SMTI 10-K & 10-Q changes, risk factors and insider trading

We have had a history of losses, which may continue as we expand our investmentselling in THP.efforts.

We have incurred net losses in most years since we began our current operations in 2004. We plan to continue making significant investments in our THPsales force operatingand segment,clinical programs, which willsubstantially substantially increase our operating expenses. Consequently, we will need to continue our revenue growth to become profitable in future periods. If we fail to achieve profitability, our stock price may decline, and you may lose part or all of your investment.

Our ability to successfully implement our business plan and develop, market and sell our surgical,surgical wound and skincare products, servicesproducts and technologies requires an effective plan for managing our future growth. Future expansion efforts will be expensive and may strain our internal operating resources. To manage future growth effectively, we must maintain and enhance our financial and accounting systems and controls, integrate new personnel and manage expanded operations. If we do not manage growth properly, it could harm our operating results and financial condition.

If we are unable to compete within our markets or our products, services and technologiesproducts do not gain market acceptance, our financial condition and operating results could suffer.

Competition from other medical device companies is significant significant, and we could be significantly affected by new product introductions and other activities of market participants. We compete with other companies in acquiring rights to products or technologies from third-party developers. In addition, many specialized products companies have formed collaborations with large, established companies to support research, development and commercialization of surgical wound care products which may be competitive with ours. Academic institutions, government agencies and other public and private research research organizations are also conducting research activities and may commercialize surgical wound care products on their own or through joint joint ventures. Although our products have performed well in customer evaluations, we are a relatively unknown brand in a market dominated by companies with extensive product lines and large customer bases. We may not, even with more efficacious products, be able to secure contracts and achieve significant growth with large national accounts.

Several factors may limit the market acceptance of our products, services and technologies, including the timing of regulatory approvals and market entry relative to competitive products, services and technologies, the availability of alternative products, services and technologies, the price of our products, services and technologiesproducts relative to alternative products, services and technologies, the availability of third-party reimbursementproducts and the extent of marketing efforts by third-party distributors or agents that we retain. Our products, services or technologiesproducts may not receive market acceptance in a commercially viable period of time, if at all. Furthermore, our competitors may develop products,products services or technologies that are more effective or achieve greater market acceptance than those being developed by us, which would render our products, services and technologiesproducts less competitive or obsolete.

The presence of competition in ourthe surgical market may lead to pricing pressure which would make it more difficult to sell our products, services and technologiesproducts at a profitable price or may prevent us from selling our products at all. Our failure to compete effectively would have a material adverse effect on our business.

In the ordinary course of our business, we use networks to collect and store sensitive data, including intellectual property, proprietary business information and important information of our customers, suppliers and business partners, as well as personally identifiable informationPII of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in the loss of existing customers, difficulty in attracting new customers, backlash from negative public relations, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties. Further, such access, disclosure or loss may cause disruption of our operations and the servicesoperations, we provide to customers, damage to our reputation, and cause a loss of confidence in our products and services,products, which could adversely affect our business.

We have programs, processes and technologies in place to prevent, detect, contain, respond to and mitigate security related threats and potential incidents. We undertake considerable ongoing improvements to our systems, connected devices and information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards. Because the techniques used to obtain unauthorized access change frequently and can be difficult to detect, anticipating, identifying or preventing these intrusions or mitigating them if and when they occur,occur may be challenging.

While we expect to have the capability to develop certain of our pipeline in-house, we do not currently own any facility that may be used as a manufacturing and processing facility, and therefore rely on our research and development partners from whom we license most of the products we currently commercialize to design, manufacture and supply certain of our products.

We and our research and development partners responsible for manufacturing certain of our products and their contract manufacturers are obliged to operate in accordance with FDA’s current good manufacturing practices (“cGMP”), current good tissue practices (“cGTP”),cGTP, and the QSR,QMSR, as applicable, as as well as other regulations applicable to medical product manufacturers. The manufacture of regulated medical products in compliance with with cGMP, cGTP, and the QSR,QMSR, as applicable, requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of medical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including product stability and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory requirements, other federal and state regulatory requirements and foreign regulations. If we or our research and development partners or their contract manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to commercialize our products would be jeopardized.

We and the manufacturers of certain of our products may be unable to comply with applicable FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of regulated products. We have little control over the manufacturers’ compliance with these regulations and standards. Our failure or a failure of any of our current or future research and development partners or their contract manufacturers to establish and follow cGMP, cGTP, and the QSR,QMSR, as applicable, and to document their adherence to such practices may lead to significant delays in obtaining marketing authorization of future products or the ultimate launch of products. Failure by us or our current or future partners or manufacturers to comply with applicable regulations could also result in sanctions being imposed on us or our partners, including fines, injunctions, civil penalties, failure of the government to grant marketing authorization, delays, suspension or withdrawal of authorization, seizures or recalls of products, operating restrictions, and criminal prosecutions. If the safety of any product supplied is compromised due to the manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to successfully commercialize our products. Any of these factors could cause a delay of commercialization of our products, entail higher costs or impair our reputation.

