have the ability to exercise significant influence over DirectDerm’s operating and financial activities. In accordance with ASC Topic 321, Investments — Equity Securities, this investment was reported at cost as of March 31, 2026. Shares of DirectDerm were previously held by THP. In connection with the discontinuation of THP’s operations and the Company’s strategic shift to focus exclusively on products for use in the surgical market, management concluded that ownership of DirectDerm continues to be an asset with ongoing value for the Company. The shares of DirectDerm were excluded from the discontinued THP assets.
The following table summarizes the Company’s investments for the periods presented:
SCHEDULE OF INVESTMENTS
The following table summarizes the Company’s share of losses from equity method investments reflected in the Company’s Consolidated Statements of Operations for the periods presented:
SCHEDULE OF LOSS FROM EQUITY METHOD INVESTMENT
NOTE 7 – OPERATING LEASES
The Company periodically enters operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine whether such arrangements constitute a lease. Right of use assets (“ROU assets”) represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized on the transition date based on the present value of lease payments over the respective lease term, with the office space ROU asset adjusted for deferred rent liability.
As of March 31, 2026, the Company had two material operating leases for office space. The leases had remaining lease terms of 60 and 29months as of March 31, 2026, respectively. For practical expediency, the Company has elected not to recognize ROU assets and lease liabilities related to short-term leases and to not separate lease and non-lease components.
The present value of the Company’s operating lease liabilities is presented below:
Maturity of Operating Lease Liabilities
SCHEDULE OF OPERATING LEASE LIABILITY
The Company recorded lease expense of $152,771 and $131,568 for the three months ended March 31, 2026 and 2025, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $154,217 and $135,594 for the three months ended March 31, 2026 and 2025, respectively.
As of March 31, 2026, the Company’s operating leases had a weighted average remaining lease term of 4.7 years and a weighted average discount rate of 13.3%.
NOTE 8 – DEBT AND CREDIT FACILITIES
CRG Term Loan Agreement
On April 17, 2024 (the “Closing Date”), the Company entered into a term loan agreement, by and among the Company, as borrower, the subsidiary guarantors party thereto from time to time (collectively, the “Guarantors”), CRG Servicing LLC as administrative agent and collateral agent (the “Agent”), and the lenders party thereto from time to time (the “CRG Term Loan Agreement”), providing for a senior secured term loan of up to $55.0 million (the “CRG Term Loan”). The CRG Term Loan Agreement initially provided for (i) a $15.0 million senior secured term loan that was borrowed on the Closing Date (the “First Borrowing”) and (ii) up to an aggregate of $40.0 million available for borrowing in two subsequent borrowings, provided that each such borrowing was at least $5.0 million and occurred between the Closing Date and June 30, 2025, subject to the satisfaction of certain conditions, including the Agent having received certain fees. The Company used a portion of the proceeds of the First Borrowing under the CRG Term Loan to extinguish the remaining balance under its previous term loan with Cadence Bank.
On September 4, 2024, the Company borrowed an additional $15.5 million under the CRG Term Loan Agreement (the “Second Borrowing”). The Company used $5.0 million of the proceeds of the Second Borrowing for its investment in CMp, and for working capital and general corporate purposes.
On March 19, 2025, the Company and the Guarantors entered into the First Amendment to the CRG Term Loan Agreement with the Agent and the lenders party thereto from time to time, which amended the CRG Term Loan Agreement to, among other things, (i) entitle the Company to two additional borrowings following the Second Borrowing, which borrowings were required to occur on or prior to December 31, 2025, if at all, and (ii) remove the requirement that any borrowing be in whole multiples of $5.0 million.
On March 31, 2025, the Company borrowed an additional $12.25 million under the CRG Term Loan Agreement (the “Third Borrowing”). The First Borrowing, the Second Borrowing and the Third Borrowing each have a maturity date of March 30, 2029 (the “Maturity Date”), unless earlier prepaid. The Company used a portion of the proceeds from the Third Borrowing for permitted acquisition opportunities, such as the CarePICS Acquisition in April 2025, and for working capital and general corporate purposes. After the Third Borrowing, the Company did not take any additional draws under the CRG Term Loan prior to the final draw date of December 31, 2025.
The CRG Term Loan bears interest at a per annum rate equal to 13.25% (subject to a 4.0% increase during an event of default), of which 8.00% must be paid in cash and 5.25% may, at the election of the Company, be deferred through the 19th quarterly Payment Date (defined below) by adding such amount to the aggregate principal loan amount, so long as no default or event of default under the CRG Term Loan Agreement has occurred and is continuing. The Company is required to make quarterly interest payments on the final business day of each calendar quarter following the Closing Date, commencing on the first such date to occur at least 30 days after the Closing Date (each, a “Payment Date”). Interest is payable on each Payment Date in arrears with respect to the time between each Payment Date and upon the payment or prepayment of the CRG Term Loan, ending on the Maturity Date. In addition, the Company is required to pay an upfront fee of 1.50% of the principal amount of the CRG Term Loan, which is payable as amounts are advanced under the CRG Term Loan on a pro rata basis. The Company is also required to pay a back-end fee equal to 7.00% of the aggregate principal amount advanced under the CRG Term Loan Agreement.
For the three months ended March 31, 2026, the Company paid $1,516,747 of interest in cash and recorded no paid-in-kind interest related to the CRG Term Loan, reflecting the Company’s election to pay interest in cash rather than capitalizing and increasing the balance of the CRG Term Loan. For the three months ended March 31, 2025, the Company paid $626,779 of interest in cash and recorded $411,324of interest paid-in-kind related to the CRG Term Loan. The paid-in-kind interest for the three months ended March 31, 2025 was applied to the principal balance of the CRG Term Loan. The Company recorded $181,944 and $176,079 for the three months ended March 31, 2026 and 2025, respectively, to interest expense related to the back-end fee. The back-end fee is accreted and amortized to interest expense over the term of the CRG Term Loan. Paid-in-kind interest and the accreted back-end fee are included under the line item captioned “Long-term debt” in the Consolidated Balance Sheets.
Subject to certain exceptions, the Company is required to make mandatory prepayments of the CRG Term Loan with the proceeds of certain assets sales and in the event of a change of control of the Company. In addition, the Company may make voluntary prepayments of the CRG Term Loan, in whole or in part, at any time. All mandatory and voluntary prepayments of the CRG Term Loan are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs on or prior to the date that is one year following the applicable borrowing (the “Borrowing Date”), an amount equal to 10.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid and (ii) if prepayment occurs one year after the applicable Borrowing Date and on or prior to two years following the applicable Borrowing Date, an amount equal to 5.0% of the aggregate outstanding principal amount of the CRG Term Loan that is being prepaid. No prepayment premium is due on any principal prepaid if prepayment occurs two years or more after the applicable Borrowing Date.
Certain of the Company’s current and future subsidiaries, including the Guarantors, guarantee the obligations of the Company under the CRG Term Loan Agreement. As security for their obligations under the CRG Term Loan Agreement, on the Closing Date, the Company and the Guarantors entered into a security agreement with the Agent pursuant to which the Company and the Guarantors granted to the Agent, as collateral agent for the lenders, a lien on substantially all of the Company’s and the Guarantors’ assets, including intellectual property (subject to certain exceptions).
