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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Sep. 30, 2025
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Basis of Presentation The accompanying unaudited consolidated financial statements include the accounts of Sanara MedTech Inc. and its wholly owned and majority-owned subsidiaries, as well as other entities in which the Company has a controlling financial interest. All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments (consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period. These financial statements and notes should be read in conjunction with the financial statements for each of the two years ended December 31, 2024 and 2023, which are included in the Company’s most recent Annual Report on Form 10-K. Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. Discontinued Operations During the third quarter of 2025, following authorization from the Board of Directors of the Company, management initiated a review of strategic options for THP. To facilitate this review, the Company engaged an investment bank to search for potential investors or purchasers. Despite such efforts, by mid-September 2025, the Company concluded that these efforts were unlikely to succeed and ended its engagement with the investment bank. Persistent losses in the THP segment and a lack of interest from investors led management and the Board of Directors to decide to discontinue THP’s operations as of mid-September 2025. The process of winding down THP is expected to continue through the end of 2025. In line with this decision, the THP segment has met the accounting requirements to be classified under discontinued operations as of September 30, 2025. In accordance with generally accepted accounting principles in the United States (“GAAP”), the consolidated balance sheets and consolidated statements of operations of the THP segment are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect only the positions and activity from continuing operations of Sanara Surgical unless otherwise noted. See Note 3 for additional information regarding discontinued operations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenue and expenses during the reporting period. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Income/Loss Per Share The Company computes income/loss per share in accordance with ASC Topic 260, Earnings per Share, which requires the Company to present basic and diluted income per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss attributable to common shareholders by the weighted average number of shares of common stock outstanding. Diluted income/loss per share is computed similarly to basic income/loss per share, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if the additional shares of common stock were dilutive. All common stock equivalents were excluded from the calculations during the three and nine months ended September 30, 2024, as their inclusion would have been anti-dilutive due to the Company’s net loss during those periods. The following is a reconciliation of the numerator and denominator of basic and diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024. SCHEDULE OF NUMERATOR AND DENOMINATOR OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net Income (loss) from continuing operations |  | $ | 834,493 |  |  | $ | (180,488 | ) |  | $ | 714,186 |  |  | $ | (2,872,286 | )
Net Loss from discontinued operations |  |  | (31,246,601 | ) |  |  | (2,702,564 | ) |  |  | (36,672,075 | ) |  |  | (5,339,011 | )
Less: Net loss from continuing operations attributable to noncontrolling interests |  |  | (955 | ) |  |  | (1,740 | ) |  |  | (5,197 | ) |  |  | (3,224 | )
Less: Net loss from discontinued operations attributable to noncontrolling interests |  |  | - |  |  |  | (23,544 | ) |  |  | - |  |  |  | (82,107 | )
Net loss attributable to Sanara MedTech shareholders |  | $ | (30,411,153 | ) |  | $ | (2,857,768 | ) |  | $ | (35,952,692 | ) |  | $ | (8,125,966 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares, basic |  |  | 8,646,668 |  |  |  | 8,517,381 |  |  |  | 8,610,538 |  |  |  | 8,468,394 |
Dilutive effect of stock options |  |  | 31,013 |  |  |  | - |  |  |  | 31,013 |  |  |  | - |
Dilutive effect of unvested shares |  |  | 263,053 |  |  |  | - |  |  |  | 266,014 |  |  |  | - |
Weighted average shares, diluted |  |  | 8,940,734 |  |  |  | 8,517,381 |  |  |  | 8,907,565 |  |  |  | 8,468,394 |
Net income (loss) per share, basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | 0.10 |  |  | $ | (0.02 | ) |  | $ | 0.08 |  |  | $ | (0.34 | )
Discontinued operations |  |  | (3.62 | ) |  |  | (0.32 | ) |  |  | (4.26 | ) |  |  | (0.62 | )
Net income (loss) per share of common stock, basic |  | $ | (3.52 | ) |  | $ | (0.34 | ) |  | $ | (4.18 | ) |  | $ | (0.96 | )
Net income (loss) per share, diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | 0.09 |  |  | $ | (0.02 | ) |  | $ | 0.08 |  |  | $ | (0.34 | )
Discontinued operations |  |  | (3.49 | ) |  |  | (0.32 | ) |  |  | (4.12 | ) |  |  | (0.62 | )
Net income (loss) per share of common stock, diluted |  | $ | (3.40 | ) |  | $ | (0.34 | ) |  | $ | (4.04 | ) |  | $ | (0.96 | )
The following table summarizes the shares of common stock that were potentially issuable but were excluded from the computation of diluted net loss per share of common stock for the three and nine months ended September 30, 2024, as such shares would have had an anti-dilutive effect: SCHEDULE OF COMPUTATION OF DILUTED NET LOSS PER SHARE
|  | September 30, 2024 |
Stock options(a) |  |  | 31,013 |
Warrants(b) |  |  | 16,725 |
Unvested restricted stock |  |  | 224,392 |
| (a) | Shares underlying stock options assumed pursuant to the merger agreement with Precision Healing, Inc. (“Precision Healing”) in April 2022.
| (b) | Shares underlying warrants assumed pursuant to the merger agreement with Precision Healing in April 2022.
Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when a purchase order is received from the customer and control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for transferring those goods or services. Revenue is recognized based on the following five-step model:
- | Identification of the contract with a customer
- | Identification of the performance obligations in the contract
- | Determination of the transaction price
- | Allocation of the transaction price to the performance obligations in the contract
- | Recognition of revenue when, or as, the Company satisfies a performance obligation
Details of this five-step process are as follows: Identification of the contract with a customer Customer purchase orders are generally considered to be contracts under ASC 606. Purchase orders typically identify the specific terms of products to be delivered, create the enforceable rights and obligations of both parties and result in commercial substance. No other forms of contract revenue recognition, such as the completed contract or percentage of completion methods, were utilized by the Company in either 2025 or 2024. Performance obligations The Company’s performance obligation is generally limited to delivery of the requested items to its customers at the agreed upon quantities and prices. Determination and allocation of the transaction price The Company has established prices for its products. These prices are effectively agreed to when customers place purchase orders with the Company. Rebates and discounts, if any, are recognized in full at the time of sale as a reduction of net revenue. Allocation of transaction prices is not necessary where only one performance obligation exists. For certain sales transactions, we incur group purchasing organization fees that are based on a contractual percentage of applicable sales and are recorded as a reduction of the revenue for those transactions. Recognition of revenue as performance obligations are satisfied Product revenues are recognized when a purchase order is received from the customer, the products are delivered, and control of the goods and services passes to the customer. Disaggregation of Revenue Revenue streams from product sales and royalties for the three and nine months ended September 30, 2025 and 2024 are summarized below. SCHEDULE OF REVENUE FROM PRODUCT SALES AND ROYALTIES
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Soft tissue repair products |  | $ | 23,424,126 |  |  | $ | 18,863,335 |  |  | $ | 66,618,023 |  |  | $ | 52,586,945 |
Bone fusion products |  |  | 2,909,693 |  |  |  | 2,808,264 |  |  |  | 8,954,144 |  |  |  | 7,779,209 |
Royalties |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 906 |
Total Net Revenue |  | $ | 26,333,819 |  |  | $ | 21,671,599 |  |  | $ | 75,572,167 |  |  | $ | 60,367,060 |
For the three and nine months ended September 30, 2025, revenue generated from the THP segment was $35,376 and $61,958, respectively. The revenue from the THP segment is related to contracts acquired in the CarePICS Acquisition (defined in Note 4 below) and is included in net loss from discontinued operations on the Consolidated Statements of Operations (see Note 3). Accounts Receivable Allowances Accounts receivable are typically due within 30 days of invoicing. The Company establishes an allowance for credit losses to provide for an estimate of accounts receivable which are not expected to be collectible. The Company bases the allowance on an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other information as applicable and will record its allowance based on the estimated credit losses. The Company’s accounts receivable balance, net was $12,085,845, $12,408,819, and $8,474,965 as of September 30, 2025, December 31, 2024, and December 31, 2023, respectively. The Company recorded credit loss expense of $165,199 and $75,000 during the three months ended September 30, 2025 and 2024, respectively, and $459,233 and $230,930 during the nine months ended September 30, 2025 and 2024, respectively. The allowance for credit losses was $1,322,000 at September 30, 2025 and $1,173,441 at December 31, 2024. Credit loss reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. The Company also establishes other allowances to provide for estimated customer rebates and other expected customer deductions. These allowances totaled zero at September 30, 2025 and $4,897 at December 31, 2024. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. Inventories Inventories are stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist primarily of finished goods and also include an immaterial amount of raw materials and related packaging components. The Company recorded inventory obsolescence expense of $117,615 and $96,684 during the three months ended September 30, 2025 and 2024, respectively, and $489,572 and $356,261 during the nine months ended September 30, 2025 and 2024, respectively. The allowance for obsolete and slow-moving inventory had a balance of $666,889 at September 30, 2025 and $534,549 at December 31, 2024. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from two to ten years. Below is a summary of property and equipment for the periods presented: SCHEDULE OF PROPERTY AND EQUIPMENT
|  | Useful Life |  | September 30, 2025 |  |  | December 31, 2024 |
Computers |  | 3-5 years |  | $ | 251,180 |  |  | $ | 295,963 |
Office equipment |  | 3-7 years |  |  | 247,535 |  |  |  | 216,491 |
Furniture and fixtures |  | 5-10 years |  |  | 335,108 |  |  |  | 346,508 |
Leasehold improvements |  | 2-5 years |  |  | 213,852 |  |  |  | 181,968 |
Property and equipment, gross |  |  |  |  | 1,047,675 |  |  |  | 1,040,930 |
Less accumulated depreciation |  |  |  |  | (630,467 | ) |  |  | (608,613 | )
Property and equipment, net |  |  |  | $ | 417,208 |  |  | $ | 432,317 |