Our pipeline contains products and product candidatesCertain for mitigation of opportunistic pathogens and biofilm, wound re-epithelialization and closure, necrotic tissue debridement, and cell compatible substrates. We may also decide to develop other product candidates. Certain of our research and development programs are in developmental stages. One or more of our product candidates may fail to meet safety and efficacy standards in human testing, even if those product candidates are found to be effective in animal studies. To develop and commercialize product candidates, we must provide the FDA and foreign regulatory authorities with human clinical and nonclinical animal data that demonstrate adequate safety and effectiveness. To generate this data, we will have to subject our product candidates to significant additional research and development efforts, including extensive nonclinical studies and clinical testing. The clinical trials of our product candidates will be subject to extensive and rigorous review and regulation by the FDA and may be considered insufficient to support clearance or approval of our product candidates. Our approach to product discovery may not be effective or may not result in the development of any product. It can take several years for a product to be cleared or approved and we may not be successful in bringing any therapeuticproduct candidates to the market. A new product candidate may appear promising at an early stage of development or after clinical trials and never reach the market, or it may reach the market and not sell, for a variety of reasons. For example, the product may:

If our delivery platform technologies or product development efforts fail to generate product candidates that lead to the successful development and commercialization of products, or if the product candidates we have (or may in the future) acquired are not approved or cleared for commercialization in the United States or, otherwise experience adverse regulatory action, our business and financial condition will could be materially adversely affected.

Healthcare practitioners play a significant role in determining the course of a patient’s treatment and, ultimately, the type of products, if any, that will be used to treat the patient. As a result, our commercial success is dependent on our ability to educate practitioners on the use of our products in both surgical and post-acute care settings. Acceptance and adoption of our products in our markets depends on educating healthcare practitioners practitioners as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products, including potential potential comparisons to our competitors’ products, and on training healthcare practitioners in the proper application of our products. If If we are not successful in convincing healthcare practitioners of the merits and advantages of our products compared to our competitors’ products, they may not use our products, and we will be unable to increase our sales and sustain growth or profitability.

Failure of any third-party assessmentsclinical study to demonstrate desired outcomes in proposed endpoints could have a negative impact on our business performance.

Part of our success depends on our and/or our research development partners’ ability to protect proprietary rights to technologies used in certain of our products. We and our research development partners rely on patents, copyrights, trademarks and trade secret laws to establish and maintain proprietary rights in our technology and products. However, these legal means afford only limited protection and may not adequately protect our and/or our research development partners’ rights or permit us to gain or keep a competitive advantage. Patents and patent applications for the products we have may not be sufficient or broad enough to prevent competitors from introducing similar products into the market. Our and/or our research development partners’ patents or attempts to enforce them may not be upheld by the courtscourts, and the damages or other remedies awarded if we were to prevail in upholding such patents may not be commercially meaningful. Efforts to enforce any of our and/or our research development partners’ proprietary rights could be time-consuming and expensive, which could adversely affect our business and prospects and divert management’s attention. There can be no assurance that our and/or our research and development partners’ proprietary rights will not be challenged, invalidated or circumvented or that such rights will in fact provide competitive advantages to us.

Furthermore, the issuance of a patent, while presumed valid and enforceable, is not conclusive as to its validity or its enforceabilityenforceability, and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. In addition, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees and current employees.

Patent rights are territorial, and patent protection extends only to those countries where we have issued patents. Filing, prosecuting and defending patents on our products and product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less or more extensive than those in the United States, and their litigation processes differ. Competitors may successfully challenge or avoid our patents or manufacture products in countries where we have not applied for patent protection. Changes in the patent laws in the United States or other countries may diminish the value of our patent rights. As a result of these and other factors, the scope, validity, enforceability, and commercial value of our and/or our research development partners’ patent rights are uncertain and unpredictable.

The patent positions of life sciences companies, including our and/or our research development partners’ patent positions, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we and our research development partners may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented. A third-party may submit prior patents, or we may become involved in opposition, derivation, reexamination, inter partes review, post-grant review, supplemental examination, or interference proceedings challenging our patent rights or the patent rights of our licensors or development partners. The costs of defending or enforcing our proprietary rights in these proceedings can be substantial, and the outcome can be uncertain. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, or reduce our ability to manufacture or commercialize products. Furthermore, if the scope or strength of protection provided by our patents and patent applications is threatened, it could discourage companies from collaborating with us to license, develop or commercialize current or future products. The ownership of our proprietary rights could also be challenged.

Our and/or our research development partners’ ability to enforce our respective patent rights depends on the ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product, particularly in litigation in countries other than the United States that do not provide an extensive discovery procedure.

CellerateRX Surgical ishas notno currently protected by any pendingcomprehensive patent application or any unexpired patent.protection. CellerateRX Surgical may be subject to competition from the sale of substantially equivalent equivalent products that could adversely affect our business and operations.