The CRG Term Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on the Company’s and the Guarantors’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions above certain thresholds, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the CRG Term Loan Agreement contains the following financial covenants requiring the Company and the Guarantors in the aggregate to maintain:
The CRG Term Loan Agreement contains representations and warranties of the Company and the Guarantors customary for financings of this type, and also includes events of default customary for financings of this type, including, among other things, non-payment, inaccuracy of representations and warranties, covenant breaches, a material adverse change, bankruptcy and insolvency, material judgments and a change of control, in certain cases subject to customary periods to cure. The occurrence and continuance of an event of default could result in the acceleration of the obligations under the CRG Term Loan Agreement.
The table below presents the components of the Company’s outstanding debt for the periods presented:
SCHEDULE OF LONG-TERM DEBT
The table below presents the aggregate maturities of the Company’s outstanding debt as of March 31, 2026:
SCHEDULE OF MATURITIES OUTSTANDING
In connection with the CRG Term Loan, the Company incurred zero and $228,183 of debt issuance costs during the three months ended March 31, 2026 and year ended December 31, 2025, respectively. Debt issuance costs are amortized to interest expense in the Consolidated Statements of Operations over the life of the debt to which they pertain. Debt issuance costs are included under the line item captioned “Long-term debt” in the Consolidated Balance Sheets. Amortization expense related to debt issuance costs was $73,541 and $59,280 for the three months ended March 31, 2026 and 2025, respectively.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
License Agreements and Royalties
BIASURGE Advanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser
In July 2019, the Company executed a license agreement with Rochal Industries, LLC (“Rochal”), a related party, pursuant to which the Company acquired an exclusive world-wide license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications (the “BIAKŌS License Agreement”). Currently, the products covered by the BIAKŌS License Agreement are BIASURGE Advanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser. All three products are 510(k) cleared.
Future commitments under the terms of the BIAKŌS License Agreement include:
Unless previously terminated by the parties, the BIAKŌS License Agreement expires with the related patents in December 2031.
Under this agreement, royalty expense, which is recorded in cost of goods sold in the accompanying Consolidated Statements of Operations, was $58,881 and $37,500 for the three months ended March 31, 2026 and 2025, respectively. The Company’s Chairman is a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder of Rochal. Another one of the Company’s directors, Ann Beal Salamone, is also a director and significant shareholder of Rochal.
CuraShield Antimicrobial Barrier Film and No Sting Skin Protectant
In October 2019, the Company executed a license agreement with Rochal pursuant to which the Company acquired an exclusive world-wide license to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing certain Rochal patents and pending patent applications (the “ABF License Agreement”). Currently, the products covered by the ABF License Agreement are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.
Future commitments under the terms of the ABF License Agreement include:
Unless previously terminated or extended by the parties, the ABF License Agreement will terminate upon expiration of the last U.S. patent in October 2033. No commercial sales or royalties have been recognized under this agreement as of March 31, 2026.
Debrider License Agreement
In May 2020, the Company executed a product license agreement with Rochal, pursuant to which the Company acquired an exclusive world-wide license to market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses primarily for beauty, cosmetic, or toiletry purposes (the “Debrider License Agreement”). No commercial sales or royalties have been recognized under this agreement as of March 31, 2026. Unless terminated or extended by the parties, the Debrider License Agreement will expire in October 2034.
In the quarter ended December 31, 2025, management determined that the debrider is no longer expected to be used in the Company’s strategic plans and concluded that the carrying amount was not recoverable. An impairment charge of $1.2 million was recorded to reduce the carrying amount of the intangible asset to zero at December 31, 2025. In connection with the strategic realignment to focus on the surgical business, the Company is in the process of terminating the Debrider License Agreement with Rochal in order to focus on developing and commercializing the Company’s surgical product portfolio.
Exclusive License and Distribution Agreement With, and Minority Investment in, BMI
BMI License Agreement
On January 16, 2025, the Company entered into the BMI License Agreement, by and between the Company and BMI, a privately-held medical device company headquartered in Shannon, Co. Clare Ireland, pursuant to which the Company acquired the exclusive U.S. marketing, sales and distribution rights to OsStic Synthetic Injectable Structural Bio-Adhesive Bone Void Filler (“OsStic”), as well as an adjunctive internal fixation technology featuring novel delivery to promote targeted application of OsStic (“ARC” and together with OsStic, the “Products”), for use in the treatment of an injury caused by a traumatic incident.
Pursuant to the BMI License Agreement, the Company was appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distribute and sell the Products for trauma indications inside the United States and its territories for an initial five-year term, which term may be automatically renewed for successive two-year periods at the Company’s discretion, provided that the Company is in compliance with its obligations thereunder. From January 16, 2025 until October 13, 2025, the Company had an option to negotiate exclusive distribution rights for the Products in additional fields and/or additional territories on substantially the same terms as those set forth in the BMI License Agreement. On June 18, 2025, pursuant to the BMI License Agreement, the Company exercised its option for exclusive distribution rights of the BMI Products for sports medicine, spine, arthroplasty, and craniomaxillofacial indications within the United States and its territories. On October 1, 2025, the Company and BMI entered into a first amendment to the BMI License Agreement to extend the option period through May 31, 2026 to provide more time to negotiate and finalize the terms of the additional fields in the contract territory.
The BMI License Agreement requires that the Company pay BMI royalties of 3% of OsStic net sales (as defined in the BMI License Agreement). Pursuant to the BMI License Agreement, the Company and BMI agreed to negotiate the applicable percentage of net sales for ARC at a future date. The BMI License Agreement also requires the Company to pay BMI annual minimum royalty payments of $100,000, $200,000, and $300,000for the first, second and third years, respectively, following the receipt of first regulatory approval for the marketing and sale of a product. No royalties have been paid under this agreement as of March 31, 2026.
Subscription Agreement
In connection with the BMI License Agreement, on January 16, 2025, the Company entered into the Subscription Agreement. See Note 6 for more information regarding the BMI Subscription Agreement.
Applied Asset Purchase
On August 1, 2023, the Company closed the acquisition of assets from The Hymed Group Corporation and Applied Nutritionals LLC (the “Applied Asset Purchase”) for an initial aggregate purchase price of $15.25 million, consisting of $9.75 million in cash and 73,809 shares of the Company’s common stock with an agreed upon value of $3.0 million, and $2.5 million in cash to be paid in four equal installments of $625,000 on each of the next four anniversaries of the closing date. The first and second of four installment payments of $625,000 were made in August 2024 and August 2025, respectively.
In addition to the consideration noted above, the terms of the asset purchase agreement provide that the sellers party thereto are entitled to receive up to an additional $10.0 million (the “Applied Earnout”), which is payable to the sellers in cash, upon the achievement of certain performance thresholds relating to our collections from net sales of a collagen-based product currently under development. Upon expiration of the seventh anniversary of the closing of the Applied Asset Purchase, to the extent the sellers have not earned the entirety of the Applied Earnout, the Company shall pay the sellers a pro-rata amount of the Applied Earnout based on collections from net sales of the product, with such amount to be due credited against any Applied Earnout payments already made by the Company (the “True-Up Payment”). The Applied Earnout, minus the True-Up Payment and any Applied Earnout payments already made by us, may be earned at any point in the future, including after the True-Up Payment is made.
