Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of Sanara MedTech Inc. (together with its wholly owned or majority-owned subsidiaries on a consolidated basis, the "Company," "Sanara MedTech," "Sanara," "our," "us," or "we") should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 and with the unaudited consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance, including topics such as new products under development. In some cases, you can identify forward-looking statements because they contain words such as "aims," "anticipates," "believes," "contemplates," "continue," "could," "estimates," "expects," "forecast," "guidance," "intends," "may," "plans," "possible," "potential," "predicts," "preliminary," "projects," "seeks," "should," "target," "will" or "would" or the negative of these words, variations of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following:

●	shortfalls in forecasted revenue growth;
●	our ability to meet our future capital requirements;
●	our ability to maintain compliance with our debt obligations;
●	our ability to develop and commercialize new products and products under development, including the manufacturing, distribution, marketing and sale of such products;
●	our ability to retain and recruit key personnel;
●	the intense competition in the markets in which we operate and our ability to compete within our markets;
●	the failure of our products to obtain market acceptance;
●	the effect of security breaches and other disruptions;
●	our ability to maintain effective internal controls over financial reporting;
●	our ability to maintain and further grow clinical acceptance and adoption of our products;
●	the impact of competitors inventing products that are superior to ours;
●	disruptions of, or changes in, our distribution model, consumer base or the supply of our products;
●	the failure of third-party assessments to demonstrate desired outcomes in proposed endpoints;
●	our ability and the ability of our research and development partners to protect the proprietary rights to technologies used in certain of our products and the impact of any claim that we have infringed on intellectual property rights of others;
●	our dependence on technologies and products that we license from third parties;
●	the effects of current and future laws, rules and regulations relating to the labeling, marketing and sale of our products, and our ability to comply with the various laws, rules and regulations applicable to our business; and
●	the effect of defects, failures or quality issues associated with our products.

For a more detailed discussion of these and other factors that may affect our business and that could cause the actual results to differ materially from those anticipated in forward-looking statements, see "Risk Factors" in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025, and Part II, Item 1A. "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date on which they are made, and we do not assume any obligation to update these forward-looking statements, except to the extent required by applicable securities laws.

OVERVIEW

We are a medical technology company focused on developing and commercializing transformative technologies to improve clinical outcomes and reduce healthcare expenditures in the surgical market. Our products are designed to achieve our goal of providing better clinical outcomes at a lower overall cost for healthcare systems. We strive to be one of the most innovative and comprehensive providers of effective surgical solutions and are continually seeking to expand our offerings for patients requiring surgical treatments in the United States.

We primarily market and sell soft tissue repair and bone fusion products for use in the operating room or other sterile environments. Our soft tissue repair products include, among other products, our lead product, CellerateRX Surgical Powder ("CellerateRX Surgical"), a hydrolyzed collagen that aids in the management of surgical wounds, BIASURGE Advanced Surgical Solution ("BIASURGE"), a sterile no-rinse, advanced surgical solution used for wound irrigation and TEXAGEN Amniotic Membrane Allograft ("TEXAGEN"), a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed. Our bone fusion products include, among other products, BiFORM Bioactive Moldable Matrix ("BiFORM"), an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site, ACTIGEN Verified Inductive Bone Matrix ("ACTIGEN"), a naturally derived, differentiated allograft matrix with robust handling properties, and ALLOCYTE Plus Advanced Viable Bone Matrix ("ALLOCYTE Plus"), a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers.

We also utilize an in-house research and development team, Rochal Technologies. We are advancing a strong pipeline of next-generation products that supports and extends our surgical strategy of "Prepare, Promote and Protect."

Summary of Our Key Products and Development Programs

We market and distribute surgical products to surgeons at hospitals and surgical centers. Our products are primarily sold in the U.S. surgical tissue repair market. We believe that we have the ability to drive our product pipeline from concept to preclinical and clinical development while meeting quality and regulatory requirements.

CellerateRX Surgical

CellerateRX Surgical is a Type I bovine hydrolyzed collagen indicated for the management of surgical, traumatic, and partial and full-thickness wounds as well as first- and second-degree burns. It is manufactured with a proprietary process. CellerateRX Surgical is sterilized, packaged and designed specifically for use in the operating room. CellerateRX Surgical is primarily purchased by hospitals and ambulatory surgical centers for use by surgeons to treat surgical wounds, including those associated with orthopedic, spine and trauma procedures. Additional surgical wounds that often benefit from the use of CellerateRX Surgical include general, vascular, plastic/reconstructive, cardiovascular, gynecologic, and urologic related procedures.