Our CellerateRX Surgical products, from which weThe derive a substantial majority of our net revenue, have no patent protection, and therefore, in order to continue to obtain commercial benefits from CellerateRX Surgical, we will rely on product manufacturing trade secrets, know-how and related nonpatent intellectual property, such as potential regulatory rights that would require various resources to separately obtain. The effect of CellerateRX Surgical’s lack of comprehensive patent protection depends, among other things, upon the nature of the market and the position of our products in the market from time to time, the size of the market, the complexities and economics of manufacturing a competitive product and applicable regulatory approval requirements. In the event that competition develops substantially equivalent products, this competition could have a material adverse effect on our business, financial condition and operating results. Trade secret protection is effective only against wrongful acquisition, use or disclosure of confidential information. A competitor can avoid a claim of trade secret misappropriation by showing independent development without use of a trade secret owner’s information, however, this typically requires some time, effort and financial resources to develop independently. The entrance into the market of a product substantially equivalent to CellerateRX Surgical may erode our product’s market share, which may have a material adverse effect on our business, financial condition and results of operations.

We may not have identified all patents, published applications or published literature that affect our business either by blocking our ability to commercialize our products or R&D candidates, by preventing the patentability of one or more aspects of our products or R&D candidates to us or our licensors, or by covering the same or similar technologies that may affect our ability to market our products and R&D candidates. For example, we (or the licensor of a product or R&D candidate to us) may not have conducted a patent clearance search sufficient to identify potentially obstructing third party patent rights. Moreover, patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the United USPTO,States Patent and Trademark Office, for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside of the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. We cannot be certain that we or our licensors were the first to invent, or the first to file, patent applications covering our products and candidates. We also may not know if our competitors filed patent applications for technology covered by our pending applications or if we were the first to invent the technology that is the subject of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents.

Government regulation by the FDA and similar agencies in other countries is a significant factor in the development, manufacturing and marketing of our products and in the acquisition or licensing of new products. Complying with government regulations is often time consumingtime-consuming and expensive and may involve delays or actions adversely impacting the marketing and sale of our current or future products.

In addition, private consumer and competitor litigation tends to follow FDA enforcement actions and publications, such that a company that is targeted by the FDA or another regulatory body is also at an increased risk of facing civil litigation (often in the form of class action actionslawsuits).

The manufacturing facilities we or our research and development partners use (and may use) to make any of our FDA-regulated products are or may become subject to periodic review and inspection by the FDA.FDA and similar state regulatory authorities. If a previously unknown problem with a product or a manufacturing or laboratory facility used or contracted by us or one of our research and development partners is discovered, the FDA or similar state regulatory authorities may impose restrictions on that product or on the manufacturing facility, including requiring us and/or our research and development partner to withdraw the product from the market. Any changes to an approved or cleared product, including the way it is manufactured or promoted, often requires FDA review and separate approval or clearance before the product, as modified, may be marketed. In addition, for products we develop in the future, we and our contract manufacturers may be subject to ongoing FDA requirements for submission of safety and other post-market approval information. If we or our contract manufacturers violate regulatory requirements at any stage, whether before or after marketing approval or clearance is obtained, we may be fined, be forced to remove a product from the market or experience other adverse consequences, which would materially harm our financial results. Additionally, due to limitations imposed on us by the scope of the cleared or approved indications or intended use of our products and by FDA and Federal Trade Commission (“FTC”) regulations relating to promotional claims, we may not be able to obtain the labeling claims necessary or desirable for product promotion.

Both before and after a product is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the FTC, and similar U.S. and foreign regulations governing the product labeling and advertising, distribution, sale and marketing of our products. Medical devices and biological products may only be marketed or promoted for the uses and indications set forth in the approved or cleared product labeling. A number of enforcement actions have been taken against companies that promoted products for “off-label” uses (i.e., uses that are not described in the approved or cleared labeling), including actions alleging that claims submitted to government healthcare programs for reimbursement of products that were promoted for “off-label” uses are fraudulent in violation of the Federal False Claims Act or other federal and state state statutes and that the submission of those claims was caused by off-label promotion. The failure to comply with prohibitions on off-label off-label promotion can result in significant monetary penalties, revocation or suspension of a company’s business license, suspension of of sales of certain products, product recalls, civil or criminal sanctions, exclusion from participating in federal healthcare programs, or other enforcement actions. In the United States, allegations of such wrongful conduct could also result in a corporate integrity agreement with the U.S. government that imposes significant administrative obligations and costs.

The developing, testing, manufacturing, marketing and selling of medical devices is subject to extensive regulation by governmental authorities in the United States and other countries. The process of obtaining regulatory clearance and approval of certain medical technology products is costly and time consuming.time-consuming. Inherent in the development of new medical products is the potential for delay because product testing, including clinical evaluation, is typically required, especially for drugs, biologics and high-risk devices, before such products can be approved for human use. With respect to medical devices, such as those that we currently market, before a new medical device, or a new indicated use of, or claim for, an existing product can be marketed (unless it is a Class I device), it must first receive either premarket clearance under Section 510(k) of the FDCA or approval of a PMA from the FDA, or be reclassified and receive marketing authorization through the de novo classification process, unless an exemption applies.