In connection with the Applied Asset Purchase, effective August 1, 2023, the Company entered into a professional services agreement (the “Petito Services Agreement”) with Dr. Petito (the “Owner”), pursuant to which the Owner, as an independent contractor, agreed to provide certain services to the Company, including, among other things, assisting with the development of products already in development and assisting with research, development, formulation, invention and manufacturing of any future products (the “Petito Services”). As consideration for the Petito Services, the Owner was entitled to receive: (i) a base salary of $12,000 per month during the term of the Petito Services Agreement, (ii) a royalty payment equal to 3% of the actual collections from net sales of certain products the Owner develops or codevelops that reach commercialization, (iii) a royalty payment equal to 5% for the first $50.0 million in aggregate collections from net sales of certain future products and a royalty payment of 2.5% on aggregate collections from net sales of certain future products on any amounts exceeding $50.0 million but up to $100.0 million, (iv) $500,000 in cash in the event that 510(k) clearance is issued for any future product accepted by the Company and (v) $1.0 million in cash in the event that a U.S. patent is issued for a certain product; provided that with respect to the incentive payments described in (iv) and (v) of the foregoing, the Owner shall not earn more than $2.5 million.
The Petito Services Agreement had an initial term of three years and was subject to automatic successive one-month renewals unless earlier terminated in accordance with its terms. The Petito Services Agreement was terminable upon the Owner’s death or disability or by the Company or the Owner “For Cause” (as defined in the Petito Services Agreement); provided, however, that the base salary described in (i) of the foregoing paragraph survives termination through the three-year initial term and the royalty payments and incentive payments described in (ii)-(v) of the foregoing paragraph survive termination of the Petito Services Agreement.
Following the closing of the Applied Asset Purchase, the Company worked to advance the collagen product related to the incentive payment contemplated under the asset purchase agreement. Despite such efforts, the Company did not receive 510(k) clearance, a U.S. patent was not issued and no net sales were collected for this product contemplated under the asset purchase agreement and the Petito Services Agreement. After a review of the status of such initiatives, related expenses and the substantial additional expense that would need to be incurred for an uncertain result, and in light of the Company’s refocus in strategy to prioritize expanding existing product platforms, in March 2026, the Company determined not to renew the Petito Services Agreement. On April 20, 2026, the Company delivered written notice to Dr. Petito that the Petito Services Agreement will not be renewed beyond its initial term and will terminate effective August 1, 2026 pursuant to its terms. Since the contingent consideration liability relating to the Applied Asset Purchase is associated with the Petito Services Agreement, the Company determined that the thresholds necessary to trigger a payment on the earnout would not be met and reduced the contingent consideration liability to zero as of March 31, 2026.
Other Commitments
On December 20, 2023, the Company signed an exclusive license agreement with Tufts University (“Tufts”) to develop and commercialize patented technology covering 18 unique collagen peptides. As part of this agreement, the Company formed a new subsidiary, Sanara Collagen Peptides, LLC (“SCP”), and issued 10% of SCP’s outstanding units to Tufts. SCP had exclusive rights to develop and commercialize new products based on the licensed patents and patents pending. SCP would pay royalties to Tufts based on net sales of licensed products and technologies. Under the exclusive license agreement, royalties would be calculated at a rate of 1.5% or 3%, depending on the type of product or technology developed. SCP would pay Tufts a minimum annual royalty of $50,000 on January 1 of the year following the first anniversary of the first commercial sale of the licensed products or technologies. SCP would pay Tufts a $100,000 minimum annual royalty on January 1 of each subsequent year during the royalty term specified in the exclusive license agreement. There have been no material accounting impacts and no royalties paid related to this arrangement as of March 31, 2026.
In connection with the shift in strategy, on March 12, 2026, the Company delivered written notice to Tufts that terminated the exclusive license agreement, effective April 20, 2026. The Company is in the process of dissolving SCP in order to focus on developing and commercializing the Company’s surgical product portfolio.
NOTE 10 – SHAREHOLDERS’ EQUITY
At the Company’s Annual Meeting of Shareholders held in July 2020, the Company approved the Restated 2014 Omnibus Long Term Incentive Plan (the “2014 LTIP”) in which the Company’s directors, officers, employees and consultants are eligible to participate. The 2014 LTIP terminated as to future awards on September 3, 2024. Previously granted awards under the 2014 LTIP will remain outstanding until they expire by their terms or under the terms of the 2014 LTIP.
On June 12, 2024, the Company’s shareholders approved the 2024 Omnibus Long-Term Incentive Plan (the “2024 LTIP”), which went into effect upon shareholder approval. The maximum number of shares of the Company’s common stock that may be delivered pursuant to awards granted under the 2024 LTIP is 1,000,000, subject to increase by any awards under the 2014 LTIP (i) that were outstanding on or after June 12, 2024, and that, on or after such date, are forfeited, expire or are canceled, and (ii) any shares subject to awards relating to common stock under the 2014 LTIP that are settled in cash on or after June 12, 2024 (the “Prior LTIP Awards”). The 2024 LTIP also provides that, to the extent an award under the 2024 LTIP or a Prior LTIP Award is forfeited, expires or is canceled, in whole or in part, the shares subject to such forfeited, expired or canceled award may again be awarded under the 2024 LTIP. For the three months ended March 31, 2026, a total of 215 shares were forfeited under the 2014 LTIP, a total of 241,612 shares, net of forfeitures of 2,997, had been issued under the 2024 LTIP and 565,903 were available for issuance under the 2024 LTIP.
Restricted Stock Awards
During the three months ended March 31, 2026, the Company issued restricted stock awards under the 2024 LTIP which are subject to certain vesting provisions and other terms and conditions set forth in each recipient’s respective restricted stock agreement. The Company issued241,612 shares, net of forfeitures of 2,997, under the 2024 LTIP, of restricted common stock to employees, directors and certain advisors of the Company during the three months ended March 31, 2026. The fair value of these awards was $4,423,702 based on the closing price of the Company’s common stock on the respective grant dates, which will be recognized as compensation expense on a straight-line basis over the vesting period of the awards.
Share-based compensation expense of $1,028,335 and $1,175,496 was recognized in operating expenses in the accompanying Consolidated Statements of Operations during the three months ended March 31, 2026 and 2025, respectively. Share-based compensation expense related to THP of zero and $129,408 was recognized in discontinued operations in the accompanying Consolidated Statements of Operations during the three months ended March 31, 2026 and 2025, respectively.
At March 31, 2026, there was $9,088,245 of total unrecognized share-based compensation expense related to unvested share-based equity awards. Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 2.3 years.
A summary of restricted stock activity is presented below:
SUMMARY OF RESTRICTED STOCK ACTIVITY
Weighted Average
Grant Date Fair Value
Stock Options
A summary of the status of outstanding stock options and changes is presented below:
SCHEDULE OF STOCK OPTION ACTIVITY
Exercise
Price
Remaining
Contract Life
Aggregate
Intrinsic
Value
NOTE 11 – RELATED PARTIES
Product License Agreements
In July 2019, the Company executed a license agreement with Rochal, a related party, whereby the Company acquired an exclusive world-wide license to market, sell and further develop antimicrobial products for the prevention and treatment of microbes on the human body utilizing certain Rochal patents and pending patent applications. Currently, the products covered by the BIAKŌS License Agreement are BIASURGE Advanced Surgical Solution, BIAKŌS Antimicrobial Wound Gel and BIAKŌS Antimicrobial Skin and Wound Cleanser. Each of these products are 510(k) cleared. Ronald T. Nixon, the Company’s Chairman, is a director of Rochal, and indirectly a significant shareholder of Rochal, and through the potential exercise of warrants, a majority shareholder of Rochal. Another one of the Company’s directors, Ann Beal Salamone, is also a director and significant shareholder of Rochal.
In October 2019, the Company executed the ABF License Agreement with Rochal whereby the Company acquired an exclusive world-wide license to market, sell and further develop certain antimicrobial barrier film and skin protectant products for use in the human health care market utilizing certain Rochal patents and pending patent applications. Currently, the products covered by the ABF License Agreement are CuraShield Antimicrobial Barrier Film and a no sting skin protectant product.