CellerateRX Surgical is used in operative cases where patients might have trouble healing normally due to underlying health complications. There is always a risk of complication with surgical wounds. This is especially true in patients with certain comorbidities, including obesity, diabetes and hypertension. These complications can include surgical wound infections, dehiscence (where an incision opens after primary closure) and necrosis. Surgical wound complications have become increasingly problematic due to the high rates of surgical patient comorbidities and the financial strain on insurance payors as well as hospitals that suffer exorbitant costs for readmission of these patients within 90 days of surgery. Surgeons use CellerateRX Surgical to complement the body's normal healing process. By supporting the body to heal normally without complications, improved patient outcomes are achieved, thereby reducing downstream costs related to complications (such as re-operation, longer hospitalization, re-admittance, extended rehabilitative care and other additional treatments).

BIASURGE

BIASURGE is a 510(k) cleared sterile no-rinse, advanced surgical solution used for wound irrigation. It contains an antimicrobial preservative effective against a broad spectrum of pathogenic microorganisms in the solution. BIASURGE is indicated for use in the mechanical cleansing and removal of debris, including microorganisms, from surgical wounds. In both in vitro testing of implant materials and ex vivo testing of dermal materials, BIASURGE was proved to eliminate biofilm-producing microbes and prevent them from attaching to the implant materials.

Other Products

TEXAGEN is a multi-layer amniotic membrane allograft used as an anatomical barrier with robust handling that can be sutured for securement if needed.

BiFORM is an osteoconductive, bioactive, porous implant that allows for bony ingrowth across the graft site. It can be hydrated and used as a strip or molded into a putty to fill a bone defect.

ACTIGEN is a naturally derived, differentiated allograft matrix with robust handling properties.

ALLOCYTE Plus is a human allograft cellular bone matrix containing bone-derived progenitor cells and conformable bone fibers. These viable cellular allografts are ready to use upon thawing and have fibrous handling properties.

FORTIFY TRG Tissue Repair Graft ("FORTIFY TRG") is a freeze-dried, multi-layer small intestinal submucosa extracellular matrix sheet. The graft is 510(k) cleared for implantation to reinforce soft tissue, is terminally sterilized, has a thin profile, is available in multiple sizes, and can be cut to size to accommodate the patient's anatomy. FORTIFY TRG is provided sterile and can be hydrated with autologous blood fluid.

Our product portfolio includes other products that have an insignificant impact on our revenue at this time.

Shift in Strategy and Discontinuance of Value-Based Wound Care Program

Our company's main source of revenue has consistently been from soft tissue repair and bone fusion products for the surgical market. Additionally, we generate a smaller portion of revenue from products sold in the post-acute setting. To further support our surgical business, particularly in wound care, we launched a value-based wound care services initiative designed to enhance outcomes while complementing our offerings in both surgical and post-acute markets. This post-acute strategy, which we referred to as Tissue Health Plus ("THP"), was focused on providing value-based wound care services. Through THP, we planned to offer a first of its kind value-based wound care program to payers and risk-bearing entities. This program was designed to enable payers to divest wound care spend risk, reduce wound related hospitalizations and improve patient quality of life. To further develop our value-based wound care strategy, we executed an investment and acquisition strategy to build telehealth services and acquire technologies to support the THP platform.

Since the second quarter of 2024, we managed our business on the basis of two operating and reportable segments: the Sanara Surgical segment and the THP segment.

Our intention in incubating THP was coupled with a goal to find an outside partner to buy or invest in the platform. Starting in 2024, we held several meetings and did significant outreach to find potential funding for THP. This effort included meetings with venture capital firms, strategic buyers, provider service companies, insurance companies and private equity firms. During the third quarter of 2025, following authorization from our Board of Directors, management initiated a review of strategic options for THP and formally engaged an investment bank to search for potential investors or purchasers. By mid-September 2025, we concluded that these efforts were unlikely to succeed within the timeline allocated by the Board of Directors and ended our engagement with the investment bank. Persistent losses related to THP and a lack of any firm commitments from potential investors led management and our Board of Directors to decide to discontinue THP's operations in mid-September 2025 and shift our focus exclusively on products and technologies for use in the surgical market.

As a result of this decision, THP met the accounting requirements to be classified under discontinued operations as of September 30, 2025. In accordance with generally accepted accounting principles in the United States ("GAAP"), the operations of THP are presented as discontinued operations in our Consolidated Balance Sheets and Consolidated Statements of Operations and, as such, have been excluded from continuing operations for all periods presented. As a result of the discontinuation of THP, we now have a single reportable segment. This determination is in accordance with Accounting Standards Codification ("ASC") 280, Segment Reporting.

Certain prior period amounts have been reclassified to conform to the current year presentation.