In the 510(k)-clearance clearance process, the FDA must determine that the proposed device is “substantially equivalent” to a Class I or II device legally on the market, known as a “predicate” device, with respect to intended use, technology, safety and effectiveness to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence for certain device types. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device for its intended use based, in part, on extensive data including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. If a device is novel and there is no appropriate predicate to which the applicant can demonstrate substantial equivalence, the device will be automatically classified as a Class III device and require approval through the PMA process prior to commercialization, unless the applicant submits a de novo classification request demonstrating that the novel device should be reclassified into Class I or II. Demonstrating that a novel device should be reclassified to Class I or II from Class III typically requires extensive information and data on the benefits and risks of the device, including performance data and frequently data from one or more clinical studies. The 510(k), PMA and de novo classification approval processes can be expensive and lengthy.

New government regulations may be enacted and changes in FDA policies and regulations and,and their interpretation and enforcement,enforcement could prevent or delay regulatory clearance or approval of new products. WeWhile we believe we understand the current laws and regulations to which our products are and will be subject, we cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation orlegislation, administrative action,action or changes in interpretation of current laws and regulations, either in the United States or abroad. Therefore, we do not know whether we or our research and development partners willwould be able to continue to comply with such regulations or whether the costs of such compliance willwould have a material adverse effect on our business. Changes could, among other things, require different labeling, monitoring of patients, interaction with physicians, education programs for patients or physicians, curtailment of necessary supplies, or limitations on product distribution. These changes, or others required by the FDA could have an adverse effect on our business, and specifically, on the sales of affected products. The evolving and complex nature of regulatory science and regulatory requirements, the broad authority and discretion of the FDA and the generally high level of regulatory oversight results in a continuing possibility that from time to time, we will be adversely affected by regulatory actions despite ongoing efforts and commitment to achieve and maintain full compliance with all regulatory requirements. If we or our research and development partners are not able to maintain regulatory compliance, we may not be permitted to market our products and our business would suffer.

Disruptions in the FDA and other government agencies caused by leadership changes, funding shortages, or other legal or political pressures could hinder their ability to hire and retain key personnel, provide regulatory clarity, or otherwise prevent new products and services from being developed or commercialized in a timely manner or hinder our ability to continue marketing existing commercial products, which could negatively impact our business.

Further, the recent presidential election and congressionalChanges seat turnover may result in increased regulatory and economic uncertainty, including the spending priorities of the new U.S. presidential administration and Congress and what challenges budget reductions will present for us and our industry generally. For example, on January 20, 2025, President Trump announced an executive order establishing the “Department of Government Efficiency” to reform federal government processes and reduce expenditures. Changes in federal policy by the executive branch and regulatory agencies may occur over time through the new presidential administration’s and/or Congress’s policy and personnel changes, which could lead to changes involving our industry. However, the nature and timing of such potential changes remain highly uncertain. At this time, it is unclear whether and how any future changes or uncertainty surrounding future changes will adversely affect our business, but material adverse effects are possible.

We rely on our research and development partners, from whom we license most of the products we currently commercialize, to determine the appropriate classification for each such product and to comply with applicable regulations related to obtaining the proper marketing authorization. With respect to each medical device product we license, our respective research and development partner designs the product and determines whether the device should be classified as a Class I, II, or III device and the appropriate FDA marketing authorization pathway to pursue (i.e., 510(k), PMA or de novo classification). In addition, we rely on our research and development partners to determine whether specific legal or regulatory definitions or exemptions apply to particular medical products, which individually may be subject to FDA oversight as a device, drug, biologic or human cellular or tissue-based product.HCT/P. The FDA has broad regulatory authority to interpret and enforce the laws and regulations that govern medical products in commercial distribution, and any adverse determination by the FDA relating to one of our licensed products could require significant cost and effort to comply.

Certain devices that we market under a license (or that we have acquired or have, otherwise, obtained commercialization rights in the United States) have been updated or modified since their initial 510(k) clearance. Depending on the nature of the updates or modifications made to a 510(k)-cleared cleared device, the FDA may require the submission (and clearance) of a new 510(k). More specifically, any modification that could significantly affect the cleared device’s safety or effectiveness, or that would constitute a significant change in its intended use, will require a new 510(k) clearance. The FDA requires device manufacturers to make the initial determination as to whether a proposed modification to a cleared device requires a new 510(k) submission, but the FDA can review any such decision not to submit a new 510(k) (if it becomes aware of the modifications during an inspection or otherwise) and may disagree with the manufacturer’s determination that the given modification(s) did not require new clearance. If the FDA finds that a manufacturer has improperly marketed a modified device (for which the FDA has determined that a new 510(k) is required) under the original device’s 510(k), the FDA may mandate that the manufacturer cease marketing and/or recall the modified device until the requisite clearance is obtained, in addition to one or more other enforcement actions. The FDA may disagree with our partners’ decisions not to submit new 510(k) notifications for those of our 510(k)-cleared cleared devices that have been updated or modified since their initial clearance, in which case, we may be subject to a wide range of FDA enforcement actions, including, but not limited to, warning letters, fines, and other penalties, and our business will be adversely affected, as we would likely be required to cease commercialization (and, possibly, conduct a recall) of the modified product(s) at-issue and may incur additional expenses in connection with the preparation and submission of a new 510(k).