In May 2020, the Company executed a product license agreement with Rochal, whereby the Company acquired an exclusive world-wide license to market, sell and further develop a debrider for human medical use to enhance skin condition or treat or relieve skin disorders, excluding uses primarily for beauty, cosmetic, or toiletry purposes. In the quarter ended December 31, 2025, management determined that the debrider is no longer expected to be used in the Company’s strategic plans and concluded that the carrying amount was not recoverable. An impairment charge of $1.2 million was recorded to reduce the carrying amount of the intangible asset to zero at December 31, 2025.
See Note 9 for more information on these product license agreements.
Consulting Agreement
Concurrent with the Rochal asset purchase in July 2021, the Company entered into a consulting agreement with Ann Beal Salamone pursuant to which Ms. Salamone agreed to provide the Company with consulting services with respect to, among other things, writing new patents, conducting patent intelligence, and participating in certain grant and contract reporting. In consideration of the consulting services provided to the Company, Ms. Salamone is entitled to receive an annual consulting fee of $177,697, with payments to be issued once per month.The consulting agreement had an initial term of three years, unless earlier terminated by the Company, and was subject to renewal. Effective July 13, 2024, the consulting agreement with Ms. Salamone was amended to provide that the initial term shall be automatically renewed for successive one-year terms for up to three successive years unless earlier terminated by either party without cause at any time, provided that the terminating party provides 90 days advance written notice of termination. Ms. Salamone is a director of the Company and is a significant shareholder and the current Chair of the board of directors of Rochal.
Catalyst Transaction Advisory Services Agreement
In March 2023, the Company entered into a Transaction Advisory Services Agreement (the “Catalyst Services Agreement”) effective March 1, 2023 with Catalyst, a related party. Pursuant to the Catalyst Services Agreement, Catalyst, by and through its directors, officers, employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the “Covered Persons”), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operational and strategic planning, relationship access and corporate development services for the Company in connection with any merger, acquisition, recapitalization, divestiture, financing, refinancing, or other similar transaction in which the Company may be, or may consider becoming, involved, and any such additional services as mutually agreed upon in writing by and between Catalyst and the Company (the “Catalyst Services”).
Pursuant to the Catalyst Services Agreement, the Company agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any of the Covered Persons at a rate no more than a rate consistent with industry practice for the performance of services similar to the Catalyst Services, as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliated third parties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Catalyst Services rendered under the Catalyst Services Agreement, with all reimbursements being contingent upon the prior approval of the Audit Committee of the Company’s Board of Directors. Pursuant to the Catalyst Services Agreement, costs incurred were $850 and $20,000 for the three months ended March 31, 2026 and 2025, respectively, and are recorded in selling, general and administrative in the accompanying Consolidated Statements of Operations.
NOTE 12 – SEGMENT REPORTING
On September 2, 2025, the Company announced that Seth Yon, its President and Chief Commercial Officer was appointed to the position of President and Chief Executive Officer, effective September 15, 2025. The Company’s Chief Executive Officer is the chief operating decision maker (the “CODM”). The CODM reviews operating results and makes decisions about resource allocation. As described in Note 1, the THP segment met the accounting requirements to be classified as discontinued operations at September 30, 2025, and the Company no longer reports the THP segment. Accordingly, the Company has one reportable segment. The determination that the Company operates as a single segment is consistent with the nature of its operations and the financial information regularly reviewed by the Company’s CODM.
Net income (loss) is the primary profitability measure used by the CODM for purposes of assessing financial performance and resource allocation. In addition to net income (loss), the CODM also uses Adjusted EBITDA for purposes of assessing financial performance and resource allocation. Adjusted EBITDA is a non-GAAP measure and is defined as net income (loss) from continuing operations excluding interest expense/income, provision/benefit for income taxes, depreciation and amortization, noncash share-based compensation expense, change in fair value of earnout liabilities, asset impairment charges, share of losses from equity method investments, gains/losses on the disposal of property and equipment, executive separation costs, and legal and diligence expenses related to acquisitions, as each is applicable to the periods presented. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The CODM also reviews budget-to-actual variances for expenses on a monthly basis when making decisions about allocating resources to the segment. The measure of segment assets is reported in the Consolidated Balance Sheets as total consolidated assets.
The following table reflects results of operations including significant segment expenses that are regularly provided to the CODM for the Company’s reportable segment and Adjusted EBITDA for the periods presented:
SCHEDULE OF OPERATIONS, ASSETS AND CAPITAL EXPENDITURES FOR OUR BUSINESS SEGMENTS
The following table provides a reconciliation of net income (loss) from continuing operations to Adjusted EBITDA for the periods presented:
SCHEDULE OF RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations of Sanara MedTech Inc. (together with its wholly owned or majority-owned subsidiaries on a consolidated basis, the “Company,” “Sanara MedTech,” “Sanara,” “our,” “us,” or “we”) should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance, including topics such as new products under development. In some cases, you can identify forward-looking statements because they contain words such as “aims,” “anticipates,” “believes,” “contemplates,” “continue,” “could,” “estimates,” “expects,” “forecast,” “guidance,” “intends,” “may,” “plans,” “possible,” “potential,” “predicts,” “preliminary,” “projects,” “seeks,” “should,” “target,” “will” or “would” or the negative of these words, variations of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:
For a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ materially from those anticipated in forward-looking statements, see “Risk Factors” in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025, and Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and we do not assume any obligation to update these forward-looking statements, except to the extent required by applicable securities laws.
OVERVIEW
We are a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical market. Our products are designed to achieve our goal of providing better clinical outcomes at a lower overall cost for healthcare systems. We strive to be one of the most innovative and comprehensive providers of effective surgical solutions and are continually seeking to expand our offerings for patients requiring surgical treatments in the United States.
We primarily market and sell soft tissue repair and bone fusion products for use in the operating room or other sterile environments. Our soft tissue repair products include, among other products, our lead product, CellerateRX Surgical Powder (“CellerateRX Surgical”), a hydrolyzed collagen that aids in the management of surgical wounds, BIASURGE Advanced Surgical Solution (“BIASURGE”), a sterile no-rinse, advanced surgical solution used for wound irrigation and TEXAGEN Amniotic Membrane Allograft (“TEXAGEN”), a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed. Our bone fusion products include, among other products, BiFORM Bioactive Moldable Matrix (“BiFORM”), an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site, ACTIGEN Verified Inductive Bone Matrix (“ACTIGEN”), a naturally derived, differentiated allograft matrix with robust handling properties, and ALLOCYTE Plus Advanced Viable Bone Matrix (“ALLOCYTE Plus”), a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers.
We also utilize an in-house research and development team, Rochal Technologies. We are advancing a strong pipeline of next-generation products that supports and extends our surgical strategy of “Prepare, Promote and Protect.”
Summary of Our Key Products and Development Programs
We market and distribute surgical products to surgeons at hospitals and surgical centers. Our products are primarily sold in the U.S. surgical tissue repair market. We believe that we have the ability to drive our product pipeline from concept to preclinical and clinical development while meeting quality and regulatory requirements.