Tufts University License Agreement

On December 20, 2023, we signed an exclusive license agreement with Tufts University ("Tufts") to develop and commercialize patented technology covering 18 unique collagen peptides. As part of this agreement, we formed a new subsidiary, Sanara Collagen Peptides, LLC ("SCP"), and issued 10% of SCP's outstanding units to Tufts. SCP has exclusive rights to develop and commercialize new products based on the licensed patents and patents pending. SCP will pay royalties to Tufts based on net sales of licensed products and technologies. Under the exclusive license agreement, royalties will be calculated at a rate of 1.5% or 3%, depending on the type of product or technology developed. SCP will pay Tufts a minimum annual royalty of $50,000 on January 1 of the year following the first anniversary of the first commercial sale of the licensed products or technologies. SCP will pay Tufts a $100,000 minimum annual royalty on January 1 of each subsequent year during the royalty term specified in the exclusive license agreement. There have been no material accounting impacts and no royalties paid related to this arrangement as of March 31, 2026.

In connection with the shift in strategy, on March 12, 2026, we delivered written notice to Tufts that terminated the exclusive license agreement, effective April 20, 2026. We are in the process of dissolving SCP in order to focus on developing and commercializing our surgical product portfolio.

RECENT DEVELOPMENTS

Vizient Innovative Technology Contract

On January 7, 2026, we announced our BIASURGE product received an Innovative Technology contract from Vizient Inc. ("Vizient"), the nation's largest provider-driven healthcare performance improvement company. The contract was awarded based on the recommendation of BIASURGE by hospital experts who serve on one of Vizient's client-led councils, and it signifies to Vizient clients BIASURGE's unique qualities that potentially bring improvement to the healthcare industry. The Innovative Technology contract offers Vizient's extensive network of healthcare facility customers access to BIASURGE at contracted pricing and pre-negotiated terms, effective January 1, 2026.

Recent Peer-Reviewed Study on CellerateRX Surgical

On March 11, 2026, we announced the publication of a peer-reviewed study evaluating the economic and clinical value of CellerateRX Surgical in the Journal of Medical Economics. The study demonstrated cost savings and improved health outcomes associated with the use of CellerateRX Surgical as an adjunct to the standard of care for high-risk spinal surgery patients, compared to the standard of care alone.

COMPONENTS OF RESULTS OF OPERATIONS

Sources of Revenue

Our revenue is derived primarily from sales of our soft tissue repair and bone fusion products to hospitals and surgical centers. In particular, the substantial majority of our product sales revenue is derived from sales of CellerateRX Surgical. Our revenue is driven by direct orders shipped by us to our customers, and, to a lesser extent, direct sales to customers through delivery at the time of procedure by one of our sales representatives. We generally recognize revenue when a purchase order is received by us from the customer, and our product is received by the customer.

Revenue streams from product sales are summarized below for the periods presented:

		Three Months Ended March 31,
		2026				2025
Soft tissue repair products		$	24,942,945			$	20,532,440
Bone fusion products			2,855,589				2,901,656
Total Net Revenue		$	27,798,534			$	23,434,096

Cost of Goods Sold

Cost of goods sold consists primarily of finished good purchases, raw material costs for certain components sourced directly by us, shipping and handling and all related royalties due as a result of the sale of our products. Our gross profit represents total net revenue less the cost of goods sold, and gross margin represents gross profit expressed as a percentage of total revenue.

Operating Expenses

Selling, general and administrative ("SG&A") consists primarily of salaries, sales commissions, benefits, bonuses and share-based compensation. SG&A also includes outside legal counsel fees, audit fees, insurance premiums, rent and other corporate expenses. We expense all SG&A as incurred.

Research and development ("R&D") includes costs related to enhancements to our currently available products and additional investments in our product and technology development pipeline. This includes personnel-related expenses, including salaries, share-based compensation and benefits for all personnel directly engaged in R&D activities, contract services, materials, prototype expenses and allocated overhead, which is comprised of compensation and benefits, lease expense and other facilities-related costs. We expense R&D costs as incurred.

Depreciation and amortization includes depreciation of fixed assets and amortization of intangible assets that have a finite life, such as product licenses, patents and intellectual property, customer relationships and assembled workforces.

Other Income (Expense)

Other income (expense) is primarily comprised of interest expense, our share of losses from equity method investments and other nonoperating activities.

RESULTS OF OPERATIONS

The following table presents certain information about our results from continuing operations and Adjusted EBITDA (as described below) for the periods presented:

		Three Months Ended March 31,
		2026				2025
Net revenue		$	27,798,534			$	23,434,096
Cost of goods sold			1,923,589				1,834,967
Selling, general and administrative			21,881,520				19,129,208
Research and development			759,592				950,359
Depreciation and amortization(1)			587,252				694,032
Other expense(2)			2,248,894				1,446,096
Net income (loss) from continuing operations		$	397,687			$	(620,566	)
Adjusted EBITDA(3)		$	4,262,168			$	2,695,058

	(1)	Depreciation expense of $5,461 was reclassified as continuing operations in the three months ended March 31, 2025 and is therefore no longer reflected in discontinued operations.
	(2)	For the three months ended March 31, 2026, other expense included interest expense and share of losses from equity method investments, offset by interest income. For the three months ended March 31, 2025, other expense included interest expense and share of losses from equity method investments, offset by interest income and gain on disposal of property and equipment.
	(3)	Adjusted EBITDA is a non-GAAP financial measure. For more information, see the "Adjusted EBITDA" section below.

