Sanara MedTech Inc. — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Sanara develops and sells surgical and chronic wound-care products and is expanding into wound and skin-care telehealth, software, and diagnostics. Substantially all revenue came from surgical wound-care products, particularly CellerateRX Surgical. Revenue was generated in the United States.
Key financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $24.14 million | $15.59 million |
| Cost of goods sold | $2.31 million | $1.62 million |
| Gross profit / margin | $21.83 million / approximately 90% | $13.97 million / approximately 90% |
| SG&A | $28.05 million | $18.67 million |
| Research and development | $0.56 million | $0.04 million |
| Operating loss | $7.38 million | $5.03 million |
| Net loss | $7.99 million | $4.45 million |
| Net loss per share, basic and diluted | $1.08 | $0.76 |
| Cash used in operating activities | $4.81 million | $4.03 million |
| Cash and cash equivalents, year-end | $18.65 million | $0.46 million |
| Total assets / total liabilities, year-end | $36.40 million / $6.24 million | $9.83 million / $3.99 million |
Liquidity and debt. The company reported $18.65 million of cash at year-end, with current assets of $24.61 million and current liabilities of $6.02 million. It had no borrowings outstanding at December 31, 2021. The $2.5 million revolving credit facility was terminated effective March 25, 2022, with no amount owed. Operating lease liabilities totaled $425,443 at year-end.
Material changes and notable transactions
- Revenue increased 55% year over year, driven mainly by higher surgical-product sales following expansion of the sales force and independent distribution network. Management said COVID-19 case surges, including Delta and Omicron, negatively affected sales in the second half of 2021.
- SG&A rose by about $9.38 million, reflecting sales-force and operational expansion, commissions, stock compensation, Rochal personnel, and WounDerm platform costs. R&D and depreciation and amortization also increased.
- Net loss widened, partly due to increased operating expenses and a $616,927 equity-method loss related to Precision Healing.
- Net cash from financing was $28.30 million, primarily reflecting net proceeds of $28.94 million from a February 2021 public offering of 1.265 million shares. Year-end common shares outstanding increased to 7.68 million from 6.30 million.
- The company acquired certain Rochal assets effective July 1, 2021, for stated purchase consideration of approximately $1.16 million, including cash, shares, assumed net liabilities, and transaction costs. The acquisition was treated as an asset acquisition; the auditor identified its intangible-asset valuation as a critical audit matter.
- Sanara invested in Precision Healing, Pixalere, and DirectDerm and expanded its WounDerm strategy. It reported $5.02 million in equity securities investments at year-end.
Outlook, risks, and other disclosures
- Management stated that cash on hand, together with expected operating cash flows, should fund its current growth strategy and anticipated expenses for at least the next 12 months, including potential acquisitions. This is a forward-looking assessment, not a guarantee; the company cited uncertainty around operating conditions and access to future financing.
- Plans included broader commercialization of Cook Biotech products in 2022, expected commercial availability of the WounDerm EMR platform in mid-2022, and anticipated availability of Precision Healing technology in 2023. These are expectations, not reported outcomes. FORTIFY TRG had initial sales in Q4 2021; FORTIFY FLOWABLE began selling in early 2022.
- Key risks include continuing operating losses and negative operating cash flow; revenue and elective-procedure volatility related to COVID-19; dependence on third-party licenses, manufacturers, and a principal product supplier; competition and product adoption; regulatory, reimbursement, and telemedicine compliance; product quality and liability; cybersecurity and health-data privacy; and the need for capital to support growth.
- Related-party matters warrant attention: the Executive Chairman and affiliates beneficially owned approximately 46% of shares at year-end and have ties to Catalyst and Rochal. Rochal licenses, the asset purchase, and a three-year consulting agreement with a company director were disclosed. CellerateRX sublicense royalties were $856,755 in 2021.
- The company reported no material pending legal proceedings. Its financial statements received an unqualified audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2021; the auditor did not provide an internal-control attestation because the company was not required to obtain one.
Important facts for investors to verify
- Whether revenue growth continues and sales become less dependent on CellerateRX Surgical and surgical procedures.
- Whether the sales-force, WounDerm, product-development, and acquisition investments translate into improved margins and a path to profitability, given the larger loss and ongoing operating cash use.
- Actual product launch timing, regulatory status, adoption, reimbursement, and clinical evidence for planned products and services.
- Cash use, investment performance, and financing needs; the stated 12-month liquidity outlook includes expected cash flows and potential acquisitions.
- Terms, obligations, valuation assumptions, and governance safeguards for Rochal-related transactions and other related-party arrangements.
- Supply continuity and license economics for CellerateRX and other products, along with the implications of the terminated credit facility.