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SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2024
Segment Reporting [Abstract]  
SEGMENT REPORTING

NOTE 14 – SEGMENT REPORTING

 

As discussed in Note 1, the Company historically managed its business as one operating and reportable segment. During the second quarter of 2024, the Company changed its reportable segments to reflect a change in the manner in which the business is managed. Based on the growing importance of the value-based wound care program to the Company’s future outlook and how the Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, reviews operating results and makes decisions about resource allocation, the Company has two reportable segments: Sanara Surgical and THP.

 

Segment Adjusted EBITDA is the primary profitability measure used by the CODM for purposes of assessing financial performance and resource allocation. The Company defines Segment Adjusted EBITDA for the reportable segments as net income (loss) 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, share of losses from equity method investments, executive separation costs, legal and diligence expenses related to acquisitions, and gains/losses on disposal of property and equipment, as each are applicable to the periods presented. The Company has historically presented this profitability measure as Segment EBITDA and, starting with the fourth quarter ended December 31, 2024, is presenting it as Segment Adjusted EBITDA. The definition and methodology for calculating this measure has remained unchanged. Segment Adjusted EBITDA, as it relates to the Company’s reportable segments, is presented in conformity with ASC 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission’s Regulation G and Item 10(e) of Regulation S-K. Segment 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 segments. The Company has not included any disclosure regarding total segment assets, as no segment level asset information is regularly provided to the CODM.

 

 

Sanara Surgical

 

The Sanara Surgical segment primarily markets and sells soft tissue repair and bone fusion products for use in the operating room or other sterile environments. Sanara Surgical’s soft tissue repair products include, among other products, the Company’s lead product, CellerateRX Surgical, and BIASURGE Advanced Surgical Solution, which is a sterile no-rinse, advanced surgical solution used for wound irrigation. Sanara Surgical’s bone fusion products include, among other products, BiFORM, which is an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site, and ALLOCYTE Plus, which is a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers.

 

Sanara Surgical also includes an in-house research and development team (Rochal Technologies) with an extensive pipeline of innovative products under development.

 

Tissue Health Plus

 

The THP segment is focused on value-based wound care services. Through THP, the Company plans to offer a first of its kind value-based wound care program to payers and risk-bearing entities such as accountable care organizations and value-based primary care companies, with Medicare Advantage payers as the initial target market for this program.

 

THP’s programs are expected to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality of life. THP plans to coordinate delivery of community and home-based wound care for its managed patients. Community based care spans a variety of settings including physician offices, skilled nursing facilities, assisted living facilities and senior living facilities. THP programs are intended to integrate science and evidence-based medicine protocols to standardize wound prevention and treatment.

 

Currently, there are no allocated costs included in the THP segment. All corporate and overhead expenses are included in the Sanara Surgical segment, as substantially all of those costs relate to supporting the operations and activities of the Sanara Surgical segment.

 

As a result of the change in reportable segments, certain prior period amounts have been recast to conform to the current period presentation. Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity reflect reclassifications related to the Company’s change in reportable segments. The change in reportable segments had no impact on the Company’s previously reported Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows or Consolidated Statements of Shareholders’ Equity.

 

 

The following table reflects results of operations including significant segment expenses that are regularly provided to the CODM for the Company’s reportable segments and Segment Adjusted EBITDA for the periods indicated below:

 

   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
  

Year Ended

December 31,

 
   2024   2023 
   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
                         
Net revenue  $86,672,425   $-   $86,672,425   $64,987,112   $2,730   $64,989,842 
Gross profit (loss)   78,532,524    -    78,532,524    57,143,391    (6,235)   57,137,156 
Selling, general and administrative   71,673,642    4,886,221    76,559,863    54,826,852    2,167,901    56,994,753 
Research and development   2,828,663    2,874,699    5,703,362    902,782    3,229,643    4,132,425 
Depreciation and amortization   2,785,829    2,137,395    4,923,224    2,046,859    1,628,167    3,675,026 
Change in fair value of earnout liabilities   (14,451)   (1,924,000)   (1,938,451)   (1,298,336)   (2,151,559)   (3,449,895)
Other expense   3,196,424    -    3,196,424    224,749    -    224,749 
Net income (loss)  $(1,937,583)  $(7,974,315)  $(9,911,898)  $440,485   $(4,880,387)  $(4,439,902)
Segment Adjusted EBITDA  $9,148,722   $(6,457,415)  $2,691,307   $5,289,634   $(5,162,387)  $127,247 

 

 

The following table provides a reconciliation of net income (loss) to Segment Adjusted EBITDA for the Company’s reportable segments for the periods indicated below:

   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
  

Year Ended

December 31,

 
   2024   2023 
   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
Net Income (Loss)  $(1,937,583)  $(7,974,315)  $(9,911,898)  $440,485   $(4,880,387)  $(4,439,902)
Adjustments:                              
Interest expense   3,128,395    -    3,128,395    475,783    -    475,783 
Interest income   (21,978)   -    (21,978)   -    -    - 
Depreciation and amortization (1)   2,785,829    2,137,395    4,923,224    2,046,859    1,628,167    3,675,026 
Noncash share-based compensation   3,969,008    138,245    4,107,253    3,201,330    241,392    3,442,722 
Change in fair value of earnout liabilities   (14,451)   (1,924,000)   (1,938,451)   (1,298,336)   (2,151,559)   (3,449,895)
Share of losses from equity method investments   90,007    -    90,007    -    -    - 
Executive separation costs (2)   964,466    -    964,466    -    -    - 
Acquisition costs (3)   185,029    1,165,260    1,350,289    423,513    -    423,513 
Segment Adjusted EBITDA  $9,148,722   $(6,457,415)  $2,691,307   $5,289,634   $(5,162,387)  $127,247 

 

(1)Includes a $506,836 non-cash charge during the fourth quarter of 2024 to write-off the remaining net book value of certain THP internal use software assets.

 

(2)Includes $328,795 of share-based compensation related to executive separation costs for the twelve months ended December 31, 2024.

 

(3)Acquisition costs include legal, tax and accounting services related to prospective acquisitions.