Net Revenue. For the three months ended March 31, 2026, we generated net revenue of $27.8 million compared to $23.4 million for the three months ended March 31, 2025, a 19% increase over the prior year period. Higher net revenue in the three months ended March 31, 2026 was driven by an increase of $4.4 million, or 21%, in sales of soft tissue repair products, offset by a slight decrease of $46,067, or 2%, in sales of bone fusion products. The increase in net revenue is primarily due to increased sales of soft tissue repair products, including CellerateRX Surgical and BIASURGE, supported by increased market penetration and geographic expansion, and our strategy to continue expanding and developing our independent distribution network in both new and existing U.S. markets.

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2026 was $1.9 million compared to $1.8 million for the three months ended March 31, 2025. Higher cost of goods sold in the three months ended March 31, 2026 was related to the increase in net revenue of CellerateRX Surgical.

Gross Profit. We generated gross profit of $25.9 million for the three months ended March 31, 2026 compared to $21.6 million for the three months ended March 31, 2025, a 20% increase over the prior year period. Gross margin was approximately 93% and 92% for the three months ended March 31, 2026 and 2025, respectively. Higher gross profit and margin in the three months ended March 31, 2026 was primarily due to the net revenue growth factors above and product mix.

Selling, general and administrative. SG&A for the three months ended March 31, 2026 was $21.9 million compared to $19.1 million for the three months ended March 31, 2025. Higher SG&A in the three months ended March 31, 2026 was primarily due to increased direct sales and marketing expenses, which accounted for approximately $1.9 million of the increase, approximately $0.5 million related to compensation expense and approximately $0.2 million related to contracted services and warehousing and distribution costs.

Research and development. R&D for the three months ended March 31, 2026 was $0.8 million compared to $1.0 million for the three months ended March 31, 2025. Lower R&D for the three months ended March 31, 2026 was primarily due to the timing of product enhancement initiatives associated with our soft tissue repair products when compared to the three months ended March 31, 2025.

Depreciation and amortization. Depreciation and amortization for the three months ended March 31, 2026 was $0.6 million compared to $0.7 million for the three months ended March 31, 2025.

Other income (expense). Other expense for the three months ended March 31, 2026 was $2.2 million compared to $1.4 million for the three months ended March 31, 2025. The increase in other expense for the three months ended March 31, 2026 was primarily due to higher interest expense and fees related to the CRG Term Loan and our share of losses from equity method investments.

Net income (loss) from continuing operations. For the three months ended March 31, 2026, we had net income from continuing operations of $0.4 million, compared to a net loss from continuing operations of $0.6 million for the three months ended March 31, 2025. Net income from continuing operations for the three months ended March 31, 2026 was primarily due to net revenue growth and decreased R&D expense offset by higher SG&A and interest expense related to the CRG Term Loan.

Net income (loss) from discontinued operations. As a result of our decision to discontinue THP, the operating results of THP are reported as discontinued operations in the Consolidated Statements of Operations for all periods presented. Net income from discontinued operations for the three months ended March 31, 2026 totaled $0.1 million compared to net loss from discontinued operations of $2.9 million for the three months ended March 31, 2025.

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) from continuing operations excluding interest expense/income, provision/benefit for income taxes, depreciation and amortization, non-cash share-based compensation expense, change in fair value of earnout liabilities, asset impairment charges, share of losses from equity method investments, gains/losses on the disposal of property and equipment, executive separation costs, and legal and diligence expenses related to acquisitions, as each is applicable to the periods presented. Adjusted EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss) from continuing operations, cash flow and other measures of financial performance reported in accordance with GAAP.

We believe Adjusted EBITDA is useful to investors because it facilitates comparisons of our core business operations across periods on a consistent basis. Accordingly, we adjust for certain items when calculating Adjusted EBITDA because we believe that such items are not related to our core business operations. We do not, nor do we suggest that investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Material limitations associated with the use of such measures are that they do not reflect all costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances. We present these non-GAAP financial measures to provide investors with information to evaluate our operating results in a manner similar to how management evaluates business performance. To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information and the related non-GAAP financial measures.