Because of the breadth of these laws and the narrow scope of the statutory or regulatory exceptions and safe harbors available, our business activities could be challenged under one or more of these laws. Relationships between medical product manufacturers and health care providers are an area of heightened scrutiny by the government. We engage in various activities, including the conduct of speaker programs to educate physicians, the provision of reimbursement advice and support to customers, and the provision of customer and patient support services, that have been the subject of government scrutiny and enforcement action within the medical device industry.

We Our and/or our research and development partners’ use of PII, including health information, is subject to federal and state privacy and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could have a material adverse effect on our client base, business, financial condition and results of operations.

Numerous state and federal laws and regulations, including HIPAA, govern the collection, dissemination, use, privacy, confidentiality, security, availability and integrity of PII, including protected health information. HIPAA establishes a set of basic national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services, which likely includes us. HIPAA requires healthcare providers and business associates to develop and maintain policies and procedures with respect to PHI that isare used or disclosed, including the adoption of administrative, physical, and technical safeguards to protect such information. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims. HIPAA imposes mandatory penalties for certain violations. HIPAA also authorizes each state’s Attorney General to file suit on behalf of their residents. Courts will be able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities or business associates for compliance with the HIPAA Privacy and Security Standards. HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made without unreasonable delay and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site.website. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

Because of the extreme sensitivity of the PII we and/or our partners may store and transmit, the security features of our technology platforms are very important. If our security measures, some of which may be managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive client and patient data, including HIPAA-regulated PHI. As a result, our reputation could be severely damaged, adversely affecting client or investor confidence. Clients may curtail their use of or stop using our products and services,products, which would cause our business to suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant costs for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to clientclients or other business partners in an effort to maintain our business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses, our coverage may not be sufficient to compensate for all liability.

In particular, companies involved in the manufacture of medical products are subject to laws and regulations intended to ensure that medical products that will be used in patients are safe and effective, and, specifically, that they are not adulterated or misbranded, that they are properly labeled, and have the identity, strength, quality and purity thatof which they are represented to possess. Further, companies involved in the research and development of medical products are subject to extensive laws and regulations intended to protect research subjects and ensure the integrity of data generated from clinical trials and of the regulatory review process. Any misconduct in any of these areas, whether by our own employees or by contractors, vendors, business associates, consultants, or other entities acting as our agents, could result in regulatory sanctions, criminal or civil liability and serious harm to our reputation. Although we have a comprehensive compliance program designed to ensure that our employees’, CRO partners’, principal investigators’, consultants’, and commercial partners’ activities and interactions with healthcare professionals and patients are appropriate, ethical, and consistent with all applicable laws, regulations, guidelines, policies and standards, it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, or our CRO partners, principal investigators, consultants, or commercial partners, those actions could have a significant impact on our business, including the imposition of significant fines, and other sanctions that may materially impair our ability to run a profitable business.

Third party Third-party payors, governmental authorities, and other applicable stakeholders have developed, and are continuing to develop, increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been numerous legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In particular, the Affordable Care Act was enacted in the United States in 2010, and various analogous or similarly intended state laws, as well as a number of executive, legislative, and judicial challenges have followed in the years since. There remains substantial uncertainty and continued evolution with regard to healthcare reform measures, and we cannot predict the effect that any current or future such measure will have on our business. Complying with any new or amended legislation, policies, rulings, or other relevant healthcare cost-containment and/or transparency requirements may be time-intensive and expensive, which could have a material adverse effect on our business.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect the demand for some or all of the products we currently market or may commercialize in the future, if any, including: our ability to receive or set a price that we believe is fair for our products; our ability to generate revenue and achieve or maintain profitability; the level of taxes that we are required to pay; and the availability of capital. We expect that existing healthcare reform legislation, and any similar measures implemented in the future, will result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the prices that we are able to charge or receive for our products and/or may create additional challenges in relation to reimbursement/coverage. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our product candidates, if approved.

We are a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical,surgical chronic wound and skincare markets.market. Our products, services and technologiesproducts are designed to achieve our goal of providing better clinical outcomes at a lower overall cost for patientshealthcare regardlesssystems. of where they receive care. Through our two operating segments, Sanara Surgical and Tissue Health Plus (“THP”), weWe strive to be one of the most innovative and comprehensive providers of effective surgical, wound and skincaresurgical solutions and are continually seeking to expand our offerings for patients requiring surgical treatments across the entire continuum of care in the United States.

