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SEGMENT REPORTING
 3 Months Ended
Mar. 31, 2025
Segment Reporting [Abstract]  
SEGMENT REPORTING

NOTE 11 – 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. 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.

 

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 the substantial majority of these 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 Quarterly Report on Form 10-Q, 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 
   Three Months Ended March 31, 
   2025   2024 
   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
                         
Net revenue  $23,434,096   $-   $23,434,096   $18,536,638   $-   $18,536,638 
Cost of goods sold   1,834,967    -    1,834,967    1,890,046    -    1,890,046 
Selling, general and administrative   19,129,208    2,311,402    21,440,610    15,592,747    599,512    16,192,259 
Research and development   950,359    163,779    1,114,138    578,980    367,318    946,298 
Depreciation and amortization   688,571    435,839    1,124,410    698,502    406,918    1,105,420 
Change in fair value of earnout liabilities   -    -    -    (103,782)   38,104    (65,678)
Other expense (1)   1,446,096    1,258    1,447,354    267,336    -    267,336 
Net loss  $(615,105)  $(2,912,278)  $(3,527,383)  $(387,191)  $(1,411,852)  $(1,799,043)
Segment Adjusted EBITDA  $2,695,058   $(2,037,089)  $657,969   $1,228,480   $(917,059)  $311,421 

 

(1)For the three months ended March 31, 2025, other expense included interest expense, share of losses from equity method investments offset by interest income and gain on disposal of property and equipment. For the three months ended March 31, 2024, other expense included interest expense.

 

 

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

  

   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
  

Three Months Ended

March 31,

 
   2025   2024 
   Sanara Surgical   THP   Total   Sanara Surgical   THP   Total 
Net Loss  $(615,105)  $(2,912,278)  $(3,527,383)  $(387,191)  $(1,411,852)  $(1,799,043)
Adjustments:                              
Interest expense   1,317,092    -    1,317,092    267,336    -    267,336 
Depreciation and amortization   688,571    435,839    1,124,410    698,502    406,918    1,105,420 
Noncash share-based compensation   1,175,496    129,408    1,304,904    753,615    49,771    803,386 
Change in fair value of earnout liabilities   -    -    -    (103,782)   38,104    (65,678)
Share of losses from equity method investments   143,608    -    143,608    -    -    - 
Gain on disposal of property and equipment   (10,932)   1,258    (9,674)   -    -    - 
Interest income   (3,672)   -    (3,672)   -    -    - 
Acquisition costs (1)   -    308,684    308,684    -    -    - 
Segment Adjusted EBITDA  $2,695,058   $(2,037,089)  $657,969   $1,228,480   $(917,059)  $311,421 

 

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