The following table provides a reconciliation of net income (loss) from continuing operations to Adjusted EBITDA for the periods presented:

		Three Months Ended March 31,
		2026				2025
Net income (loss) from continuing operations		$	397,687			$	(620,566	)
Adjustments:
Interest expense			1,799,345				1,317,092
Depreciation and amortization(1)			587,252				694,032
Noncash share-based compensation			1,028,335				1,175,496
Share of losses from equity method investments			462,507				143,608
Gain on disposal of property and equipment			-				(10,932	)
Interest income			(12,958	)			(3,672	)
Adjusted EBITDA		$	4,262,168			$	2,695,058

(1)

Depreciation expense of $5,461 was reclassified as continuing operations in the three months ended March 31, 2025 and is therefore no longer reflected in discontinued operations.

For the three months ended March 31, 2026, our Adjusted EBITDA was $4.3 million compared to $2.7 million for the three months ended March 31, 2025. Higher Adjusted EBITDA in the first quarter of 2026 was primarily due to net revenue growth offset by increases in SG&A.

LIQUIDITY AND CAPITAL RESOURCES

Cash on hand at March 31, 2026 was $13.6 million, compared to $16.6 million at December 31, 2025. Historically, we have financed our operations primarily from borrowings under our credit facilities and the sale of equity securities. Based on our current plan of operations, we believe our cash on hand, when combined with expected cash flows from operations, will be sufficient to fund our growth strategy and to meet our anticipated operating expenses and capital expenditures for at least the next 12 months.

We expect our future needs for cash to include further development of our product portfolio, clinical studies, repayment of debt as it becomes due and for general corporate purposes.

Our cash outlay associated with winding down THP in the first quarter of 2026 was $0.4 million. We do not anticipate material cash spend related to winding down THP for the remainder of 2026.

Applied Asset Purchase

On August 1, 2023, we entered into an asset purchase agreement (the "Applied Purchase Agreement") by and among the Company, Sanara MedTech Applied Technologies, LLC ("SMAT"), The Hymed Group Corporation and Applied Nutritionals, LLC (together with The Hymed Group Corporation, the "Applied Sellers"), and Dr. George D. Petito (the "Owner"), pursuant to which SMAT acquired certain assets of the Applied Sellers and the Owner, including, among others, the Applied Sellers' and Owner's intellectual property, manufacturing and related equipment, inventory, rights and claims, other than certain excluded assets (the "Applied Purchased Assets") and assumed certain Assumed Liabilities (as defined in the Applied Purchase Agreement) upon the terms and subject to the conditions set forth in the Applied Purchase Agreement. The Applied Purchased Assets were purchased for an initial aggregate purchase price of $15.25 million, consisting of (i) $9.75 million in cash (the "Cash Closing Consideration"), (ii) 73,809 shares of our common stock, with an agreed upon value of $3.0 million (the "Stock Closing Consideration") and (iii) $2.5 million in cash, to be paid in four equal installments on each of the four anniversaries following the Closing (the "Installment Payments"). The first and second of four Installment Payments of $625,000 were made in August 2024 and August 2025, respectively.

In addition to the Cash Closing Consideration, Stock Closing Consideration and Installment Payments, the Applied Purchase Agreement provides that the Applied Sellers are entitled to receive up to an additional $10.0 million (the "Applied Earnout"), which is payable to the Applied Sellers in cash, upon the achievement of certain performance thresholds relating to SMAT's collections from net sales of a collagen-based product currently under development. Upon expiration of the seventh anniversary of the closing, to the extent the Applied Sellers have not earned the entirety of the Applied Earnout, SMAT shall pay the Applied Sellers a pro-rata amount of the Applied Earnout based on collections from net sales of the product, with such amount to be due credited against any Applied Earnout payments already made by SMAT (the "True-Up Payment"). The Applied Earnout, minus the True-Up Payment and any Applied Earnout payments already made by SMAT, may be earned at any point in the future, including after the True-Up Payment is made.

Following the closing of the Applied Asset Purchase, we worked to advance the collagen product related to the incentive payment contemplated under the asset purchase agreement. Despite such efforts, we did not receive 510(k) clearance, a U.S. patent was not issued and no net sales were collected for this product contemplated under the asset purchase agreement and the Petito Services Agreement. After a review of the status of such initiatives, related expenses and the substantial additional expense that would need to be incurred for an uncertain result, and in light of our refocus in strategy to prioritize expanding existing product platforms, on March 31, 2026, we determined that the thresholds necessary to trigger a payment on the earnout would not be met and reduced the contingent consideration liability to zero.