Depreciation expense related to property and equipment was $41,557 and $129,592 during the three months ended September 30, 2025 and 2024, respectively, and $133,165 and $395,862 during the nine months ended September 30, 2025 and 2024, respectively. The Company recorded an asset impairment charge of $8,144,993 during the three and nine months ended September 30, 2025 related to THP developed technology and internal use software which is included in net loss from discontinued operations on the Consolidated Statements of Operations. Internal Use Software The Company accounted for costs incurred to develop or acquire computer software for internal use in accordance with ASC Topic 350-40, Intangibles – Goodwill and Other (“ASC 350-40”). The Company capitalizes costs incurred during the application development stage, which generally includes employee compensation and benefits costs as well as third-party developer fees to design the software configuration and interfaces, coding, installation and testing. The Company begins capitalization of qualifying costs when the preliminary project stage is completed, management authorized further funding for the completion of the project, and it is probable that the project will be completed and the software will be used to perform the function intended. Costs incurred during the preliminary project stage along with post implementation stages of internal use computer software are expensed as incurred. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. The Company had been developing internal use software in conjunction with the development of the THP platform. The development phase of this internal use software began at the beginning of January 2025, and it was in the development phase until the disposal of the THP segment in mid-September 2025. Therefore, under ASC 350-40 the project included capitalizable costs of employees and external vendors who were developing the application. As of the date of this report, the project included approximately $4,372,847 in capitalized costs which were fully impaired in mid-September 2025. Capitalized development costs were classified as “Property and equipment, net” in the Consolidated Balance Sheets. Goodwill The excess of purchase price over the fair value of identifiable net assets acquired in business combinations is recorded as goodwill. As of September 30, 2025 and December 31, 2024, all of the Company’s goodwill relates to the acquisition of Scendia Biologics, LLC (“Scendia”). Goodwill has an indefinite useful life and is not amortized. Goodwill is tested annually as of December 31 for impairment, or more frequently if circumstances indicate impairment may have occurred. The Company may first perform a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than the respective carrying value. If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value, then the Company will determine the fair value of the reporting unit and record an impairment charge for the difference between fair value and carrying value (not to exceed the carrying amount of goodwill). No impairment was recorded during the three or nine months ended September 30, 2025 or 2024. Intangible Assets Intangible assets are stated at cost of acquisition less accumulated amortization and impairment loss, if any. Cost of acquisition includes the purchase price and any cost directly attributable to bringing the asset to its working condition for the intended use. The Company amortizes its finite-lived intangible assets on a straight-line basis over the estimated useful life of the respective assets which is generally the life of the related patents or licenses, seven years for customer relationships and five years for assembled workforces. See Note 6 for more information on intangible assets. Impairment of Long-Lived Assets Long-lived assets, including certain identifiable intangibles held and used by the Company, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated fair value less cost to sell. An asset impairment charge of $26,472,407 and zero was recorded during the three and nine months ended September 30, 2025 and 2024, respectively. The impairment charge was attributable to the write-off of property, equipment, and intangible assets associated with the THP segment, which was classified as discontinued operations (see Note 3). Investments in Equity Securities The Company’s equity investments consist of nonmarketable equity securities in privately held companies without readily determinable fair values. Unless accounted for under the equity method of accounting, the investments are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in the same issuer. The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. As discussed further in Note 7, as of September 30, 2025, the Company had three investments that were recorded applying the equity method of accounting. The Company had two investments recorded applying the equity method of accounting as of December 31, 2024. The Company’s proportionate share of the net income (loss) resulting from these investments is reported under the line item captioned “Share of losses from equity method investments” in the Company’s Consolidated Statements of Operations. The Company’s equity method investments are adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company classifies distributions received from its equity method investments using the cumulative earnings approach in the Company’s Consolidated Statements of Cash Flows. The Company has reviewed the carrying value of its investments and has determined there was no impairment or observable price changes as of or for the nine months ended September 30, 2025 and 2024. Fair Value Measurement As defined in ASC Topic 820, Fair Value Measurement (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both the initial and subsequent measurement. The three levels of the fair value hierarchy defined by ASC 820 are as follows: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include nonexchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses, other than acquisition-related expenses, approximate fair value because of the short-term nature of these instruments. The fair value of acquisition-related accrued expenses is categorized as Level 2 of the fair value hierarchy. The value of these instruments has been estimated using discounted cash flow analysis based on the Company’s incremental borrowing rate. The fair value of the contingent earnout considerations and the acquisition date fair value of goodwill and intangibles related to the acquisitions discussed in Notes 4, 6 and 10 are based on Level 3 inputs. Liabilities for contingent