CellerateRX Surgical
CellerateRX Surgical is a Type I bovine hydrolyzed collagen indicated for the management of surgical, traumatic, and partial and full-thickness wounds as well as first- and second-degree burns. It is manufactured with a proprietary process. CellerateRX Surgical is sterilized, packaged and designed specifically for use in the operating room. CellerateRX Surgical is primarily purchased by hospitals and ambulatory surgical centers for use by surgeons to treat surgical wounds, including those associated with orthopedic, spine and trauma procedures. Additional surgical wounds that often benefit from the use of CellerateRX Surgical include general, vascular, plastic/reconstructive, cardiovascular, gynecologic, and urologic related procedures.
CellerateRX Surgical is used in operative cases where patients might have trouble healing normally due to underlying health complications. There is always a risk of complication with surgical wounds. This is especially true in patients with certain comorbidities, including obesity, diabetes and hypertension. These complications can include surgical wound infections, dehiscence (where an incision opens after primary closure) and necrosis. Surgical wound complications have become increasingly problematic due to the high rates of surgical patient comorbidities and the financial strain on insurance payors as well as hospitals that suffer exorbitant costs for readmission of these patients within 90 days of surgery. Surgeons use CellerateRX Surgical to complement the body’s normal healing process. By supporting the body to heal normally without complications, improved patient outcomes are achieved, thereby reducing downstream costs related to complications (such as re-operation, longer hospitalization, re-admittance, extended rehabilitative care and other additional treatments).
BIASURGE
BIASURGE is a 510(k) cleared sterile no-rinse, advanced surgical solution used for wound irrigation. It contains an antimicrobial preservative effective against a broad spectrum of pathogenic microorganisms in the solution. BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including microorganisms, from surgical wounds. In both in vitro testing of implant materials and ex vivo testing of dermal materials, BIASURGE was proved to eliminate biofilm-producing microbes and prevent them from attaching to the implant materials.
Other Products
TEXAGEN is a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed.
BiFORM is an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site. It can be hydrated and used as a strip or molded into a putty to fill a bone defect.
ACTIGEN is a naturally derived, differentiated allograft matrix with robust handling properties.
ALLOCYTE Plus is a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers. These viable cellular allografts are ready to use upon thawing and have fibrous handling properties.
FORTIFY TRG Tissue Repair Graft (“FORTIFY TRG”) is a freeze-dried, multi-layer small intestinal submucosa extracellular matrix sheet. The graft is 510(k) cleared for implantation to reinforce soft tissue, is terminally sterilized, has a thin profile, is available in multiple sizes, and can be cut to size to accommodate the patient’s anatomy. FORTIFY TRG is provided sterile and can be hydrated with autologous blood fluid.
Our product portfolio includes other products that have an insignificant impact on our revenue at this time.
Shift in Strategy and Discontinuance of Value-Based Wound Care Program
Our company’s main source of revenue has consistently been from soft tissue repair and bone fusion products for the surgical market. Additionally, we generate a smaller portion of revenue from products sold in the post-acute setting. To further support our surgical business, particularly in wound care, we launched a value-based wound care services initiative designed to enhance outcomes while complementing our offerings in both surgical and post-acute markets. This post-acute strategy, which we referred to as Tissue Health Plus (“THP”), was focused on providing value-based wound care services. Through THP, we planned to offer a first of its kind value-based wound care program to payers and risk-bearing entities. This program was designed to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality of life. To further develop our value-based wound care strategy, we executed an investment and acquisition strategy to build telehealth services and acquire technologies to support the THP platform.
Since the second quarter of 2024, we managed our business on the basis of two operating and reportable segments: the Sanara Surgical segment and the THP segment.
Our intention in incubating THP was coupled with a goal to find an outside partner to buy or invest in the platform. Starting in 2024, we held several meetings and did significant outreach to find potential funding for THP. This effort included meetings with venture capital firms, strategic buyers, provider service companies, insurance companies and private equity firms. During the third quarter of 2025, following authorization from our Board of Directors, management initiated a review of strategic options for THP and formally engaged an investment bank to search for potential investors or purchasers. By mid-September 2025, we concluded that these efforts were unlikely to succeed within the timeline allocated by the Board of Directors and ended our engagement with the investment bank. Persistent losses related to THP and a lack of any firm commitments from potential investors led management and our Board of Directors to decide to discontinue THP’s operations in mid-September 2025 and shift our focus exclusively on products and technologies for use in the surgical market.
As a result of this decision, THP met the accounting requirements to be classified under discontinued operations as of September 30, 2025. In accordance with generally accepted accounting principles in the United States (“GAAP”), the operations of THP are presented as discontinued operations in our Consolidated Balance Sheets and Consolidated Statements of Operations and, as such, have been excluded from continuing operations for all periods presented. As a result of the discontinuation of THP, we now have a single reportable segment. This determination is in accordance with Accounting Standards Codification (“ASC”) 280, Segment Reporting.
Certain prior period amounts have been reclassified to conform to the current year presentation.
Tufts University License Agreement
On December 20, 2023, we signed an exclusive license agreement with Tufts University (“Tufts”) to develop and commercialize patented technology covering 18 unique collagen peptides. As part of this agreement, we formed a new subsidiary, Sanara Collagen Peptides, LLC (“SCP”), and issued 10% of SCP’s outstanding units to Tufts. SCP has exclusive rights to develop and commercialize new products based on the licensed patents and patents pending. SCP will pay royalties to Tufts based on net sales of licensed products and technologies. Under the exclusive license agreement, royalties will be calculated at a rate of 1.5% or 3%, depending on the type of product or technology developed. SCP will pay Tufts a minimum annual royalty of $50,000 on January 1 of the year following the first anniversary of the first commercial sale of the licensed products or technologies. SCP will pay Tufts a $100,000 minimum annual royalty on January 1 of each subsequent year during the royalty term specified in the exclusive license agreement. There have been no material accounting impacts and no royalties paid related to this arrangement as of March 31, 2026.
In connection with the shift in strategy, on March 12, 2026, we delivered written notice to Tufts that terminated the exclusive license agreement, effective April 20, 2026. We are in the process of dissolving SCP in order to focus on developing and commercializing our surgical product portfolio.
RECENT DEVELOPMENTS
Vizient Innovative Technology Contract
On January 7, 2026, we announced our BIASURGE product received an Innovative Technology contract from Vizient Inc. (“Vizient”), the nation’s largest provider-driven healthcare performance improvement company. The contract was awarded based on the recommendation of BIASURGE by hospital experts who serve on one of Vizient’s client-led councils, and it signifies to Vizient clients BIASURGE’s unique qualities that potentially bring improvement to the healthcare industry. The Innovative Technology contract offers Vizient’s extensive network of healthcare facility customers access to BIASURGE at contracted pricing and pre-negotiated terms, effective January 1, 2026.
Recent Peer-Reviewed Study on CellerateRX Surgical
On March 11, 2026, we announced the publication of a peer-reviewed study evaluating the economic and clinical value of CellerateRX Surgical in the Journal of Medical Economics. The study demonstrated cost savings and improved health outcomes associated with the use of CellerateRX Surgical as an adjunct to the standard of care for high-risk spinal surgery patients, compared to the standard of care alone.
COMPONENTS OF RESULTS OF OPERATIONS
Sources of Revenue
Our revenue is derived primarily from sales of our soft tissue repair and bone fusion products to hospitals and surgical centers. In particular, the substantial majority of our product sales revenue is derived from sales of CellerateRX Surgical. Our revenue is driven by direct orders shipped by us to our customers, and, to a lesser extent, direct sales to customers through delivery at the time of procedure by one of our sales representatives. We generally recognize revenue when a purchase order is received by us from the customer, and our product is received by the customer.