Our Sanara Surgical segment We primarily marketsmarket and sells sell soft tissue repair and bone fusion products for use in the operating room or other sterile environments. Sanara Surgical’sOur soft tissue repair products include, among other products, our lead product, CellerateRX Surgical Activated CollagenPowder (“CellerateRX Surgical”), a hydrolyzed collagen that supports a local environment for surgical sites to aidaids in the naturalmanagement woundof healingsurgical process, wounds, and BIASURGE Advanced Surgical Solution (“BIASURGE”), a sterile no-rinse, advanced surgical solution used for wound irrigation. Sanara Surgical’sOur 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, and ALLOCYTE Plus Advanced Viable Bone Matrix (“ALLOCYTE Plus”), a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers.

Our Sanara Surgical segment We also includesutilize an in-house research and development team, Rochal Technologies,Technologies. withWe anare extensiveadvancing a strong pipeline of innovativenext-generation products that undersupports development.and extends our surgical strategy of “Prepare, Promote and Protect.”

Summary of Our Product,Key Service and Technology OfferingsProducts and Development Programs

Our Sanara Surgical segment marketsWe market and distributes surgical,distribute wound and skincaresurgical products to physicians,surgeons hospitals,at clinics,hospitals and post-acutesurgical care settings.centers. Our products are primarily sold in the U.S. surgical tissue repair and advanced wound care markets.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. We are constantly seeking long-term strategic partnerships with a focus on products that improve outcomes at a lower overall cost.

CellerateRX Surgical is a medical hydrolysate of 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 powder is sterilized, packaged and designed specifically for use in the operating room or other sterile environment.room. CellerateRX Surgical products areis primarily purchased by hospitals and ambulatory surgical centers for use by surgeons onto surgical wounds. The majority of CellerateRX Surgical products are used for a variety oftreat surgical wounds, including those associated with orthopedic, spine, traumaspine and oncologictrauma procedures. Additional surgical wounds that mayoften benefit from the use of CellerateRX Surgical include general, vascular, plastic/reconstructive, cardiovascular, gynecologic, urologic, vascular and plastic/reconstructiveurologic 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. 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). 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 whothat suffer exorbitant costs for readmission of these patients within 90 days of surgery.

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. First sales of BIASURGE occurred in November 2023.

Other Surgical Products

InOn December December20, 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. Pursuant toUnder 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 December 31, 2025.

On April 17, 20242024, (the “Closing Date”), we, as borrower, entered into a Term Loan Agreement (the “CRG Term Loan Agreement”) with the subsidiary guarantors party party thereto from time to time (collectively, the “Guarantors”), CRG Servicing LLC as administrative agent and collateral agent 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 million (the “CRG Term Loan”). In April 2024, our first borrowing (the “First Borrowing”) under the CRG Term Loan of $15.0 million was used to repay our then-existing loan with Cadence Bank (the “Cadence Term Loan”) and to pay fees and expenses related to the CRG Term Loan Agreement. In September 2024, we borrowed an additional $15.5 million under the CRG Term Loan (the “Second Borrowing”), a portion of the proceeds of which were used for theour investment in ChemoMouthpiece, LLC (“CMp”), and describedfor below.working capital and general corporate purposes. On March 19, 2025, we and the Guarantors entered into the First Amendment to the Term Loan Agreement with the Agent and the lenders party thereto from time to time (the “CRG Amendment”) to, among other things (i) entitle us to provide for up to two additional borrowings following the Second Borrowing under the CRG Term Loan, which mustadditional borrowings were required to occur on or prior to December 31, 2025, if at all.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”), a portion of the proceeds of which were used for permitted acquisition opportunities, such as the CarePICS Acquisition (defined below) in April 2025, and for working capital and general corporate purposes. 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. 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.

On January 16, 20252025, (the “Execution Date”), we entered into a Licensing and Distribution Agreement (as amended, the “BMI License Agreement”) with Biomimetic Innovations InnovationLimited Limited, (“BMI”), a privately-held medical device company headquartered in Shannon, Co. Clare Ireland (“BMI”),Ireland, 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 “BMI Products”), for use in the treatment of a wound oran 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 term may be automatically renewed for successive two-year periods at our discretion, provided that we are in compliance with our obligations thereunderthereunder. For more information regarding the BMI License Agreement and BMI Subscription Agreement (defined below), see the “BMILiquidity Termand Capital Resources”). section below.

Our revenue is derived primarily from sales of our soft tissue repair and bone fusion products to hospitals and othersurgical acute care facilities.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, andand, 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 customercustomer, and our product is received by the customer. Prior to 2024, we recognized royalty revenue from a development and licensing agreement with BioStructures, LLC. Under the terms of the development and license agreement, royalties of 2% were recognized on sales of products containing our patented resorbable bone hemostasis. The minimum annual royalty due to us was $201,000 per year throughout the life of the patent, which expired in 2023.

Revenue streams from product sales and royalties are summarized below for the yearsperiods ended December 31, 2024 and 2023.presented:

Cost of goods sold consists primarily of the acquisition costs from the manufacturers of our licensed products, 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.

Research and development (“R&D”) includes costs related to enhancements to our currently available products and additional investments in our product, servicesproduct and technologies technology development pipeline. This includes personnel-related expenses, including salaries, share-based compensation and benefits for all personnel directly engaged in R&D activities, contractedcontract services, materials, prototype expenses and allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities relatedfacilities-related costs. We expense R&D costs as incurred. We generally expect that R&D will increase as we continue to support product enhancements and to bring new products to market.