consideration are comprised of (i) the Precision Healing merger in April 2022; (ii) the acquisition of Scendia in July 2022; (iii) the acquisition of assets from the Applied Asset Purchase in August 2023; and (iv) the CarePICS Acquisition in April 2025. The liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred. The Precision Healing contingent consideration was classified as a liability at its fair value at each reporting period due to the fact that the monetary value of the shares to be issued was predominantly dependent on the exercise contingency (i.e., revenue targets). Subsequent changes in fair value of contingent consideration related to the Precision Healing merger were reported under the line item captioned “Change in fair value of earnout liabilities” in the Company’s Consolidated Statements of Operations. The Company reviewed the thresholds necessary to trigger a payment on the Precision Healing earnout and deemed the thresholds to be unachievable by the former Precision Healing security holders. Therefore, the remaining fair value on the Precision Healing earnout was reduced to zero as of December 31, 2024. The contingent consideration for the Scendia acquisition was settled as of September 30, 2024, and the final earnout payment of approximately $1.1 million was paid in cash in October 2024. Due to the Applied Asset Purchase being accounted for as an asset acquisition and given that this transaction did not include contingent shares, subsequent revaluations of contingent consideration for the Applied Asset Purchase result in adjustments to the contingent consideration liability and the intellectual property intangible asset, with cumulative catch-up amortization adjustments. Due to the CarePICS Acquisition being accounted for as an asset acquisition and given that the transaction included contingent shares, subsequent revaluations of cash settlements related to contingent consideration were recognized as adjustments to the developed technology and the earnout liability, with cumulative catch-up depreciation adjustments. The CarePICS Acquisition contingent liability was deemed to have a value of zero as of September 30, 2025 due to the discontinuation of the THP segment and related assets. Management concluded that the targets necessary to trigger a payment would not be met and therefore a payment is not expected. The current year revaluation of earnout liabilities below is a result of a decrease in the estimated value of the earnout liability established at the time of the Applied Asset Purchase and the full write-down of estimated liability established at the time of the CarePICS Acquisition. The following table sets forth a summary of the changes in fair value for the Level 3 contingent earnout considerations. SCHEDULE OF CHANGES IN FAIR VALUE FOR CONTINGENT EARNOUT CONSIDERATION
|  | Amount |
Balance at December 31, 2024 |  | $ | 748,001 |
Additions |  |  | 1,355,603 |
Revaluation of earnout liabilities |  |  | (1,875,603 | )
Balance at September 30, 2025 |  | $ | 228,001 |
Financial Instruments Not Measured at Fair Value The estimated fair value of the Company’s borrowings under the CRG Term Loan (defined below) was $57.1 million as of September 30, 2025, compared to the carrying amount, net of debt issuance costs, of $45.1 million. The estimated fair value of the Company’s CRG Term Loan approximated its carrying value as of December 31, 2024. The estimate of fair value is generally based on the quoted market prices for similar issuances of long-term debt with the same maturities, which is classified as a Level 2 input. Given the disposal of the THP segment, the Company’s credit rating is now determined by only continuing operations; as such, the Company’s credit rating improved resulting in an increase in the fair value of the CRG Term Loan. Income Taxes Income taxes are accounted for under the asset and liability method; whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all the deferred tax asset will not be realized. Share-based Compensation The Company accounts for share-based compensation to employees and nonemployees in accordance with ASC Topic 718, Compensation – Stock Compensation. Share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as expense over the stipulated vesting period, if any. The Company estimates the fair value of share-based payments using the Black-Scholes option-pricing model for common stock options and warrants, and the closing price of the Company’s common stock for grants of common stock, including restricted stock awards. Research and Development Costs Research and development (“R&D”) expenses consist of personnel-related expenses, including salaries, share-based compensation and benefits for all personnel directly engaged in R&D activities, contracted services, materials, prototype expenses and allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities-related costs. R&D expenses include costs related to enhancements to the Company’s currently available products and additional investments in the product and platform development pipeline. The Company expenses R&D costs as incurred. Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of incremental segment information on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company adopted the new guidance effective for its annual report for the fiscal year ended December 31, 2024, and for interim filings beginning with the interim period ended March 31, 2025. The adoption did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. See Note 13 for segment reporting disclosures. In connection with the disposal of the THP segment as detailed in Note 3 below, the Company determined that continuing operations comprise a single operating and reportable segment: Sanara Surgical. Recently Issued Accounting Pronouncements In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which expands the disclosure required for income taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures. In November 2024, FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires new disclosures providing further detail of a company’s income statement expense line items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

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