Cost of Goods Sold
Cost of goods sold consists primarily of finished good purchases, raw material costs for certain components sourced directly by us, shipping and handling and all related royalties due as a result of the sale of our products. Our gross profit represents total net revenue less the cost of goods sold, and gross margin represents gross profit expressed as a percentage of total revenue.
Operating Expenses
Selling, general and administrative (“SG&A”) consists primarily of salaries, sales commissions, benefits, bonuses and share-based compensation. SG&A also includes outside legal counsel fees, audit fees, insurance premiums, rent and other corporate expenses. We expense all SG&A as incurred.
Research and development (“R&D”) includes costs related to enhancements to our currently available products and additional investments in our product and technology development pipeline. This includes personnel-related expenses, including salaries, share-based compensation and benefits for all personnel directly engaged in R&D activities, contract services, materials, prototype expenses and allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities-related costs. We expense R&D costs as incurred.
Depreciation and amortization includes depreciation of fixed assets and amortization of intangible assets that have a finite life, such as product licenses, patents and intellectual property, customer relationships and assembled workforces.
Other Income (Expense)
Other income (expense) is primarily comprised of interest expense, our share of losses from equity method investments and other nonoperating activities.
RESULTS OF OPERATIONS
The following table presents certain information about our results from continuing operations and Adjusted EBITDA (as described below) for the periods presented:
Net Revenue. For the three months ended March 31, 2026, we generated net revenue of $27.8 million compared to $23.4 million for the three months ended March 31, 2025, a 19% increase over the prior year period. Higher net revenue in the three months ended March 31, 2026 was driven by an increase of $4.4 million, or 21%, in sales of soft tissue repair products, offset by a slight decrease of $46,067, or 2%, in sales of bone fusion products. The increase in net revenue is primarily due to increased sales of soft tissue repair products, including CellerateRX Surgical and BIASURGE, supported by increased market penetration and geographic expansion, and our strategy to continue expanding and developing our independent distribution network in both new and existing U.S. markets.
Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2026 was $1.9 million compared to $1.8 million for the three months ended March 31, 2025. Higher cost of goods sold in the three months ended March 31, 2026 was related to the increase in net revenue of CellerateRX Surgical.
Gross Profit. We generated gross profit of $25.9 million for the three months ended March 31, 2026 compared to $21.6 million for the three months ended March 31, 2025, a 20% increase over the prior year period. Gross margin was approximately 93% and 92% for the three months ended March 31, 2026 and 2025, respectively. Higher gross profit and margin in the three months ended March 31, 2026 was primarily due to the net revenue growth factors above and product mix.
Selling, general and administrative. SG&A for the three months ended March 31, 2026 was $21.9 million compared to $19.1 million for the three months ended March 31, 2025. Higher SG&A in the three months ended March 31, 2026 was primarily due to increased direct sales and marketing expenses, which accounted for approximately $1.9 million of the increase, approximately $0.5 million related to compensation expense and approximately $0.2 million related to contracted services and warehousing and distribution costs.
Research and development. R&D for the three months ended March 31, 2026 was $0.8 million compared to $1.0 million for the three months ended March 31, 2025. Lower R&D for the three months ended March 31, 2026 was primarily due to the timing of product enhancement initiatives associated with our soft tissue repair products when compared to the three months ended March 31, 2025.
Depreciation and amortization. Depreciation and amortization for the three months ended March 31, 2026 was $0.6 million compared to $0.7 million for the three months ended March 31, 2025.
Other income (expense).Other expense for the three months ended March 31, 2026 was $2.2 million compared to $1.4 million for the three months ended March 31, 2025. The increase in other expense for the three months ended March 31, 2026 was primarily due to higher interest expense and fees related to the CRG Term Loan and our share of losses from equity method investments.
Net income (loss) from continuing operations. For the three months ended March 31, 2026, we had net income from continuing operations of $0.4 million, compared to a net loss from continuing operations of $0.6 million for the three months ended March 31, 2025. Net income from continuing operations for the three months ended March 31, 2026 was primarily due to net revenue growth and decreased R&D expense offset by higher SG&A and interest expense related to the CRG Term Loan.
Net income (loss) from discontinued operations. As a result of our decision to discontinue THP, the operating results of THP are reported as discontinued operations in the Consolidated Statements of Operations for all periods presented. Net income from discontinued operations for the three months ended March 31, 2026 totaled $0.1 million compared to net loss from discontinued operations of $2.9 million for the three months ended March 31, 2025.
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) from continuing operations excluding interest expense/income, provision/benefit for income taxes, depreciation and amortization, non-cash share-based compensation expense, change in fair value of earnout liabilities, asset impairment charges, share of losses from equity method investments, gains/losses on the disposal of property and equipment, executive separation costs, and legal and diligence expenses related to acquisitions, as each is applicable to the periods presented. Adjusted EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss) from continuing operations, cash flow and other measures of financial performance reported in accordance with GAAP.
We believe Adjusted EBITDA is useful to investors because it facilitates comparisons of our core business operations across periods on a consistent basis. Accordingly, we adjust for certain items when calculating Adjusted EBITDA because we believe that such items are not related to our core business operations. We do not, nor do we suggest that investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Material limitations associated with the use of such measures are that they do not reflect all costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances. We present these non-GAAP financial measures to provide investors with information to evaluate our operating results in a manner similar to how management evaluates business performance. To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information and the related non-GAAP financial measures.
For the three months ended March 31, 2026, our Adjusted EBITDA was $4.3 million compared to $2.7 million for the three months ended March 31, 2025. Higher Adjusted EBITDA in the first quarter of 2026 was primarily due to net revenue growth offset by increases in SG&A.
LIQUIDITY AND CAPITAL RESOURCES
Cash on hand at March 31, 2026 was $13.6 million, compared to $16.6 million at December 31, 2025. Historically, we have financed our operations primarily from borrowings under our credit facilities and the sale of equity securities. Based on our current plan of operations, we believe our cash on hand, when combined with expected cash flows from operations, will be sufficient to fund our growth strategy and to meet our anticipated operating expenses and capital expenditures for at least the next 12 months.
We expect our future needs for cash to include further development of our product portfolio, clinical studies, repayment of debt as it becomes due and for general corporate purposes.
Our cash outlay associated with winding down THP in the first quarter of 2026 was $0.4 million. We do not anticipate material cash spend related to winding down THP for the remainder of 2026.
On August 1, 2023, we entered into an asset purchase agreement (the “Applied Purchase Agreement”) by and among the Company, Sanara MedTech Applied Technologies, LLC (“SMAT”), The Hymed Group Corporation and Applied Nutritionals, LLC (together with The Hymed Group Corporation, the “Applied Sellers”), and Dr. George D. Petito (the “Owner”), pursuant to which SMAT acquired certain assets of the Applied Sellers and the Owner, including, among others, the Applied Sellers’ and Owner’s intellectual property, manufacturing and related equipment, inventory, rights and claims, other than certain excluded assets (the “Applied Purchased Assets”) and assumed certain Assumed Liabilities (as defined in the Applied Purchase Agreement) upon the terms and subject to the conditions set forth in the Applied Purchase Agreement. The Applied Purchased Assets were purchased for an initial aggregate purchase price of $15.25 million, consisting of (i) $9.75 million in cash (the “Cash Closing Consideration”), (ii) 73,809 shares of our common stock, with an agreed upon value of $3.0 million (the “Stock Closing Consideration”) and (iii) $2.5 million in cash, to be paid in four equal installments on each of the four anniversaries following the Closing (the “Installment Payments”). The first and second of four Installment Payments of $625,000 were made in August 2024 and August 2025, respectively.
In addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides that the Applied Sellers are entitled to receive up to an additional $10.0 million (the “Applied Earnout”), which is payable to the Applied Sellers in cash, upon the achievement of certain performance thresholds relating to SMAT’s collections from net sales of a collagen-based product currently under development. Upon expiration of the seventh anniversary of the closing, to the extent the Applied Sellers have not earned the entirety of the Applied Earnout, SMAT shall pay the Applied Sellers a pro-rata amount of the Applied Earnout based on collections from net sales of the product, with such amount to be due credited against any Applied Earnout payments already made by SMAT (the “True-Up Payment”). The Applied Earnout, minus the True-Up Payment and any Applied Earnout payments already made by SMAT, may be earned at any point in the future, including after the True-Up Payment is made.
Following the closing of the Applied Asset Purchase, we worked to advance the collagen product related to the incentive payment contemplated under the asset purchase agreement. Despite such efforts, we did not receive 510(k) clearance, a U.S. patent was not issued and no net sales were collected for this product contemplated under the asset purchase agreement and the Petito Services Agreement. After a review of the status of such initiatives, related expenses and the substantial additional expense that would need to be incurred for an uncertain result, and in light of our refocus in strategy to prioritize expanding existing product platforms, on March 31, 2026, we determined that the thresholds necessary to trigger a payment on the earnout would not be met and reduced the contingent consideration liability to zero.
On April 17, 2024 (the “Closing Date”), we, as borrowers, entered into a Term Loan Agreement (the “CRG Term Loan Agreement”) with the subsidiary guarantors party thereto from time to time (collectively “the Guarantors”), CRG Servicing LLC as administrative agent and collateral agent (the “Agent”), and the lenders party thereto from time to time, providing for a senior secured term loan of up to $55.0 million (the “CRG Term Loan”). In April 2024, our first borrowing (“the First Borrowing”) under the CRG Term Loan of $15.0 million was made to repay our then-existing loan with Cadence Bank (the “Cadence Term Loan”) and to pay certain fees and expenses related to the CRG Term Loan Agreement. The remaining proceeds of $4.5 million were distributed to us. As a result, the Cadence Term Loan was terminated and all outstanding amounts under the Cadence Term Loan were repaid in full and all security interest and other liens granted to or held by Cadence Bank were terminated and released.
On September 4, 2024, we borrowed an additional $15.5 million under the CRG Term Loan Agreement (the “Second Borrowing”). We used $5.0 million of the proceeds of the Second Borrowing for the investment in ChemoMouthpiece, LLC, and for working capital and general corporate purposes. Prior to the CRG Amendment (defined below), pursuant to the CRG Term Loan Agreement, we were entitled to one additional borrowing, which was required to occur on or prior to June 30, 2025 and be at least $5.0 million or a multiple of $5.0 million. On March 19, 2025, we and the Guarantors entered into the First Amendment to Term Loan Agreement with the Agent and the lenders party thereto from time to time (“the CRG Amendment”), which amended the CRG Term Loan Agreement to, among other things, (i) entitle us to two additional borrowings following the Second Borrowing, which borrowings were required to occur on or prior to December 31, 2025, if at all, and (ii) remove the requirement that any borrowing be in whole multiples of $5.0 million.
On March 31, 2025, we borrowed an additional $12.25 million under the CRG Term Loan Agreement (the “Third Borrowing”). The First Borrowing, the Second Borrowing and the Third Borrowing each have a maturity date of March 30, 2029 (the “Maturity Date”), unless earlier prepaid. We used a portion of the proceeds from the Third Borrowing for permitted acquisition opportunities and for working capital and general corporate purposes. After the Third Borrowing, we did not take any additional draws under the CRG Term Loan prior to the final draw date of December 31, 2025.
The CRG Term Loan bears interest at a per annum rate equal to 13.25% (subject to a 4.0% increase during an event of default), of which 8.00% must be paid in cash and 5.25% may, at our election, be deferred through the 19th quarterly Payment Date (defined below) by adding such amount to the aggregate principal loan amount, so long as no default or event of default under the CRG Term Loan Agreement has occurred and is continuing. We are required to make quarterly interest payments on the final business day of each calendar quarter following the Closing Date, commencing on the first such date to occur at least 30 days after the Closing Date (each, a “Payment Date”). Interest is payable on each Payment Date in arrears with respect to the time between each Payment Date and upon the payment or prepayment of the CRG Term Loan, ending on the Maturity Date. In addition, we are required to pay an upfront fee of 1.50% of the principal amount of the CRG Term Loan, which is payable as amounts are advanced under the CRG Term Loan on a pro rata basis. We are also required to pay a back-end fee equal to 7.00% of the aggregate principal amount advanced under the CRG Term Loan Agreement. We paid upfront fees of $225,000 on the Closing Date related to the First Borrowing, $232,500 of upfront fees on September 4, 2024 related to the Second Borrowing and $183,750 of upfront fees on March 31, 2025 related to the Third Borrowing. As of March 31, 2026, there was $46.2 million of principal outstanding under the CRG Term Loan. Although the CRG Term Loan permits certain interest to be paid-in-kind, we elected to pay all interest accrued during the three months ended March 31, 2026 in cash rather than adding such amount to the outstanding principal balance.
Subject to certain exceptions, we are required to make mandatory prepayments of the CRG Term Loan with the proceeds of certain assets sales and in the event of a change of control of the Company. In addition, we may make voluntary prepayments of the CRG Term Loan, in whole or in part, at any time. All mandatory and voluntary prepayments of the CRG Term Loan are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs on or prior to the date that is one year following the applicable borrowing (the “Borrowing Date”), an amount equal to 10.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid and (ii) if prepayment occurs one year after the applicable Borrowing Date and on or prior to two years following the applicable Borrowing Date, an amount equal to 5.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid. No prepayment premium is due on any principal prepaid if prepayment occurs two years or more after the applicable Borrowing Date.
Certain of our current and future subsidiaries, including the Guarantors, guarantee our obligations under the CRG Term Loan Agreement. As security for our obligations under the CRG Term Loan Agreement, on the Closing Date, we and the Guarantors entered into a security agreement with the Agent pursuant to which we and the Guarantors granted to the Agent, as collateral agent for the lenders, a lien on substantially all of our and the Guarantors’ assets, including intellectual property (subject to certain exceptions).
The CRG Term Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on our and the Guarantors’ abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions above certain thresholds, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the CRG Term Loan Agreement contains the following financial covenants requiring us and the Guarantors in the aggregate to maintain:
As of March 31, 2026, we were in compliance with all debt covenants.
BMI Investment
On January 16, 2025, we entered into a Licensing and Distribution Agreement (the “BMI License Agreement”) with Biomimetic Innovations Limited, a privately-held medical device company headquartered in Shannon, Co. Clare Ireland (“BMI”), pursuant to which we acquired the exclusive U.S. marketing, sales and distribution rights to OsStic Synthetic Injectable Structural Bio-Adhesive Bone Void Filler (“OsStic”), as well as an adjunctive internal fixation technology featuring novel delivery to promote targeted application of OsStic (“ARC” and together with OsStic, the “Products”), for use in the treatment of a wound or injury caused by a traumatic incident.