Change in fair value of earnout liabilities represents our measurement of the change in fair value at the balance sheet date of our earnout liabilities that were established at the time of our merger with Precision Healing mergerInc. and acquisition of Scendia Biologics, LLC (“Scendia”).

ThereExcept as set forth below, 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.

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 hashad exclusive rights to develop and commercialize new products based on the licensed patents and patents pending. SCP willwould pay royalties to Tufts based on net sales of licensed products and technologies. Under the exclusive license agreement, royalties willwould be calculated at a rate of 1.5% or 3%,3.0%, depending on the type of product or technology developed. SCP willwould 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 willwould 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 beenwere no material accounting accounting impacts and no royalties paid related to this arrangement as of MarchJune 31,30, 2026.

In connection with the shift in strategy,strategy to focus on developing and commercializing our surgical product portfolio, on March 12, 2026, we delivered written notice to Tufts that terminated the exclusive license agreement, effective April 20, 2026. WeIn areJuly 2026, we dissolved SCP and eliminated the 10% equity ownership interest in the process of dissolving SCP inheld orderby to focus on developing and commercializing our surgical product portfolio.Tufts.

On January 7, 2026, we announced that 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.

Cost of goods sold consists primarily of finished goodgoods 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.

Net Revenue. For the three months ended MarchJune 31,30, 2026, we generated net revenue of $27.8$28.1 million compared to $23.4$25.8 million for the the three months ended MarchJune 31,30, 2025, a 19%9% increase over the prior year period. For the six months ended June 30, 2026, we generated net revenue of $55.9 million compared to $49.2 million for the six months ended June 30, 2025, a 14% increase over the prior year period. Higher net revenue infor the three months ended March 31,June 30, 2026 was driven by an increase of $4.4$2.6 million, or 21%,11%, 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 SurgicalSurgical, BIASURGE and BIASURGE,FORTIFY TRG, offset by a slight decrease of $0.2 million, or 8%, in sales of bone fusion products. Higher net revenue for the six months ended June 30, 2026 was driven by an increase of $7.0 million, or 16%, in sales of soft tissue repair products, including CellerateRX Surgical, BIASURGE and FORTIFY TRG, offset by a slight decrease of $0.3 million, or 5%, in sales of bone fusion products. These increases were supported by increased market penetration andpenetration, geographic expansion,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 MarchJune 31,30, 2026 was $1.9$2.0 million compared to $1.8$1.9 million for the three months ended MarchJune 31,30, 2025. Cost of goods sold for the six months ended June 30, 2026 was $3.9 million compared to $3.8 million for the six months ended June 30, 2025. Higher cost of goods sold in the three and six months ended MarchJune 31,30, 2026 was related to the increase in net revenue of CellerateRX Surgical.

Gross Profit. We generated gross profit of $25.9$26.2 million for the three months ended MarchJune 31,30, 2026 compared to $21.6$23.9 million for the the three months ended MarchJune 31,30, 2025, a 20%10% increase over the prior year period. We generated gross profit of $52.0 million for the six months ended June 30, 2026 compared to $45.5 million for the six months ended June 30, 2025, a 14% increase over the prior year period. Gross margin was approximately 93% and 92% for the three and six months ended MarchJune 31,30, 2026 and 2025, respectively. Higher gross profit and margin infor the three and six months ended MarchJune 31,30, 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 MarchJune 31,30, 2026 was $21.9$22.6 million compared to $19.1$19.6 million for the three months ended MarchJune 31,30, 2025. SG&A for the six months ended June 30, 2026 was $44.5 million compared to $38.8 million for the six months ended June 30, 2025. Higher SG&A in the three months ended MarchJune 31,30, 2026 was primarily due to increased direct sales sales and marketing expenses, which accounted for approximately $1.9$1.2 million of the increase, approximately $0.5$0.6 million related to compensation expense and approximately $1.1 million related to legal and advisory services associated with corporate strategic initiatives. Higher SG&A in the six months ended June 30, 2026 was primarily due to increased direct sales and marketing expenses, which accounted for approximately $3.1 million of the increase, approximately $1.1 million related to compensation expense, approximately $1.1 million related to legal and advisory services associated with corporate strategic initiatives and approximately $0.2 million related to contracted services and warehousing and distribution costs.services.

Research and development. R&D for the three months ended MarchJune 31,30, 2026 was $0.8$1.2 million compared to $1.0$1.1 million for the three months ended MarchJune 31,30, 2025. LowerR&D for the six months ended June 30, 2026 was $1.9 million compared to $2.0 million for the six months ended June 30, 2025. Higher R&D for the three months ended MarchJune 31,30, 2026 and lower R&D for the six months ended June 30, 2026 was primarily due to the timing of product enhancement initiatives associated with our soft tissue repair products when compared to the three and six months ended MarchJune 31,30, 2025.