CRG Term Loan Agreement

On April 17, 2024 (the "Closing Date"), we, as borrowers, entered into a Term Loan Agreement (the "CRG Term Loan Agreement") with the subsidiary guarantors party thereto from time to time (collectively "the Guarantors"), CRG Servicing LLC as administrative agent and collateral agent (the "Agent"), and the lenders party thereto from time to time, providing for a senior secured term loan of up to $55.0 million (the "CRG Term Loan"). In April 2024, our first borrowing ("the First Borrowing") under the CRG Term Loan of $15.0 million was made to repay our then-existing loan with Cadence Bank (the "Cadence Term Loan") and to pay certain fees and expenses related to the CRG Term Loan Agreement. The remaining proceeds of $4.5 million were distributed to us. As a result, the Cadence Term Loan was terminated and all outstanding amounts under the Cadence Term Loan were repaid in full and all security interest and other liens granted to or held by Cadence Bank were terminated and released.

On September 4, 2024, we borrowed an additional $15.5 million under the CRG Term Loan Agreement (the "Second Borrowing"). We used $5.0 million of the proceeds of the Second Borrowing for the investment in ChemoMouthpiece, LLC, and for working capital and general corporate purposes. Prior to the CRG Amendment (defined below), pursuant to the CRG Term Loan Agreement, we were entitled to one additional borrowing, which was required to occur on or prior to June 30, 2025 and be at least $5.0 million or a multiple of $5.0 million. On March 19, 2025, we and the Guarantors entered into the First Amendment to Term Loan Agreement with the Agent and the lenders party thereto from time to time ("the CRG Amendment"), which amended the CRG Term Loan Agreement to, among other things, (i) entitle us to two additional borrowings following the Second Borrowing, which borrowings were required to occur on or prior to December 31, 2025, if at all, and (ii) remove the requirement that any borrowing be in whole multiples of $5.0 million.

On March 31, 2025, we borrowed an additional $12.25 million under the CRG Term Loan Agreement (the "Third Borrowing"). The First Borrowing, the Second Borrowing and the Third Borrowing each have a maturity date of March 30, 2029 (the "Maturity Date"), unless earlier prepaid. We used a portion of the proceeds from the Third Borrowing for permitted acquisition opportunities and for working capital and general corporate purposes. After the Third Borrowing, we did not take any additional draws under the CRG Term Loan prior to the final draw date of December 31, 2025.

The CRG Term Loan bears interest at a per annum rate equal to 13.25% (subject to a 4.0% increase during an event of default), of which 8.00% must be paid in cash and 5.25% may, at our election, be deferred through the 19^th quarterly Payment Date (defined below) by adding such amount to the aggregate principal loan amount, so long as no default or event of default under the CRG Term Loan Agreement has occurred and is continuing. We are required to make quarterly interest payments on the final business day of each calendar quarter following the Closing Date, commencing on the first such date to occur at least 30 days after the Closing Date (each, a "Payment Date"). Interest is payable on each Payment Date in arrears with respect to the time between each Payment Date and upon the payment or prepayment of the CRG Term Loan, ending on the Maturity Date. In addition, we are required to pay an upfront fee of 1.50% of the principal amount of the CRG Term Loan, which is payable as amounts are advanced under the CRG Term Loan on a pro rata basis. We are also required to pay a back-end fee equal to 7.00% of the aggregate principal amount advanced under the CRG Term Loan Agreement. We paid upfront fees of $225,000 on the Closing Date related to the First Borrowing, $232,500 of upfront fees on September 4, 2024 related to the Second Borrowing and $183,750 of upfront fees on March 31, 2025 related to the Third Borrowing. As of March 31, 2026, there was $46.2 million of principal outstanding under the CRG Term Loan. Although the CRG Term Loan permits certain interest to be paid-in-kind, we elected to pay all interest accrued during the three months ended March 31, 2026 in cash rather than adding such amount to the outstanding principal balance.

Subject to certain exceptions, we are required to make mandatory prepayments of the CRG Term Loan with the proceeds of certain assets sales and in the event of a change of control of the Company. In addition, we may make voluntary prepayments of the CRG Term Loan, in whole or in part, at any time. All mandatory and voluntary prepayments of the CRG Term Loan are subject to the payment of prepayment premiums as follows: (i) if prepayment occurs on or prior to the date that is one year following the applicable borrowing (the "Borrowing Date"), an amount equal to 10.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid and (ii) if prepayment occurs one year after the applicable Borrowing Date and on or prior to two years following the applicable Borrowing Date, an amount equal to 5.0% of the aggregate outstanding principal amount of the CRG Term Loan being prepaid. No prepayment premium is due on any principal prepaid if prepayment occurs two years or more after the applicable Borrowing Date.

Certain of our current and future subsidiaries, including the Guarantors, guarantee our obligations under the CRG Term Loan Agreement. As security for our obligations under the CRG Term Loan Agreement, on the Closing Date, we and the Guarantors entered into a security agreement with the Agent pursuant to which we and the Guarantors granted to the Agent, as collateral agent for the lenders, a lien on substantially all of our and the Guarantors' assets, including intellectual property (subject to certain exceptions).