Pursuant to the BMI License Agreement, we were appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distribute and sell the BMI Products for trauma indications inside the United States and its territories for an initial five-year term, which may be automatically renewed for successive two-year periods at our discretion, provided that we are in compliance with our obligations thereunder (the “BMI Term”). From January 16, 2025 until October 13, 2025, we had an option to negotiate exclusive distribution rights for the BMI Products in additional fields and/or additional territories on substantially the same terms as those set forth in the BMI License Agreement. On June 18, 2025, pursuant to the BMI License Agreement, we exercised our option for exclusive distribution rights of the BMI Products for sports medicine, spine, arthroplasty, and craniomaxillofacial indications within the United States and its territories. On October 1, 2025, we and BMI entered into a first amendment to the BMI License Agreement to extend the option period through May 31, 2026 to provide more time to negotiate and finalize the terms of the additional fields in the contract territory.
The BMI License Agreement requires that we pay BMI royalties of 3% of OsStic Net Sales (as defined in the BMI License Agreement). Pursuant to the BMI License Agreement, we and BMI agreed to negotiate the applicable percentage of net sales for ARC at a future date. The BMI License Agreement also requires that we pay BMI annual minimum royalty payments of $100,000, $200,000, and $300,000 for the first, second and third years, respectively, following the receipt of first regulatory approval for the marketing and sale of a Product (as defined in the agreement). No royalties have been paid under this agreement as of March 31, 2026.
In connection with the BMI License Agreement, on January 16, 2025, we entered into a Share Subscription and Shareholders’ Agreement (the “Subscription Agreement”), by and among us, The Russell Revocable Living Trust, BMI and the existing shareholders of BMI, pursuant to which we made an initial cash investment in BMI totaling approximately $3.1 million (€3.0 million). The initial cash investment and our previously disclosed convertible loan to BMI of $1.1 million (€1.0 million) were converted into 8,230 ordinary shares of BMI, constituting approximately 6.67% of the outstanding equity of BMI as of January 16, 2025. Pursuant to the Subscription Agreement, we also agreed to contribute an additional €4.0 million to BMI through a series of capital contributions in exchange for 8,230 additional ordinary shares of BMI upon the achievement of certain development, clinical, and regulatory milestones expected to occur at various points during 2025 and 2026. As of June 30, 2025, BMI had achieved two of such milestones, and upon settlement, we paid BMI $2.4 million (€2.0 million) on July 1, 2025 in exchange for 4,116 additional ordinary shares of BMI, bringing our total ownership of BMI’s outstanding equity to approximately 9.678% as of July 1, 2025. In September 2025, BMI achieved the final three milestones, and upon settlement, we paid BMI $2.4 million (€2.0 million) on October 2, 2025 in exchange for 4,114 additional ordinary shares of BMI, bringing our total ownership of BMI’s outstanding equity to approximately 12.499% for a total cash investment of $9.0 million (€8.0 million) as of October 2, 2025. In March 2026, additional ordinary shares of BMI were sold to other outside investors, thereby decreasing our ownership of BMI to approximately 12.141% as of March 31, 2026.
Cash Flow Analysis
For the three months ended March 31, 2026, net cash used in operating activities was $2.5 million compared to net cash used in operating activities of $2.0 million for the three months ended March 31, 2025. The increase in cash used in operating activities during the three months ended March 31, 2026 was primarily due to the timing of commissions payments, higher cash interest expense resulting from a larger outstanding debt balance compared to the prior-year period and the absence of paid-in-kind interest.
For the three months ended March 31, 2026, net cash used in investing activities was $43,772 compared to $5.2 million used in investing activities for the three months ended March 31, 2025. Cash used in investing activities during the three months ended March 31, 2026 primarily related to leasehold improvements and equipment.
For the three months ended March 31, 2026, net cash used in financing activities was $0.5 million compared to $12.0 million provided by financing activities for the three months ended March 31, 2025. Cash used in financing activities during the three months ended March 31, 2026 primarily related to net settlements of equity-based awards.
Refer to Note 3 to the consolidated financial statements, “Discontinued Operations,” for the operating cash flow information related to the discontinuation of THP.
MATERIAL TRANSACTIONS WITH RELATED PARTIES
In July 2021, we entered into an asset purchase agreement with Rochal, a related party. Concurrent with the Rochal asset purchase, we entered into a consulting agreement with Ann Beal Salamone pursuant to which Ms. Salamone agreed to provide us with consulting services with respect to, among other things, writing new patents, conducting patent intelligence and participating in certain grant and contract reporting. In consideration of the consulting services to be provided to us, Ms. Salamone is entitled to receive an annual consulting fee of $177,697, with payments to be issued once per month. The consulting agreement had an initial term of three years. Effective July 13, 2024, the consulting agreement with Ms. Salamone was amended to provide that the initial term shall be automatically renewed for successive one-year terms for up to three successive years unless earlier terminated by either party without cause at any time, provided that the terminating party provides 90 days advance written notice of termination. Ms. Salamone is a director of the Company and is a significant shareholder and the current chair of the board of directors of Rochal.
In March 2023, we entered into a Transaction Advisory Services Agreement (the “Catalyst Services Agreement”) effective March 1, 2023 with The Catalyst Group Inc. (“Catalyst”), a related party. Pursuant to the Catalyst Services Agreement, Catalyst, by and through its directors, officers, employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the “Covered Persons”), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operational and strategic planning, relationship access and corporate development services for us in connection with any merger, acquisition, recapitalization, divestiture, financing, refinancing, or other similar transaction in which we may be, or may consider becoming, involved, and any such additional services as mutually agreed upon in writing by and between Catalyst and us (the “Catalyst Services”).
Pursuant to the Catalyst Services Agreement, we agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any of the Covered Persons at a rate no more than a rate consistent with industry practice for the performance of services similar to the Catalyst Services, as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliated third parties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Catalyst Services rendered under the Catalyst Services Agreement, with all reimbursements being contingent upon the prior approval of the Audit Committee of our Board of Directors. Pursuant to the Catalyst Services Agreement, costs incurred were $850 and $20,000 for the three months ended March 31, 2026 and 2025, respectively.
Receivables and Payables
We had no outstanding related party receivables at March 31, 2026 and December 31, 2025. We had outstanding related party payables totaling $15,847 at March 31, 2026. The related party payables balance for December 31, 2025 has been reclassified and is included in accounts payable in the accompanying Consolidated Balance Sheets.
IMPACT OF INFLATION AND CHANGING PRICES
Inflation and changing prices have not had a material impact on our historical results of operations. We do not currently anticipate that inflation and changing prices, including the impacts of tariffs, will have a material impact on our future results of operations.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in these estimates could materially affect our consolidated financial position, results of operations or cash flows. Significant items that are subject to such estimates and assumptions include revenue and expense accruals, the fair value measurement of assets and liabilities and the allocation of purchase price to the fair value of assets acquired. Our critical accounting estimates have not significantly changed since December 31, 2025 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officers (whom we refer to in this periodic report as our “Certifying Officers”), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of March 31, 2026, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - Other Information
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in claims and legal actions that arise in the ordinary course of business. To our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.
ITEM 1A. RISK FACTORS
There were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. For more information concerning our risk factors, please see “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
There were no sales of unregistered securities during the quarter ended March 31, 2026 that were not previously reported on a Current Report on Form 8-K.
Issuer Purchases of Equity Securities
The following table summarizes our share repurchases during the three months ended March 31, 2026:
Total Number
of Shares
Purchased (1)
Average Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly Announced
Plans or
Programs
Maximum Number
(or approximate
dollar value) of
Shares that may
yet be Purchased
Under the Plans
or Programs
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended March 31, 2026, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted,modified, or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408(a) of Regulation S-K).
ITEM 6. EXHIBITS
The exhibits listed below are filed as a part of this report or incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.