Depreciation and amortization. Depreciation and amortization for the three months ended MarchJune 31,30, 2026 was $0.6 million compared to $0.7 million for the three months ended MarchJune 31,30, 2025. Depreciation and amortization for the six months ended June 30, 2026 was $1.2 million compared to $1.4 million for the six months ended June 30, 2025.

Other income (expense). Other expense for the three months ended MarchJune 31,30, 2026 was $2.2 million compared to $1.4$2.0 million for the three months ended June 30, 2025. Other expense for the six months ended MarchJune 31,30, 2026 was $4.4 million compared to $3.4 million for the six months ended June 30, 2025. The increase in other expense for the three and six months ended MarchJune 31,30, 2026 was primarily due to higher 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 MarchJune 31,30, 2026, we had a net incomeloss from continuing operations of $0.4 million,million compared to net income from continuing operations of $0.5 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, we had a net loss from continuing operations of $13,457 compared to a net loss from continuing operations of $0.6$0.1 million for the threesix months ended MarchJune 31,30, 2025. Net income loss from continuing operations for the three and six months ended MarchJune 31, 30, 2026 was primarily due to net revenue growth and decreased R&D expense offset by higher SG&A andA, interest expense related to the CRG Term Loan.Loan and share of losses from equity method investments, partially offset by net revenue growth.

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 incomeloss from discontinued operations for the three months ended MarchJune 31,30, 2026 totaledwas $0.1 million$41,720 compared to a net loss from discontinued operations of $2.9$2.5 million for for the three months ended MarchJune 31,30, 2025. Net income from discontinued operations for the six months ended June 30, 2026 was $19,196 compared to a net loss from discontinued operations of $5.4 million for the six months ended June 30, 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 asset impairment charges, share of losses from equity method investments, gains/losses on the disposal of property and equipment, executive executive separation costs, and legalacquisition and diligenceother expensestransaction related to acquisitions,costs, 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,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 MarchJune 31,30, 2026, our Adjusted EBITDA was $4.3$5.0 million compared to $2.7$4.7 million for the three months ended MarchJune 30, 31,2025. For the six months ended June 30, 2026, our Adjusted EBITDA was $9.3 million compared to $7.4 million for the six months ended June 30, 2025. Higher Adjusted EBITDA in the first quarter of 2026 was primarily due to net revenue growth offset by increases in SG&A.

Cash onand handcash equivalents at MarchJune 31,30, 2026 was $13.6$15.4 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 onand hand,cash equivalents, 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, and repayment of debt as it becomes due and for general corporate purposes.

Our cash outlay associated with winding down THP infor the firstthree quarterand ofsix months ended June 30, 2026 was $0.4 million.million and $0.8 million, respectively. 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 firstfirst, second and secondthird of four Installment Payments of $625,000 were made in August 20242024, 2025 and August 2025,2026, respectively.

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 issuedissued, 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 March 31, 2025, we borrowed an additional $12.25 million under the CRG Term Loan Agreement (the “Third Borrowing”). The First 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, such as the opportunitiesCarePICS Acquisition in April 2025, 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%4.00% 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 MarchJune 31,30, 2026, there was $46.2$46.5 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 and six months ended MarchJune 31,30, 2026 in cash rather than adding such amount to the outstanding principal balance.

As of MarchJune 31,30, 2026, we were in compliance with all debt covenants.

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. On May 6, 2026, the Company and BMI entered into a second amendment to the BMI License Agreement to further extend the option period through January 31, 2027.

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 MarchJune 31,30, 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. InSubsequent Marchto 2026,such date, additional ordinary shares of BMI were sold to other outside investors, thereby decreasing our ownership of BMI to approximately 12.141%11.945% as of MarchJune 31,30, 2026.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $2.5$0.4 million compared to net cash usedprovided inby operating operating activities of $2.0$0.7 million for the threesix months ended MarchJune 31,30, 2025. The increase in net cash used in operating activities activities during the threesix months ended MarchJune 31,30, 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 threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was $43,772$49,052 compared to $5.2$9.1 million used in investing activities activities for the threesix months ended MarchJune 31,30, 2025. Cash used in investing activities during the threesix months ended March 31,June 30, 2026 primarily related primarily to leasehold improvements and equipment.

For the threesix months ended MarchJune 31,30, 2026, net cash used in financing activities was $0.5$0.7 million compared to $12.0$9.5 million provided by financing activities for the threesix months ended MarchJune 31,30, 2025. Cash used in financing activities during the threesix months ended MarchJune 31,30, 2026 related primarily related to net settlements of equity-based awards.

Refer to Note 3 to the consolidated financial statements, “Discontinued Operations,” for the operatingoperating, investing and financing cash flow information related to the discontinuation of THP.

In July 2021, we entered into an asset purchase agreement with Rochal,Rochal Industries, LLC (“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 chairChair of the board of directors of Rochal.

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$653 and $20,000$10,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $1,503 and $30,000 for the six months ended June 30, 2026 and 2025, respectively.

We had no outstanding related party receivables or related party payables at MarchJune 31,30, 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.