The CRG Term Loan Agreement contains affirmative and negative covenants customary for financings of this type, including limitations on our and the Guarantors' abilities, among other things, to incur additional debt, grant or permit additional liens, make investments and acquisitions above certain thresholds, merge or consolidate with others, dispose of assets, pay dividends and distributions and enter into affiliate transactions, in each case, subject to certain exceptions. In addition, the CRG Term Loan Agreement contains the following financial covenants requiring us and the Guarantors in the aggregate to maintain:

	●	liquidity in an amount which shall exceed the greater of (i) $3.0 million and (ii) to the extent we have incurred certain permitted debt, the minimum cash balance, if any, required of us by the creditors of such permitted debt; and
	●	annual minimum revenue of at least (i) $60.0 million for the twelve-month period beginning on January 1, 2024 and ending on December 31, 2024, (ii) $75.0 million for the twelve-month period beginning on January 1, 2025 and ending on December 31, 2025, (iii) $85.0 million for the twelve-month period beginning on January 1, 2026 and ending on December 31, 2026, (iv) $95.0 million for the twelve-month period beginning on January 1, 2027 and ending on December 31, 2027 and (v) $105.0 million during each twelve-month period beginning on January 1 of a given year thereafter.

The CRG Term Loan Agreement contains representations and warranties of the Company and the Guarantors customary for financings of this type, and also includes events of default customary for financings of this type, including, among other things, non-payment, inaccuracy of representations and warranties, covenant breaches, a material adverse change, bankruptcy and insolvency, material judgments and a change of control, in certain cases subject to customary periods to cure. The occurrence and continuance of an event of default could result in the acceleration of the obligations under the CRG Term Loan Agreement.

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

BMI Investment

On January 16, 2025, we entered into a Licensing and Distribution Agreement (the "BMI License Agreement") with Biomimetic Innovations Limited, a privately-held medical device company headquartered in Shannon, Co. Clare Ireland ("BMI"), pursuant to which we acquired the exclusive U.S. marketing, sales and distribution rights to OsStic Synthetic Injectable Structural Bio-Adhesive Bone Void Filler ("OsStic"), as well as an adjunctive internal fixation technology featuring novel delivery to promote targeted application of OsStic ("ARC" and together with OsStic, the "Products"), for use in the treatment of a wound or injury caused by a traumatic incident.

Pursuant to the BMI License Agreement, we were appointed by BMI as the exclusive distributor to promote, market, offer to sell, transfer, distribute and sell the BMI Products for trauma indications inside the United States and its territories for an initial five-year term, which may be automatically renewed for successive two-year periods at our discretion, provided that we are in compliance with our obligations thereunder (the "BMI Term"). From January 16, 2025 until October 13, 2025, we had an option to negotiate exclusive distribution rights for the BMI Products in additional fields and/or additional territories on substantially the same terms as those set forth in the BMI License Agreement. On June 18, 2025, pursuant to the BMI License Agreement, we exercised our option for exclusive distribution rights of the BMI Products for sports medicine, spine, arthroplasty, and craniomaxillofacial indications within the United States and its territories. On October 1, 2025, we and BMI entered into a first amendment to the BMI License Agreement to extend the option period through May 31, 2026 to provide more time to negotiate and finalize the terms of the additional fields in the contract territory.

The BMI License Agreement requires that we pay BMI royalties of 3% of OsStic Net Sales (as defined in the BMI License Agreement). Pursuant to the BMI License Agreement, we and BMI agreed to negotiate the applicable percentage of net sales for ARC at a future date. The BMI License Agreement also requires that we pay BMI annual minimum royalty payments of $100,000, $200,000, and $300,000 for the first, second and third years, respectively, following the receipt of first regulatory approval for the marketing and sale of a Product (as defined in the agreement). No royalties have been paid under this agreement as of March 31, 2026.

In connection with the BMI License Agreement, on January 16, 2025, we entered into a Share Subscription and Shareholders' Agreement (the "Subscription Agreement"), by and among us, The Russell Revocable Living Trust, BMI and the existing shareholders of BMI, pursuant to which we made an initial cash investment in BMI totaling approximately $3.1 million (€3.0 million). The initial cash investment and our previously disclosed convertible loan to BMI of $1.1 million (€1.0 million) were converted into 8,230 ordinary shares of BMI, constituting approximately 6.67% of the outstanding equity of BMI as of January 16, 2025. Pursuant to the Subscription Agreement, we also agreed to contribute an additional €4.0 million to BMI through a series of capital contributions in exchange for 8,230 additional ordinary shares of BMI upon the achievement of certain development, clinical, and regulatory milestones expected to occur at various points during 2025 and 2026. As of June 30, 2025, BMI had achieved two of such milestones, and upon settlement, we paid BMI $2.4 million (€2.0 million) on July 1, 2025 in exchange for 4,116 additional ordinary shares of BMI, bringing our total ownership of BMI's outstanding equity to approximately 9.678% as of July 1, 2025. In September 2025, BMI achieved the final three milestones, and upon settlement, we paid BMI $2.4 million (€2.0 million) on October 2, 2025 in exchange for 4,114 additional ordinary shares of BMI, bringing our total ownership of BMI's outstanding equity to approximately 12.499% for a total cash investment of $9.0 million (€8.0 million) as of October 2, 2025. In March 2026, additional ordinary shares of BMI were sold to other outside investors, thereby decreasing our ownership of BMI to approximately 12.141% as of March 31, 2026.

Cash Flow Analysis

For the three months ended March 31, 2026, net cash used in operating activities was $2.5 million compared to net cash used in operating activities of $2.0 million for the three months ended March 31, 2025. The increase in cash used in operating activities during the three months ended March 31, 2026 was primarily due to the timing of commissions payments, higher cash interest expense resulting from a larger outstanding debt balance compared to the prior-year period and the absence of paid-in-kind interest.

For the three months ended March 31, 2026, net cash used in investing activities was $43,772 compared to $5.2 million used in investing activities for the three months ended March 31, 2025. Cash used in investing activities during the three months ended March 31, 2026 primarily related to leasehold improvements and equipment.

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

Refer to Note 3 to the consolidated financial statements, "Discontinued Operations," for the operating cash flow information related to the discontinuation of THP.

MATERIAL TRANSACTIONS WITH RELATED PARTIES

Consulting Agreement

In July 2021, we entered into an asset purchase agreement with Rochal, a related party. Concurrent with the Rochal asset purchase, we entered into a consulting agreement with Ann Beal Salamone pursuant to which Ms. Salamone agreed to provide us with consulting services with respect to, among other things, writing new patents, conducting patent intelligence and participating in certain grant and contract reporting. In consideration of the consulting services to be provided to us, Ms. Salamone is entitled to receive an annual consulting fee of $177,697, with payments to be issued once per month. The consulting agreement had an initial term of three years. Effective July 13, 2024, the consulting agreement with Ms. Salamone was amended to provide that the initial term shall be automatically renewed for successive one-year terms for up to three successive years unless earlier terminated by either party without cause at any time, provided that the terminating party provides 90 days advance written notice of termination. Ms. Salamone is a director of the Company and is a significant shareholder and the current chair of the board of directors of Rochal.

Catalyst Transaction Advisory Services Agreement

In March 2023, we entered into a Transaction Advisory Services Agreement (the "Catalyst Services Agreement") effective March 1, 2023 with The Catalyst Group Inc. ("Catalyst"), a related party. Pursuant to the Catalyst Services Agreement, Catalyst, by and through its directors, officers, employees and affiliates that are not simultaneously serving as directors, officers or employees of the Company (collectively, the "Covered Persons"), agreed to perform certain transaction advisory, business and organizational strategy, finance, marketing, operational and strategic planning, relationship access and corporate development services for us in connection with any merger, acquisition, recapitalization, divestiture, financing, refinancing, or other similar transaction in which we may be, or may consider becoming, involved, and any such additional services as mutually agreed upon in writing by and between Catalyst and us (the "Catalyst Services").

Pursuant to the Catalyst Services Agreement, we agreed to reimburse Catalyst for (i) compensation actually paid by Catalyst to any of the Covered Persons at a rate no more than a rate consistent with industry practice for the performance of services similar to the Catalyst Services, as documented in reasonably sufficient detail, and (ii) all reasonable out-of-pocket costs and expenses payable to unaffiliated third parties, as documented in customary expense reports, as each of (i) and (ii) is incurred in connection with the Catalyst Services rendered under the Catalyst Services Agreement, with all reimbursements being contingent upon the prior approval of the Audit Committee of our Board of Directors. Pursuant to the Catalyst Services Agreement, costs incurred were $850 and $20,000 for the three months ended March 31, 2026 and 2025, respectively.

Receivables and Payables

We had no outstanding related party receivables at March 31, 2026 and December 31, 2025. We had outstanding related party payables totaling $15,847 at March 31, 2026. The related party payables balance for December 31, 2025 has been reclassified and is included in accounts payable in the accompanying Consolidated Balance Sheets.

IMPACT OF INFLATION AND CHANGING PRICES

Inflation and changing prices have not had a material impact on our historical results of operations. We do not currently anticipate that inflation and changing prices, including the impacts of tariffs, will have a material impact on our future results of operations.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in these estimates could materially affect our consolidated financial position, results of operations or cash flows. Significant items that are subject to such estimates and assumptions include revenue and expense accruals, the fair value measurement of assets and liabilities and the allocation of purchase price to the fair value of assets acquired. Our critical accounting estimates have not significantly changed since December 31, 2025 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.